AMENDMENT OF LAW.

HC Deb 27 April 1933 vol 277 cc265-393

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.]

3.22 p.m.

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

In my desire to leave as much time as possible for the speeches of hon. Members last night, I deprived myself of the necessary time in which to conclude the observations which I was making on behalf of His Majesty's Government, but I hope I said enough to remind the Committee that the Chancellor of the Exchequer has devised a means of reducing taxation which would not have been open to him had he not proceeded on the principle of a balanced Budget. His policy of improving British credit, commonly known as the cheap money policy, has resulted, as I informed the Committee, in direct savings to the taxpayer amounting to £96,000,000 in the current year, a far greater sum than could have been achieved except by further drastic cuts in the essential services or by a deliberate policy of budgeting for a deficit. After setting against this sum certain losses of revenue under other heads, and the appropriate items of expenditure, how has my right hon. Friend used his savings?

He has, in the first place, decided to concur in the recommendation made to him by the Opposition that some relief should be brought to the Income Tax payer. The Committee will recall that, when Lord Snowden changed the method of collecting Income Tax on earned income under Schedules B, D and E, by obtaining five quarters' payments in one year, protest was vehement in the House, because it was said that his proposal had an unfair incidence upon a particular class of the community, a frugal class of the community not pos- sessed of financial reserves. Nevertheless, Lord Snowden, being under the necessity of obtaining additional revenue, confronted this class of taxpayers with a dilemma. He said that either he must increase the standard rate of tax, or must, for that year, obtain what was the equivalent of an increase of 25 per cent. He decided to adopt the course of collecting the five quarters' payments rather than increase the standard rate of tax, because, he said, he could not ignore the psychological effect on trade and commerce of any increase in direct taxation. My right hon. Friend has reversed this process, so that the same class will now pay, not five quarters or four quarters, but only three quarters of the tax in the current year. They are thus given what is the equivalent of a remission of 1s. 3d. in the pound in their Income Tax during the current year. The concession applies to 2,800,000 persons, among whom an additional purchasing power of £12,000,000 will be distributed at the most useful season of the year, namely, at Christmas.

I want to inform the Committee what this remission of tax means to particular individuals, and I will proceed in ascending scales. A single man whose income wholly earned is £140 a year would have paid, on the 1st January, 1934, £1 2s. 6d. Instead of that, he will only pay 15s. A single man with £250 a year would have paid £9 7s. 6d., instead of which he will only pay £6 5s. A single man with £500 a year, instead of paying £39 16s. 10d., will only be called upon to find £26 11s. 3d. Such an individual with £1,000 a year would only pay £76 11s. 3d. instead of £114 16s. 10d., while a single man with £2,000 a year will pay £189 1s. 3d. as against £283 11s. 10d. A married man earning £300 a year, with one child will pay £2 10s. instead of £3 15s. A married man with £500 a year and one child will pay £14 1s. 3d., instead of £21 1s. 10d. A married man earning £700 a year and having one child will pay £34 1s. 3d. instead of £51 1s.; with £1,000 a year and one child he will pay £64 is. 3d. instead of £96 1s. 10d.; and, with 22,000 a year, £176 11s. 3d. instead of £264 16s. 10d. That is a measure of the benefit which my right hon. Friend has given to the direct taxpayers—a benefit, as I have said, equivalent to 1s. 3d. in the £ as compared with the standard rate. He gives it at a most welcome season, so that not only will the individuals have the additional comfort of retaining the disposition of their own money, but, to the extent to which they spend it, they will confer advantages upon the whole trading community.

The other use to which my right hon. Friend has put his savings is in the remission of the Beer Duty. I cannot speak with personal knowledge as to what the effects are likely to be, but, in so far as the criticisms made from the benches opposite with regard to this tax last year were true, so must the reverse be true. We were told of the great unemployment that would be caused in the hop and barley growing industry, the loss to the brewers, to the fifty allied trades and to the licensed victuallers. To the extent I say to which the criticisms were then valid, so also will the contrary now be the case.

Viscountess ASTOR

Last year the Chancellor of the Exchequer admitted that beer was very much overtaxed, but said that all other industries were too, and he could not afford to lose £10,000,000. Are not the other industries just as much taxed Is there any more reason for giving up £14,000,000 this year simply to see that the people will spend more on the brewers? Is that really the policy of the Government?

Mr. HORE-BELISHA

The Noble Lady asked a question yesterday but did not wait for the reply. I gave figures of the yield to the Revenue of this tax. The Revenue has depended upon it to the extent of £70,000,000 or so a year, and we cannot afford to destroy that source of revenue.

Viscountess ASTOR

The hon. Gentleman talks as if the money was not going to be spent on other things. It is now being spent on other things. If you make beer cheaper and heavier, does not that mean that the brewers are going to get more and that you are going to get a decrease in production from inefficient work?

Mr. HORE-BELISHA

Perhaps the Noble Lady will come and tell me pri- vately what she has to say about the matter. I must inform her that the State relies upon this revenue in order that it may meet its obligations. The sailors, soldiers, dockyard men and the unemployed derive benefit from its distribution. If the Noble Lady dries up the source, plainly additional taxes will have to be put upon other industries. I hope she gives us credit for not being in the least interested in the welfare of the brewers. We are interested in the welfare of the Revenue.

These are among the direct advantages which my right hon. Friend confers by the Budget. What are the indirect advantages? Industry has, through my right hon. Friend's policy, been provided with an abundant supply of cheap money. It has reduced, it is reducing, and it will reduce the obligations of mortgagors and of lessees. It will reduce the fixed charges on industry, and it will enable industry to raise its requirements at a correspondingly better rate. To what extent has industry derived advantage from the policy of cheap money? Since the Five per cent. War Loan Conversion, the total new issues upon the market have amounted to approximately £136,000,000, of which £73,000,000 was for conversion purposes to a lower interest rate alone. As regards the new issues themselves, £65,600,000 has been raised between January and March this year for capital purposes upon the market, as compared with £29,000,000 in the three months of last year. Surely it is better that my right hon. Friend should create a condition in which industry can raise its own money than that he should artificially raise money through the direct agency of the State. All this additional money, raised by natural means as the result of my right hon. Friend's policy, will be progressively spent on creating employment. I hope I have said enough to show that my right hon. Friend, by pursuing his own policy and by refusing to be distracted from it, has made savings for the nation and has used them for the best national purposes.

3.55 p.m.

Sir STAFFORD GRIPE'S

The hon. Gentleman told the Committee last night that he did not suppose that within living memory there had ever been a Budget which evoked so little hostility and to the proposals of which so few alternatives have been forthcoming. I suppose it is true that this is probably the dullest and the gloomiest Budget that this House has debated for years. It was introduced in what one might call the funeral oration of the tariffists' hopes, accompanied of course by a substantial libation of beer, and one can hardly expect a House confronted with such a Budget to show very great interest in it. The lack of alternatives which the hon. Gentleman commented upon is perfectly true so far as those people who believe in Capitalism are concerned. Within Capitalism itself there are painfully few alternatives to this type of financial planning. The right hon. Gentleman the Member for Darwen (Sir H. Samuel) demonstrated that by his speech. He harks back to the suggestion of Free Trade and free competition as being the prosperous basis for the finances of the country, the very system under which the country was labouring at the time of what now I believe is rightly called the bad money crisis of 1931, and to meet which he himself joined in emergency measures of Protection, presumably thinking that they were the only measures which he could devise which might help the State in those circumstances and which, of course, definitely and inevitably led, as everyone could have foreseen, to the present full-blooded tariff policy of the Government. The child which the right hon. Gentleman then assisted to introduce into the world, and which he excused on that occasion as being only a little one, has inevitably grown by the course of nature into the full tariff policy man which he is now complaining about. Surely, if he assisted at its birth, it is rather hard for him now to complain that it has grown up into a healthy and full-blooded child.

He and his friends always seem to like to find that nice balance on the wall of indecision so that they may be prepared to jump in either direction when the fitting moment arrives. This Budget, indeed, he defends as not being nearly as bad as its opponents make out, but, on the other hand, of course it is not as good as it might be coming from this Government. I am glad to hear applause from his supporters because that has been the typical attitude of the right hon. Gentleman and his supporters throughout the last few months of this Government, that they always desire to maintain that position of support and opposition at the same moment, and I think he has succeeded in doing it with extreme skill on this occasion. It is really useless, as we see it, for Members on the Government side to suggest that the Government should make increased expenditure on this, that or the other unless they are also going to suggest means by which the money can be obtained to make that increased expenditure. You cannot at one moment say you desire to have economies and to reduce taxation and at another moment say you think the Government ought to have an expansionist policy. The two things cannot possibly fit into a Budget.

The Chancellor of the Exchequer is perfectly logical in this at least, that he believes in a continued deflationist policy, and he has brought forward a Budget which shows that that strong belief of his is, apparently, to be the policy of the Government in the forthcoming year, forcing down public expenditure in every way he can and attempting to increase thereby the profits from private enterprise in the hope that those accumulated profits may one day become large enough to force their way into industry and so to come back into circulation and to increase the consuming power of the population of this country. So far that policy has been a complete failure. Profits are being and have been accumulated. The idle money which is responsible for this great fall in the price of money for which the Financial Secretary takes such credit is merely a sign of the inanition of industry, and is something which is most undesirable from the point of view of a capitalist State which desires to see all its money used up by private enterprise and private industry. The very fact that accumulations are taking place in the deposit accounts in the bank—I think, to the extent of over £250,000,000 in the 12 months of last year—demonstrates that this system of trying to revivify private enterprise by allowing it to accumulate a large profit fund is not functioning. The profit fund is being accumulated, but the money is not flowing into industry, nor is it flowing into the pockets of those people who go to make up the consuming public for the products of industry. It cannot go into circulation because at the other end you have not the consuming power to afford the profit to people to increase their production. They are holding back because of the lack of consuming power, and however great you build up those reserves of money, and however cheap it is, it has been demonstrated during the last year that certainly that alone cannot force it into circulation, which is where you want to have it. That is why we get suggestions from various persons of some means of forcing circulation by the Government. If hon. Members have read in the "Times" of to-day the result of the Washington talks as they are there reported in the statement which was issued by President Roosevelt and the Prime Minister, they will have found this sentence: Enterprise must be stimulated by creating conditions favourable to business recovery,"— I gather from the hon. Member who has just spoken that that has been done. Lots of cheap money is the condition which he considers to be favourable to recovery. Then it goes on: and Governments can contribute by the development of appropriate programmes of capital expenditure. So, apparently, the Prime Minister has been convinced by Mr. Roosevelt that it is necessary. If you are to get this money into circulation as useful money it has to be done by the Government by somehow or other devising schemes of appropriate programmes of capital expenditure. If you are to do that out of revenue, you unfortunately find yourself in the position under the present system, that you have to raise the money in some way, either by capital borrowings in the market, or by taxation. Thereby you deplete the profit fund which the right hon. Gentleman believes to be the one vital factor in the reorganisation and revitalisation of industry. In other words, you cannot have it both ways. You cannot have an arrangement by which the State puts the money into circulation by carrying out industrial schemes, building schemes and other schemes, and at the same time continue with a theory which demands diminution of taxation in order to increase the profit fund in private enterprise. It is because of the attempt to do those things side by side that the Chancellor of the Exchequer has said over and over again that the Government cannot meet the capital expenditure which is necessary to put the money into circulation. Until the Government make up their minds to take such control of the whole financial machine that they are able to bring about an expansionist policy and to neglect the profit fund and put it aside as something which is not material and not vital to the reorganisation of industry, in our view, they will be unable to bring about a decrease in unemployment and a consequent increase in the consuming power.

So far as this Budget is concerned, the right hon. Gentleman has clearly pinned his faith upon the revitalisation of industry by the building up of the profit fund. I understand the argument which is behind it, but it seems to us that the argument has been proved to be false. I do not understand the argument behind the theory of the Liberal party, that you can do both things at once; that you can both increase the profit fund and increase expenditure by the State. It seems to me that those two things are entirely inconsistent. As far as we are concerned, we believe that you have to eliminate the profit fund altogether and that the State has to take over the control of the means of production and thereby the organising of the expenditure of the national funds, and that in that way you can force into circulation money and credit which at the present time are lying idle and unused.

The hon. Member told us with great pride that confidence had been created in this country by the balancing of the Budget, which, apparently, is the keynote of his ideas as regards sound finance. Have a balanced Budget and then the profit fund will start to flow into industry. The valve, as it were, which determines that flow, is what he calls confidence. Confidence is based, and based only, upon a balanced Budget. So give him his balanced Budget and these great reserves of money which are lying idle in the banks will start to flow into industry and will make the consuming power which we require. If balancing ate Budget means engaging in the sort of clever financial jugglery with which we were entertained last night, when he gave us the figures intended to disprove the perfectly frank statement of the Chancellor of the Exchequer that last year's Budget had a deficit of £32,000,000 and to prove instead, that there was, in fact, a surplus on last year's Budget, if it depends upon arguments of that sort, I should hardly have thought that it could have had very much value, because when one comes to examine the position it is clear—and I think that there can be no doubt about it—that during last year the capital indebtedness of this country was very considerably increased. If that happens during a year as a result of expenditure made during the year, surely, that must mean that the Budget is unbalanced upcn any criterion.

If the hon. Member will recollect the figures, there is the debt to the United States, which was paid off to the extent of £28,000,000, part of which was interest payment and part capital payment. There was the Sinking Fund of about £17,000,000 which was paid. He says: "I take credit for these as repayments of capital." But they were statutorily obliged to be paid out of revenue. He can hardly take credit for that certainly it has never been done in regard to earlier Budgets. They are sums which have to be discharged out of the annual income of the State. That is the position which the Sinking Fund, and an annuity payment, such as is paid to the United States of America, must always take. If you add to that the Conversion Loan extra expenditure of £23,000,000, that is an extra capital indebtedness of the State. If you add, further, the national savings interest, which is clearly a sum which has to be provided annually as interest on National Savings Certificates, you arrive at a very large sum.

Arising out of the debt to the United States and the Sinking Fund the deficit of £32,000,000 is going to be capitalised, so we understand from the Chancellor of the Exchequer. Therefore, a sum of between £50,000,000 and £60,000,000 is going to be capitalised as a result of last year's Budget. If that does not show an unbalanced Budget, I am afraid that I do not understand what the term means. So far as the forthcoming year is concerned the Sinking Fund has to be paid out of capital. Ten millions of capital accumulation on the 5 per cent. War Loan is to be used for the purpose of revenue expenditure. There we have sums amounting to £17,500,000 straight away which are not brought into the Budget. In addition, there is the money for the distressed areas, which has to be provided, and for which, admittedly, no provision has been made in the Budget. That is a charge which has to be paid during the coming year, unless the Government are going back upon the promise which they have already given.

Mr. HERBERT WILLIAMS

Is it not the case that the sum of £7,500,000 to be borrowed will be used to reduce other debt? Accordingly, on balance, the transaction leaves the total debt the same?

Sir S. CRIPPS

No. That is where the hon. Member is wrong. If you have a statutory obligation to pay off a certain amount of debt out of revenue and you capitalise it instead of paying it off out of revenue, you are increasing your capital obligation. [HON. MEMBERS: "No!"] I think that must be quite clear. I appreciate what the hon. Member is thinking, namely, that in the actual amount of money which you still owe at the end of the year you are in the same position.

Mr. H. WILLIAMS

Hear, hear.

Sir S. CRIPPS

But when, instead of making the Sinking Fund service out of revenue you recapitalise it, you are in fact increasing your capital obligation. [HON. MEMBERS: "No!"] It is a matter of opinion which it is no use arguing, because one looks at it one way or the other. If what we saw in the "Times" this morning is true, that the Prime Minister has agreed upon an expansionist policy, whereby Governments are to contribute to the development of appropriate programmes for capital expenditure, there is nothing in this Budget for any such contribution. I should have thought that in view of the intimate knowledge which the Chancellor of the Exchequer must have of exactly what the Prime Minister was saying to President Roosevelt, he would have kept any money that he had available for the purpose of providing this expansionist fund which, apparently, is to be used in association with a similar fund in America.

The argument as regards the balancing of the Budget is not perhaps a very important one. The really vital matter so far as this is a capitalist Budget, as we see it, is the purpose for which the surplus is to be used. The Committee will bear in mind that this is not what one might call a normal surplus. It is a surplus which has been arrived at by the most acute cutting of salaries, wages, unemployment benefit, education, housing and everything else. Therefore, obviously, when one comes to try to examine how that surplus should be used one must also examine how the surplus has been attained. Until one has done that one cannot arrive at any fair and just conclusion. The cuts which have been made I need not repeat to the Committee. They will remember the cuts in the special Budget of September, 1931, and the smaller sums which the Chancellor of the Exchequer has managed to squeeze out since on education, diminution of the housing grants, the stoppage of allotments for agriculture—£65,000, or whatever it was—the stoppage of land drainage schemes, and the hundred and one matters which make up the social life of this country. Every one of these services, practically speaking, has suffered its share of cutting. When we find that, surely the first place to look for the utilisation of the surplus is to whether it is fair that all these cuts should continue, before we begin to consider whether the money should be distributed to someone else.

The Financial Secretary to the Treasury, with great skill, pointed out that during the last Budget I stated that I was in favour of a reduction in the Beer Duty. He also said that one of my learned Friends had stated that the resumption of the fifty-fifty payments instead of the seventy-five and twenty-five payments as regards Income Tax would be an excellent thing.

Mr. HORE-BELISHA

I said that not only had that been said, but that an Amendment to that effect was moved.

Sir S. CRIPPS

Certainly, and if my hon. Friend will look at the rest of the records he will see a number of these were voted upon, but I do not notice that he suggests that he is going to give us any of them. He cannot pick out two lines which happen to suit his book—[HON. MEMBERS: "Why not?"] For this reason, because we stated emphatically last year that we considered that the first thing to be done was to help the unemployed. We have always said that if there was a surplus, as there was not last year, the first charge on that surplus should be the unemployed and those who have suffered by the means test. When that claim has been discharged, when the civil servants, the teachers and other people have had their cuts restored, we shall agree that there are a lot of other matters where reductions will be most welcome. The small Income Tax payer, so far as he is benefiting, is obviously a person who in his turn is entitled to benefit. I would point out to the Financial Secretary that there are a great many people, very wealthy people, who will benefit by this Income Tax reduction, people making large professional incomes, will benefit, and I am quite certain that none of them want it and none of them need it.

The right hon. Gentleman, I think, hardly appreciates the position. When the Budget Resolutions have been passed it is impossible to propose or to vote for an increase of taxation. There are many matters in which we could wish for very large increases of taxation, but this is not our Budget. There are many matters in which we think that decreases of taxation would fit in with those increases, but, so far as we are concerned, we can vote only for decreases, and we shall continue to do so, as all Oppositions have done in the past. But we have always said that the first charge on any surplus which appeared in a Budget should go to the unemployed people and the other people who have been cut. Here is a surplus of £17,000,000, a nest-egg, or a ram caught in the thicket of £10,000,000, and I am surprised that the right hon. Gentleman overlooked that ram when he was sacrificing the social services. It would have come in very handy on some of these occasions, but it was not, apparently, until the sacrifice was an Income Tax payers' sacrifice that he noticed the ram at all. The right hon. Member for Darwen (Sir H. Samuel) says that it was not there. It has been there since the Conversion, and that is long enough. I will not, however, vie in Biblical knowledge with the Chancellor of the Exchequer or the right hon. Member for Darwen, but, having that surplus, the right hon. Gentleman proposes to give £14,000,000 of it to beer drinkers and brewers, and £12,000,000 of it to the small Income Tax payers, or some to the small Income Tax payers.

There are at least two other ways in which he might have dealt with that money. We say that primarily under the pledges—indeed, they were implied at the time of the economy cuts which Lord Snowden, in another place, emphasised on another occasion—that money should have been made, in the first instance, a contribution towards putting back the 10 per cent, cut, and to ameliorate the conditions of people under the means test. But if the right hon. Gentleman and his party thought that 15s. 3d. was really adequate, and that it was quite unnecessary to increase it, at least they might have considered that there is a mass of essential works to be done in the country towards which that money would have been a considerable contribution.

Time after time in this House, when right hon. Gentlemen on the Treasury bench are asked questions about this or that work, or this or that undertaking, they say that they have great sympathy with it, bat, unfortunately, there is no money available. The, right hon. Gentleman the Minister of Agriculture said it the other day about the drainage scheme of the Don Valley. Surely, if there is to be a surplus, the people who have been flooded in the Don Valley, I think four times in the last two years, and who cannot be saved from successive flooding because there is not enough money to do it, are more to be considered than the people who want cheaper beer? Surely, too, instead of trying to squeeze out of these essential services an extra £100,000 here, £400,000 there, or £1,000,000 somewhere else, it would have been far better, if you were not prepared to give this money for the alleviation of the unemployed, to have allowed it to be used by Government Departments for works which would have been productive of labour, which would have ensured it going into circulation immediately, and would not have led to it possibly arriving at the some end as so much of the rest o5 the private funds of the country, namely, the cellars or the books of the various banks.

That is the main criticism that we have to make upon the actual form of the Budget, but it all really comes back to what is, in our view, the essential capitalist mentality which lies behind this Budget. Private interests are to be encouraged; private profits are to be increased at all costs, regardless of such things as education, housing, drainage, agricultural development, allotments and everything else. They are to be brushed aside if only the brewers' profits can be increased adequately to cause a fresh flow of money into their industry. We believe that that is entirely wrong, and will, moreover, never succeed in getting the circulation of consuming power which is absolutely essential if we are ever going to have a revival of industry in this country.

I want to say a word about the cooperative societies. The hon. and learned Member for Argyll (Mr. Macquisten) had a few words to say last night about the co-operative societies. I am bound to say he seemed to be mixed up rather with the seamy side of the business. I should like to remind the Committee that the co-operative societies were not started, as he seemed to think, as a sort of benevolent society or charitable institution to assist the poor working classes. They were, and are, a great organised movement of the workers themselves, intended to protect them from exploitation by the trading community of this country, and they have been astoundingly successful. It is their success which is at the moment drawing upon them the odium of the competitive trade. We believe that they are bodies to be encouraged and helped in every possible way. They give a vastly superior and cheaper service than the small traders. I do not know anything of the seamy side of the matter to which the hon. and learned Member for Argyll referred last night. He seemed to be complaining that there was some corruption or bribery, about which I know nothing, but it is clear that, as long as private profit-earning and competitive enterprise continues, there will always be bribery and corruption. It is only in countries or places where you can eliminate private profits and private enterprise that you can eliminate bribery and corruption, and then, of course, it becomes a serious crime. You must, in fact, change the whole system to the truly co-operative system if you are to get rid of such intolerable features.

This Budget, so far as we see, opens up no prospect of relief at all to the people of this country. It foreshadows a continuance of the old competitive system which is struggling against its gradual dissolution, and even in its final stages it is failing, as it always must fail, to give a fair deal to those for whom it can find no work. The brewer, the beer- drinker and the Income Tax payer are given the preference by that system over the unemployed and the low-wage earner. Some day, and perhaps before very long, the workers as a body will realise that under capitalism that is inevitable, and when they do realise it they will see to it that the present system is changed.

4.10 p.m.

Mr. AMERY

I wish I could arrive at a really clear picture of what the hon. and learned Member means by capitalism and the capitalistic system. He began and ended his speech with a denunciation of capitalism, and just before the end of his speech he devoted a, short excursus to a glorification of the co-operative movement. I am one of those who sympathise greatly with that movement. It is essentially an individualist and capitalist movement in which small capitalists combine for a common profit. There is nothing in that identical with the State or municipal Socialism which, I gather, the hon. and learned Gentleman advocates. More than that, the co-operative movement is not only capitalistic but is also most vigorously competitive, and as long as it competes under fair conditions, I do not think there is anybody in this House who would grudge it any measure of success which it may achieve. The only question which arises in connection with the co-operative movement in this Budget, as in every Budget for many long years past since we have had Income Tax on the present scale, is whether the special remissions and favours given to the co-operative movement in its early days, when the Income Tax was comparatively insignificant, can be justly and fairly conceded to it in competition with other traders. One authoritative committee after another has come to the conclusion that those concessions, at any rate as regards the reserves used for purposes of competition, should no longer be conceded, and I confess that I, and, I think, a good many in this House, were rather puzzled when the Chancellor of the Exchequer the other day said that he was unable even now, 13 years after the report of the Royal Commission on Income Tax, to come to a decision because he wanted an agreement. Surely this question is not one of agreement but of justice and equity, and on that it ought to be possible for this House and the Government to make up their minds.

To come back to the hon. and learned Member opposite. He wants to eliminate the profit fund. He also is very anxious to embark on a policy of expansion by borrowing. After all, when a Government wants to borrow, it borrows from that same capitalist profit fund. The alternative under a system of complete Socialism, when there is no private money, is that everything you spend has to come directly out of taxation, and then when you want to indulge in great expenditure at a time of industrial depression, and your taxation has to come upon the working classes, the capitalist having been eliminated—well, I think the last state of the working classes would be much worse than it is to-day even with the cuts that are in force ! I think there are many Members of this House who will have had a certain sympathy with the appeal made by the hon. and learned Member and the right hon. Member for Darwen (Sir H. Samuel), that the whole question of cuts imposed in 1931 should be reconsidered as soon as reasonable opportunity arises, but it is worth while, after all, to remember two facts. One is that there has been, even since 1931, a very definite, marked fall in the cost of living. The other is that the vital question for the unemployed to-day is how to find employment, and the vital duty of the Government is to find them employment even before it increases their unemployment benefit. That is the real issue, which affects the attitude some of us take towards the present Budget.

You can look at the Budget from two points of view. You can regard it, as it has been regarded for generations past, as an item in the normal housekeeping of the State, a statement in which the Chancellor of the Exchequer points out what measures he proposes to take, with the least inconvenience to the public, in order to cover his necessary expenditure; a self-contained affair carried on year after year and not very immediately concerned with the employment of the people or the welfare of the nation. But you can also look at it from a very different point of view. You can, in a crisis such as we are in to-day, judge the Budget by the test as to whether it is contributing to the aggravation of the crisis or whether it is contributing to a solution of the crisis; whether it is helping to get us out of our difficulties, is leaving us where we were, or is bringing us into an even worse position. From the first point of view, that is looking at it as a normal Budget, I do not know that there is much to be said about the Budget which was opened two days ago. Certainly such remarks as I have to make will be brief, and in large part commendatory. I think the Chancellor of the Exchequer was wise, even though somewhat tardy, in recognising the fact that the taxation of beer had reached a point at which it was defeating its own object. The hon. and learned Member opposite overlooked that point in his argument that what was given to the beer drinker should have been given to the unemployed. What evidence has he to show that if the duty had been kept at its recent level the revenue would not have gone down even more than the amount of the loss which the Chancellor of the Exchequer anticipates?

Sir S. CRIPPS

The only evidence I have is the Chancellor of the Exchequer's statement on his estimates.

Mr. AMERY

That was an estimate for a loss of about £6,000,000.

Sir S. CRIPPS

Six million pounds additional to the £14,000,000.

Mr. AMERY

That may be so. The Chancellor of the Exchequer has made a valuable concession, which may be of real use to industry, in the reduction of taxation on new capital issues. I wish he had gone further and recast the whole of our system of taxation on the raising and transfer of capital. It is full of anomalies, almost incredible anomalies, which are often prejudicial to British investment and preferential to foreign investment. I should like to see it recast on a more logical basis, and on a basis which would give a definite preference to investment in this country and in the Empire. The Chancellor of the Exchequer has brought the Government's fiscal policy up to date in one or two minor matters, like heavy oils and matches. I wish he could have found it possible to have done so in respect of silk. If a whole year has gone by without it being possible for the Import Duties Advisory Committee to give him a satisfactory scale of Silk Duties, then that department must be overworked or understaffed. There is also the change in the duties on motor vehicles. I will say nothing on them except this, that I hope we shall get from the Chancellor of the Exchequer, subsequently, 'a fuller justification for the considerable departure that has been made from the agreed recommendations of the Salter Report.

There are, however, two items in respect of duties which the Chancellor of the Exchequer has failed to impose which really call for serious consideration,. There is the Sugar Duty. It is calculated to yield a gross revenue of £13,000,000, from which something like £3,000,000 has to be deducted for the beet-sugar subsidy. Ten years ago sugar yielded £39,000,000, at a time when the price of sugar, without the duty, was far higher than it is to-day. It seems to me that there is every reason now for some recasting of the Sugar Duty, not necessarily to bring it back to the level of 10 years ago, but in order to bring it back to a level which would yield £12,000,000 or £15,000,000 extra revenue, with no real hardship to the consumer, and, incidentally, get rid of the subsidy system, which I entirely 'agree is not the most satisfactory method of dealing with the question.

More serious still is the question of the Meat Duty. We have committed ourselves to a policy of raising the wholesale price of meat. Whether it should be done partly by restriction, I do not propose to discuss at the moment, but at any rate it could be done in part by the imposition of a duty, and, under present conditions, it is as certain as anything can be that the greater part of the duty would be paid by the foreign supplier of meat. We are at this moment throwing sway a substantial source of revenue which might well run up to £15,000,000 or £20,000,000, in deference to a curious and novel enthusiasm for the method of regulation and quantitative control, which at one time was the favoured policy of the benches opposite. Moreover, by the Danish Treaty we have precluded ourselves for a period of years from imposing a duty on, one form of meat, and no doubt it will be disclosed in a day or two that we have precluded ourselves in another treaty from imposing 'a, duty on beef and other forms of meat. I should have thought that it was perfectly possible to conclude treaties—and I am all in favour of specially close relations with countries so closely akin to us in culture and outlook as the Scandinavian countries—without bringing in unnecessary pledges with regard to duties.

Above all, under the most favoured nation Clause these pledges apply to every other country. It is not Danish bacon or cream, or butter or eggs, that we are exempting for at least three years; it applies also to Holland or Lithuania, and to every other country; even to Russia when the embargo is removed. Surely when we are considering the balance of production in this country and the revenue which is so essential, this is a short-sighted policy. The items I have mentioned might well together afford a really substantial reduction in the Income Tax, and more particularly in that aspect of the Income Tax which most directly concerns employment—namely, that part of it which is imposed on undistributed profits which are put back into industry for development purposes. No reduction of Income Tax on that side is open to any of the objections which may be urged against relieving the Income Tax payer at the expense of the ordinary consumer. It is something which would directly help industry and also help employment. That is the criticism I make upon the Budget, regarded as an ordinary Budget.

But the other point of view of the Budget as a contribution to the present situation is far more important, and from that point of view I must say—I hope that the Chancellor of the Exchequer will forgive me—that my right hon. Friend has missed an opportunity. We have to remember that we are no longer living in the Victorian age, when the total of taxation and expenditure was so small a part of the total national income that it made no appreciable difference to the general prosperity of the nation. To-day our Budget is a vital factor in the whole economic situation, and to take up an air of rectitude and talk about balancing the Budget is irrelevant unless you take into account at the same time the general position of the nation. We have had a number of speeches in which the underlying conception has been that Government finance can be compared with that of an ordinary business. It cannot. The business which you have to consider in your comparison is the whole business of the nation. The problem is: is the nation solvent; can you maintain the solvency of the nation? Government expenditure is only one Department, and to make that Department put on a businesslike appearance of solvency may not be in any sense sound business from the point of view of the nation.

After all it is from the national point of view that we ought to consider these things, and I want to put to the Chancellor of the Exchequer one or two considerations. British industry and the whole foundations of British life and civilisation are in grave danger. Of the problems which we have to face two stand out; one of them is recognised in the Prime Minister's letter this morning. That is the problem of the terrible fall in prices. The other is over-taxation. I should like to ask the Committee to consider whether we have not, in fact, reached and passed the point of overtaxation, more particularly in respect of those taxes on direct income and capital which are so essential, as long as our capitalist system endures, to replenish industry. There is such a thing as overtaxation. The Chancellor of the Exchequer has had to admit it in connection with beer. Is not the same true of the whole volume of our taxation? In connection with beer, the Chancellor has himself pointed out, that this heavy taxation has tended to kill the desire for that particular form of refreshment and so to destroy the elasticity of the revenue. Is it not also possible that you may reach, in direct taxation, a point at which you destroy the desire to accumulate wealth or to run risks in accumulating wealth 7 I think there is a very real danger of that. It seems to me that the figures which have been quoted more than once in the House in the last few days confirm the view that we are suffering from overtaxation in respect of the direct contribution levied on income and capital. The right hon. Member for Darwen stated yesterday that the receipts of Income Tax and Surtax together were £364,000,000 in 1931–32, that they were estimated at £326,000,000 the following year but yielded only £312,000,000, and that they are now estimated to produce £291,000,000. That is a reduction of £73,000,000, or 20 per cent. in two years.

I wonder how long we are going to persist bravely in our financial rectitude with a system of taxation that is actually reducing the yield of these taxes by 10 per cent. a year. Or are we sooner or later to accept the same lesson as we have accepted in the case of the Beer Duty and face a reduction of these excessive direct taxes? In these matters if it is true—I think it is true—that taxation has exceeded the limit, then the only sound national policy is to deal with first things first and to reduce taxation to the point at which productive industry can lift its head again and see its way to affording employment to our people.

You may naturally ask, if that reduction is made first, what happens to your expenditure? That depends on two factors. One is the view you take of the character of your own expenditure, and the other is the view that you take about the future situation. If the view you take about the future is a gloomy one, if you doubt whether the situation is going to improve over a number of years, or whether your action in reducing taxation is going to improve it, there is no alternative except to cut down ruthlessly your expenditure, to jettison even the most valuable forms of public expenditure in order to restore the situation.

On the other hand if you consider that your present expenditure is vital to your defence, vital to the development of the nation, vital to your social order, and if you also hold that the present situation is a temporary one and will get better, not by the clouds rolling by while you wait, but because you are determined that it shall get better, because your policy of reducing taxation is one element in improving the situation, then it seems to me you are fully justified, during a period of years, in departing from the ordinary canons of what is called sound finance, and if necessary borrowing a certain limited amount to supplement your taxation revenue during a period of crisis.

During the world war, during any war, no one suggests that you can pay the whole of the expenditure out of current revenue. You do the best you can by taxation and supplement by borrowing, because you are determined to win the war and to retrieve the situation. Is there any essential difference between a world crisis which forces you to take 3,000,000 men or more out of industry and to put them in the field, and a world crisis, also largely out of y6ur control, which drives 3,000,000 men out of their employment and makes them an involuntary army of dependants on the State It seems to me that it would be perfectly reasonable, in these exceptional circumstances, frankly to borrow a fixed and limited amount for a period of years in order to enable you to win your war, instead of going on under conditions which are bound to end in defeat.

The Chancellor of the Exchequer, I am afraid, did not—it was in no sense intentional—give a fair representation of what is advocated by those who, like myself, believe that you ought to look at the budgetary situation not only by the year but over a period of years. No one has ever suggested that a remission of £50,000,000 in Income Tax would yield an increase of the Income Tax revenue of £50,000,000 next year or of £100,000,000 the year after. That is not suggested. The whole question is whether a remission of Income Tax rightly effected—I would begin on undistributed profits put into industry—would not have a substantial effect on the unemployment which to-day costs £80,000,000 to the Exchequer, and a great deal more to the nation as a whole. If so, you would not only get increased yield from Income Tax, but a vast body of men who are to-day dependent upon State expenditure would become contributors to State expenditure, and through every channel, through every tax, direct and indirect, through every trade, through the mutual stimulation of trade, you would get new revenue flowing in. Your money would truly be fructifying in the pockets of the country.

We are told that all this is highly immoral. I wonder whether even the present policy is so watertight in its virtue as some people profess? Last year we borrowed £32,000,000 to make both ends meet, according to the Chancellor of the Exchequer. According to right hon. Gentlemen and hon. Gentlemen opposite the figure is between £80,000,000 and £75,000,000. At any rate we did not balance our Budget last year. Nor are we really balancing it this year. To begin with, £7,500,000 of statutory Sinking Fund is being borrowed instead of being paid out of current revenue, as normally it should be. There are large sums—we do not know how much—to be taken over from the rates by the Exchequer in connection with unemployment relief. More than that, we are leaving out of account all debt payments to America. It is true we may secure a substantial reduction. It is conceivable, but I think it is extremely unlikely, that we shall secure complete remission.

What I cannot understand is why it should be gambling to make one remission of taxation, in the hope, and more than the hope—the probability—that your action will improve the general sources of revenue, and not gambling to speculate on what America may do with regard to the debts you owe. Again, if it is gambling to go on making remissions which at any rate you have some reason to believe will improve the situation, is there no element of gambling in the policy of going on with obstinate determination in keeping up taxes whose yield is steadily diminishing and whose result is steadily leading to the destruction of the very sources of all taxation? It is a mistake to introduce this moral issue of rectitude into the matter. The real question is whether, considering the nation as a business concern, we can at this moment, with the concern in such difficulties, withdraw so much of its working assets as are needed to sustain and expand the business, in order to preserve the kind of fiscal rectitude that was normal in the Gladstonian and other past periods. If we proceed too obstinately with that policy we shall only find that policies far more desperate and far more unvirtuous than anything I have suggested will presently be adopted in other quarters, as was indicated in the very able speech of my hon. Friend the Member for Huddersfield (Mr. Mabane) last night.

Equally important with the question of over-taxation is the question of the price level. What has been the effect of our successive Budgets of rectitude upon the price level? We have pursued a budgetary policy of deflation ever since the War, and the consequence of that policy is that the Budget of to-day, standing at £700,000,000, is a heavier burden upon the nation than the Budget of 1920, which stood at over £1,000,000,000. We are, by a strange paradox, screwing up the burden upon ourselves the more we try to reduce its nominal amount, by our methods of taxation. That policy must be stopped.

There is at any rate one saving thing, from that point of view, in this Budget, and that is that the Chancellor of the Exchequer has suspended the Sinking Fund. By this means, to some extent, he is not continuing the process of deflation. But he is doing nothing to redress the mischief of the past. I believe that what I am suggesting, the definite reduction of taxation, even if some of the money has to be borrowed, would also contribute to that rise in price levels which by common consent, and by the Prime Minister's own announcement, is the thing that we want. I am not one of those who think that it is essential that that money should be spent by the State. If you can get private enterprise to spend it so much the better, because it is mostly spent in direct industry, where the money revolves more rapidly and gives more employment per £1,000,000 than the building of roads or public works would give. Unless you give cheap money a real inducement to invest and speculate, to take risks, how will you ever get cheap money contributing to a rise in prices'? What are wanted are measures of direct encouragement of industry, trade facilities in the widest sense of the word and not in the more limited sense.

Those are the things that we ought to do. Whether the policy of deflation and economy adopted in 1931 was right or wrong I shall not discuss now, but at any rate the right policy for to-day is not the policy adopted in September, 1931. The time for "a change from contraction to careful scientific expansion," is due and overdue. I shall be told that we ought to wait for international action. Why? If we help our own situation will not that help the international situation and make things better than they are for the Economic Conference in June? At any rate President Roosevelt did not wait. He did not even allow the Prime Minister time to land before he launched his policy. Within a few days he seems to have persuaded the Prime Minister to go a great deal further than all our efforts during the last 18 months have persuaded the Chancellor of the Exchequer to go. Let us hope that there will be no serious relapse in the Prime Minister's case when he comes back. What is wanted is not international action in the sense of a rigid scheme, but a general agreement for parallel action among the nations, and the sooner we get ahead with our part in that parallel effort the better.

I regret if I have been in any sense critical, but I have felt bound to express my disappointment at the little which the Budget has contributed to dealing with the present grave situation. I have never been a pessimist about our future. On the contrary, I think we have unlimited resources within our own territory, within our own Empire, human as well as material, by which we could raise ourselves, and raise ourselves rapidly, to a far higher level of prosperity than. this or any other part of the world has ever known. I believe that we could do so entirely by ourselves, though I would be the last to disparage any additional help that might be given by co-operation with the rest of the world. But in this tremendously grave situation I think that what is needed is a far less conventional and a far more positive view of our duties, of our obligations and of our powers.

4.47 p.m.

Mr. LAMBERT

I may be forgiven if I begin by stating that I do not agree with my right hon. Friend the Member for Sparkbrook (Mr. Amery) that the cure for our present difficulties is that we should borrow more money. It seems to me that one of our great difficulties to-day is the payment of the interest on the National Debt. To borrow more would be a very doubtful experiment. I am also unable to agree with the hon. and learned Member for East Bristol (Sir S. Cripps) that we want more Socialism—more Government control. I want less Government control. We have too much Government control to-day. The Government and the local authorities are controlling one-third of the national income and, if we had less of this Government control, and if private individuals were allowed to spend their own money, they would spend it to better advantage than the Government, even with the experienced officials that the Government have at their disposal.

The Chancellor of the Exchequer congratulated himself on the fact that we have balanced our Budget. In this matter I am a supporter of his and I want to help him and when he says we have balanced our Budget that is quite true, but I ask how have we done so? We have balanced our Budget by the extraordinary exertions of the taxpayer. It is not due to the Government but due to the taxpayers, who have borne what is really penal taxation. When I hear comparisons with other countries; that France has not balanced her Budget or America has not balanced her Budget, I reflect that if the people of those countries submitted to the taxation to which the British people have submitted, their revenues would be overflowing. I ask the Chancellor however whether we have not arrived at the bankruptcy of our present system of direct taxation? Has direct taxation not been increased to such an extent that any further increase in the rate will yield a diminishing return?

Again, as regards luxury taxes, such as the Beer Duty or the Tobacco Duty, if the Chancellor increases the rate the actual proceeds will fall. My right hon. Friend the Member for Sparkbrook quoted the Income Tax receipts. I do not wish to go into that question again, but I would point out that since Lord Snowden increased the Income Tax so largely in 1931 the receipts have diminished, and my right hon. Friend the present Chancellor is budgeting for a much smaller revenue under that head this year. If he were to put another is on the Income Tax I believe the actual revenue would diminish rather than increase. I am one of those who do not suffer from what I may describe as "fiscal brain-fever." Some of my hon. and right hon. Friends think that free imports represent the salvation of the country. Others of my hon. Friends on this side think that tariffs will be our salvation. In my judgment neither free imports nor tariffs could under present conditions secure prosperity. We had free imports up to 1931 and we had the collapse. We have had tariffs since 1932 and our trade balance is still against us. In 1931 it was against us by £100,000,000. In 1932 the adverse balance is something like £54,000,000.

I ask the Chancellor of the Exchequer when he replies to explain to the country what will he the real effect of suspending the Sinking Fund. This is a matter which is beyond my comprehension. I remember that in the old days Sir William Harcourt and Sir Michael Hicks-Beach used to say that it was necessary to maintain the Sinking Fund in order to get rid of the Debt. It was a cardinal principle with Chancellors of the Exchequer to maintain the Sink- ing Fund. The present Chancellor of the Exchequer—and I do not blame him —is deliberately refraining from providing a Sinking Fund for the present enormous amount of Debt. What will be the effect? Will he kindly give us his view on that subject when he is winding up the Debate? I remember reading a speech made in 1928 by the then Chancellor of the Exchequer in which he said —it seems to be one of those extraordinarily bad prophecies which are made from time to time—that it was proposed to devote £355,000,000 a year to the Sinking Fund and the service of the Debt and it was hoped that our internal and external Debt would be extinguished in 50 years. Now I am not sure that my right hon. Friend the Chancellor is not in the position of Mr. Micawber and waiting for something to turn up.

Then, I wish to ask him: Is he quite sure that the Ottawa Agreements are proving beneficial, especially as they have restricted his power of taxation? I Stall have something to say on the subject of the other agreements when they come up for discussion, but I cannot help thinking that the Ottawa Agreements have tied our hands with regard to taxation. I firmly believe, looking back over the situation of the last two years, that it would have been infinitely better if the Government, at the commencement, had introduced a 10 per cent. revenue duty upon all imports. That would have given them revenue which they require very badly to-day.

I would also reinforce what my right hon. Friend the Member for Sparkbrook said about quota arrangements. They are new and possibly I am an old-fashioned person who does not take readily to new ideas. But quota arrangements are intended to restrict imports and, by restricting imports, they will raise prices here in this market. What ever rise in price takes place in this market, however, only a proportion 'of it will go to the home producer. The other proportion will go to the foreign producer. I wish well to the foreigner, but I wish still better to the British taxpayer. I would like him to get a little of that revenue, and I ask the Chancellor: is he certain that he is not going to land himself or his successors into considerable difficulties on this question by tying our hands with regards to taxes? Is he quite certain that this quota business will not inflict a blow to his revenue and make it more difficult to impose taxation? We are told that it is intended to raise the prices of agricultural products. We have not seen great signs of it up to now but we are told that such a rise of prices will come later. But would not those prices be raised by a revenue tariff better than by a quota? For one thing, the tariff would give revenue whereas the quota is simply going to raise the prices, and as I say, put part of the proceeds into the hands of the oversea producer. I ask the Chancellor of the Exchequer, speaking as a supporter of his, to think of these things. These marketing arrangements, these quotas are new, but I am not sure that they are sound.

I saw in one of the newspapers this morning a statement that there have been no references to economy in our Debates. I remember moving a Motion from the other side of the House 10 or 12 years ago in favour of economy and, knowing something of the difficulties connected with this question, I would like to defend the Chancellor. If I were Chancellor of the Exchequer I would ask any hon. Member who declared himself in favour of economies to specify what economies he meant. That is the real point. Hon. Members come here and demand that we should economise. But where? Directly you begin to propose economies you raise tremendous opposition, and, with a democratic electorate outside, it is very difficult indeed to get Members to face that opposition. It is not only the Socialist party. There are other Members to whom it applies. Only a week before we adjourned for Easter the Chancellor of the Exchequer had to give in about the maintenance of the able-bodied unemployed in the necessitous areas. I know the difficulties and I am sure that so long as we have such a large democratic element electing Members of the House of Commons, an element who have in the past been led to believe that the taxpayer's purse is bottomless, so long you will have great difficulty in imposing economies. We know the great opposition that there was to economies in unemployment pay and in the teachers' pay. I think that if the Chancellor of the Exchequer is to economise, and he may be obliged to economise later on, he should require his critics to tell him where he is to begin.

May I turn to another matter'? There is no provision in the Budget for the American Debt payment. There was no provision last year, but still it was made. I hope that my right hon. Friend is going to harden his heart and say: "Look here, we have paid enough, and we do not propose to pay America any more than we receive of the debts due to us.' I would not have paid the instalment last year. I believe that Great Britain has paid enough. She has paid something like £200,000,000 more than she has received, and I cannot help thinking that, if these payments are to go on, the standard of life of our own people will be lowered. That was prophesied by the late Mr. Bonar Law, who was one of the most successful post-War statesmen, and it must come to pass.

May I now deal with another topic? It is clear to me that the House of Commons, which used to be regarded as the guardian of the public purse, is no longer such a guardian, and when we listen to the speeches of hon. Members, we realise that there is an incessant and insatiable demand for more Government expenditure, which, of course, is quite inconsistent with economy. I ventured the other day to put forward the idea that there should be a Revising Chamber for finance, and immediately I was shut down by that genuine Conservative, the Lord President of the Council. However, I remain unrepentant. I think there should be a Revising Chamber for finance, because finance is the most important of all our responsibilities. Therefore,. I still believe in that idea, and I believe in it not only to control the Socialist party, but to control erratic Conservatives as in 1924–9. They were very adventurous politicians then. We had de-rating, which my right bon. Friend the Chancellor of the Exchequer described as a recurring expenditure with a non-recurring revenue. Then we had the great enfranchisement of the women in 1929, and the Conservative party at the last moment repealed the Tea Duty in order to get their votes.

Mr. H. WILLIAMS

We did not get them.

Mr. LAMBERT

That served you right, because this political bribery ought to be stopped. I have said before, and I repeat, that I think it.is true that taxation is strangling industry. The May Committee stated quite frankly that taxation has attained such proportions since 1924 that it must now be considered definitely restrictive of industrial enterprise and employment. I have an illustration, which came to me only this Easter. I was staying with a friend of mine, who has been interesting himself in the development of a new industry in this country. It is the production of a sparkling wine. I am not much of a judge of champagne myself—we in Devonshire drink more cider—but I had a vintage wine of a good year and a sample of this wine, which, as I understand it, is brought over from France in a kind of grape pulp and manufactured in this country; and you really cannot tell the difference from a good champagne. [An HON. MEMBER: "Nonsense!"] Well, that is my view, though I agree that I am not a connoisseur. It is sold at half the price. They have had the advantage of a lower duty,.but now the Chancellor of the Exchequer is going to raise the tax from 1s. 6d. to 6s. a gallon. [An HON. MEMBER: "7s. 6d.!"] Whatever it is, this gentleman who is interested in this enterprise told me that they have just spent a large sum of money in advertising, and he added: "This will just knock us out." Here is a case where, if there is an industry that can be established in this country, the Chancellor of the Exchequer should not knock it out, especially as it only brought him £7,000 a year.

I am sorry the Chancellor of the Exchequer has gone out, because I want to deal with another topic, and that is the Land Taxes. What does he propose to do with the Land Taxes? I asked him on Tuesday: "What do you propose to do? Do you propose to repeal them or not? Do you propose to put them in the Budget, because it is really time you made up your mind?" I fought the Land Taxes in the Parliament of 1931, and I am still against them. I say that this compromise of keeping the Land Taxes in a state of suspended animation is bad business, and it ought to be ended. If the National Government is to be a compromise Government, it will fail. We want a Government that knows its own mind, and really those Ministers who oppose the repeal of the Land Taxes do not represent either the House of Commons or the country.

Surely, if there was one thing more than another that we were sent here to do, it was to repeal that piece of Socialist legislation. It has not been done, and I cannot help thinking that the Chancellor of the Exchequer himself must have been overborne, and that he is in favour of abolishing these taxes. Unless they are abolished, however, I promise the Government my strongest opposition, and I hope to get the support of Conservatives who are consistent in this matter and who opposed these taxes in 1931. That is all that I have to say about the Budget. I hope the Chancellor's expectations will be realised, but I am certain that until he takes measures to raise the price level and so increase the real income of the country, we shall never be able to tolerate this great load of debt.

5.8 p.m.

Mr. LEONARD

I have listened to quite a number of the speeches made in this House with regard to the Budget, and very few of them did not contain some reference to the position of the co-operative societies, but I fully appreciate the fact that the Government themselves have not yet displayed their intentions with regard to these societies in detail, and therefore I do not propose to go into that matter. I simply rise because of the attitude that has been adopted on one or two occasions, and particularly by the hon. and learned Member for Argyll (Mr. Macquisten) yesterday, to whom I sent notice of my intention to raise this question to-day. In the earlier part of his speech he endeavoured to belittle the efforts made by the co-operative movement to express their indignation at the proposals of the Raeburn Report, and he said, for the guidance of Members of this House who were not so experienced as himself, that if ever they received "tons and tons of postcards," they should look upon them as a sign of weakness, and that the postcards represented, not majority opinion, but minority opinion. I do not know who has received "tons and tons of postcards." I take it that that expression has to be taken with some qualification. It may be like the last Town Clerk of Glasgow, who, when he was asked to indulge in replies that contained figures, always safeguarded himself by saying, after the figures, "more or less." I presume that the expression "tons and tons of postcards" has to be taken in that sense. But I would suggest to the hon. and learned Member that if it is the case that that attitude has to be adopted to postcards received by Members of this House, we might take his advice in so far as those postcards come from interests with which he is very intimately identified, namely, the beer and spirit industry of this country.

I want to say, with regard to the very scurrilous attack that was made, not only upon the co-operative movement, but upon the personnel of the movement, and especially the personnel which has been selected to perform very important and heavy duties, that that attack cannot be allowed to pass without reference. The hon. and learned Member made a statement alleging that people in high places, working in and for the co-operative movement, and in their behalf, have stooped to practices of corruption and indulged in bribery; and he gave an illustration in this way: A friend of mine offered the Co-operative Wholesale Society 4,000 automatic machines to help to defeat that wretched Act. He had previously mentioned the Shop Hours Act. He went on: He offered them at £18 a machine. Immediately after that, a gentleman waited upon my friend who said he was a commissioner collector"— I think that should have been "commission 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 hack, put in an offer of £25 per machine, and give the collector a commission note for the difference."—[OFFICIAL REPORT, 26th April, 1933; cols. 228–9, Vol. 277.] Later on, hon. Members can read for themselves in the OFFICIAL REPORT the rest of the story, but I will confine myself to adding that it was agreed that £16,000 should be divided up among them because of the modification of price suggested by those gentlemen.

I have been in touch with the secretary of the Co-operative Wholesale Society, Mr. Lancaster, and when the details were given to him, he naturally expressed great surprise that such a statement could be made in this honourable House, based upon mere hearsay, and also in the course of a journey on board ship by a friend unspecified, and at a time unspecified. I assured him that not only was that statement made in the House, but that it was made by a learned lawyer, and the fact that a lawyer should express hearsay details of that character surprised him greatly. I assured him that it was quite possible to make the wildest statements in this House and receive protection for them, even to the extent that the hon. and learned Gentleman himself last night displayed to the House when he said that he himself had guided persons as to how they could indulge in corruption and escape the results of that corruption.

The secretary of the Co-operative Wholesale Society at once made it clear, and I desire to make it clear, that he personally could not be aware of what happened in 1912, the year in which the Shop Hours Act was passed, but it seems strange, if that be the Act referred to, that 20 years have to be retraced in order to get a detail of that character on which to base a charge against the Co-operative Wholesale Society. While he personally had no knowledge, not being there, of what happened at that time, he has taken steps to have the records gone through, and they make no mention, nor have people in the department at that time any knowledge, of any such activity having been indulged in. However, if it be the case that it was not the Shop Hours Act, but the Shops (Hours of Closing) Act of 1928, then the secretary of the Co-operative Wholesale Society, Mr. Lancaster, can personally touch upon that matter. He desires personally to deny categorically and emphatically the allegations that any such thing took place or that any such transaction was ever mooted or took place under his jurisdiction as secretary of the Co-operative Wholesale Society. He and I are in treaty with an offer that has been made by the hon. Member for Argyllshire to give the name of the informant to the Chancellor of the Exchequer, but we challenge him not to stay there but to give the name of the informant to the Co-operative 'Wholesale Society; and if that is not possible, to go outside the House and outside the privilege of the House to make the state- merit. We can give him a definite assurance that steps will be taken to allow him to prove these allegations where the privilege of this House cannot be taken advantage of by him. With regard to a suggestion by the hon. Gentleman that the Inland Revenue might find something if they went to the books of the society, I will quote Mr. Lancaster himself: It was a deliberate and calculated lie to suggest that if the Inland Revenue had access to the society's books they would find evidence of fraudulent or corrupt transactions. He points out that the books of the Cooperative Wholesale Society were open to inspection and were inspected by various Government Departments in the same way as the books of any other business concern, and, moreover, such books were under public audit. On behalf of the directors and officials of the Co-operative Wholesale Society, Mr. Lancaster is glad of the opportunity which is afforded me of refuting the statements which amounted to malicious and entirely unfounded attacks upon their personal honour and character, and were made in a way and in circumstances which enabled the speaker to take advantage of his position. I want also to make an emphatic protest with regard to the scurrilous and libellous statement made by the hon. Member for Argyllshire when he said last night: 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?"— [OFFICIAL REPORT, 26th April, 1933; cols. 234–5, Vol. 277.] If the hon. Member had desired that information he might not have allowed this time to elapse before endeavouring to get it. He might have asked the First Lord of the Admiralty at that time the details which he claims that he is desirous of getting at the present time. It must be common knowledge among Members of the House that the political head of any Service Department can in no way interfere with the placing of contracts to meet the requirements of the respective Departments. There is a controller of contracts, who, I think, must be an hon. Member before he can attain such a position, and I think that the Controller of Contracts of the Admiralty must be taken as being quite capable of protecting himself against any political interference in this matter, and would rightfully resent any political representative interfering in the duty that is placed upon him, especially if it were possible that anything that might be done could savour of corruption.

The position with regard to these contracts must be made clear. Answers have been given in the House both by the First Lord of the Admiralty in the Labour and the First Lord of the present Government. I propose to quote an answer given by Mr. Alexander, who was First Lord in the Labour Government. The hon. Member for North Newcastle-on-Tyne (Sir N. Grattan-Doyle) on the 4th June, 1930: asked the First Lord of the Admiralty whether he is aware that the Co-operative Wholesale Society, Limited, were invited to tender, and tendered, for a flour contract for the Admiralty in October, 1929, and that a contract for flour was placed with them; how many other tenders were invited and submitted, and to what extent, if any, the tender of the Co-operative Wholesale Society, Limited, was lower than the others submitted; and the date upon which the first contract was made with the Co-operative Wholesale Society, Limited? Mr. ALEXANDER: The answer to the first part of the question is in the affirmative. After a preliminary test of samples, nine firms were invited to tender and eight firms tendered. The Co-operative Wholesale Society's tender was accepted for one-fifth of the total requirements for which portion their quotation was the lowest. This is the only contract for flour which has been entrusted to the society."—LOFFICIAL REPORT, 4th June, 1930; cols. 2174–5, Vol. 239.] Later, on 29th June last year, the hon. and gallant Member for North Battersea (Commander Marsden) directed a question to the First Lord of the Admiralty as to what contracts have been made between the Admiralty and the Co-operative Wholesale Society, Limited, during the past three months? Sir B. EYRES-MONSELL: No contracts have been made by the Admiralty with the Co-operative Wholesale Society, Limited, during the last three months. Mr. MORGAN JONES: Are they invited to tender? Sir B. EYRES-MONBELL: They are treated in exactly the same way as the others."—.[OFFICIAL REPORT, 29th June, 1932; col. 1784; Vol. 267.] That position was reiterated by the Financial Secretary to the Department on 13th July, 1932. Again the hon. and gallant Member for North Battersea asked: whether the trial contract for candles placed in April last with the Co-operative Wholesale Society is being satisfactorily fulfilled; and whether the Admiralty propose to renew the contract? Lord STANLEY: It is too early to say whether this trial contract is being satisfactorily fulfilled, as no quantities have yet been demanded by the establishments at which deliveries are to be made. The placing of a further order with the society will depend upon the prices quoted and upon whether deliveries under the trial order are satisfactory. I regret that this trial contract was inadvertently omitted from the reply given to the hon. and gallant Member on the 29th June last. Mr. T. WILLIAMS: Is there any real reason why the Co-operative Wholesale Society should not have these contracts? Lord STANLEY: I think they have just the same opportunities as others."— [OFFICIAL REPORT, 13th July, 1932; col. 1277; Vol. 268.] This is not the only instance upon which this movement, which is now being placed upon the spotlight in regard to taxation, has been attacked in the same manner, and I want to make a protest with regard to the use that is made of. the privileges of this House.

I have also given notice to the hon. Member for Macclesfield (Mr. Remer) that I am going to reply to something that he said. He has replied, however, that he may not be able to be here in time. Notwithstanding that, I must express my opposition to the attitude which he has adopted. The hon. Member made reference to the question of the execution of orders for jute wrappers for Denmark, and suggested that the Co-operative Wholesale Society of Scotland supplied the goods from foreign firms. A long correspondence has taken place between the hon. Member and the society through myself, and he was informed that the Scottish Co-operative Wholesale Society have never purchased a yard of continental hessian in all their experience, and that they guarantee every wrapper supplied by them to Denmark as entirely of their own manufacture at their own works in Dundee. The hon. Member then tried to wriggle out of the matter and endeavoured to suggest that the yarn from which the hessian for the jute wrappers was manu- factured was of foreign origin. He was then informed: The yarn used for making the hessians from which the wrappers are produced was all manufactured in the works of the Scottish Co-operative Wholesale Society. He has been challenged either to give proof of his allegation or to withdraw it, but the hon. Member has not withdrawn. Therefore I am entitled to enter a protest at the use that has been made of the exercise of the privileges of this House. There have been repeated occasions recently when wholly inaccurate slanderous statements directed against the society have been made, and I desire to suggest to you, Sir, that it is high time that some steps were taken to prevent the deliberate abuse of the privileges of this House. Hon. Members should no longer be permitted under the shelter of that privilege to make unfounded attacks which they dare not repeat outside the House, attacks, moreover, of a libellous nature, which are not even based on firsthand information, but merely upon second-hand hearsay evidence. We therefore challenge the hon. Member for Argyllshire and the hon. Member for Macclesfield to bring forward something of a substantial character to support their assertions and their innuendoes which have been contained in their speeches not only on this subject, but at other times.

5.26 p.m.

Sir GEORGE GILLETT

I do not propose to follow the hon. Member who has just spoken because it is not a subject into which I have specially looked, but no doubt after the explanation which has been made on behalf of the Society, hon. Members who made the charges will themselves answer in due course. I desire to bring back the Debate to the main questions that have already been referred to to-day in connection with the Budget. I congratulate the Chancellor of the Exchequer on having stood firm in face of the suggestion that the needs of the nation to-day made it imperative that we should have what has been termed an unbalanced Budget. I listened to the right hon. Gentleman who spoke earlier in the Debate, and while I agree with him in certain respects as to the seriousness of our financial position, I do not believe that our position would have been in any way strengthened by following out his suggestion in regard to a reduction of taxation by a diminution of the Income Tax and Surtax.

The question of the burden of taxation upon industry is one on which Members hold diverse points of view. If the burden upon industry is due to rates, the case cannot be disputed. If the burden on industry is due to the Income Tax paid upon money placed to reserve, then I agree with the right hon. Gentleman that that is a burden but I do not agree with him when he suggests that it is possible to differentiate in regard to the taxation of reserves and the taxation of profits. I have heard successive Chancellors of the Exchequer say that although they looked into this matter, they found it impossible to carry out such a suggestion in actual practice. When you ask how far Income Tax and Surtax is a burden upon industry, I believe it is exceedingly difficult to prove the case. I believe it was true 30 or 40 years ago to a far greater extent than it is to-day. In those days private individuals largely owned industries, out of which they made large profits, and probably put those profits back into the expansion of their businesses.

To-day most of the business of this country is carried on by limited companies, and when they pay dividends the money goes into the pockets of their shareholders, who, beyond drawing their dividends, in many cases take no interest in the concern, and have no opportunities, except at the annual meeting, to express their views. The directors have probably retained in the hands of the company as much in the form of reserves as they think desirable, and the rest passes entirely out of their control, and will only go back into industry if the owners of that money are willing to place it in some new investment. Looking at the financial position in the City to-day, no one can 'suggest that there is any lack of money. In the case of many sound investments the lists have hardly been opened before they have been subscribed for over and over again. It may be said, however, that there is a certain kind of enterprise which is of a more speculative nature, in which a man who owns money is willing to take considerable risks in the hope that he will make a considerable profit out of the adventure. I suggest that with industries of that kind to-day it is not necessarily a question of want of money, but that the reason why industry is not moving is lack of confidence, and confidence is not necessarily going to be restored by providing larger sums of money in the way suggested by the right hon. Gentleman.

All roads that anyone may follow on this particular problem of our national industrial and financial position lead inevitably, to my mind, to one point, the great question of our international trade. If one talks to the business men in London and in other great industrial centres one finds that what are perplexing them to-day are the exchange restrictions and the difficulty by reason of those restrictions of getting money which is due to them paid to them. On that account I welcome the action of the Prime Minister in going to Washington and attempting to grapple with this particular problem. I entirely agree with what the right hon. Gentleman has said about the very serious position in which the country is placed to-day. As he has pointed out, we see a declining revenue from Income Tax and Surtax, and a revenue from Customs and Excise duties that may not come up to the anticipations of the Chancellor of the Exchequer. On the other hand, we find an expenditure which is hardly reduced at all in comparison with the last days when the Conservative Government were in office. When we compare the estimated national income now with what it was when the first Labour Government was in office we find that it is some hundreds of millions less. At the same time, the national expenditure is as high as it was then. Therefore, we are taking from a reduced income a far larger percentage of the revenue produced in this country. That is why the position seems to me to be so very serious.

Criticism has sometimes been made that the Prime Minister has devoted too much of his time to foreign affairs and not sufficient to home affairs. Ultimately the solution of this problem must be an international one. Before I sat down I would like to say a word or two about certain aspects of the problem which are of a national character, but I do feel that the Prime Minister, in his recognition of the importance of the international question, is really following the path along which the only real solution of our unemployment problem will be found. On his arrival in New York the Prime Minister was faced with the fact that the American dollar had gone off gold. It is hardly needful for me to point out to any business man how serious is that move. If we are going to witness a competition in exchange depreciation between England and America, and later, perhaps, between France and the smaller countries of the world, the position of the business man would seem to be utterly hopeless and, indeed, desperate. Unless we arrive rapidly at some arrangement with America I do not see how such a competition is to be avoided. For that reason I disagree entirely with the right hon. Member for South Molton (Mr. G. Lambert) when he said that it was a mistake for us to pay the American debt. I believe it was the wisest policy this Government could have followed, because I feel that the only solution for most of the world difficulties to-day is to be found in an understanding between this country and the United States.

No solution of this problem will probably be arrived at without this country being asked the question, Are you prepared to go back to gold again? I suppose there is hardly another Member in the House at the present time who took the action which I did in speaking against the proposals of the right hon. Member for Epping (Mr. Churchill) when he was Chancellor of the Exchequer and, on the advice of his financial advisers and others, hurried this country back upon gold. We are well aware now of what that meant to British industry. I know that there are many who are suggesting to-day that some other standard rather than the Gold Standard might be found. I should say to anyone who put forward such a proposal that I do not believe, in the financial condition in which the world is to-day, that we are going to have an opportunity of working out a new system which will commend itself to the various nations. Therefore, provided we can get a satisfactory undertaking with the great gold-owning countries of the world that they are prepared to work the Gold Standard, in the long run it will be the soundest policy to look to a return to the Gold Standard, and probably to a return to it very much quicker than we may have thought desirable at one time. In saying this I wish to impress upon the Treasury, though I know it is needless to do so, the extreme caution with which such a policy has to be followed out. I know that even making a recommendation of this kind involves a very great danger to the whole of our industrial system, because if we should finally decide upon a, figure which is not quite the correct figure we may do our export trade enormous harm, or, on the other hand, we may be doing other industries tremendous harm. But I am so much impressed with the urgency of coming to a final solution of these exchange problems that I believe we shall have to take some very grave risks and be prepared to face up to this problem.

If we look all over the world to-day we shall find that not only are we faced with the question of the War debts but that many countries are literally smothered under their own debts. Why are so many of the exchanges held up and controlled to-day? Largely because the countries concerned cannot possibly afford to pay the debts with which they are saddled. Look at South America, or at the countries of Central Europe like Rumania and Hungary, and see the debts with which many of them are burdened. All those problems will have to be considered before we can expect that retrictions upon exchanges will be lifted, and this is the great problem that the Prime Minister' has been, shall, I say, preparing the way for solution of by his visit to New York. I am not saying that anything definite has been attained on that visit, but if an atmosphere has been created which is likely to lead to a solution of some of these problems one of the most important steps in regard to the restoration of finance and trade will have been taken.

There is one point in connection with the speech of the Chancellor of the Exchequer on which I must express regret —not for what he said, but for what he did not say. I have very much sympathy with the speech of the right hon. Member who spoke from these benches a short time ago and said that he felt the Budget speech ought to be a review of our financial position, that it was vitally connected with our trade and our industry and had a profound influence upon them. We listened to the Chancellor of the Exchequer for two hours, and the matters with which he was dealing, important as they may have been, were relatively small. After all what does the Beer Duty, and the question whether we pay one-quarter of Income Tax this year or next year amount to compared to the problem of getting the wheels of industry moving? Hon. Members must agree that they are all second-rate questions.

I think it was exceedingly wise of the Government to balance their Budget and to organise the great reduction in interest charges which has helped to relieve the Budget. All that has been absolutely sound, but what I would point out to the Government now is that a few years ago industry was sacrificed by our financiers when they hurried us back too rapidly to gold. The financial side owes something to industry, and now it is possible to use financial power to a greater extent for helping industry. I am not suggesting that it is desirable at once to go and raise large loans in order, perhaps, to prepare roads or things necessarily of that kind, but I believe that there are many other ways in which the credit of this country might be used. Some of them are small and some are important. I very much hope that in the housing proposals of the Government this financial credit will be used. We have had such a fall in industry that it may be possible to finance housing schemes, apart from the slum clearance schemes, without requiring any definite Government assistance, but, if this is required, I hope that it will be used.

I do not see why we should not again consider whether the Trade Facilities Act might not be very usefully applied. When I was at the Overseas Trade Department I often wondered why the business world does not make greater use of the facilities of the Export Credits Guarantee Department. There you have the principle of insurance adapted to overseas trade to a far greater extent than many business men are aware of. There has of late been a development of it, but at that time the proposals that came to the Department were for some specific and definite transaction, say between an exporter in this country or an importer on the Continent or in South America. Under recent arrangements the scheme has been so enlarged that, at any rate in one case, one business firm practically insured—for that is what it amounts to—the whole of its export trade with the Export Credits Department. In view of the difficulties of securing payment, I am amazed that this Department of the Government is not used to a far greater extent. It may be that these are only small ways in which the Government might be of assistance. I cannot help feeling that what we need is recognition of the assistance from the Government in every possible way.

There is another matter that came before me, and I do not believe that anyone has ever solved the problem, in relation to a gap in our financial system between the short advances made by banks and the long advances procured by industry when it floats a loan. Between those two there is a gap. A man wants to export machinery which is not going to be paid for, perhaps, for two, three or four years, and in our financial system to-day there is nothing, or at least funds are not easily available, for financing transactions of that kind. Attention was constantly being drawn to this matter when I was at the Overseas Trade Department; I suggest that the Government might look closer into it in order to see if they could help in that direction.

I should like to congratulate the Government on the arrangement with Denmark of the new commercial treaty. In regard to questions of Free Trade or Protection I was, of course, for many years a Free Trader. It seems, with the world as it is to-day, absolutely impossible to carry out Free Trade in the way in which it could be successfully carried out in pre-War days. During a number of years, taking the case of Denmark, we have been receiving vast amounts of bacon and other foodstuffs, but Denmark has been buying very small amounts from us. Now at last, on account of the use that has been made of the protective system, it is possible to come to some understanding by which, one hopes, a far larger amount of goods will be purchased in this country.

I was rather interested, during the Debate that took place recently on Russia, in the suggestion made by the right hon. Gentleman the Member for West Birmingham (Sir A. Chamberlain) that the Bill then before the House should be made applicable only to the emergency connected with the trial in that country. As a matter of fact, sooner or later, if a State organises its industry in the way in which Russia has done, and where they have begun to export certain goods into this country, you will have to consider whether you can possibly allow them to come in. In recent years, I suppose, Russia has been sending us timber and other goods with which our manufacturers could not compete. A few years ago there was a proposal that sweets should come from Russia to this country, and I remember receiving a letter from a gentleman who was an ardent Free Trader and was connected with the sweet industry, asking whether those sweets were to be allowed to come in and undercut his industry and the work that he had been doing. I am not disputing the right of any country to have a system like that which Russia has. The great principle by which goods are imported and exported is based upon considerations of private profit, but that is eliminated in the case of Russia. If Russia wants to raise credit in a country, Russia has to sell her goods. It can confine itself to any country or market that it chooses. It is only raising money, and the loss that it sustains is simply the loss of its trade. I cannot but believe that sooner or later, in our financial and industrial system, we shall find problems of this kind, not only with regard to Russia, but to other countries. The whole problem is whether you can allow goods to come indiscriminately into this country.

While we may congratulate the Chancellor on having stood firm against what I know was the very attractive and somewhat plausible suggestion that we should raise part of the national income by borrowing, I still regret that in the Budget speech we found so little connected with the great, burning problems of to-day in industry, our relationships with the United States, the Gold Standard, what we are going to do to solve the Exchange problems and how we are going to re move the debts of the world, which is the real financial problem that is before this country. We might have had a fuller statement from him and an indication from the Government that they recognise that the powers that they have obtained by their financial policy might now, to a greater extent in some way or other, be used in trying to get the wheels of in- dustry moving, and to give that confidence which the industrial world is 3o needing to-day.

6.54 p.m.

Mr. ANEURIN BEVAN

The discussions which have taken place yesterday and to-day have revealed an agreement between hon. Members in all parts of the Committee that while the Chancellor's statement was adequate, so far as the Budget itself was concerned, it was supremely inadequate in its survey of the nation's economic resources. The hon. Gentleman who has just spoken and the right hon. Gentleman the Member for Sparkbrook (Mr. Amery) emphasised that criticism. On this side of the House we have always contended that the Budget statement is itself entirely inadequate unless it takes cognisance of the general economic resources of the community. The Budget is not an instrument of economic organisation as much as it is a mirror of the state of trade, industry and finance. I must join issue with the right hon. Gentleman the Member for Sparkbrook in his contention that the Budget now is a very formidable instrument of governmental policy. It does not seem possible that a Budget can ever be a formidable instrument of economic and financial policy in a society in which the Government deliberately strip themselves of any power of economic direction.

I can quite understand that the Russians' five-yearly Budget is itself the Russian economic policy, but I do not understand why right hon. Gentlemen and hon. Gentleman criticise the Chancellor of the Exchequer because he does not present the House with a carefully-planned and carefully-marshalled set of statistics as to the actual state of trade in order to give some idea of what is to be put into operation in the succeeding year. The right hon. Member for Sparkbrook declared that it was possible for the Chancellor of the Exchequer to have framed his Budget upon certain principles which would contribute to the revival of trade and industry. The one contention which he advanced was that the condition of trade is due primarily to the heavy burden of taxation, and that if it wa3 possible for the Chancellor of the Exchequer to relieve the burden of taxa- tion, industry would immediately become more buoyant, the Income Tax payer and the investor would become much more optimistic, the investor would have larger resources at his disposal to invest and that, in that way, even though the Budget might not be balanced at the moment, the increased resources of the community would soon create such reservoirs of wealth that the Chancellor could tax them and again balance his Budget. I do not wish to misrepresent the right hon. Gentleman, but I understand that that was the course his argument took.

I have heard and read this argument so frequently that I have, striven to understand what it means. I have heard it advanced in this House that the reason why industry is impoverished is that the investing classes are called upon to make too large a contribution to the expenditure of the State, and that therefore they have far too little resources at their disposal for investment in ordinary enterprises. One criticism that we would like to make is that the money which the ordinary taxpayer and the potential investor pay to the State is not flung away. It is not dropped into the ocean. A very large portion of it finds its way back into the pockets of the investing class in the form of interest on the National Debt. That portion of it is simply a redistribution of the national income. In so far as taxation derives its funds from the general taxpaying classes and concentrates it in the pockets of the interest holders, it is in fact a concentration of the investment fund in larger pools. If the accumulation of funds in larger pools is one of the main means of getting money back into industry, one would suppose that this is an excellent method.

In the second place, if the £50,000,000 —we are told that to reduce the Income Tax by 1s. in the pound would cost the Chancellor of the Exchequer £50,000,000 —is left in the pocket of the potential investor, what will he do with it? Is there any reason to suppose that he will be able to spend it more wisely than the money he has already got and cannot spend? The right hon. Gentleman the Member for Sparkbrook, in order to prove his case, must say that the potential investor lacks funds at the moment, and that consequently the State is depriving the potential investor of funds which he would have invested if he had possessed them. I admit that the whole argument is purely quantitative, and that I am to some extent over-simplifying it, but it must be simplified for the purpose of seeing it in its proper outline.

The whole problem is, indeed, a quantitative problem. You have a large amount of money normally accumulating in the State that is available for reproductive or extension purposes. Industry has to be replenished; the whole economic apparatus of modern society has to be maintained from year to year. A very large portion of that money escapes taxation at the moment; indeed, if our Inland Revenue laws are just, practically all the money which is necessary for purely reproductive purposes at the moment escapes taxation. Last year company reserves were further exempted from taxation, and, if a case could be made in the House of Commons that reserves are not sufficiently large, that they are not sufficiently encouraged, that they have to carry too heavy a burden of taxation, I am sure there is no Member of the House who is more sensitive to an appeal of that kind than the Chancellor of the Exchequer. But the Inland Revenue Department is perfectly satisfied that there is not a deficient accumulation of reserves because of heavy taxation.

In addition to the money that is available for reproductive purposes, industry provides every year in normal times a natural increment for extension purposes, for the creation of new industries. I would like to know what the contention is. Is it that industry is not at the moment producing that normal annual income, and that, consequently, there are no funds available for the setting up of new industries and for economic extensions? Surely any survey of the situation would show that that is not so. What is happening at the present time is that over whole ranges of industry the profit-making principle is breaking down as a means of attracting the funds that are available. The point has been put by the Gold Standard people over and over again that what is wrong is that there is a profound disequilibrium between nations producing industrial products and nations producing primary products, and that that disequilibrium must be put right by reductions in overhead charges and in standards of living in the industrial countries, in order that they may come nearer to the standards of living of the nations producing primary products, and that when that new equilibrium is established it will be possible to make the nations producing primary products more prosperous. They will then be able to purchase larger quantities of industrial products, and thereby bring prosperity to the industrial nations, and again everything in the garden will be lovely, and capitalism will have a new lease of life.

The contention is that one of the reasons why that cannot be done is because the wicked Bolshevists in Great Britain, the trade unions and the Labour party, are able to put up such a formidable resistance to a reduction of the standard of life that that equilibrium cannot be established. The case is not that inadequate funds are available in Great Britain for investment purposes; the case is that there are not in existence, because of this disequilibrium, industries and nations able to use that money upon the basis of potential profit. It is obvious to all Members of the House that, if attempts are made in Great Britain to reduce the standard of life still further, to cut wages, to reduce the prices of industrial products, that cannot be accomplised without grave suffering for the population as a whole, and, indeed, is incompatible with the maintenance of a democratic Constitution in this country. There are those who whisper behind closed doors as yet, but who come forward now and again and say, that this rigidity of wage standards in industrial nations can be broken only by methods akin to Fascism. They will say, much more loudly than they are saying it now, that you cannot work a Gold Standard unless you break down the rigidifying effects of comparatively high wage levels and social services of different kinds; that, unless you can make them as flexible as the movements of the prices of goods all over the world, it is impossible for the profit-making system to work at all; and they will say that, as it is impossible to convince even a Tory working man in regard to lower wages and longer hours—because even he, poor fool, votes for the Tories because he believes that the Tories stand for higher wages and shorter hours —as it is impossible to keep on obtaining a Parliamentary majority by a policy of that kind, the advocates of the aboli- tion of democratic forms of constitution will come along and say that it can only be done by means of a distatorship. If that way out of our difficulties is to be adopted, it cannot be done unless Great Britain ceases to be a last defender of democratic liberties; that way out for capitalism is closed in a democratic country.

The other suggestion that is made is that what we want to do is to raise prices—that, if the price of cash can be reduced and the price of goods sent up, there will be an additional incentive to the producer to produce goods in larger quantities. That argument is very attractive; indeed, it has been put forward in some parts of the Labour party. It is suggested that, if we could only inflate, it would have the effect of reducing the general burden of fixed interest-bearing bonds, rents and fixed charges of all kinds, and that, by this financial sleight-of-hand trick, by a piece of financial chicanery quite incompatible with the maintenance of confidence in the capitalist system, it would be possible to reduce the overhead charges of industry and to pump a little oxygen into the deflated lungs of the capitalist system. I could never understand how that is going to be brought about. Some hon. Members have suggested that it might be done by ordinary Bank of England manipulation, that what is needed is to bring down the price of gilt-edged stocks, to encourage open-market operations by the Bank of England, and to increase the cash balances of the joint stock banks, when they will themselves be driven to lend money in larger quantities to would-be borrowers. The argument, therefore, is that industry is not making a profit, that it can only be given a profit by increasing the price of its goods, and that the price of its goods can only be increased by the banks being encouraged to lend money to borrowers who are not making a profit.

I cannot understand that. How is the bank manager going to do it? Ordinarily the bank lends money on the existence of a profit, or a reasonable certainty of a profit coming, but the inflationist argues that the bank must lend money because there is no profit, that only by lending money can a profit be created. That is all very well for the producer of goods, but what about the poor bank manager? How is he going to choose between a bad borrower and a good borrower, if the whole criterion of profit has been destroyed? The poor banker has to discharge his obligations to those who have entrusted him with their deposits; he has to earn dividends for his shareholders; he has to maintain the credit of the financial system. How is he to discharge all those obligations, or, in other words, how is he going to be a succesful capitalist, as he is entitled to be just as much as the producer of goods, if he is to ignore the existence of profit as a means of determining between a had borrower and a good borrower? It seems to me that those Members who are urging inflation upon the Government as a means of restoring prosperity to capitalist industry, are in effect saying that profit-making as a means of stimulating enterprise has broken down in the very citadel of private enterprise, finance itself, and that, therefore, credit must not be sown, but must be distributed. Everyone knows that the banking system cannot possibly live on principles of that kind, and I am not surprised to hear that the Chancellor of the Exchequer has declared against any such abandonment of capitalism in such a very important stronghold of capitalism as the banking system.

What other suggestions are made? The right hon. Gentleman the Member for Sparkbrook came forward this afternoon with a suggestion which I thought was one of the most extraordinary that had ever been made. His suggestion is that the State should be made a sort of cat and rat business, where the rats feed on the cats and the cats feed on the rats. He suggests that the Chancellor of the Exchequer should borrow £50,000,000 from the Income Tax payers in order to leave £50,000,000 more in the Income Tax payers' pockets. That is an extraordinary proposal. The whole advantage would be that the Income Tax payer, being no longer able to lend profitably to anyone else, could lend profitably to the State. I am asked to pay an additional 1s. in the £ in Income Tax, but a good, kind Chancellor of the Exchequer says. "No, I will not tax you that 1s.; I will borrow it from you, and pay you 31 per cent. for the privilege of so doing." Surely, the right hon. Gentleman does not believe for a moment that any Chancellor of the Exchequer in his senses could adopt a proposal of that kind. The only encouragement it would give to the Chancellor of the Exchequer would be the thought that in some way a reduction of Income Tax would come to the rescue of the capitalist system, and prosperity would again ensue. What evidence is there of that?

The United States of America was, in proportion to the total wealth of its population, the lowest-taxed country in the world. It is now the country with the heaviest unemployment figures in the world. President Hoover was a perfect representative of the school of the right hon. Member for Sparkbrook. He advocated low taxation over and over again. He said he would not borrow money for unproductive purposes. He did not believe in spending money upon public works, because public works were unproductive. For four or five years America adopted that policy. The result at the end of it was 12,000,000 unemployed. The right hon. Gentleman the Member for Sparkbrook is an exceedingly able man, and we are entitled to ask him to give evidence to show that the system will succeed here whereas it failed in the United States. We should like to know why it failed there and what reasons lead him to suppose that, whereas it failed there, it will succeed here. There was not a word from him in the whole of his speech. There was just an exhortation to the Chancellor to throw overboard all those wonderful Gladstonian principles the praises of which I have heard hon. Members sing so often, to turn their backs on what they did in 1931, to say that, after all, an unbalanced Budget is a splendid and a glorious thing and is the only way of reviving industry. It was disastrous in 1931 but it is a God-sent hope in 1933, but not a word of evidence, not a single fact have we had from the right hon. Gentleman except a pious hope that, if that were done, in some way rescue would come.

There are hon. Members who say that the only way, therefore, in which a rise in the price of commodities can be accomplished is by finding a spender. What is required in Great Britain is a spender. And that comes from Members of the Conservative party. They say that, if the State were to embark upon public works schemes of various kinds, it would be a substitute spender for private persons who are no longer able to spend money, and that is the way out of our economic difficulties. While the party to which I belong is an advocate of public works schemes of various kinds we have never put it forward that they will rescue this system from the difficulties in which it is placed. We do not subscribe for a moment to the notion that public works schemes will do any other than construct very useful things for the country, and improve our economic and social apparatus enormously, but at the end, it will leave you face to face with precisely the same difficulties. We simply put it forward because we say that, if we have idle men in a modern State we might be as intelligent as Pharaoh was. When he had surplus slaves on his hands, he built tombs. We might be reasonable enough to build houses. We have 3,000,000 people for whom we cannot find any useful employment, and the suggestion is that we might borrow a leaf from Pharaoh's book and build houses. The party to which I belong does not advance that proposition as a way out of the difficulties of the Government, but merely as a temporary expedient which has certain intrinsic advantages of its own. Therefore, if one examines proposition after proposition brought forward in the course of this Debate as a way out of the economic difficulties of capitalism, they will not bear examination. Equilibrium, Gold Standard, inflation, public works—many of them are mutually contradictory but, if a single one is adopted, there still remains an economic problem which is bound to produce difficulties for the Chancellor of the Exchequer.

I shall be saying something on which there is common agreement in all parts of the Committee if I say that what is required to be done is to get the economic system at work, to get the wheels of industry turning, and the Chancellor will be a very happy man, because he could carry this burden of taxation quite easily if the 3,000,000 men who are now idle were producing wealth. It is not the Chancellor of the Exchequer who is creating poverty out of the failure of the economic system to exploit properly the resources of the nation. What evidence is there that there is any prospect in the immediate future of that situation occurring' I have certain very interesting figures here, which have been got out from various Government publications, to show what actually happens when we start producing goods in a normal way. A census of production was taken of a number of industries between 1924 and 1930. The net value of the production during 1924 was £1,526,200,000. In 1930 the production in the same industries was £1,431,800,000. There is a reduction of 6.2 per cent. On that slightly smaller production profits increased by 3.6 per cent.

Mr. H. WILLIAMS

Did the information with regard to the profits come from the same document as the information with regard to production?

Mr. BEVAN

Yes.

Mr. WILLIAMS

Will the hon. Member inform the Committee of the name of the document?

Mr. BEVAN

No, I cannot do that because the information is scattered over various Governmental documents. I will not go so far as to say for a moment that I had either the means, the time or the money at my disposal to examine all these documents and get the figures out myself.

Mr. WILLIAMS

I want to know whether the hon. Member has any definite evidence that the profits to which he refers relate to the same industries as the production?

Mr. BEVAN

I understand that they relate entirely to the same segment of industry. From 1924 to 1930 there was a reduction of almost £100,000,000 in production, but an increase in profits of 3.6 per cent. That is a very serious thing. I am not putting it forward because I am making an indictment of the fact that profit has increased, but to show the mechanistic difficulties of the system in getting consumption and production equated. The number of men employed was 7,140,600 in 1924 and 6,784,000 in 1930, which shows a decrease of 5 per cent. The output per person in those industries in 1924 was £214 a year and, in 1930, £211a reduction of 1.4 per cent. The total wages, taking the industries as a whole, show a reduction of 4.3 per cent. Those are significant figures because, if you have a reduction in the total wage bill of 4.3 per cent. and an increase in profits of 3.6 per cent., and a general increase in production with a smaller number of men producing goods, you can make up for that margin only in one of three ways. You can either lend money abroad for the extension of industry in new lands requiring industry, you can have ostentatious spending on the part of the rich, converting steel-workers into chauffeurs and men servants, or you can spend it in raising the general wage level of the community so as to obtain a market in that way. We have refused to spend it in the last way, because wages have fallen by 4.3 per cent. The ostentatious spending of the rich has been to a large extent arrested because capitalism cannot furnish them with the confidence necessary for further ostentatious spending and, although it is true that you find plenty of Rolls-Royce cars on the road, nevertheless in modern society, what with wireless exhortations to save, on the one hand, and exhortations on the other hand to spend money, with bond holders being told that they are having too much and with the general collapse of world credit, you are not converting colliers and steelworkers into gardeners and chauffeurs quickly enough.

That is what is happening. From the purely mechanistic point of view, merely from the point of view of getting your products consumed, it will be a good thing for capitalism, for those who receive their incomes with such certainty and security that they can afford to expand their standard of living and live in the modern world as the patricians did in ancient Rome, but the difficulty of our modern rich class is that the very system that produces the wealth produces uncertainty, which prevents them spending their wealth. The result is that they hang on to their money, it accumulates in the bank, and, in consequence, there is a glut in the market, men are thrown out of work, a deflationary crisis sets in and lower eddies in the vortex are created. The third way, of lending money abroad, has been almost entirely arrested. There is a hope being expressed in many quarters that, if we only keep our mouths and our eyes shut and have confidence in the Foreign Secretary, he will be able to persuade Japan quietly, without anyone noticing it, and by not too violent violations of the obligations under the Kellogg Pact and the League of Nations, to conquer China and, by restoring order there, we shall be able to find some place where our wealthy people can dump our surplus, because the wage system makes it impossible to dump the surplus in South Wales, in Scotland, or in the Midlands. Having limited the purchasing power of our people under the wage system, having increased our productivity by machine production, we must do something with the margin. We refuse to raise the standard of wages or to spend ostentatiously, and we have to lend it somehow or another. The world is in a very difficult position. You cannot find places in which to invest your money. Mr. Gandhi has been walking up and down India creating trouble, and India is not a very good place for investment just now. Nationalist movements of various kinds cause difficulties there. Russia has, of course, gone along her own road and you cannot get in there. You cannot get into America, which is overindustrialised. You cannot get into Australia, New Zealand or Canada because you have not a pioneer population. You have not a rural surplus. You have an industrial surplus, and when labourers go to Australia or to New Zealand they stay in the towns, and will not be satisfied with simple living. You cannot have ostentation on one side and labourers living in a state of frugality on the other. The industrialists will persist in remaining in the industrial towns. Where are you going to put your surpluses? [An HON. MEMBER: "In Russia!"] The hon. Member says "In Russia." If you are sufficiently intelligent you will have realised that the one country in the world which is likely to raise its standard of consumption quickly is Russia. I have heard it said in this House on more than one occasion—Lord Snowden said it, and it has been said over and over again by hon. Members of the Liberal party—that if you only put one additional clout round the hips of a Hindu or a shirt on a Chinaman's back you would place hundreds of thousands of men into employment in Great Britain.

There are 150,000,000 people in Russia. It is true that they have been compelled in the course of the last few years to spend very much of their substance upon the building up of their military equipment. You have made them. No one is more responsible for the fact that Russia' has to organise her economic system on a war basis than Great Britain. You have therefore made it very difficult for Russia to raise her standards of life. It is true, if you have the intelligence to realise the fact, that the mechanisation of Russia provides an excellent opportunity for some years for dumping your surpluses abroad. But you might say to me that you would lose your money. [Interruption.] They would not borrow money if they were not purchasing goods. They are purchasing goods in large quantities. I am not saying this with a party object. I am only pointing out the difficulties with which you are confronted. It is not my fault at all; if you are throwing such large quantities of sand into the machine, that the machine will not work. I am not indicting you; I am only describing you..

Where, indeed, are those surpluses to be lent? You hope that China, will be opened up quickly, but it is going to be a long job. 400,000,000 people are not to be made into a province of Japan very easily or very quickly. Some hon. and right hon. Gentlemen have gone so far, and are so entirely uncertain about the future of civilisation, as to say that they hope that there will be a war somewhere else. If a war is somewhere else, existing competitors of ours and potential customers of ours will need our goods, and for a little time our difficulties will be resolved. It shows the utter commercial and moral bankruptcy of the capitalist system when responsible people can talk like that; and they are actually talking like that, as hon. Members of this House very well know. They are actually hoping that something like this will happen, although we are engaged at the present time in telling America that we cannot pay back all the money she lent us. Capitalism now hopes that it will be allowed to lend money to another country at war in order to lose it after the war is over. You dare not give money away to the poor in Great Britain, but nobody can argue that there is any nation in the world with sufficient credit to borrow money from Great Britain with the expectation of ever being able to pay it back. You do not want it back. At any rate, you want somebody to have a war because for a time industry will be fully employed in Great Britain, but when the end comes the foreign country will say, "We cannot pay it back; it will unbalance exchanges and disorganise world capitalism," and all the money will be lost.

There is no fault to find with the Chancellor of the Exchequer as a Chancellor of the Exchequer. He is behaving like a good Tory. It is true that all Tories are bad, but, as Tories go, he is good. The poor man is faced with impossibilities. His advisers are offering quack remedies. There is no solution of the difficulties. The Government have got themselves into an absolutely impossible state, and the indictment which we make from these benches is, that it is not the Chancellor of the Exchequer who has failed, but the whole system of private profit has failed to produce the wealth which the Chancellor of the Exchequer can tax. If we wish to have an intelligent discussion in the House of Commons, let us have it on the one issue that hon. and right hon. Gentlemen will not attack the Chancellor of the Exchequer, but will say how, in their judgment, with those facts, we can put 3,000,000 men into useful employment. There is in all ranks of the Conservative party a deep disbelief in the capacity to get themselves out of their difficulties. They do not believe that it is possible.

Viscountess ASTOR

The hon. Member is talking about the capitalist system. If we had a Socialist Government to-morrow and they put into operation a Socialistic system based on man being non-materialistic and loving his neighbour as himself and wanting nothing for himself, does the hon. Member honestly believe that that system would work?

Mr. BEVAN

I have never contended that the difference between a Conservative and myself is that I love my neighbour any the more strongly than he does. All I have said about the Conservative is not that he is less humanitarian, but simply that he is more stupid. There is nothing at all, as the Noble Lady and hon. Members can see, to give them hope for the future. If hon. Members feel optimistic, perhaps they will give us the benefit of their optimism, but we have not had it so far. I, therefore, suggest to them that they have no answer to us when we bring the economic indictment against them. They have no answer to us when we say that all that they can do at the moment is to cling on to precarious power by debauching democracy. No one in the House of Commons has proved that more charm- ingly or convincingly than the Noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor). As you are making the economic system more intolerable, you have to make the proletariat more drunk. The reason why the Chancellor of the Exchequer remits Beer Duty is because the Conservative party has a very low estimate of the working class of this country. I admit that, having regard to the boobies they send here, the low estimate is justified. You hope to snatch power for a little longer by the miserable device of giving more and cheaper beer. There is not an hon. Member who, in his private life, would conduct the distribution of his own income in the way he approves of the action of the Chancellor of the Exchequer in regard to this matter. All that you hope at the moment is that it will deepen your popularity, but your popularity is bound to decline because the economic system in which you believe is going more and more into ruin.

What will happen in the course of the next few years? Next year the Chancellor of the Exchequer will again have to balance his Budget. How will he balance it in view of declining economic resources and increasing financial difficulties? By repeating the device of 1931. He will have to have a new economy Bill. He dare not increase taxation very much because his taxable resources will be reduced. We have never contended on this side of the Committee that social justice is to be produced by humanitarian Budgets. We say that you cannot produce the surpluses necessary to redress social injustices. You are getting into increasing difficulties, and will have to bring forward another economy Bill. Although during the last election you were able to get working-cass people in this country to put up with great sacrifices, you cannot keep on doing that sort of thing. The working-class people normally look upon their political power as a means of redressing their economic wrongs. You cannot perpetuate your political power in a declining economic system without taking power away from democracy.

I, therefore, prophesy that as your system declines your attacks upon democracy will become more and more bitter. As you take away the workers' standards of life, you will take away the liberties about which you boast, and your moral and economic decline will be accompanied by bloody-mindedness and thugism, because you will have nothing at all left to defend it. It is difficult to bring home the realities of the situation to hon. Members who are so complacent. I should really like to hear from those who laugh and jeer some contribution which would bear examination. It is an economic difficulty and not a financial one with which the Chancellor of the Exchequer is faced. It is because we believe that you will not be able to do it, that we are certain that, small though we are, the time will come when we shall occupy the seats of power, and you will not be here to jeer.

6.45 p.m.

Lord APSLEY

This is the third day of the Budget Debate and I think from the general tone of the Debate and the comparative lack of interest in it the Opinion appears to be from all sides of the House that the Chancellor of the Exchequer has made the best of a bad job. He found the coffers when he came into office not only empty but with holes in them, with the result that the money went out at the bottom as fast as you put it in at the top. His predecessor, Viscount Snowden, at the last minute was afraid of what the evident policy of his party would mean for them and he attempted to patch up the holes, but even as there is still a good deal of work to be done, and now comes the difficult job of filling the coffers. Until the coffers are filled it is idle to speak about spending money and scattering it in largesse, as some hon. Members opposite would like to do, for they cannot do it, as they know well, until the coffers are filled.

I wonder what would have been the financial situation in this country had the present Chancellor been Chancellor of the Exchequer ever since 1924. Suppose from that date there had been sound, honest budgeting with the assistance of a scientific tariff, such as we have now, I believe that not only would there have been no financial crisis here but there would have been no financial crisis in America. There would have been none of that orgy of over-spending and over-investing which caused the crash. It 'would not have happened if America had realised that the markets for their goods were not unlimited. Alas, that has not been the case. The right hon. Member for Epping (Mr. Churchill) came back to us from the wilderness as a prodigal returned. And we made him Chancellor of the Exchequer on the grounds that a reformed poacher makes a good gamekeeper. He had been living a life of riotous living among his Liberal friends, and he found it difficult to reconcile his political conscience immediately to a sound fiscal system. It is true that he tried a few experiments on buttons, silk and enamel hollow-ware. Suppose he had gone the whole hog. I wonder what the position of our trade and industry would be to-day. He came to us a prodigal returned to the family amid some murmuring among the elder brethren.

I have sometimes wished that we could hear the end of the story about the prodigal son. I am disinclined to believe that after the feast of the fatted calf he settled down to honest work and did what 'his father and brothers told him. I have known some prodicals myself and have found as a rule that once a prodigal, always a prodigal, although there are sometimes exceptions, but I am afraid that it was not the case with the right hon. Member for Epping. The name prodigal rather than prodigy applies to him more than to any Chancellor of the Exchequer with the possible exception of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George). He spent. this country's revenues in a wasteful fashion and made up for it by a series of very clever Budgets. We are inclined to forget what those were because memories are short, but now we see the effects of them. The right hon. Gentleman is not here, although I did give him warning of my intention to refer to him. It is very difficult to find out when he or the right hon. Member for Carnarvon Boroughs will come to the House to listen to Debates. The right hon. Gentleman in somewhat difficult times among other financial measures for balancing his Budget made Super-tax payable a year earlier. He rechristened it the "Surtax" and said that nobody would notice the difference until the day of judgment. What actually happened was that the Super-tax payers had to economise very drastically in order to meet the obligations which immediately fell upon them.

At a time when the Prime Minister is urging the people of this country to spend boldly the Super-tax payers find it very difficult to carry on at all. They have had to economise which means turning off labour and the loss of trade which is always the inevitable result of drastic economies. Some of the smaller Super-tax payers have not been able to pay this double burden and are constantly receiving reminders of that fact from the Government while others have been compelled to borrow from the banks or to realise capital or property in order to meet the demands for Surtax owing to that device of putting back the Super-tax for one year. That was one of the measures by which the right hon. Member for Epping balanced his Budget. I only quote these facts in the hope that when the state of the Exchequer permits some relief may be given to those who have been unfairly treated.

Another measure adopted by the right hon. Member for Epping was that of the Royalties Tax. There was already in existence the Mineral Rights Tax of 1s. in the &. After the coal strike, in order, I suppose, to soothe the ruffled feelings of the miners—I will not say to get their votes, as he did not get them—the right hon. Gentleman imposed a Royalties Tax of 1s. in the together with a tax of one penny per ton payable by the colliery undertakings from the actual coal raised, which was to provide a fund for the erection of pit-head baths and other amenities. I do not know whether the miners were grateful to the right hon. Gentleman for this measure or how it has been administered. Apart from that, a tax should not be judged by its political merits, but by its equity and economic worth. The right hon. Member for Epping is an author of great repute and of excellent style. His English and powers of description rival Kipling and Masefield. His works, in a generation that adores historical fiction, command considerable sales. Suppose the present Chancellor of the Exchequer imposed a literary writers' tax of 1s. in the £amp;, together with a royalties tax of another is in the £amp; levied on the author's royalties to be paid by the author and a further tax of 1d. per volume payable by the publisher in order to provide free hair cutting and shampoos for the publisher's hands—

Mr. H. WILLIAMS

Can the Noble Lord tell us when all this happened?

Lord APSLEY

It was during the last Conservative Government.

Mr. WILLIAMS

No.

Lord APSLEY

The Royalties Tax was. The hon. Member perhaps will correct me if I am wrong—

Mr. WILLIAMS

It was during the time the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) was Prime Minister.

Lord APSLEY

I am afraid I cannot accept that statement. The Mineral Rights Tax, if my memory is correct, was imposed during the Premiership of the right hon. Member for Carnarvon Boroughs, but the Royalties Tax for the Miners' Welfare Fund was imposed in 1926 when the right hon. Member for Epping was Chancellor. I think the hon. Member will find that that is right. If not, he will correct me. It is useless for the Prime Minister to tell us to spend boldly in these conditions. How can one spend boldly without any money? The large landowner by the time he has paid Schedule A Income Tax and Income Tax on other schedules, Surtax, the Land Tax—I am referring to the Land Tax which was put on by Alfred the Great to keep out the Danes and which has never been repealed, and not Lord Snow-den's Land Tax, which appears to have gone to ground and we do not know whether it is going to bob up again—has to pay 15s. in the pound. Moreover, if any part of his money comes from mineral rights there is a further 2s. in the pound to be paid. With all these charges for Income Tax, Surtax, Mineral Rights Tax, Land Tax how can he spend boldly? How can he employ more labour? How can he help his tenants to keep their farms as they should be kept? No wonder that the countryside of which we were once so proud is now rapidly disintegrating, that buildings are falling to pieces, that fences are overgrowing, that ditches are filling up, that walls are tumbling down, and honest stone replaced by barbed wire and corrugatediron. No wonder that farm labourers are leaving the farms and flocking into the towns and taking other men's jobs or going to some other work in the village in order to qualify for the dole.

No wonder that the landowners are selling their estates to building contractors who put up jerry-built villas. This process is going on and it will continue so long as there is no adequate provision from Income Tax for a proper allocation for repairs. You are allowed to deduct a certain amount for repairs from Income Tax and Surtax, but nothing like the proportion that ought to be allowed in consideration of the capital money spent. Further, no improvement that is made, and every improvement employs labour, no improvement that the landowner or the farmer may do qualifies for any relief of tax, on the ground that, it is a capital improvement. All that happens is that his successors have to pay Death Duties on a greater amount on a wholly fictitious value, calculated by official valuers as the value of the estate. Lord Snowden's party followed the right hon. Member for Epping into greater orgies of expenditure, with the result that the State coach was rapidly going down the steep slope that ends in bankruptcy. No wonder that the leaders jibbed and then broke away, leaving the coach in the middle of the road, but still unbroken.

There is comparatively little criticism of the Budget that has been presented by the Chancellor of the Exchequer even from hon. Members opposite. The right hon. Gentleman is relieving us of a certain amount of taxation, and is beginning from the bottom. The relief on beer and the relief on Income Tax, with the exception of those people who have big salaries, such as lawyers and specialists, will benefit principally those with the smaller incomes. That no doubt is a wise and humane course but it is not an economic course, and it is not really the right course. Ever since the days of Solon there has been an economic law, which has never been challenged, that taxes on the rich are paid by the poor. Hon. Members may see that recurring time after time all through history. Where taxation has been heavily graded, as has been frequently done by many statesmen in the past, there has been an immediate increase in unemployment. Trade, commerce and industry when heavily taxed cannot possibly revive. Relief of taxation of the small man may benefit the cinemas, the breweries and the dog-racing tracks, it may benefit the tramway and omnibus undertakings, and it may benefit the factories of cheap goods, but they form only a fraction of our trade and industry.

Those hon. Members who are constantly stating that the way to restore economic equilibrium is to raise the purchasing power of the people should remember that it will affect only those industries I have mentioned, and that it will not affect the trade and commerce of this country as a whole. Trade and commerce as a whole is at this moment faced with such a burden of taxation that it cannot possibly thrive. Philip of Spain conquered Portugal which was then the richest country in the world. He hoped to get a considerable increase to his revenue from that country. He found in a very short time that the revenue seemed to vanish, and he got no more out of Portugal than out of Spain.

Mr. LAWSON

Where else did he go?

Lord APSLEY

He went to Flanders, but that has no bearing on the matter I am discussing. In spite of the fact that gold was pouring into Spain from America, and into Portugal from the West Coast of Africa, he could not get his revenue for trade and industry always run the risk of loss and men will not risk loss when the Government takes 50 per cent. of any possible profits. That brings me to the interesting question of the relationship of gold to the spending power and wealth of the community. We hear a great deal about this and, if I may be permitted to say so, we hear from economic experts a great deal of nonsense about it. We have never gone off the Gold Standard, nor has America done so. We are still on the Gold Standard. We have only depreciated our currency, and so have the Americans. It is hardly an experiment. It is a practice which has been followed all through history by rulers, whether of kingdoms, empires or republics, back to the days of Babylon and Egypt when they found their expenditure higher than their revenue. Even the Socialist Republic of Sparta, in order to encourage the production of iron, and thrift among its citizens, went off the Gold Standard and adopted iron. What happened? The only result was that, as the production of iron increased, so the size of the ox wagons in which Spartan ladies going to market brought their currency increased also. For the price of commodities simply varied according to the amount of iron you could buy for an ounce of gold or silver in Athens.

So long as nations as a whole are on gold or gold and silver you cannot adopt any other currency. What we have done is to depreciate our currency and the only cure is that which was put forward by the hon. and learned Member for Argyll (Mr. Macquisten) last evening when he said that the high price which gold had acquired at the present moment was bringing the inevitable result of increase of production. That increase of production will in time bring gold back again to a parity, perhaps such as we had before the War. If this is what we desire, it can be done only by the increase of gold, and not by juggling with currency. Any attempts at this will have serious repercussions on trade. If we deflate our currency we have trade depression. If we inflate we have an artificial stimulus to trade which lasts just as long as credit lasts and then a worse depression. The proper course, I am afraid, may perhaps take the ten years which the right hon. Gentleman told us we might have to wait. It can only be hastened to a certain extent by the adoption of silver on an agreed basis, among all nations, to assist gold to perform its function. Americans have already discovered that fact, and I hope this country will follow until gold is produced in sufficient quantities to supply world requirements. I hope that, meanwhile, we shall be allowed silver as a proper currency. We might make a start by producing silver coins, and not coins which are part silver and part nickel. Although they would cost a little more money, they would assist trade with India and China.

The Chancellor of the Exchequer asked every Member of this House to give his suggestions on economy, and the hon. Member for Ebbw Vale (Mr. A. Bevan) said he would like to hear if anybody had a proper suggestion for economy. If I may, I would make one or two suggestions. Charity begins at home, and so does economy. You have to start at the centre, and secure economies there before you can start anywhere else. We should begin by cutting down the Cabinet. I cannot conceive of even running a village cricket club with a committee of 23, let alone running the country. I should like to see the Cabinet cut down very materially or else the introduction of a small super Cabinet of four or five Members governing policy and only calling in other Members of the Cabinet with reference to their own Departments for which they would be entirely responsible. I believe that would add to economy and efficiency. I would like to see drastic revisions and alteration of the whole system of Departmental Government in this country. I would like to see it tackled in the way a gardener deals with a bed of perennials that has overgrown. Where Departments interlink and overlap I would like to see Departments rooted up, divided, and replanted so that the more vigorous shoots are allowed to grow and flourish. If I may give one or two examples, I would suggest that a Department of Public Works and Crown Lands should take over the whole of the building and land agency work of the Government of the country. It should take over all the Crown land and all the buildings and public works done by the Government. They should be put under one Ministry with qualified men well grounded in that job. Land and building is definitely a job for experts and experts only. You can lose more money at that than anything else, and indeed money is being lost. Departments such as the Ministry of Education, the Ministry of Transport, the War Office and the Air Ministry do their own building and buying and selling of property. In most cases they lose a great deal of money over it. If the work of landlord were done by a Department of experts and all other Ministries merely rented land and building from it, I believe there would be a vast economy made. I would like to see a Ministry of Communications which would preside over the interests of all transport by land, by sea, and by air. I would like to see the Board of Trade dealing with trade only and not shipping, and the Air Ministry with air defence only. Under a Ministry of Communications would be the British Broadcasting Corporation, Imperial Airways, the London Traffic Board, the Electricity Board and Post Office.

To my mind, under such a system there would be enormous scope not only for economy but also for increase of efficiency. I would like to see one Minister in charge of each Department. If it is urged that a Department so extended would be so large that it would be impossible for one man to take charge of it, I would submit that there are in the present House of Commons a larger number of able young men and women than there has been in any House of Commons which has been elected for a great many years. They are anxious to do their very best and to give all the service that they possibly can. If a Department when so reorganised was so complex that one man could not possibly look after one Ministry, surely he could choose from among Members of the House of Commons any number of young men or experienced men to help. They would be chosen regardless of party and entirely according to their experience or merits. They would give the Minister any assistance he needed in executive work. They would do it without payment. I believe that a great deal of that energy with which the last election filled this House of Commons and which is being wasted in endless committees and commissions, would find a much more useful outlet if a system of this kind were adopted, and I am sure that if this were done the country, as a whole, would realise that this National Government had tackled its job by reorganising the administration. By such means we could show the world that democracy as practised in this country could be made every bit as efficient and as effective as any of the autocracies or dictatorships we find abroad.

7.12 p.m.

Mr. LESLIE BOYCE

As there will be ample opportunity to discuss the details of the Chancellor's proposals in the Committee stage of the Finance Bill, I propose to confine my few remarks to that part of the Budget statement which relates to duties upon road vehicles. In dealing with this question, what is the real nature of the problem which confronts the Chancellor of the Exchequer? Fundamentally, it is not a conflict between road and rail transport, but a question of the position of mechanically-propelled road vehicles in relation to the general community. This new form of transport has been superimposed, over a very short space of time, upon other forms, and has completely upset the old equilibrium. At present the heavier class of road vehicles are admittedly not making their proper contribution towards the cost of the roads, with the result that the existing position is not only unfair to other forms of transport, and detrimental to the public interest, but inequitable between one class of road-users and another.

It cannot be seriously disputed that a new equilibrium will have to be established. It should be established on the basis that each form of transport should be self-supporting and pay its own costs; that it should be conducted with fairness to all transport users and as between one operator and another, and that wasteful and redundant transport facilities, which ultimately have to be paid for by industry, should be eliminated.

The ostensible object of the Chancellor's proposals is to provide that each class of commercial goods vehicles should pay its appropriate share towards the cost of the roads. When, however, we come to examine these proposals in detail we find that they fall far short of the recommendations of the Salter Conference. Many hon. and right hon. Members who hoped and expected, not without reason, that those recommendations would be fully implemented in the Budget, cannot fail to be disappointed that their hopes and expectations have not been realised. I need hardly remind the Committee that the Salter Conference, consisting as it did of an equal number of road and rail representatives, after three and a-half months of most careful and exhaustive investigation, reached unanimous conclusions on this subject; but only after both sides had made concessions on many points to which they attached importance, in order that they might be in a position to present the Government with unanimous recommendations. The case for very substantial increases in the contributions of heavy vehicles is, as the Chancellor of the Exchequer himself has stated, unanswerable. There is a strong presumption that if the compromise which was agreed upon by the Salter Conference erred in any way it was on the side of leniency towards road interests which were directly and immediately concerned.

In spite of that, the Chancellor's proposals go only part of the way towards removing the subsidy which heavy road transport at present enjoys, and which confers upon it a very definite and unfair advantage in competition with the railways, canals and coast-wise shipping. Until all classes of commercial vehicles pay their proper contribution in full towards the cost of the roads—and I submit that under the present proposals they will not do so—other forms of transport will remain under a very severe and unfair handicap, and progress towards that proper co-ordination and division of function which we all desire to see between different forms of transport, and which is envisaged in Part III of the new Road and Rail Traffic Bill, must be seriously impeded. Although I regard the Chancellor of the Exchequer's proposals as being inadequate, nevertheless, so far as they go I regard them as a step in the right direction and welcome them as the first serious attempt that has been made by any Government to place heavy commercial road transport on something approaching a self-supporting basis.

7.22 p.m.

Colonel GRETTON

I have listened to a large part of the Debate on the Budget proposals, and it is remarkable that practically very few Members in discussing the Budget have alluded to the subject of economy. We shall be driven sooner or later, by the force of circumstances, to consider very definitely and closely the subject of economy in future Budgets. Our expenditure is enormously and overwhelmingly high, and every possible economy will have to be made in the future. I will not follow the example of the noble lord the Member for Central Bristol (Lord Apsley) and make any further suggestions but may I emphasise this point, that I hope the Committee will not be discouraged by the statement of the Financial Secretary to the Treasury when he said that there was only some small portion of Government expenditure which is now open to consideration in regard to economy. The Budget, I suggest, is a good Budget in the circumstances. The times are abnormally difficult, and the Budget follows the lines of sound finance and stability, although it also makes raids on resources which cannot be repeated. The proposals of the Chancellor of the Exchequer mean that for the time being there is to be a suspension of the Sinking Fund. A canon of sound finance ever since I can remember, and probably long before that, is that debt ought to be paid off as means and revenue will allow, and although it may be possible to suspend the Sinking Fund for this year, and possibly for another year or two, we shall have to find the revenue to restore it.

A matter which has caused great alarm, or perhaps I should say great uneasiness, among many hon. Members is the series of agreements now in process of being made, and the arrangements now being entered into for quotas on imported goods from abroad. It is not only causing some uneasiness, but we think that there is a great danger of encroaching on the spirit if not the letter of the Ottawa Agreements. We do not wish to see the liberty of this or any other Government curtailed in making further arrangements for extending Imperial Preference or to carry out an extension of the principles of the Ottawa Agreements. We hope that the Chancellor of the Exchequer will be alert to see that these resources of revenue, and the elasticity of these resources, are not interfered with by any arrangements that are now being made. We have not at the moment a regular system of tariff protection. The number of goods on which there is a protective duty is comparatively small. It is true that there is a general revenue tariff of 10 per cent., except on some articles of food, but its protective effect on any of the commodities to which it applies is practically negligible. The yield of the Customs Duties, as the Chancellor of the Exchequer has said, has been of great assistance in balancing the Budget this year. There may have been a shrinkage in imports but that shrinkage is not, in my opinion, due to the protective effect of the duties. I do not think they have the effect of curtailing imports, to the extent to which the Chancellor seemed to indicate. I have promised to be very brief and, therefore, I will content myself with saying that those who believe that the principle of tariffs is a sound and right one, view with much regret these quotas, which are intended to raise the prices of commodities in this country, and which will at the same time raise the prices we have to pay to the importer. These sources of revenue are slipping from the Chancellor of the Exchequer, and the profits are in a large proportion going into the pocket of the foreign importer.

The Chancellor of the Exchequer has at last, I admit on the first opportunity, returned to the Income Tax payer of this country the one-quarter's revenue which was collected by Lord Snowden when he was Chancellor of the Exchequer. In the year of emergency the Income Tax payer was required to pay a full year's tax with one-quarter added. Clearly that quarter had to be returned at some time or other to the taxpayer, and the Chancellor has now arranged to make restitution of the £12,000,000 which the Income Tax payer found for the emergency. That very hardly vexed member of the community will now be able to pay his Income Tax as he did previous to Lord Snowden's Budget, that is, half-yearly. The Chancellor has also done right in reducing the tax on beer. He had three reasons for doing so. I took no part in the negotiations between the Chancellor of the Exchequer and the representatives of the Brewers' Society, therefore I cannot speak with any inside knowledge of what occurred. But the Chancellor of the Exchequer has not to consider the interests of the brewers. He has to consider the revenue of the country, the consumers of beer, and also the agriculturists. From the point of view of revenue, under the excessive and overwhelming taxation which prevailed until two days ago, the revenue from beer was rapidly declining. Undoubtedly the high taxation was killing a valuable source of revenue, and the reduction of one penny per pint will do something to preserve that revenue. Therefore, from the public point of view, the reduction that is made in the tax on beer is entirely justified.

It will undoubtedly be a relief and satifaction to the consumers of beer, who in this House are often abused and reviled to an unlimited extent by some hon. Members. It is no crime to drink beer. When I was a very young man I was told that beef, beer and the Bible were the backbone of the nation. You can put them in which order you like. I think I should put the Bible first myself. Beer is not a drink that necessarily produces drunkenness. It is one of the drinks that may be indulged in to a considerable extent without doing any harm to anyone. The Americans have found that out in the last few weeks. Under prohibition drunkenness was rife. Directly the American people could get beer, light beer, it is true, drunkenness decreased very considerably. Indeed, we are told that it decreased by one-third in New York and by one-half in some parts of the country. Beer is better than prohibition even from the very stern point of view of the strict teetotaller.

Unfortunately, I did not hear the speech of the Noble Lady the Member for the Sutton Division (Viscountess Astor), and she is not present now. But I did hear a few of her concluding sentences, and she indulged in unlimited abuse of brewers, in which others have to some extent followed her. I do not think that anyone believes that kind of violent and hysterical language. The Noble Lady accused brewers of bribing the Press, it appeared, and of illegitimate pressure on the Chancellor of the Exchequer. I am sure the Chancellor will repudiate any accusation of that kind. It would be difficult to prove that any of the great and reputable organs of this country could for one moment accept any form of bribery, and I need hardly say that it has never been attempted. The beer drinker will get the benefit of this concession.

I believe that the Chancellor would have done better for the revenue in the long run if he had seen his way to reduce the duty by an amount equivalent to 2d. a pint. It would have cost him very little more, and it would have done more to re-establish that stability of the revenue which he desires to keep in future years. But one penny is something to get along with, and we shall have to see how the reduction works. Without doubt either the present Chancellor or future Chancellors will make further reduction in the duty when the finances of the country allow. The Chancellor of the Exchequer desired to help the agriculturist. That is a very proper desire, and one with which I entirely sympathise. By the undertaking given by the Brewers' Society, British materials in larger proportions are to be used in the increased production of beer. That is all very satisfactory. But I wonder whether the Chancellor of the Exchequer is taking the best means to produce the right beers. The minimum gravity for taxation is fixed at 1027 degrees, and in terms of the old taxation, which ended two days ago the Chancellor has reduced the duty upon the standard barrel by 24 shillings, and there is to be a rebate of 30 shillings a liquid barrel instead of the 20 shillings given previously. The rebate on the liquid barrel is, of course, a premium upon lighter gravity, on the lighter kinds of beer. If the premium works as is intended, in encouraging the consumption of the lighter gravity beers, it means that less barley and less hops will be used in the production of those lighter beers. Of course the rebate per liquid barrel works on an ascending scale. A gravity of 1027 degrees costs about 11d. hut at the old standard gravity of 1055 degrees, the gravity will cost 1s. 5½d. per degree. That is not an encouragement to the production of beers of heavier gravity.

But I am not criticising the proposal. The Chancellor has made this change and a year's working will show what the result will be. Meanwhile the Budget proposal has afforded a very sensible and welcome relief to the consumers of beer. As a brewer I thank the Chancellor for having been able to pay attention to this side of his revenue, and so far as I am able to speak for brewers, I can say that every effort will be made to carry out the undertaking which has been given.

7.40 p.m.

Mr. DAVID MASON

I am sure that the right hon. Gentleman who has just spoken will not expect me to follow him into the intricacies and the technicalities of the taxation of beer. All of us will agree that the right hon. Gentleman could have taken no part in bringing pressure on the Treasury with regard to this proposed taxation. On the contrary it will be within the memory of some hon. Members that when the De-rating Bill was before the House the right hon. Gentleman rose—his company was then paying 25 to 30 per cent.—and refused to take any advantage of the De-rating Bill, but urged that its benefits should be devoted rather to the distressed areas.

I would ask the attention of the Committee to a question that was put by my right hon. Friend the Member for Darwen (Sir H. Samuel) to the Financial Secretary to the Treasury. My right hon. Friend's speech, I believe, commanded appreciation from every quarter of the Committee, and was regarded as one of the finest speeches that my right hon. Friend has ever delivered in this House. Its broad survey of affairs and the high statesmanship shown throughout will be remembered for many a long day to come. My right hon. Friend asked the Financial Secretary, with reference to the Exchange Equalisation Fund, what was the state of the fund, and the Financial Secretary in his reply very courteously said that the fund showed a profit. I have made a considerable study of the fund. I opposed it when it was originally introduced, and I cannot understand the Financial Secretary's statement. It seems to me that his answer was misleading.

Of course if we adopt the premise that it is the policy of the Government to stabilise the pound at or about the existing rate of exchange, then the fund might possibly show a small profit; but, as we know, the Bank of England and the Treasury combined since 1931 have purchased something like £64,000,000 of gold bullion, and obviously either the Bank of England or the fund have had to bear the cost. It is difficult to find out what is the policy of the Government with reference to currency. But if it is the policy to restore the pound, to revert again to a figure at or about the old parity, there must be a loss of anything from £26,000,000 to £30,000,000. Assuming that that is the policy of the Government the country will have to face that loss. If, on the other hand, the Government propose, as is stated in some quarters of the Press, to stabilise at a lower figure or at a different figure from the old parity, let us call it by the right name—it is a policy of repudiation. If you do not pay 20s. in the pound and propose to pay only 15s. in the pound, it is repudiation. If the Chancellor of the Exchequer wishes to go down to history as a defaulter, if the present Government wish to add that to their reputation in the future, let them say so. We gave the Government the right to borrow £150,000,000 for this fund, and we are entitled to know how the money has been disposed of, and what is the policy of the Government.

Let me give a quotation from a speech delivered during a. Debate similar in character to that in which we are now engaged which took place in the House of Commons 100 years ago. It was a Debate as to whether this country ought to revert to the standard of currency which had formerly existed, and in the course of that Debate a speech was made by Canning, who was one of the greatest of our Foreign Ministers and also a great Conservative. His reputation as a statesman is more generally associated with his foreign policy—which was largely Liberal, although, as I say, he was a great Conservative. But he was a liberty-loving man and devoted his life to the cause of freedom in regard to such matters as Catholic Emancipation and many other subjects. Although his reputation is so much associated with foreign policy his contributions to financial debates will bear comparison with those of any of the great financiers of his time. What did he say when a policy of repudiation was suggested and when it was proposed that this country ought not to go back to the old parity? Good God, what is this but to say that the system of irredeemable paper currency must continue for ever, …that debts incurred and contracts entered into under the old-established legal standard of the currency, including the debts and contracts of the State itself, are now to be lopped and squared to a new measure, set up originally as a temporary expedient? That is exactly what would happen today if the Government proposed not to return to the old parity but to have a changed parity and to reduce the purchasing power of the &. It would mean the lopping of so much interest from every creditor of the State. It would mean a loss to every bondholder and to every wage-earner. I ask the attention of the Leader of the Opposition to this point. I am trying to show what would be the effect of such a policy on the part of the Government—

Mr. LANSBURY

I have been trying to discover what is the policy of the Government.

Mr. MASON

Then perhaps the right hon. Gentleman will unite with me in trying to elicit from the Government whether their policy is to maintain the honour of this country and get back to the old parity, or to alter the parity in a manner which has been suggested in the public press. Suppose that you were to establish our currency on a different parity, say at about the existing rate of exchange, I suggest it would mean a drop of about 5s. in the & for every wage-earner. If the & is to be stabilised at about 15s. then the money which the wage-earner receives from day to day would be worth so much less. The interest of the bond-holder as well as the wages of the wage-earner would be reduced to that extent. Therefore, it is essentially a working man's problem. When America was going through a similar experience it was well said by a great American statesman, Daniel Webster, that "he who tampers with currency robs labour of its bread."

Mr. LANSBURY

But it is tampered with all the same, whether that is the effect or not.

Mr. MASON

That is why I am asking the right hon. Gentleman to unite with those of us who are fighting for sound finance and a sound currency. This is a subject which ought to appeal to the right hon. Gentleman and his colleagues. They talk of wages but if the £ is stabilised at a parity different from the old parity, with a lower content of gold, it will mean a reduction of wages throughout the length and breadth of the land. Therefore I hope that this subject will receive more sympathetic attention and study from hon. and right hon. Gentlemen of the Labour party. There is also a moral question involved. What is the basis of the £ in this country? It goes back to the Gold Coinage Act of 1870 when the gold sovereign was fixed as being equal to 123¼ grains of standard gold. The Currency Act of 1914 provided that the holder of a currency note, on which the Bank of England note of to-day is based, was entitled to obtain on demand at the Bank of England payment for the note at its face value in the gold coin which was for the time being legal tender in the United Kingdom. The gold coin which was legal tender in the United Kingdom at that time was on the basis of 123¼ grains of standard gold. That was the standard by which British currency was regulated, and when those notes were issued they gave the holders the right to obtain at the Bank of England gold coin of a certain weight and fineness.

During the War we went off the Gold Standard, and when we restored the Gold Standard in 1925 the same conditions prevailed with this alteration, that under the Currency and Bank Notes Act of 1928 the holders of notes instead of being able to get gold coins were limited to gold bars. But the same basis remained. It was limited to 400 ounces of fine gold in bars, but with that exception that remained the basis of our currency. It was well said by a Noble Lord that we were really not off the Gold Standard but that we were off gold parity. We still regarded that parity as the measure of value and there was still the belief that some day we would revert to the old parity. This is a rather technical subject and I am grateful to those hon. Members who have done me the honour of giving me their attention and I hope I have not wearied them by my explanation of a very technical problem. But unless we take the trouble to master this subject we shall not be able to play our part in those discussions which will take place later on in regard to the World Conference and the future of our currency.

I hope I have been able to show the vital necessity of returning to the old parity. I believe that we could do so with comparatively little distress. Many people suggest that it would entail a great deal of unemployment and many other difficulties, but I cannot follow that argument. Commodities have never been so low as they are to-day and I cannot believe that reverting to the old parity now as compared with 1925 would mean any further fall. On the contrary, I believe that if London were restored as the great international banking centre we would have the opportunity of a lifetime of leading the world as international bankers. Loans would be floated here just as we saw the loan floated the other day for Denmark. That is the true way in which to restore prosperity. Every loan floated here must of necessity go out of this country in the farm of goods and services which would stimulate our industry and expand our foreign trade. To my mind it would lead to a rise in prices rather than a further fall.

Mr. LANSBURY

I always understood that the policy of the Liberal party and of the Manchester school was to cheapen production and cheapen the cost of food. Now things are cheap but nobody is able to buy them. Can the hon. Member explain that?

Mr. MASON

That is a very proper question and my object in offering these observations is to show how people can buy them. I think if you can by increasing the demand—[HON. MEMBERS: "Hear, hear!"] I have tried to show how you could increase the demand. I have pointed out on a previous occasion how, about the middle of last century, £150,000,000 was spent in this country on the development of railways which led to an increased demand.

Mr. LANSBURY

Why not spend £150,000,000 to-day on houses?

Mr. MASON

I am coming to that. I am trying to show the analogy if the right hon. Gentleman will be patient with me. That vast expenditure brought about an increased demand. Workmen were fully employed and agriculture flourished because there was this vast expenditure. The difficulty to-day is this. The Government are just as anxious as we are to bring about an increased demand and I am in favour of public works if they are sound, productive and necessary. But obviously, in a country like this which is fully developed, there are not opportunities. It is all very well for hon. Members opposite to smile. You may go in for slum clearance and I am in sympathy with such a movement but that is not going to give the vast expenditure which is necessary to set industry going full time. You have to look elsewhere. This little island with the best roads in the world does not offer any opportunity for expenditure of that kind. That is not saying that there are not opportunities for improvement. Of course there are. I am in favour of these improvements but we cannot proceed—to use a colloquialism—by taking in each other's washing.

Mr. LANSBURY

We have some land which is not under cultivation.

Mr. MASON

I am quite in favour of that too but I ask the right hon. Gentleman to take a bigger view. You will never in this little island keep 45,000,000 employed, prosperous and happy by means of palliatives. It is useless to imagine that we can live on each other. We live by our foreign trade and the question is how we can restore our foreign trade. I have tried in a humble way to show how we can do so. Our foreign trade in the past was largely the result of the fact that London was the great international banking centre. Loans to all parts of the world were continually taking place, and that was why it was so necessary that we should have a sound financial system. I was discussing this problem with a French banker in Paris not long ago and he frankly said that with him one of the causes of distrust was this Exchange Equalisation Account. Remember that France in the past sent millions to the London money market. My informant said that while he and his business colleagues had tried to master economics, as bankers have to do, they could not tell what was going to happen as the result of the creation of a fund of £150,000,000 which was handed over to the Treasury and the Bank of England.

Other bankers and traders in other centres have no idea of what the Government are going to do with that fund. The exchange becomes a gamble and the result is that we do not get that capital which the Chancellor described as "bad money." I must confess I was not able to follow the right hon. Gentleman in that description. I do not see how money which comes here to the London money market in that way can be described in any circumstances as bad money. It is the nature of this country to attract big capital from all parts of the world, because we are the best able to use it. New York and Paris, with all their huge gold reserves have not the knowledge or the skill that are centred in the City of London, where you have skill that has been acquired over centuries, and, given the opportunity, by the removal of these shackles and restrictions, and by getting rid of the embargoes which restrict the freedom of London and of this country, we should see loans floated and we should see that prosperity and that demand which the right hon. Gentleman opposite asked me to explain how to bring about. I hope I have said enough to demonstrate the importance of London's restoration as the financial centre of the world as one of the principal causes which would restore prosperity to the working classes and to all classes in this country.

I should like, before resuming my seat, to offer an observation or two on the proposal to tax the co-operative societies. I have read the Raeburn Report very carefully, and I should like to offer to the Government my wish that they may be able to come to an amicable settlement. There is one point in the report of the Raeburn Committee that I think is worthy of the attention of those who have studied this question. It draws a comparison between the members of a co-operative society and shareholders in an ordinary company, and it says, on page 9: Income Tax at the full rate has to be paid on the undistributed profits of a company irrespective of the individual liabilities of the shareholders, and there must be many companies in which a considerable body of the shareholders are not individually liable at that rate. I do not think that is a fair statement of the case. I think there is no analogy between a company, which on the whole may have some comparatively poor shareholders, and a co-operative society, which is largely made up of the poorest people in the land, who are bound to appeal, if this taxation should go through, and try to get it back again. Therefore I doubt very much if there will be much reward for the Government if they proceed with this proposal. I think therefore that a co-operative society is not in the same category as a company, and neither economically nor financially is it advisable for the Government to proceed along these lines. I hope, therefore, that the agreement will be an amicable one and that we shall hear no more about it.

Finally, some reference was made in a newspaper to the fact that in yesterday's Debate the word "economy" was not mentioned. There have been references to it to-day, but while we on these benches favour public works, that does not mean that we favour public waste or extravagance. I have given some study to this question recently, with reference to administration costs, and I find that the Treasury have two and a-half times as many people employed now as before the War and cost the public three times as much; the Foreign Office have a staff four times as large and cost three times as much; the Home Office have a staff twice as large and cost the country twice as much; and the Scottish Office expense is three and a-half times more. These facts are not, I feel, justified, and while I pay my tribute to the efficiency and usefulness of the Civil Service, I think those facts are an indication of where the waste is going on. The secret of widening the area of employment is to reduce the charge upon trade and industry, through economy to create a surplus, and then to reduce taxation. I hope the Chancellor of the Exchequer or whoever replies for the Government will answer my questions with regard to the Exchange Equalisation Fund, and be able to hold out to us some hope that this country, which was built up on sound finance, will again revert to those high traditions of the past.

8.6 p.m.

Mr. BOULTON

Every hon. Member, in whatever quarter of the House he may sit, must sympathise with my right hon. Friend the Chancellor of the Exchequer in the extraordinary difficult and unenviable position in which he must find himself, for I doubt whether there has been, in recent history at any rate, a time that can be comparable to the complexities of home and world affairs to-day, which must have a direct bearing on the momentous decisions embraced in the financial statement that has been. presented to us. I do not think I am using extravagant language when I describe the financial statement as momentous because I am one of those who believe that on this year's Budget proposals depends what may hope to be achieved in the lifetime of this Parliament. If that be true, it must bring to our minds the anxiety with which the Chancellor of the Exchequer has had to approach his task, but, it also throws upon those who wish to offer criticism a greater responsibility.

First of all, I should like to offer my humble tribute of gratification to my right hon. Friend for what I believe to be the outstanding feature of the Budget, and that is the reduction of the Beer Duty. It will give great satisfaction, not only to the brewing trade and allied trades and workers, but to many thousands of workless, people who have been deprived of one of those comforts to which they have become accustomed; and although this reduction will not be sufficient to replace the loss of revenue to the Treasury that will take place, it is in the right direction, and I hope the day is not far distant when my right hon. Friend will again be able to give some relief to a still over-burdened industry. The reduction of the duty on arrears of Excess Profits and Death Duties will be very welcome, as indeed will be the reduction of the companies' capital duties, which I think is not only timely, but a very wise decision.

The Budget statement covers a very wide field for discussion. There are, however, two items to which I intend to confine my remarks, but which I have always held to be of fundamental importance, particularly so at the time at which we have arrived in reconstructing our finances for the next forward step for future development and constructive purposes. The first is the curtailment of expenditure of an unproductive nature from which the country is not getting real value. I welcome the important savings that have been effected, to which my right hon. Friend has referred. They indeed have been most gratifying, and the Chancellor of the Exchequer has the gratitude of the nation for the way in which he has handled the finances of this country, which has enabled him to make the considerable savings that he has done. But the savings on conversions and money rates are not quite the items of economy to which I refer. Conversion savings are simply reducing the liability of the Government to pay interest at the expense of taking it away from bondholders, who have consequently less to spend and from whom the Treasury will receive less revenue in the future.

The absence of proposals for real retrenchment and economy is, I think, disconcerting and disappointing. The Civil Estimates gave us a horrible shock, but after v hat my right hon. Friend the Chancellor of the Exchequer said on another occasion, that "the limits of economy" had not been reached, and after setting up the Ray Committee, to say nothing of the Private Members' Economy Report, I had hoped and expected that my right hon. Friend would have taken this opportunity, surely unique, of presenting a considered plan of policy, gradually reducing much of that expenditure which we can only call luxury expenditure. Both the reports to which I have referred point the way to very considerable savings, without, I think, doing any real harm to the true national interests. I do not wish for a moment to minimise the considerable savings that have been effected, nor do I expect that all the recommendations embraced in the reports to which I have referred could be accepted, but I do say that the economies that have been effected, considerable as they are, do not go nearly far enough.

I want to see national expenditure of a permanent character cut to a figure that the country can conveniently and prudently carry in normal times, and I would like to ask my right hon. Friend, "Have, in his opinion, the limits of economy now been reached? If not, is this not the time to set our house in order and to sift unproductive from productive expenditure?" The country, I think, wants to know where it stands in this matter, and we have to ask ourselves, "Can we continue to afford to spend at the present level, absorbing somewhere near one-third of the total national income as it does without doing irreparable harm to our people and to our future development?" We must remember that we have a highly artificial industrial organisation, peculiar to this country. Therefore, I ask again whether we can continue to carry this huge burden. We live very largely on our foreign trade, and I consider that the proportion is too high. The present national expenditure gives many of us great concern. I do not believe that a country can continue to develop with that natural freedom which is so essential for an industrial country situated as we are when the domestic expenditure is carried to such excess. Any expenditure of an excessive nature has its effect some time or another. Are we not now feeling the effect of that extravagance. If we are to understand that the present rate of expenditure is to be the normal figure, what hope is there for a permanent reduction of Income Tax?

That brings me to my second point. The relief that has been granted with regard to future payments of Income Tax will, I am sure, be most acceptable, and it will be a welcome reminder to that weary and diminishing band of taxpayers that they have not altogether been forgotten. I can well understand and appreciate that some change of policy by America and the obscurity which it throws over the immediate trend of events may have caused my right hon. Friend to adopt a more reserved attitude than we had hoped he would have been able to take on this occasion with regard to the relief of the burdens that are oppressing our industries. I think perhaps that I am voicing not incorrectly the feelings of, I suppose, most Members of this House when I say that never before have we been so convinced of the necessity of keeping our financial position in order and our credit high. There can be no doubt about that, but those of us who have ventured to advocate a wider and longer view for rearranging the finances of the country so as to allow of a substantial reduction of Income Tax, are naturally profoundly disappointed that my right hon. Friend was not able to see his way to entertain that view now or to give us some hope in future. It would have been, of course, a departure from the customary and from what is sometimes called the orthodox methods of procedure.

I was very glad to hear my right hon. Friend make it clear that it was not on the grounds of orthodoxy that he was not in agreement with such proposals. I have not much patience with those who pose as being strictly orthodox but who are really nothing of the sort. The pedant and the purist of finance would sacrifice all opportunities, however good they may be, for what is known as humdrum methods. Imagination is taboo and yet such a type is perhaps more dangerous in so-called orthodoxy than the more enterprising character. How ridiculous it is when we all know that for some years we have been balancing our Budgets by taking capital and calling it revenue. I calculate that in the last 10 years we have taken from Estate Duties something like £650,000,000, and, together with borrowings for payments of Income Tax and Surtax, we arrive at a figure, for which I have good grounds, in the neighbourhood of £1,000,000,000. That k all capital taken by successive Governments and used as revenue. I wish that some of those who are so ready to throw up their hands in dismay at any new proposals would remember these facts. It appears to me that there are two methods of dealing with this question of taxation and unemployment. One is to await events for international conferences and agreements. That, I understand, is the method to which my right hon. Friend inclines. The other is so to arrange and reconstruct our finances as to allow for an immediate and substantial reduction in Income Tax, limiting ourselves to taking the comparatively short view—three years if you like—so as to enable us to gain experience as to the result. That does not necessarily mean unbalancing the Budget, but there is a risk attached to whichever method is adopted.

My right hon. Friend referred at some length and not without some warmth to the proposals which have been made to take a three years' view with regard to the reduction of taxation. It seemed to me that he took it for granted that that proposal advocated deliberately unbalancing the Budget. If my right hon. Friend was referring to a proposal which I ventured to make in the House on 1st March when moving a Motion calling attention to the question of excessive taxation, I can hardly think, nor am I so presumptuous as to imagine, that he could have read what I said. If he had, he would have seen that I particularly said that the balancing of the Budget requires no stressing, and I went on to enumerate proposals which I ventured to think—and I do now—would provide for any anticipated loss of revenue. I had not at that time, of course, the final figures for the year. It is only fair to say that. On a previous occasion I expressed the view that the extraordinary conditions under which we are living call for extraordinary measures. Abnormal times, if you want to overcome them within a reasonable period, demand sometimes abnormal remedies. I do not think that there are many hon. Members who will disagree with that, and I would like to focus the attention of the Committee on the fact that Income. Tax provides the greater share of the cost of unemployment. Therefore, you cannot divorce consideration of one from the consideration of the other. If unemployment costs can be drastically rearranged and dealt with as an abiding call on the nation's funds, it will be acknowledged that the Income Tax payer should also be considered and in justice handled with a view to keeping him healthy and as a reserve of strength for times of stress and danger. If we can use our financial strength for useful and productive work instead of subsidising idleness, then we can relieve the Budget of a substantial amount of unemployment finance. With the reduction of unemployment, the Conversion savings, the suspension of the Sinking Fund and further economies, we could, over a short period, justify a substantial reduction of Income Tax, and provide for any short fall which there might be in any one year.

In moving the Motion which I did I particularly stressed the question of retrenchment, but if there is to be no further retrenchment, if the recommendations of the Ray Report are not to be acted upon, if we are to take the view that the reduction of Income Tax is to be a dead loss, and if we have no faith in our capacity and courage to recuperate, then the policy of wait and see appears to be the only alternative. But has that policy been a success in the past? I think there is a risk attached to it which ought to be seriously considered. I am, however, glad to note that my right hon. Friend is inclined to agree that a reduction in direct taxation might produce a real psychological effect. He made one proviso, and that was that expenditure must be covered by surplus revenue. But need he trouble about psychology if we have the surplus revenue? Surely it is when we are not in that happy position that the question of psychology arises in all its importance. As an example, I would quote the case of that master in the study of psychology the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), who so successfully applied psychology towards securing a successful issue of the Great War when there was little or no margin left. I think that even those who have so energetically criticised the views which I, for one, have ventured to advance in favour of the reduction of Income Tax, will agree that at least they have had one beneficial effect in introducing a livelier discussion into this Debate, which otherwise, I fear, has been rather a dull one.

The right hon. Member for Darwen (Sir H. Samuel) waxed eloquent yesterday in discussing these wicked proposals, but do not let us talk any more about gambling with the nation's finances, for already we have a precedent for that to which the right hon. Gentleman himself has been a party. The truth is that the right hon. Gentleman and his friends have departed from the sound Liberal' principle of retrenchment, and that, I believe, has been one of the principal causes of our troubles to-day. Let us be quite sure before throwing aside lightheartedly any proposal, however heterodox it may appear, that there is not some germ of sense in it. I sincerely hope that I may be wrong in the view which I hold and have expressed, but no argument has yet been put forward in this Debate which has shaken me in my belief in it. I want to assure my right hon. Friend the Chancellor of the Exchequer that any views or criticisms I have put forward have been advanced in no hostile spirit, but with a sincere desire to make a contribution towards helping to solve the great problem of unemployment. I hope the Economic Conference will prove a success and give that relief which is so earnestly anticipated and desired, but I cannot help feeling a little sceptical about bringing these foreign mentalities into permanent agreement with ours. Important and necessary as it is for us to continue to work for international agreements, I believe the surest and safest way is for us to concentrate on setting our own house in order and developing our vast Empire resources. A British economic unit would be, I believe, the quickest way of leading the world back to its senses and, perhaps, into economic units of manageable proportions with whom we could all freely trade.

8.33 p.m.

Mr. CHARLES BROWN

If the hon. Member for Central Sheffield (Mr. Boulton) had listened to the speech of the Financial Secretary to the Treasury last night he would understand that his plea for economy and more economy had already been very largely answered, because the Financial Secretary was very much concerned to convince us that the Government had already effected economies to the extent of £100,000,000, and that any further economies would be difficult of achievement. Therefore, the hon. Member got his answer before his speech was delivered, but I would ask him to continue to hope, because the present Government yield to pressure, and if he can bring the necessary pressure to bear I think he will be able to get further economies in the not distant future. I am very sorry that the hon. Member for East Edinburgh (Mr. D. Mason) has left his seat, because I listened to him with a great deal of interest, and his speech recalled to my mind a speech made by the Prime Minister on the day of the Adjournment before the Easter Recess. The Prime Minister told us then that there was little hope in Protection, that there was none in old-fashioned Free Trade, he had apparently lost all his faith in Socialism, and the only thing that remained,' he said, was systematic study. Systematic study was obviously, according to the Prime Minister, going to get us out of our difficulties. I did feel, while the hon. Member for East Edinburgh was talking, that he had been engaged in some systematic study of the question of currency. I can only hope that he will continue his study, and that, in due course, he will come back to the House and be able to enlighten us in such a way that we shall feel that if he had charge of the world's currency all our difficulties would soon be resolved.

It is inevitable that, in a Debate of this kind, we should have speeches of approval of the Budget and speeches of criticism. All the speeches of criticism have not come from these benches; there have been critical speeches from supporters of the Government. Everybody has realised, especially the supporters of the Government, in view of the various proposals that they have been putting forward during these two days' Debate as to what we should do to get out of our difficulties, that the Budget of this year is not going to make any appreciable difference to the general conditions which obtain in this country. We have been advised that perhaps a return to the Gold Standard would be all to the good. We have been told over and over again that more economy would be a good thing. We have even been reminded that Bimetallism might get us out of our difficulties. We have been told by the right hon. Gentleman the Member for Darwen (Sir H. Samuel) that if we returned to old-fashioned Free Trade that would solve our problems. We have heard the hon. Member who told us that one of the essential things was some reform in the machinery of government. After having heard all those suggestions, and having taken into consideration the Budget proposals, I am certain that even if all those experiments were tried and the Budget were allowed to work itself out, none of them would touch what is fundamentally wrong with the society in which we live.

We are compelled to remind His Majesty's Government that they were formed to take us out of the crisis. We were told that one of the most dangerous features of that crisis was an unbalanced Budget. There is a difference of opinion in the House as to whether the Budget this year is balanced. It has been said from these benches that it is not balanced; and it has been said by supporters of the Government during these Debates that it is not balanced. Consequently, if one of the ways out of the crisis is a balanced Budget, it still remains for the Chancellor to convince us by some further jugglery with figures, when he closes the 'Debate to-night, that he has really balanced his Budget. Nobody is convinced up to this stage that he has done so.

The Chancellor of the Exchequer claims that his measures, and the steps which have been taken during the period of office of the National Government, have achieved a certain amount of success in getting us out of the difficulties in which we found ourselves. He applies certain tests. He says that he has produced a condition of things in which there is plenty of cheap money, Government credit is good and there is a flow of capital to this country. I was rather astonished to hear him say that to some extent that capital is unwanted. Surely there can never have been a Chancellor who, through the instrumentality of a Budget statement, has made such a complete confession of the utter failure of the Government of which he is a member to restore the trade and prosperity of the country, which restoration it had presumably set out to accomplish when it took office. By every test that you can employ—every economic test, let me put that word in—the statement to which we listened on Tuesday was a confession of failure. Let me apply that economic test. The condition of trade: we have had a story told to us of declining trade. The condition of the Revenue: we have had a story told to us of declining Revenue. The Chancellor did not mention employment, but I am going to do so. If that is a test that we can legitimately employ, what is the position in regard to employment? Infinitely worse than when the National Government came into office. By every economic test that we can apply, the Budget statement was an abject confession of failure on the part of the National Government to accomplish the things to which they set their hands.

We have presented to us a picture of the steady decline of an economic system of which the Chancellor and all the supporters of the National Government are defenders. They are engaged presumably in the task of shoring up that system, which is visibly cracking and breaking. One word is always on their lips, evidence of the truth of what I am saying. They are always talking about "recovery." If they do not change their policy, some of us on these benches cannot see how recovery is to come about. The Chancellor was hound to admit failure, by all the economic tests that you can apply. As the economic sea was so depressing, the Chancellor took a flight into the realms of psychology. He told us that confidence had been restored. Confidence in what? Confidence in the stability of the financial system. The country, we were told, had become again a safe repository for foreign money. We were told that deposits in foreign banks were piling up. When I heard that, I could not but think that the reason for the deposits being piled up in the banks was that, under our economic system, a relatively small class of the community inevitably have sums of money of which they cannot dispose in satisfying their legitimate needs, and consequently, having no use to which they can put that money for the satisfaction of their legitimate needs, the money necessarily accumulates in banks. Obviously, there is something fundamentally wrong with an economic system where such a condition of things can obtain.

I can understand to some extent the Chancellor's pride in the restoration of confidence in our financial system. That might be impressive if it had tangible results in the lives of the mass of our people. If I could see, as a result of the restoration of confidence in our financial system, some tangible result in the lives of the people, I would not criticise that claim, but we have relative poverty in a community of which we are told that its financial stability is its chief glory; nay, there is in this community semi-starvation. Think for a moment, when you are expatiating on the financial stability of Great Britain, of the semi-starved miner, of the long queues of unemployed, of impoverished children, of anxious women, of poor homes, of economic insecurity, and of the harassing anxiety among millions who inhabit the country, and you will see that none of those other things matter. I am not suggesting that hon. Members on those benches are not as humane as we are, but somehow or other they look with entirely different eyes at the problems that face us. They talk, and probably rightly from their point of view, of the stability of the financial system. Will they not see at the same time that, in spite of so-called confidence that has been restored, and in spite of the so-called stability, there is still, behind that, a seething mass of poverty, want and distress? I ask hon. Members: Surely you are not going to pursue a policy in which the creation of a stable financial system is an end in itself? If that is merely to be an end in itself, the policy is not worth while. If you are to pursue that policy and take pride in it, you must ask yourselves: Is it a means to an end, and to what end? Surely, that end should be the smooth working of your system of production and distribution, and the getting back again to the millions who produce, in ever-increasing volume, the quantities of goods that their labours call into existence.

Of what use is the confidence of the capitalist classes in the banking system if millions of people remain unemployed and in poverty? The main task of the Chancellor of the Exchequer and the Government—and they have been nearly two years at it now—seems to have been to make the owners of capital feel safe, to give them a little sense of security. That is all very well, but can there be any real security for the people whom the Chancellor of the Exchequer seems so anxious to safeguard, while at the base of our economic system there is a seething mass of poverty, want and insecurity, and a tremendous volume of unemployment? Hon. Members must be living in a fool's paradise if they do not understand that, before real security is possible, steps must be taken to remove that mass of poverty and want and despair. As yet the Chancellor's success has meant little or nothing for the millions, though I grant that it has enabled the owners of capital to sleep more securely at night.

What benefit or satisfaction do the masses of the people derive from this restoration of confidence? How is it to translate itself into the material needs of the people—into better houses, better clothes, decent food, more amenities such as the modern age should be bringing to the millions of the people? I would ask the Chancellor of the Exchequer, when he winds up the Debate to-night, to show us how the policy he has pursued is going to be translated into concrete form in the ways that I have enumerated. If he could show us that this stable financial system is going to be translated into real things for the millions of the people, we should have no hesitation in supporting the policies that he pursues, and in giving him the tribute that he would then deserve. But, instead of deriving benefits from the policy that he pursues, the people have suffered impoverishment. The Financial Secretary talked to-day about the Government's economies, and prided himself on the fact that they amounted to well over £100,000,000. I wonder if, when he made that statement, he recalled the fact that £30,000,000 of that amount had been taken from the unemployed of this country? As far as one can see, there is only one way in which the benefits of this restoration of confidence can reach the common people. It has been said over and over again, and there is no harm in saying it once more, that that way is by giving them the power to purchase in greater quantities the goods and services that they need. But the very methods which have been pursued to give stability to the much lauded financial system have made that policy more and more difficult.

I want to say a word about the proposal which the Chancellor of the Exchequer outlined for doing something further in regard to the Exchange Equalisation Account. I ventured last year to say that the setting up of this Fund marked the beginning of a fight for the possession of the world's gold supply, and I do not think I was far wrong, judging by what has transpired in the intervening months. We are constantly reminded, by articles in the newspapers with reference to the Disarmament Conference, that war is a very imminent thing, that it is quite possible. The Government have waged, during the last 12 months, an economic war by means of tariffs, quotas, the Ottawa Agreements, and so on, and, as that war becomes more intense, the louder becomes the cry for a world conference. That puzzles me very much. In addition, you have here a financial war, because obviously that is the meaning of the intention to increase the Exchange Equalisation Account, which is another method that is being employed in the clash of rival capitalist systems; and meanwhile the common people pay the price.

I want also to say a, word in reference to the attack on the co-operative societies. The Chancellor in his Budget speech, prided himself on the fact that he had resisted the great drive made by newspapers, economists, and Members of the House for a lower Income Tax; but he has led another drive, which he began in his Budget speech last year, namely, a drive for what I am going to call penal taxation of co-operative societies. There is no explanation for that that I can see except that the co-operative movement is mainly a working-class movement. The 7,000,000 co-operators in this country are mainly drawn from the ranks of the working class. I think it would he safe to say—it is only a rough calculation—that the co-operative distributive societies now do about one-ninth or one-tenth of the total retail trade of this country, and obviously, as they encroach more and more upon the preserves of private enterprise in the distribution of commodities, they will attract to themselves the hostility of the organised private trading interests, chambers of commerce, and organisations of that description; and this accounts for the loud cheers that greeted the suggestion that the Chancellor was going to do something in this connection. It is sometimes argued —the argument was used last night, and probably it will be said to me—that, if confidence in the financial system were not maintained, the poor would be the first to suffer; but the answer is that they are always the first to suffer whatever happens, confidence or no confidence. The Financial Secretary to the Treasury last night chided us on these benches in regard to what has been said in connection with the question of a penny a pint off beer, and in regard to the rearrangement of the Income Tax so that there might be two half-yearly payments. He said that those suggestions came from these benches, but I do not know why he should have chided us about that.

Mr. HORE-BELISHA

I hope my hon. Friend does not think that I chided him for it. I was merely paying a tribute to those who initiated suggestions which the Government have carried out.

Mr. BROWN

I am very glad to hear the hon. Gentleman say that, because obviously this Government has no initiative of any kind, and it is necessary that the initiative should come from somewhere else. If only the Government carry out these suggestions a year afterwards, that is very good because usually they are a century behind the times. Obviously, according to what has been said in these Debates, we have reached a stage where the accumulation of capital has become embarrassing, and not an urgent necessity. We are told that there are nowadays no profitable sources of investment available with the certainty of a sure and adequate return, and that accounts, we are informed, for the large amount of money in the banks. If I were to summarise the speeches in the House since this Parliament assembled, I think I should be safe in saying that there are Members who think we have sufficient roads, sufficient houses, adequate transport, plentiful supplies of food, abundant clothes, and so on; but this Budget, like every Budget which has preceded it, makes one thing clear and distinct and that is that there exists in this country a mal-distribution of wealth, and, until that mal-distribution of wealth has been corrected, there will be no real recovery. If the labour that is now employed was adequately rewarded, it would soon result, through the increase in the spending power of those who are in employment, in more people being employed.

The tables of statistics with which we are presented from time to time are, indeed, impressive and important, but sometimes I think we consider them in isolation, divorced from reality, and I am going to ask hon. Members to see beyond those tables of statistics and Budget statements to the mills and factories, the coalfields, the ironworks, the mean streets of towns and cities where the common people live and ask what use is your balanced Budget and your stable financial system if it makes no difference there? What are we to say if it has been achieved by an increase of misery and poverty rather than by an improvement in the conditions of the mass of the people? Are you going to make a change there in the coalfields and in the mean streets of the towns and cities? Is the policy that you are pursuing going to make a change there? That is the final test of whether your policy is good or bad. That is the test by which your policy will be finally judged. You may beat the American or the Frenchman or the German in your exchange war. You may bring gold in cargoes to the Bank of England, and yet the unemployed may be without food, clothes, boots and decent shelter. Little children may utter their plaintive cries of hunger and longing for the things that they cannot have, for the toys and simple pleasures that bring joy and laughter into their lives. You mock them all with your talk of balanced Budgets and stable' financial systems if, after all your financial jugglery, you do not lift them out of the poverty of despair.

8.57 p.m.

Mr. HALES

The Noble Lady the hon. Member for the Sutton Division of Plymouth (Viscountess Astor), in her speech yesterday, expressed the opinion that, no matter how many difficulties confronted the Chancellor of the Exchequer, there would be found a number of hon. Members who would accept the position. From careful calculations, I find that there are 614 Members who in their opinion could bring about such a change in unemployment that would set the joy bells ringing from Land's End to John o' Groats. I also would like to offer the Chancellor a few suggestions for the amelioration of our present depression in trade. What I was afraid of in this Budget was that, with the economists and financiers so busy directing our Members on the Front Benches, they would be confused and confusion would be worse confounded by the advice tendered. But, to my great relief, I find that the Chancellor of the Exchequer has steered the ship of State safely. He has successfully avoided the Scylla of Stamp and the Charybdis of Keynes. It is not a Budget that has indulged in heroics. It is a commonsense and careful Budget and, if we can carry on without any adverse circumstances coming along, I, for one, shall be very grateful. I want to touch on three points. The first is the Irish Annuities. The Chancellor expressed anxiety that he would have to Budget for £3,000,000 to make up for the lack of that payment. I put a question to the Dominions Secretary a few weeks ago as to the advisability of putting on another 50 per cent. duty and bringing the matter to an immediate crisis. The next week I was inundated with no fewer than 36 letters from Southern Ireland. I was afraid to open them for fear of the blackguarding I was going to get, but to my astonishment they all, without exception, endorsed the idea and wondered why the Dominions Secretary had not taken the step long ago. That is from the Irish people themselves, who are writhing under a state of things too difficult to contemplate.

The next point is the American Debt. Last year it was not taken into calculation, but the inevitable Nemesis arrived and, after we had saved £23,000,000 by the conversion scheme, we calmly handed it over, with a few millions more, to America. Are we like a boy whistling to keep his spirits up? We shall have to face that music, and I think the only solution of it is by demanding from Europe at least the amount that we have to pay to America, or there is trouble in store for this country. The difficulty of the private Member is in getting the Front Benches to listen to the pearls of wisdom that he can give them. Only a fortnight ago I was reduced to the expedient of chasing a Member of one of the Front Benches to a hairdresser's shop and waiting till he had the sheet round him and then, when operations had commenced, I gave him 20 minutes of good sound advice.

We are ignoring a serious aspect of our position in neglecting the Japanese invasion. In my travels abroad I have seen what is coming to us. I feel sure that, if the Leader of the Opposition were told that half-a-million Japanese were coming to this country, he would take a header into the Serpentine next morning, and yet he will allow the products of their labour to come here and take away the livelihood of our workers. There is a great tide sweeping across Asia which will overwhelm this country and, no matter what remedies, artificial or otherwise, you may adopt, unless you prevent the commercial invasion from Japan you are going to have within the next six months half-a-million more on the dole in spite of all the precautions that you may take against it. We have only yet felt the spray of the tidal wave which will inundate this country with the competition which will have to be dealt with if we are to avoid the disasters which the Labour party talk about in every discussion that we have. There is only one solution. The adverse trade balance means that this country is slowly bleeding to death with the export of gold to make up for the shortage of orders from abroad. We are buying from America £104,000,000, and she buys from us £18,000,000. You have an adverse balance of £86,000,000 which must go across in bullion. We want less taxation and more pay. Before we can arrive at that happy climax, we must have an increase of trade. The Ottawa Conference has made a great step forward, from what I saw in Malaya last October. I hope the Financial Secretary will convey these points to the Chancellor of the Exchequer. I feel sure that the £3,000,000 from Ireland can be obtained. We must stop the invasion from Japan, and then we shall have in the next year a happier state of affairs than we have witnessed during the last few years.

9.5 p.m.

Mr. HENDERSON STEWART

The hon. Member for Mansfield (Mr. C. Brown) was good enough to congratulate me after any original effort in this House, and I have great pleasure in returning the compliment to-night. Although I did not agree with his remarks, I understood and could follow him, which is much more than I, and, I think, any other Member of the Committee, can say of the remarks of his colleague the Member for Ebbw Vale (Mr. A. Bevan). The meaningless ravings which came from that bench made me wonder whether I was in the House of Commons or had entered some asylum. I have often wondered how intelligent young men can remain in the Labour party, but I see now the reason. It is that, like people under a bad and intolerable mental strain, they give way and relapse into a state of economic insanity, and something of the insanity to which we have been treated this evening. I really do not think that it is worth saying anything more about his particular contribution.

Like other Members on this side of the Committee, I would like to offer my con- gratulations to the Chancellor of the Exchequer upon a workmanlike Budget. There are points in it which I do not like particularly, and there are omissions which I regret with other Members, but on the whole it seems to be a sound, sober and tenacious statement. I personally regret the omission of some proposal to bring a measure of relief to the families of unemployed men and women. It is unnecessary for me to expound and develop the effect of the cuts which took place some time ago. The health of the children, I know, is not seriously impaired, but we are maintaining, I believe, the standard of life of the children at the expense of the physical condition of the mothers in too many instances. It is right to protect the rising generation, but it is wrong to do so at the sacrifice of those who bore them and are performing such a great service to the future generation. I realise fully that it is not possible to restore the full cuts which were made to adult unemployed people, but the children's allowances could be tackled. A 1s. extra would be an immense boon to poor mothers, and 6d. even would be welcome. It is a suggestion that would not involve tens of millions, but one which could be covered by a sum considerably below such an amount. I beg of the Chancellor, as a supporter of his, to consider even now making such a gesture to those unemployed people who are rearing the rising generation.

If the absence of effective criticism is any criterion of the value of the Budget, the Chancellor of the Exchequer has a right to feel a certain measure of satisfaction. There have been only two leaders of the Opposition who have spoken in this Debate in critical terms. We have had a speech from the hon. Member for Limehouse (Mr. Attlee). I have not been long in this House, but I have for many years listened to these Debates from the Gallery, and I have never listened to a more supercilious statement than the one which he made. It reminded me of the sort of speeches you hear from clever young men in university unions, and it is not quite the standard which the world and the country expect from the Opposition Front Bench. He started by complimenting the Chancellor of the Exchequer upon a very candid and honest statement. I wish I could return the compliment to the hon. Gentleman. He distorted every figure and fact, and almost every sentence of the statement of the Chancellor. The right hon. Gentleman the Member for Darwen (Sir H. Samuel) exposed the fantasy of his figures regarding the balanced Budget. The Financial Secretary dealt with his pathetic gestures regarding beer and the new arrangement for the payment of Income Tax. When that had been done, the hon. Member for Limehouse made a pathetic effort, as did the hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) this afternoon, to run away from their propagandist action of last year.

Last year the Labour party supported the suggestion of a 1d. off the Beer Duty because they were protecting the rights of the workers. This year, when someone else carries through the same proposal, it becomes a present to the brewers, and, according to the hon. and learned Gentleman the Member for East Bristol, a bribe to the workers. Last year the Laboar party proposed the fifty-fifty arrangement of the payment of Income Tax in order to relieve trade and to start the wheels of industry moving. The same proposition this year coming from another side of the House becomes a selfish buttress to the system of capitalism. Distortions such as the declaration that the Government have delayed the World Economic Conference and that they have tried to maintain Super-tax payers in order that they could continue gross inequality in this country are as patently absurd as they are designedly unjust. The hon. and learned Gentleman complained and made a great fuss about the flood of bad money that was moving over the world. The real trouble is not bad money, but bad memory. That is their trouble. They complain about the fact that the Budget is not properly balanced, and yet the same party were responsible for a deficit last year of £170,000,000. They criticised the suspension of the Sinking Fund, and yet they themselves, in their manifesto to the public 18 months ago, advocated that very same proposal. They attack now the cuts. They seem to forget that they themselves initiated them not so very long ago. [HON. MEMBERS: "No."]

The truth is that the country, if not this House, is getting a little tired of this self-righteous partisan drivel of which we hear so much from the other side. A repetition of that kind of thing has as much effect upon me as the similies of the hon. Member for Dumbarton Burghs (Mr. Kirkwood). I had not been many weeks in this Chamber before I heard him claiming kinship with the unemployed—"bone of my bone," "flesh of my flesh," "I am as good as he and he is as good as me." But the only claim which I have never heard him make, and never shall, is You're a better man than I am, Gunga Dhin! The hon. Member for Dumbarton Burghs has a pretty good conceit of himself and he is not likely to make an admission of that kind. The contribution of the hon. and learned Member for East Bristol was not supercillious; it was merely dull, unconvincing and uninteresting. He started in that airy way of his. It was the sort of thing I used to hear at the university and which used to make us sleep easy. He based an academic discussion upon the balancing of the Budget but he finished by saying that he did not understand what it meant, and he agreed ultimately that what he had said was not important. With that we were in entire agreement. Like his colleagues on the Front Bench and on the Back Benches, having no constructive alternative to offer, he blamed the capitalist system for all the troubles with which we are faced. It is no good doing that, and it is no good, as they do, painting with the blackest colours the conditions of this country. It is so easy to point to increased unemployment and the fall in the figures of Income Tax. It is so useful for the platform to be able to blame the Government and charge it with having no plan, as the hon. Member for Limehouse did. I cannot help thinking that in the special circumstances that is rather a mean policy.

Time was when the state of this country could be remedied by domestic proposals alone. There was a time when we had a monopoly of the world's markets, when the English £ dominated the currency of the world, when we could not only look the dollar in the face but stare it down; a time when there was comparative freedom of trade between countries and when the world was comparatively prosperous. In those days you did not consider, as you do now, the international conditions. In the Budget of 1906, when proposals were made that revolutionised the social system of this country and marked it now as being different from any other country in the world, in those tremendous debates that shook the country no mention was made of the problems with which we are dealing now. Foreign exchanges, world prices, debts, gold standards and quotas did not come into those great debates before the War. The fact is that we were independent then, more or less, of the world conditions. But that day has gone. We have now such conditions that there is scarcely a single measure that we can consider in this House without first of all looking into the bearing that it is going to have upon conditions of trade and our relations with other countries.

In regard to Income Tax, as the right hon. Member for Darwen (Sir H. Samuel) said yesterday, a reduction is not possible at this moment. Why? Partly because it would weaken the hands of our negotiators in the United States. We were prevented from altering unemployment benefit greatly a few months ago because of our obligations to overseas creditors. We cannot make an agricultural policy for this country now without considering its effect upon farmers in Denmark, in the Argentine, and other places throughout the world. The truth is that we have become international, and the reasons for our troubles here at home are not the faults or failings of our own Parliament but are connected with the chaotic depression throughout the world. The Labour party know that perfectly well, but they forget it now; they even deny it now. They admitted it themselves when they had the responsibility of office. They were not slow then to seek causes for their failures. Mr. Clynes and other members of their party, from quotations that I have, were perfectly frank in urging upon their country the super importance of international conditions. Until international difficulties are settled I am afraid that nothing really big can be done at home alone. There is a tide in the affairs of men, Which, taken at the flood, leads on to fortune. But there is another tide which does not flow, which tends rather to recede, and in that tide your duty is mainly to hold on. It is that kind of tide which is ebbing to and fro on our shores at this time and while it lasts it seems to me that it is the duty of the Chancellor of the Exchequer to maintain an iron grip on the resources of the country. That he has done in this Budget, and that is the justification for the policy which he has outlined. The time will come when we can relax our hold, and that time is being prepared. The hon. Member for Limehouse charged the Chancellor of the Exchequer with economic nationalism, and yet there is no Government within our time that has done more to establish the spirit of internationalism for which hon. Members opposite so of ten ask. That work began immediately the Government took office and the preparations have been proceeding long. We have passed through a hard economic political winter, but I seem to see now the first signs of an economic spring. Treaties are being made with foreign countries, and more will follow. This morning and yesterday we have seen signs of the real budding for which we have been looking so long. In a few weeks time we shall welcome here nations from all parts of the world to a Conference whose success has already has already been secured by our Ministers with preliminary talks. The result of that Conference we feel certain will increase the trade of the world and bring prosperity to all parts. Time was when we could in this House legislate for the security and the betterment of our country alone. That day has gone. Time was when we could neglect the circumstances of the world, but we cannot do that to-day. The economic conditions of the world press and oppress every individual nation. In these circumstances I believe the Governiment have done right in introducing a Budget prudent, cautious and safe on the lines which we have heard from the Chancellor of the Exchequer.

9.23 p.m.

Mr. STOURTON

I have sat here for nearly two days endeavouring to contribute my quota to the Debate, and I am forcefully reminded of a conundrum which was asked me by a, Member of this House this afternoon. He asked why making a speech was like having a baby. The answer is that they are both easy to conceive but difficult to deliver. I will not attempt to follow other hon. Members at length, as time is so limited, but I must confess that I find myself at variance with a great deal of what was contained in the Chancellor of the Exchequer's speech on Tuesday. I would characterise his Budget statement as one of the most unfortunate made in recent times. By declining to take the necessary measures to adopt the bold policy of a drastic cut in taxation, to stimulate trade, he has, if I may borrow a phrase from my right hon. Friend the Lord President of the Council, "missed the' bus." Further than that, I would say that he has delivered a blow to the prestige of the National Government.

Practically all informed opinion from amongst leading economists and financial experts and almost the entire Press has indicated to the Chancellor of the Exchequer what was expected of him, but I am sorry to say that he has turned his head aside and maintained his orthodox point of view. I think that is greatly to be deplored, and the more so because the direct taxpayers of this country for the last two years have made enormous sacrifices, sacrifices which I believe no other Government in the world would dare to demand of its people. If I may make one or two comments on the crumbs of comfort which the Chancellor of the Exchequer offers, I would say that the reduction in the price of beer by one penny a pint and the improvement in the quality will be widely appreciated, and not least by those farmers who grow barley and hops. I must add that I was disappointed that the Chancellor again failed to adopt the bolder and, as I think, wiser policy of taking off twopence a pint instead of a penny. If by taking a penny off the yield is likely to be smaller, a reduction of twopence might well have increased it.

As regards the taxation of heavy motor road vehicles, I think that is a step in the right direction, inasmuch as it will do something to put road and rail on a fairer competitive basis, quite apart from its merits as a means of raising considerable revenue. I regret that the Chancellor has not seen his way to approximate the scale of taxation on these motor vehicles more closely to that recommended by the Salter Conference. In surveying the Budget as a whole, the first thing that strikes one is the immense total of national expenditure, which is, in round figures, £700,000,000. That, half a generation after the War and, mark you, after £52,000,000 has been saved on Debt service! If the House will bear with me for a moment I would like to quote the following significant extract from the "Times": After allowance is made for the supplementary estimate which will be necessary to meet the cost of transitional payments, the total of supply votes stands at £463,000,000, which is £16,000,000 higher than the corresponding figure in last year's Budget estimates, and £5,000,000 higher than the actual Exchequer issues during the year which has just closed. Bearing this in mind, and also that no provision whatever has been made for debt reduction, the estimated revenue from taxes for 1933–34 is put at £652,000,000, which is practically the same as the yield from taxes in the 1929 Budget, although taxation since then has been enormously increased, the Income Tax by 1s., Sur-tax by 25 per cent. Death Duties by 9 per cent. and £24,000,000 is now raised by tariffs. It is perfectly clear then that revenue from Income Tax and Sur-tax is rapidly declining. Apart from these two factors, let us remember that there are no more hen roosts for the Chancellor to raid, and, in addition no more sacrificial rams to be found in convenient thickets. It must be clear to the Chancellor then that orthodox finance is rapidly becoming impossible with national expenditure at anything like the present level and the taxation on the present scale. I say deliberately that if orthodox finance is to be maintained, then the Chancellor must be prepared to make drastic cuts in expenditure, which would mean cuts in wages, salaries, pensions, interest on Government securities, which would undoubtedly create more unemployment. Surely my right hon. Friend can see it is his duty to break this vicious circle of contracting incomes, increased taxation, followed by more unemployment and yet more taxes. I believe the longer we follow the disciples of orthodoxy the deeper we shall sink into the morass of stagnation.

Having made these criticisms of the Budget, I think it is incumbent on me to make one or two constructive suggestions, which I do with great diffidence. First of all, I would have wished the Chancellor to cut the Income Tax by Is. The psychological effect of that would have been enormous, confidence would have been fully restored, enterprise stimulated, and there would have been a tendency for prices to rise, which we all so much desire to see. Such a policy would, I believe, have found support among the majority of Members of this House. I ask my right hon. Friend, how can he expect industrialists to show confidence in the future when he so obviously lacks confidence himself, inasmuch as he will not take the risk of reducing taxation in the hope of improved trade in the future, that is, over the three years for which I hoped he would budget? In the short time I have been in this House, I have consistently advocated a policy of controlled reflation which would lead to a rise in prices and thereby lighten the load of commercial debt, and the internal debt, which have become intolerable since the immense fall in prices which we have experienced in the last few years. By this means I think industrialists and farmers might have been given some hope of survival, and even possibly have been enabled to make a profit. Again, the expansion of the national income would enhance the yield of taxes, and make it possible for the Chancellor to balance his Budget with the lower rate of taxation such as I have envisaged.

Thirdly, I do think that economy inconsistent with the policy of controlled reflation as far as wasteful expenditure is concerned. If my right hon. Friend asks me in what direction he can economise, may I respectfully refer him to the Ray Report on Local Expenditure and to the Economy Report of the Conservative private Members which is also in his hands? Lastly, may I suggest to the Government that they should embark on a policy of encouraging expenditure on capital goods? Let me give him to examples of what I mean. I suggest that a national loan be issued on a sufficiently large scale to enable 1,000,000 houses to be built of the type which are most needed in this country at present, that is houses for the lower-paid working classes for which there is an almost unlimited demand. I suggest they could he built at such a price that they could be let at a reasonable rent, and at the same time the rents would show a fair return on the capital invested. I desire to lay particular stress on that point. Any expansionist policy involving capital expenditure which could not show a return on the money invested would be very unwise.

There are ways, of which I have given one example, by which the Government could interest themselves in capital expenditure which would be reproductive, that is, show a return on the money invested. There is one more example that occurs to me by which Government encouragement of expenditure would be wise, and that is, with regard to the immense amount of obsolete tonnage which is rusting, rotting and blocking our estuaries, rivers and harbours. If many of these ancient vessels were scrapped and new tonnage constructed, these new ships could be run at a much more economical figure, and we should be ready to take advantage of that improvement in trade which we all hope to see in the not far distant future. In my belief it is only on lines such as I have indicated that prosperity will ever be brought back to this country, and a reasonable proportion of the unemployed restored to work. Therefore, in commending these suggestions I have made to the notice of the Chancellor of the Exchequer, I would respectfully remind him that the patience of the people of this country is not inexhaustible. The country looks to him to carry out a bold policy to meet what is undoubtedly an abnormal situation.

9.36 p.m.

Captain HAROLD BALFOUR

In adding my humble tribute to the congratulations which the Chancellor of the Exchequer has received on his Budget, and particularly as representing not only a beer-consuming but a barley-growing constituency, I would also like to add to those congratulations the gratification we feel at the relief which has been introduced and the help given to agriculture. But there is one point which is giving many hon. Members representing South of England constituencies a great amount of misgiving. Last night the Financial Secretary was asked by the right hon. Member for Darwen (Sir H. Samuel) to give some particulars about the contribution in the Budget for the relief of the distressed areas, and the Financial Secretary said that negotiations were at present going on and that: 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 takes shape."—[OFFICIAL REPORT, 26th April, 1933, col. 232, Vol. 277.] Presumably we shall hear further details of these provisions when we come to discuss the Finance Bill, but I should Like to ask the Chancellor of the Exchequer to consider particularly a point of view as affecting South of England constituencies, and that when the time arrives he will give us some information, and possibly some help, in the direction I am about to suggest. This scheme for which the Chancellor of the Exchequer cannot yet name a specific sum is going to mean in a short term a voluntary remission by the more prosperous South of England of their block grant in favour of the more distressed North, and in the long term it is going to mean a levy of direct taxation in order to maintain the unemployed as a national charge. I do not dispute either of these objectives, and I do not think the majority of South of England Members will object in principle to trying to help the North of England. But we cannot give up any of our block grant and later on pay in direct taxation; we cannot pay twice over. We, therefore, ask the Chancellor of the Exchequer to approach the Minister of Labour to see if the present uncontrolled and unscientific migration of labour from the North to the South can be brought into more controlled and reasonable channels.

Around the industrial areas which are growing up near London there are many thousands of builders who are out of work. They are asking for buildings to be put up. If you trace the history of these builders you will find that a large percentage of them have come from the North of England, with no prospects of a certain job but in order to see if they can find better luck than the poor fellows have had in the North. When we want a man in the Kent coalfield the manager of the mine applies for the man by name and he is brought down to the coalfield; but for everyone who is so brought down there are two or three who come down voluntarily in order to try to find a job. The result of this uncontrolled and unscientific migration of labour is that these men, who may have got out of unemployment benefit, have to go on the dole, and in the case of large families their relief is supplemented from the Poor Law. Therefore, not only will the South of England be called upon to pay by a remission in the block grant and in direct taxation later on, but also we shall have to carry this burden of uncontrolled migrating of labour.

I suggest also that this uncontrolled migration of labour is bad for the North of England. If things revive and industry gets better, the North of England may find itself depleted of men of the greatest initiative and skill. Therefore, I ask the Chancellor of the Exchequer when he brings his scheme forward that he will consult with the Minister of Labour and, without checking a man's legitimate right to look for work, will see that in the national interests it is better to keep labour in those places where it will be more useful in the long run, and also that he will take into consideration the point that the South of England should not be asked to pay twice over. In that case there would be a more willing backing up of the scheme by the South than if there was a feeling that they were liable to be called upon to pay twice over.

9.41 p.m.

Sir GERVAIS RENTOUL

Many congratulations have been offered to the Chancellor for the lucidity and comprehensiveness of his Budget statement. I should also like to add my respectful tribute. It has been pointed out that the Budget is not one which is likely to arouse enthusiasm. That was inevitable: but there is probably a general agreement that it is the best that could be done in difficult circumstances. I am glad to have an opportunity of intervening for a few moments; in the Debate in order to express a certain sense of personal disappointment which I feel, and which is shared, I know, by a number of other hon. Members, that the Chancellor of the Exchequer has apparently given up hope of any further economies on a substantial scale in public expenditure. To some of us that seems a remarkable change of attitude compared with the views which he expressed some months ago. It is the most striking tribute to the Budget that it should have been so little criticised by the Opposition. We recognise that it is the duty of the Opposition to oppose, bat one cannot escape the feeling that throughout the whole of these discussions they have found it rather heavy weather; that they have been trying to make bricks with the minimum quantity of straw.

The criticisms that have been offered have mainly centred on the reduction of the Beer Duty. I have no interest in that particular commodity, nor, let me confess, have I any particular taste for it, but, looking at the matter from a purely revenue point of view, I submit that it was impossible for any Chancellor of the Exchequer to leave matters where they were, once he had come to the conclusion that the law of diminishing returns was beginning to apply to that tax. Opposition to the reduction has come chiefly from those who want this legislation to be of a penal character, and who hope that by a side-wind some measure of prohibition may be produced. There is no majority for that either in this House or in the country, and in any event it would not be a matter for the Chancellor to deal with in his Budget. But once any tax is defeating its own purpose, whether the Beer Duty or the Income Tax or anything else, surely it is the duty of the Chancellor to deal with it as best he can in order to fortify the revenue. Personally I am inclined to agree with those who suggest that the reduction in the consumption of beer is not due simply to the duty, but is due very largely to a change of habit among the people. But that rather appears to me to strengthen the obligation of the Chancellor to do what he can from the revenue point of view.

Let me come to the particular matter to which I was anxious to call attention. I was very astonished to hear my right hon. Friend the Member for South Molton (Mr. Lambert) say that those who were desirous of a policy of economy should be prepared to put forward proposals. I was under the impression that if there was one thing more than another with which the Chancellor had been inundated within recent months it was suggestions for economy of one kind or another, both officially and unofficially. In fact so much was this the case that I should have thought we might have been entitled to some clearer, more definite and more precise statement and examination from him of the proposals that have been put forward in order that we might know more definitely what is the attitude of the Government. My right hon. Friend the Chancellor in this House last June made a remarkable speech which has been frequently quoted, and I think it may be worth while to remind the Committee again of one or two sentences. My right hon. Friend said: After all the resources of civilization, are not yet exhausted. Increased taxation is not the only way of meeting the problems which lie before us, if we should find it necessary to tackle them afresh. I decline altogether to accept the view (if anybody put it forward) that we have come to the end of the possibilities of a reduction of our national expenditure. I respectfully ask whether the Chancellor still holds that view. Or does lie agree, with my hon. Friend the Financial Secretary, who last night said that further large economies were impossible? It is quite true that in that former speech the Chancellor went on to say: If substantial reductions in national expenditure were desired we should have to contemplate something more than mere paring down. In other words it may be some change in. national policy, possibly involving a repeal of existing legislation. What is the view of the Government on that matter? Do they feel that the situation is so much improved that it is no longer necessary even to contemplate any idea of diet kind? Are we to believe that the economies which have already been effected, and which I agree are substantial, represent the maximum of what can be done in this connection, and that failing a miraculous improvement in world conditions we must contemplate a Budget of nearly £700,000,000 as a more or less permanent feature of our national life in the years that lie immediately ahead? If so, it is a very depressing outlook for the trade and industry of the country, and particularly for the unemployed, who are so anxiously awaiting a trade revival. Is it not a fact that sooner or later we may have to consider whether the statutory burdens that we imposed in more prosperous times can be maintained indefinitely?

References have been made more than once to certain inquiries into this subject in recent months—an official inquiry appointed by the Chancellor of the Exchequer and an unofficial inquiry by certain Members of the House. I think it is true to say that both those inquiries had only one object, and that was to try to assist the Chancellor in his tremendously responsible end difficult task. That was the purpose of them, and that, I think, has been recognised. The Chancellor has been good enough himself on more than one occasion to express appreciation of the work of those inquiries. We are told that the suggestions that were put forward have been carefully and sympathetically examined, that some of them have been adopted, though not very many, I am afraid. But what we never have been told is the view of the Government with regard to the proposals as a whole, and why it is that the Government have found it impossible, or consider it inexpedient, to carry through a great proportion of them.

A very interesting part of the Budget statement was devoted to an examination of the suggestions that have been made for a reduction of taxation through a deliberately unbalanced Budget. I think that the Committee were impressed by what the Chancellor said, and to my mind he put forward an unanswerable case in reply to those suggestions. But there is, after all, this other way in which taxation might also be reduced, and that is by cutting down still further the enormous burden of public expenditure. Might not—I say this with all respect—the Chancellor take an early opportunity of reviewing in greater detail the suggestions that have been put forward, and tell the Committee what of them have been carried into effect and the reason why others cannot be? Those suggestions were all made with a sense of responsibility. They did not disregard the two important qualifications which the Chancellor said were essential, namely, that one should not disregard the economies that have already been made, and that one should not fail to take into account the automatic increases under existing Acts of Parliament.

While the enthusiasm in certain quarters for economy may not be as great as it was, there are still many who believe that there is no real hope for trade and employment in this country unless we do by some method obtains substantial reduction in the present burden of direct taxation. That being so, I venture, in conclusion, to ask my right hon. Friend, does he consider that the situation in this respect has materially changed since last June, so far as the need for national economy is concerned? Secondly, does he consider that the economies already effected really represent the maximum that can be done unless there is a very definite change in national policy? Thirdly, does he consider that the country can continue indefinitely to support a Budget on anything like the present scale? These are vital questions. They are questions to which an answer is being awaited with painful and increasing anxiety by hundreds of thousands of taxpayers throughout the country—those people who, as the Chancellor has said, have already given ample proof of their patriotism and their desire to help, but who at the same time are beginning to wonder how long they can keep afloat if present conditions are to continue indefinitely.

9.55 p.m.

Mr. MORGAN JONES

I am sure that not only hon. Members on this side associated with my party have listened with great interest to the speech of the hon. and learned Member for Lowestoft (Sir G. Rentoul), but that a great number of Members of his own party have paid particular attention to it. If my memory is not playing me an unkind trick, the hon. and learned Gentleman was himself the chairman of an economy committee, and in association with a number of his Parliamentary colleagues entered into a prolonged discussion of this subject of economy. The ultimate issue of those proceeding if I remember aright was that when their proposals on economy were made known, not to the general public but to the hon. and learned Gentleman's fellow Members of the Conservative party they all, with one accord, declared "We are in favour of economy but not that sort." Not only that, but they showed the hon. and learned Gentleman their sense of violent disapproval of his action in declaring publicly the nature of the economies which they had been discussing so long. From that day to this, in spite of repeated attempts to secure a copy of that famous document, I have never been able to induce any Member of the Conservative party to offer me even a fleeting glimpse of the proposals for which the hon. and learned Gentleman was responsible.

Sir G. RENTOUL

I shall be glad to let the hon. Gentleman have a copy.

Mr. JONES

I am very much obliged to the hon. and learned Gentleman and I close with his offer at once. I hope that in his case the promise will be redeemed, because on other occasions, I am bound to say similar promises have not been redeemed, and I look forward with some anticipation to receiving a copy. The Chancellor of the Exchequer opened his Budget on Tuesday in a characteristically lucid speech. It was the sort of speech which those of us who had the privilege of listening to his great exposition of the Local Government Act of 1929 expected from him. But though the speech was lucid, and the figures were marshalled in logical order, I am afraid that the right hon. Gentleman failed to convince his Parliamentary followers that there was anything of great promise in the proposals which he presented to the House. This is the third Budget which has been presented by the National Government. It is the second for which the right hon. Gentleman has been responsible, but it is the third for which a, National Government of which he has been a member has been responsible. The late Labour Government were responsible for two Budgets, and we are entitled to recall to the right hon. Gentleman and his colleagues that they have now had a more ample opportunity of facing the problems of the times than was afforded to the late Labour Government. That Government laboured under the disability of being a minority Government. This Government has been endowed with unrivalled authority in the House of Commons.

Shall I be exaggerating if I say that, in spite of the compliments offered to the right hon. Gentleman by many of his followers in the course of the last two days, there has been absent from almost every speech any element of cordiality in those compliments? Even the hon. and learned Member for Lowestoft who never fails as a patient supporter of the Government, on this occasion, having offered his little bouquet, felt called upon to enter upon what was, for him, a comparatively violent attack on the right hon. Gentleman. What has occasioned the almost universal sense of disappointment which has pervaded the discussions of the last two days? I am sure the right hon. Gentleman himself, having heard the discussion, feels that he has no ground for preening himself on the reception given to the Budget. Everyone will agree that throughout this discussion there has been a feeling that the Chancellor of the Ex- chequer on this occasion has not done what we had a right to expect him to do, namely, face the problem with which the nation is confronted.

It would be far even from my thoughts concerning the right hon. Gentleman to suggest that he is indifferent to the national problem. What I suggest, and I submit it honestly, as a criticism of his Budget and his defence of the Budget, is that he has disclosed an attitude of mind which can be fairly presented in this way. He has not regarded it as his job as Chancellor of the Exchequer to face, through the medium of this Budget, the grave national crisis through which we are passing. That brings us face to face with the fundamental difference of approach to this problem as between the right hon. Gentleman and his friends on that side of the Committee and those on this side. I shall return to that point presently, but at the moment I think I am entitled to say that every speaker in the Debate has given expression to this feeling, "What shall we do to save the nation from the greater calamity that may befall it in the future?" [An HON. MEMBER: "Keep out the Socialists!"] That is a purely negative approach to the problem. Hon. Members may think that the coming in of a Labour Government would be an even greater disaster than for the present Government to remain in office. They are entitled to hold that view, but I submit that in a critical hour of the nation's history it is not enough to say that the biggest contribution which hon. Members can make is to keep us out.

They asked for a doctor's mandate. They have been given an overwhelming majority to do what they desire to do, and they have been there for a year and three-quarters. We ask them to give an account of their stewardship and to defend their efforts. Throughout the last 10 years one curious feature has dominated the minds of the political followers of the right hon. Gentleman. They have chased Will o' the wisps year after year. Take this question of economy. There is a sort of feeling that we are hearing this cry of economy for the first time, but twice in the course of the last 10 years this country has been stampeded into a campaign for economy. One was in 1922, when the famous Geddes Committee was appointed, and the other was in 1931, when the May Committee was appointed. Honestly—I am not trying to make a party point at the moment—I ask hon. Members if they can point to any substantial result in the direction which they desire that came to the country, by way of revival of industry or renewed prosperity, as a result of the Geddes proposals of 1922. On the contrary, it is not a difficult proposition to support that the Geddes Committee Report, so far as it was translated into action, did not in fact produce any measure of renewed prosperity in the land whatsoever.

In addition to this demand for economy, you have had, in the realm of industry, enormous wage cuts on every hand. An hon. Member, speaking an hour or two ago, called attention to the enormous contribution which Super-tax and Estate Duties had made in the course of the last 10 years. I do not desire to controvert that position at all. It is a fact that some £600,000,000—I forget the exact figure—has been contributed through the medium of these various direct taxes, but hon. Members must not forget that while that contribution has been made by the direct taxpayers, a greater contribution still has been made by the workers of the country through direct cuts in wages, and if hon. Members have the desire to verify that statement, they will find verification of it in the current number of the "Ministry of Labour Gazette," from the returns in which, on a hurried computation, I estimate that the workers in the last eight or 10 years have made a sacrifice of many hundreds of millions of pounds in decreased wages.

Sir JOSEPH NALL

Is the hon. Member talking of the rates of wages paid to men who are in work or of loss of wages due to the large number of men who are out of work?

Mr. JONES

That is a fair question. No, the cuts to which I have referred have been cuts imposed upon people still in work, and an hon. Friend of mine reminds me that the actual contribution made in that direction in the course of the last eight or 10 years comes to the colossal total—I take his figure, which I have not verified—of something like £6,000,000,000. I am assured that that is since 1920.

Mr. HANNON

Does the hon. Member say that we have lost £500,000,000 a year in wages during the period to which he refers?

Mr. JONES

Yes.

Mr. HANNON

Five hundred million pounds a year?

Mr. JONES

My hon. Friend asks me, and I give him the categorical answer, "Yes." I ask him to examine the figures for himself, and he will find that what I am saying is substantially true. Therefore, when hon. Members opposite call attention to the contributions made by direct taxation to the revenues of the State in the last few years, which I do not deny, I ask them to look at the enormous contributions which the workers have had to make through enforced decreases in wages. Let me take the argument a little further, into a field which hon. Members opposite, I am sure, will be willing to approach sympathetically. If you go to any small township in my constituency to-day, and pass through the main street, I guarantee that you will see anything from six to a dozen business shops closed. Why are they closed? [An HON. MEMBER: "Co-ops."] I am trying to argue facts, and I ask, "How does any business man, be he co-operator or private trader, live?" His market, after all, is composed of working men with the capacity to buy, and all this poverty imposed upon these areas has simply ruined the small business man.

I see in their places the hon. and learned Member for Lowestoft and the hon. Member for Richmond (Sir W. Ray), both of whom have concentrated in their reports on the question of local taxation, and many hon. Members here to-night have spoken of it. May I call attention to this fact, that the outstanding loans of local authorities at the end of 1932 were something round about £1,200,000,000? These loans were for local expenditure. But businesses since 1929 have been exempted from three-quarters of their burden in that matter. The consequence has been that that burden has been thrown on the backs of people who are suffering this depression. Yet hon. Gentlemen still speak of economy as though in some way, by the operation of some curious alchemy, they could effect an economy in local expenditure and still provide those areas with the efficient services which these distracted people have to maintain.

Sir WILLIAM RAY

Yes, we could.

Mr. JONES

I shall be glad when we come to discuss local accounts in this House to get the hon. Gentleman to develop that point a little more fully. Who gets the product of those loans, Which amount to £1,200,000,000 I Suppose they are out at 5 per cent. 7 The interest amounts to £60,000,000 a year. Who gets the benefit of that? It goes outside those areas broadly speaking; it goes to the very people whose cause has been pleaded so eloquently in the Committee to-night, and who, we are called upon to believe, are in the direct need of immediate support and succour from the Chancellor of the Exchequer. That will-o'-the-wisp has carried the country nowhere. It has brought us no relief. It can give the country no relief.

Where else have the Government turned? They have turned to tariffs. The right hon. Gentleman, one of the archpriests of tariffism in this country, who has been that for years, had to admit on Tuesday that his anticipations in regard to the success of his tariffist policy had been completely frustrated. [HON. MEMBERS: "No"] I withdraw the word "completely," and will say that his anticipations are far from having been realised.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

Anticipations of revenue only.

Mr. JONES

I am coming to that. The revenue, says the right hon. Gentleman, has not been realised, but he states in effect that if he has not got his revenue he has killed some foreign trade. That is what it comes to. What has been the effect of the killing of foreign trade to which he referred? If hon. Members will look again at the Ministry of Labour Report, page 143, they will see the effect upon the trades immediately concerned with tariffs and the effects of tariffs. A small note in the centre of the page reads as follows: On a comparable basis the percentage rate of unemployment at the 20th March, 1933, in dock, harbour, river and canal service was greater by 2.4 per cent. than at the 23rd March, 1931. What a contribution to trade revival to have added to unemployment in the docks, wharves and elsewhere to the tune of 2.4 per cent.!

Mr. GODFREY NICHOLSON

How have other countries suffered?

Mr. JONES

Other countries are worse than we are. May I turn from that argument to another? I am still on the question of the failure of the Government to use this Budget for the purpose for which we think it ought to have been used. Take the test of unemployment. There are to-day nearly a quarter of a million more registered unemployed—and I emphasise the word "registered"—than there were in March, 1932, and the contrast is even greater if we make the comparison with March, 1931. Let me turn to the figures of poor relief, given on page 146 of the same publication. It states that the number of persons relieved on one day in March, 1933, in the 47 selected areas named was 827,955, or 1.95 per cent. less than in the previous month, but 19.6 per cent. more than in March, 1932. In other words, in 47 selected areas nearly 20 per cent. more people, according to the Government's official publication, are now marching steadily towards Poor Law institutions or Poor Law relief. What an eloquent testimony to the effect of the two Budgets for which the right hon. Gentleman and his colleagues have been responsible!

I challenge the whole philosophy which underlies this Budget, and the statement of the Chancellor in support of it. There seems to be a feeling that the thing to do is in some way to reduce direct taxation, and that that reduction will inure in some obscure way to the public advantage in a revival of trade. I take the strongest exception to that suggestion, because I do not think it is true, and I do not think experience has proved it to be true. In 1925 the then Chancellor of the Exchequer, in a Tory Administration, gave certain benefits-small ones, if you like—by reducing the Income Tax from 4s. 6d. to 4s. and giving certain reliefs in respect of earned incomes and so on. If there had been any basis of truth underlying the theory that a reduced Income Tax has an immediate reviving effect on trade one would have supposed that such a revival would have been disclosed in the figures of unemployment in this country in 1925. I will not take the year 1926, because that was an exceptional year, in which there was a good deal of "stoppage," and I do not want to be unfair. In point of fact, no one can show that there was any advantage in the way of reduced unemployment following that reduction in the Income Tax. To suggest that a reduction in Income Tax has that effect is simply nonsensical. It cannot be true.

I want to invite the hon. Gentleman to look at another possible line of approach. It is perfectly true that in the last year or two there has been a decline in the receipts from Income Tax, Super-tax and Estate Duties. My hon. Friends on this side will desire me to say that we do not subscribe to the proposition that the limit of the area of taxability has been reached, within the realm of direct taxation. I will give a figure or two for the information of the Committee; I cull them from an official publication. Comparisons of the net capital value of estates liable to Estate Duty in 1931–32 show very remarkable results. If you take the figures of estates up Ito £1,000—not a very big figure, but big enough for many of us on this side of the Committee—the total amount possessed below the £1,000 limit came to something like £40,000,000. Above the £1,000 level, the total value of estates liable to Estate Duty was £427,500,000. In other words, putting it into percentages, the percentage of the total represented by estates below £1,000 was 7.9, and the percentage above that was 92.1, showing the gross indefensible inequality of wealth still prevalent in this country right up to the year 1931–32.

Take another test, if you will, and spread it over 10 years. Take estates not exceeding £1,000 a year in value in the year 1922–23, that is 10 years ago; their aggregate was about £28,300,000. In 1931–32 they were still round about £36,900,000, a very insignificant rise indeed. Estates exceeding £1,000 in value had risen from £402,700,000 to £430,000,000, indicating that, in spite of the taxation which hon. Members cry so much about, there has been no substantial change in the relative distribution of wealth between the poor and the rich in this land. I therefore suggest that before hon. Members ask us to consider their cry for economy upon the social services and for the reduction of this or that social service, it is up to them to prove up to the hilt that there is no case for further attack upon this unjust distribution of the wealth of the nation.

I want to say one other word. I will give the right hon. Gentleman ample time to make his speech to wind up the Debate. Hon. Gentlemen are prone to think that some particular form of economy or of attack upon something else will save them. I find that feeling behind the demand for our attack upon the cooperative societies. Hon. Gentlemen believe that an attack upon the societies will in some curious way save them. Suppose that the Chancellor's proposals had been based upon the original report and recommendations of the committee that considered the co-operative societies, what benefit would that have been to private industry as a whole? How could those proposals help to revive private trade? How could they assist anybody 1 Hon. Gentlemen really must face up to the proposition that, if every iota of the recommendations of the committee's report were adopted, it would not assist this nation one bit to get out of its present troubles. Everyone knows by now that the right hon. Gentleman sees the possibility of two things if that were done—the one the possibility of losing more financially than he would gain, and the other the possibility, which is perhaps the bigger consideration for the Government, of their losing more politically than they had bargained for.

I want to associate myself with the protest of my hon. Friend the Member for St. Rollox (Mr. Leonard) in regard to a disgraceful attack which was made upon a late right hon. 1Sember of this House and a distinguished Member of the late Labour Administration. Those of us who were in the last Parliament had the privilege and pleasure, some of working with, and all of knowing, Mr. A. V. Alexander, and I think I can say that everyone, whether Tory, Liberal or Labour, will agree that Mr. Alexander is a man of sterling character and integrity. It seems to me, therefore, to be a monstrous thing that an ex-Minister of the Government should be accused in this Chamber, as he was last night, of abusing his position as a Member of the Ministry in order to secure for an organisation with which he was ordinarily associated some pecuniary advantage. If the hon. and learned Member for Argyllshire (Mr. Macquisten) were here, I would tell him frankly that, when hon. Gentlemen in this Chamber are challenged either to prove their statements or withdraw them, it is usual to withdraw unless they feel that they can justify their accusations up to the hilt. The hon. and learned Gentleman was here this afternoon, and we named him specially for that purpose, but he sat in craven silence without responding to our challenge.

The last observation that I want to make is this. One of the uses which the right hon. Gentleman has made of his money has been the giving of some £14,000,000 by way of reduction of the Beer Duty. We have not heard to-night any of the anticipations that were expressed last year concerning the effect of a reduced Beer Duty upon employment. I have been hoping to hear the right hon. Gentleman himself advocate this reduction on the ground that it is going to help employment in some way, but, of course, he must have had in his mind the speech which he himself delivered on the point last year when he was contraverting the arguments of the hon. Member for Canterbury (Sir W. Wayland). The right hon. Gentleman says that he was more cautious than I. I have not yet quoted from his speech, but I warn the right hon. Gentleman that the proposal still remains, and he has to justify, if there is no contribution to employment through the medium of this reduction of tax, the giving of £14,000,000 at a time like this to an industry which only a few years ago got a toll of some millions from the de-rating proposals of the Government. The right hon. Gentleman and his friends may have many reasons for this. They may feel that there is a certain financial necessity for it.

I do not approach it as a temperance matter at all. I could say a good deal about it from that point of view, but I do not. All I will say is that it seems to me a monstrous thing, at a time when the nation is passing through a very grave financial difficulty, that a responsible spokesman of the Government should find it necessary to stimulate the development of the strongest anti-social forces within the State. I should feel, whatever may be the views of many individual followers in my constituency in regard to beer consumption, that I was well within the truth if I said that however much one of them may have believed in a reduction of the Beer Duty as such, they would infinitely prefer that it should have given way to some relaxation of the burden on the unemployed before their own claims had been considered in this way. In my judgment, this Budget fails in the essential quality that it does not face up to the national crisis with which we are confronted; it is a "bung and bunk" Budget. If it is the last word of the Government for the restoration of prosperity within the country, then indeed is the statesmanship of this Government utterly bankrupt.

10.37 p.m.

Mr. CHAMBERLAIN

The first duty that falls upon me in winding up the Debate is to thank those supporters of the Government who have in such large numbers been good enough to express their general approval of the proposals that I have made. Of course, it would not be human nature, and certainly I did not expect any effusive enthusiasm for proposals which were so strictly limited by the circumstances of the case as those which I have put before the Committee, but I have very much appreciated the general recognition of the extraordinary difficulties of the time and what I think I might call the consensus of opinion among supporters of the Government that I had, at. any rate, made the best use of those resources. We have had many admirable and interesting speeches. It is always invidious to single any out, yet I think the Committee will allow me to say that I heard at least two maiden speeches which seemed to me to be quite exceptional in quality. I refer to those of my hon. Friends the Member for Rossendale (Mr. Cross) and East Fife (Mr. Henderson Stewart).

Like my hon. Friend the Financial Secretary last night, I am really embarrassed in having so little to reply to, because there has been no serious attack upon the Budget as a Budget from any quarter of the House. The attack of the official Opposition has not been upon the Budget. It has been an attack upon the capitalist system. The hon. Gentleman who has just spoken complained bitterly that I had not provided the Opposition with what they had a right to expect. The objection which the hon. Gentleman and his friends would like to have taken to the principal changes in taxation was blown into air last night by the quotation which the Financial Secretary was able to give from their speeches last year. No doubt they have forgotten those little incidents of their career last year, and that is the reason why I say they should have been more cautious.

Take the attack of the right hon. Gentleman the Member for Darwen (Sir H. Samuel). He did not attack the Budget; it was a defence of Free Trade. My right hon. Friend the Member for Sparkbrook (Mr. Amery) was almost forlorn in still maintaining the position that I ought to have deliberately unbalanced the Budget in order to take 1s. off the Income Tax. It is true that my hon. Friend the Member for South Salford (Mr. Stourton), who also takes that view, told me that all informed opinion was on his side. That is an injustice to the information of the majority of this House. From my long and intimate knowledge of my right hon. Friend I should always expect that if there were a last ditch he would be found in it. He is in the ditch on this occasion, and, without repeating all the arguments which I addressed to the Committee in the course of my Budget statement upon that subject, I would just say once more to him, that it is not a question of morality as to the interpretation of his remarks this afternoon; it is a question of hard business sense. We have to consider whether it would pay this country to have its Budget unbalanced for the purpose of reducing taxation in the hope that the Budget might be balanced again at the end of the year. I have expressed my opinion that, having given ample consideration to the subject, it would not pay the country to pursue such a course. I feel that the majority of the Committee are with me in that view, and, that being so, I will say that there is an end of it.

I mentioned just now the two important changes which appear in the Budget. First, as regards the Beer Duty, I was astonished to hear the violent language used by the hon. Member for Caerphilly (Mr. M. Jones) that it was a monstrous thing to stimulate the strongest anti-social influence in the State. When I compare it with the language of the hon. and learned Member for East Bristol (Sir S. Cripps), sitting next to him, who said last year: That is one of the things which I believe might reasonably be done, and I should certainly support that proposal,"—[OFFIOLAL REPORT, 21st April, 1932; col. 1753, Vol. 264.] I advise the hon. Member to move a little further along the bench. The hon. Member, I think, is making the mistake which has sometimes been made by others who take violent views on this subject of supposing that increased drinking necessarily means an increase in drunkenness. Nobody here would stand up for anything which would encourage an increase in drunkenness, but I am quite satisfied that the change in the habits of the people, to which allusion has been made in the course of the Debate, and which must be a matter of observation to anybody who has passed middle age, removes any danger of falling back to the state of things which some of us may remember many, many years ago when it was often possible to see drunken men in the street. That has now become merely a memory. I am not afraid that the increased consumption of beer which may follow upon the changes which I am proposing now will be followed by any antisocial influence of such an extent as the hon. Member suggests. The justification, if I want further justification than the testimony of the hon. and learned Member for this change, is that I am bound to safeguard the revenue of the future. I have not attempted to suggest that I am reducing the duty on beer because I think that is the way to increase employment. That it will incidentally, to some extent, increase employment is possibly the case, but the real cause for the change is that the effect of this tremendous duty is so reducing the yield of it that unless it be changed, in a few years time it will be necessary for whoever holds my present office to find some other means of taxation to take the place of the present revenue from the Beer Duty.

In regard to the relief of the Income Tax payer, the right hon. Member for Darwen said that it would not ease the position of the taxpayer by one iota. There, I think, he will find that he is mistaken. It eases the position of the taxpayer very materially during this year.

Sir H. SAMUEL

I did not quite say that. I said that it would not, reduce the burden but make it more comfortable to carry.

Mr. CHAMBERLAIN

The right hon. Gentleman said that it would not reduce the burden by one iota. I say that it will reduce the burden by many iotas during this year, but it is not a permanent relief of the Income Tax payer. That, again, is an answer to those, whether belonging to the Opposition or among the supporters of the Government, who have said that they would desire to see relief given in some other way. There was a desire to see relief given by way of mitigation of cuts, alteration of allowances for Income Tax, and so forth, but every one of those measures would be not merely a temporary relief given during this year only, but a permanent relief and a permanent charge upon the revenue. As I have not got any permanent source of increased revenue it is impossible for me to make changes of that kind at this stage. That I have been able to do it is because I was able to find a non-recurring source of revenue which I could use for this year only and which could be used for a purpose of this kind. That I am very glad to have been able to do, because it will, I believe, give relief in a quarter where it will be extremely appreciated, and also it will set free a considerable sum of money which will circulate through the country and generally improve trade.

I come now to another matter, raised not by the official Opposition but by the hon. and gallant Member for Thanet (Captain Balfour), and I give my assurance that I will certainly consult with my right hon. Friends the Minister of Labour and the Minister of Health on the particular point of view that he put, which I admit was new to me and which I think is worthy of examination, although at first sight it seemed to me to be rather difficult to say that a workman in the north shall not come down to the south if he thinks that he has a chance of obtaining employment there which he cannot obtain in his own district. That sounds to me rather a difficult thing to do, but I will undertake to talk it over with my right hon. Friends. Let me say a few words in answer to the hon. and learned Member for Lowestoft (Sir G. Rentoul) who addressed to me some questions on the subject of economy. It is not the case that I consider that everything has been done that can be done in the way of economy. We have made very great economies, as I have specific- ally shown to the Committee. We have continued to scrutinise every item of expenditure and we have made numerous other additions to our economies besides those that formed part of our original plan. We shall continue to carry out that process, and I anticipate that we shall be able to find even further reductions of expenditure, but I repeat that to obtain large scale reductions which will provide a sufficient amount of revenue to enable substantial reductions to be made in direct taxation can only be achieved by such drastic changes of policy as would require, very great and clear justification before I could consider it desirable or possible at present to adopt such a course. I have never said that it might not ever be necessary hereafter to propose such reductions. It might be; it depends on other matters. But I feel that it could only be justified if the circumstances of the country were such that it was quite clear that there was no escape. That is why, originally, when I was dealing with this subject, I said it would require bard thinking before one could attempt to ask the country to accept the further sacrifice which would be necessary before those economies could be made on a large scale.

There is one observation by the hon. and learned Gentleman the Member for East Bristol on which I must comment, because he tried, as I think he has tried on more than one occasion before, to claim some words I had used as justifying a statement that in fact they did not justify. He claimed I had now admitted that the whole cause of the crisis in 1931 was the presence of bad money in London. He did that by leaving out a very vital phrase in the statement I made. What I said was that after we went back to the Gold Standard large supplies of short-term foreign money in London had rendered us vulnerable, and that ultimately they had driven us off gold at a time of special financial weakness. I was not more precise because at that moment I did not seek to invite controversy, but if the hon. and learned Gentleman were to take my words, leaving out that vital phrase, as a justification for the suggestion that the crisis of 1931 had nothing to do with the Labour Government's finance, then I must take this opportunity of correcting him. The Macmillan Committee in their report pointed out that, as a matter of fact, the supplies of short-term money in London at that time were actually less than they had been in the years 1927, 1928, 1929 or 1930, and it was not that which would have driven us off gold, if it had not been for the finance of the Labour party, and, in particular, the unbalanced Budgets of the Labour Government which so frightened the whole of foreign holders of that short-term money in London that the flight from London took place.

I want for a moment to come to some observations made by the right hon. Member for Darwen. I must express my regret that the right hon. Gentleman—for whose power of picking out the broader aspects of an issue I have great respect—should have allowed himself to make some small debating points by twisting the obvious meaning of my words and so seeking to establish inconsistencies. The right hon. Gentleman said I had been inconsistent because at the time I introduced the Import Duties Bill I had claimed that the only true way of remedying unemployment was to transfer work from the foreigner to this country, and that since then I had claimed that the only way to prosperity was now to seek collaboration with foreign nations. I can prove, in the first place, that the right hon. Gentleman has misinterpreted the obvious meaning of my words, in the second place, that what I said in bringing in the Import Duties Bill was absolutely consistent with what I have said since, and that, in the third place, his statement that the falling off in our foreign trade was due to the introduction of tariffs in this country was, to use a phrase which has been made famous by my predecessor, grotesque and ridiculous. What was it that I said? I said that one of the objects of the Import Duties Bill was to transfer to our own factories and our own fields work which is now done elsewhere and thereby decrease unemployment in the only satisfactory way in which it could be diminished. I said that if we put work into our own factories it was the only satisfactory way of reducing unemployment. Whether work was put into our factories by transferring it from foreign factories or by starting works in this country obviously the effect would be the same in either case as far as unemployment is concerned.

I made a number of other statements as to the objects of the Bill, all of which have been justified since. I said that we meant to use the tariff for negotiations with foreign countries which had not hitherto paid very much attention to our suggestions. As regards foreign trade in 1929 our exports were £729,000,000, and in 1932 they had gone down to £365,000,000—about half. When the right hon. Gentleman tries to make out that this was due to the imposition of the tariff he has not studied the figures or he would have seen that out of the diminution of £304,000,000, 23389000,000 took place before we put on tariffs at all. What has happened is perfectly consistent with my statement. I said that we had a programme in our Import Duties Bill which would bring about a number of objects. The first of these was to give our home manufacturers some security in the home market and at a later stage to promote foreign trade by negotiations with other countries. These negotiations are now being carried on with success by the President of the Board of Trade. Three of them have already been concluded, and we have every reason to suppose that others will follow.

I deprecate altogether the continuous suggestion of pessimism, the idea that we must give up all hope of any success in collaboration with other countries. Not only do I believe that there is the greatest prospect of regaining some of the 2364,000,000 of foreign trade which has disappeared, not that we have lost it, but that we are within sight now of collaboration of that kind, and the information we have of the work that has been done in Washington by the Prime Minister indicates that his visit has had the effect which we hoped it would have, that is, to establish a personal contact and understanding between himself and the head of the American State, and we have good reason to anticipate that when he comes back he will he able to report to us an atmosphere in Washington very different from that which existed before he went.

Question, "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," put, and agreed to.

Resolution to be reported To-morrow.

Committee to sit again To-morrow.