HC Deb 01 March 1933 vol 275 cc383-447

3.35 p.m.


I beg to move: That this House views with anxiety the existing high level of taxation and diminishing revenues in this country, believes that this creates an intolerable burden on industry, and urges His Majesty's Government to consider means by which this burden may be lessened at the earliest possible moment. It is in no mere spirit of carping criticism that I venture to draw attention to the matters mentioned in the Motion. I know how easy it is to air views and to level criticism on such a wide and absorbing subject, and how often the difficulties and the responsibilities of the Chancellor of the Exchequer are forgotten. A year or even six months ago, I should not have felt justified in making this Motion, but the position has materially altered, and now warrants consideration and examination, perhaps from a wider and different angle. The quickly changing circumstances of to-day do not leave very much room for the strictly orthodox. If we are to approach the present-day position with any hope of success, we have to do so with a wide outlook and an elasticity of mind to which we have hitherto been unaccustomed.

To the credit of the Government, three important things have taken place in our national life during the year, which have weighed with me in drawing attention to this question. The first is that financial stability has been restored and the conspicuous ability with which our finances have been handled by the Chancellor of the Exchequer has placed the credit of this country at a higher level than it has enjoyed for a very long time. The second factor is the reversal of our fiscal system, and the third is the Ottawa Agreements. These three factors have made for general stability. They have given us tremendous power, and solid ground as a jumping-off point for using that stability for constructive purposes. The limits of taxation have been reached and passed, as is shown by the declining Revenue and unemployment is at a terribly high figure, and, although the industrial outlook is brighter and there are definite indications of recovery, it is no use blinding our eyes to the fact that confidence is still lacking—the want of inducement to take business risks.

It has been pointed out that large sums of money are lying at the banks waiting for investment and for industrial development. That is true, but that money constitutes the working capital of the country. What is to bring it into active use? Money, like everything else, requires an inducement for use. It has to be given a fair opportunity to make a fair return for reasonable business risk. It is beyond doubt that the heavy burden that is being placed upon our people and upon industry, especially in high rates and taxes, is one of the main factors, if not the main factor, that is stifling industry. It is an obstacle to creating the inducement to release that great volume of working capital, which is the lifeblood of industry. It is hardly necessary for me to remind the House of the distressing effects that high taxation is having on the many thousands of small investors who are living upon their hard-earned savings, and have barely enough to keep a home together, but who are bearing their hardships so quietly; but it is more particularly from the industrial point of view and from the point of view of the effects on unemployment that I want to draw attention to this matter to-day.

This country is taxed about one-third higher than the next highest taxed nation in the world. What does that mean to the competitive power of industry in the markets of the world? In reply to a question in this House as to what it would cost the Exchequer if all company reserves were released from Income Tax, it was stated that in a normal year, at the standard rate of 5s. in the £, it would cost the Exchequer £60,000,000 a year. Think what that means. With £60,000,000 in cash, you could command £600,000,000 of credit. That is some indication of what industry is up against. When we realise the conditions under which our industries are working, and particularly the basic industries upon which we rely and upon which we shall have to depend for our future existence, and the struggle that they are engaged in against world barriers, I would ask the House, can we afford to continue to allow the risk which industry in compelled to take at the present high level of taxation, or is it better to shift the risk and lighten some of the burdens that it now carries?

It is with the broader and more general effects of taxation that I am particularly concerned, but, if the House will bear with me for a few minutes, I would like to give one instance, even at the risk of covering ground which may have been fully covered previously but which I believe is typical of the manner in which excessive taxation is affecting trade, and, consequently, revenue returns. It has been the tradition of our Chancellors, up to quite recent times at any rate, to see that the distribution of taxation should be as fair and just as was possible. Can we claim that for the brewing and allied trades. So long as we are allowed to eat and drink, of course in moderation, what we wish, these trades have a right to receive as fair treatment as any other trades. I do not wish to bore the House with figures, but I should like to give one or two in support of my contention. I do not propose to give many, because they have been so recently published in connection with the deputation which visited the Chancellor of the Exchequer. I would remind the House that in 1914 the Beer Duty was 7s. 9d. per standard barrel, and in 1932 it was 114s. 8d. In 1914, the net standard barrelage was 35,178,000. It fell in 1932 to 15,576,000. The Chancellor of the Exchequer, speaking in this House on the 21st April, 1932, said: I see in beer one of the great sources of revenue to the State, which has been for some considerable time declining, and which suffered a severe acceleration of that process by reason of the increase in the duty last September. I do not wish to see such a source of revenue permanently undermined."—OFFICIAL REPORT, 21st April, 1932; col. 1762, Vol. 264.] Let us see how this increased duty has affected the revenue of this country. In 1931, when the duty was 103s., the Chancellor collected from it, including Customs, £75,700,000. The estimate for the year ending April, 1933, the first full year of the increased duty of 114s. was £80,000,000. I am advised on very reliable authority that it is thought that the Chancellor will collect for the year —and this figure includes only two months for which the yield is estimated—£73,602,000. That shows a loss of £2,000,000 as compared with the amount that he collected in 1931, when the duty was 103s., and is down by £6,000,000 on the estimate of 1932. At the present rate of loss, what is the year 1933–34 going to show? If it were a question of a decrease of £6,000,000 only, it might, perhaps, not be so perturbing, but how much additional loss is my right hon. Friend going to suffer in Income Tax and Surtax, on farmers' profits—if there are any—on maltsters' profits, which have fallen by 77 per cent., and on the profits of allied trades, in Death Duties on lower values, and in Schedule A licence duties in respect of public houses and buildings. Moreover, what is he losing in unemployment payments Taken together, these losses must represent a very large total.

It is difficult to estimate the number of those who have been thrown out of employment, but I think a very reliable indication is given by the wages bill, which shows a fall of 10 per cent. in the actual wages paid on the manufacturing side of the brewing industry, not including the allied trades. If we take all these into account, it must represent a very serious number of persons who are unemployed. I do not wish to labour the point further, for these figures speak only too clearly for themselves. I have only selected this trade because it has always been the most fruitful source of revenue. I hold no special brief for the brewing trade, but I do for justice. I think that the Chancellor of the Exchequer has the sympathy of the large majority of Members of this House, for he inherited this legacy from his predecessor, but I sometimes wonder what Lord Snowden's thoughts must be when he reflects on one of the greatest Budget miscalculation that, I suppose, has ever been made. He may, of course, have had other motives; I do not know; but I am always inclined to think, much as I sympathise with the temperance reformer, that he usually destroys his own case by being too intolerant.

What of the future? How are we going to replace these diminishing revenues? The present high level of taxation is ceasing to perform its natural function. What is going to be done? Unfortunately, my right hon. Friend who is going to reply will not tell me. But this April is the crucial time, and will decide and set the seal on what we can hope to achieve in the lifetime of this Parliament. It is the situation that I have outlined that brings me to the definite conclusion that, however heterodox it may appear at the moment, my right hon. Friend might deflect the course of the financial ship a little with a view to escaping still fouler weather. The Government favours a long-term policy. I have no quarrel with that, but why not apply that policy when reviewing the whole field of taxation? The balancing of the Budget requires no stressing, but I suggest that the Government might take a three years' view of taxation. I may be thought bold, but I suggest that they might reduce the Income Tax by, say, is. 6d. in the £. I believe it would have an immediate and beneficial effect, but close observation of the result of that relief for a few months would quickly gauge the effect. Suppose we were down by £50,000,000 or £60,000,000, and a lesser amount in the second year, that surely need not perturb us. You still have ways and means to correct that.

If my calculations are correct—and I do not think they are very far out—there will this year be added some £40,000,000 to the National Debt. Who can doubt that it would have been fatal if the Chancellor had produced a Supplementary Budget to meet the prospective deficit by imposing taxation? Cannot we apply the same method and precedent in the event of there being a deficit in the first or second year? But the third year I believe you would get a rich reward. Although the conditions are different, I do not see why history should not repeat itself. I am not alone in that belief, for there are many men with far greater experience than I have, better qualified to speak than I am, and whose views are worthy of consideration, who hold the belief that I am expressing. I believe that the bold treatment of the disease of taxation by such means as I have suggested would do more to restore confidence and put heart into our people and into enterprise than anything else. The patient requires a changed treatment. I do not think there will be very much disagreement with that. Our Chancellors up to late years have kept the patient in splints, and have bound them ever tighter as each April came round. The circulation of the patient's blood has been somewhat overlooked.. Relax the taxation bandages and strip some of them off, and see how the improved circulation of the blood will go far to invigorate the whole body politic. Increased purchasing power in the hands of the people will create demand, which will be reflected in every trade, and in our export trade, and will remove the greatest obstacle to greater employment.

It will be said, of course, that it is easy enough to suggest a reduction of taxation, but how can it be met, and what of the risk? The risk of the reduction of taxation is incomparably less than that of maintaining it at its present high level and maintaining 3,000,000 people in enforced idleness at a cost of £130,000,000 a year. At any rate, in present conditions I contend that at least it would be a sound and legitimate risk which the Government would be justified in taking and would be well advised to take. Such a risk is lightened by our restored stability, good credit and the increased power that we have in our hands from our tariff policy and the Ottawa Agreements, which have given us an entirely new outlook. We have also had the great Conversion Loans carried through with dexterous management and truly worthy of this country's financial reputation. That has given us some £30,000,000. There are two sources which my right hon. Friend might call to his aid to meet any problematical risk. If we have to borrow for the Sinking Fund, I would waive the Sinking Fund and reduce taxation. A real surplus is simply a surplus of revenue over expenditure. If there is no surplus, what is the use of borrowing to replace one form of debt for another? I, therefore, say suspend the Sinking Fund if necessary until better days. I will not trouble the House by quoting precedent or authority but I cannot do better than recall a letter recently written to the "Times" by my right hon. Friend the Member for Hill-head (Sir R. Horne) which, no doubt, will still be fresh in many of our minds.

But the most fruitful source from which my right hon. Friend can draw, and one that I particularly wish to stress, is the reduction of unnecessary and wasteful expenditure. Ever since the War, Governments and local authorities have spent on a colossal scale, and much of this has been expenditure of an unproductive nature which should properly be de- ferred to a time of greater prosperity. In a word, we must cut our coat according to our cloth and the fact, that we have not carried out that practice is I think the cause of much of our difficulties in taxation. We are advised to spend wisely, and I entirely agree, but let us see to it that we discontinue and cut out now all expenditure which has been found to be unproductive. There can be little doubt by anyone who has taken the trouble to study the expenditure on some of our services that for much of it we are getting insufficient value. It is wise and intelligent retrenchment that I advocate and not simply shifting the burden from one section and harming another.

Since I put this Motion down I have been inundated with correspondence and suggestions from all parts of the country. I shudder to think what my right hon. Friend's postbag must be, but I do want to remind him, in case he should have overlooked them, of the official and unofficial economy reports. The conclusions and recommendations of those reports resemble each other in a, very marked degree. I had myself the privilege of serving, as a very humble Member, on the latter Committee. It has never been suggested that any individual Member could be expected to agree with all the recommendations made in that report, but I do say that those reports should be a guide and a value in showing the road to very substantial savings, and it will be interesting in due course to learn how far our labours have been appreciated.

The right hon. Gentleman the Member for Darwen (Sir H. Samuel), if I understood him correctly, has given us to u_nderstand that the objects for which His Majesty's Government were returned to power may be said to have been achieved. submit that the first object may be said to have been achieved, but the second, and no less important, has yet to be faced. Retrenchment falls within that category, and is not the least urgent, as we have been sharply reminded by the very disagreeable shock we have had in the publication of the Civil Estimates. I refuse to believe that the Civil Estimates, as issued, are the last word of the Government in the matter of national economy. It would be contrary to everything that my right hon. Friend has told us, that is, that the limits of economy have not yet been reached. But it shows how vitally necessary the question of retrenchment is, and I am sure the right hon. Gentleman the Member for Darwen would not think me offensive or impertinent if I were to say that the attitude of himself and his followers has puzzled me a good deal, as, indeed, it does puzzle a very large number of their former supporters in the country, for, after spending a long summer's day with our Nationals, now in the wintry weather they are experiencing they appear to be finding an excuse for contemplating seeking warmer quarters. I say with all sincerity, is not their spiritual home standing side by side with the Government in pressing forward and supporting their own well-established principle and as a barrier against the peril as represented by hon. and right hon. Gentlemen opposite? I feel sure that I shall have the support of the right hon. Gentleman and his followers for this Motion, for, after all, it embraces one of the oldest and most cherished Liberal principles—retrenchment and reform.

I wonder if it is any use my appealing to those who sit on the opposite benches? [An HON. MEMBER: "Not an earthly."] I would, however, like to remind them, if I may be allowed to repeat what I ventured to say in this House when speaking some short time ago, that the question of Income Tax is not a class question. It is an industrial question, for every point of taxation imposed adversely affects, either directly or indirectly, the very poorest. Our social services are founded on a sound and prosperous industry. Destroy the foundation, and what becomes of your social services? Surely this question is worthy of their reconsideration, if for no other reason than in the interest of that great mass of unemployed persons who are expecting and waiting, not without hope, for some relief from their distress. It is with that object in view, and with that in view primarily, that I have ventured to move this Motion.

I must apologise to the House for having detained it longer than I intended, because I know there are many Members who wish to speak. In conclusion, I would say that to-day we have got to view these problems with a broad mind, with common sense and courage, boldness with prudence, the nation expects. Timidity it will not tolerate. What I have ventured to advocate I can assure my right hon. Friend is in no lighthearted spirit, but from deep conviction, and it is with all humility that I do submit and stress that the time has now come when the Government should seriously consider the reversal of its taxation policy. I can well imagine and appreciate what such a change must mean to anyone who is responsible for the nation's finances, but I, for one, trust and believe, and I am sure that my right hon. Friend will face this issue with his accustomed, traditional family courage.

4.8 p.m.


I beg to second the Motion.

I congratulate my hon. Friend the Member for Central Sheffield (Mr. Boulton) on having secured first place in the Ballot, and I may tell him that there are a large number of Members who have spent a good many years in this House who have never been so fortunate. I also congratulate him on his perspicacity and judgment in bringing forward a Motion so timely and important when the House is pressed on all sides and from all parts of the country to take its courage in both hands, to reduce taxation and at the same time to incur a good deal of new expenditure. It is one of the difficulties of a discussion of this sort that one is apt to be accused, perhaps naturally, of putting forward contradictory ideas in one speech. I am quite certain that what I have to say this afternoon will certainly lay me open to a charge of that kind, but I think that the extraordinary conditions which we are passing through at the present time justify any departure from precedent in these matters, and, in fact, our difficulties cannot be got over so far as the remedies are under our control here at home, except by both expenditure and economy.

I well remember, and many other hon. Members will also recollect, the speech of the Chancellor of the Exchequer when he introduced his Budget about a year ago. At that time he said that the path of financial stability was hard and stony, and the road long and weary, and he added that the whole country was crying out for relief from taxation. At that time my right hon. Friend the Chancellor of the Exchequer, perhaps naturally, did not feel able to give that relief for which the country was crying so bitterly. I do not quarrel with that, but I think it is clear that what may not have been possible a year ago may certainly be possible to-day. The position is not whether you can produce a complete and an accurate balance sheet which will enable you to reduce taxation. These are not the conditions under which this country to-day can look at this matter. It is not a. question only of justice. Everyone will agree that the taxpayer, to whose self-sacrifice eloquent tributes were paid a year ago, is well deserving of relief, but it is not only a question of justice, it is a question purely of economic accountancy. In our own interests, we cannot go on without industry being relieved of the burden of taxation which is bearing upon it. It is a, truism, but it possibly bears continual repetition, that not only, as my hon. Friend has said, does all taxation come out of industry, but that everything we have, every emolument, every salary, whatever our occupation, primarily comes out of productive industry, and unless we can keep that industry prosperous and enable it to expand, there is no other economic subject that is worth discussion in the country, because on that all depends.

Therefore, if we are to spread the immense burden which this country is bearing over larger tracts of the production area, it can only be done by making industry prosperous. For that reason alone, quite apart from any question of justice, it is to our interest to see what relief will give an impetus to enterprise and will put new life into existing industry. I think there are three causes which prevent that expansion of industry which we all want to see. The first of these is concerned with conditions all over the world. Industry, above all other things, wants industrial world peace, which means political peace. It wants, if possible, to be assured that the ordinary political conditions of the world are not likely to be violently upset, as, unfortunately, there is every sign they are going to be, in the East at any rate, at the present moment. In that regard the Government can do no more than it is doing at the present time. It means international agreement and international negotiation. It means sup- port for the objects of the League of Nations whether the League gives all the result we would all like to see at once or not. I do not suggest that the Government can do more in that direction than it is doing to-day, but international agreements in regard to War Debts and other matters are fundamental.

The second cause is the uncertainty of our own financial policy. In that connection I venture to say that there is a great deal we can do, and, much as I admire what has been done by the National Government, in many directions, it is, to my mind, the one direction in which they have not advanced as they might have done. I have great hopes of my right hon. Friend the Chancellor of the Exchequer, whose recent speeches in the country together with the answer that was given in the Chamber this afternoon, show quite clearly that he, at any rate, is convinced that there can be no return to the Gold Standard until the conditions which made such a standard possible in the past are reestablished in the world.

I wish I could feel quite certain that those who have the daily management of our currency matters were as convinced of that as is the Chancellor of the Exchequer. I am afraid that there is still grave doubt about the views still held by those who are responsible for the timid and vacillating policy in currency matters imposed upon us immediately after we were forced off gold. That policy, apparently, was based upon the idea that there would be some violent upheaval and that the people of this country would rush away from their own money, and as a consequence the policy of an unnecessarily high bank rate was followed for months. I do not want to labour that fact—it has passed—but I hope that those who are responsible for our currency policy to-day are as convinced as the Chancellor of the Exchequer evidently is, judging from his recent speeches, that there is no chance whatever of the return of this country to any Gold Standard until the conditions which make that standard possible can again be set up. Fortunately, to back up any opinion that may be expressed in this House, we have now the views of the experts of the nations and of those responsible for drawing up the Agenda of the World Economic Conference. If anybody has any doubt as to the certainty that you cannot return to gold in the near future he has only to read the conditions which they set out as being fundamental before any such restoration can take place.

I do not know whether these matters will be discussed at the World Economic Conference or not. I fear very much, in spite of the conditions laid down, efforts will be made to try and drag this country back to gold before those conditions are fulfilled. We were forced off gold with great and unnecessary expense to the taxpayer when we should have gone off ourselves months before. Leaving that aside, I would say that in this second difficulty—the question of our financial policy—I desire to congratulate the Government upon what they have done, and particularly upon the working of the Exchange Equalisation Account, which, I think, has been of immense benefit to trade in this country. The whole country has benefited since we went on to sterling and our trade has expanded directly as a cause of it. The Government, however, should make clearer than they have done up to now what their financial policy in future is to be, and how they propose and intend to raise wholesale prices. It is the goal to which they have referred over and over again, and quite rightly, as being the principal aim they have in view, in keeping with the rest of the world, but I think they should make it plainer than they have so far done how they propose to set 'about it, and, above all things, they should make it clear that we intend to stick to sterling and that sterling is to be our money as far ahead as we can see at the present time. Since that period to which I have referred—the period of weakness in policy on the part of the Bank of England and the Treasury—I think you have to combine them—we have had a period of cheap money.

One extraordinary thing is to be found in the speeches of many of the great bankers in this country. I think that it is only right to put these things quite plainly. At the annual meetings of some of these banks I read that it is a matter for congratulation that the balances on deposit in the great banks have gone up £200,000,000, and, presumably, equally a matter of congratulation that the advances to industry and trade have gone down £130,000,000. It is not a matter for congratulation at all. To stand at a table and express satisfaction that the deposits in the banks have grown and to refer to that as being a sign of prosperity appears to me to be only possible on the part of those who have never had anything to do with trade or industry at all. Cheap money has been offered. The reason why the trader does not take that cheap money, and will not accept it, is, first of all, the difficulty of the international situation and the uncertainty in that connection; secondly, owing to the want of a quite definite statement regarding financial and Government policy; and thirdly, because he is absolutely tired of having the Government as a 25 per cent. partner in his industry, taking that share, or a larger one, of his profits but bearing no share of his losses. We are told constantly by Government speakers, bankers, economists and all kinds of people that we are suffering from a lack of confidence. It is true, but the lack of confidence is not something you cannot explain or understand. It is not a psychological phenomenon. It is not something which is going to come right by itself. It is something which we can do a great deal to ensure that it will pass away without very much delay. We can do that, as I have said, in three ways.

I may be told that I have not suggested any definite way in which the Government can set about raising prices. It is hardly usual to expect private Members in this House to put forward definite proposals, but I intend doing so to-day, although I am perfectly well aware that they will not meet with universal acceptance. I say quite frankly, having declared that sterling is not a makeshift but is going to be our money for a long time to come, and making the best progress we can in the settlement of international affairs, such as War Debts and the like, our definite aim should be to consolidate within the Sterling Union, and particularly within the Empire, the exchange rates of the countries concerned on as close a basis as possible. The whole world, and particularly the Sterling Union, is waiting for a lead in this matter. It can be done, and the World Conference should then devote itself to fixing as closely as practicable the basis of exchange between the sterling and gold countries.


On a point of Order. I do not want to spoil the speech of the hon. Member. It is very interesting, but it seems to be very remote from the Motion, and there will be no opportunity on the part of hon. Members to reply to arguments from which they dissent.


I do not, as a rule, like to interfere with Debates on a private Member's day, but I was just reading the Motion when my attention was called to it. I am bound to say that I do not think that the speech of the hon. Member has anything to do with it.


May I draw your attention to the fact, Mr. Speaker, that I am endeavouring to explain the measures which, in my view, will enable the Government to reduce the burden of taxation. May I further point out that the Motion distinctly urges the Government to consider means by which this burden may be lessened. I venture to suggest to you, Sir, that it is useless making statements merely declaring that a reduction in the burden upon industry is essential. Everybody knows that.


If the hon. Member leads up to it, it will be all right, but he is taking a long time in doing it.


I think that the hon. Member for South Croydon (Mr. H. Williams) should permit me—and I have not taken very long—to develop my argument in my own way, nor do I ask the House for its indulgence as often as he does. I get back, perhaps in a roundabout way from his particular view of the subject, to the means by which this burden may be lightened. I was saying that there are these three causes which directly bear upon the difficulties of carrying on prosperous industry and make it essential that that burden of taxation should be reduced. I have laid stress upon the financial action which the Government should take, because I do not think that you will get any expansion in industry until the points with which I have dealt are dealt with and until traders have some security as to the future in that regard. If anyone suggests any form of reflation in this country we immediately hear talk of the dangers of inflation. We hear that everywhere when any body suggests that prices should be raised by monetary action. It is true, however, that while retail prices have only dropped half-way clown the hill, wholesale prices have dropped to the bottom. Therefore, before any rise should take place in the level of retail prices there is a long way up the hill for wholesale prices to go.

I should have liked to have dealt further with these matters if the occasion had been appropriate, but in view of the anxiety of my hon. Friend to speak on the burden of taxation, he will perhaps allow me to do something which I would rather not have done, and that is, to give him some little idea of what that burden is and of the difficulties with which industry is faced. On the figures which were ascertained for 1913 it was estimated that the total wealth in this country amounted to something like £16,000,000,000 on the gold basis figure of that date. To-day gold prices are very much the same as they were in 1913, a little lower, and consequently probably that figure is not very far out to-day. Just think of the position of the industrialists in this country if that is our total wealth and the country, that is productive industry, is bearing a burden of mortgage debt equal to 50 per cent. almost of its total wealth. There is no other country in the world bearing such a load. Our total National Debt is greater than that of the United States, France and Belgium put together. It is true that if the conditions under which we were working previous to the War had continued it might even have been possible for this country to bear that debt load, but it is certainly one to-day which makes it almost impossible for industry to prosper.

If we are, therefore, in the position that it is impossible for any Government to reduce its taxation, industry must be very prosperous to carry it. That prosperity could be assisted by inflation which I definitely and clearly recommend. I believe that the country has suffered far more than is fully realised from a long period of deflation and that it is high time we reversed the process. We are told that inflation does not help industry at all. It would raise wholesale prices and by so doing would benefit, not only this country, but the whole world. It is so very easy to talk of the dangers of inflation but that talk has been overdone.

The second way is by economy. Like my hon. Friend I recommend to the Government the official and unofficial reports on possible economies. Those economies, however, cannot immediately meet the situation, and I believe that you could make certain economies by further expenditure in the right direction. Economies are badly needed where we are wasting money. That is the real economy. But there are certain economies which you can make by spending money. For example, you have the case of unemployment pay alone—the enormous payment of £100,000,000 a year for the benefit of those who are unemployed. Anything which could be done to employ them would mean at once that you were making economies by 'spending money.

I want to give to the House something which, at first sight, hon. Members may-say is entirely fantastic, but I will give it to them as an instance of what is in my mind. Why do we not scrap the Navy altogether, and rebuild it, of course within the limits of the most recent agreements with other nations Why not scrap the Navy? All your battleships are 16 or more years old. They will be out of date any way, if they are not so already, before you can replace them. Scrap the Navy gradually and replace these ships by up-to-date vessels, even by a smaller number if you like. You would spend less on upkeep and it would give employment, not only in building, but throughout the heavy trades of this country. It is not so fantastic as it seems at a first glace. I am not suggesting that it should be done out of current revenue, but I do suggest that a loan of a hundred millions for that purpose would enable the Government to save a very large amount of money in other ways. We have two or three capital ships only which are less than 16 years old. I do not pretend to be an export on the Navy, but one does not need to be an expert to know that your battleships which are 16 years old and your cruisers which are 10 years old are getting out of date, and it is doubtful whether it is good economy to go on paying money for the upkeep of vessels so nearly obsolete. It is better to raise a definite loan for the rebuilding of the, Navy within such limits as have been laid down in the various international agreements and set aside £7,000,000 or £8,000,000 a year for interest and sinking fund.

I hope that in the equipment of the railways, of which we hear so much, the necessity will be considered of providing a big supply of larger capacity wagons and of transferable wagons from road to rail. I think the right hon. Member for Tamworth (Sir A. Steel-Maitland) wrote or spoke about that matter the other day. That is a development in regard to which other parts of the world are setting a very good example to us. There is a great deal that might be done in that direction. In these matters the Government may require to act, but when one comes to consider the question of private enterprise, one is faced with the fact that it does not matter how cheap you make money in the banks the trader will not avail himself of it so long as these immense taxation burdens are upon him, and so long as the State takes such a large share of his profits.

I agree with my hon. Friend who moved the Motion as to the necessity for a reduction in the taxation of beer. There, again, it is not a question of the justice of the case. I do not say that because some hundreds of people, it may be that some of them are ladies, have sent me postcards on the subject. Other hon. Members have also received postcards. If anything would make me disinclined to propose a reduction in' the taxation on beer it is the receipt of these postcards. Some of the writing runs from one line into another and it would appear that the subject was a very vital one at the time in the minds of those who wrote them. From the point of view of mere economic accountancy it is not paying us to tax beer as we do at the present time. I entirely agree that a reduction in this form of taxation is desirable from the working man's point of view, although I do not consider him the only person worth consideration in this connection. The postcards that I have received would lead one to believe that only the working man drinks beer. A great many other people I can assure the writers are interested in the taxation of beer, besides the so-called working man. The increased taxation of beer is not bringing in the expected revenue. It is causing unemployment, it is causing loss of rates, it is driving a large number of retail traders out of business and it is not doing any good to the State or anyone else. Leaving aside the question of justice and the question of the rights and pleasures of the working man, this is a question that the Chancellor of the Exchequer will no doubt consider very seriously in connection with, future Budgets.

I understand that my right hon. Friend the Lord President of the Council is going to reply. I hope that he will forgive me if I say that the bulk of Members of this House—I say this with no disrespect to the Prime Minister or to any other Member of the Government—are looking to him more than anyone else to give us a lead in putting things in order and in measures to give industry a new opportunity of prosperous working. No one understands and appreciates the position of the traders of this country better than my right hon. Friend, and no Member of the Government understands these problems better than he. Many of us remember the time in 1923 when he took his political courage in his hands in order to bring about a new order of things he considered essential and which is now accepted. His proposals were refused by the people then, but they have now been accepted. Just as the tariffs for which he fought then are forming the backbone of our return to prosperity to-day—[Laughter]—There is no doubt about it. If hon. Members have the slightest doubt about that statement, they. will be able to put their case, if not to-day on some other day and we shall be glad to prove our statements. There is not the slightest doubt, however, that the real proof of success—perhaps this will please some hon. Members better—of our tariff policy will be the bringing about of free trade throughout the world. The extension of fair and freer trade throughout the world will be, I repeat, the greatest proof of the success of that policy.

I want to echo what was said by my hon. Friend who moved the Resolution, that the House has waited very patiently and the country has waited very patiently for action to relieve our present distress. Much I agree has been done but more is wanted. The House will accept almost anything from this Government except weakness and timidity. It will attempt almost any new scheme that can be brought forward, and will admire and support I believe any proposals, however drastic, if they really deal with the situation. Every one of us, wherever we may sit in the House, wants industry to be restored to prosperity, but that cannot be done except by bold measures, by the Government saying: "We are dealing with exceptional times, times just as exceptional as in the days of war, and these times require exceptional methods. We care nothing about what may be the ordinary practice in normal days."

The idea of suspending the Sinking Fund may appear to those who live in the past as something too horrible to be considered seriously. We must wipe out that idea altogether. Suspend the Sinking Fund, raise the loan of which I have spoken—which, no doubt, will be described later as fantastic—and rebuild the Navy. That cost would be a mere bagatelle. Some £5,000,000, £8,000,000 or £10,000,000 a year would give you your interest and Sinking Fund, and you would save more than that in regard to unemployment benefit. The Government may not accept that idea. I press nothing in detail upon them to-day but I say that the whole country is waiting for a lead from the Government, and in the end it will he judged by what it has done for industry and unemployment and by that test alone.

4.39 p.m.


I beg to move, in line 1, to leave out from the word "House," to the end of the Question, and to add instead thereof the words: realises that the existing level of taxation is largely due to expenditure on unproductive services, views with anxiety the growing burden of indirect taxation upon the working classes, and will resist any attempt to reduce direct taxation by further economics in the social services. I should like to congratulate die Mover of the Resolution on the selection of the subject matter and the manner in which he presented his case. I am very much interested in what he said and I am sure the whole House appreciated his argument. I am glad that this subject has been raised, because it gives me an opportunity of stating, perhaps in an imperfect way, the position of the party to which I belong. We believe that it is impossible within the confines of the capitalist system to give a high standard of living to our people. We believe that out of the present system, in spite of the fact that we have enormous productive capacity, we have not the machinery to distribute that produce amongst the people. The Seconder of the Resolution said that the whole of his party were looking to the Lord President of the Council more than to any other Member of the Government to see that the trade of the country had fair play. He appealed to the right hon. Gentleman to remember the position of the industrialists and the traders of the country.

I want to appeal to the right hon. Gentleman on another score and to ask him to tell us to-night, and also the many thousands of people outside, whether the Government are still maintaining the principle of equality of sacrifice which they evoked during the crisis. At that time the Government stated that the country was in a crisis and all the citizens must make sacrifices towards the recovery of the nation. There were cuts in the pay of the police, the Army, the Navy, and the teachers of round about 10 per cent. The benefit of the unemployed was also cut 10 per cent. I want to ask the right hon. 'Gentleman whether he can reassure me and reassure the unemployed and all the other 'classes that. there will be no relief of direct taxation unless there is also relief of the cut classes, that if the addition to the Income Tax that was put on during the crisis is to be removed then, at the same time, the Government will also remove the cuts that were put upon various people. I hope that the right hon. Gentleman will be able to reassure not only industrialists and traders, but the cut classes who were involved in the principle of equality of sacrifice.

I was much interested in some of the arguments of the Mover and Seconder of the Motion, but I do not think they established their case. I do not think they made it clear that taxation is a burden on industry. It was not made clear to my satisfaction that if we were to remove taxation there would inevitably flow from that fact a revival of trade. As a matter of fact, all the economic opinion that I have been able to consult, including the most exhaustive inquiry that was made in 1925, 1926, and 1927 by the Colwyn Committee, is in the opposite direction. The Colwyn Committee came to the conclusion that taxation was not a burden upon industry, that direct taxation did not enter into prices, that the producer did not, for instance, charge a price higher because there was a, 5s. Income Tax than when there was a 4s. Income Tax.

I remember the late Chancellor of the Exchequer, Lord Snowden, before he became Chancellor of the Exchequer, making a statement on this subject when he sat on the Opposition benches. He said that taxation was levied after profits had been made. That fact establishes the point that taxation is not a burden on industry, does not enter into prices and does not rob us of our competitive power or interfere with the necessary capital needed for the development of British industry. It was abundantly proved by the Colwyn Committee, in the conditions which then existed, that there was sufficient capital not only to finance industry but to finance a substantial increase in trade, and what was true then is doubly true to-day. If the prosperity of British trade depended on the supply of capital British trade would be prosperous at this moment. The seconder of the Motion pointed out that there were millions of pounds lying idle, rotting. You have this condition to-day, on the one side, you have human labour and human beings rotting under our present system of society and, on the other, capital rotting, wasting, lying idle. There is plenty of capital available for effective investment in industry, and there need be no concern on that point. The Colwyn Committee directed special attention to the fact that public companies were largely financing their own industry out of their own reserves and savings; that the great bulk of the new capital needed was being provided by the companies themselves.

Let me draw attention to this important point. If the case put forward by the hon. member in this Motion has any truth in it, if hon. Members opposite really mean business, there is only one way in which they can relieve the burden of taxation effectively and that is by examining the figures of the Budget and tackling those items which really are costing money. What is the main item of cost in the Budget for 1932–33? It is the gigantic item of the unproductive Debt. Look at it. We have an esti- mated expenditure of about £760,000,000, and out of that over £300,000,000 is raised for the purpose of paying interest on the National Debt, that is to say, that about 45 per cent. of the taxation raised in the Budget goes to pay the interest on the National Debt. That is just a shifting over from one set of people to another, a re-distribution of the national income of this country. I remember Lord Snowden saying—I am sure be will be accepted by hon. Members opposite except when he talks about tariffs—that the rich classes of this country were not paying for the Army, the Navy or the Social Services, that the wealthier sections of the community were making little or no contribution to the maintenance of the Navy and Army or the Social Services, that their contributions through direct taxation went back into their own pockets in the form of interest on their investments in the National Debt. As a matter of fact, the direct Income-tax payer to-day is not even paying a sum sufficient to pay for the interest which that class is drawing from the War Debt.

The whole burden of the Social Services and the maintenance of the Navy and Army rests upon the shoulders of the working classes, through the medium of indirect taxation; and I say that if you are going to tackle this problem at all you cannot escape the National Debt. You must cut it down, and not merely by conversion loans, for we shall never get rid of it in that way. Let me refer to that famous report which lowered British prestige so much and helped to create the panic and crisis through which we passed last year—the May report. The figures were evidently got out by one of the Departments. An exhaustive and detailed analysis of national expenditure is given in that report, on page 235. They give the total figures of the increase of budgetary expenditure for 1931-32 over 1913-14, and say: From the foregoing table, it will be seen that out of a total increase of £633,318,000, no less than £318,498,000, or 60.24 per cent. is on account of Debt, War Pensions, etc., and if there he added the increase in respect of Defence Services £33,334,000 as being generally related to like purposes, the increase is £414,832,000 —namely, 65.50 per cent. of the total increase. These are staggering figures. They show that 65 per cent. of the budgetary increase in expenditure for 1931–32 over pre-War is due to the Debt and Defence Services. They go on to say: Next in order of increase are the Social Services. To the sum of £99,945,000 there has to be added £12,324,000 increase under grants to local revenues that is £38,324,000 less £26,000,000 for de-rating) showing a total increase of £112,269,000—namely, 17.73 per cent. Therefore, 65 per cent. of the increase in expenditure in the Budget is due to Debt and War Services and 17 per cent. to Social Services. If the principle of equality of sacrifice is to be applied; if there is to be any equity at all, if you are going to deal with this on principles of sound economy, you must cut down that 65 per cent. burden before you touch the 17 per cent. burden. A reference has been made to the burden of local rates; but in that case there are assets for loans, local authorities have millions of pounds worth of productive assets, houses, electrical works and tramcars, all of them producing wealth now and will produce wealth in the future. But here is an unproductive burden, and a burden behind which there are no real assets at all. This is one of those curious things, an unreal, intangible thing to the extent of £400,000,000 with no assets behind it; waste. It is only real in the sense that it brings in dividends to those who own it. That is the only reality behind it, except of course the reality of the terrible consequences which resulted from the expenditure of the money during the War period.

A reference has already been made to two reports, the Rentoul Report and the Ray Report, and it is suggested that in these reports we have the lines of policy which the Government should follow. What does that mean? It does not mean economy on war Debt but economy on the Social Services. The Mover and Seconder of the Motion did not go into, any detail, they sheltered themselves behind these Reports, but I am sure that the Lord President of the Council will not be much frightened by the Rentoul Report. Everybody ran away from it, and I see a consequence of it sitting on the bench behind the Government. The impression I got was that some people were prepared to say, "We do not mean that; we do not subscribe to every item; we do not want it to be known too thoroughly by the public, but what we are subscribing to is the cutting down of the services of education and the health services, and, generally speaking, curtailing and crippling the Social Services."

I do not understand finance and currency, but it appears to me that the Mover and Seconder of this Motion put forward two entirely contradictory propositions. They pleaded for inflation, high prices, but at the same time advocated a thorough-going policy of deflation, which is absolutely contradictory, because an economic policy is a policy of deflation, of the curtailnient of spending power. It was said that everything depends on a productive industry. No one disagrees with that, but the health and well-being of productive industry does not begin and end with the production of the commodity. It goes into the realm of selling the commodity. Productive industry must have purchasers; there must be spending power. The health of productive industry depends much more upon the ability of our people to spend than on the need of capital. There are millions of capital lying idle and there are millions of unemployed. No one can say that 16s. 3d. a week will keep a man decently, that it will provide a decent standard of life.

The amazing thing, the tragic thing is that some hon. Members opposite think that 6d. in a. rich man's pocket is far more economic for the nation than 6d. in a working man's pocket. There have been demands for 1s. 6d. off the Income Tax. What for? To rot in the banks? What are you going to do with it when you have it? It may be £30,000,000 or £60,000,000. There are those who say, "It does not matter. Let us have the money, even if it means an unbalanced Budget." The sanctity of a balanced Budget has gone. I ask hon. Members opposite to tell us how that money, if it is saved, can be productively employed. It would weaken our opposition to the Motion if hon. Members could tell us that. The fact of the matter is that they know full well that what they are pleading for to-day is the financial easement of a class of people in the nation at the expense of the health and the physical and mental development of the vast masses of the people. Only 6.35 per cent. of the increase in expenditure is due to education. Education has been cut down. I have here other figures which to me are extremely important in relation to this Debate. On page 237 of the famous May Committee's Report we have an analysis of the amount that the Budget has taken out of the national income pre-War and 1931–32. The report gives tables in detail and makes this comment: It will be seen that the proportion of expenditure to national income has risen from 7.4 per cent. in 1913–14 to 18.93 per cent. in 1929–30, an increase of 11.53 per cent. So that you have now in the Budget an increased expenditure out of the national income of 11 per cent. over pre-War. See how it is made up. What are the items that cause it? You have gone up from 7 per cent. pre-War to 18 per cent. in 1929–30. Here are some figures:

Debt interest and management, 7.06 per cent.; Sinking Fund, 87 per cent.; War Pensions, 1.36 per cent.; Social Services, 1.41 per cent. The first three items together account for 9.29 per cent. You have had an increase of expenditure in relation to national income of 11 per cent. Of that 11 per cent., 9 per cent. is due to War debt in the main, and 2 per cent. is due to the social services. Take the subject of education. You are spending a lower percentage of the national income on education to-day than you spent pre-War. It is quite evident that if you are going to deal with this question you cannot avoid dealing with the War debt.

I want now to come to one or two other points. I have been interested in finding some figures which would show the relationship of direct Income Tax to unemployment. It has been stated here to-day that a high level of taxation results in a high number of unemployed. There are no facts in existence to bear out that assertion; there is no correlation at all. I have figures here from 1922 up to the present time. Income Tax for a number of years was 4s. Take the years 1926 to 1930. During those years you had a 4s. Income Tax. Look at the unemployment figures. They have varied from quarter to quarter and from year to year. They have changed while Income Tax remained exactly at the same level. Unemployment figures have fluctuated between 19 per cent. and 9 per cent. I agree that there is one relation- ship between the expenditure of the Budget and unemployment, but it is not the relationship mentioned on the other side to-day. The relationship is this: If you have millions of unemployed you have to tax in order to try to keep them somehow. High taxation is not the direct cause of unemployment, but unemployment is a cause of higher taxation. If you can solve the problem of unemployment you will relieve your budgetary expenditure to that extent.

We believe that it would be a monstrous injustice to relieve the direct taxpayers and forget the "cut classes. It would be a monstrous injustice to take 6d. off the Income Tax and not put that 10 per cent. back for the unemployed. I do not believe that the public conscience of this country would stand it. What you want at the moment is not more capital. That is lying rotting and idle in the banks by millions. What you want to do is to increase the purchasing power of the people. Instead of blowing up the Navy and putting it back, digging a hole and filling it up again, and all that sort of thing, why not scrap your slums? It would be a good thing if you gave enough money to the unemployed to scrap their old clothes and to buy new suits. It would be a sound economic proposition to give money to the children in my division and other divisions so that they could buy the boots they want. That would set the boot factories going. Industry to-day wants greater purchasing power among the people. The party to which I belong has the right policy. It says that the economic health of the nation and the social stability of the people depend in the long run on the standard of remuneration, on the rate of wages they receive, and that employment can be provided only when a higher purchasing power is put into the people's hands.


I beg formally to second the Amendment.

5.14 p.m.


I wish first of all heartily to congratulate my colleague in the representation of Sheffield on his good fortune in selecting this subject, and on making a speech of such a calibre as to interest the House and the country—a speech that will be of particular interest to his constituents in Sheffield when they have an opportunity of reading it to-morrow. The subject of the Motion is one which at the moment arouses the intensest interest. Everyone, except possibly hon. Members opposite, will agree that taxation in any form is bad, but that taxation in some form is necessary. If we agree that taxation in all forms is bad, we can test the various forms of taxation in order to ascertain whether they are excessive or not. There are two tests. Taxation is excessive when it ceases to achieve its purpose and results in a reduction of the revenue produced, and it is bad when the tax is not borne by the people who are intended to be taxed but by the people who produce the commodity that is taxed.

There is, for instance, the case of the Tobacco Duty. That is a tax borne by the consumers of tobacco. As far as we know it is not borne to any grievous extent by those who make or distribute tobacco. On the other hand, the Beer Duty seems at the present time to have all the evils of bad taxation. The revenue from it is going down, and it is not being borne mainly by the people who drink beer but by the people who make and distribute the various corn-modifies from which beer is produced. Again, the Entertainments Duty. It might appear to be perfectly fair, in a way, to tax the person who goes to entertainments. It may be found, for instance, in the case of greyhound tracks that the Entertainments Duty is being paid by people who go there to get entertainment. But it is a bad tax when you come to certain classes of seats in cinemas and certain other classes of entertainment, where it can be definitely proved that the tax is not paid by the people who enjoy the entertainment. The burden in those cases falls upon those who provide the entertainment because the tax becomes a charge upon their gross profits. I think we can get in that way a touchstone whereby it is possible to judge whether or not taxation is excessive and evil.

I do not wish to deal with any of the subjects which have been dealt with already except one mentioned by the Mover of the Amendment. He used the oft-repeated statement of the purist that direct taxation, as such, has no evil effect upon industry, in that it is a tax upon profits, after the profits have been ascer- tained and therefore does not appear as a charge upon the particular commodity concerned before that commodity is sold. I agree that Income Tax is better from the point of view of industry than rates, because rates are definitely a prior charge on production. But to say that direct taxation is no injury to industry is very far from true. In order to build up a sound business it is necessary to put aside money year by year and accumulate a reserve. Those businesses which have prospered chiefly in the past and which are now able to weather the storm are those which have been able to put aside large sums for development and for meeting the storm when the storm came. At a time when taxation is very high the tax is borne first by the industry before it comes on to the actual taxpayer. It has to be paid out of the company's profits before those who are running the business can see what they will pay in dividends and what they will put to reserve. Those who are conducting a business look to see What they will pay in dividends after they ascertained what is to be paid in taxation. It may be said that you deduct the taxation when you pay the dividend, yet, from the practical point of view, when profits are small you are naturally inclined, first, to pay a reasonable dividend before you put to reserve—


Is it not the case that before any taxation is paid, the Inland Revenue authorities make allowances in respect of extensions and replacements and matters of that kind?


The Inland Revenue authorities allow a certain amount for depreciation. They do not allow for any depreciation in value on buildings and nothing for extension, nothing for development and nothing for improvement. It is very difficult to get what is called obsolescence allowance.


Surely not?


It is very difficult indeed to get any adequate allowance under that head. But hon. Members opposite appear to be trying—though I do not say that they are doing it wilfully —to divert me from pursuing a rather complicated argument and I must try to get back to that argument. As I was saying, when profits are lean and when the question arises as between reserves and dividends, the natural inclination is to pay a reasonable dividend, taking into account the taxation that will be deducted from what goes into the pockets of the shareholders. The natural inclination is to pay that reasonable dividend before putting anything into reserve. That is one point. Another point is that at the present time when reserves are taxed so heavily, necessarily much less goes to reserve than would be the case if taxation were lower. If only 15s. goes to reserve where 20s. went formerly, then, consequently, the amount of reserves are considerably less than they would otherwise have been and these are the reserves from which all industry must refit and from which all new industrial developments must be produced.

These facts are obvious to anyone with a knowledge of business management, but there is another point which is not quite so obvious. There is the question, not merely of the effect of taxation on profits, but of the effect of taxation on the psychology of the man who is thinking of new developments. That consideration is most important. I mention one instance of which I have heard, and, while I do not know of the case myself, and am not prepared to say that it is true, yet it is a case which sounds likely, because it is in accordance with human nature. It is the case of a dentist who, when the Income Tax was increased at a certain period, ceased to work on Saturdays. He said that he was being taxed so heavily that he was going to enjoy one more half-day off in the week. That is human nature and we all have our human instincts—on this side of the House just as on the other side.

Then consider the case of a man who has thoughts of investing a large sum in a new enterprise. He gets out his plans, specifications and figures and he sees that if he invests that sum in that enterprise it is likely to bring him in 10 per cent. There is of course the risk of the enterprise going wrong. There is no enterprise devoid of risk. He calculates that out of the 10 per cent.,2½ per cent. is going to be taken for Income Tax and possibly another 21 per cent. for Surtax, leaving him a return of only 5 per cent. Such a man will then consider that if he invests that sum of money in some established business—arid at the present time, outside of trustee securities, any wise investor can easily find a safe investment at 5 per cent.—he will get a return, after deducting taxation, of 2½ per cent. on his money. Thus the only margin between taking the risk of the new enterprise and investing outside his business at 5 per cent., is a margin of 2½ per cent. In those circumstances a great many people would prefer not to have the worry, work, anxiety and risk of going in for some big development for such a small margin. This, I may say, is not an entirely imaginary case. I say nothing more than that.

I have to offer one concrete suggestion. I think we ought to try from our own experience to suggest anything which we think might be helpful, and the matter which I wish to mention deals directly with taxation, because it deals with the question of reserves. I suggest that the Lord President of the Council might consider issuing a bold prospectus to the nation—if you like to call it so—to say that anyone who was willing to start some capital reproductive enterprise and start it now would get certain facilities. Proposals would have to be passed by a committee—which ought not to take too long—and if a scheme is found definitely to be a capital reproductive enterprise, then let it be registered with the Inland Revenue authorities who would allow that man or that firm, out of the profits of that enterprise or other profits of the same concern, to set aside the capital value of that enterprise during the next 10 years over and above ordinary depreciation. I believe there would be such a flood of people coming forward with new enterprises as would very quickly cause a substantial deflation in the numbers of unemployed, and by reducing the number of unemployed as quickly as possible you would be reducing the enormous amount which is now being paid week by week for unemployment benefit. The one main way to keep down future taxation is to reduce the vast expenditure of this country. At the present time our taxation is a grievous burden upon all classes, and we confidently look to the Government to take some steps in regard to it. We are grateful for this opportunity of bringing the matter before the Government and of showing, as humble private Members, how strongly some of us feel on this question. We appreciate the opportunity and we hope for results from it.

5.27 p.m.


The speeches delivered for and against this Motion have been of a very high order. I desire to join in the Debate because this is an old subject of mine and I remember some 10 or 12 years ago from the opposite side of the House moving a Motion in favour of rationing Government Departments. I would first offer some observations on the speech of the hon. Member for Aberavon (Mr. Cove). He advocated a policy of equality of sacrifice. He represents, I understand, the National Union of Teachers.


He represents his constituency.


I make no suggestion whatever against the hon. Member, but I understand that he has some special connection with the National Union of Teachers, and he complained about the cut of 10 per cent. made in the teachers' salaries a year ago. Let him come to my constituency among the cultivators of the land and he will find cuts, not of 10 per cent. but of 50 per cent., and if there is to be equality of sacrifice the cultivators of the land are entitled to as much consideration as the teachers. The hon. Member spoke of increased purchasing power. What does that mean 4 It means that the Government are to enable the people to buy more commodities. A very large percentage of those commodities will come from abroad. How can those commodities come from abroad unless something is produced here to pay for them? If you increase purchasing power without increasing production surely hon. Members realise what must be the result.

Then the hon. Member referred to unemployment and said that taxation had nothing to do with unemployment. That theory cannot be maintained in these days. We have got in the world now the highest taxation since the War. We have never had taxation so high as it is in this country now, and we have never had unemployment at so high a level. I do not understand the hon. and learned Member for East Bristol (Sir S. Cripps) smiling. I understand that he is appearing in a case in another place, and if he presents a sound argument like mine there, as I suspect he does in his legal capacity, quite different from what he does in his political capacity, I am not surprised at his having the admirable record that I understand he has.

I am very glad that this Motion has been moved. I do not wish to condemn the Chancellor of the Exchequer or the Government, because, after all, the Government succeeded to a terrible heritage. It is an appalling problem that the Chancellor of the Exchequer has had to face, and there is no doubt that the Government have restored the credit of the country to such an extent that money is coming here from abroad to be invested. But I do say that unless there is a rise in prices or a reduction of taxation, there must be a default on many of our fixed public charges. The hon. Member said that taxation does not matter at all. I was brought up in the school of Mr. Gladstone, and I am not ashamed of it. In fact, I am an ardent Gladstonian to-day, though I do not know whether there are many of us left. This is what Mr. Gladstone said about taxation: It is a characteristic of the mischiefs that arise from financial prodigality that they creep onwards with a noiseless and stealthy step; that they commonly remain unseen and unfelt, until they have reached a magnitude absolutely overwhelming. That was Mr. Gladstone's dictum, and he was a greater financier than any man in this House, especially any man on the Front Opposition Bench. Under that system of rigorous economy the wage-earning classes increased their prosperity amazingly.


indicated dissent.


My right hon. Friend the Leader of the Opposition shakes his head. I remember, and he 'does as well as I do, the days in London when there were soup kitchens and all sorts of things, children without boots or shoes, and so on. You do not see that to-day, and the standard of life in this country has increased enormously, but it will go down if taxation continues to be piled up as it is to-day. I feel quite convinced of that.


I dissented in regard to wages. Under Mr. Gladstone's great Budgets the wage of an able-bodied workman, with a wife and family, in East London was 17s. or 18s. a week.


My right hon. Friend will agree with me that the standard of life as a whole has increased,


The right hon. Gentleman was backing up Mr. Glad-stone's greatness.


Certainly, because I think Mr. Gladstone was the greatest financier this country has ever produced.


He was the greatest —well, never mind.


I am very glad to have the Lord President of the Council here, because I am glad that the Conservative party is taking up this question of economy. I always think they have been devoting too much attention to tariffs and too little to taxes. I remember in this House Sir Michael Hicks-Beach, who was a great Conservative statesman, and he was the last man to follow Gladstonian finance. They called him "Black Michael." I believe he had a considerable vocabulary for his colleagues, but I do not suppose that 30 years hence my right hon. Friend the present Chancellor of the Exchequer will be called "Black Neville"; I do not think he is quite so stern. For the past 30 years we have always been spending money to overcome political difficulties. This has got to cease. I have said it here before, and I shall keep on saying it. We had it on Irish land, and I was a Member of the Government that spent a great deal of money on social services and £1,000,000 was voted for the Welsh Church. Then came the War, and since the War we have had an orgy of expenditure.

I have come to the conclusion, which has been fortified by the Debate to-day, that the extension of the franchise in this country has made it impossible for this House to be the guardian of the public purse. The whole system since 1918 has been one of bribing the electors at the taxpayers expense. I am sorry to say it, but there it is, and no longer is the House of Commons the guardian of the public purse. It is always raiding the public purse, and everything which is done here now and demanded in the way of social services, and so on, always means spending more of the taxpayers' money. I think it is a fatal policy. What I am going to suggest may sound strange, coming from an old Liberal, but I am quite convinced that we ought to have a revising Chamber for these questions of finance. It. cannot be the present Upper Chamber—it must be non-hereditary—but there should be some check upon a Government spending money, particularly at the behest of the House of Commons.

Especially do I say this when I hear the arguments from the other side, which are very powerful, and were put very powerfully, I have no doubt, at Rotherham the other day. There must be a greater check on expenditure. We know that, in this House especially, whatever the Cabinet proposes, we carry. The Cabinet has enormous power. We had an example of it the other day on the Austrian loan, when everyone spoke against it, but it was carried. We know, too, that in the last Parliament, owing to the fear of a Dissolution, we had Land Taxes passed by a combination of Liberals and Socialists. I did not join in that combination, but there it was, and there certainly should be some revision of such combinations and such expenditure.

I have thought this over very carefully, and after a long experience of this House, I have really come to the conclusion that it is essential, if we are to get a reduction of taxation in this country, that there shall be some revising Chamber, in order that Governments of the day shall not have an unlimited right to spend money. There is also such an enormous power in the hands of the Prime Minister. He can always threaten a Dissolution of Parliament. I remember Sir William Harcourt once - saying to me here, "There is nothing that the House of Commons dislikes so much as a General Election." Therefore, naturally, Members of Parliament will vote under pressure for many things for which they would not vote if they were not in fear of a General Election. I do not propose to occupy more of the attention of the House. I have said my say. I think that what I have suggested would be of great advantage, and I press it on the Lord President of the Council, who, after all, is the master of the great legions in this House. The Conservative majority is enormous. Do let him think of this question of a revising Chamber, not only for legislation, but also for finance.

5.40 p.m.


The hon. Member for Aberavon (Mr. Cove), who moved the official Opposition Amendment, in the course of a very imformative speech, upon which, from his point of view, I congratulate him, stated what, to my mind, is a new viewpoint of political philosophy. He stated that the people who pay Income Tax and Super-tax in effect do not pay it at all, in that the interest on the War debt services is returned to them. All that I can say to him is that, among many of my friends, I know it is a fact that on the occasion of their payment of Income Tax last month, and on the two occasions last year, they did not think they were not paying Income Tax, because in many cases they had to have recourse to their banks for an overdraft to meet the demand. The hon. Member also stated that it would be difficult to visualise how, and where, the money could be spent that would be saved by a reduction of 1s. 6d. in the pound in the Income Tax. My reply to that question is that, if such a miracle were possible, the industry of the country would welcome at once all the savings that would be caused by such a reduction, owing to the increased confidence created in industry. Confidence begets confidence, and that added confidence brings out in the English character that innate quality, the spirit of adventure. The spirit of adventure opens out many avenues wherein risk and speculation may play a part and employment be found for our people.

Of all the subjects that one could choose for the purpose of a private Member's Motion, none, in my opinion, is so worthy as that of excessive taxation. No subject compares in importance or gravity with that of the intolerable burden of excessive taxation which. we have in this country at the moment. It is a subject which should command the undivided attention of this House, and I trust that this House will send a message in such terms and with such. an overwhelming vote that at last His Majesty's Government will realise that something real and effective must be done to reduce this intolerable burden of taxation which is crippling our industries to-day. Let us be frank and honest. Let me ask: Has not every Conservative Minister in the National Government promised a reduction of taxation and economy? Was not the word Retrenchment in the battle cry of the old Liberal party? The right hon. Member for South Molton (Mr. Lambert) proudly said that he was an ardent Gladstonian. It was always a Gladstonian dictum to reduce taxation to the lowest possible limit. I hope, therefore, that the Liberal Members will support this Motion.

All those who supported the National Government at the last election advocated a reduction of taxation. In fact, the party to which I have the honour to belong put the reduction of taxation and economy as a corner-stone of their programme. Did we not buoy up the hopes of the business community that if we were returned to power we would make an effective reduction in taxation and have real economy? I am not unmindful of what the National Government have achieved so far. I know that by the Debt Conversion scheme £23,000,000 has been saved and that in the Budget of last year economies to the extent of 4,79,000,000 were effected, but still Income Tax is 5s. in the £ and more taxes were imposed in the last Budget. This ogre of taxation is destroying the enterprise and confidence of our people. I ask myself why it is that the competitive power of industry has become so impaired since the War. Why is it that from occupying the first place among the nations of the world in the matter of exports we have fallen to third place up to a few months ago? There is only one answer—costs which have been swollen by taxation. Statesmen of a generation ago advocated the lowest possible taxation as the keystone of the archway of industrial prosperity. This country to-day is taxed double and treble compared with its chief competitors. No matter where we look we discover that we are in an unfair competitive position, and never in the history of the world was there such an example as in this country of the dead weight of taxation.

This question is undoubtedly the most important and urgent one before the people of the country. Every economist, industrialist and banker has issued warnings and continues to issue warnings of the dangers confronting us. The leaders of commerce and industry, who have their fingers on the economic pulse of the country, issue similar warnings. I make bold to say that until we effect a real and substantial reduction in taxation there is no possible hope for an improvement in trade or employment. We must recognise the cardinal fact that excessive taxation impoverishes the home markets and deprives industry and enterprise of the capital which is essential to successful development, the capital which is the life blood of industry, without which it is impossible for it ever to achieve its former prosperity. I am only a back bencher, and I do not wish to be presumptuous, but I would like to warn the House not to be lulled into a false sense of contentment and complacency that all is well. Prosperity is not just round the corner, and it is futile to talk of prosperity while the tax gatherers of the country are draining dry the resources of individuals and of industry. I know that it is all very well talking in this strain and not advocating a remedy, but in the short time at my disposal it is not possible to develop the points that I would like to put before the House.

I do suggest, however, that the Government Departments should be rationed. Lord Oxford, who spent many years at the Treasury, said in 1924 that in his opinion the only possible way of dealing with this question was by rationing the Departments. If it is right to ration the spending departments of a business house, is not that policy worthy of consideration for the spending Departments of the Government? Before the War we had 15 Ministries; now we have 19. The number of employés has increased from 11,000 to 43,000, and the cost of administration from £6,000,000 to £22,000,000. I know that a reduction there would be only a small saving compared with the amount that would be desirable to effect any real improvement, but still it would be a march in the right direction.

The Beer Duty has been referred to to-day. Last year I voted for the Government in the retention of the Beer Duty, because, in my opinion, at that time there was no certainty that we would not have a supplementary Budget, and I did not feel disposed to support legislation for the remission of taxation until it was known for a certainty whether or not the country was out of the wood. To-day, however, the position is very different. From the figures supplied, I find that the revenue from beer is estimated to be £2,000,000 less than in 1931 and over £6,000,000 less than the fore-cast of the Chancellor of the Exchequer in presenting his Budget. On top of that, of course, there is the loss to the country caused by increased unemployment and the reduced Income Tax due to the reduction in profits of the farmers and malsters. That is a point which the Government ought seriously to consider.

The Government have been placed in possession of the reports of the unofficial and official committees on economy, and I am certain that by a close scrutiny of those reports the Government would find plenty of ways in which to reduce taxation. I appeal to my right hon. Friend the Lord President of the Council to act firmly and courageously, and to reduce taxation to reasonable limits. The one thing that industry needs to-day is room to breathe, and nothing would give more life to it than the knowledge that excessive taxation was to be reduced to reasonable limits. It would restore confidence to industry, and that confidence, by increasing employment, would bring to the Treasury an increased revenue. An increased confidence in industry would bring to the people who are unemployed hope and a better outlook. I 'appeal to the Government to proceed fearlessly with this reform. I am certain that along the line of reduced taxation they will earn for themselves a place in the annals of this country which centuries will never efface, and that they will attract themselves more favour than any of their predecessors have done.

5.56 p.m.


I would summarise the speech of the hon. Member who moved the Motion in this way: Eighteen pence off Income Tax and a penny off beer; Accept these two suggestions and the dole will disappear. The hon. Member tolds us that taxation was excessive and that, as a consequence, industry was suffering keenly. He went on to say that not only were the owners of industry suffering but that it affected the poorest of the poor. Then he told the Government how in his opinion taxation ought to be reduced, and his only suggestion seemed to be 1s. 6d, off Income Tax 'and a reduction in the Beer Duty. The only suggestion which I heard from the hon. Member who seconded the Motion was that we should smash up the ships of the Navy and immediately start re-building. All the arguments of the Mover and Seconder and of those who supported the Motion. were for a reduction of direct taxation. No suggestion of any kind has been made that there should be any reduction in indirect taxation. I have tried to find out the reasons for these suggestions and the source from which they emanate.

I find that the Federation of British Industries have been sending annually to the Government for some years their views as to what ought to be done by the Government. They said that what was needed was a substantial reduction in direct taxation, and in a book, a copy of which every member received, I have no doubt, they went rather carefully into the question of the social and other services and their cost, and put forward suggestions as to how those services should be dealt with and how taxation generally should be handled. A table of figures prepared by the Federation of British Industries in regard to the unemployed is very interesting to me. They stated that in 1931 the rate of benefit for a man and wife and three children was 33s. a week and the rate of benefit for a single man was 17s., and suggested that if those benefits were reduced to correspond to the fall in the cost of living from the peak point to the percentage existing at that time—it was about a year or so ago and I believe the percentage was 23 —the figure of 33s. would be reduced by 46 per cent. and the figure of 1'7s. reduced by 3n per cent. They suggested that the following allowances would be adequate, apparently, or at least all that the country could afford—for a single unemployed man, 11s. 4d., and for a married man with a wife and three children, 17s. 4d.

Those industrialists were asking, and to a large extent they succeeded in inducing, the Government to give them considerable reductions in taxes and in rates. I have in mind arguments advanced by the Federation of British Industries in connection with the De- rating Act. We were told that if the concession of de-rating were made an increase in prosperity would undoubtedly follow. They got the concession, and I have figures here which show that very considerable reductions were made in rates—which would benefit them to exactly the same extent as the reductions in taxation which they are now advocating. The figures are an estimate, it is true, but they are as accurate as such estimates can be. The engineering trades, including marine engineering, benefited by de-rating to the extent of more than £2,000,000, shipbuilding by £400,000, the chemical trades by £600,000, the coal industry by £3,100,000, and the cotton and spinning trade by £1,500,000.

Some 11 or 12 industries, the principal ones in the country, got relief approximating to £17,000,000. That ought to have been a very considerable help to industry, but will anybody dare to say that there is any evidence of prosperity having come to industry in consequence? Everyone who knows anything about it will agree that all those payments to the owners of industry have simply been used to enable them to live a more luxurious life. No Member of this House can show me any evidence of any increase in prosperity in any industry as a consequence of the derating proposals. The main proposal of the Mover of the Motion is a reduction of 1s. 6d. in the Income Tax. The Mover of the Amendment, in an effective and brilliant speech, put a question to the Government which I would like to reinforce: "What can be done by the people who benefit as a consequence of a reduction of the Income Tax by 1s. 6d. or any other sum which can in any way lead to greater prosperity? No answer has been given to that question, and I venture to say no answer will be given. As the Mover of the Amendment said, "Is there really any shortage of capital in industry?" If there were, it might be a legitimate argument to say that a reduction of Income Tax would enable capital to be provided, but every hon. Member knows that so far from there being a shortage of capital there is a surplus.


What about the Cunarder?


The hon. Member had better ask those who are on the Treasury Bench. That is hardly a question to be put to me. There is plenty of money for a dozen Cunarders, for 100 Cunarders, in fact, for 1,000 Cunarders. I am not exaggerating when I say there is sufficient idle capital in this country to build 1,000 Cunarders. The seconder of the Motion suggested that, the Navy should be scrapped. He said every ship in it should be broken up and rebuilt. It will take a good few Cunarders to equal the Royal Navy, and I think the hon. Member who interrupted me had better meet the seconder of the Motion, in the Library or somewhere else, and settle whether the scrapping of the Navy or the building of two Cunarders is of the more importance to the unemployed and industry. I have been pointing out that there has been no sign of increased prosperity having followed derating, although it was a considerable financial concession to industry. When they were advocating derating the industrial magnates of the Federation of British Industries told us that it would lead to a great increase in prosperity. In reality that has not been brought about; derating has been followed by a far greater depression in industry than existed previously. But the causes are very much deeper.

I would like to say a word or two with regard to direct and indirect taxation, because, in view of the statistics we have, it is interesting to note that we should be asked still further to reduce direct taxation. It could only be done—other things remaining the same, as they are likely to do—by a further increase in indirect taxation. In one year the proportions between direct and indirect taxation have undergone a very remarkable change. In 1931–32 indirect taxation represented 34.12 per cent. and direct taxation 65.88 per cent. Between 1931–32 and 1932–33 the percentage of indirect taxation rose from 34.12 to 39.06, and the percentage of direct taxation fell from 65.88 to 60.94. In that one year the people who paid direct taxation, who are generally the people represented by hon. Members opposite, did very well indeed in their efforts to shift the burden of taxation from their own shoulders on to the shoulders of the people who, in the main, pay indirect taxation. How have they done it? I do not want to weary the House with a statement of how it has been done, because everyone knows that it is not an easy explanation to give, and it would take more time than the House would like to give me in which to deal with it, but these figures have occurred to me in connection with the figures I have just given. In 1931–32 indirect taxation represented, roughly speaking, £1 and direct taxation £2— broadly speaking, one was double the amount of the other—whereas in 1932-33 £1 of indirect taxation is represented by £1 10s.

How is that change reflected in the every-day life of the people? The social services have been ruthlessly cut down, taxes have been increased on almost everything that the average poor citizen uses. Hundreds of things have been scheduled for taxation, and as a result the poor are more heavily taxed and the rich are more lightly taxed. Now we are being asked for further relief for industry, though not one word has been said by any speaker who is in favour of this Motion to show how industry could be relieved to the benefit of the people generally. It is true that the Mover of the Motion said the poor would benefit, but he gave no evidence in support of that assertion; he just made the statement and expected us to accept it on his assertion. All the evidence is against it, because de-rating which was a reduction in local taxation—but, all the same, taxation—did not lead to greater prosperity but to a greater lack of prosperity.

In regard to the Beer Duty, let me say frankly that if we were considering the taxes which have to be imposed on different industries it would be my personal view, though I am speaking as a total abstainer, and as one who has no interest in and no great love for the beer industry, that there is a measure of injustice in the tax imposed on that industry at the present time. The beer industry is doing very well, in spite of all that may be said to the contrary. I have a set of figures with me taken from the "Economist" dealing with the beer industry, among other trades. I do not know that it matters about reading all the figures, but I notice that the dividends paid in the industry as a whole, during the past seven or eight years, have varied between 17 per cent. and 14.7 per cent.

If those figures are right they prove, I suggest, that the industry is well able to stand a good deal in the way of a reduction of beer prices before the workman, who is generally supposed by hon. Members in this House to be in want of beer—[Interruption]—well, it is not general, but fairly general—the industry would stand a reduction of beer prices, if such a reduction were necessary, and still would be able to pay fairly good dividends. I am not very much concerned about that, because it is a matter of minor importance. I am concerned that any reduction made in taxation should be made in a way that will benefit the indirect taxpayer, and that if there is any increase in taxation, the direct taxpayer ought to pay and not the indirect taxpayer. The indirect taxpayer has been compelled during the last year, and for a number of years, to pay taxation very much in excess of his capacity to pay.

If a vote is taken to-night on this Motion, I have not a shadow of doubt that we shall be beaten by people with interests to serve. Many of them are advocating here the policy of the Federation of British Industries, from whose requests to the Government I have a quotation. The Financial Secretary to the Treasury will know all about that. I have no doubt that he has had an opportunity of reading these communications as they have from time to time been sent to the Government. The Government are fairly subservient to that set of interests, which are able to dictate policy to the Government. The Government pay far more attention to those interests than to the majority of the people who vote for them at General Elections or at any other elections. They arc far more influenced by the class of people who form the Federation of British Industries.

No argument has been put forward—none could be put forward, because there is no such argument—to prove that a reduction of taxation would benefit industry to the extent of increasing trade or of increasing the number of workers engaged in any trade. As a matter of fact, it was stated by the Mover of the Amendment that the arguments and the figures are against it. The reports of committees and commissions set up by the Government are also against it. There is no possible argument that you could put forward that could induce anybody, except an interested party, to vote in favour of a further reduction in taxation that would in no way benefit industry but would benefit industrialists personally, enabling them to live a more comfortable life and to enjoy more of the luxuries, which many of them enjoy almost to superfluity to-day. There is not a shadow of proof that any such reduction as is advocated in the Motion would be of the slightest benefit to the great mass of the people, to whom I adhere, for whom I speak and whose opinions I desire to voice in this House.

6.20 p.m.


Before discussing the Motion, I would like to say a word or two about the speech made by the hon. Member for West Walthamstow (Mr. McEntee). He said that a reduction of taxation would not benefit industry. If one starts from the idea that there is only a certain amount of money in the country, if the Government take that money the individual cannot spend it on a great many things. If the individual spends it on extra boots, it is obvious that that must help the boot industry. If there is more money in circulation, industry is helped and more people are put into employment and made better off. We are all in favour of doing anything that will help industry and help more people to get employment and wages. When wages are better, there is more money in circulation, and this country is more prosperous.

I would now like to turn to the subject of the Death Duties. I expect that the Opposition will agree with me, not on the subject of Death Duties, but on the subject of spending capital as income. If a Budget takes £80,000,000 a year as capital and spends it as income, that is not a good thing. Signor Mussolini can be taken as an example of a man who has made his country more prosperous. One of the first things that he did was to do away with Death Duties. All Death Duties are very bad. Some people think that if the money from Death Duties is used to reduce the capital Debt of the country that is all right. I have heard it said this afternoon that the Sinking Fund ought to be done away with; if that is so, the Death Duties ought to be done away with also. I do not think that the use of Death Duties to pay the capital Debt of the country makes any difference to the people who pay those Duties. Money goes out of the country, and gets spent as income, and that is bad.

I want to say a, few words about Death Duties upon agricultural land. It may sound like an Irishism to say that agriculture is the greatest industry in this country. When Death Duties are imposed upon agricultural land, that industry is deprived of capital which is more necessary at this time than it ever was. Agricultural properties have to pay, perhaps 20 per cent. or 30 per cent. in Death Duties. The land is being sold, and the farmer is having to buy his own farm. He therefore uses up capital which he ought to employ on his farm. If he cannot find capital, he has to borrow it and to pay a much larger sum in mortgage interest than he did in rent. The Opposition will probably agree with us that the best system of farming is that of a tenant under a landlord, but the Opposition think that the landlord should be the nation, while we think that the landlord should be an individual. It is bad for the farmers in this country to have to buy their own land. Death Duties on land are paid on what might be called the amenity or market value. The assessment is not the same as it is in the case of shares. I know estates that produce no income, or even an annual liability, and yet Death Duties are paid on those estates. The duties are very often considerable.

It is of no use expecting the Government this year, unless they are to unbalance the Budget, to make very large reductions in taxation, but I think that the Mover of this Motion was right when he said that he would take a risk. The risk would be justified. If the Government treated the budgetary position by looking at it in relation to a period of three years, which is until the life of the present Government is over, they would do much better than merely looking at each year as a sort of water-tight compartment. If they took a risk this year I think that they would be repaid. The yield of Death Duties on agricultural land at the present time is not very big; I think it is about £1,700,000, and I suggest to the Chancellor of the Exchequer that if he could see his way to do away with that tax, to reduce the rate of it, or to alter the method of assessment and assess land in the same way as shares, he would be doing a very great thing for the agriculture of this country.

I want to talk about another matter, especially as the hon. Member for West Walthamstow has said that it is a pity that hon. Members who were interested in certain matters talked about them in this House. Some of my personal friends are aware that I happen to be interested in brewing. I am not ashamed of it, except for the reason that the brewing trade is not paying as well as it did. The hon. Member gave a few figures, in the course of which he said that the interest on capital in the brewing industry is 17 per cent., or 14 per cent. He may not have gone into the question that before the War the capital of certain breweries was £1 per share, and that those breweries have reduced their capital to 9d. per share. If 14 per cent. is paid upon ninepenny shares I think the hon. Member might find that the return upon the capital is not very much. Before dogmatising on the capital of any industry, one should look right into the matter and find out what the original capital was and what the losses were, and every other point connected with the matter.

Let me say five things about the brewing trade, not from the point of view either of the industry or of the consumer, but from the point of view of the Revenue. In the last seven years, up to the end of this year, the estimates for the Revenue from beer had been £29,000,000 more than was received. I am not in any way blaming the Treasury, because it is a fact that consumption has been going down. This year the estimate is £80,000,000, and it looks as if the result will be £6,000,000 down on that. It is only fair to say that the reason for the decrease is that most of the beer sold is not good enough. Another reason is that it is not value for money. You cannot expect a workman or anyone else to go on buying something which is not good value. Taxation being as high as it is, it is good policy for the Government to look into the situation and to try to preserve what Revenue they get now, and what Revenue they may get in the course of a few years. When a patient is bad, a stimulant is needed. I am certain if the Government take that course that they will be repaid. Let the Government inspire the people with faith in the future, and in the years to come historians will look back and say that the Budget of Great Britain for 1933 was a turning point in the prosperity of the world.

6.30 p.m.


This Motion is couched in terms to which very few of us would take any exception, but, during the short time that I have been a Member of the House, I have discovered that what matters about a private Member's Motion of this kind is not so much what is said by it as what it implies, and that very often a Resolution couched in the mildest and most non-controversial terms is used by the Mover as 'a peg on which to hang most controversial proposals. That is what has happened in the Debate this afternoon. May I briefly remind the House of the proposals which the Mover of the Motion made? He suggested that the Sinking Fund should be suspended, and he calculated that that would give us £32,000,000. He then said that it would not matter if in the first year we were down on our national accounts by £50,000,000 or £60,000,000—that that need not perturb us too much; and, as far as I could follow his argument, his suggestion was that we should use the money gained in this way for two purposes, and for two purposes only—firstly, for some remission of the Beer Duty, and, secondly, and far more important, for a remission of Income Tax in the neighbourhood of 1s. 6d. in the pound.

I want to join with the hon. Member for Aberavon (Mr. Cove) and others who have spoken—most of them from the Opposition benches—in protesting against any proposal of that kind. It is a proposal which did not emanate in the first place from the hon. Member for Central Sheffield (Mr. Boulton), but was advanced a few days ago by the right hon. Gentleman the Member for Hillhead (Sir R. Horne) in a letter to the "Times," and it had some support, I think, in a leading article in the "Times." We have travelled a very long way since the last General Election if we are going to listen to proposals of that kind in this House. May I remind the House of what happened in the period August-October, 1931? We were told that heavy sacrifices must be required from every section of the community, and heavy sacrifices were, in fact, exacted from every section of the community. There was the increase in the standard rate of Income Tax; there were the cuts in the pay of the Services, the teachers and the police; but, in my view—personally, I have never used the expression "equality of sacrifice"—relatively much the heaviest sacrifice was demanded from the unemployed. The National Government imposed those burdens and made those cuts before the General Election, and then it went to the country and asked for an endorsement of them. It won the most remarkable victory, as I think, in modern political history, because, of all the millions of people who voted for the National Government, practically every one was going to be poorer as a result of the policy which that Government had already introduced and carried through. As I have said, it was, perhaps, the most remarkable verdict in our political history.

Why were those sacrifices made? Why was it that even the unemployed themselves in large numbers consented to the cut that was made in the very small amount that they received from week to week'' They consented to it because of the argument put forward that above all things, if we were to retain our financial stability, we must have a balanced Budget, and the central argument on which the National Government was returned at the last General Election was the argument of the supreme necessity of balancing the national accounts. The unemployed and the others accepted the cuts on the basis that the Budget had to be balanced. Now the right hon. Gentleman the Member for Hillhead and the hon. Member who moved this Motion come along and say, "Undo what was done in 1931; unbalance your Budget; it does not matter any longer about having a balanced Budget; unbalance your national accounts, not in order to restore those cuts, but for the sole and exclusive benefit of the direct taxpayer."




I do not wish to interrupt the hon. Member, but he is misconstruing, perhaps unintentionally, what I said. My words were: "The balancing of the Budget requires no stressing."


It will be within the recollection of the House that the hon. Member went on to say that, even if in the first year of his scheme the national accounts were down by some £50,000,000 or £60,000,000, that need not perturb us too much; and, if that does not mean unbalancing the Budget, I personally do not understand what it does mean. I say that the whole trend of the hon. Member's remarks in moving the Motion was that it was worth while to take a risk—I think that that was his phrase—and, tem- porarily at any rate, to unbalance the Budget. No one disputes the burden of indirect taxation. I myself speak an an Income Tax payer, at any rate in a small way, and none of us in this House is likely to dispute how heavy a burden direct taxation is. But if it is possible—I do not know if it will be possible, but if by any means it is possible—in the Budget of this year, to give any form of relief, I feel that the first claim on that relief should go, not to the direct taxpayer, however heavy his burden may be, and not even to those other classes who suffered very severe cuts, but that the first claim on any relief that it may be possible to give should be the claim of the unemployed.

Supposing that it were possible to spare even some £5,000,000 or £6,000,000, that, at a rough estimate would enable the standard rate of unemployment benefit to be raised from 15s. 3d. to something in the neighbourhood of 16s. The Mover of the Motion said that we needed an increased circulation of blood in the body politic, and that we needed increased purchasing power in the hands of the people. The remission of direct taxation may or may not increase purchasing power. The money may be put into the bank; some direct taxpayers may even spend it abroad; but, if it is possible to give relief, to however small an extent, to the unemployed, it is quite certain that every penny of that relief will go in increased purchasing power, and that every penny of it will be spent to the very best advantage. I am not for a moment opposing the idea of diminishing, when it is possible to do so, the burden of direct taxation. I think that all of us, even hon. Members on the Opposition Benches, realise how heavy that burden has become. But I feel that, even though most of us in this House may be direct taxpayers, we realise that the heaviest sacrifice of all was demanded from the unemployed, and I think that, if and when it is possible for any relief to be given from the arduous burdens imposed in 1931, the claim of the unemployed should be paramount.

6.37 p.m.


We have before us this afternoon a Motion in favour of reduced expenditure, and an Amendment has been moved, with very great ability, if I may say so, by the hon. Member for Aberavon (Mr. Cove), repudiating that proposal. It is on the Amendment that I should like to speak. The hon. Member was not merely destructive in what he said; he had a remedy; and his remedy, as I understood it, was that we should maintain Government expenditure and, if possible, increase it, raising taxation, if that were required, in order to put more purchasing power in the hands of the unemployed. That is what I took the hon. Member to say, and I think it is a fair account of what he said.

This is not a new remedy. I have only had the honour of being in this House for two years, but I have heard the same remedy put forward by hon. Members opposite a great many times, and, indeed, they put it into force during the two years for which they were in office. They spent, if I remember rightly, about £100,000,000 on relief schemes for the unemployed. They did that with the very best intentions, but, as the Chancellor of the Exchequer pointed out last week, the only result was to raise the number of people unemployed by 1,600,000. I do not want to overstate the case. It is obvious that that was not the only cause, but we on this side of the House believe that it was a material cause. I believe that a main cause of that increase was that increasing expenditure and taxation struck a very great blow at confidence. The hon. Member for Aberavon said that he had never heard any direct evidence that taxation influenced employment. I would like to quote a few words from the Final Report of the Balfour Committee on Trade and Industry. The report states, on page 248, that: While the Income Tax, being a charge on profits, is not in the main a burden on industrial costs, nevertheless a high rate of taxation has very serious effects on competitive power, both by diminishing the fund out of which the hulk of the national savings are accumulated, and extensions and improvements of industrial plant provided and also by discouraging enterprise and initiative. I know that hon. Members opposite do not hold that view. One of the first speeches that I heard after I came into this House was a speech by a right hon. Gentleman who was at that time their Leader, and who is now Lord Snowden. I remember that he said at that time that saving was a question of individual habit; and he went on to explain that in his opinion, once a man had got the habit, nothing would make him alter it. Of course, that is perfectly true with regard to an individual. We all know that there are people who are more apt to save, and people who are more apt to spend. But, nationally, there is obviously a great deal more in it than that. Saving on the part of the nation is undoubtedly dependent on another condition, and that is the condition of security. People put by money for a rainy day, as we say, and they only put it by because they feel that it will be there when the rainy day comes. That is why there is very much more investment in civilised countries than there is in uncivilised countries, because in the former the security is greater. Decrease the security, and you decrease the incentive to save and produce. I know that hon. Members opposite do not hold that view. I remember that when I heard Lord Snowden's speech it reminded me of a very old fable about a man who said that he could teach his horse to live upon nothing. Every day he gave it just a little less and less food, until at last the day came when he was to give it nothing at all. On that day, however, by an unfortunate accident the horse died, and, therefore, as he explained to his friends, he would never know whether he had been right or wrong. If you substitute the word "enterprise" for horse, "and" profits "for" food, "you will get a very near analogy. Hon. Gentlemen opposite thought two years ago that they could get industry and enterprise to live upon nothing. But the horse, willing though it was, pined away and died. That is one of the main causes why we have reached the situation in which we are today.

The principle underlying the policy put forward by the hon. Member for Aberavon is, as I understand it, that he proposes to re-distribute wealth by means of taxation, and increase the consuming power of the poor. All that one can say is that that policy has been tried, and has disastrously failed. The money has been spent, taxation has been increased, and the number of people unemployed is far greater to-day than it was before. It is really impossible for hon. Gentlemen opposite to argue any more that, when taxation is imposed upon a rich man, he alone pays it. What happens in practice, when an employer is very heavily taxed? He knows that, if he makes a profit, the vast proportion of it will go to the State and, if he makes a loss, he will have to bear it himself. Therefore, if he is making a loss, he limits it in the only way he can, and that is by closing his works. Who suffers? It may be said that he suffers because he does not make a profit; but the only persons who really suffer are his work-people, because they are reduced from good wages of 40s. or 50s. or 60s. to the dole. I am certain that hon. Members opposite put their policy forward with the highest motives. But it is not really a policy of economy. It is a sentimental policy. From the point of view of the social services themselves I believe a reduction in taxation is desirable. For the Government has no money of its own. All the money it has comes from productive industry. And, if industry cannot produce at a profit, there will be no social services at all or, at least, they will have to be very greatly reduced. The hon. Member who spoke last said that relief ought to be given first of all to the unemployed. I believe that first of all relief ought to be given to the country and, if the country gets relief, everyone in the country will benefit.

6.46 p.m.


I should like to put a rather different point of view from those which have hitherto been put before the House because, unlike most Members, I do not really endorse either the Motion or the Amendment. It seems to me that they both stress points which are not of real importance and call attention to rather secondary things. The Motion itself is one of gloom and despondency. Both the Mover and the Seconder implored the Government to show courage, and not timidity. I think their Motion shows a lack of courage. The sort of Motion that I should have liked the House to accept would be: The House views with satisfaction the financial strength of the country, will support the Government in maintaining a balanced Budget, and looks to the Government to assist in lightening the burden of industry by a policy of gradual and limited price raising. The House surely ought to realise and feel immense pleasure in what the Government have achieved and the amazing financial strength that we have attained. We have had this combined position of high taxation coupled with the maintenance of social services, though not at the height or the standard that we should have liked—straitened but not strangled. We are maintaining them at the cost of high taxation, and at the same time we have a financial position of unrivalled strength throughout the world. I would ask anybody in the House who has any responsibility for running a business concern, Is there any country in the world to which he would prefer to transfer his business? There are plenty of countries with lower taxation, if he wants lower taxation. What he will not find anywhere in the world is a country which has succeeded, by imposing high taxation, in maintaining the level of social services and maintaining a position of confidence and financial strength. Industries have been strengthened enormously by the appreciation of reserves which has resulted from the Chancellor's Conversion scheme. Company after company has almost been pulled out of the mire by having its reserves so strengthened. Is not that a thing for which to be grateful? When we get these rather airy and light-hearted suggestions for dreamy and speculative finance, casting away big blocks of our revenue, I submit that we ought to reject those alluring schemes and be content to accept such taxation as is necessary to maintain the financial stability of the country. The whole basis of our industrial prosperity depends on the knowledge of the whole world that we are essentially financially sound. That gives a basis of confidence, and on that basis alone we shall rise in time to prosperity.

6.51 p.m.

The LORD PRESIDENT of the COUNCIL (Mr. Baldwin)

It is not without interest to reflect that a very well-known Member of Parliament of the name of Hume, 111 years ago, moved as an Amendment to the Address: That we cannot but express most respectfully to His Majesty our opinion, that an excessive taxation, disproportionate to the reduced value of all property, is a principal cause of those distresses; and humbly to intreat that he will be graciously pleased immediately to direct such reductions in every branch of our expenditure, from the highest to the lowest department, as shall enable us forthwith to relieve His Majesty's faithful people from a large portion of that burthen of taxation, which, in their present impoverished condition, presses so heavily upon all classes. History repeats itself and, as this country extricated itself from the difficulties that existed at the time when Hume moved that Amendment, so I trust and believe that with perseverance we shall extricate ourselves from the difficulty in which we find ourselves to-day. I must apologise to the House for taking the place of the Chancellor of the Exchequer, who is the proper Minister to deal with a Debate of this kind. He had an old engagement to speak to-night in the country, and the House knows how difficult it is to get out of those engagements when once made. But perhaps it is a little easier for me, not being Chancellor, to speak on this subject, because it really is impossible for a Chancellor to speak with any freedom on a question of this kind when the shadow of the Budget is already hanging over his head. I have had some experience in taking part in these Debates, now many years ago, and though there is little that one can say, for the same reason that the Chancellor himself would be found rather fettered, I hope I may be able, by commenting on and perhaps criticising some of the observations which have been made, to make my contribution before we decide whether or not we will adopt the Motion before the House.

I should like to begin by congratulating most warmly the Members of my own party who, at great sacrifice to themselves, have put in so much work on that most difficult subject of examining what economies were and were not possible in the expenditure of the country. Their investigation has been of great service and on one or two points the Government have already adopted their suggestions —the abolition of the housing subsidy, for instance—and I can assure them that the Chancellor is examining with sympathy and with care the suggestions that have been put forward. I do not know whether there is any truth in it—all kinds of rumours reach me in my position as Lord President—but I have heard that some of those who have advocated various economies were a little less enthusiastic in desiring to see them pursued than they have been when they first advocated them.

First of all, let me say a word about the speech of my hon. Friend who moved the Motion. I thought both: the quality and the temper of his speech were admirable, and I listened with much interest to what he had to say. He began by saying he wanted to see on the part of the Government a wide outlook and elasticity of mind. Those are two qualities which I have always flattered myself I am not without. He spoke of one subject the idea of which has been advocated in many quarters, that is, a planned Budget over a term of years. I have no doubt that, when my right hon. Friend considers his Budget, he will not fail to give his attention to every suggestion that has been made to make his task less difficult than it would naturally be. My hon. Friend went on to speak of the way in which Income Tax affects the competitive power of this country. That being a subject which interests me very much, as having been at the Treasury at the time when the Income Tax was raised from what we used to consider a normal figure to the height at which it stands today, there are one or two observations that I should like to make, first of all perhaps in the way of comfort. It is quite impossible, I believe, to calculate by any process open to us what the real relative weight of direct taxation is on the industry of one country and another, because we have no reliable data of the proportion of the total taxation in this country to the total wealth and total income of this country—those are very relevant factors—or, indeed, to the comparative distribution of both wealth and income in other countries. You have also to reckon as permanent factors the general character of the industries in each, country.

Remember that we are the first country to apply our direct taxation, at enormous figures, to the balancing of our Budget. No other country has approached us in what we have done in that direction, but it is certain that other countries will have to follow us in some form of taxation or leave their Budgets unbalanced, and unbalanced Budgets over a, term of years mean bankruptcy. Until the time comes that we are all on a level in that work and have balanced Budgets, we have another reason for knowing that we cannot really assess the real relative position of ourselves and other countries with regard to the incidence of Income Tax. It does not in the least follow that Income Tax is not, in the words of the Motion, an intolerable burden. So much has been said by the Chancellor of the Exchequer himself. I know, as every Member of this House knows, that, theoretically, Income Tax is not a charge on industry, but I heard an interesting quotation given by my Noble Friend the Member for Dorsetshire (Viscount Gran-borne) which he took from the Report of the Balfour Committee. I agree entirely with what was said there. There is no doubt very high Income Tax, plus Surtax and Death Duties, all at exorbitant rates, does lower the level of the pool of savings for investment of the country. There is also the psychological effect when trade is bad. The collection of so large a part of income, for the purposes of the Government, depresses very heavily—and far more than would be the case if trade were good—all those on whose skill, brain and energy the satisfactory conduct of business depends. I think anyone who has experience, or knowledge, will agree that, theoretically, whatever may be said about the incidence of Income Tax, there is no doubt that, except in the best of times, it does act as a great burden on the industry of the country.

My hon. Friend mentioned one subject, which was mentioned by a great many other Members, namely, beer. I should like to pay tribute to the altruistic question, propounded by that warm heart we all know he has, of the hon. Member for West Ham (Mr. Thorne), who was so worried because at Streatham it was impossible to get a half-pint measure. No half-pint measure would have any interest to him. I sympathise very deeply with what has been said about beer, but I think that, in the rather judicial view I am trying to give in this Debate, I ought perhaps just to put one consideration which is sometimes overlooked. I know the argument about the Beer Duty with regard to unemployment —unemployment both in the industry and in agriculture. They are weighty arguments undoubtedly, and must be considered. But there is one argument which is used—that lowering of the tax would be necessarily followed by such a large increase of consumption that the loss to the revenue would be negligible. We have had many disappointments in similar respects. There is no doubt that the habit of beer drinking, for good or evil—very likely caused in the first instance by high war taxation—has changed in this country. The money which used to be spent on beer is now largely spent on other things.

I said there were similar cases. I look back a few years to the last time when I was in the Government. We brought in, just as the close of our term, a Measure which we all hoped would be of great benefit to the country—the Measure for rating relief. We hoped, and believed, that it would have a really stimulating effect on the railway services of this country. It may be that we did not realise the way in which the railway habit has been changing in this country. People are taking themselves, and their goods, more and more to the roads. Of course, the result was a terrible falling off and depression in traffic. The fact remains that a most substantial help, which was meant to be a stimulus, failed completely to save this falling traffic which is now causing such anxiety to so many people in this country. This point might be borne in mind. I do not commit myself either way, and it would be most unfair to give any views of my own at this moment, when the Chancellor of the Exchequer has that most difficult task, envied by no one in this House, of getting his Budget ready in the next few weeks.

The question which has been raised in many quarters was also raised by an hon. Member—the suspension of the Sinking Fund. That again is a subject which, of course, will be examined and every relevant factor will be borne in mind. I would like to say something in this connection, which I can do without betraying any secrets. Everyone seems to speak as though there was going to be a large surplus. There may be; I do not know. I know just as well, no better and no worse, than every other Member. Every Member who has an income of any kind from invested funds whether small, medium, or large, will agree that, never has he known so many cases where his income has been reduced, or where dividends have failed to be paid at all as in this last year. He knows perfectly well that that will be reflected directly in terms of Inland Revenue. I have, purposely, not looked at any figures, but I cannot see how, until there is a real improvement in trade, you are going to get any improvement in the figures of what has been for so long, and is to-day, the real standby of the Inland Revenue returns.

My hon. Friend who sits for a constituency adjoining my own—he had the satisfaction of winning a seat which I was unable to win many years ago—was much bolder. He began what looked like being a very interesting discussion on the raising of prices, but I think it dawned on him that that is a subject of discussion next Wednesday. Then he spoke of three measures which might help the Budget. One was inflation, on which I certainly do not propose to embark to-day. The second was economy, with which we all agree. The third was useful work. He mentioned wagons, which I remember being mentioned some time ago. It is very interesting to know that the Great Western Railway have placed, or are on the point of placing, a very large order for 20-ton wagons, and, if that be successful, as I hope and believe it will, then we may see that example followed in many parts of the country. I think he put his finger on a very practical spot there. I think that large-wagon building for commercial purposes is one of the directions in which we may look with some moderate hopes. Frankly, although I do not wish to betray any confidence, the Chancellor of the Exchequer has not yet considered the rebuilding of the Navy. If he returns in safety from Derby, I will tell him of the scheme, and I have no doubt he will give it his most careful consideration.

The hon. Member for Aberavon (Mr. Cove) has a gift which has been denied to me. He can whip himself in two or three minutes into a fervent enthusiasm about anything. I listened with much interest to what he said, but I was rather puzzled by some of the figures he gave about percentages. I do not want to deal with figures, and I do not want to give more than one minute to this matter. I only wish to refer to the matter, because, unintentionally on his part, for a short time he misled me, and he may have misled other Members of the House. The figures he quoted were taken from the Minority report on National Expenditure and the percentages were the percentages of increase.


That is what I said.


It was difficult to follow. When you are told that the increase since the War was only 15 per cent. for the social services, it does not make you realise the actual fact that the social services have risen since 1913 from about £14,000,000 a year to £100,000,000 a year. I just wanted to mention that in case other hon. Members had been misled. I was very much surprised at the percentage, and did not at first realise it was the percentage difference between 1913 and now. Of course, it is perfectly obvious that when you have a war, and war debts, that the percentage of these debts is an enormous volume of the total increase.


I read the exact words.


I make no accusation against the hon. Member. I wanted to explain to my friends. The hon. Member must recollect that we have a reputation for being slow thinkers. I was very glad to hear my hon. Friend the Member for Ecclesall (Sir S. Roberts). He, naturally, coming from Sheffield, was very interested in new productive enterprise. I think the suggestion he made was very interesting and well worthy of consideration. The moat amazing suggestion was from my old Friend the Member for South Molton (Mr. Lambert-). I remember many years ago Mr. Asquith saying to me: "I have long ceased to be either surprised, or disgusted, at anything that can happen." In this matter the question of disgust does not come in, and I have ceased to be surprised at anything. While at first sight it seemed a very plausible suggestion we cannot forget what has been in the blood of this House for many centuries. The House has fought for supremacy in finance and whether another body was co-equal, or superior, whatever party was in power in this House, I think there would be a continuous fight until this House either went under or came out on top.

The hon. Member for North Salford (Mr. J. P. Morris) also made an interesting speech. He spoke about rationing the Departments. What does one mean exactly by rationing? You may say that in one way the Departments are rationed now. Their expenditure is carefully checked, and certain things are allowed and certain things are disallowed. By that rationing he means that when a Department has put in a figure, and when you have more or less got an agreement what that figure shall be, you say: "Then you are going to have 75 per cent. of that." The difficulty with that is that you cannot apply rationing to War pensions or to any Department where any large portion, or the whole portion, of its expenditure is statutory or contractual. I can assure my hon. Friends, as having had some experience both of Government Departments and of "axes," because I was alive when the Geddes axe was wielded, there are immense practical difficulties in the way of rationing. If you attempted to carry out rationing, even on a Department where the bulk of its expenditure was not a statutory or contractual obligation, you would in fact create great anomalies and great hardships, and you would probably do some very grave injustices. It is really too much like the unjust steward rendering his accounts.

I have dealt with a number of the speeches, and I am sure that everyone will feel that we have had a most useful Debate. These Debates on Wednesdays are of the greatest value for ventilating opinions. They are not, and cannot be, Debates in which Ministerial policy is set forth at any length. I was myself for so many years a private Member that I am always very jealous of these days for the private Members, and I am very glad to think that to-day has been a private Member's day, and that we have had no speech from any Front Bench except the one which, as a matter of courtesy, I am delivering to the House at this moment.

I should like to make one or two general observations before I sit down. The burden of this Debate has been the urging upon the Government not to relax for one moment the pressure for economy. Not much has been said directly to-day as to the direction in which economy is to be sought, but it is clear that in the minds of every Member is that desire, even if we cannot repeat —and no one expects us to repeat—the phenomenal reductions which were made between 1931 and 1932, yet they do want to feel that the Government will not relax their pressure, Departmental pressure all the time. They want to feel that the Government fully realise the pressure and the burdens of taxation. Anyone who has read the recent speeches of the Chancellor of the Exchequer will recognise freely that he regards the present burden as excessive. He also said the other day that to increase that burden would he disastrous, and he has given very definite pledges about economy. He said in a speech delivered about a month ago— While we cannot expect to save tens of millions of pounds by economy, there are economies which individually may not be of a very striking character, but put together they make up a substantial sum, and it will be the duty of the Government to show the House of Commons and the country that they will not tolerate unnecessary expenditure until it is possible again to reduce taxation. The scrutiny, I can assure the House, is always going on, and in the aggregate the savings are important. Out of this year's Estimates, excluding some 11 mainly token votes which show no change, well over half show a reduction, which is no mean performance after what was done last year, and of those that show increases three of them are increased solely by reason of the absence of receipts from Ireland, quite a number solely by reason of the fall in receipts from fees of different kinds, and a few have been increased by the growth of contractual charges. The watch is constant on expenditure, and I can assure the House that the Chancellor of the Exchequer, the Financial Secretary—a very important person in these days—and the whole of that most efficient staff at the Treasury are as alive to their responsibilities as any Member of this House would like to see them.

I want to say a word on the reduction of taxation. I want to tell the House how I regard it. I am not going to give my views of what ought to be done, because here again I should be impinging on the prerogative of the Chancellor of the Exchequer. I am not the Chancellor of the Exchequer, but I do not see, as he has said in that speech, from where reductions of tens of millions are to come. I believe that you will never get them unless some course were pursued, as has been advised in some quarters today, of gambling with the future. I believe that the real reduction of taxation will come when you are able to get an increase of revenue. That sounds a platitude, but until you can get the yield of the revenue, and especially those great Inland Revenue duties, unless you get an increase there, I do not see very much prospect of getting substantial reliefs apart from that. Those can only come by an improvement in trade.

I come back to the question of the employment of our people. There is nothing which has exercised my mind during the last 11 years more than that. Allusion was made to the election into which I led my party in 1923. I led them to it because I believed that there was nothing else at that time which would help us to fight the unemployment which was beginning and which I saw coming, and which I had little hope at that time of seeing remedied. I do not regret to-day what I did then. I think that we were perfectly right, but the whole situation to-day is still more difficult because now the prosperity of our industry is so wrapped up with the international situation. That makes the great importance of the World Conference, and there is no doubt, as has been said over and over again, we have to do all we can to get reduced tariffs in the world and to get the exchanges set in order. I hope that something in that last respect may be done in the negotiations we are having with our friends in the Argentine, but until world causes are set in order we cannot advance beyond a certain point.

Our situation to-day, I believe, bad as it is, is more favourable than that in any other country in the world, and I take hope from that fact. But I want the House to remember that there is one method of reducing taxation, and that is by reducing it at the expense of the social services, and this Government will not do that. It is perfectly true that many sacrifices were made and made in all classes. I hope that sometimes the party opposite, when they expatiate, and quite rightly, on the sufferings of the very poor, will not forget the real sacrifices which have been made by many poor in their glad consent for the sake of the country to knock 40 per cent. off their incomes from the funds. Our people made great sacrifices there, and, more remarkable, it was made a year after the great sacrifices were made by all the rest of the people. But naturally, when a year or 15 months have gone by after you have made your sacrifice, and you can yet see little that helps, not realising the sounder condition of the country and the more favourable environment for its expansion, but seeing only that work does not come, there is no wonder men's hearts fail them.

What we have to try and do in this House is to keep up our courage, and the courage in the country, with the certain hope that if we keep on courageously we shall do better. I have great hopes of the World Conference. I have great hopes of the position in which we find ourselves. I think that we are ready to take advantage now of what may come, and, while I do not like to use the expression of the Chancellor of the Exchequer, "Pegging away," because everyone interpreted it wrongly the other day, I would rather say: "Let us go forward with high courage and with hope practising those very virtues which the

House would have us do—economy and thrift—and we shall see better times." I would say, on behalf of the Government, that we accept the Motion. There is only one thing I will say about it. I want it to be clear the sense in which I accept the word "intolerable." I do not accept it in its literal meaning. I accept it in its meaning in good, classical English.

But one half-pennyworth of bread to this intolerable deal of sack !

Perhaps that intolerable voice is speaking. If I may take the word "intolerable" in that sense, I accept that Motion on behalf of the Government.

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

The House divided: Ayes, 277; Noes, 46.

Division No. 63.] AYES. [7.30 p.m.
Acland-Troyte, Lieut.-Colonel Craddock, Sir Reginald Henry Harbord, Arthur
Adams, Samuel Vyvyan T. (Leeds, W.) Cranborne, Viscount Hartland, George A.
Agnew, Lieut.-Com. P. G. Craven-Ellis, William Harvey, George (Lambeth, Kennlngt'n)
Albery, Irving James Crooks, J. Smedley Harvey, Major S. E. (Devon, Totnes)
Allen, Sir J. Sandeman (Llverp'l, W.) Crookshank, Col. C. de Wlndt (Bootle) Headlam, Lieut.-Col. Cuthbert M.
Allen, William (Stoke-on-Trent) Crookshank, Capt. H. C. (Gainsb'ro) Hellgers, Captain F. F. A.
Amery, Rt. Hon. Leopold C. M. S. Croom-Johnson, R. P. Heneage, Lieut.-Colonel Arthur P.
Anstruther-Gray, W. J. Crossley, A. C. Hapworth, Joseph
Applln, Lieut.-Col. Reginald V. K. Dalkelth, Earl of Herbert, Capt. S. (Abbey Division)
Apsley, Lord Davies, Maj. Geo. F.(Somerset, Yeovll) Hills, Major Rt. Hon. John Waller
Aske, Sir Robert William Davison, Sir William Henry Hoare, Lt.-Col. Rt. Hon. Sir S. J. G.
Astbury, Lieut.-Con.. Frederick Wolfe Denman, Hon. R, D. Hore-Bellsha, Leslie
Atkinson, Cyrll Denvllle, Alfred Hornby, Frank
Baldwin, Rt. Hon. Stanley Dlckie, John P. Horebrugh, Florence
Baldwin-Webb, Colonel J. Donner, P. W. Howard, Tom Forrest
Balfour, George (Hampstead) Doran, Edward Howltt, Dr. Alfred B.
Balfour, Capt. Harold (I. of Thanet) Drewe, Codric Hudson, Capt. A. U. M. (Hackney. N.)
Balnlel, Lord Duckworth, George A. V. Hudson, Robert Spear (Southport)
Barclay-Harvey, C. M Dugdale, Captain Thomas Lionel Hume, Sir George Hopwood
Beauchamp, Sir Brograve Campbell Duncan, James A. L. (Kensington, N.) Hunter, Dr. Joseph (Dumfries)
Benn, Sir Arthur Shirley Dunglass, Lord Hunter, Capt. M. J. (Brigg)
Blrchall, Major Sir John Dearman Ellis, Sir R. Geoffrey Iveagh, Countess of
Bird, Ernest Roy (Yorks., Sklpton) Elmley, Viscount James, Wing-Com. A. W. H.
Borodale, Viscount. Emmott, Charles E. G. C. Joel, Dudley J. Barnato
Bowyer, Capt. Sir George E W. Erskine, Lord (Weston-super-Mare) Johnston, J. W (Clackmannan)
Braithwalte, J. G. (Hillsborough) Essenhigh, Reginald Clare Jones, Henry Haydn (Merioneth)
Briscoe, Capt. Richard George Everard, W. Lindsay Jones, Lewis (Swansea, West)
Broadbent, Colonel John Fermoy, Lord Kerr, Lieut.-Col. Charles (Montrose)
Brown, Ernest (Leith) Flelden, Edward Broeklehurst Kerr, Hamilton W.
Brown,Brig.-Gen.H. C.(Berks.,Newb'y) Ford, Sir Patrick J. Klrkpatrick, William M.
Browne, Captain A. C. Forestier-Walker, Sir Leolln Knebworth, Viscount
Buchan-Hepburn, P. G. T. Fox, Sir Gilford Knox, Sir Alfred
Burnett, John George Framantle, Sir Francis Lambert, Rt. Hon. George
Cadogan, Hon. Edward Fuller, Captain A. G. Law, Sir Alfred
Campbell, Vice-Admiral G. (Burnley) Gault, Lieut.-Col. A. Hamilton Law, Richard K. (Hull, S.W.)
Caporn, Arthur Cecil Gibson, Charles Granville Lelghton, Major B. E. P.
Carver, Major William H. Gllmour, Lt.-Col. Rt. Hon. Sir John Lennox-Boyd, A. T.
Cautley, Sir Henry S. Glossop, C. W. H. Levy, Thomas
Cazalet, Thelma (Islington, E.) Goff, Sir Park Liddall, Walter S.
Chapman, Col.R. (Houghton-le-Spring) Goodman, Colonel Albert W. Lindsay, Noel Ker
Chapman. Sir Samuel (Edinburgh, S.) Gower, Sir Robert Lister, Rt. Hon. Sir Philip Cunllffe-
Clarke, Frank Graham, Sir F. Fergus (C'mb'rl'd, N.) Little, Graham-, Sir Ernest
Clarry, Reginald George Grattan-Doyle, Sir Nicholas Llewellin, Major John J.
Cobb, Sir Cyril Greaves-Lord, Sir Walter Lloyd, Geoffrey
Cochrane, Commander Hon. A. D. Gretton, Colonel Rt. Hon. John Loder, Captain J. de Vere
Colville, Lieut.-Colonel J. Grimston, R. V. Lumley, Captain Lawrence R.
Conant, R. J. E. Guinness, Thomas L. E. B. Lyons, Abraham Montagu
Cook, Thomas A. Gunston, Captain D, W. Mabane, William
Cooper, A. Duff Guy, J. C. Morrison Mac Andrew, Lt.-Col C. G. (Partick
Copeland, Ida Hales, Harold K. MacAndrew, Capt. J. O. (Ayr)
Courtauld, Major John Sewell Hannon, Patrick Joseph Henry McCorquodale, M. S.
MacDonald, Malcolm (Bassetlaw) Pickford, Hon. Mary Ada Somervllle, Annesley A. (Windsor)
McEwen, Captain J. H. F. Potter, John Sotheron-Estcourt, Captain T. E.
McKie, John Hamilton Power, Sir John Cecil Southby, Commander Archibald R. J.
Maclay, Hon. Joseph Paton Procter, Major Henry Adam Spears, Brigadier-General Edward L.
McLean, Major Sir Alan Ramsay, Capt. A. H. M. (Midlothian) Spencer, Captain Richard A.
Macmillan, Maurice Harold Ramsay, T. B. W. (Western Isles) Stanley, Lord (Lancaster, Fylde)
Magnay, Thomas Ramsden, Sir Eugene Stanley, Hon. O. F. G. (Westmorland)
Maklns, Brigadier-General Ernest Rankin, Robert Stewart, J. H. (Fife, E.)
Manningham-Buller, Lt.-Col. Sir M. Ray, Sir William Stewart, William J. (Belfast, S.)
Margesson, Capt. Rt. Hon. H. D. R. Reed, Arthur C. (Exeter) Storey, Samuel
Marsden, Commander Arthur Reld, David D. (County Down) Stourton, Hon. John J.
Martin, Thomas B. Reld, James S. C. (Stirling) Sueter, Rear-Admiral Murray F.
Mason, David M. (Edinburgh, E.) Remer, John R. Sutcllffe, Harold
Mason, Col. Glyn K. (Croydon, N.) Rentovl, Sir Gervals S. Thomas, James P. L. (Hereford)
May hew, Lieut.-Colonel John Renwick, Major Gustav A. Thompson, Luke
Merrlman, Sir F. Boyd Roberts, Sir Samuel (Ecclesall) Thomson, Sir Frederick Charles
Milne, Charles Robinson, John Roland Thorp, Linton Theodore
Molson, A. Hugh Elsdale Ropper, Colonel L. Tltchfield, Major the Marquess of
Morris, John Patrick (Salford, N., Rosbotham, Sir Samuel Todd, Capt. A. J. K. (B'wlck-on-T.)
Morrison, William Shephard Ross, Ronald D. Touche, Gordon Cosmo
Moss, Captain H. J. Ross Taylor, Walter (Woodbridge) Train, John
Munro, Patrick Ruggles-Brise, Colonel E. A. Ward, Lt.-Col. Sir A. L. (Hull)
Nail, Sir Joseph Runge, Norah Cecil Ward, Irene Mary Bewick (Wallsend)
Nail-Cain, Hon. Ronald Russell, Albert (Kirkcaldy) Ward, Sarah Adelaide (Cannock)
Nation, Brigadier-General J. J. H. Russell, Alexander West (Tynemouth) Watt, Captain George Steven H.
Newton, Sir Douglas George C. Rutherford, John (Edmonton) Wedderburn, Henry James Scrymgeour-
Nicholson, Godfrey (Morpeth) Rutherford, Sir John Hugo (Llverp'l) Whiteside, Borras Noel H.
Nicholson, Rt. Hn. W. G. (Petersf'ld) Samuel, Sir Arthur Michael (F'nham) Williams, Charles (Devon, Torquay)
North, Captain Edward T. Samuel, Samuel (W'dsworth, Putney) Williams, Herbert G. (Croydon, S.)
Nunn, William Sandeman, Sir A. N. Stewart Wills, Wilfrid D.
O'Connor, Terence James Sanderson, Sir Frank Barnard Wilson, G. H. A. (Cambridge U.)
Ormsby-Gore, Rt. Hon. William G.A. Savery, Samuel Servington Windsor-Clive, Lieut-Colonel George
Palmer, Francis Noel Scone, Lord Winterton, Rt. Hon. Earl
Patrick, Colin M. Selley, Harry R. Wise, Alfred R.
Peake, Captain Osbert Shaw, Helen B. (Lanark, Bothwell) Womersley, Walter James
Pearson, William G. Shaw, Captain William T. (Forfar) Wood, Sir Murdoch McKenzle (Banff)
Peat, Charles U. Shepperson, Sir Ernest W. Worthington, Dr. John V.
Penny, Sir George Shute, Colonel J. J. Young, Rt. Hon. Sir Hilton (S'v'noaks)
Percy, Lord Eustace Slater, John
Perkins, Walter R. D. Smiles, Lieut.-Col. Sir Walter D. TELLERS FOR THE AYES.—
Petherick, M. Smith, Louie W. (Sheffield, Hallam) Mr. Boulton and Sir J. Wardiaw-
Peto, Sir Basil E. (Devon, Barnstaple) Smith-Carington, Neville W. Milne.
Peto, Geoffrey K.(W'verh'pt'n,Bllston) Somervell, Donald Bradley
Adams, D. M. (Poplar, South) Grenfell, David Rees (Glamorgan) McGovern, John
Attlee, Clement Richard Grundy, Thomas W. Maclean, Nell (Glasgow, Gcvan)
Banfield, John William Hall, F. (York, W.R., Normanton) Mallalleu, Edward Lancelot
Batey, Joseph Hall, George H. (Merthyr Tydvll) Maxton, James
Bevan, Aneurin (Ebbw Vale) Harris, Sir Percy Milner, Major James
Buchanan, George Hicks, Ernest George Nathan, Major H. L.
Cape, Thomas Janner, Barnett Parkinson, John Allen
Cocks, Frederick Seymour Jones, J. J. (West Ham, Silvertown) Price, Gabriel
Cove, William G. Jones, Morgan (Caerphllly) Rathbone, Eleanor
Crlpps, Sir Stafford Klrkwood. David Salter, Dr. Alfred
Daggar, George Lansbury, Rt. Hon. George Tinker, John Joseph
Davles, David L. (Pontypridd) Lawson, John James Williams, Edward John (Ogmore)
Edwards, Charles Llewellyn-Jones, Frederick Williams, Dr. John H. (Llanelly)
Foot, Dingle (Dundee) Logan, David Gilbert Williams, Thomas (York, Don Valley)
George, Major G. Lloyd (Pembroke) Lunn, William
Graham, D. M. (Lanark, Hamilton) McEntee, Valentine L. TELLERS FOR THE NOES.—
Mr. C. Macdonald and Mr. Groves.

Question put, and agreed to.


" That this House views with anxiety the existing high level of taxation and diminishing revenues in this country, believes that this creates an intolerable burden on industry, and urges His Majesty's Government to consider means by which this burden may be lessened at the earliest possible moment."