HC Deb 23 June 1933 vol 279 cc1071-154

Order for Third Heading read.

11.5 a.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

I beg to move, "That the Bill be now read the Third time."

In ordinary circumstances I should have proposed to adopt to-day the same procedure that I followed on the Second Reading, when I waited to intervene in the discussion until I had heard part of the Debate. But the House is aware that the World Economic Conference is in session and, as one of the representatives of His Majesty's Government at that Conference, my presence will be required there in the course of the day, and, as I shall not be able to be here all day, I am proposing to leave the task of replying to the Debate in the extremely competent hands of my hon. Friend the Financial Secretary and to confine myself to commending the Third Reading to the House with a very few brief observations.

The Bill is to-day entering upon the final stage of its calm and tranquil course. It is in very much the same shape as it was when it commenced its voyage. It has, however, taken in a certain amount of cargo in the course of its passage through Committee and Report stages, and it is now adorned by nine new Clauses. Two of them are concerned with the taxation of profits arising out of mutual trading, and the remainder are representative of various concessions which I have been able to make in response to representations put to me from various quarters of the House. With regard to the taxation of the reserves of co-operative societies, which the Amendment on the Paper seeks to condemn in what I may describe as purely conventional terms, so much has been said in the course of our Debates that I shall only make one observation upon it. In my judgment, the co-operative societies have got an extremely good thing out of this settlement. I do not believe that the great mass of co-operators have any desire to evade or to avoid making their fair contribution to the National Exchequer, nor have I thought for a moment that they wish to be put in a position of privilege as compared with those who are described, quite accurately, in the Amendment as competitive interests.

At the same time, they cannot but have been aware that, in the minds of a very large section of the community, by no means confined to those competitive interests, they have been in such a privileged position, and they have thereby acquired a very considerable volume of odium. By Clauses 31 and 32 of the Bill they rid themselves of that odium. They are placed in exactly the same position as the ordinary trading company competing with them, and they have acquired that new and virtuous position at a cost which, compared with their vast turnover, may be called almost trifling. But, on the other hand, there is one thing to which all co-operators attach the utmost importance. That is the security of their "divi" They know very well that there have been many people who have viewed the "divi" as a kind of dividend in the ordinary sense of the word applied to trading companies, that is to say, as similar to a profit distributed among shareholders. The only real substantial fear, I believe, that any of them have felt about the proposals in this Bill was lest they should prove to be the first step towards a subsequent taxation of "divi." Under Clause 31 (3) they have the charter of the "divi." For the first time it has actually been laid down in a Statute that the "divi" is not a profit for the purposes of taxation, that it is a trade expense and it may be deducted, for the purpose of computing profits for taxation, and that that applies not only to a "divi" distributed out of the earnings of the current year, but also to any "divi" which may be distributed out of resources accumulated in bygone years. That seems to me to be a positive and substantial advantage accruing from this legislation to co-operative societies for which I have not any doubt in time to come, when the political propagandists of the co-operative movement are chasing some other hare, they will give due credit to the authors of this provision.

The only other matter in the Bill which has given rise to any considerable amount of controversy is the tax upon heavy hydrocarbon oils. I have reason to suppose that the exemption which has been granted to these oils when used as fuel for vessels in home waters has been greatly appreciated. I am sorry that I have had to disappoint numerous hon. Friends of mine who have put to me a request that I should give a similar exemption to fuel used for a great number of other purposes. I have not seen my way to comply with that request, but I must say that the evidence that continues to come into my hands adds to my conviction that, when the trade settles down, the disturbance which has been anticipated will prove to have been greatly exaggerated while the benefits bestowed by this taxation upon the coal industry and industries closely allied to it will be found to be substantial and progressive.

Taking the Bill as a whole, I could hardly expect that it would satisfy those who regard a Budget primarily as an instrument for levelling out inequalities of income. I do not suppose that anyone will be inclined to disagree with the dictum that the sole basis of taxation must be the public interest. In putting that into a Motion for the rejection of the Finance Bill, right hon. and hon. Gentlemen opposite are merely begging the question, the real question being what is the public interest. In considering that question in relation to the Finance Bill, if the House is not to be a mere debating society arguing questions of that sort upon purely academic and theoretical grounds, they must face up to the facts and the realities of the situation such as a Chancellor of the Exchequer has to do. I am sure that anybody who faces up to those facts and realities must admit that there was very little scope this year for any far reaching alteration of taxation within the limits of sound finance—I make that qualification.

On the one hand, there have been those who have thought that the circumstances of the day were so exceptional that we were justified in going beyond the bounds of sound finance. There were some who thought that the benefits which might be expected to accrue from a, reduction in Income Tax were so great and would fall in so rapidly that we might be justified in accepting all the risks and dangers of an unbalanced Budget in order to take 6d. or 1s. off the Income Tax. I do not propose now to repeat the arguments which I used in my Budget speeches to show that, in my judgment, such a course was undesirable. I will only say that what has happened since in other countries whose Budgets are unbalanced has only strengthened the view which I expressed then, and which I hold still, that, if I had followed the advice of those who called upon me to unbalance the Budget for this purpose, I should have inflicted upon our national credit an injury which would have taken years to heal.


May I ask if the right hon. Gentleman is referring to the United States of America?


The right hon. and gallant Gentleman may ask, but I am not called upon to answer. There was the opposite course advocated by hon. and right hon. Gentlemen opposite. They would have had me undo all that we have been trying to do since we have been in office to restore the national credit by giving back the cuts in pay of public servants and increasing Unemployment Insurance benefits and transitional payments. That could only have been done in one of three ways. Either the Budget must have been unbalanced, which I have rejected already, or the additional money must have been found by direct taxation, or the national expenditure must have been correspondingly reduced. Surely, it is already demonstrated that to put further additional taxes on to the direct taxpayers is impossible, at least if you hope to get a larger revenue, because the declining returns from taxes have already shown us that we have reached the limits of what can profitably be done in that direction. On the other hand, reduction in national expenditure could only be attained by a reduction in the social services which the party opposite would have been the first to denounce if I had attempted to carry it out.

In these circumstances, rejecting the advice given me both from the right and from the left, I have taken the middle course. Practically the whole of the surplus available to me for the permanent reduction of taxation has been devoted to a reduction of the Beer Duty, and although the object of that reduction was, as I have repeatedly explained, primarily to safeguard the revenue of the future, I am entitled to point out that the bene- fits incidentally accrue mainly to the poorer classes, and that the alteration which it induces in the proportion of direct and indirect taxation is in favour of the indirect taxpayer. It would be unreasonable to ask for, or to expect, an exhibition of irrepressible enthusiasm for a Bill constructed under such limitations. That will be reserved for some more fortunate Chancellor who in the future will be able to distribute right and left the favours which are denied to me. [AN HON. MEMBEE: "Next year!"] But I am entitled, and I do say, that I have done the best for the taxpayer that I could in circumstances of extraordinary-difficulty and that by avoiding dangerous and unsound expedients, either in one direction or the other, I have fulfilled my duties as the guardian of the public purse.

11.23 a.m.


I beg to move, to leave out from the word "That" to the end of the Question, and to add instead thereof the words: this House regrets the failure to adjust the burden of taxation according to capacity to pay, declares that the sole basis of taxation must be the public interest, and declines to assent to the Third Reading of a Bill which provides the national finances under a system in which the poorest suffer most, and which, in violation of a ministerial pledge and of a hitherto accepted principle of taxation, imposes a penal tax upon co-operative societies at the behest of competitive private interests. I am sure that the whole House appreciates to the full the graceful acknowledgment which the right hon. Gentleman has made this morning among his many other preoccupations, in coming down to the House of Commons to deliver the interesting speech to which we have just listened. I am sure I am speaking in the name of the whole House when I say that if the right hon. Gentleman had felt obliged to absent himself from the proceedings to-day we should have fully understood it. But having said that I wonder all the same why the speech was necessary. It sounded very much like an apologia for this Budget. Perhaps the right hon. Gentleman has heard of the great meeting of co-operative women at the Crystal Palace last night, where some 15,000 women demonstrated their "irrepressible enthusiasm," to borrow the words of the right hon. Gentleman, in the fight against the proposals which he has embodied in this Bill. He has taken some trouble to assure the cooperative societies that, after all, it is only a small tax; it is only a drop in the bucket, and they need not worry. That may be true, but perhaps after next Wednesday the right hon. Gentleman may not be Chancellor of the Exchequer. The right hon. Member for Epping (Mr. Churchill) may be Chancellor of the Exchequer or Prime Minister, for anything we know, and who has any guarantee that he will not make another raid upon the co-operative hen-roosts? We have only the assurance of the present Chancellor of the Exchequer concerning his present intention. So far as he is concerned, we have no assurance that next year his friends on the right and the left, as he puts it, may not press him further to drive the thin end of the wedge into the co-operative fabric. The right hon. Gentleman took trouble, also, to explain away the tax upon heavy oils. Indeed, the whole burden of his speech seemed to me to be in the nature of a feeble defence of the proposals embodied in the Finance Bill.

We have reached the last stage of the Government's second Finance Bill, and whatever its merits or demerits, and there are strong opinions on both sides of the House concerning that matter, we can all be unanimous in appreciating the way in which the Bill has been piloted through its various stages by both the Ministers responsible for it. We owe the right hon. Gentleman and his colleague, the Financial Secretary, a debt of obligation for the way they have expounded the proposals embodied in the Bill, and I should like to add my tribute to that which he has paid to the Financial Secretary, who has shown unfailing courtesy and tact throughout the discussion, who has shouldered manfully a heavy responsibility and discharged his duties with distinction to himself and with profit to the House.

The right hon. Gentleman said that the Bill had reached its final stage substantially unchanged. There are some minor concessions that have been made, but the Bill does remain substantially unaltered, and it is true that the criticisms which we advanced against it at an earlier stage remain intact. Perhaps I might recall to the House, roughly, the main line of our criticism. In the first place, we challenged the unsoundness of the Budget on the ground that where it made concessions it gave concessions to those who were less deserving than those who had been left out. The right hon. Gentleman made reference to that in his opening speech. We advanced that criticism against the Bill very earnestly and I challenge, and I am sure my hon. Friends on this side will equally challenge, the proposition that the right hon. Gentleman is entitled to say to the unemployed "I have not restored your unemployment benefit, but I have made your beer cheaper." I wonder how an unemployed man going before a public assistance committee would be entitled to argue that he had spent so much money per week upon beer. The moment the committee heard of such a thing they would strike him off benefit.

The right hon. Gentleman referred to the fact that we have criticised him for not having restored the cuts. In respect of the Beer Duty, however, he has returned completely to the position prior to the Snowden Budget of 1931. Every single penny of imposition then put on to the brewers by the Chancellor of the Exchequer has been given back by the right hon. Gentleman to the brewers through the medium of this Finance Bill. When I say that, I do not speak without authority. I have the very best authority for making that statement. In the monthly journal published by the brewers' friends, The Fellowship of Freedom and Reform, on page 57, of the May issue, there appears the following statement: It will be found that 36 gallons of beer of 1055° of original gravity (that is, the old standard barrel), which under the combined Snowden taxation was taxed 114s., will now be taxed at 80s. In other words, the whole Snowden tax of 34s. on a standard barrel has been removed. That is the testimony of the brewers themselves through their own special organisation. If this be a contribution to prosperity, then apparently in the view of the right hon. Gentleman we shall have to trundle our way back to prosperity on the beer wagon. There is further testimony to the effect of the Budget by the same organisation, on page 57— The point is that the new taxation which will help one kind of beer will probably help all kinds of beer. Then there is a whoop for joy. The point is— A fading fashion will be set going again. As a contribution, in these days of depression, towards the revival of industry, it is a real masterpiece.

The second point of our criticism was that this Finance Bill leaves the heaviest burden of taxation on the shoulders of those least able to bear it, and that it reveals no effective policy for the restoration of trade and commerce. My Amendment deals principally with the second item in that indictment, and I hope to apply myself argumentatively to the point which the right hon. Gentleman made, as to the way and the extent, in our opinion, that this Budget falls short of serving the public interests. Before I do that I want to make reference to a phrase which fell from the right hon. Gentleman concerning his Budget. I think he used the phrase, "a balanced Budget". I wonder if that phrase is still applicable in the present circumstances. As I understand it, according to the statement made by the right hon. Gentleman about 10 days ago, we have made a temporary arrangement with America whereby a sum of £2,000,000 is to be paid as a token payment to America in respect of the debt. Where is that provided for in the Budget? I understood that there was no provision for the repayment of debt in the Budget as originally introduced. That is my first question.


It is an easy one.


It may be easy, and we would like to have an easy answer. The Debt question between ourselves and America has not been settled but only temporarily adjusted, and I would urge on the Chancellor of the Exchequer, and I am sure that members of all parties will agree with me in this, that we should not again be led into the undignified situation of 10 days ago whereby the settlement was left to the last minute of the last hour, almost, before we were able to arrive at a conclusion in regard to the matter. A breathing space has been secured, and, as far as we are concerned, we wish the Chancel- lor of the Exchequer and those who may go to America every possible good luck in their future discussions with the American Government. But that does not dispose of the problem of War Debt, nor must the House suppose that it does, because there still remains in this Budget a provision for a sum of £224,000,000 for the payment of interest and management on the National Debt.

I have made the point before, and the right hon. Gentleman has done me the honour of replying to it, that there still remains the task of applying ourselves to the unconverted portion of our War Loan indebtedness. The right hon. Gentleman argued, no doubt quite correctly, that there is no substantial body of war loan to be converted until we reach the year 1940, and that if we convert what falls between this year and 1940 the saving would be about £2,000,000 or £3,000,000 per year. I am not controverting that point at all, but I make this statement quite categorically, that this nation cannot go on bearing this intolerable burden of debt interest without a substantial change in its incidence. I go further, and I say that we shall be compelled to convert compulsorily; and in saying that I am not making any revolutionary suggestion. Hon. Members opposite during recent months have spoken about repudiating our obligations to America. I am not asking for repudiation. I am asking for the Government to realise that this nation cannot go on in these days of depression bearing this intolerable burden, which is more than one-third of our annual Budget commitments. I admit the value of what was done last year, but we shall have to consider once again the whole question if we are to save this nation from this great burden.


In order that I may have some grounds upon which to reply to the hon. Member, may I understand exactly the proposal which he and his party now make for compulsory conversion. Will he say how much of the War Debt they would convert, at what rate of interest, and what would be the annual saving?


That is a simple question, and, as the right hon. Gentleman would say, an easy one; but, as he also said, I do not propose to answer it at this point, except to say that I do not go back upon the plain implications of that statement. You have converted the wages of the workers of this country compulsorily; you have converted their transitional payment from one figure to a lower figure; there has been compulsory conversion during the last ten or twelve years of the income of the workers of this country, and I am not exaggerating when I say that the value of the 4½ per cent. interest which war loan now produces is greater to-day than it was when the money was lent because of the decline in the cost of living. Therefore, I am entitled to argue that if employers can go to their workmen and say that as the cost of living has come down therefore their wages must come down, we are also entitled to say to war loan holders that they too have enjoyed the same reduction in the cost of living and must accept the same cut in their earnings.


The hon. Member, I am sure, will not think that I am asking him anything unnecessary, but I do want to know what he means by the Government converting the wages of the people of this country compulsorily.


If I said "the Government" it was a slip of the tongue.


I do not want to trap the hon. Member.


I know that the right hon. Member is only asking for information, and if I used the word "Government" it was a slip. What I mean is that during the last ten or twelve years, on the ground that they has been a decline in the cost of living, substantial cuts, amounting to thousands of millions of pounds in the aggregate, have been made in the wages of the workers of this country, including Government servants, and I say that if that argument can be legitimately applied to the workers of this country, on the ground of the decline in the cost of living, it is equally applicable to those who have enjoyed war loan interest unchanged since the time it was first given. That is all that I say.

The right hon. Gentleman spoke of a balanced Budget. From the papers this morning I understand that the Minister of Health has made an announcement in which he proposes to find £500,000 for necessitous areas. That is not provided for in the Budget. I only want to make that point because it is associated with debt. I want the right hon. Gentleman the Minister of Health and the Chancellor of the Exchequer to bear this in mind. One of the pleas advanced from their side, with some truth, in relation to these distressed area, has been the heavy incidence of local rates upon industry; they have made their own contribution to it. I am not arguing whether it was right or wrong, that is quite another point, but I want the Chancellor of the Exchequer and the Minister of Health to look at this matter from this point of view, that there still remains a very heavy burden of municipal debt on local authorities owing also to the persistence of the heavy rates of interest incurred during war time, and still persisting because there is no power to break the understanding between the lender and the one to whom the money was lent. That involves legislation, and I will not discuss it further; but I do say that something will have to be done in this matter. In my own area I know the colossal sum that has had to be borrowed at 6½ per cent. which cannot be repaid until 1960. It is an intolerable situation, and I give the Minister of Health notice that we shall return to this matter later when we discuss the Estimates of his Department.

It is no use our beguiling ourselves into the belief that the question of debts stands alone. It is intimately related with the problem of armaments as well. The Chancellor of the Exchequer will no doubt argue that the Government have done all they could. I am not accepting that proposition, but that is his view. It is clear that this thing will not be finally settled until disarmament has brought us some measure of relief, not only in our own country, but has given us a handle for negotiations with people beyond the seas. I will read a short passage from a speech delivered by Senator Borah of the United States: To cancel debts of a comparatively few-million dollars upon the theory that it is going to help the business and economic conditions of Europe, without a change in the situation, is in my judgment a perfectly futile thing. It is simply impossible. These armament burdens mean economic distress, mean misery and poverty for countless millions, and there is not enough wealth in the United States to bring prosperity to them while this programme of armaments lasts. That is the mentality of a substantial body of American opinion, and we might as well face up to it first as last. Let me turn to the main gravamen of the Amendment which I have moved. The Chancellor of the Exchequer acknowledged by implication in his speech that the party to which I have the honour to belong is obliged to look upon our financial instruments, such as this Bill, somewhat differently from the way in which hon. Gentlemen opposite look at it. We are committed, and we are proud to be committed, to big ideas of social readjustment, and, that being so, the Finance Bill necessarily becomes an important element in connection with that consideration.

We lay down a criterion, and it is the public interest. What is the public interest? I need not ask the Chancellor of the Exchequer what it is, for he has told us. He has said that the public interest demands that beer shall be cheaper. That is his view. What is our view? I say quite categorically that we see elements of social maladjustment all around us—unemployment, slumdom, overcrowding, underfeeding, under education. All these are elements in a vast and complicated and challenging social problem, and we say that the only instrument we can use in tackling these social maladjustments is the instrument of finance. The public interest demands it. It will be in the public interest that we will tackle slumdom and under education. It is in the public interest that we shall lift the social burdens from the shoulders of those least able to defend themselves, through the medium of corporate action by the State. That raises the question of the capacity to pay. I challenge categorically the proposition which the right hon. Gentleman lays down by implication in this Bill, and indeed he supported by actual argument this morning—that this Bill imposes taxation according to capacity to pay.

My memory does not serve me, but I think it was William Pitt who said that it was possible to tax the shirts off the backs of the people, and that some of the people would scarcely be aware of it. I can prove conclusively that the whole tendency of the present Government's taxation is in the direction of readjusting the incidence of direct as compared with in- direct taxation, in the sense of adding to indirect taxation and reducing direct taxation. Let me give a figure or two. Our critics are somewhat hard to please. If we lay down a proposition and do not quote figures we are accused of generalising, and if we do quote figures we are accused of throwing a plethora of statistics at people's heads. My proposition involves proof and I will do my best to apply myself to it.

My argument is that the Chanceller of the Exchequer is shifting the burden of taxation from direct to indirect taxation. I will compare 1913–14 with 1924–25 and 1932–33. Take direct taxation, that is Income Tax, Super-tax and Death Duties. In 1913–14, 74.6 millions were raised in that way. In 1924–25 the figure was 396 millions; and in 1932–33 it was 389 millions. Take indirect taxation for the same years. Customs and Excise in 1913–14 provided 75 millions; in 1924–25 the figure was 234 millions; and in 1932–33 it was 288.1 millions. These figures show a steady increase on the indirect side and a decrease on the direct side. Let me carry the matter further to the lifetime of the present Government. I will give the percentage of direct taxation to total taxation. The figures are: 1930–31, direct taxation, 65.77 per cent.; indirect, 34.23 per cent. That was the situation when the present Government came in. For 1931–32 the figures are: direct, 64.7 per cent.; indirect, 35.3 per cent. For 1932–33 the figures are: direct, 59.72 per cent.; indirect, 40.27 per cent. For 1933–34 the Budget estimate is, 60.84 per cent. direct, and 39.16 per cent. indirect.

It is clear, therefore, that the trend is in the direction of increasing the burden of indirect taxation. Let me give one or two concrete facts. Take the revenue raised by tariffs. In 1931–32 there was raised in connection with Abnormal Importations, Horticultural Products, Import Duties, Irish Free State Special Duties and Ottawa Agreements, £2,089,000; in 1932–33, £26,796,000; and in 1933–34 we hope to get £28,000,000. That is an ever-increasing burden of indirect taxation, mainly, I may add upon articles of food. I know that hon. Gentlemen opposite will say that the consumer does not pay and that it is the producer who pays. If that be so, I wonder what was the case for making the concession which was made the other day to the hon. Member for West Birkenhead (Lieut.-Colonel Sandeman Allen) on the question of oil. The gravamen of his ease was that if you imposed a tax upon heavy oils, those owning vessels engaged in the coastal trade would be heavily hit, presumably because they were paying the duty. The right hon. Gentleman rushed to his assistance with a concession, lest, presumably, the consumer will not be called upon to pay I invited a friend of mine to make an inquiry on my behalf in connection with this Debate. I invited him to look into the Budget proposals for this year with a view to disclosing if possible the incidence of indirect taxation upon people of different grades of income and in order that I may not mislead the House I give the basis on which my friend has made his estimate. He says: The following estimate of the incidence of taxation on various classes of income is in each case for a married man with three children, all the income being earned. The estimate is taken from the schedule issued by the Treasury in the case of income-tax and sur-tax. In the case of indirect taxation and stamps the estimates of the Colwyn Commission on Taxation and of Mr. D. M. Bandrall (Journal of the Royal Statistical Society, 1931, Part I) have been used with adjustments for changes of taxation rates and yields. I give the results of this analysis. I am speaking now of indirect taxation, and taking the man with an income of £100 a year and taking such items as sugar, tea, tobacco, alcohol, petrol and motors and other articles of that kind, we find that the man with £100 a year income on this year's Budget pays a total of £ll 16s. in indirect taxation. The man with £500 a year income will pay a total of £22 9s. 9d. in indirect taxation, and the man with £50,000 a year, the right hon. Gentleman's darling, the one to whom he referred with irrepressible enthusiasm when we last discussed this subject—he pays in indirect taxation £631 9s. 3d. Thus, the £100 a year man is taxed to te extent of 11.8 per cent.; the £500 a year man is taxed to the tune of 4.5 per cent., and the £50,000 a year man is taxed to the tune of 1.3 per cent. as regards indirect taxation.

Lieut.-Colonel C. MacANDREW

But what about direct taxation?


What is the use of talking about direct taxation? [HON. MEMBERS: "Oh".] Hon. Gentlemen opposite ought to be fair. I am arguing now the point as to indirect taxation. I will come to the question of direct taxation in a moment.

Lieut.-Colonel MacANDREW

And use the same figures?


Has the hon. Gentleman's friend made any calculation as to what the percentage would be if you took into account, not the gross income, but the net income after paying direct taxation?


If the right hon. Gentleman will allow me to proceed I can assure him that I do not want to escape any substantial point and that I will do my best to meet all his arguments. I do not want to be unfair but, for the moment, I am dealing with indirect taxation.


The hon. Gentleman is putting what he alleges to be the payment in indirect taxation as a percentage of income and I only draw his attention to the fact that there is a considerable difference between net income and gross income in these cases. The income which a man has to spend upon indirect taxation is what he has left after paying direct taxation.


I appreciate that fact, but that arises in both cases. If it be true that you are shifting the weight on to indirect taxation the effect is to impose a bigger share of the burden upon the shoulders of those least able to 'bear it and if I have made that point clear I have proved at least one part of the proposition which I set out to prove. I shall return presently, if time allows, to the question of direct taxation but while I am dealing with this aspect of the question may I say that what I have stated is not the whole story of this matter. The right hon. Gentleman has invited me to take other factors into consideration. Very good, but if I am asked to do that, I must also ask the right hon. Gentleman to take into account certain other relevant factors in relation to taxation in this country. Let hon. Gentlemen opposite consider the fact that in 11 years the net decrease in the wages of men at work in this country has been over £3,000,000,000.


What does the hon. Gentleman mean by net? Does that take into account differences in the cost of living?


The right hon. Gentleman had better address that question to the Minister of Labour. These figures are taken from the "Ministry of Labour Gazette." They are official figures and if they are given officially as net figures, I accept them as such. But there is another part of the story still. There is the heavy toll upon the unemployed. Possibly the right hon. Gentleman has had the curiosity to look into some returns given by a Cabinet colleague of his own in recent weeks concerning this toll upon unemployed men in respect of the cutting down of benefit. The figures are appalling. In 18 months or less over 5,000,000 applications for transitional benefit have been turned down. In addition to that, there is the terrible and increasing trek of people to the doors of the Poor Law institution and the heavy burdens placed upon the authorities in the necessitous areas. Take another symptom. Look up the statistical abtracts for last year, and note the enormous sacrifices which the workers have had to make in these days of depression in being unable to keep up various insurance policies of one kind and another.


What kind?


Industrial and others. The figures are staggering and indicate the depredations which poverty is making particularly in the depressed areas. Almost the only thriving industry in some of our areas is the industry of the pawnbroker. Not only that, but let hon. Members opposite look at the doles which they have given to their own class. When they first came into office, in 1925, they made a gift of £29,000,000 in reduction of Income Tax, and in the same year they made a gift of £10,000,000 in the reduction of Super-tax; in 1926 they gave £26,000,000 to the coal owners; and in 1927 they made a gift in a special alteration of the valuation; in the Local Government Act they made a gift of three-quarters of the rates; and since 1931 there have been gifts in regard to wheat subsidies, and all sorts of other subsidies, all coming in the long run from those who can least afford to bear these enormous burdens. Lastly, in the presence of this situation the right hon. Gentlemen and his friends speak of raising the wholesale prices of goods. At what point are we to reach the limit of the taxability of the poor? We hear a good deal of the limit of the taxability of the rich, but at what point are the poor to be expected to dry up? If you raise wholesale prices, surely retail prices will equally rise, and how the poor can meet that situation heaven alone knows; certainly the Government does not know.

I turn now to direct taxation. I wish the right hon. Gentleman and his friends would refrain from using the case of the man whose income is £50,000 and who pays out £53,000 in taxes. Really that story is a little thin and worn by now, and surely the right hon. Gentleman himself implied the answer in that portion of his speech on the Second Reading in which he said that much of the money is spent by way of insurance in respect of forthcoming Death Duties. If you are going to calculate that, as part of the taxation imposed upon these people, you cannot at the same time claim that the Death Duties are paid, for if an insurance in respect of Death Duties has been paid all along the years, when the Death Duties are paid they are not paid by the heirs concerned, but on their behalf by the persons with whom they have insured against this calamity. You cannot have it both ways. You cannot claim on the one side the annual premium in respect of insurance and at the same time claim that when the benefit accrues from the premium that is also a tax.

Lieut.-Colonel MacANDREW

The hon. Gentleman has spoken of the £50,000 a year man. If he is 40 years old, after paying his direct taxation, he would not have enough income left to pay the insurance premium required to cover his Death Duties; in other words, his net income is actually a minus quantity.


It does not make any difference what figure of income you tax. The point remains that the insurance paid is a saving and not strictly a tax. The argument arose originally over the case taken by the Chancellor of a man who has an income of £50,000 and who, by reason of insurance payments, paid in Income Tax, Super-Tax and Death Duties £53,000. If he had been in that distressing situation—

Lieut.-Colonel MacANDREW

I wish I were!


The hon. and gallant Member is crying for more distress. If what is paid in insurance is a premium in order that a tax need not be paid when it fall due, when the money finally accrues you cannot call it a tax as well. With regard to the question of direct taxation on which I promised that I would say a word before I sat down, I submit to the Chancellor of the Exchequer that, if he is entitled to argue as he has done concerning the heavy incidence of direct taxation—and I do not deny that, because, of course, it is heavy—all that I say is, that if you must have money, you should get it from those who have it.

I invite hon. Members opposite to look at the Statistical Abstract, issued this year, for 1930–31, in which this fact is shown: When hon. Members speak of the heavy incidence of taxation, I do not deny it, but let them also bear in mind that, in point of fact, if you deduct from the actual total of taxable income the total sums which are deducted in respect of allowances, and then distribute the tax, you will find this significant fact, that, according to the figures on page 167, the total taxable income, the actual income, in 1930–31 was £2,467,000. Now out of that £2,467,000 there was excused, being personal allowances of various sorts, including insurances, £1,189,000. If you deduct those personal allowances, because they are not taxed, you will find that half the actual income of this country escapes taxation altogether, and if you distribute the taxation over the whole of the actual income, you will find that, so far from being 4s. 6d. in the £ in 1931, it was only 23.76d. It was not 2s. in the £, distributed over the whole of the actual income. I do not attach undue importance to that, but I merely make this point. Hon. Members repeat to us over and over again in this House, "Oh, but the poor man gets away with it, because he is below the Income Tax limit; he is excused taxation below £130 a year." On the basis of that argument, the rich of this country too escape actual taxation to a considerable degree, and they nearly get away untaxed with one-half of the total taxable income which they enjoy.

I am sorry for having detained the House for so long, but in conclusion, my hon. Friends on this side desire me to say that Members opposite, supporting the Government, are turning to all sorts of expedients—to money manipulation, Gold Standard arrangements, conferences of various sorts, taxing co-operative societies, tariffs, and so on—to dodge the coming of the evil day. Sooner or later the people of this country will wake up to the fact that our present system of taxation cannot be defended. The only way of basing your taxation is to base it in such a way that it is based upon the principle of capacity to pay. For myself, I much prefer a direct tax upon everybody than indirect taxation, so that every one may know exactly what he pays. These expedients, these devices, these tricks, these dodges all pushing finance burdens on to the shoulders of other people in the hope that they will not discover what they pay, are tricks and dodges which, sooner or later, the people of this country will find out. For my part, I look forward to the time when there will be a Government in office in this country which will give its mind and its heart to protecting the poor of this land, and, in keeping that before their mind, will apply their will to the task of bringing hope and happiness, contentment and comfort to the homes of the common people.

12.17 p.m.


I am sure that there is no one in this House who would take any objection to the speech which the hon. Member has just given us on the score that he has brought into it a plethora of statistics. We are very glad, indeed, that he has produced his statistics, though, of course, anyone speaking immediately after who has not had the opportunity of checking or considering them in detail is at a disadvantage in replying. But I think he will not be put in the position of the man who can get away with it, because I am sure that before this Debate is ended there will be some criticism from the Financial Secretary to the Treasury.

All that I would say on that part of his speech, which was very interesting, is that, as regards the burden of direct and indirect taxation—I do not profess to have checked his figures; obviously, he would not expect me to have done so, but, no doubt, it will be done—we do not know the method on which he calculates his direct and indirect taxation. In the old Gladstonian days, the difference between direct and indirect taxation was simple. Direct taxation—Income Tax and other taxes of the same kind—we know. Indirect taxation in those days was simply a tax consisting of a number of consumption duties, which, under a system of Free Trade, were obviously and directly paid by the consumer. In so far as they were consumption duties, they were a burden on the working classes who were, of course, by far the greatest proportion of consumers. But the moment you come to a system of taxation which includes a large number of protective duties on imports it is different. I do not know whether he counts them in his table of indirect taxation. You may or may not object to them on the ground of Free Trade as against Protection, but it is obvious that there is a complete difference in the incidence of those duties from what there was originally in the case of the pure consumption duties in the old days of complete Free Trade.

I do not want further to elaborate that point. I am sure the Financial Secretary will have the data and the material to deal with it much better later on. But the hon. Member did make one very important pronouncement with regard to the National Debt, and I presume he was speaking responsibly for his party. He refused to give us any details. Perhaps that was prudent even when interrogatories were addressed to him. He refused to give us any details with regard to his pronouncement of the policy of the party opposite as to the National Debt, but I think I am not misrepresenting him when I say that he and his friends are not in favour of repudiation. They do not want repudiation, whether in whole or in part, but so far as the burden of the Debt is concerned, they are going to achieve the same effect as repudiation, but by different means.




If he did not mean that, then I want to know what he really did mean. I am not asking for specific figures in this case, but it is clear that if you are going to reduce the burden of the National Debt, you ought to give us same idea of the means by which you are going to do it, and how, in fact, that does in essence and principle differ from repudiation.

Let me go on to another part of the speech of the hon. Gentleman on the same subject, and here, again, I think he was mistaken. He based the principles which he was enunciating on the fact that there ought to be equality of sacrifice, that burdens ought to be distributed over the shoulders of people in proportion to their capacity to bear those burdens, and that that was not the case at the present time. He attacked the policy of the Government in that it was going counter to those principles, which, he said, should be established. He referred to the state of affairs in the last 10 to 12 years as supporting the case he made in attacking the Government. He said that wages were compulsorily reduced during that period, that the compulsory reduction was based or justified by the fall in the cost of living, but that, on the other hand, the inference was that there was no reduction in the burden of the interest on the Debt at all proportionate.

Judged from the point of view of real economics, the hon. Member had no right to take, in a general loose way, the last period of from 10 to 12 years. The period of 12 years is from 1921 to the present day. Anyone who has really followed industrial and economic history during the post-War period knows that 1921 was the close of a great inflationary period, and that the next period of between eight and nine years to the middle of 1929 was a period, more or less, of deflation, but differing in different countries. At the same time, it was a period quite distinct in its characteristics from the period that succeeded the great speculative boom which broke in America about September, 1929. From the economic point of view, to lump all those periods together, and to make some general inference with regard to them, is quite misleading.


Is it not true to say that the period of deflation enhanced the value of investments and depreciated the value of earned income—wages, and so on? Is it not a fact that the investor has greatly benefited and the wage-earner has suffered?


I will deal with that point in a moment, but I wish, first, to point out that there was a great difference between the pre-1929 and the post-1929 period, and therefore, to take any broad general period of 10 to 12 years is unjustifiable, especially if the hon. Gentleman wishes it as an attack on the Government of the day. From that point of view again, he ought to discriminate much more closely and accurately, because, if he is going to urge the responsibility of this Government. He must take into account what happened at the time that the last Government were in office. That was at the beginning of this last period of acute and quick deflation. That Government when in office never had brought forward a "drastic measure of dealing with the interest on Debt" in some way that would not have been repudiation but would nearly have had the same effect. We never had any proposals of that kind from the previous Socialist Government. Indeed, so far as compulsorily dealing with some of the receipts of poorer people is concerned, it is within the memory of everyone that the proposals that were made by the Government before they went out of office contained the germs of more than half the reductions, either in Government wages or in benefit, which the hon. Member and his friends criticise so acutely to-day.

With regard to the question put to me by the hon. Member for Aberavon (Mr. Cove), it is perfectly obvious that when we have a great period of deflation like the present it adds to the purchasing power of fixed incomes. I have not had time to refresh my mind with the exact figures from the Ministry of Labour, but I have no doubt of the general accuracy of the statement that at the present time the real wages of the men who are in work in this country are probably higher than they have been at any time in the whole history of the country. The hon. Member for Aberavon shakes his head.


I want the right hon. Gentleman to take not only this moment but the whole of the period, and then tell us whether wages have not suffered much more than invested incomes:


I am prepared to take the whole period, but what I am taking at the present moment is the period for which I remember the figures pretty accurately, and it is the only period that the hon. Member opposite is justified in taking in basing his attack on the Government. That is the period when the great slump started in 1929. I am sure that if anybody refers to what happened before that, and if we were to go to the bulk of the working-men in this country and ask whether they would like to be put back, both in wages and in what they had to pay so as to get at their real wages, to the 1929 level, there is not one of them but who would say, "Put us back to that level, and we will be thankful". It was a great improvement on the present state of affairs, though obviously we do not consider it as the final goal towards which we are trying to aim in this country.


What are you doing to get back to it?


Let the right hon. and gallant Gentleman make the speech that he is prepared to make on that subject later. It introduces another form and direction of thought. It is not the case as the hon. Member says, that a great hardship has been brought on ordinary men and women who are in work as compared with those who are living on fixed incomes and incomes derived from the National Debt. So far as ordinary working-men are concerned, they are better off at this moment in real wages than at any time previously in the history of the country. The fall, such as there has been, in money wages is infinitely less than the fall that there has been in the level of retail prices and the cost of living as judged by the only figures that are obtainable in this country. As against that, it seems to me that hon. Members opposite have not taken into account what has happened generally with regard to the recipients of interest on National Debt. I did not hear a word of appreciation of the fact from the hon. Member opposite that the interest on War Loan has been reduced from 5 per cent. to 3½ per cent.


I did mention it.


If the hon. Member did, I am sorry if I missed it. That is a 30 per cent. reduction.


The Chancellor of the Exchequer said it is 20 per cent.


I think it it 30 per cent. It is 1½ per cent. out of 5 per cent., and if you multiply 1½ by 20, it comes to 30. The hon. Member must remember as well that the class of Income Tax payer is largely the class which is interested in that income from the National Debt. Therefore, in addition to the reduction in the rate, it is obvious that we have to take into account the increase in Income Tax, Super-tax and Death Duties, which were imposed to meet the present emergency, in order to arrive at what the actual reduction has been. So that, whatever may be the result as regards receipts from fixed income securities and from debentures, where there has not been a default, yet, so far as the Government debt is concerned, it is wholly untrue to say that an advantage has been gained by the recipients of fixed incomes as compared with the working-classes who are still in work. I am not thinking for a moment of trying to minimise the misery that is caused by unemployment. We are dealing with the wages of those who are in work and the receipts of those people who are the holders of Government securities.

I do not for a moment argue, and I do not suppose any person in the House wishes to argue, that the standard of living in this country in 1928 or 1929, which, as I say, was better than it is at the present moment, is the ultimate standard at which we aim. No one thinks that it should be, but at the same time, taking all factors into account, I have always been of the opinion that it would compare favourably with the standard of living in any other country in the world. Actual wages in the United States, of course, were very much higher and real wages were higher. But take the ordinary man's life from the time he first goes into employment to the time of his death, and then take all that he would receive in this country, the conditions of his work, the effect on his life of the social services, and all the other factors that really go to make up the standard of living, then it is at any rate arguable that the standard of living in this country both before the great slump came and since then has been probably at least as high as it was in the United States despite their high standard of wages. From the general point of view, Members on all sides of the House recognise, probably, that if we do get over this present depression, even then we have a long way to go in order to improve standards above what they were before. I do not believe any good is served in this country or in the world outside by exaggerating the state of affairs, as it has been exaggerated by the hon. Member, because he did not take into account the fact that, imperfect as this world is and always will be, yet at the same time the standard of living here does compare favourably with that in every other civilised nation.

12.36 p.m.


I object to this Budget, because I do not think it just, and yet, ironically, it contains one of the attributes of justice in that it is blind. It is the most unjust Budget I can remember. It is unjust in that it selects specific persons for taxation, and is not general and universal in its incidence. In one case the Government select the whole of the members of the co-operative societies and levy a tax upon them. In the interests of the State, actuated by ideas of expediency, they select that particular body of persons for taxation. We all know that to select certain persons for taxation is unjust, but it is more than unjust in this case, because we are also selecting from among the whole body politic a certain much smaller body of people for penal taxation in that the holders of ordinary shares in manufacturing companies which use fuel oil will suffer a penal tax of 40 per cent. on the raw materials used by the companies. That point has been argued at length, and I do not propose to reopen that issue, but I think it is right that we should put it to the Chancellor of the Exchequer that he is not merely the guardian of the public purse but the guardian, or he should be the guardian, of certain British traditions. The Chancellor defends not only his tariffs, but his tax on fuel oil and his tax on co-operative societies, not, primarily, on the ground of justice, but on the ground of expediency, and when statesmen begin to act not on the lines of justice but of expediency the traditions of this country are violated, and the results of that expediencing are apt to turn out diametrically contrary to what was expected. Expediency, acting in the interests of the State for the safety of the State, has been the excuse for every iniquity that has happened in history, from the burning of heretics and the suppression of free speech and freedom of opinion down to the expulsion of the Jews from Germany to-day. In every case these acts by Government have been supported because they were in the interests of the State, or what people believed at the moment to be the interests of the State. Looking back on all those steps, honestly taken, at the time as being in the interests of the State, we may say, I think, that that argument has been a disastrous guide for modern statesmen to follow. Here we are doing exactly the same thing.

I ask the House to listen for a moment to one of those more or less mythical stories told of the education of the young Cyrus. In Xenophon's Cyropaedia hon. Members will find a long account of how little Cyrus was brought up in order that he might be a good ruler for Persia. When he was young his tutor put him in charge of a children's court, where he had to learn to judge justly. There came before young Cyrus two boys, a big boy and a little boy. The little boy. was crying. Cyrus asked for an explanation of the case, and the big boy said, "I took his coat, it was too big for him, and I gave him in exchange my coat, which was too small for me." Cyrus, anxious to display the real wisdom of his youth, said, "Try the coats on." The big boy's coat fitted the little boy, and the little boy's coat fitted the little boy, and Cyrus decided that things should stand as they were. The little boy left the court still weeping bitterly. Cyrus went off to his tutor, very proud and pleased with himself, to tell him about it. The tutor said, "I sent you to do justice; who made you a fitter of coats?" and he had him soundly flogged. That is what I should like to do to the Chancellor of the Exchequer. He has tried to use taxation, I suppose, in order to direct production on to the lines he thinks best for this country, but I think we can do with a little bit more of Cyrus's tutor and a little bit less of this principle of not levying taxes fairly all round but selecting certain persons for penalisation.

That is one charge against the Budget, a charge with which I think everybody will agree, though people will have varying ideas as to the importance of putting justice first. What is the other charge? That the Budget is blind. The Chancellor, in his peroration to-day, claimed that whatever else might be said about the Budget he had been an efficient guardian of the public purse. That is true, but the question is whether we do not need from the Chancellor to-day something more than a balanced Budget. He scoffed at the idea of those people who would unbalance the Budget, who would remit Income Tax and give industry a chance and send up prices. It is possible to scoff at every proposal put forward by anyone, economist or statesman, for raising prices, but I think we are much more justified in scoffing at those people who on every platform and in every speech in this House say they wish to raise wholesale prices without doing anything to bring about what they want.

I take from the "Times" to-day a statement by Mr. Walter Lippmann which I should like to read to the House, because it seems to embody in a few words the chief criticism that we must make of the Chancellor of the Exchequer and the whole of the Government. Mr. Lippmann says: A tentative and temporary and very flexible stabilisation within ample limits may be desirable; but the essential fact is that until Britain and France give some real proof that they mean to take positive measures to raise prices, relieve debtors, and enhance purchasing power, we cannot afford"— that is, America— to be bound by their hesitation and their inaction…they must not expect the United States to stand and wait with them. International co-operation is an admirable ideal, but it should be a co-operation in powerful, concurrent, and concerted measures, and not merely a co-operation which produces a negative and impotent stability. The Chancellor of the Exchequer in his speech to-day scoffed at the United States of America for taking towards this problem, which he has had before him for two and a half years now, a different line. I think that the majority of the people of this country would rather have Franklin Roosevelt as Chancellor of the Exchequer than the right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain). At least he does some- thing and does not merely talk. Every year the right hon. Gentleman has got up and said, "We must restore prices to the 1928 and 1929 level." We are getting tired of listening to him. No action is taken, and we are becoming increasingly conscious that no action is taken because the right hon. Gentleman really is not the motive power in England to-day.

The right hon. Gentleman must know by now what would increase prices and what evil effects those increased prices would have. During the last two years. he has had the problem constantly before him, and, to the amazement of mankind, he has alternatively and simultaneously tried to keep the £ up and tried to keep the £ down. I believe that at this moment we have given up the effort to keep the £ down, but until recently we were selling sterling from the Exchange Equalisation Account week after week in an endeavour to keep the £ down. At the same time, the same man, by other measures, was endeavouring to keep the £ up, just as to-day the Minister of Health is proposing to spend £500,000 upon the distressed areas, thereby sending the £ down and unbalancing the Budget, while the Chancellor of the Exchequer is protesting that there must be no unbalancing of the Budget. There is no united voice, even on that Bench. The Chancellor of the Exchequer is selling sterling to keep the £ down, and is prohibiting the issue of loans abroad in order to keep the £ up. The Governors of the Bank of England are selling sterling, and private persons are prohibited from selling sterling.

The Chancellor of the Exchequer gets up, without the consciousness of any contradiction, to urge that we should not sell sterling and lend money abroad in order that we should not leave this country open to an influx of foreign exports, while at the same time we are selling sterling and buying gold dollars and silver in order to do that very thing. The only change that has happened has been that, while we have been talking and doing contradictory things in this matter, America has acted. The serious problem before this country is the fact that the dollar is falling in terms of the £. The dollar falls daily, and more and more dollars are required to buy a pound's worth of goods. It was proposed the other day to establish some sort of stabilisation, between the dollar and the £, at 4.05 dollars to the £. Since then, the dollar has gone to 4.23. It is going down and down, and the £ is getting worth more and more dollars. Everyone in this House must realise what that means. It means that we can buy goods more cheaply from America and that we can sell fewer and fewer goods to America. The one part of our export trade that survives, is being hamstrung by the depreciation of the dollar relatively to the £. That is being done by America in order that she may recover her export trade.

When we went off gold three years ago, we suddenly realised for the first time that it meant a boost to our export trade. We did not realise it before, and we did not know it. America, with our example before her, has seen that exactly the same thing can be achieved. By sending the dollar down, the export trade of America will go up. The Americans see perfectly well all the side issues—reduction in the return to the fixed-interest bearing securities, the improvement of trade that follows, the fact that with the fall in the value of your currency you automatically give protection to your imports and a bonus to your export. They are doing this in America. We ask them daily in the Conference to stop for a breathing space. The Chancellor of the Exchequer knows perfectly well that if the £ keeps up in terms of dollars we shall be undercut everywhere by America, just as we have been undercut everywhere by Japan because the yen has gone down far below sterling.

That was why the Chancellor of the Exchequer brought in a balanced Budget. We call it balanced. If it had not been balanced the pound would have remained down. In America, the Budget is far from balanced, and it is getting more and more unbalanced month by month. They are facing the risks there. They say: "We have to clip the wings"— which means to clip the returns—"of those who lent money, until prices have risen to the 1929 level. We are justified in continuing to depreciate our currency. We are not going to pay back, or pay interest, in dollars twice as valuable in terms of purchasing power as they were when the debts were incurred. We are going to increase prices and reduce the value of the dollar, so that debt will be repaid in the same terms in which it was borrowed, and in the same values." Here we go on desperately attempting deflation, balancing the Budget, piling up sinking funds, preventing the export of British capital, and making no effort to do that which all the statesmen in this country desire to do every bit as much as Franklin Roosevelt himself. We do nothing. The whole financial world is changing from day to day now, but the Chancellor of the Exchequer is as blind to-day as when he introduced his Budget two months ago; he is as blind to-day as when we went off gold, and first discovered this new possibility of reducing the burden of debt. I do not think that many people have much hope from this international conference that is meeting in London; certainly there is no hope at all unless our statesmen and financiers can manage to see this problem in the same light in which it is seen in America, and can advance towards stabilisation and towards a recovery of trade in agreement on principle and in agreement on the details of the measures which should be taken.

12.57 p.m.


I am usually in general agreement with the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood), but he appears to me this morning to have somewhat overstated his case. I had intended to refer to a somewhat similar point, but the astonishing conglomeration of undigested statistics presented by the hon. Member for Caerphilly (Mr. Morgan Jones) demands, I think, some attention. I felt that the hon. Member was going to be in considerable difficulty in criticising the Budget, because I have taken the trouble to read his Third Reading speech last year, and I find that in the first part of his speech he concentrated on the subject of the National Debt. His principal complaint was that the Budget was burdened with £289,000,000 by way of debt interest. The hon. Member for Farnham (Sir A. M. Samuel) corrected him, and pointed out that it was only £276,000,000, but it was plain that in his opinion this was really the burden on the Budget that mattered, and he said last year that it was time the rentier was made to take a little less in return for the money he had lent. I had hoped to hear him congratulate the Chancellor of the Exchequer this morning on the ground that the burden of the debt interest this year has been reduced to £224,000,000, but, instead of doing that, he proceeded to put the extraordinary point that there should be compulsory reduction of interest, and endeavoured to support that point by saying that there had been a compulsory reduction of wages. From that loose statement that there had been a compulsory reduction of wages, he proceeded to the general statement that the condition of the country to-day, and particularly the condition of the working-class people in this country, is far worse than it has been in recent years, or, indeed than it has ever been before.

I want to produce some statistics which the right hon. Gentleman the Member for Tamworth (Sir A. Steel-Maitland) had not available, and which I think will contradict the hon. Member's extremely loose statement. First of all, it is surely fantastic to suggest that wages have been compulsorily reduced. In so far as there have been reductions, almost all those reductions have been achieved in precisely the same way as the reductions in interest on the War debt, that is to say, by agreement between the parties concerned. But, if we look at the figures for wages, we find that in 1931, the last year for which figures are available, the average increase in the weekly wages of manual workers as compared with 1914 was between 66 and 70 per cent. That figure must be corrected for the difference in the cost of living figure, which in 1931 was 47 per cent. above the figure for 1914; and, when that correction is made, we find that the average increase in the weekly wages of manual workers in this country in 1931 was 15 per cent. over the figures for 1914. Since 1931, there has been no substantial reduction in wage rates.

The hon. Member then went on to suggest that the income of the weekly wage-earner had been seriously affected by cancellation of insurance policies and that sort of thing; but if we consider, in addition to the increase in wages that has taken place since 1914, the increased benefits given to the weekly wage-earner by way of national insurance, we find a positively astonishing state of affairs. In 1914, National Health Insurance benefits amounted to £14,000,000; in 1920 they amounted to £21,000,000, and in 1932 to £31,000,000; while the old age pension figures were £9,000,000 in 1914, £15,000,000 in 1920, and £37,000,000 in 1932. Then, in the last few years, there has been the introduction of the widows' and orphans' pensions, and the amount distributed in that direction has risen from £11,000,000 in 1928 to £38,000,000 in 1931. In whichever direction one turns, one finds that there is abundant evidence that, notwithstanding our present depression, the condition of the people in this country is better to-day than it ever was before, and, notwithstanding the fact that the right hon. Gentleman the Member for Tamworth seemed to doubt it, it is better than it was during the 10 years which are commonly supposed to have been the prosperous years, 1920–1930. That is, of course, not to say that we have achieved our goal. As the right hon. Gentleman said, we want conditions to be even better. But I think it is time we ceased to hear these continual complaints from the benches opposite that the condition of the people of this country is worse than it has been, that the standard of living is declining—


That is not the only criterion, surely.


; Surely, the criterion of the well-being of the people of this country is their general standard of life.


The fear of unemployment is worse to-day than it was a year ago, and fear is the worst possible thing.


That leads me to my next point, in connection with unemployment. It may be true that in the last year the fear of unemployment has been greater than it was 10 years ago, but I am prepared to show that the policy of this Government is going to make the fear of unemployment considerably less in the coming year. Indeed, it is a cause of complaint that I have against the Chancellor of the Exchequer that he has not sufficient confidence in his own policy. At an earlier stage of these Debates, I asked him to reduce the level of Income Tax by 6d. in the £. I did so because I believed that it would cause an improvement in trade, and that it would not unbalance the Budget. There has been a good deal of loose talk about unbalancing the Budget. Some of us who wanted the Income Tax reduced have been accused of wanting to unbalance the Budget and throw the national finances into disorder. I, at any rate, want to do nothing of the sort, but it seems to me that the important thing is not the estimate presented at the beginning of the year, but the way in which the accounts turn out at the end of the year; and, while in the last two years the House may have been presented with a balanced Budget at the beginning of the financial year, when the financial year closed we have found that there has been a deficit. I would rather look at the financial situation from the other angle, and direct my policy so that at the end of the financial year there should not be a deficit, but a surplus. It was for that reason that I desired the Income Tax reduced—not in order that there should be a deficit, but in order that the improvement of trade should be so great that there would be a surplus.

I pointed out, when I made that suggestion, that whether there was a surplus or a deficit at the end of the year depended on the course of employment. The Chancellor of the Exchequer has suggested that those of us who want to see a reduction in Income Tax, and consider that the money for that purpose could be got by the saving on unemployment, want him to estimate falsely. We are not wanting him to estimate falsely. We are wanting him to estimate optimistically. It is impossible to estimate unemployment accurately. It has not been done for years past, and I suggest that it has not been done this year. When I originally made the suggestion that Income Tax should be reduced by 6d. in the £, I gave, as a justification for that, that there would be in the present year an average reduction in the number of unemployed of about 360,000. In his reply, the Chancellor of the Exchequer said that any man who would believe that would believe anything. Since I made that speech, there has been a reduction in unemployment of 300,000.


And no reduction in Income Tax.


My point was that a reduction in unemployment justified a reduction of Income Tax.


Unemployment has fallen and Income Tax has got so that the two do not go together.


There is speed, and there is greater speed. Unemployment has been reduced. I believe that would have happened in any case, but I believe it would happen more rapidly and substantially if Income Tax were reduced. Apparently the one thing that upsets the Chancellor of the Exchequer is if anyone suggests that his policy is going to be successful. If we tell him that the policy of the Government is going to be so successful that the country can afford a reduction in Income Tax, and that unemployment is going to be reduced, that really makes him squirm. I feel that we who wanted a Budget which would have for its object the stimulation of trade and industry will have to wait for another year.


We have often heard the hon. Member plead for an inflationary and expansionist policy. He now believes that that is of no further use. He can hardly deny that the present policy of the Government is deflationary and he tells us it is going to be so successful that they have not confidence in their own policy.


The hon. Member need not be disappointed. I have not changed my views. If the hon. Member had read the speech I made at an earlier stage, he would have seen that I said that while this Budget was apparently balanced it was not balanced in reality. It was balanced to such an extent that it satisfied Members such as the hon. Member for Central Southwark (Mr. Horobin), but those who looked beneath the surface could see that it really was not balanced at all. I said that the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme rather over-stated his case. He wants too much. Those who want unbalance ought to be satisfied with the fundamental unbalance of the present Budget, and say nothing about it. That being so, we who have advocated an expansionist policy ought not really to be too discontented. My complaint is that while an expansionist policy has really been pursued to the extent of this fundamental unbalancing of the Budget, I should like it to have been pursued still further by way of a reduction of Income Tax. The hon. Member for Central Southwark has made many speeches in which he has pointed out that this country depends upon a balanced Budget. If my researches are correct, he is the man who introduced the phrase "expansionist policy" to the House. Speaking on the Budget last year he said: From whatever angle we look at our immediate currency policy, all the indications are that our policy should be what, roughly speaking, is summed up in the words 'an expansionist policy.'"—[OFFICIAL REPORT, 25th April, 1932; col. 121, Vol. 265.] He has changed his mind in the last year, but it discounts some of the things he says now when we know that a year ago he was, like the hon. Member for East Aberdeen (Mr. Boothby), the hon. Member for Stockton (Mr. Macmillan), the right hon. and gallant Member for Newcastle-under-Lyme, and myself, an advocate of an expansionist policy.

1.10 p.m.


I should like, first of all, to say a word in answer to the vital question raised by the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood) when he dealt with the question of the dollar sterling exchange. I think the reason why the dollar is depreciating at present as against sterling is that when President Roosevelt says, as he frequently does, that it is his intention to raise commodity prices, every one in the world believes that he is going to do something about it, and, when the Chancellor of the Exchequer says, as he frequently does, that it is his intention to raise commodity prices, no one believes that he is going to do anything about it at all. That is the reason why there is disequilibrium at present. In case my right hon. Friend should become too despairing, if the President of the United States succeeds in his policy and raises prices over there, and we do not raise prices internally over here, that in itself will to some extent offset the difference in the exchange value of the £ and the dollar. That is to say that, prices being higher inside the United States than they are here, our customers will not have an insuperable difficulty when it comes to the cost of production.

The Chancellor of the Exchequer has made several important and valuable con- cessions in the course of the Budget, for one of which I myself should like to express my sincere gratitude—the concession in regard to management expenses of trust companies. It is almost unprecedented that any House of Commons in the Committee stage has bad so much attention paid to its views by any Chancellor of the Exchequer on points of detail, and many of us are extremely grateful for the courtesy with which any small suggestions that we made have been received. But to-day we are discussing, inevitably, the principles that underlie the Finance Bill as a whole. I think we can say that the Chancellor of the Exchequer has been orthodox, consistent and courageous in the policy that he has adopted. He was determined to balance his Budget at any cost, whatever advice he might be given to the contrary, and for the moment he has succeeded. I think that is a mistaken policy. I cannot help it. I think it is wrong. But at the same time we ought to recognise his consistency and the courage with which he has held his point of view and translated it into action.

The situation is, I think, a good deal more serious than some of us have yet realised. The Chancellor recognises that the limits of direct taxation, at any rate, have been reached, and indeed of all taxation, because with the exception of the fuel tax no important new proposals are made, although every one knows that it is highly desirable that we should have as much revenue as we possibly can. At the same time, he has not been able to hold out any promise of substantial new economies, nor has he held out any hope of action in the near future designed to expand the national income and thus to raise the yield of the existing taxes. Expenditure on the Supply Services, we ought not to forget, is sharply up on the estimates—there is nearly £14,000,000 more for unemployment alone—and the revenue from direct taxation is down by £14,000,000 on the estimate, which is the answer for the hon. Member for Caerphilly (Mr. Morgan Jones).

I listened with great attention and a certain amount of mental disturbance to the statistics which he put before the House, though I could not follow him in every respect, and, in reply, I should like to submit two points. First of all, the increase in indirect taxation has certainly been offset by the reduction in the cost of living due to falling world commodity prices in the last two years. In the second place, we come at once to the basic fact, which we shall have to face up to in the years that lie ahead, that at the present level of prices direct taxation is in excess of what is economically sound. The yield from the Income Tax, and particularly from Super-tax, is falling, and, in my submission, will continue to fall. I do not believe that the Budget will be balanced. In fact, I am certain that, unless we take action in order to raise commodity prices, the Budget will not balance next year. To that extent, I agree with the hon. Gentleman the Member for Huddersfield (Mr. Mabane) in his rather subtle argument in favour of an expansionist policy.

Another matter of very great importance is that, while the Chancellor of the Exchequer has completely acknowledged that the limits of taxation have been reached, he has made no provision at all for Debt redemption. I do not think that it could have been avoided, but it brings us pretty well down to bed-rock that we should have taxation maintained at its present repressive, crippling level, and, at the same time, make no provision for Debt redemption at all. We are applying the proceeds of taxation of capital to annual revenue expenditure. We have for the first time in the financial history of this country a tax on capital, and we are flinging it straight into annual revenue without making any provision for the repayment of Debt at all. I have been amazed in the Debates on the Finance Bill that that fact has not been brought out a little more strongly than it has been. Our expenditure is static; our revenue is falling. I should like to know from the Financial Secretary to the Treasury, taking the long view, what steps the Government propose to take to deal with that very alarming situation.

I do not believe that the Budget will balance, and I am certain that, unless some constructive action is taken by the Government, we shall be left with a series of unbalanced Budgets, which is what the Chancellor of the Exchequer told us this morning he was most anxious to avoid. In order to increase revenue, we must increase the profits of industry, and it does not appear that this can possibly be done until we re-establish a proper and fair relationship between costs and prices. The cause of the depression— who can deny it—has been, and is, the fall in the commodity price level. Tariffs, exchange restrictions and all the things we hear so much about at the World Economic Conference and elsewhere are symptoms of the root cause of the industrial depression, which root cause is falling world prices. I ask my hon. Friend how he proposes to carry into action the repeated hopes of the Chancellor of the Exchequer that prices will not only stop falling but will begin to rise? You can only do it in one of two ways. You can either reduce costs until industry is able to make a profit, or you can raise prices.

I want to know from the Financial Secretary to the Treasury whether the Chancellor of the Exchequer is really prepared to advocate ruthless cuts in interest charges and in wages throughout this country, and to come down to the House with definite proposals for a cut in the expenditure of the Government by at least £100,000,000 a year? Unless he does that, apart altogether from efforts designed to raise prices, there is no hope of our achieving recovery under our present system and of balancing future Budgets. We want to know whether the right hon. Gentleman is prepared to advocate a reduction of costs, including expenditure by the Government, in order to bring them once more into relation with existing price levels. If he is not prepared to do that and give us direct economies, not of £1,000,000 here or £500,000 there, but of £100,000,000, he ought to take the House into his confidence and tell us not only that he wants to raise prices, but how he proposes to do it, and then to do it. I agree with the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme that this is a deflationary budget. One cannot get away from it. If the Government will not face up to the realities and the necessities of deflation, it is the last that will be introduced in this country for many years to come, not because we or the Chancellor of the Exchequer wish to avoid a deflationary budget but because it will be imposed upon him by sheer necessity.

The Chancellor of the Exchequer has been very scathing in his denunciations of those who have been asking for what I and the hon. Gentleman the Member for Huddersfield describe as an expansionist policy, and he has not provided a single valid argument against it. Our position is different to-day from what it was before we went off the Gold Standard. We have no Gold Standard on which to hold. If foreign balances leave London for the time being, it is not of great moment. We are a protected country. The Government have taken steps to bring about some restoration in the operations of trade. By his own showing, if the Chancellor of the Exchequer continues his present policy his Budget will be unbalanced, and we shall then have done involuntarily and to no purpose what could be done deliberately and with a very good chance of achieving the very objective which the right hon. Gentleman tells us he has continuously in mind. He will not balance his Budget in this way. Why should he not deliberately unbalance it, and go in for a policy of controlled inflation? In my submission it is the only way he will be able to balance his Budget again. If he does not do that, I think that we shall be in a very serious predicament. In the view of those of us who have expressed our beliefs as well as we could in this House the deflationist policy pursued by successive Governments in this country has been fatal. It was responsible, in the first instance, for the general strike and the whole industrial upheaval of 1926, and has been responsible for most of our industrial misfortunes ever since.

Those of us who believe that deflation has carried with it falling prices and unemployment, and immeasurable and avoidable misery and suffering to the working-classes of this country, have despaired of being able to influence, in the slightest degree, those who are in authority in this country. Now almost miraculously at the eleventh hour salvation appears, but alas not from my hon. Friend the Financial Secretary to the Treasury, but from the other side of the Atlantic. Mr. Roosevelt has seen the light. Much to the indignation of orthodox economists of all shades of opinion, and of the Treasury, and to the horror of the Bank of England, Mr. Roosevelt is proceeding to take action to save his own country, at any rate, from collapse and catastrophe. What is he trying to do? He is trying to increase the national revenue by raising prices by raising the level of demand. I have no doubt that the Treasury were greatly shocked when the United States came off the Gold Standard, and I have no doubt that they will be shocked by the Public Works Loan which is to be produced in the United States very soon. I hope that they will continually be shocked by what is done by President Roosevelt and his administration in the months that lie ahead. This is an effort, and it does not really much matter from whence it comes, as long as it is made by powerful authority in the world in order to break the sequence and to haul the world out of the morass which it got into as a result of the four or five years' spiral of deflation. If the policy of controlled inflation in the United States succeeds, it will spread. We shall come in, and the two main charges made against what is called the capitalist system by hon. Gentlemen sitting below the gangway and by the hon. Member for Bridgeton (Mr. Maxton) and his hon. Friends will have been met. I do not think that hon. Members who sit above the gangway will say that I am unfair when I say that the whole charge and challenge of the Socialist party against the capitalist system can be crystallised into a single sentence, that under capitalism you cannot distribute the goods which are produced in such abundance and that, owing to the accumulation of surplus falling in the hands of a few people, ultimately it must be stifled. The whole industrial system must be stifled under the burden of debt. I believe that that is a fair description of the main charge made by Socialism against capitalism. Controlled inflation is the only way by which, by recreating a demand, you can re-distribute the goods which the capitalist system has proved that it can produce in abundance. It is the only method of quickly and fairly alleviating the burden of debt which at the present time presses upon every country.


What does the hon. Member mean by controlled inflation? How are you going to control it?


I am coming to that point. It is perfectly easy, in my submission, to inflate without allowing your currency to go to the limits to which it was deliberately allowed to go by the German Government in 1921. If my hon. Friend is going to compare the position of this country or the position of the United States with the position of Germany in 1921, I do not agree with him. We have never tried to control inflation. We have had one period when it was deliberately uncontrolled and when it was impossible to control. I believe that it is possible to control inflation and that if world commodity prices are raised the economic systems of the world will be saved.

In this Budget the two main features are that there has been no reduction in direct taxation, while on the other hand £350,000,000 is set aside for the purpose of the Exchange Equalisation Account. One fourth of that amount or one half of the £360,000,000 used as a loan for capital development, capital expenditure, say, on housing construction in this country would do more good to this country and would help us more quickly to get out of the economic crisis than all the exchange equalisation funds in the world. If we can afford to raise £350,000,000 for the purpose of an Exchange Equalisation Account, surely we can afford to raise £350,000,000 for the purpose of getting rid of our slums and for great housing schemes in the industrial centres of the country.


Even if we could raise £350,000,000 for re-housing or for pulling down the slums, that is begging the whole question. The hon. Member has suggested that there are slum eradication schemes or housing schemes for which we are not willing to find money, but we have been told over and over again from the Treasury Bench that there is no scheme which is feasible and put forward by any municipality or from any other body for which money is required towards which the Government will not help with money. There is no substance in the statement made by the hon. Member that money is not forthcoming. The money is there.


I do not agree with the hon. Baronet. Although there has been some relaxation lately, there certainly was for a very long time a severe holding up of schemes of public works, at the instance of the Treasury. That was part of our financial policy and it was necessary at the time of the supreme crisis. The essential corollary to the restoration of the balance of trade is internal expansion. I see no reason why we should not go forward with a bold policy at this juncture, but the initial impetus must come and can come only from the State. The Chancellor of the Exchequer talks about the desirability of cheap money, but money is of no use merely because it is cheap. It has to be used, and the impetus must be given by the State. It is no good giving the money to the hon. Baronet or me. If I get money, I am not going to put it into industry at the moment until I am assured that a definite revival has set in. I would rather put it into Government securities so that it will be safe until the revival movement has started, and we are generally on the upgrade. At this particular stage the responsibility of the State is to give an initial impetus to these development schemes. We could proceed With a development programme at a cheaper rate and with cheaper wages and with cheaper money to-day than perhaps at any other time during the last seven or eight years.

The deflationary forces in this country, which are powerful, have been trying to induce premature stabilisation of the dollar sterling exchange during the past few days. That has been resisted, not by our Government, but by the Government of the United States, and rightly resisted. I hope the Financial Secretary to the Treasury will be able to reassure us on this particular point that the best way to achieve international economic cooperation, which we are all seeking, is to back up the United States of America in their effort to raise world commodity prices by adopting a similar policy on our own and by developing ourselves internally. If we do that, the dollar sterling rate can well be left to look after itself, without the necessity for risking any of the taxpayers' money in speculations in the exchange markets of the world. When we have got prices back to a reasonable and fair level then will be the time, and not till then, to discuss the question of the stabilisation of the rates.

I believe that we are at the cross-roads from the economic point of view. If what is known as the capitalist system is to survive in any recognisable form—hon. Members above the Gangway do not want it to survive, but some of us do want it to survive—it must be relieved of some of the terrific burdens which press upon it at the present time, tax burdens and debt burdens which have been enormously increased by the deflation of the last ten years. Short of deliberately cutting interest charges and wages and reducing expenditure by £100,000,000 at least, there is only one way of relieving the capitalist system of its burdens, and that is by embarking upon a policy of what I describe as controlled inflation. Those who fail to recognise that fact are living in a fool's paradise.

1.34 p.m.


The hon. Member for East Aberdeen (Mr. Boothby) has said that we do not desire the capitalist system to survive. What about his alternative? I am charmed with the way that he puts his arguments in order to keep us in subjection under the capitalist system. In every Budget discussion the same sort of arguments are advanced, but one sees no change. Last year the same line of argument was trotted out in the maiden speeches of those who came to this House fully believing that the present Government were going to do something to improve things under the present system, but nothing has been done. We find the same poverty and the same riches, and yet we are always being preached at and told that if inflation or deflation succeeds all will be well. I have been trying to find out where inflation or deflation will lead us. I am quite at a loss to understand which is the better policy, and, after all, what I am concerned about is how we are going to remove the poverty in the land. That is our Amendment. We want to know what the Chancellor of the Exchequer is going to do in the matter. I listened to the right hon. Gentleman this morning to find out whether he had anything more for us from the World Economic Conference. He put that aside, and instead displayed his feelings of satisfaction with the present Budget. He seemed to be quite happy over it. I have never seen the Chancellor of the Exchequer so happy as he was this morning. He complimented the Government on having put a tax on Co-operative societies and said that in the main the rank and file would be well pleased with it; that it was only men like the hon. Member for St. Rollox (Mr. Leonard) who objected to it. I can tell him that he is under a wrong impression. The rank and file believe that an injustice has been done and will resist it when the opportunity presents itself.

The second point in our Amendment is the unfair burden that is borne by one side as against the other. Direct taxation remains the same as it was last year. I maintain that so long as there is so much wealth in the country direct taxation should be increased. The hon. Member for Caerphilly has told us that direct taxation represents 60 per cent. and indirect taxation 40 per cent. of the taxation. So long as we have that inequality there will be dissatisfaction. 60 per cent. in direct taxation is not enough, it should be as much as 90 per cent. if we are going to give satisfaction to the vast masses of the people. An hon. Member put a question the other day as to the relative position of those who pay taxes, the amount of Income Tax derived from incomes up to £500, between £500 and £750, between £750 and £1,000, and over £1,000; and the reply he got was that the amount of revenue obtained from incomes up to £500 was £20,000,000; from incomes between £500 and £1,000, £35,000,000; from incomes between £1,000 and £2,000, £40,000,000; and from incomes exceeding £2,000, £152,000,000. That is to say, the percentages were, in the first case 10 per cent., in the second, 14 per cent., in the third, 16 per cent., and 60 per cent. in the case of the higher rates of Income Tax. That proves that those with money, the wealthier people, have vast resources even yet. There can be no greater proof of that than the display of wealth which takes place daily.

Only last week all the newspapers were filled with Ascot. I do not know whether it is glorious Ascot or glorious Goodwood, but I will call it glorious Ascot, and, the other week every picture paper showed people flaunting their wealth at Ascot. I put that picture against the picture in our industrial areas. In South Wales or Lancashire, which is now almost as derelict as South Wales, you find a state of great poverty, and when you compare it with the wealth seen at Ascot one wonders how long we, in the House of Commons are going to allow it to go on. The House of Commons itself may be said to represent Ascot and the derelict areas of South Wales and Lancashire. On the Government Benches we have the Ascot representatives. I say that because hon. Members on that side stand for that class of people, and in framing their Budgets they have in mind all the time that section of the population. The hon. Member for Farnham (Sir A. M. Samuel) may object to this. He may say that he does not go to Ascot any more than I do, and other Members opposite may say the same thing, but that does not get away from the fact that the people who go to Ascot are largely from that section of society which hon. Members opposite are defending all the time. They are always trying to reduce direct taxation and to put the burden on indirect taxation. I remember some four or five years ago when I was arguing on this line that the hon. Member for Farnham retorted by saying that if I had my way I should drive all capital out of the country. Does he remember that?


Has the hon. Member for Leigh (Mr. Tinker) ever been to Doncaster to watch the St. Leger, or to the Grand National or to Epsom, where thousands of people every year enjoy the innocent amusement of watching the races?


I was not referring to that. I was referring to the fact that when we discussed the question of direct taxation some years ago the hon. Member for Farnham in his reply said that if I pursued the course I was proposing I should drive all capital from the country; that if too much burden was put on capital it would be taken away and invested in other countries. Since that time he has withdrawn that argument, simply because this country is the safest country in the world for rich men. Wealth is not safe in other lands. If wealthy people flaunt their riches at Ascot and the Derby, or at Goodwood, while there is so much poverty in other parts of the country I am wondering how long we shall tolerate that kind of thing. The House of Commons has no right to be defending the condition which exists to-day.

We have arrived at the final stage of the Budget. The discussion again has taken an academic turn, and we have been treated to high sounding phrases by the pundits who have talked about deflation and inflation, and all that sort of thing. They never seem to get down to the bed rock of the position. When I hear these high sounding phrases about deflation and inflation I wonder why they do not get something done. They have had it in their hands, but they never do anything, while unemployment increases, poverty increases, and then when we come to debate the Budget we have the same thing over again about inflation and deflation. The hon. Member for Aberdeen East, I am sorry he has not stayed in the House, was at one time Parliamentary Private Secretary to the right hon. Member for Epping (Mr. Churchill) when he was Chancellor of the Exchequer. He then had a chance of putting forward his views, and I think he should have prevailed on the Government to take up some of his ideas. No. We get these speeches every time of what ought to be done. The hon. Member for Huddersfield (Mr. Mabane), he too has left the House. It seems to me that whenever they have made their speeches off they trot, and do not give one a chance to reply to them. He defended a reduction of the Income Tax, but did not put anything forward to fill up the breech. Where is the money to come from? He talked about increased employment. That is pure theory, we do not know that it would take place: and last time the Chancellor of the Exchequer told him quite plainly that there was no hope on that line and demanded how he would balance the Budget.

So this afternoon I hope the House will get away from high-sounding phrases about balancing the Bndget, and will get down to bedrock, and that it will try to uplift the vast masses of our people who are suffering. That is the duty of every Government. There can be no contented country as long as we have so much poverty on the one side and so much wealth on the other. So we stand for an equalisation of the wealth of the country. We argue that our job is to take from the wealthy some of their wealth, until we can say that the poor people have got a better standard of life. I do not think our policy is wrong. I believe it is sound. If we can take from the rich some of their wealth, and bring them down more to our level, then we shall get them to view, as we view, the poverty and the suffering of our people. Until we are able to do that the present kind of society will go on. I for one stand for bringing about a change in society. I am satisfied that the present ssytem has failed. Until the country, through the House of Commons, determines to alter the present system, so long will there be trouble, and perhaps trouble of a kind—I hope it will not come about —to cause such concern that everyone will be sorry it has occurred.

1.47 p.m.


I am sure no one can have listened to the hon. Member for Leigh (Mr. Tinker) without feeling a very considerable measure of sympathy, which must always be aroused in Members in every part of the House when a contrast is drawn between the great wealth in one particular section of the community and the poverty or suffering in another. But I cannot believe that hon. Members are going to make the poor any better off by making the rich poorer. The hon. Member said quite truly that England is the best country in the world for the rich to live in. But the corollary is also true, that England is the best country for the poor as well. The hon. Member for Caerphilly (Mr. Morgan Jones), I am sure, will be adequately answered, in regard to facts and figures, by the Financial Secretary to the Treasury. I cannot possibly accept any of the conclusions which he drew from the existing varieties of taxation in this country. I believe that there is no industrial country in the world where wages have been reduced so little in the last few years, or where the cost of living has gone down to a greater extent, and there is certainly no country where a greater proportion of the revenue is devoted to social services for the masses of the people. Where else in the world does a so-called rich person pay a greater contribution to the Treasury for being allowed to enjoy the fruits of his possessions or labour?

I listened with great interest to the speech of the Member for East Aberdeen (Mr. Boothby). No one can say that the hon. Member is inconsistent, but I cannot believe that the problem is as simple as he says. Before passing final judgment upon what is taking place in America I, like others, would prefer to see how it is to work out in the next year. I hope it will be successful, and that some measure of that success and prosperity which we trust will come to America will be shared and enjoyed in this country. I was one of those who a few months ago was tempted into support and advocacy of what is known as an expansionist Budget. Why? The first reason was that it is pleasanter to think about a Budget which is to leave a little more money in the pockets of the people, especially if one's own pocket is among those to be affected. It is not a very long step from that to the persuasion of oneself that what benefits oneself benefits the country as well. Also one is helped in that view by the currency and economic and financial authorities who support the expansionist policy. When orthodoxy supports one's personal predelictions it is very hard not to succumb.

But although I must plead guilty to occasionally enjoying flirting with the expansionists, such as the hon. Member for East Aberdeen, on the whole, taking things as they are this year fin this country and in the world, I think there is a good deal to be said for the stern, rigid finance pursued in what has been called the standstill Budget of the Chancellor of the Exchequer. I believe it is a Conservative Budget, not in the political sense, but in the sense of pure finance. I think it is possible, unless we encounter unforeseen difficulties, economic or otherwise, that it will show a surplus next year. I hope that that surplus may be devoted to a restoration of the percentage cuts and also to a reduction in direct taxation. I have no hesitation here or anywhere else in advocating a reduction of direct taxation. After all, the way to raise more money is not to raise the taxes upon a particular section of the community, but to expand the trade turnover of the country so that the same taxes or even lower taxes produce a greater amount of revenue. If a mid-Victorian visited this country and was told that the country takes a quarter of a man's income, nearly three-quarters of a rich man's income, and that nearly half of his whole estate was confiscated, I think he would consider that the system savoured more of a Socialist-Soviet regime than of a regime where private property and enterprise were still the accepted order of the day.

As regards certain incidence of the Budget, I believe the Beer Duty relief is not only just to the industry but wise from the point of view of the Exchequer. I am doubtful as regards the Oil Duty. I believe that practice may show the need for many modifications and changes which the Chancellor of the Exchequer did not see his way to make in this Budget, and that he may be compelled by the facts to make alterations next year. As regards the tax on co-operators' funds, I believe that once it has become the law of the land we shall not hear very much more about it. My postbag, I admit, is weighed down by printed postcards, but on the other hand I receive a considerable number of letters thanking the Government for what they have done. I believe that the agitation was very largely political. I understand that a very large and representative body of the co-operative movement was prepared to accept the Chancellor's offer of discussion of this matter, and would have been prepared to make a definite fixed grant annually to the Exchequer in order to help the country.

It is quite obvious that the whole financial position of this country, our Budget this year and its success or failure, and our Budgets in years to come, must be largely but not entirely dependent on the outcome of the deliberations that are now taking place at the Geological Museum. Much praise must be given and much praise has been given to the Chancellor of the Exchequer for his speech at the opening of that Conference. The right hon. Gentleman has never been a darling of the economists, but distinguished economists have showered praises on him for the speech that he made. I should not be surprised, in view of that fact, if the Chancellor of the Exchequer began to doubt the wisdom of some of the proposals which have been so highly praised. On the results of the Conference depends the question of international debts and particularly War debts. It is all very well to pretend that they do not exist, and it may appear in the case of some countries to be tactful not to say too much about them. But they do exist and upon the solution of the debts question depends the solution of the currency question, of the gold standard question, and very largely of the question of lending abroad, all of which vitally affect the future of trade and industry.

I do not think there are any two opinions as to the wisdom of the temporary settlement with the United States which was announced a few days ago. But it is also quite clear that United States policy is growing more nationalistic every day. There is not the remotest chance of the cancellation of this debt, and I believe it would be better policy not to ask for or to advocate cancellation, but to ask for and to advocate a scaling-down of the debt. I read with great interest the speech of the hon. Member for South West Hull (Mr. R. K. Law) the other day in regard to what is known as the Baldwin settlement. I know that a discussion on this matter usually raises strong feelings and often reveals Cabinet secrets both of which results, while highly entertaining, do not contribute to the solution of the problem. It would not be proper, nor do I intend to delve into the arguments for and against the Baldwin settlement. I would only say that it is very easy ten years after the event to become a judge and partisan in these matters. I believe that in the circumstances existing then, it was the best possible settlement. I believe that if the representatives of this country had not accepted that settlement, we should not have been able to get any settlement at all. The results of that I need not go into this morning. We should have been subject to the dictation of America. They could have demanded at 48 hours' notice full payment of the debt in gold and five per cent. interest as well.


A debt of honour.


As the right hon. and gallant Gentleman says—a debt of honour. Whenever this question is raised hon. Members always claim to know certain Americans who agree with their own views on the subject. It would be curious if, among 120,000,000, one did not find some Americans to agree with one's own point of view. The trouble is that the Debt settlement then was not decided and the Debt settlement in the future will not be decided by the ordinary business men whom we come across in everyday life, but by a set of gentlemen who are politicians in Washington and are very different types of individuals. May I say from a certain amount of experience of and discussion with these individuals that they consider the Baldwin settlement an act of the utmost generosity on the part of the United States. These are the same people or the same types of individuals as those with whom we shall have to make any future settlements.

An invitation has been extended to us to reopen the whole question. I hope it will be accepted. I hope we shall avail ourselves of it. There are two or three considerations which I believe have a very fair chance of being sympathetically considered by the American public and of being acceptable also to Congress. First, practically the whole of this money was spent in America in the purchase of American goods. A large proportion of it was returned to the American Treasury as excess profits taxation. That amount which has already been paid to the American Treasury ought to be deducted from the amount payable. Again, the money was borrowed when commodity prices were very high. I believe the total Debt ought to be scaled down in proportion to the fall in commodity prices, a figure which would be easy to calculate. Third, all interest should be written off and only the capital sum should be repaid. Lastly, all the past payments which we have made either in interest or capital should be deducted from the sum so colculated.


Would my hon. and gallant Friend rule out the possibility of using the tariffs between ourselves and the United States as a bargaining instrument? Could we, for example, bargain to get so much off the Debt in return for a reduction in the rate of duty on certain classes of articles?


I would not rule out any proposition which I believed the American Congress—not the American public or the American President, but the American Congress which is a very different thing—would accept as a reasonable basis of argument. I only put forward these suggestions because I have some reason to believe that they are propositions which in themselves would be acceptable to the members of Congress and as a result of which we should be able to scale down our debt. I suggest that we should not talk about either translation or repudiation, but that we should consider a scaling-down which might entail a payment of from £5,000,000 to £10,000,000 a year for 30 or 40 years. That was the sum mentioned to me by no less an authority than Mr. Walter Lippmann who has been quoted here this morning already. He mentioned a sum of 1,000,000,000 dollars, which would be a payment over 40 years of from £5,000,000 to £10,000,000.


How can you scale down a debt of honour?


Certainly you can if your creditor comes to you and says "I am prepared to take less. I recognise that the debt was contracted in certain circumstances which do not prevail today, and I will let you off with a certain percentage." If we can scale down the debt to some figure such as I have suggested, it is a sum which we can pay, which we should pay and which, on the lowest ground it would pay us to pay. We have heard a great deal of criticism of the Government's financial policy. We have heard a great deal about distress and unemployment and poverty in the country. But if we compare the position to-day with the position as it was at the Third Reading of last year's Finance Bill I venture to say we shall find that there is hardly a single aspect of our national life in which there has not been improvement. I believe that facts and figures could be given to show that that view is correct. Although it may not have been to the extent which we would all wish to see, there has been a definite improvement.

During the debate on the Third Reading of the Finance Bill last year references were made to two conferences then about to take place and hopes were expressed, as regards both Lausanne and Ottawa, that the decisions which would be taken would ameliorate conditions in this country. I believe that without Lausanne the World Economic Conference would never have been held. I do not think we recognise how much the country owes to the Chancellor of the Exchequer and the President of the Board of Trade for their work in bringing the Lausanne Conference to a successful conclusion. Opinions vary as to the benefits of the results of the Ottawa Conference, but, whatever else may be said about that Conference, it set the world an example. It showed how, the representatives of countries could meet together, and though in some cases their views were diametrically opposed how each was prepared to make sacrifices for the benefit of all. This is an example which will stand in good stead in the World Economic Conference to-day. If we can look forward to the Conference being one-half as successful as either the Conference at Lausanne or the Conference at Ottawa, then I believe we can look forward to next year's financial position and Budget, not only with equanimity, not even, in the phrase of the Chancellor of the Exchequer, with tempered optimism,' but with positive optimism.

2.6 p.m.


We have had a very significant debate on the most sterile Budget of recent times. It has been significant not only for the type of speeches that we have had, contradictory and conflicting in their nature, but for the sparsity of the attendance during the discussion. We have had conflicting advice given to the Chancellor of the Exchequer from Members who are similarly minded politically, and that, to me, is rather remarkable, because I see in that fact that on the side of the Government and those who support the present system of running industry there is no cohesive purpose, there is no concerted action envisaged, there is no common policy, there is nothing but chaos and confusion. The significance of the confusion of advice given is, to me as a Socialist, that it reflects in this House the chaos and confusion of the capitalist system of society under which we are living. No one seems to know positively what to do.


Will the hon. Member tell us what he proposes to do?


I will, before I sit down, but it cannot be doubted that what I have stated as to this morning's debate is true.

The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Dr. Burgin): indicated dissent.


The representative of the Government shakes his head, but let us take one question alone. From some of the supporter of the Government we have had the advocacy of inflation. Inflation is the cure, the immediate and positive remedy. From other supporters of the Government we have had it stated that inflation is the road to ruin, to an unbalanced Budget, to financial bankruptcy, and therefore we should continue the sound financial policy of deflation. There has been complete confusion, and, as I say, that confusion indicates not only the inadequacy, the sterility, the ineffectiveness of the Budget to meet the existing situation, but it also reflects the confusion and chaos and antagonisms that lie behind that Budget in the general economic, industrial, and financial situation in which we find ourselves.

I was interested in some of the remarks of the hon. Member for Huddersfield (Mr. Mabane), and I wondered whether he was a Die-hard Tory or a Young Liberal. He seemed to me to justify the whole of the existing situation as far as the wage-earning classes of this country are concerned. Indeed, the more he proceeded, the more I began to feel that he desired the greater depth and wider extension of the depression. The working classes were far better off in the depression than ever before. Other hon. Members have said that, and really I began to say to myself, "Thank God, on behalf of the working-classes, for the depression which has overtaken us." It is another instance of the terrible straits into which the defenders of the present system have got. Even in depressions they argue, "We have chronic unemployment existing, with a means test, with cuts upon unemployment benefit, with a million of our people thrown on relief, we have curtailment of social services, education restricted, housing restricted, health services restricted," and they are forced to come along and say that the working classes are better off. It is a profound untruth to say that the working classes of this country are better off, and it does not meet the charge which we make against the present system.

Our main charge is that in relation to the productive capacity of modern society, in relation—I give you this—to the technical power that capitalism has given us to produce, there is unnecessary and degrading poverty. I readily concede, I have never disputed, that the capitalist form of society has benefited mankind tremendously by the great advance that it has brought us in power of production, the technological advance, the scientific advance, the wonderful organisation of industry, all giving tremendous and increased power of production. The charge that we make is that you have now reached the point where that productive power operates in a social system and with social relationships which will not allow that production to reach the vast masses of mankind. That is our main charge against the capitalist system of society.

We were told by the hon. Member for East Aberdeen (Mr. Boothby) that what we want to do to solve the problem of unemployment, to raise the standard of life of our people, is to raise prices, to inflate. Get prices up, and then there will be economic health. He further stated that the cause of the depression was the slump in prices. I think he was confusing effect with cause. The slump in prices is not the cause of our depression, but the effect. Anyone who has followed matters for the last few years is bound to agree with Sir Arthur Salter, who, in his book on recovery, said that, while there are a number of contributory factors, the main factor that caused the slump in prices and the depression was the over-production in relation to the consuming power of the people. You may raise prices, you may inflate, you may increase credit, but if you do not increase the purchasing power of the people to consume the goods which are produced, then your last state will be worse than your first.

The policy embodied in the Budget of raising prices will only make things worse. There is no solution in increased prices, and the remarkable thing is that we have had this afternoon an advocacy of increased prices, but not on the basis of the general well-being of the community and the raising of the purchasing power of the community. The hon. Member for East Aberdeen said that you cannot run capitalist production unless it produces a profit, and a policy of inflation, the raising of prices, must be followed in order that there may be profits. All those who advocate the raising of prices merely advocate increased profits, and do not touch the question of wages. I understood from the Chancellor of the Exchequer that he had had a memorandum from the Trades Union Congress which seemed to indicate that they were in favour of raising prices. I have not been privileged, as a mere humble Member of the Labour party, to see that document. I can only observe what has been stated by responsible representatives of the Trades Union Congress. The Chancellor of the Exchequer may seize upon some phrase or other, but I am reassured by statements made by the Chairman of the Trades Union Congress that the policy of that Congress by no means begins or ends with inflation or the raising of prices, and that the Trades Union Congress realises, as anyone ought to realise without any economic knowledge at all—indeed, I think if we had no economic knowledge, and did not listen to the experts, we might realise it more easily from the point of view of common sense—that to raise prices, to pursue a policy of inflation, is to make the lot of the working classes worse than it was before.

I have tried to follow it out a little, and I have here two or three examples. For instance, if you raise prices with fixed wages—and that is what the inflationists mean—resilient prices soaring up, but stable or depressed wages—capitalist production cannot function. You have now come to the point where capitalist production can only function on a lower standard of life for the working-classes, that is, the policy of inflation is the dilution of real wages. The capitalist production here, and in America and elsewhere, can now only continue to flourish on the basis of a lower standard of life and a dilution of wages. But here is the dilemma in which capitalist production finds itself. If you raise prices and do not raise wages—and, mind, it is not intended to raise wages—immediately effective demand is curtailed. Therefore you pursue a policy of inflation in order to get profits, and that surplus of which the hon. Member for East Aberdeen spoke, and at the same time pursue a policy of curtailing effective demand among the working classes.

I can follow it up by giving other postulates. Suppose you increase prices and also increase wages, what then? Am I not right in saying that again your plight is worse than before, because by that very action of raising prices and even raising wages, you rob British industry of effective competitive power, and, therefore, you are in the dilemma that as long as you run your industries on the basis of competition internally and externally, one nation against another, capitalism is landed in a dilemma from which it cannot escape. Let us take a third postulate. Suppose you increase wages without increasing prices. It is very difficult, I admit, but let us consider it theoretically. You will certainly create greater purchasing power and competitive demand in the home market, but you will do exactly what you did in the second case, that while you increase the purchasing power by giving an increase of wages, under capitalism you are, at the same time, adding to your competitive difficulties.

You come to this position in capitalism. I agree with those who talk about its decay. I profoundly believe that this Budget, apparently uninteresting, apparently devoid of policy, indeed, really devoid of policy, indicates a position which says quite definitely and clearly that there is nothing of hope for the near or distant future as far as the development of the standard of life of our people is concerned. Even if you increase wages while keeping prices stable, I say that you are still in the eternal dilemma which you have now reached in capitalism of giving a standard of life to your people, and, at the same time, maintaining your competitive power as against the competition of other nations. That is the dilemma of capitalism. What solution does this Budget give? What policy is there in this Budget? Where is there anything constructive in it?

To my mind, one of the most remarkable statements made in this Debate and on Second Reading was made by the Chanceller of the Exchequer himself. I do not think that we have yet been fully seized with it, although it may sound platitudinous. The Chancellor, by his action and by his words in these debates, has given up the hope that relief of direct taxation will result in an expansion of industry and trade He has been asked to take 6d. off the Income Tax. He has said that he will take it off, or even a shilling off, provided we can give him an equivalent income, which, says the right hon. Gentleman, must come out of the lower rate of taxation but with an expanding industry. The Chancellor has given up the argument we have heard over and over again from the Benches opposite: "Let us have 6d. off the Income Tax, and then we shall see a revival in trade." He has given that up. There is no assurance for him. [AN HON. MEMBER: "He is afraid to risk it."] Yes, he is afraid to risk it. As a matter of fact, he is not only afraid to risk it, but he has said quite definitely that, so far as he is concerned, he must have a guarantee that if there is to be this relief of Income Tax, there must be an expansion in trade.

I hope I may be reassured on this point from the Treasury Bench, but, quite frankly, to me this Budget is an. ominous budget. It has been described as a half-and-half Budget, as a stand-still Budget, but I really feel that it is an ominous Budget. I should be glad, and the country would be glad, to know from the Chancellor what is behind the policy embodied in this Finance Bill. As a matter of fact, I fear, although I hope that my fears may be dispersed, that behind this Budget lies further drastic attacks on the social services and the general standard of life of our working folk. There is no hope in it as far as I can see. There is no policy. One would have thought that there would have been some attempt at least in the Budget to increase the resources by which the taxpayers can pay the taxes, but even from the capitalist point of view there is nothing but sterility and menace to the general social services and the standard of life of our people. I admit that if we look at the Chancellor of the Exchequer as a ledger keeper, he has done his work very well. If it is just a matter of keeping accounts, the Chancellor has done his work efficiently.

In modern times, however, we expect to see much more than that in the Finance Bill. We expect to find some indication of national policy, some initiative and some constructive proposals. I find nothing but negation, sterility and menace so far as the working folk of the country are concerned. The hon. Member for Central Leeds (Mr. Denman) smiles. I should welcome the opportunity of seeing a National Labour man defend a diehard Tory like the Chancellor of the Exchequer; I should like to see the erstwhile Free Trader stand up behind the back of the Protectionist Chancellor of the Exchequer. There is a policy of tariffs in the Budget, but is there any hope for industry in tariffs. Have they brought economic health and social well-being? Another policy involved in the Budget is the newest form of Protectionist policy as embodied in the Marketing Bill introduced by the Minister of Agriculture. In short, the Budget embodies the policy of creating scarcity, increasing the cost of living, and lowering the standard of life which is being pursued by every Department and by the Government as a whole.

I admit that the Socialist party cannot offer anything substantial in the way of suggestions if we are to run the capitalist system and have such a Finance Bill as this. In looking at the figures, I find a shrinking Income Tax, a shrinking trade, a shrinking production and a general shrinkage all round. All these things are there. We say that under these conditions, under the conditions of competitive capitalist Imperialism, we can render no effective and permanent solution. We urge upon the Government to spend what they have got and to make the best that they can out of a bad job. We urge them to take the surplus of private industry that now lies rotting without investment and without use, and spend it on housing, on the development of education, health and agriculture. In short, we urge them to go as far as they can within their own policy with an active, virile policy of spending in order that they may put as many people as they can to work under a capitalist system that is more and more doomed to failure.

2.31 p.m.


The hon. Member for Aberavon (Mr. Cove) has been very critical of the capitalist system, but since he has not attempted to show how the system which he defends would produce any improvement, I hope that he will not think me discourteous if I talk about something else. However proud we may feel to-day of the financial position of the country, I do not think that anyone can fail to view with some alarm a situation in which the sinking fund has been suspended, in which such a large proportion of our taxation is derived from taxes upon capital, and in which the taxation of the country is admitted on all sides to have reached the limit. Our real financial strength is far more a matter of relativity than actual strength. I do not desire to criticise economy because I think the Government are deserving of considerable congratulations for the economies which they have carried out and for the very small amount of hardship which those economies have entailed. I still think, however, that there are some directions, small individually but collectively amounting perhaps to considerable sums, in which economies can be carried out.

It appears to me that the actual practice of economy may in some directions lead to an increase in expenditure and as an instance I would refer to one matter connected with the Defence Services. I do not refer to the system which seems to encourage the spending up to the full limit of the Estimates in order to prevent a reduction of the Estimates in the following year, but rather to the system of controlling expenditure in the Defence Services. Officers in the Army who are responsible for expenditure are called upon to maintain and to send in the most elaborate returns to show that every penny entrusted to them is wisely and carefully expended. It is necessary that these returns should be carefully checked and counter-checked at the centre. A very close control is, of course, kept over expenditure, but it seems to me that some relaxation of this rigid control, although it might lead to mistakes and a little less wise spending, would in the end mean a considerable saving at the centre and a considerable reduction in the enormous staff which is maintained by the Defence Services, and particularly the War Office.

I should like to refer to the Oils Duty because it affects my own constituency perhaps more than most other coal-producing districts. My constituency produces coal almost entirely for the home market, and principally for domestic use. Undoubtedly a tremendous impetus was given to the displacement of coal by oil by the events of 1926, and the blame for this change-over undoubtedly rests to a large extent upon the coal industry itself, and mainly upon those agitators who spend their lives going round the country stirring up discontent. But even if an industry attempts to commit suicide, it is the function of the Government to do what is practicable and necessary to safeguard employment, and I am quite certain that, at least as far as my own constituency is concerned, this tax upon fuel oil will mean a great deal of employment for the miners living there. I know that individual firms, and perhaps some industries, will be affected by this tax, but it seems only fair that those who have chosen to use foreign fuel, and have thrown men out of work by their action, should be called upon to contribute towards the cost of maintaining British workmen in idleness.

That brings me to the taxation of another kind of fuel. Just as coal and oil are the fuel of industry, so profits are the fuel of the capitalist system. I have no complaint to make of the action of the Labour party in advocating an increase in direct taxation, although they know there is no more money to be obtained from that source, because, after all, there is no more certain method of destroying the capitalist system, bringing industry to a standstill and preventing any possible expansion of trade, than taking away the reward of enterprise— profits—the motive power of the capatilist system. Every country, whether under a Socialist system or under capitalism is bound to have some motive power to overcome the natural laziness of the human race. In Russia they attempted to carry on with a high sense of patriotism as the motive power behind the system, but they very soon found that the motive power had to be fear, and the motive power behind the system to-day is fear, the holding of mock trials, confiscation of food cards and the arrest, imprisonment and execution of their citizens. That is the motive power of that system. We in this country, under capitalism, are more humane, and we give rewards to our people, and the more we whittle away these rewards by high direct taxation the more impossible industrial expansion must become.

I would like to draw attention to some remarks made by the Royal Commission on Unemployment Insurance when they were discussing the changes in the employment situation since the War. In paragraph 156 they say: British industry has not shown since 1920 the resilience and powers of spontaneous expansion in new directions that characterised it before the War. In other words, since 1920 enterprise in industry has been lacking, according to the Royal Commission. Before the War we continuously had a low level of direct taxation. Since the War it has been continuously high. In paragraph 160, discussing the changes in the employment situation since the War, they say: The loss of markets and the decay of old industries was not a new experience. What is new is the failure of new industries to compensate for the decline of the old, a failure that must be overcome before any permanent recovery of employment can take place. Again a lack of initiative in British industry has been responsible for unemployment. The words I have quoted come from men who were picked for their knowledge of these affairs, their wisdom and their understanding of the unemployment situation, and they were picked not by capitalists but by the Labour Government, and therefore hon. Members on all sides of the House ought to pay particular attention to their observations. May I conclude by expressing the hope that the few small items in this Bill which are directed towards the assistance of British industry, such as the Fuel Tax, the reduction in Stamp Duties on the capital of companies, and the changes in the payment of instalments of Income Tax, are indications of the Government's determination to direct their financial policy rather towards the assistance of industry than towards the securing of popular support, because it is only by assisting industry that employment can be created, and it is only by the creation of employment that the support of the country can be maintained.

2.42 p.m.


I have listened to the debate to-day and previous debates on this Measure with some attempt to get up something approaching enthusiasm either for or against the Bill, but I have been entirely unable to do so, and though it is perhaps not a tribute I have to express this gratitude—that these debates have given me many moments of much sounder slumber than I enjoy during the night hours when it is my business to sleep. This feeling that there is nothing very much in this Bill in the direction that many hon. Members have hoped for is, perhaps, a compliment to it indirectly, because quite a number of Members on both sides of the House are in the habit nowadays of expecting great positive pieces of policy to be contained in Finance Bills. I believe that to be fundamentally erroneous. Finance Bills are meant to deal with taxation, and taxation is a dull and unpleasant thing. We would all rather be taxed less ourselves, and if we have got any human feeling we are mostly glad that other people should be taxed less as well.

The last speaker but one said he hoped and expected to find in the Finance Bill something to increase the resources of the people. I think a Finance Bill is the wrong place in which to look for that. It is not to the Finance Bill that one would naturally look for a great line of national policy. But the criticisms I have to make are that in two fairly important matters the Chancellor has not stuck quite closely enough to the primary duty of regarding his Finance Bill simply as a means of getting revenue with the least possible amount of that vexation which it always entails. The Chancellor ought to be a man who sees everything and who hears nothing, and I think that in this Finance Bill the Chancellor has allowed himself to be influenced too much from outside. That would not have happened if he had been merely looking for revenue.

The two points I naturally hit upon are the decrease of the Beer Duty and the tax upon co-operative societies. The Chancellor of the Exchequer and the Financial Secretary have said over and over again, the Chancellor saying it to-day for about the fifth or sixth time, that his object in the decrease of the Beer Duty was to conserve the revenue. That was done in order to increase revenue. The figures are plain. The Chancellor anticipated a drop of £6,000,000 if he made no alteration in the tax; he has introduced a Budget with a reduction of £14,000,000. We must all realise that if there is to be a change in the drinking habits of the people it will not be spread over several years, and that if people are going to drink more beer they will drink more beer now. Unless the alteration in the level of the Beer Duty leads to an increase in consumption and consequently to an increased revenue it would have been better to have left the duty where it was. One has listened to proposed new Clauses being politely, efficiently and courteously, but Very ruthlessly, turned down, and one has wondered what the Chancellor might have done if he had been left with the £8,000,000 that he has lost as a result of the reduction of the Beer Duty. It would have given him an opportunity to do a little more for the different sections of taxpayers who so much hope for relief. With regard to that matter, the Chancellor has yielded to the pressure of a section of public opinion, unwisely from the point of view of the revenue.

Surely that is even more true as regards the taxation upon co-operative societies. For a brief period I was Financial Secretary to the Treasury, and in those days it was always a canon of taxation that you should not introduce a new tax unless you were going to get some money out of it. If a tax was going to yield £500,000 or £1,000,000, or even £1,500,000, it was not worth while, when we had to think in large totals of hundreds of millions, especially if the new tax was vexatious and was going to be resented. Those were the days of the War, when we had to be looking round for new sources of revenue. I remember considering the possibilities of taxation upon advertisements and bicycles and all sorts of things, but people said: "Do not bother about anything now unless it is going to pay you." The tax upon co-operative societies is not going to pay. I very much agreed with the phrase used in the remarkable speech of the noble Lady the Member for the Sutton division of Plymouth (Viscountess Astor) when she said that she objected to a tax which did not really tax. It is not going to bring in any revenue. It gives the maximum of irritation with the minimum of yield. The Chancellor has been affected by the influence of outside public opinion, and public opinion of that kind is not going to be satisfied. Nothing short of the taxation of the dividend would have met the criticism of the private trader. There will be just the same feeling of the unpopularity and unfairness of the competition of the co-operative society.

The major criticism which has been directed against the Finance Bill is that it does not go in for a big gamble by reducing the Income Tax in the hope of stimulating prosperity and of getting the money back in other ways. I believe that the Chancellor of the Exchequer has been right in resisting that temptation. Once you reduce Income Tax, and once you gamble in that way and deliberately unbalance your Budget, you may find that the opportunity of getting the money back again will never occur. People may say: "Give us another year with an unbalanced Budget and things will improve." People hope that, somehow, better days are just round the corner. Better days have always been just round the corner. A gamble with the Budget is not a certain way of get-tings things back again. The Chancellor has been right in resisting that pressure, and in not devising any major forms of economy in social services, which he says are the only possible alternative to increase of taxation.

My general feeling comes to this: I would like to repeat the very well-known story of the agricultural labourer who was commenting on the beer that his master provided during harvest work, because it expresses exactly what I feel about the Budget. He said "I reckon it is about right. If it had been any better we should not have got it, and if it had been any worse we could not have drunk it." If the Budget had been any better we should not have got it from that quarter, and if it had been any worse there would be a great deal more to be said against it than there is in the present circumstances.

2.51 p.m.


I wish to deal with one or two points that have cropped up during the discussion of the taxation of the co-operative societies. I am dissatisfied with the time that various hon. Members have allotted to the subject, but the time that would be required to deal with the various misconceptions that have been expressed would take much longer. Typical of them are the figures that were introduced by the hon. Baronet the Member for Barnstaple (Sir B. Peto) with regard to the relationship of co-operative turnover to taxation. They were wide of the mark by ten miles and would not have been accepted by the revenue authorities.

Another illustration was furnished by the hon. Member who said that he knew an individual who had £10,000 to spare, and was in the process of going round depositing the money in multiples of £200 in various co-operative societies and so escaping taxation. Co-operative societies have qualifications for membership, and one of them is based upon the amount of purchases that are made by the member. Even if it had been possible to put those sums into the various societies, and to satisfy the requirements with regard to purchases, the individual referred to would never escape taxation, because no other co-operator ever escapes taxation. It has been asserted that this tax is for the protection, firstly, of the small trader and, secondly, to conserve a field of taxation from which the country has expected in the past to receive revenue. The small traders with whom I have discussed the matter are not so much afraid of the co-operative societies as they are of the multiple stores. There are many parts of Great Britain where men who have been in business for themselves are now working in co-operative employment.

There is only one statement upon the distributive trade which I can get which is sufficiently comprehensive for my purpose, and that is given in a book written by Lawrence E. Neal. That states that the distributive trade in this country amounts to £1,750,000,000 per year, and is done in about 500,000 shops; that 10 per cent. of that trade is conducted in multiple, chain and co-operative stores, and 90 per cent. is conducted by small shopkeepers with an average turnover of just under £2,000. The 10 per cent. group, that is to say, the co-operative societies and multiple stores, do 45 per cent. of the trade, and the 90 per cent. group do 55 per cent. According to the authority I am quoting, the total figure for the co-operative societies is £250,000,000. The small traders stand at £960,000,000, and the multiple stores are making headway to such an extent that at the present time their turnover is no less than £540,000,000. Therefore, I think the small trader has more reason to look with apprehension at the advance which is being made by multiple and chain stores than at the co-operative societies, especially bearing in mind the treatment that he receives from those respective organisations.

This £960,000,000 of trade is done, in the main, by small shopkeepers who are not paying Income Tax, so that, if the House desires to protect the small shopkeepers in their present methods, it is not at the same time protecting the field from which tax can be drawn. I have here an authentic case, that of a small shopkeeper doing a trade of £2,254. Added to that he has a sub-post office, which brings in £175. He owns the shop and the house in which he lives, the annual value being £35. His family consists of himself, his wife and two-daughters. He is typical of these small shopkeepers, being perhaps above the general average, and he pays no Income Tax; and if that be the general position in this branch of the distributing trade, it cannot be expected to yield any more taxation, and there is no danger of the co-operative societies eating into it. From the point of view which appears to be most accepted in the House, there can be no case for treating the co-operative societies as they are being treated in this Finance Bill. They are not in business to make anything, but to assist in spending, and the tax that is going to be placed upon them should be governed by the income which they earn and not by the manner in which they spend it. For these reasons I protest against the attitude towards them which has been adopted in the Finance Bill.

2.58 p.m.


I desire to deal with precisely the same points which have been raised by the hon. Member for St. Rollox (Mr. Leonard). Twenty-five years ago I was associated with the right hon. Gentleman the Member for North Cornwall (Sir F. Acland) in starting in connection with the Agricultural Organisation Society, a co-operative society for the insurance of farmers. Since that time it has gathered together 5,000 members, and the bonus to participating policy-holders has averaged nearly 4s. in the £. The House, therefore, will appreciate that I do not regard with any pleasure the abolition of the privilege which we have been enjoying for so long. At the same time, I am bound to say that, having listened to these debates, I am unable to see the least ground for the allegations which are made in the Amendment which has been moved. There is the curious argument, which we have heard over and over again from the Labour Opposition and from the Liberal Opposition, that the principle of mutuality entitles a body to escape Income Tax, But the principle of mutuality has never in this country, whatever the lawyers may say, been an accepted ground for freedom from Income Tax.

Let me take the case of two great classes of co-operative institutions. The mutual life assurance offices, a very large body, whose Income Tax must be within measurable distance of the total amount which will be derived from the present amendment of the law, have consistently paid Income Tax. They have not been able to recover Income Tax in respect of their very large investment income, and have gone on paying it year after year. But there is a far more important set of mutual traders, the great local authorities, who are no doubt by far the largest and most important mutual traders in the country, eclipsing even the co-operative societies. What is more perfectly mutual than the provision by ratepayers for ratepayers of waterworks, electricity works, tramways, and so on? And yet these local authorities have been consistently taxed on the surpluses that they make from those activities. With these two great examples before it, the House will surely see that it is sheer nonsense to say that the principle of mutuality has been recognised as a reason for exemption from Income Tax.

The actual reason for exemption has been the highly artificial one that the corporation in question which escaped tax has been registered under a particular Statute, the Industrial and Provident Societies Act. Indeed, it has been my lot to point out to colleagues in a mutual life assurance society that, if they wanted to escape Income Tax and save themselves scores of thousands of pounds a year, all that they had to do was no longer to conduct their operations under a deed of settlement, as these old mutual societies do, but to transform themselves into a society registered under the Industrial and Provident Societies Act—a perfectly simple process. In the same way I have pointed out to colleagues on a local authority that, if they wanted to escape Income Tax, all that they had to do was to transfer their undertaking to an industrial and provident society registered under that Act. If they did that, and if the rules of the society provided that any surplus that might be made should be devoted to, if you like, the educational activities of the local authority, they could escape the Income Tax which they at present paid. What can be more artificial than that privilege which has been given to societies so registered? An extreme example of the error of arguing that it is the principle of mutuality which justifies exemption is that in each case, had these bodies taken the steps necessary to escape taxation, there would have been a decided dilution of the purity of the principle of mutuality, because in each case, instead of existing to provide services for their own members, they would have had to introduce a fresh, element of shareholders, whose dividends would have depended on profits, and would have had no relation to the amount of trading that those shareholders did with the bodies themselves. That, surely, proves conclusively how little the principle of mutuality has governed taxation in this country.

As I have said, I am faced with this provision which abolishes a privilege that I myself have enjoyed for many years. How ought I and others who are similarly situated to act? I seem to recollect that both the Liberal party and the Labour party in the past have not been especially staunch in their advocacy of privilege. When they have come up against it, they have been rather apt to attack it than otherwise. I seem to remember the House of Lords claiming privileges and the Liberals very busy in objecting to them. The arguments for privilege are always the same. They are that the particular body enjoying the privilege is performing a certain valuable social function, and in the case of the co-operative societies we all admit that they are performing a very valuable social function. No one who has been associated with them would wish to depreciate the great value of what they have done. But when a privilege is attacked, when those who do not enjoy it feel a real sense of grievance and openly attack it, it is high time that those who enjoy the privilege realised their position.

You cannot in the long run maintain a privilege against the resentment of those who do not enjoy it. From that point of view I felt, as a co-operator, that I had no choice but to accept what was obviously the view of those who do not enjoy this privilege. I recollect that we had an analogous problem during the War when the question of Excess Profits Duty was raised. I remember going with Mr. May, who was then Parliamentary Secretary of the Union, and seeing Mr. McKenna at Downing Street and discussing with him the application of the Excess Profits Duty to co-operatives. We then felt, as of course co-operators feel now, that they do not want their privilege interfered with, but wiser counsels prevailed and a special scheme was devised by which the co-operatives were brought within the conditions of that particular method of taxation. I wish the same wisdom had prevailed this time. I wish they had come to an agreement with the Chancellor of the Exchequer on some special terms. I do not like the precise method that has been adopted, but I do not see that the Government had any choice. It was forced on them by the refusal of the co-operators to come to an agreement on any other lines. I congratulate the Chancellor, as I did when he introduced his Budget, on a sound Finance Bill. I should like to congratulate him also on his Financial Secretary who, I believe the whole House will agree, has conducted an arduous task with quite conspicuous capacity and to the general satisfaction of the House, however little we have been convinced by his arguments. I shall vote for the Bill, including the tax on co-operators, with a profound conviction that, on the whole, it is a just and an adequate measure.

3.9 p.m.


We have had many days' Debates on the Bill, and we are now at the very last lap of the discussions for this year. When I came to the House this morning, I felt that I should hear nothing new in the Debate to-day. Unlike the hon. Member for North Cornwall (Sir F. Acland) I have never been able to sleep in this Chamber, so I have heard everything that has been said and I have marvelled at the versatility of hon. Members one after the other as the Debate has gone on. We have had a great number of unconvincing speeches on inflation and the raising of wholesale commodity prices, each one contradicting the other. I fail to understand what they mean by the idea of rising prices. I was the eldest of a fairly large family, and my father was a miner. Wages were very low in those days, and when his wage dropped by 1s. or 2s. it brought difficulties into the home in providing the necessaries of life for the family. But when flour went up 3d. a stone and there were ten of us to keep out of a small wage the difficulty was greater.

I do not understand how the mass of the people are to benefit by the raising of prices. If anyone can convince me— and I am open to be convinced if it is possible for anyone to do it—that the raising of prices will benefit working people. [HON. MEMBERS: "Wholesale prices!"] I will come to that point. My hon. Friend the Member for Aberavon (Mr. Cove) dealt fairly fully with this question, and I think exposed most of what has been said before with regard to it. But there was one point with which he did not deal, namely, the raising of retail prices. It is argued in this House that we should raise wholesale commodity prices, but who will guarantee that retail prices will not be raised? There is no control over either wholesale or retail prices. Everybody must have food, and we are paying the same for it to-day as we paid before the War as far as retail prices are concerned. [AN HON. MEMBER: "No!"] They can charge us whatever they like because we are bound to have food. It is not proposed to institute any control over either prices, and, unless they are controlled, there can be no guarantee whatever that anything which is done will be for the benefit of the masses of the people. We ought to control prices and also control and own the industries which produce the materials, as well as the land, and, most important of all, we ought to control the goods which we import into the country. If we took that course we should be able to see that the masses of the people received an advantage if there was to be any raising of prices. I am not opposed to high wages. Most people in industry would welcome high wages to-day, but I have always found that even if prices are raised wages are a long way behind. Feeling that that would be the position under this system, I cannot for the life of me understand what we are likely to gain out of the particular matter under discussion.

Someone mentioned the Trades Union Congress Circular. Yesterday the President of the Trades Union Congress, Mr. Walkden, was dealing with the World Economic Conference and said that two measures are urgently needed to meet the economic situation of to-day. These were, increased purchasing power for the people and reduction of hours of labour. But he and Mr. Citrine found that the delegates of the 66 Governments represented were obsessed with the opposite notion that the way to put things right was to restrict production and to get prices raised. Obviously, if prices were made higher the workers could not buy the goods. That is my attitude absolutely with regard to the position. Such an attitude of mind could not bring any solution of the situation from which the world was suffering. I take that particular view with regard to the matter, and I am very pleased to be able to quote the President of the Trades Union Congress, as the head of the trade union movement, as supporting that point of view.

There have been many criticisms of the provisions of the Bill and many appeals for concessions. In reply to an appeal the other day the Chancellor of the Exchequer said that these insidious and dangerous arguments made it very difficult for him to resist them, but, like every other Chancellor of the Exchequer, he resisted almost every appeal. There has been no encroachment upon the Bill as it was introduced, and I think I am safe in saying that the Bill as it will leave the House to-day will be practically in line with the speech of the Chancellor of the Exchequer when he introduced his Budget. Many Members of my party have stated the views of the party on the financial conditions. I do not claim to be a financial expert, but I would remind hon. Members of the most fundamental fact that it is working men and working women who constitute the greater part of the population, and who have to pay the most. It is the producers of wealth who will find the millions sought for in this Bill, and it is a colossal sum.

When the Chancellor of the Exchequer introduced his Budget he said that he had to find £777,000,000 and that his revenue fell short by £32,000,000. That included a payment of £29,000,000 to the United States Government. Since that date the right hon. Gentleman has had to pay to the United States as a token payment practically every penny of his estimated surplus for the coming year. Can anyone say with certainly that he will not have to pay the whole before the end of this year? Is there anyone in the House who could make that declaration? I hope sincerely that it will be possible for a settlement of war debts to be established before the end of the year. What a different state of affairs there would have been had the proposals made by the Labour party 13 or 14 years ago for the heavier taxation of fortunes made out of the sacrifices of the people in the War, been adopted. Many of our difficulties and the talk about unbalanced Budgets would never have arisen. That course was not adopted. Because the Government did not accept the wise advice of the Labour party we are to-day paying a heavy penalty, and will continue to do so.

There is no tax relief for the masses of the people in this Bill. There is a reduction of 1d. per pint on beer. I have believed, like other Members of my party, that the Beer Duty was fixed too high, but I do not pay the tax inasmuch as I am a lifelong teetotaller, and I do not intend to pay the tax in the future. I agree with the hon. Member for Caerphilly (Mr. Morgan Jones) that it would have been infinitely better if the Chancellor of the Exchequer had restored the cuts that were taken from the unemployed and from other people in Government service, than have reduced the taxation on beer. I do not think that we are justified at this time in view of what is needed in the homes for the people. There is no relief for those who are in employment, and those who have low incomes. Something like 2,000,000 were brought under the Income Tax scale 18 months ago, and they were promised that before anything was done in any other direction their position would be restored. Nothing has been done, nothing whatever is mentioned in the Budget about restoring the position of these people.

We desire to raise the standard of life of the people, but there is nothing in the policy of the Government in their taxation proposals towards this end. This Bill does nothing whatever to reduce the intolerable burden of taxation on the masses, nor does it do anything to reduce the cost of living. To us these are the practical measures by which we should examine the Budget. That is why we feel so strongly on the additional taxation of co-operative societies. In the few words I have to say on that matter I will only call attention to the points of our opposition to this vindictive and unjustifiable imposition on the greatest movement for thrift we have ever known in this country. This is a democratic country, and I want to say first of all that the Government had no mandate whatever at the General Election to impose penal taxation on the co-operative movement. In fact, at the election the Prime Minister, who is supposed to be the head of the Government, said that co-operative societies should not have additional taxation imposed upon them so long as he was a member of the National Government. If he remains in it after to-day millions of co-operators will believe that he is not to be relied upon, not to be trusted, either in word or deed.

The Chancellor of the Exchequer in setting up the Committee to inquire into co-operative societies in relation to Income Tax, prejudiced their decision by saying that they enjoyed a privileged position; in fact, he asked the Committee to report in a particular manner; and they did so. In order to satisfy the demands of private traders he is now proposing to take, unfairly, by taxation £1,200,000 from the funds of mutual trading societies, and although the co-operative movement has assisted its members and relieved the State and municipalities, and voluntary organisations of all kinds, of many millions of pounds, the Chancellor of the Exchequer has refused to concede a single point in all the Amendments which have been discussed during Committee stage. This unfair policy has been influenced because Toryism believes the co-operative movement is a menace to private enterprise and capital. I hope that it will continue to grow in strength despite what is now being done, so that we can overthrow the individualistic system under which we live to-day. The whole Labour movement, industrial and political, will continue its efforts until such time as it is possible to right the wrong which is now being done. We cannot allow, longer than we are forced, this unjust and inequitable tax to continue because it is against the best interests of the nation as a whole.

Then we are not unmindful of the fact that educational facilities are being reduced, that many millions are being taken from social services, and that at the same time many more millions are being provided in order to maintain and increase the fighting services. This Bill does not give us much hope. We can see nothing in it to improve the trade and industry of the country, or to remedy unemployment, or in any way to solve our social and economic problems. It is a continuation of the devices to bolster up a system which we believe cannot be restored by this Bill or even by the work of the World Economic Conference in the way that is being attempted to-day. At the same time we wish every success to the Conference, as we see the effect of economic nationalism in other countries. We believe that it is a hopeful prospect for the future so long as the nations of the world can be kept collaborating together.

This Bill is not enough, nor is anything that this Government is attempting to do. There has to be a change, and there will be a change. Feeling as we do the necessity for a revival of prosperity for the masses of the people we realise that to achieve that end the country will have to organise sooner or later on the basis of the programme laid down by the Labour party in "Labour and the Nation." I am a loyal member of the Labour party, a believer in its policy and its programme, a believer that Socialism is the only possible hope and cure for the ills under which the people are suffering. "Labour and the Nation" is an exposition of that idea, and I want to see in power a Government which will carry it into effect. We, therefore, cannot assent to this Bill. There is nothing in it to meet the awful conditions of the masses of the people of this country. I support the Amendment.

3.28 p.m.


My task has been very much simplified, though I confess that it has been equally embarrassed by the absence of criticism against the Finance Bill. In so far as there has been criticism, I agree with the hon. Member for Rothwell (Mr. Lunn) that it has been but a reiteration of criticism that has already been answered and dismissed. We are, however, indebted to such hon. Members as the hon. Member for East Aberdeen (Mr. Boothby), my hon. and gallant Friend the Member for Chippenham (Capt. Cazalet) and the right hon. and gallant Member for New-castle-under-Lyme (Col. Wedgwood), for expressing their views as to what the currency and Debt policy of the country should be. I have no doubt that my right hon. Friend, amid the arduous and practical labours in which he is now engaged, will derive much benefit from a consideration of the speeches to which I have referred. But it would be obviously improper for me in the midst of the Economic Conference to make any general pronouncement upon currency or Debt policy. I hope that the whole House will agree that in that I am pursuing a proper course.

The Amendment moved by the hon. Member for Caerphilly (Mr. Morgan Jones) is similar, with certain significant omissions, to the Amendment which he moved on the Second Reading of the Bill. It was then complained that we were not only raising our revenue by placing burdens on the shoulders least able to bear them, but that we were unfairly distributing the money. The hon. Gentleman with his usual and conspicuous fairness admitted that the second count of the indictment had been dropped. I can only hope that it was because the argument which I adduced in reply to him upon the Second Reading has satisfied hon. Gentlemen opposite that they have nothing to cavil at in regard to the distribution of expenditure. Analysing that expenditure, I then showed that almost the whole of the £697,000,000 which we are spending this year, with the exception of what is required for the Debt services, is spent directly or indirectly for the benefit of the working-classes.

I confronted the hon. Gentleman with this dilemma, that the balance of expenditure, namely, the £234,000,000 of the Consolidated Fund services, mainly required for the interest and management of the National Debt, could only be reduced by one of two methods—either the method employed so successfully by my right hon. Friend the Chancellor of the Exchequer of putting the finances of the country upon so sound a basis that you could convert the Debt, or, alternatively, the method of repudiation. This afternoon the hon. Gentleman appreciated that that was a dilemma, and he has now made an important pronouncement—I take it on behalf of his party—and has told us for the first time that they would compulsorily convert what remains of the National Debt. Authorised by my right hon. Friend, I, at once, rose, because the occasion justified it, and asked the hon. Gentleman what portion of the National Debt he would convert and to what rate of interest he would convert it, but, thinking discretion the better part of a lack of valour, he refrained from giving me any satisfaction. It was not me he was entitled to satisfy upon that point; it was the depositors in the National Savings Banks, and the trade unions and friendly societies who hold so large a proportion of these Funds and perhaps my hon. Friend, having determined upon his general policy, will consider the details later and let us know what they may be, in order that we may deal with them.

Leaving the Consolidated Fund services out of account this country spends annually £463,000,000 and of that more than half, £244,000,000, goes in direct payment to the working-classes in respect of pensions, insurance, housing and education. The rest goes in wages salaries and materials, mainly to the working-classes. I am not therefore surprised to find that that part of the Amendment which was on the Paper on the occasion of the Second Reading of the Bill and which took exception to the distribution of expenditure has been omitted on this occasion. It may be that in future there will be available greater resources wherewith to satisfy the high sence of social obligation which is characteristic of this country, but let it be acknowledged that even in these two last lean years we have continued to give out what is computed to be one-fifth of the national income mainly for the working-class, and that, while incomes have contracted, the social commitments of the State have been almost integrally maintained.


Of the £244,000,000 direct benefit to the working-class, is there not a large part of it that is a direct contribution from them?


I was about to proceed to analyse that, because I think the country should have it on record. For years this country has been conscious of its duty towards the poor, and I do not think the manner in which it has met that duty should be misrepresented. I was dealing, first of all, with the destination of the money, and I do not think there can be any dispute as to the fact that the working-class derive the major advantage from the distribution of the national revenue. I agree at once that it is not a sufficient answer to a criticism that we are raising the money inequitably to say that we are spending it beneficently. It may be admitted, as it must be—that the destination of the taxes is in the homes of those who most need the national support. If, however, we are taking the money from those homes merely to give it back to them, we may be furnishing an admirable example of the co-operative spirit, but at the same time we may be failing to adjust the burden of taxation to the capacity to pay.

How then do we adjust the taxation? We are spending £697,000,000 in the current year. We derive some contribution from the Post Office, from Crown Lands, and from other miscellaneous sources, leaving £652,047,000 to be provided from the taxes. To this total, the direct taxpayers contribute £382,900,000, which is almost £60 out of every £100 of the revenue raised, or £3 out of every £5 is contributed by the direct taxpayers. Who are the direct taxpayers? They are not the poorest section of the community. No one who earns an income of less than £2 10s. a week or has an unearned income of less than £2 a week is liable to direct taxation, to Income Tax, at all. There are 8,400,000 persons in the United Kingdom with incomes in excess of these limits; that is to say, there are 8,400,000 persons in the United Kingdom with more than £2 a week, but such is our system of allowances, for marriage, for children, for dependant relatives, that of those 8,400,000 people, we deliver altogether from obligation to tax 4,700,000, leaving only 3,700,000 to bear the whole burden of Income Tax and Surtax in this country.

I listened to the hon. Gentleman, who is a masterly statistician, and who has an eminently moderate way of stating his case which I very much appreciate. Now the hon. Gentleman took the total Income Tax of this country, omitting the Surtax, and he said that because half of the income assessable to tax escapes taxation, therefore the total burden of the tax should be averaged out at half the standard rate, but if, by the generosity of the State, we remit half the people from taxation, the other half bear, not half the taxation, but twice the amount of taxation, and therefore his whole argument tended to prove that, instead of the Income Tax being 5s. on those who bear it, it is really 10s. And he was not far from the mark. Income Tax itself, apart from the allowances, is so graduated that out of the 3,700,000 persons who pay the whole of it, 90,000 only, or, with their families added, less than one per cent. of the population provide £152,000,000, or 60 per cent. of the whole of the Income Tax and Surtax raised.

Hon. Members opposite think that they ought to pay more. They do. Exactly the same section of the community, this one per cent. of the community, provides an additional £64,000,000 in Death Duties. The hon. Member for Caerphilly had some subtle argument on this point, but I can only refer him to the Committee appointed by the Government of 1924 to inquire exactly what did happen. I refer to the report of the Committee on National Debt. They said: The method of treatment of death duties as equivalent to an annual insurance charge is indeed traditional, having been employed in a Paper put before the Select Committee on Income Tax in 1906, and in answer to Parliamentary questions, and having been adopted by Sir Herbert Samuel himself. What greater satisfaction could they want? Of course the death duties are equivalent to an addition to the income tax. But we are talking about this one per cent. of the community, that is to say that section of the community which has more than £2,000 a year, and it provides an additional £64,000,000 a year in death duties, and contributes to what is commonly called direct taxation 65 per cent. So that one section of the community contributes by Income Tax, Surtax and Death Duties 65 per cent. of what is commonly called direct taxation. Hon. Members, and I am not surprised, complain in this Amendment that the distribution of taxation is unequal. Perhaps this one per cent. of the community who pay so overwhelming a proportion of it may think so too although they have no Amendment on the Paper. They would accept at once the canon of the right hon. and gallant Gentleman the Member for Newcastle-under-Lyme who said that to select certain persons, and in particular a small body of persons for special burdens, is outrageous. He was referring to that part of the oil duty which falls on the pottery industry. But I accept that canon of taxation. The hon. Gentleman the Member for Caerphilly, in pursuance of his closely argued speech, thought that they ought to be further mulcted—indeed, it is so stated in the Amendment—on the ground of their capacity to pay. Is that alone to be the criterion?




I am glad to have that assent. The aggregate income of Super-tax payers is £420,000,000, and the State takes from them more than half their incomes. I see that the gross income of co-operative societies is not far short of that figure. The State is asking them to make a contribution of £1,000,000, and it is described in this Amendment as "penal taxation." We are told that it is an argument for remitting taxation from co-operative societies that they have been expanding for years, that they are fulfilling a public need, that they are increasing their turnover and their income. But the income of the Super-tax payers has been falling for years. In the last five years it has fallen from £580,000,000 to £420,000,000, and we are taking well over half of it. It has now reached the lowest level since the War. Hon. Gentlemen tell us that they rely upon these people for contributions to be paid to the working-classes, but let them beware lest they say to the Income Tax payers too audibly, Sic vos non vobis mellificatis apes"— "You bees are making honey, but not for yourselves." So much for direct taxation. I do not think that it can be contended that direct taxation is borne by the working-classes. Indeed, we have it upon the admission of hon. Gentlemen opposite that it ought to be increased because it does not bear upon the working-classes. It is 60 per cent. of the total taxation, and its incidence is not upon the poor. When we come to indirect taxation, it must be remembered in the first place that direct taxpayers pay that too. Indirect taxation may also be said to be graded. On luxuries it is heavier than upon necessities— a principle in which hon. Gentlemen opposite would readily agree. They say that it falls upon the poor. We have remitted £14,000,000 of indirect taxation, and, as a result, the proportion of indirect to direct taxation becomes lower than it otherwise would. What we have done ought to be acclaimed. The hon. Gentleman the Member for Caerphilly says it is not a gift to the working-classes but a gift to the brewers. So that when indirect taxation remains on it is a penalty upon the working-classes, but when it is taken off, it is largesse to their employers. In any event, the allegation that indirect taxation enters into the cost of living cannot apply to import duties on articles that can be made in this country. You do not eat steel girders, you make them. You give employment by that indirect taxation.

That leads me to another significant omission from this Amendment. On the Second Reading it was complained in the Amendment that we had failed to disclose any effective policy for restoring employment. Why has that count been abandoned? Possibly because hon. Members opposite have appreciated that, whatever qualifications may be made in these figures, the general tendency is apparent. The number of insured persons in employment in this country shows an increase of 123,000 on the month, an increase of 372,000 since the end of January, an increase of 306,000 since a year ago and an increase of 319,000 since September,

1931. The number of insured persons recorded as unemployed at the end of May shows a decrease of 108,000 on the month, a decrease of 324,000 since January, a decrease of 201,000 since a year ago, and a decrease of 239,000 since September, 1931. It is too much to hope that in the uncertainties of this world this tendency can continue unchecked, but the fact that the tendency has shown itself reveals, not only the cause of the omission of this charge from the Amendment, but the demonstrable fact that the recuperative powers of this country have been conserved and fostered by the National Government, and that we are ready to take advantage of any expansion that may occur.

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

The House divided: Ayes, 290; Noes, 42.

Division No. 239.] AYES. [3.54 p.m.
Acland-Troyte, Lieut.-Colonel Campbell-Johnston, Malcolm Ford, Sir Patrick J.
Adams, Samuel Vyvyan T. (Leeds, W.) Cassels, James Dale Fox, Sir Gifford
Agnew, Lieut.-Com. P. G. Castlereagh, Viscount Fraser, Captain Ian
Ainsworth, Lieut.-Colonel Charles Castle Stewart, Earl Fremantle, Sir Francis
Aitchison, Rt. Hon. Cralgie M. Cautley, Sir Henry S. Fuller, Captain A. G.
Albery, Irving James Cazalet, Thelma (Islington, E.) Galbraith, James Francis Wallace
Alexander, Sir William Cazalet, Capt. V. A. (Chippenham) Ganzoni, Sir John
Allen, Sir J. Sandeman (Liverp'l, w.) Chamberlain, Rt. Hon. N. (Edgbaston) Gault, Lieut.-Col. A. Hamilton
Anstruther-Gray, W. J. Choriton, Alan Ernest Leofric Gilmour, Lt.-Col. Rt. Hon. Sir John
Applin, Lieut.-Col. Reginald V. K. Clayton, Sir Christopher Gluckstein, Louis Halle
Apsley, Lord Cobb, Sir Cyril Goff, Sir Park
Astor, Maj. Hn. John J. (Kent, Dover) Colfox, Major William Philip Goodman, Colonel Albert W.
Atholl, Duchess of Colman, N. C. D. Grattan-Doyle, Sir Nicholas
Balfour, Capt. Harold (I. of Thanet) Colville, Lieut.-Colonel J. Graves, Marjorie
Balniel, Lord Conant, R. J. E. Greaves-Lord, Sir Walter
Banks, Sir Reginald Mitchell Cooke, Douglas Greene, William P. C.
Barclay-Harvey, C. M. Courthope, Colonel Sir George L. Gretton, Colonel Rt. Hon. John
Beauchamp, Sir Brograve Campbell Cranborne, Viscount Grigg, Sir Edward
Beaumont, Hon, R.E.B. (Portsm'th, C.) Croft, Brigadier-General Sir H. Grimston, R. V.
Belt, Sir Alfred L. Crookshank, Col. C. de Windt (Bootle) Guest, Capt. Rt. Hon. F. E.
Benn, Sir Arthur Shirley Cross, R. H. Guinness, Thomas L. E. B.
Bennett, Capt. Sir Ernest Nathaniel Cruddas, Lieut.-Colonel Bernard Gunston, Captain D. W.
Bernays, Robert Dalkeith, Earl of Guy, J. C. Morrison
Betterton, Rt. Hon. Sir Henry B. Davidson, Rt. Hon. J. C. C. Hacking, Rt. Hon. Douglas H.
Birchall, Major Sir John Dearman Davies, Maj. Geo. F.(Somerset, Yeovil) Hall, Capt. W. D'Arcy (Brecon)
Bird, Ernest Roy (Yorks., Skipton) Davison, Sir William Henry Hamilton, Sir R. W.(Orkney & Zetl'nd)
Boothby, Robert John Graham Denman, Hon. R. D. Hammersley, Samuel S.
Borodale, Viscount Denville, Alfred Hanbury, Cecil
Bossom, A. C. Despencer-Robertson, Major J. A. F. Hanley, Dennis A.
Boulton, W. W. Dixon, Rt. Hon. Herbert Hannon, Patrick Joseph Henry
Bowater, Col. Sir T. Vanslttart Donner, P. W. Hartington, Marques of
Bowyer, Capt, Sir George E. W. Doran, Edward Hartland, George A.
Bracken, Brendan Dower, Captain A. V. G. Harvey, George (Lambeth, Kenningt'n)
Braithwaite, J. G. (Hillsborough) Drewe, Cedric Headlam, Lieut.-Col. Cuthbert M.
Brass, Captain Sir William Duckworth, George A. V. Henderson, Sir Vivian L. (Chelmsford)
Broadbent, Colonel John Duggan, Hubert John Heneage, Lieut.-Colonel Arthur P.
Brocklebank, C. E. R. Edmondson, Major A. J. Herbert, Capt. S. (Abbey Division)
Brown, Ernest (Leith) Elmley, Viscount Hills, Major Rt. Hon. John Waller
Brown, Brig.-Gen, H.C. (Berks., Newb'y) Emmott, Charles E. G. C. Hope, Capt. Hon. A. O. J. (Aston)
Buchan-Hepburn, P. G. T. Emrys-Evans, P V. Hope, Sydney (Chester, Stalybridge)
Bullock, Captain Malcolm Entwistie, Cyril Fullard Hore-Bellsha, Leslie
Burghley, Lord Erskine, Lord (Weston-super-Mare) Hornby, Frank
Burnett, John George Essenhigh, Reginald Clare Horobin, Ian M.
Butler, Richard Austen Evant, Capt. Arthur (Cardiff, S.) Howitt, Dr. Alfred B.
Cadogan, Hon. Edward Fermoy, Lord Hudson, Capt, A. U. M. (Hackney, N.)
Campbell, Sir Edward Taswell (Brmly) Foot, Dingle (Dundee) Hudson, Robert Spear (Southport)
Hume, Sir George Hopwood Molson, A, Hugh Elsdale Simmonds, Oliver Edwin
Hunter, Dr. Joseph (Dumfries) Monsell, Rt. Hon. Sir B. Eyres Sinclair, Col. T. (Queen's Unv., Belfast,
Hunter-Weston, Lt.-Gen. Sir Aylmer Moore, Lt.-Col. Thomas C. R. (Ayr) Slater, John
Hurd, Sir Percy Moore-Brabazon, Lieut.-Col. J. T. C. Smith, Bracewell (Dulwich)
Hunt, Sir Gerald B. Morgan, Robert H. Smith, R. W. (Ab'rd'n & Kinc'dine, C.)
Hutchison, W. D. (Essex, Romford) Morris-Jones, Dr. J. H. (Denbigh) Smith-Carington, Neville W.
Inskip, Rt. Hon. Sir Thomas W. H. Munro, Patrick Somervell, Donald Bradley
Jackson, Sir Henry (Wandsworth, C.) Murray-Philipson, Hylton Ralph Sotheron-Estcourt, Captain T. E.
James, Wing-Com, A. W. H. Nation, Brigadier-General J. J. H. Spears, Brigadier-General Edward L.
Jesson, Major Thomas E. Newton, Sir Douglas George C. Spender-Clay, Rt. Hon. Herbert H.
Joel, Dudley J. Barnato Nicholson, Godfrey (Morpeth) Stanley, Lord (Lancaster, Fyide)
Johnstone, Harcourt (S. Shields) Normand, Wilfrid Guild Stanley, Hon. O. F. G. (Westmorland)
Ker, J. Campbell O'Neill, Rt. Hon. Sir Hugh Steel-Maitland, Rt. Hon. Sir Arthur
Kerr, Lieut.-Col. Charles (Montrose) Patrick, Colin M. Stewart, William J. (Belfast, S.)
Kerr, Hamilton W. Peat, Charles U. Storey, Samuel
Kimball, Lawrence Penny, Sir George Stourton, Hon. John J.
Knight, Holford Peto, Sir Basil E. (Devon, Barnstaple) Stuart, Lord C. Crichton-
Lamb, Sir Joseph Qulnton Peto, Geoffrey K. (W'verh'pt'n, Bllst'n) Sugden, Sir Wilfrid Hart
Latham, Sir Herbert Paul Pickford, Hon. Mary Ada Summersby, Charles H.
Leckie, J. A. Potter, John Sutcliffe, Harold
Lees-Jones, John Powell, Lieut.-Col. Evelyn G. H. Tate, Mavis Constance
Leigh, Sir John Power, Sir John Cecil Thomas, Rt. Hon. J. H. (Derby)
Leighton, Major B. E. P. Pownall, Sir Assheton Thomson, Sir Frederick Charles
Llewellin, Major John J. Procter, Major Henry Adam Thorp, Linton Theodore
Lloyd, Geoffrey Raikes, Henry V. A. M. Todd, A. L. S. (Kingswinford)
Locker-Lampson, Rt. Hn.G. (Wd, Gr'n) Ramsay, Capt. A. H. M. (Midlothian) Touche, Gordon Cosmo
Loder, Captain J. de Vere Ramsay, T. B. W. (Western Isles) Turton, Robert Hugh
Lyons, Abraham Montagu Ramsbotham, Herwald Vaughan-Morgan, Sir Kenyon
Mabane, William Ramsden, Sir Eugene Wallace, Captain D. E. (Hornsey)
MacAndrew, Lieut.-Col. C. G. (Partick) Rankin, Robert Wallace, John (Dunfermline)
MacAndrew, Capt. J. O. (Ayr) Ratcliffe, Arthur Ward, Lt.-Col. Sir A. L. (Hull)
McConnell, Sir Joseph Ray, Sir William Ward, Irene Mary Bewick (Wallsend)
McCorquodale, M. S. Rea, Walter Russell Ward, Sarah Adelaide (Cannock)
Macdonald, Capt. P. D. (I. of W.) Reid, David D, (County Down) Wardlaw-Milne, Sir John S.
McKie, John Hamilton Reid, William Allan (Derby) Warrender, Sir Victor A. G.
Maclay, Hon. Joseph Paton Remer, John R. Watt, Captain George Steven H.
McLean, Dr. W. H. (Tradeston) Rhys, Hon. Charles Arthur U. Wedderburn, Henry James Scrymgeour.
Macmillan, Maurice Harold Robinson, John Roland Whyte, Jardine Bell
Magnay, Thomas Ropner, Colonel L. Williams, Charles (Devon, Torquay)
Maitland, Adam Rosbotham, Sir Thomas Williams, Herbert G. (Croydon, S.)
Makins, Brigadier-General Ernest Ross, Ronald D. Wills, Wilfrid D.
Mallaileu, Edward Lancelot Ross Taylor, Walter (Woadbrldge) Wilson, G. H. A. (Cambridge U.)
Manningham-Buller, Lt.-Col. Sir M. Runge, Norah Cecil Winterton, Rt. Hon. Earl
Margesson, Capt. Rt. Hon. H. D. R. Russell, Alexander West (Tynemouth) Withers, Sir John James
Marsden, Commander Arthur Russell,Hamer Field (Sheffield, B'tslde) Wolmer, Rt. Hon. Viscount
Martin, Thomas B. Rutherford, John (Edmonton) Womersley, Walter James
Mason, Col. Glyn K. (Croydon, N.) Rutherford, Sir John Hugo (Liverp'l) Wood, Sir Murdoch McKenzle (Banff)
Mayhew, Lieut-Colonel John Salmon, Sir Isldore Worthington, Dr. John V.
Merriman, Sir F. Boyd Samuel, Sir Arthur Michael (F'nham)
Mills, Sir Frederick (Leyton, E.) Sandeman, Sir A. N. Stewart TELLERS FOR THE AYES.
Mills, Major J. D. (New Forest) Shaw, Captain William T. (Forfar) Mr. Blindell and Commander
Mitchell, Sir W. Lane (Streatham) Shute, Colonel J. J. Southby.
Adams, D. M. (Poplar, South) Grenfell, David Rees (Glamorgan) Maxton, James.
Attlee, Clement Richard Groves, Thomas E. Parkinson, John Allen
Banfield, John William Grundy, Thomas W. Price, Gabsel
Batey, Joseph Hall, George H. (Merthyr Tydil) Rathbone, Eleanor
Bevan, Aneurin (Ebbw Vale) Hirst, George Henry Salter, Dr. Alfred
Brown, C. W. E. (Notts., Mansfield) Jenkins, Sir William Smith, Tom (Normanton)
Cocks, Frederick Seymour Jones, Morgan (Caerphilly) Thorne, William James
Cove, William G. Kirkwood, David Tinker, John Joseph
Daggar, George Lansbury, Rt. Hon. George Wallhead, Richard C.
Davles, David L. (Pontypridd) Lawson, John James Williams, Edward John (Ogmore)
Davies, Rhys John (Westhoughton) Leonard, William Williams, Dr. John H. (Llanelly)
Dobbie, William Lunn, William Williams, Thomas (York, Don Valley)
Edwards, Charles McEntee, Valentine L.
George, Major G. Lloyd (Pembroke) McGovern, John TELLERS FOR THE NOES.
George, Megan A. Lloyd (Anglesea) Mason, David M. (Edinburgh, E.) Mr. John and Mr. G. Macdonald.

Bill read the Third time, and passed.

The remaining Orders were read, and postponed.

Whereupon Mr. SPEAKER adjourned the House, without Question put, pursuant to Standing Order No. 3.

Adjourned at Four Minutes after Four o'Clock until Monday next, 26th June.