TRANSFER TO EXCHEQUER OF BALANCE OF WAR LOAN DEPRECIATION FUND.

HC Deb 02 May 1933 vol 277 cc697-819

20. "That the unexpended balance of the Depreciation Fund established in connection with the Four per cent. War Loan (1929–1942) and the Five per cent. War Loan (1929–1947) shall, at such time as the Treasury may determine, be paid into the Exchequer."

First to Fifth Resolutions agreed to.

Sixth Resolution read a Second time.

Mr. HERBERT WILLIAMS

On a point of Order, Mr. Speaker, may I ask whether you will permit a discussion on this and the next Resolution simultaneously, as they both deal with mechanical lighters, and it would probably save time if both were discussed together. There is a point bearing on the relationship between Excise Duty and Customs Duty which it may be desirable to raise.

Mr. SPEAKER

If the House is in agreement with that suggestion, I have no objection.

3.41 p.m.

Mr. RHYS DAVIES

I beg to move, in line 6, after the word "shall," to insert the words: where the value of the mechanical lighter or the component part, as the case may he, exceeds one shilling and three-pence. The House will find on page 23 of the Financial Statement that the Chancellor of the Exchequer in the Budget of 1932–33 expected from the Customs Duty on matches and mechanical lighters some £2,000,000 and that the actual receipts were down to £1,706,000. The estimate for the year covered by the present Budget puts the receipts from the Customs Duty at £1,465,000. The figures on page 23 also cover the Excise Duty on matches and mechanical lighters. I first ask the right hon. Gentleman whether he can divide these figures, showing how much is expected from matches and in the case of mechanical lighters separately. It is quite appropriate that the present Government should attack mechanical lighters. Wherever they see a little light they try to put it out; but it is our intention in this case, as is our custom, to try to help the Government out of the difficulty.

There is at the moment a duty of 6d. on each mechanical lighter whatever the price may be and the Budget proposal is to increase that duty to 1s. 6d. Our Amendment proposes that that duty shall only apply where the mechnical lighter is priced at more than 1s. 3d. We cannot understand why a mechanical lighter which only costs 6d. on importation should be charged with a duty of 1s. 6d. At the moment, the duty of 6d. on the 6d. article represents a duty of 100 per cent. If the duty is increased as proposed in the Budget, then you will have a duty of 300 per cent. on the same article. Although we are dealing here with a comparatively small matter it is not without its serious aspects. There are three types of mechanical lighters sold in this country. I speak of the retail prices in this connection. There is the cheap type costing from 1s. to 3s. 6d. each; there is the medium type costing from 7s. 6d. to 10s. each, and there is the expensive type costing from one guinea upwards. I suppose all the Members on the other side of the House buy the latter type.

Major COLFOX

Why?

Mr. DAVIES

I do not want to be led from the main theme of my argument, otherwise I could reply to that question. There is a very strong argument against this universal duty on all types of mechanical lighters. If the Chancellor charges a duty of 1s. 6d. on the 6d. article and the same amount on the guinea article, there is an obvious unfairness in the incidence of the duty. It has to be borne in mind that there are no very cheap mechanical lighters manufactured in this country at all. I am informed authoritatively that the very cheapest type of this article is not produced here and that only those falling into the medium and costly categories are manufactured within our shores. According to the Budget proposals, there will be a duty of 1s. 6d. on the imported and 1s. on the home produced article. In order to make the argument clear it may be well to recapitulate those facts. There is to be a duty of 1s. on the home produced article and practically all the home produced lighters are of the medium or higher prices. There is a 1s. 6d. duty on the cheap article and practically all the cheap ones come from abroad. The mechanical lighter produced abroad and sold at a very cheap price will therefore bear a 300 per cent. duty. Of course, the ordinary working man is the person who buys the cheaper form of lighter, and it is grossly unfair to the man who can only afford the cheapest article to impose upon him a duty of 300 per cent., while only about 5 per cent. is imposed on the person who is able to buy the guinea article. That argument ought to appeal to the Chancellor of the Exchequer.

As I have said, we on this side are very anxious in these financial matters to help the Government out of any difficulties and they are in a serious difficulty over this Budget. I hardly think that even the suggestion which I am now making will help them to actually balance the Budget, but I will do my best to assist them.

It is argued that the imposition of this duty on the cheap article may ultimately prevent the importation of that article altogether. In that case, what would happen would be exactly what has happened in the case of beer. It would be found again, that when you increase the duty on any commodity there comes a stage at which revenue goes down. Those who have been on municipal authorities will remember the argument always used by the manager of a tramways department—that up to a point you can increase fares and increase your revenue, but you finally reach a point beyond the limit of the passenger to pay, and your revenue then goes down although your fares go up. [HON. MEMBERS "Income Tax."] I am not going to be drawn aside. It is a, habit of the Tory party to try to draw one from the main argument.

There is therefore a danger that the imposition of such a heavy duty on a very cheap article may prevent the Chancellor of the Exchequer from achieving his object. I was interested the other day to learn that there are millions of people in this country who buy the cheap mechanical lighters because they find that it is economical to do so. It is very much cheaper than to use matches, I am informed, and I am told also that seven out of every 10 of our people in this country use mechanical lighters. Consequently, it is to some of the very poorest very important indeed that this duty should not be increased.

Mr. PIKE

Does the hon. Member suggest that all the cheap lighters, in other words those below 6d. or 1s., are of foreign manufacture or foreign origin?

Mr. DAVIES

Those who know better than I do, and probably better than does the hon. Member, declare that in the main the cheap mechanical lighters used in this country are imported from abroad; and as a general statement I am informed that only the best and the dearest mechanical lighters are manufactured in this country. I would not be a bit surprised at that, because my experience has been that we have reached the stage in this land where we manufacture nothing but the best. Let me pass on to another point, and let me take an actual case to see what might happen. If the duty on a foreign lighter is 1s. 6d., it will mean that that lighter, costing, say, 3d. to purchase abroad, may easily sell in a shop in this country at as much as from 5s. to 7s. 6d. each.

Mr. HANNON

Why?

Mr. DAVIES

The hon. Member's mind is travelling too fast. He was travelling too rapidly for his own Government yesterday; but I shall not allow him to draw me off my main line of argument today. This, of course, is a picture of the way in which the capitalist system works. A paper has been put in my hands, by one who knows, from which it appears that if the cost of production abroad is, say, 3d., the tax will be 1s. 6d., and the Customs clearance charges and packing take another 2d. That brings the article at once from 3d. to 1s. 11d. There is no argument about that, because, as the hon. Member for the Moseley Division of Birmingham (Mr. Hannon) knows, it is his tariff policy that has brought up the price of the 3d. article to 1s. 11d. Let me now bring the same article to our own country and see what happens to the 1s. 11d. lighter when it gets into the hands of the capitalist class here. The importer will sell these—

Mr. HANNON

Does the hon. Member include the Co-operative Wholesale Society?

Mr. DAVIES

The hon. Member, I am sure, understands the difference between co-operative and capitalist efforts. If he does not, I will lend him a book on the subject.

Mr. HANNON

I have written a book on the subject.

Mr. DAVIES

Then perhaps the hon. Member will lend me that book. But, to return to my argument, we have now reached the price of 1s. 11d. from 3d., being the original cost of production abroad. The home importer, I am told, will ordinarily sell this article to the wholesaler, not for 1s. 11d., because he must have a profit, but, say, for 2s. 6d. [HON. MEMBERS: "Oh!"] Surely no hon. Member will dispute that the wholesaler, having an article at 1s. 11d. in his ware-house, will charge 2s. 6d. for it to the retailer. If he does not, let me ask them where the wholesaler will get his profit from? He must have it from somewhere, and consequently the 3d. article has already grown to 2s. 6d.

Mr. H. WILLIAMS

In a well-known establishment you can buy one of these lighters for 6d. and pay 6d. Customs duty at the same time, and that brings the total price up to 1s. Why do they have such smaller overhead profits than he now suggests?

Mr. DAVIES

I am speaking of the wholesaler, not the retailer. The hon. Member does not apparently understand how goods are produced wholesale and turned over to the retailer. He must take some lessons in connection with the wholesale and the retail trade, and then he will know. I am informed that when the retailer secures this article for 2s. 6d., it is not uncommon for him to charge as much even as 3s. 6d., 4s., or 4s. 6d. for that article. Suppose we put it at 35. 6d., which is not uncommon anyhow There is a feeling, of course, that all this taxation is being put on in order to help the great match producers in this country; that it is done not only to carry out the policy of the Government of shutting out all foreign-manufactured lighters, but to help great firms, like Bryant and May, who will sell more matches if we prevent the use of mechanical lighters altogether. I would call the attention of the right hon. Gentleman the Chancellor of the Exchequer to the very grave danger that he is running in proposing this tax, because I have looked up a bit of history about the taxation of lighters and matches of all kinds, and I find—

Sir JOHN HASLAM

May I ask the hon. Member to carry on his list of profits a bit further? He said that these lighters would be sold in the shops at from 5s. 6d. to 7s. 6d. He has gone forward with his mathematical sum and got up to 3s. 6d., but then he has stopped. Will he show us how he gets 5s. 6d. and 7s. 6d.? Will it only reach that price where they return something in the form of dividends?

Mr. DAVIES

The hon. Member represents a division next to mine, and he is now trying to draw me off the track, but I will respond by saying that I was dealing with the cheapest mechanical lighters of all, produced abroad at about 3d. or 6d. Where the mechanical lighter costs about 1s. or 2s. to produce, the retail price may be 7s. 6d. or more.

Sir J. HASLAM

I will ask the hon. Member one more question then. He gets the wholesaler's price of 2s. 6d. If the wholesaler is charging 2s. 6d. for this article, will any retailer go to the wholesaler and pay him 2s. 6d. when he can go to nothing to over 6d. in the stores? I have had some experience of the retail trade, as has my hon. Friend, and I think the retailer is wide enough awake to purchase in the cheapest quarter. Why should he go to the wholesaler when he can buy in the retail shops much more cheaply?

Mr. DAVIES

Yes, but the hon. Member is thinking of the past. We are now looking to the future. I can assure him that Woolworth's who have sold these mechanical lighters up to now for 6d., plus 6d. duty, will be compelled to charge the 1s. 6d. duty on somebody in future, and I do not know how the 6d. store is going to get over the difficulty unless it can in future charge 6d. for the lighter and 1s. 6d. duty.

Mr. PIKE

They are British made at 6d.

Mr. DAVIES

They are not producing the very cheap article in this country so I am informed.

Mr. PIKE

Does the hon. Gentleman state definitely that the stores to which he has referred are only selling foreign-made lighters at sixpence, plus a sixpeny duty? Woolworth's sell British-made lighters at 6d., plus the sixpenny duty.

Mr. DAVIES

I do not think I have mentioned Woolworth's.

HON. MEMBERS

You have.

Mr. DAVIES

Then I correct myself. The firms that have been selling imported mechanical lighters in the past will have to add the new duty to the price. But let me come back to the point at which I started. There has been introduced into this Debate a good deal of humour which is not at all warranted. I ask the right hon. Gentleman to follow me in my final words. Once upon a time there was a Chancellor of the Exchequer who produced a tax on matches, and he got printed on each box, "From light a little lucre." I wonder what words the present Chancellor of the Exchequer is going to put on mechanical lighters? I am sure he will find something appropriate. It is a fact, and that is the burden of our complaint, that the new duty will put 300 per cent. on the price of the cheapest form of lighter which is bought in the main by the working classes, whereas only 5 per cent. will be borne by way of duty in the case of lighters which the well-to-do are able to buy.

4.2 p.m.

Major HILLS

The hon. Gentleman who moved the Amendment told the House that the Government were extinguishing light and that he was going to bring light into this Debate. He brought a good deal of humour into it, but I do not think he brought very much light. Let me remind him that we are here discussing a tax, and that we have to consider the comparative value in light of the lighters and the matches, and the comparative amount of tax that each ought to bear from that standpoint. Of course the public are entitled to buy matches or mechanical lighters just as they please, but both from the revenue point of view and from the standpoint of fairness to the trade, a lighter ought to bear its fair share of the burden which the State has laid upon lights generally. At present, with the sixpenny duty, the lighter pays about one-eighth of the duty paid by the corresponding amount of matches. Very big claims are made for the lighting power of some of these mechanical lighters. A very ordinary claim is 10,000 lights in one lighter. Under the old duties 7,200 matches would have paid 4s. 2d. or 4s. 4d., according as the matches were home-made or imported.

Mr. RHYS DAVIES

Has the right hon. and gallant Gentleman ever calculated the tax on the petrol in the lighters?

Major HILLS

It is very small indeed, and hardly comes into the calculation. Besides, it is paid for by the difference between the 10,000 lights that you get from the lighter and the 7,200 matches which pay a duty of 4s. 2d. In fact the lighter which gives 10,000 lights, in the past has paid a duty equivalent to the duty on only 831 matches. So I hope I have convinced the hon. Gentleman that as far as light-giving power is concerned the lighters are very much under-taxed. Now take the revenue position. The average imports are about 2,236,000 lighters. The home production in the five years 1928–1932 was about 350,000, and it has now risen to 888,000. To take round figures, about 2,500,000 lighters are put on the market every year. They pay only a very small sum in duty to the Chancellor of the Exchequer. We may reckon that if 2,500,000 lighters are imported or made every year, there are about 2,500,000 lighters in use at this time. Each one of the inhabitants of these islands consumes eight matches a day, but of course the smoker consumes more than eight, and if you put the consumption of matches as 20 for each smoker, you get a tax on the matches about eight times that on the lighters.

The difference is further accentuated when you come to the other sort of lighter, what is called the pistol or electric lighter, used for the lighting of gas stoves. There you have almost unlimited replenishment possible, and you have your lights at a much cheaper rate than with matches. Even with the increased duty proposed it will be seen that the matches will pay a far heavier share to the revenue than the lighters. It is not entirely the case that all cheap lighters are imported. The manufacture of cheap lighters has been going on in this country. It increased very largely in the last year or two, and it will increase further under the preference now given. Even with this 1s. 6d. duty on the imported article, and 1s. on the homemade article, the mechanical lighter will be grossly under-taxed. If the hon. Gentleman wants cheap lighting—it is no doubt a desirable thing—he has to persuade the Chancellor of the Exchequer to reduce the tax all round, both on matches and on mechanical lighters. In the present condition of the revenue that is a task which I should not envy him, and I do not think that even he, with all his persuasiveness will get very far.

4.8 p.m.

Colonel WEDGWOOD

This is not a revenue tax, even if it is a protective tax. It is a method of compelling people to use matches for the benefit of Kreuger's innocent victims. In these days, if there were vestal virgins and vestal fires they would be made illegal.

4.9 p.m.

Mr. H. WILLIAMS

Let me say how glad I am that the Chancellor of the Exchequer has decided to make the changes contained in the present Resolution, and in the one which preceded and the one which followed, because for some years I have been urging that this large revenue-producing industry ought to be granted some measure of protection. I am rather wondering how the hon. Member who proposed the Amendment is going to make his peace with the right hon. Gentleman the Leader of the Opposition. I well remember that six years ago I sought an invitation to visit the great factories in the right hon. Gentleman's constituency, to the splendid condition of employment in which I had heard him pay a tribute. How the right hon. Gentleman is going to reconcile support of this Amendment with the desirability of maintaining the industry at its maximum at Bow and Bromley, I do not know.

I want, however, to raise the question, not of the relationship between the Match Duty and the Mechanical Lighter Duty—I had intended to do so, but it has already been dealt with very adequately by my right hon. and gallant Friend the Member for Ripon (Major Hills), who speaks with special experience—but to draw the attention of the Chancellor of the Exchequer to a curious difficulty which has arisen, largely, I understand, on administrative grounds. Those who were present in this House in 1928 will remember that in that year a duty of 6d. on imported and home-produced lighters was first introduced by the right hon. Member for Epping (Mr. Churchill), because it was thought undesirable that there should be a duty on matches and no corresponding duty on lighters. My right hon. Friend the Member for Ripon last year expressed the view that lighters should be charged 6s. each in order to pay a comparable duty.

Major HILLS

That is the comparative duty.

Mr. WILLIAMS

I do not think we can penalise things to that extent. I am, however, in favour of the increase now proposed, and of its being made protective, just as in the case of matches. Whether the protection is adequate only experience can show. There are two items of protection in this—the protection of one industry against another, and the protection of the British matchmaking industry and lighter industry against the corresponding foreign industries. In 1928 all the foreign lighters in the country were naturally free of duty, because they had already passed the Customs, and as there was no duty there were no lighters in bond. Those in the hands of the British manufacturers that were complete were also, I understand, free of duty, and the duty applied only to those that were completed after the date on which the Budget Resolution took effect.

On this occasion the situation is different. We are increasing the existing duty. In respect of the foreign lighters that are in the country but have not paid the duty, the situation is quite saisfactory; as they come out of bond they will pay the extra shilling. On the other hand there are very large stocks, I am informed, of foreign lighters in the possession of the wholesalers and retailers, which will be sold on the basis that they have paid only the sixpenny duty. There are substantial stocks, I am told, of British-made lighters in the hands of manufacturers that have in some cases paid the original sixpence duty. They are still in the manufacturers' warehouses. They are accordingly liable to the new sixpence, and for a period of some months, until the foreign duty-paid stocks have been exhausted, the British lighters will be subject to a duty of 1s. and the foreign lighters to a duty of only 6d.

I raise this point because I hope that the Chancellor of the Exchequer can deal with it by some administrative method. I have already taken the liberty of sending him particulars of a factory in my own constituency which makes all classes of lighters and employs about fifty people. The proprietor of that factory telis me that as far as he can see, judging by the experience he has already had, and by conversations and communications he has had with the large distributors in this country who sell his lighters, for a period, until the foreign stocks which have paid the duty of 6d. only have been exhausted, these distributors will not be able to place any orders with him, because there will be 1s. duty placed on the lighters included in any such new orders. I hope that the Chancellor will be able to protect the employment in my constituency for the temporary period until the situation is cleared up, and also the corresponding people employed in other constituencies. I do not know whether my suggestion calls for an Amendment to the Budget Resolution, or whether, as I think, it can be done merely by a rewording of the customary circular which is sent out by the Customs and Excise authorities when a change in duty is made. I have studied the circular sent out in 1928 and the one sent out this year, and there seems to be a difference in wording. If the Chancellor could only adopt what was done in 1928 this disability on my constituency and on others would be avoided.

4.16 p.m.

Sir JOHN WARDLAW-MILNE

The difficulty which the hon. Member for South Croydon (Mr. H. Williams) has pointed out is a very real one, and I do not know that there is any way of getting over it. I had not myself thought of the suggestion that he made with regard to the change in the wording of the circular, but if that could get over the difficulty it would be a very good thing. Apart from that, if there is a temporary disadvantage to the British manufacturer, that may well be the case for a few months until the foreign stocks have been cleared. But even if that be the case, I congratulate the Chancellor and thank him for putting on this duty. I had a case some time ago of another factory in which some £3,000 had been spent in laying down machinery for the manufacture of lighters, and no trade of any extent was possible because of the large stocks of Swiss and German made lighters that were being imported into this country. I am not clear whether the difference between the Excise and the Customs duties is sufficient to protect the trade, but whether that be the case or not I want to thank the Chancellor for helping the industry. It will undoubtedly give some employment in this country, though not on a great scale, but it will do something to help us to supply ourselves with our own manufactures.

4.18 p.m.

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

I congratulate my hon. Friend the Member for Westhoughton (Mr. R. Davies) for having started an interesting discussion, to which he has been the chief contributor. The Resolution increases the Customs duty on imported mechanical lighters from 6d. to 1s. 6d. The Amendment would limit that increase of duty to lighters which exceed 1s. 3d. in value. The consequence of accepting such an Amendment would be that the cheaper lighters would remain dutiable at 6d., but if the cheaper lighters were made at home they would be dutiable at 1s. Therefore, unless some change were made in the law, which I understand my hon. Friend does not desire, you will be placing a direct penalty upon the domestic industry. Whatever my bon. Friends may think, I am sure that the House of Commons would not agree to a proposal such as that. I cannot help feeling that my hon. Friend misconceived the whole purpose of the duties. The purpose has been explained by my right hon. and gallant Friend the Member for Ripon (Major Hills).

What is it we seek to do? We do not seek to penalise the industry of mechanical lighters. We seek to relate the duty on lighters to the duty upon matches. We depend for about £24,000,000 a year of revenue on matches. If, therefore, you were to allow the mechanical lighter to get off at a cheaper rate of duty you would not only jeopardise your revenue but injure the match industry in this country. That plainly would not be fair. How, then, are we to arrive at some method of relating these two imposts? Our problem is to ascertain the extent to which the lighter displaces matches. It was not necessary for my hon. Friend to go back to Sir Robert Lowe and his duty on matches. That duty was continued by the Chancellor under whom the hon. Gentleman served. We have had four years experience of the duty. The duty of 6d. was equivalent to a duty on less than 900 matches, that is, two and a-half matches a day per year. I do not think any hon. Member would contest that that duty was insufficient. We now make the new duty equivalent to 2,270 matches; that is equivalent to six matches a day for a year. With these figures I hope that my hon. Friend will agree that far from the industry of making mechanical lighters having been penalised, it has escaped in the most remarkable fashion. It remains only for me to say upon the Amendment that the loss of revenue involved in the Amendment would, as far as we can calculate it, be about £50,000 a year. I do not say that it would be exactly that because it is difficult to compute. The Mechanical Lighter Duties, both Customs and Excise, are estimated to bring in £130,000 a year. At any rate, my hon. Friend's Amendment would involve us in considerable loss besides doing a great injustice both to the revenue and to the match-making industry.

I now pass to the question raised by my hon. Friend the Member for South Croydon (Mr. H. Williams). He and the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) feared lest the stocks in the hands of British manufacturers of mechanical lighters already made would have to pay the higher rate of duty, that is to say, the duty of 1s. and would therefore be deprived of their advantage as compared with the imported article which had paid a duty of 6d. and which is now out of bond. In the first place, no duty has been paid by these manufacturers, as my hon. Friend seemed to think. They only pay the duty when they deliver the goods. Apart from that small error in my hon. Friend's supposition, he rightly wants to know whether these stocks in the hands of manufacturers will have to pay at the increased rate of 1s. It is customary in all Budget duties that the duty should become payable from the moment it comes into force, and there are few if any exceptions to that rule. However, my right hon. Friend the Chancellor of the Exchequer was impressed by f he point raised by my hon. Friend, and I think that he and the hon. Member for Kidderminster may rest assured that this Resolution will permit us to charge the lower rate of duty on lighters that have already been manufactured, and that are in the hands of manufacturers but have not yet been delivered. I hope that that will give satisfaction to my hon. Friends.

Mr. H. WILLIAMS

I wish to express my grateful thanks to the Chancellor of the Exchequer.

4.25 p.m.

Mr. HOLDSWORTH

With reference to component parts, do I understand from the Resolution that on a spring which might cost 1d. there might be a 1s. 6d. duty? I can see a difficulty in the replacing of small parts which might cost only a copper or two, and from my reading of the Resolution they may have to bear a 1s. 6d. duty.

Mr. HORE-BELISHA

My hon. Friend realises, I am sure, that we are not in Committee, and it is for that reason that I waited until everyone had risen before I rose to reply. I can only answer any further questions by the courtesy of the House, but I can assure my hon. Friend that he is right, and that the duty is not only on the mechanical lighter but on any of the component parts except the flint, the object of the duty being in this case to encourage the manufacture of these lighters at home.

Amendment negatived.

Motion made, and Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Seventh Resolution agreed to.

Eighth Resolution read a Second time.

4.28 p.m.

Mr. MAINWARING

I beg to move, in line 6, after the word "shall," to insert the words: except the rebate with respect to kerosene. This Amendment is intended to remove a certain oil from the Resolution. I have in mind the position of that section of the rural population which of necessity is bound to depend upon oil as the source of light for its homes. I am sure it will be clear to the House that that section is the one that is least able to bear the additional taxation. In the Budget of 1928 a similar proposal, but of a heavier character, was suggested, but, to the credit of the Chancellor of that day, he withdrew the proposal before it came before the House. The only justification suggested for its reintroduction now is that on this occasion it is a smaller amount, but the principle is the same, because it is an imposition upon a section of the population least able to bear it.

Apart from those who use the oil for domestic purposes, a number of industries will also be affected by being subjected to what may well be an unbearable tax. Involved in this question is the necessity for dividing the heavy oils into the two categories into which they fall, lubricating oils and other heavy oils. For some information regarding the effect of the proposed duty on these two classes of oil, I would refer hon. Members to a series of enlightening letters in to-day's "Daily Telegraph." I cannot answer for the correctness of the information given there, but I presume the writers have some degree of knowledge of the subject. The first letter mentions that oils in the lubricating oil class are priced in the neighbourhood of £40 per ton, while oils used as heavy oil fuel are round about 50s. per ton. It is obvious therefore that unless these two classes are separated, the incidence of the duty upon them would differ very much indeed. In one case it would amount to an increase of 2 per cent. in the price, while in the other it would amount to 40 per cent.

The writer of a letter interested in the manufacture of steel castings refers to the fact that the price of the oil used in that industry will be increased by 33 per cent., he is informed. In the same way, hotels and restaurants, which are now displaying a tendency to transform their ovens into oil-burning ovens, will be materially affected by the increased duty on oil fuel. One man interested in the hotel and restaurant business, referring to the two classes of oil, points out that in one case an extra expenditure of £3 10s. will be placed upon him for lubricating oil, whereas the same tax applied on oils—

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

On a point of Order. Does not this Amendment refer to kerosene only?

Mr. SPEAKER

I was listening to the hon. Member, and thinking his speech would be more appropriate on the Question, "That this House doth agree with the Committee in the said Resolution." On the present Amendment he ought to confine his remarks to kerosene.

Mr. MAINWARING

The two oils require to be separated for the purposes of this taxation, but I shall be quite content to rest my case on the first charge I made, that an important section of the population is being asked to bear an additional burden in respect of the oil it uses for lighting purposes. Those people live in those parts of the country where social amenities are at their lowest. The proposal I am making to exempt kerosene commended itself not merely to the House of Commons but to the whole country in 1928, when it was felt to be unfair and unjust to ask these people to bear this burden, and I do not think the country is to-day any less favourable to the removal of this burden. I make a special appeal to the Chancellor of the Exchequer to agree to the Amendment.

Mr. BATEY

I beg to second the Amendment.

4.35 p.m.

Mr. HORE-BELISHA

The hon. Member has moved an Amendment to exempt kerosene. The position is this. All hydrocarbon oils imported into this country since 1928 have been subject to a duty under the Finance Acts, the present rate being 8d. a gallon, but a rebate equivalent to the full amount of the duties has been allowed upon the heavy oils. Under the Import Duties Act every import coming into this country is subject to the general ad valorem duty, unless it be on the Free List, or unless it be subjected to taxation under some other enactment. Therefore, we have this anomaly arising, that heavy oils, which are not taxed at all, except in theory, escape because they are in form though not in fact subjected to duty under the Finance Acts. In these circumstances, the Import Duties Advisory Committee cannot touch these heavy oils. It is to remove the anomaly under which heavy oils enjoy a quite peculiar exemption from tax that my right hon. Friend the Chancellor of the Exchequer has brought forward his proposal. The Mover of the Amendment wishes to prolong the anomaly as far as kerosene is concerned, upon the ground, presumably, that a duty upon it would inflict some hardship upon the cottage homes. He has recalled that the right hon. Gentleman the Member for Epping (Mr. Churchill) withdrew his tax upon kerosene in 1928, when the grievance of the cottage homes was represented to him. But the right hon. Member for Epping was at that time placing upon kerosene a tax four times as great as that which we are now suggesting, and I do not think anybody could represent our proposal as being a hardship upon the cottage homes, for the very adequate reason which I shall give.

The price of kerosene has fallen between 3rd March and 6th April by 1½d. per gallon and consequently, in spite of this penny tax to be placed upon kerosene, the price of it will still be cheaper than it was before 3rd March. In those circumstances I am not surprised that the claims put forward in 1928 have failed to find any echo to-day. But there are technical reasons, beside that very human reason, why we cannot accept the Amendment. I am informed that kerosene is easily capable of use in certain Diesel engines, and therefore, if we sought to give some exemption to kerosene intended for the cottage homes it would be impossible to distinguish between that which was intended for the cottage homes and that which would be used for other purposes. In the circumstances, I hope the hon. Member will not press the Amendment.

Mr. MOLSON

Can the hon. Gentleman tell us what the price of kerosene was in 1928 and what it is to-day? I think is has fallen.

Mr. HORE-BELISHA

On 25th January, 1928, several months before the Budget, it was 7½d. a gallon. On 1st March, 1929, it was 9d.; on 3rd March, 1931, 7½d.; on 6th April this year 6d., and on 26th April—after this duty came into force—7d. The wholesale price is therefore now lower than it has been at any time during the last five years, except for the three weeks immediately prior to the Budget.

Mr. LUKE THOMPSON

May I ask the hon. Gentleman whether he has taken into account the extended use of these heavy hydrocarbon oils in industry and the extent to which he is adding to the fuel expenses of certain industries?

Colonel WEDGWOOD

Does not that question arise on the next Amendment?

Mr. SPEAKER

This Amendment deals with kerosene.

Mr. THOMPSON

If I may raise the question later it will be all right.

Mr. PIKE

The hon. Gentleman told us that there would be great difficulty in differentiating between kerosene for the homestead and kerosene used in Diesel engines, Does not the same difficulty arise in the case of kerosene used by the vessels engaged in the fishing industry and kerosene used in the homestead? If so, how is the difficulty overcome in that case?

Amendment negatived.

4.41 p.m.

Mr. GEORGE HALL

I beg to move, in line 6, after the word "shall" to insert the words: except as regards oil mixed with coal for the purpose of making fuel. I must apologise to the House for submitting a manuscript Amendment. The purpose of it is to prevent hydrocarbon oils which are being mixed with coal for fuel purposes from being taxed. As most hon. Members know, several processes for making what is called colloidal fuel are at present the subject of investigation. It is said that some of processes have overcome the technical difficulties, and that there is every prospect, in the near future, of this mixture being substituted for the plain oil now being used for fuel purposes. Not only could such a mixture be used in marine boilers, but it is said that something like 200,000 tons of oil are being used in London alone for such purposes as bread and biscuit making, metal work, heating in restaurants and hotels, and so on.

Mr. CHAMBERLAIN

Mixed with coal?

Mr. HALL

No, this is plain oil. I am showing the possibilities that exist for the use of this mixture in places where they at present burn plain oil. I am told that the change could be made without any alteration to the apparatus. If this mixture of coal and oil could be adopted it would give a fillip to the coal industry. Colloidal fuel is a mixture, in some cases, of 60 per cent. coal and 40 per cent. oil, and in some cases of 50 per cent. coal and 50 per cent. oil. I am sure the Chancellor of the Exchequer would not like to impede any progress which is being made in bringing this mixture into use. We are not quite sure what the position would be regarding some of these hydrocarbon oils which are being used in the manufacture of some patent fuels. In South Wales there is a, very extensive patent fuel industry. In some cases tar is used, but in other cases heavy oils enter into the composition of these patent fuels, and I feel sure it would not be the intention of the Chancellor to interfere in any way with a very hard pressed industry. I hope that the Chancellor will give some attention to the aspect of the question which I have placed before the House.

Mr. HANNON

Would this be the time to deal with the question of the taxation of oil produced from coal or is the Motion confined entirely to the mixture of oil with coal?

Mr. SPEAKER

That would be in order on the Question, "That this House doth agree with the Committee in the said Resolution."

4.46 p.m.

Mr. CHORLTON

This Amendment is rather important. As was stated by the Mover, there is a very great possibility of the successful use of colloidal fuel which would have the advantage of using coal while maintaining the convenience of oil. The particular instances which he gave may affect the following Amendment also, in the sense that the industries which use fuel oil through burners for the purpose of heating might very possibly use colloidal fuel. The Chancellor should very seriously consider whether this is the time to raise the incidence of the duty or the method by which it has been expressed. I rather hoped to raise these points on the following Amendment, but it has been brought out quite clearly that when you are considering fuel of the relatively low value of £3 per ton, the rebate proposed now, leaving a penny per gallon as the actual duty, is excessive.

Mr. SPEAKER

This Amendment deals with oil mixed with coal only and it does not deal with oil fuel as such.

Mr. CHORLTON

No, Sir, it does not, but it is the same oil, and it is very difficult technically entirely to distinguish them. Unfortunately I am one of those who have spent a long time in oil and coal, so to speak, and I was trying to make the matter a little clearer and to draw the attention of the House to the need for considering the two together. However, if I am out of order in speaking any more I will reserve my further remarks until the consideration of the Amendment which follows.

4.49 p.m.

Mr. PIKE

The Chancellor should be absolutely certain that the coal which will be used in equal parts, or to whatever extent it may be used, is produced from the pits of this country, before he accepts this Amendment. British coal in the production of the oil will give employment not only to labour but to capital, and so will increase the possibility of prosperity in the industry, but if coal is to be used of German or any other foreign origin, that will be of little benefit to the oil industry in this country and to those who depend upon that industry for their livelihood. The hon. Gentleman who moved the Amendment will recognise that unless some precaution is taken against the possibility of the use of the foreign product, greater obstacles will be created in the way of the British mining industry and of the oil industry generally, than already exist.

4.50 p.m.

Mr. CLARRY

I think the hon. Gentleman who spoke last must be under some misapprehension. There is no question of the use of foreign coal in colloidal fuel. I was not aware that this point was going to be raised. Although the object that I have in view is identical with that of the hon. Member for Aberdare (Mr. G. Hall), I reason from quite the reverse point of view, which is that there should be a heavier tax on the oil used for colloidal fuel. Experiments that have taken place in connection with colloidal fuel do not represent a large quantity of oil, but there is an endeavour to produce a British oil specially for the purpose from British coal. It seems that there is a new line of effort in the endeavour to produce new British oils to mix with coal for the purpose of making colloidal fuel. For that reason I cannot support the Amendment of the hon. Member for Aberdare, although our objects are identical.

4.51 p.m.

Mr. MOLSON

I congratulate the hon. Member for Aberdare (Mr. G. Hall) on bringing forward the only helpful and constructive suggestion I have heard come from the Labour benches. He will recognise that we are at a disadvantage in dealing with an Amendment which is only in manuscript form. We are almost in general agreement in encouraging anything that can be done to stimulate the use of home-produced fuel rather than imported oil, and that should receive the support of the Government and of the House, but it would be a mistake if the Government came to a conclusion on this matter when we have had no time to consider it. I wonder whether the Government would be prepared to consider if by adopting the hon. Member's proposal they would be assisting the development of colloidal fuel, or whether, as has been suggested from other parts of the House, it would have the opposite effect. I wonder whether the Government would be prepared, not to give a definite answer to this Amendment, but to consider it.

4.52 p.m.

Mr. HORE-BELISHA

I was a little surprised when the hon. Member for Aberdare (Mr. G. Hall) moved this Amendment and pleaded with the Chancellor to give encouragement to a hard-pressed industry. It is the purpose, or a distinct part of the purpose, of my right hon. Friend to give encouragement to the very much depressed industry of coal by placing a duty upon oils that are used in competition with it. The hon. Member seeks to give further encouragement by excepting from the duty oil mixed with coal. In so far as the mixture consists of British coal, of course it will not be subject to tax, and in so far as it consists of oil produced from British coal or from shale it will not be taxed. The hon. Member says that it would be useful to adapt present oil installations in hotels and elsewhere to the use of colloidal fuel, but may I point out to him that colloidal fuel will gain by the imposition of this duty? If oil fuel is a penny a gallon, that is, £1 per ton, colloidal fuel, which is part oil and part coal, will go up only by one halfpenny a gallon, and therefore will have a 10s. per ton advantage over the pure oil. The hon. Member will see also, as has been pointed out by the hon. Member for Newport (Mr. Clarry), that coal already has one advantage by the tax, and in so far as the mixture in which he is interested is concerned it has another advantage. I hope, therefore, that he will not press his Amendment.

Amendment negatived.

4.55 p.m.

Colonel WEDGWOOD

I beg to move, in line 6, at the end, to insert the words: provided however that the tax on such oils shall in no ease exceed 15 per cent. ad valorem. I have put two Amendments on the Paper suggesting a modification which the Chancellor of the Exchequer might make without waiting for the introduction of the Second Reading of the Finance Bill. I am sure that it is not his intention specially to penalise selected industries in this country. The tax, from the point of view of kerosene and of petrol, is the very small one of a penny in the gallon, but when that tax of a penny in the gallon is applied to heavy oils the value of which is only 2½d. in the gallon, it becomes of crushing proportions. When we remember that the use of these heavy oils has only come in recently and has been adopted particularly by progressive firms anxious to improve British products and to use mechanical exactitude in firing, firms that are anxious above everything else to cut expenses so as to compete in the neutral markets of the world, we see that it would be a disaster suddenly to apply to these firms—not even to entire industries but to isolated firms in each industry—a penal tax on account of their progressive and up-to-date character. No sooner did this tax appear, than there was opposition to it in every quarter and in every newspaper. I would call the attention of the House particularly to the words of Sir Charles Hipwood, director of the National Union of Manufacturers, who said, in a speech on Saturday: Industrialists are very much concerned about the effect of the proposed duty on fuel oil in a number of industries, especially in the Midlands. I call the attention of the Chancellor to the Midlands. [HON. MEMBERS: "Why?"] He represents the Midlands in a dual capacity, not merely as Chancellor of the Exchequer, but as a Mem- ber of this House. The quotation proceeds: Coal and coke are much cheaper fuels than oil, on a heat-producing basis, but oil is the cheapest source of accurately-controlled heat and it is for technical reasons being adopted in many modern factories. That is Sir Charles Hipwood, and everybody knows that what he was saying is correct. Oil has been adopted in tube manufacture, for ships' boilers, for trawlers and for central-heating purposes, but above all, from my point of view, it has been adopted in certain pot and glass factories. I would ask the House to observe what it is that we have adopted in the pot factories. We have adopted for firing, one of those tunnel arrangements where the ware goes in at one end of a long tunnel and as it passes slowly through is heated by fuel oil for a period up to 12 hours by continuous heat. Patent methods of increasing or decreasing the heat are employed, so that you get a most perfectly cooked plate. In the old system the loss by coal firing was very considerable, because heat varied in different parts of the oven and at different times—because of smoke and sulphur. It is by this new system, which is more costly than the old, that you can save money and get fewer bad pieces and fewer seconds. The pottery industry is unlike every other industry, in that you cannot be sure, when you start making a thing, that you will be able to finish it. The percentage of bad may amount to 25 per cent. in the firing, and the percentage increases as the different stages go on. It is therefore of infinite importance to us to get a certainty that we can produce the right ware from the oil fired glost ovens.

Mr. PIKE

Could not that difficulty be overcome by automatic coal-stoking machines?

Colonel WEDGWOOD

We have tried various methods. We have tried firing with producer gas and Mond gas, and for enamelling purposes we have electric ovens, where the heat is not so great. But of all these methods we have come to the conclusion that the heavy oils are much the best. Then, of course, there is the cost of installing this plant. The cost of failure in trials has been considerable. The cost of each of these ovens is about £24,000. So a very heavy expense is in- curred in order to produce the best ovens to enable British trade to keep its head up all over the world. I do not know if the same arguments apply to glass or tubes, but those are the considerations which have driven us to employ oil.

In passing, I may say that oil does away with some of that horrible smokiness that destroys the beauty of our cities. Here you have a quite up-to-date system; but along come the Government and say, "We want to help the coal industry; therefore we must put a tax upon fuel oils which will destroy the property of those people who have invested their money in the alternative form of heating and will drive them back to the old-fashioned method." That is not a way of encouraging British industry. We still use coal for half the purposes in the factory; we still use it for the biscuit ovens and for firing our engines, and we burn anything up to 5,000 tons of coal a year for these purposes. If by special taxation you hit at our special means of producing good ware, you will injure the coal industry, because our trade will go down. We shall buy less coal, and consequently the coal trade will suffer.

Every hon. Member of the House, however, knows perfectly well that it is the most futile thing on earth to try to put back the clock. You do not make it a penal offence to run a motor car in order to save the railways, nor did you to use railways in order to save the canals. Government action cannot wisely be used for the purpose of stereotyping bad old methods and preventing industrialists from going ahead on new lines. It is silly to put a tax on the raw material of industry of this country at any time. The whole difficulty from which we are suffering is our inability to get costs down. We want, at the present time, to cut everything to the bone in industry in this country. Here come the Government, however, and add to the cost of our principal raw material in the pottery industry. That is a barren thing from the point of view of the recovery of trade. It is a bad thing even to put an ad valorem duty on to this raw material of heat; but it is not merely foolish, it is iniquitous, to make that tax a penal one by levying it at so much a gallon instead of so much per cent. If the Government is convinced that it must do something to raise money—though I should prefer to unbalance the Budget—for goodness sake let it raise it equitably from all users; let it not leave particular industries and particular firms with a sense of injustice in being singled out specially for heavy taxation.

I believe that the Government probably tumbled into this tax without quite knowing what was affected or how the industry, and the foreign trade particularly, of this country would suffer. I do beg the Government, however, if they cannot remove this tax altogether from the raw materials of a great many of the industries of this country, at least to accept my Amendment, which limits that tax to 15 per cent., instead of leaving it, as at present, such a tax that it would be nearly 40 per cent. and might soon be 50 per cent. of the cost of the fuel we use.

5.6 p.m.

Sir ISIDORE SALMON

I feel that the Chancellor of the Exchequer should give very serious consideration to the effect of this tax on heavy oils. The previous speaker has said that it would mean an addition of 40 per cent. to the fuel bill of anyone who is using fuel oil to-day. If it is imposed with the intention of trying to help the coal industry, I would remind the Chancellor that in many cases it would be impossible to change the method. Manufacturers would be compelled to continue with oil, and the Government would therefore be penalising industry, because they would be taxing it so heavily that one of two things is bound to happen: either the manufacturer will have to charge more to the consumer, or himself pay the tax. In the case of the manufacturer of bread, for instance, if the ovens are automatic oil-fired ovens the manufacturer cannot change them. The tax would therefore add to the cost of manufacture and consequently to the cost to the consumer. Obviously, when the cost is increased, the usual result is that business goes down and unemployment is increased.

I suggest that it could never have been in the mind of the Chancellor that he was going at once to say to industries which are using oil that they were to pay a penal tax of 40 per cent. additional on their bill for fuel. If I may remind him, I will call his attention to the effect the tax will have on those hospitals of London which have installed oil-fired plant for central heating. To take the case of the glass industry: it may interest hon. Members to know that abroad, there is a tax of 5s. only per ton, as against the 20s. 5d. proposed by the Chancellor. The manufacturers of glass in this country at the present moment have an advantage, but as soon as this tax becomes operative at the proposed figure the effect will be to give a bounty to the foreign competitors of no less than 6s. or 7s. a ton for their glass. I am quite sure that that was never the intention of the Chancellor. I should also like to submit to him another point. We are talking about the congestion of our streets in London. Does the right hon. Gentleman realise the number of vans that have to be used for delivering the fuel and collecting the rubbish that arises from the fuel consumed in different places throughout the Metropolis? On the one hand we are saying that we have congestion of transport, and on the other hand we propose to increase it further by saying that manufacturers must do away with oil fuel, which can be easily transported and does not create the congestion that the extra number of coal vans would create.

But the most important question of all is that here the House is being asked to try to help—we all want to help it as far as is practicable—the coal industry. But we should not really be helping that industry, and the tax would do a great deal of damage to all industries that have to use oil. Oil was never introduced, I would remind the House, because it was a cheap fuel to use. It was introduced for the purpose of cleanliness, for the purpose of gaining a real control over the heat. For many industries it is the only fuel that they can use in order to produce in competition with the world. They cannot produce certain products except by using oil heating. I suggest to the Chancellor that he should give serious consideration to the position that has now arisen. The tax would enormously increase the fuel bill of every hotel in the country which has oil-fired central heating. When the public first saw the tax a penny a gallon down, no one realised, except those who had to foot the bill, that that reduction meant a 40 per cent. increase on their fuel bill.

I would ask the Chancellor to consider seriously whether he cannot see his way to giving up some part of this penal tax. Let him not forget the fact that we are only dealing with 1,500,000 tons of heavy oil. It is true that 3,000,000 tons of heavy oil are used, but half of this is for bunkers, so the only figure we need to consider is 1,500,000 tons. We are trying to see where we can put more people into employment, and certain Resolutions were passed last night to meet that difficulty. To-day the Chancellor, with all respect, is introducing a piece of legislation that I honestly believe will prove that we shall be increasing unemployment, and not decreasing it, through the extra cost of manufacture which will undoubtedly be reflected in the trade of this country.

5.14 p.m.

Mr. GRAHAM WHITE

I wish to support this Amendment for the reason given by the Mover and by the hon. Member for Harrow (Sir Isidore Salmon), and also because I believe that the effects of this tax are very much wider, as has already been realised, and also so contrary to the expressed intention—and indeed the anxiety—of the Chancellor of the Exchequer to help industry. For these reasons the House is certainly entitled to a very much more detailed explanation of the reasons of the Government for bringing in this new impost than we have yet had at any stage of the discussion. The hon. Member for Harrow referred to the fact that this new impost lays a very severe burden upon the glass industry. That is certainly the case. I have had brought to my attention, in the case of one particular firm, certain facts which would lead one to believe that this business would almost, in that particular branch, be crippled in relation to its foreign competitors if this new impost is not altered.

Again, one of the professed objects of this tax is to help the coal industry, a thing which we are most anxious to do, but many of the uses to which fuel oil is now put are entirely specialised, and cost is not the prime consideration. In a large number of cases, in connection with the food industries, the dairy industry, and many others, it is impossible to set the clock back and return to the old methods, so that in no circumstances would this impost help the coal industry. There are also some matters in regard to which the tax in its present form would give rise to grave administrative difficulties, and I should like to mention some of these now, as I think it may possibly save time at later stages of our financial legislation. We are at a loss to understand why coastal shipping should be subjected to this impost—

Colonel WEDGWOOD

And not over-sea shipping.

Mr. WHITE

And not oversea shipping. This is a very serious matter for coastal shipping. I know of one company of whom I am credibly informed that the impost would absorb the whole of their surplus over working charges. It seems to me that that is an absolutely indefensible thing, for the only argument which could be adduced in favour of such a tax would be one which I am sure the Chancellor of the Exchequer would not use, namely, that he proposed to take the lot rather than take a small proportion by those methods of taxation to which we have been accustomed, such as Income Tax and the like. I would ask, in particular, for information regarding this impost on coastal shipping, in order that we may know, as I have said, what steps it may be necessary for us to take, and so that time may be saved at later stages.

For example, the House is well aware that it is the custom for ships sailing from some port to call at several ports before finally leaving the country for their foreign destination. In cases of that kind, will the ships be entitled to have their fuel oil free from this impost or not? That is a matter regarding which we should like to have an answer before we part with this Resolution. Again, as things stand at the moment, ships sailing, say, from Liverpool to Belfast would presumably be engaged in the coastal trade, and, therefore, their fuel oil would be taxed. If, on the other hand, a ship proceeded from Liverpool to Dublin, it would presumably be going to a Dominion, and, therefore, being engaged in oversea trade, its fuel oil would not be subject to the duty. In such a case the traffic between this country and the North of Ireland would be subsidising the traffic to the Free State. It seems to me that that is a matter which, possibly, was not foreseen, and which requires further consideration and explanation.

The argument, and, so far as I can see, the only argument, in favour of this new tax, is that it will help the coal industry, but let me consider for a moment the gas industry. The House is familiar with the fact that certain kinds of coal which are used for distillation for the purpose of making gas are not primarily suitable for that particular purpose. They yield, it is true, under certain conditions of temperature and pressure, a very considerable volume of gas which has very valuable properties, but of which the illuminating power is very small, and some 275,000 tons a year of this oil are used to reinforce and strengthen the illuminating power of such gas. Here is a direct tax placed upon the gas industry, and placed upon it in such a way that it would be likely to handicap the use of coal—if not of all coal, certainly of certain types of coal. I would like to know whether that particular aspect of this impost was considered before these proposals were laid before the House.

There is quite a number of other industries which are likely to suffer very severely and to be handicapped in general competition as a result of this tax. I may, perhaps, refer to one more, an industry which is growing up at the present time in this country and which has been strengthened in recent years, namely, that of the various horticultural operations which are carried on in glasshouses. This particular method of heating has been adopted because it gives much greater control and much greater cleanliness, and generally is far more satisfactory than any other form of heating which has yet been devised. Reference has already been made to the fact that oil fuel permits of greater control and greater cleanliness, and is, in fact, essential in the carrying out of many of the operations in which science has been applied to modern industry. Anything that would interfere with that development is contrary to the interests of industry and of the country, and, therefore, I hope the Chancellor of the Exchequer will give favourable and sympathetic consideration to this Amendment.

5.22 p.m.

Mr. BANFIELD

I desire to support the appeal which is now being made for some reconsideration of this duty, and I want to point out to the House what will be the effect of this tax of 1d. per gallon. In a circular issued by the Shell- Mex Company on the 27th April, they notified their customers that the new duty of 1d. per gallon will work out, on the basis of the arbitrary figure of 245 gallons per ton fixed by the Customs authorities, at £1 0s. 5d. per ton. I represent a constituency which for the most part is engaged in producing steel and iron, and which is, and has been for many years, the centre of the tube industry, and I have been receiving within the last two days correspondence from all kinds of manufacturers in the Black Country, in the Wednesbury Division, Tipton and Darlaston, pointing out to me the effect that this duty will have upon their trade. I have in my hand a typical letter, which says: To a certain branch of our trade the net result of the proposed new duty on fuel oil will be an increase in our fuel bill by some 30–40 per cent., and an increase in our costs of production of 5s. per ton. It wipes out practically any possibility whatever of getting foreign trade, and it seriously jeopardises the employment of 120 people at these works. The Association of Steel Conduit Manufacturers, assembled in Birmingham yesterday, passed a resolution protesting against the duty, the Birmingham Chamber of Commerce has passed a similar Resolution, and the National Union of Manufacturers, I understand, are protesting in a similar manner. Another manufacturer writes: On the furnace alone at our works we use 40 to 50 tons of fuel oil per month for making tubes. We are having to pay to-day £6 17s. 6d. per ton for strip, against £5 1s. 6d. before the tariff on iron and steel. We are already practically put out of our foreign markets, and this additional £1 0s. 5d. per ton on oil will stand a good chance indeed of closing down our tube mill completely. One can only assume that the Chancellor and the people behind him have no conception of the results of their efforts to bolster up trusts and the like, to the detriment of ordinary traders. I have another letter here pointing out again that the firm in question will be compelled to close their tube works, because they have been carrying on with such a small margin for the last 18 months. I have quoted these letters to show that this tax is going to have very serious results indeed. If it be the intention of the Government to do what they can to improve trade, and to get as many people as possible in employment as soon as possible, it is obvious that, so far as the iron and steel industry is concerned, their action in regard to this tax will have precisely the opposite effect. I want to suggest to the Chancellor of the Exchequer and the House that anything happening at this time that will throw more people out of employment will be a very serious matter indeed. It seems to me that perhaps this particular tax has not received from the Chancellor of the Exchequer and his advisers all the thought that it might have received. I am confident that, if a moment's thought had been given to the matter, particularly so far as it affects the hard-hit tube industry, in which a further tax of £1 0s. 5d. per ton will compel employers to close down, thus causing more misery and more unemployment in an area where already from 33½ to 40 per cent. of the people are unemployed, the Chancellor of the Exchequer and his advisers would have reconsidered the question of this tax, and I trust, therefore, that the matter will be given further consideration.

The tax will also hit very badly the catering trade, and to some extent the baking trade in this country. Oil fuel is used in up-to-date modern bakeries with the very laudable idea of removing from the process of bread-baking and confectionery making as much dust and smoke as possible. Firms have put down new plant, new machinery has been invented, and the use of fuel oil in this way has resulted in a degree of cleanliness, so far as the manufacture of foodstuffs is concerned, which 20 years ago would not have been thought possible. I have had a letter from a baker, a rather small employer, who has put down plant of this description, and he informs me that the extra cost to him in a twelvemonth will be between £150 and £200. He feels that he is unable to pass that on to the consumer, and the result will be that he will be definitely penalised for his efforts to give to the public clean bread and confectionery produced under the best possible conditions.

So far as the hotel side of the catering trade is concerned, I am sure that the effect of this tax will be to run big hotels into an expenditure of some thousands of pounds a year—anything from £5,000 to £8,000, £9,000 or £10,000 a year; and I am very doubtful if even this will have the result which the Chancellor of the Exchequer may possibly have had in his mind in putting on the tax. I am sure that, if there is one tax more than another in this Budget which many Members of the House will agree requires a great deal of further consideration, it will be this tax. There is a real case for consideration and further inquiry and I hope the Chancellor may be able to reassure us that the matter will be taken back and further inquired into.

5.30 p.m.

Sir ADRIAN BAILLIE

When the Chancellor of the Exchequer told us in his Budget statement that he had decided to impose a duty of 1d. a gallon on the importation of heavy oils, I, for one, welcomed that decision, not only because of its revenue-bearing potentialities, but also because I am informed that, when in 1928 the right hon. Gentleman the Member for Epping (Mr. Churchill) introduced a similar proposal, it was recognised to be of such value to the Scottish shale oil mining industry that, the morning following the statement, Scottish Oils, Limited, were able to announce a 10 per cent. increase in the wages of their employés. I was, therefore, distressed to hear from the right hon. Gentleman the Member for Darwen (Sir H. Samuel) that he and those who sit beside him had decided to oppose this duty. Although I was not in the House at the time, I recollect that, as the result of an agitation which was rather unexpectedly led by the member for the constituency that I now represent and supported, to my mind misguidedly, by a majority of Conservative and Unionist Members, the duty was withdrawn, and likewise the 10 per cent. increase in the wages of those engaged in the industry in Scotland.

Over and above that fact, there ensued unemployment for thousands of shale miners in that area, which situation would not have arisen had the duty been maintained. The opposition at that time was chiefly supported by Members representing rural and agricultural constituencies, on the assumption that the weekly budget of the agricultural worker and his wife and family would be inordinately increased. I believe it was even suggested that it might be increased by a matter of 4s. a week. Of course, if you work that out, even with the then suggested impost of 4d. a gallon, that was a ridiculous assumption. I wish with all my heart that the duty introduced by the right hon. Gentleman the Member for Epping had been maintained, because not only would it have been of inestimable advantage to a very important industry, the only real oil producing industry in the country to-day, but it would have given a stimulus to the coal industry, which I believe the Chancellor of the Exchequer desires to encourage.

I realise that since 1928 the situation has somewhat changed, and I have considerable sympathy with the right hon. Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood) and others who have pointed to one industry after another which, probably since 1928, have introduced fuel oil consuming plants. Of course, the duty proposed to-day must to some extent be disadvantageous to industries which have introduced that plant, but I am not yet convinced that it will have a penal effect on them except in so far as they are engaged in the export trade. There is a matter which does not seem to have been given credence to, that the duty is expected to stimulate the production of oil in this country, the very raw material which we realise is required. I give a considerable amount of credence to that expectation. I have special reason to do so in so far as the shale oil industry is concerned, which is able to-day, and will certainly be in a better position to-morrow, to provide a much greater quantity of the raw material of oil than it does at present. I feel that in a matter like this, as when we are discussing trade agreements with various countries, the Chancellor of the Exchequer must take into account the possibility of providing increased employment, and I believe this duty will achieve a great deal in that direction. I believe that the major industries which the duty is designed to encourage will in fact be able to provide more employment out of all proportion to the threatened reduction of employment in existing industries as a result of the duty. In his Budget statement the Chancellor of the Exchequer told us that he had decided to introduce an import duty of 1d. a gallon and that it was also his intention to impose an Excise Duty of 1d. a gallon on all stocks of heavy oils in the country over 10,000 gallons, but he did not make it clear whether this Excise Duty was also to apply to stocks of heavy oils which have been produced in this country. I am inclined to believe that that could not be the case, but I should like an assurance on the point.

5.39 p.m.

Mr. HOROBIN

In adding a few words to the appeal that has been made from various quarters to the Chancellor of the Exchequer to reconsider this impost, I should like to give a rather obvious answer to the speech to which we have just listened. Those of us who have practical experience of the matter are not weaving fairly tales from our imagination. The price of this oil has already gone up. We have been informed under our contracts that the full extent of the duty will be charged, and no one can deny that, the price being in the neighbourhood of 3d. a gallon, it is in fact an actual increase in fuel cost, and it is quite useless, therefore, to tell us that this is not a very serious impost. That, incidentally, answers another point made in the same speech, because, if the shale industry can immediately act as a substitute, it would not be possible for the big oil suppliers to put up their price, because people would be able to buy their oil from the industry which my hon. Friend represents and it is obvious that, while the shale industry is a most important and valuable industry, it cannot anything near fill the market which has hitherto been supplied by the great oil companies. I think those two points to a considerable extent answer the single speech that we have heard in favour of the tax. I can imagine the Chancellor of the Exchequer retorting to the rather damaging remarks made by a Member who spoke from those benches with regard to the gas industry that the impost is not likely to be opposed by the gas industry. It is true that this tax on balance is too light to be opposed by the gas industry.

Mr. GODFREY NICHOLSON

Is it not a fact that they asked for it?

Mr. HOROBIN

If my hon. Friend will make his speech when he is called and allow me to make mine when I am called, we may be able to get on. The reason why the gas industry will not strongly object to the impost is that they say that they are consumers of heavy oil and it will, therefore, pro tanto, tend to put up the price of gas. There are in fact only two competitors, gas and oil. It is im- possible to consider coal or, even with the present state of technical development, coke as a serious competitor. Therefore, the competition is between gas and oil. Gas will pro tanto be handicapped by this tax because one part of its raw material will be taxed, but obviously its main competitor will be taxed on 100 per cent. of its fuel, and, in measuring the competition between these two fuels, gas will stand to gain. But considering the point of view of British industry, the price of both fuels will be put up. Gas will not particularly mind whether the price of oil is put up much more, but from the point of view of industry as a consumer of fuel it will not gain on the roundabouts what it loses on the swings. It will only lose rather less on the one than on the other.

I make those few remarks to spike that possible objection before it is made. This tax will be the heaviest import tax in the whole range of our duties. It is contrary to all the canons of Protection. It is a tax upon raw material and upon fuel. It is going to hit, not those industries or firms or commercial buildings which want reorganisation or replanning, or any of the latest catchwords that we are always hearing. It will not only hit those firms which have made the greatest efforts to increase their efficiency and those employers who have endeavoured to reorganise for the purpose of benefiting their competitive position, but it will hit those employers who have made the biggest effort to improve working conditions for their staffs. They have found that gas has been a very great improvement in cleanliness, in the temperature in boiler houses, and so on. It is extraordinary that we should single out industries and firms which have made the biggest effort to improve their efficiency and to improve working conditions.

There is only one other point that I want to make, which is to a certain extent new. I associate myself entirely with all that has been said by other speakers in the same sense. I can speak from actual experience. I believe that much too great expectations have been held out by some Members as to the possibilities of transferring back again to coal or coke. In many cases it is physically impossible. I am not now speaking of considerations in regard to technical details of the processes, but I have in mind another type of consideration. I have in mind a particular building which, after most careful consideration of the facts in the light of cost, economy in building, conditions of staff work, was put up to use oil. It is physically impossible to use solid fuel because there is no access. Oil is pumped by an elaborate arrangement out of the street underground for a distance of nearly 100 feet into a boiler chamber to which, short of carting it through the whole set of offices, it is impossible to get sold fuel. Buildings costing from £30,000 to £40,000 cannot switch back again from the use of oil to solid fuel. I mention that as a particularly extreme case, but it has a bearing upon this matter.

I put it to the Chancellor of the Exchequer and to all Members of the House, many of whom who have had far greater experience than I have, that you cannot chop and change in these matters. You cannot by fiscal experiments of this sort compel businesses, when they have been gradually making certain changes and most laudable efforts, suddenly to go back on all they have done. They have engaged a staff of a certain type used to dealing with a certain kind of accurate machinery. They have planned in this particular case a whole advertising angle, as it is called, because they have made a point of their hygienic conditions, and if they scrapped it all the good will upon which they have spent some years in advertising would be gone. All sort of practical considerations of that sort will make it impossible in many cases, and absolutely unjustified in the interests of the worker and the employer and efficiency and hygiene to go back. I suggest that this tax, small as it may be in other matters, is a really penal tax upon every consideration we are endeavouring to support and encourage in business. I add my few words of appeal to the Chancellor of the Exchequer in the interest of the progress of British industry and commerce to reconsider this very sudden and retrograde impost.

5.49 p.m.

Mr. H. WILLIAMS

I wish to say a few kind words in support of the the proposal of the Chancellor of the Exchequer, though I shall have a few minor criticisms to make. The hon. Gentleman the Member for Central Southwark (Mr. Horobin) has painted rather a terrifying picture of what may happen because a building has been constructed to use liquid fuel, and obviously cannot use coal. But it can use gas. He does not quite appreciate that the reason they do not use gas is not because of any inefficiency connected with gas. The inefficiency is in respect of this Chamber and successive Governments. The gas industry is hampered in a most curious way. It was my privilege in 1928 to help to conduct through this House the first Measure to liberate it from some of its shackles. Last year my hon. Friend the Member for Newport (Mr. Clarry) was successfull in getting through another small Bill, supported, I am glad to say, by the hon. Member for Central Southwark, but we are still awaiting a really big change in regard to the powers of charge.

It is absurd that the gas industry is compelled to charge identically the same rate to the person who consumes only one cubic foot a year as to the person who consumes 100,000,000 cubic feet, though the cost to the gas company in selling in very large quantities is much lower. The reason gas is not used in a great many cases where oil is used is because Parliament will not allow the gas industry to supply gas at a proper price. Parliament has insisted upon the gas industry profiteering at the expense of everybody when it is desired to sell gas under really commercial conditions for heating, power and all purposes. The grievance which I have is that the Chancellor of the Exchequer has not yet been in consultation with his colleague the President of the Board of Trade to tell him to hurry up and present to the House the necessary legislation to put the gas industry on to a really scientific basis as far as its power of charge is concerned. If that happens we shall have gas, which, for industrial purposes, in most cases is equally as good as oil and in some cases better, on a thoroughly satisfactory basis.

All gas is made from British coal, except a small amount of gas oil used for the purpose of enriching gas in particular cases, and there is not the slightest reason why, in the bulk of the cases where oil is used, gas should not be used. That the Government have this clearly in mind is seen by reference to a further Resolution which runs to many pages in which there is a discrimination between duties on road vehicles. I am sorry that the Government, in making this important change for the legitimate development and protection of British industry which has been subjected to a form of competition not altogether fair, should not be passing at the same time that other legislation which would eliminate all the trouble. Like most hon. Members, I have received a number of letters from constituents. I have four or five letters with me now protesting against the fuel tax. On the other hand, I am satisfied that in nearly every case, if they were only free to use gas under commercial conditions the object of their protest would disappear.

I pass now to a complaint of a constituent who uses a great deal of lubricating oil for the purpose of making printing ink, without which all of us would suffer in the long, run. [HON. MEMBERS: "No!"] I have never yet met an hon. or a right hon. Member of this House who, after delivering a speech, has not looked in the Press the next day in the hope that it would be reported. My informant tells me that he uses some 5,000 tons of lubricating oil a year for the manufacture of printing ink, and that, roughly speaking, the duty will cost him £5,000. I agree that the problem can be solved if there is an increase in the Import Duties on competing inks coupled with some drawback, as far as printing inks are exported—and they are exported to a substantial extent. If there is no drawback in respect of the export of printing ink, he assures me that the export trade will be seriously hampered. I am not asking that the main duty should be modified, but I am asking the Chancellor of the Exchequer to give consideration to the consequential facts and to make it easy, either through the Finance Bill, or, alternatively, on the recommendation of the Import Duties Advisory Committee, that in cases where an industry is likely to be prejudiced by the Oil Duties, the necessary drawbacks or increase of duty will be granted so that they will not be prejudiced in competition with foreign producers of similar manufactured articles.

5.55 p.m.

Miss HORSBRUGH

I wish to draw the attention of the Chancellor of the Exchequer to another difficulty which another industry will suffer under this additional tax. The particular industry to which I refer is in no way in competition either with the coal industry or the gas industry, because the oil in this case is not used as fuel. I draw the attention of the Chancellor of the Exchequer to the spindle oil used by the jute industry in the process of batching. The increase in the price of this oil works out at £1 per ton, and in future the extra charge upon the jute industry will run to about £8,000. I have already referred many times in this House to the difficulties of that industry. The fact that there cannot be an increase in taxation on imports because there is no tax on imports from India, the real competitor, will leave the industry in a very great difficulty in being up against great competition from India and abroad. The industry has endeavoured to bring down the costs in every way possible. There is nothing which can be substituted for the oil which is required. The processes of jute-weaving and spinning cannot be altered in any way to do away with the batching process, and therefore the extra taxation will amount to £8,000 on an industry which is at present struggling for its life.

Other hon. Members have referred to the difficulties of certain industries, and I notice that the hon. Member for East Birkenhead (Mr. White) referred to the horticultural industry, which he said had so improved of late, and which, I would add, is due to the duties which have been put on by the present Government to help that industry. If that help has been given to that industry is it right or fair, especially in this case where it is in competition with Indian products that this extra taxation should be suffered? No doubt many of these points have not been brought to the consideration of the Chancellor of the Exchequer. I remember some time ago bringing the case of manilla hemp for his consideration and I was unsuccessful at first but now that the whole product is again on the Free List, dare I hope that I can plead with him on a second occasion, and not plead in vain. Although I have been in this House for more than a year, I have not yet lost all sense of hope. I urge the Chancellor of the Exchequer to consider this particular case where this industry is bound to use this spindle oil which cannot as yet be obtained from home supplies. There will be an extra taxation of £8,000, and although I am thankful to know that we are getting assistance in the trade agreements, and that the Government are helping there, the extra tax will take away some of the great advantages which I hope that this industry may obtain during the time the present Government are in office.

5.58 p.m.

Mr. HANNON

It is not very often in this House that I find myself in agreement with the right hon. and gallant Gentleman the Member for Newcastle - under - Lyme (Colonel Wedgwood), but I rise on this occasion to support the Amendment which he has presented to the House. I feel very strongly that my right hon. Friend the Chancellor of the Exchequer did not have before him all the facts relating to the incidence of this tax before he imposed the penny upon heavy oil employed in industry. Indeed I think that most Members of the House regarded the tax as comparatively insignificant and harmless. In the Midland area, as my right hon. and gallant Friend has properly pointed out, a whole series of small industries are intimately and seriously affected by the proposed tax. In recent years a number of progressive manufacturers have been installing in their factories devices for the use of fuel oil instead of coal. It will cause a complete reorganisation of their factory equipment if because of the tax they have to go back to coal or gas. The glass industry, with which we in the Midlands are concerned will, in many instances, be put out of business if the tax upon heavy oils comes into actual operation against them.

The glass industry of the country uses, I understand, about 100,000 tons of fuel oil in the year. That will mean a tax of £100,000 on the glass industry. In the case of one comparatively small glass industry in the Midlands, of which I have personal knowledge, the actual impost under this tax will be about £4,200 a year. It will be a very serious matter in the case of small manufacturers who have improved their factories and introduced new appliances that govern heat application in the production of glass, if they have either to close their factories or change the mechanical apparatus which they use in production. The regulation of temperatures in regard to the production of glass means everything, and the regulation of temperatures can only be efficiently carried out and controlled by the use of fuel oil.

I would appeal to the Chancellor of the Exchequer to reconsider the tax and to ask himself whether he is not adding a further serious burden on a whole series of small industries, already struggling for existence but which are coming more and more into vitality from day to day because of the protective policy adopted by the Government? He knows the facts perfectly well. The imposition of a tax of £100,000 a year on an industry in which the whole turnover is only about £7,000,000 will be out of all proportion to sound statesmanship and out of all relation to a fair and reasonable tax. I hope, therefore, in view of the circumstances, the strength of the arguments submitted to him, and his own knowledge of the difficulties of various industries in the Midlands area, he will consider whether this rebate cannot be fixed at a figure not exceeding 15 per cent., or, better still, that he should remove the tax altogether.

6.4 p.m.

Mr. LECKIE

I should like to join in the appeal to the Chancellor of the Exchequer that if he cannot accept the Amendment he should try to meet the case that has been so ably put before him and to exempt fuel oil used for manufacturing purposes from the proposed tax. I have been surprised to find how many firms in my constituency are seriously affected by the proposed tax. I have received many letters and representations as to the effect that the tax will have. These manufacturers have had a very lean time during the past year or two and in order to bring their costs down they have made economies in every way they possibly could. The installation of new oil fuel furnaces and heating apparatus in connection with the iron and steel trade has been wonderful. Many new installations have been put in costing many thousands of pounds. These latterly have been of British make, thereby giving work to British manufacturers and work-people. Now, they are faced with a very serious charge. I know one firm in my constituency to which this tax, if adopted, will mean a cost of £3,000 per annum. I know of other smaller concerns who will also be seriously affected. This morning I received a letter from the director of an old established tube works saying: Although we have had a difficult time during the past few years we have kept our men fully employed, but if this one penny per gallon tax goes oil our fuel oil costs a most difficult position will arise, as it is impossible, to pass such an extra charge on to one's customers. Many small works in this district are using fuel oil. In our case the extra cost will be £11,000 a year, which is definitely a charge on actual manufacture. I am sure the Chancellor of the Exchequer did not intend to injure struggling industries in the iron and steel trade either in my constituency or in other parts of the Midlands, and I hope sincerely that he will take the matter into his very serious consideration and exempt fuel oil used for manufacturing purposes.

6.7 p.m.

Mr. CHAMBERLAIN

I do not want to interfere with the many speeches still undelivered on this subject, but we have had a good deal of light upon it, and perhaps it would be convenient if I were at this stage to give some indication of the Government's view on the situation after hearing the appeals that have been made. The Amendment which we are discussing is one to substitute an ad valorem duty not exceeding 15 per cent. for the specific duty proposed by the Government. The particular proposal which the Mover of the Amendment makes, to substitute an ad valorem duty for a specific duty, offers difficulties of an administrative kind. The difficulty lies in saying what is the value of oils which are produced here from imported crude oils, on which the duties are levied on the products of bonded refineries, in relation to the value of imported oils. The right hon. and gallant Member will appreciate the difficulty of saying what the ad valorem duty is for the purpose of the tax. But I do not want to stress that special difficulty attaching to the Amendment, because I recognise that it ranges over a very much wider field than that. Hon. Members have hardly mentioned the particular point about the ad valorem duty, but have rather directed themselves to representing that the imposition of any duty, or any substantial duty, on fuel oils would inflict very serious hardship and injury upon a number of important industries.

Let me remind the House what was the origin of the proposal and the reason why we have been led to make it. In the first place, the House must admit that under the fiscal system we have introduced it is an anomaly that this particular importation should escape duty altogether. It is not only an anomaly but an accident. It was not done deliberately. It was an accident arising out of the particular form in which light oil was taxed. All oils were taxed, but there was a rebate of the full duty upon those oils which it was not desired to tax by the light oils tax. The result was that the heavy oils which escaped taxation in this way by means of the rebate also escaped the purview of the Import Duties Acts. Because they were nominally subject to the duty, although it had been cancelled by the rebate, they could not be dealt with by the Import Duties Advisory Committee. That being so, I had to consider whether there was any reason why these oils should remain outside the purview of our taxation system, and I further had to consider what would be the result to the revenue if a duty were imposed upon them. One might say that there were three reasons for this particular tax. The first was that these oils were only left out of the general system of duties by an accident; secondly, they were calculated to produce an appreciable amount of revenue, which was naturally a matter of importance to the Chancellor of the Exchequer; and, thirdly, I had strong representations from home industries that these imported oils competed with them, and that it was not fair that they should be left out of duties altogether.

I noticed that once or twice in the course of the Debate these oils have been referred to as raw materials. Surely that is an inaccurate description. They are not raw materials; they are a form of fuel and they are a form of imported fuel. The House is well aware that these heavy oils if produced in this country are not subject to duties, but are free. Therefore, it is only the imported fuel oil which is subject to this duty, and that is, of course, a form of protection against something which competes with articles which are produced in this country—it competes against coal and also against those industries which use shale or peat for the production of oil, and against the gas and electricity supply industries. Industries use oil as fuel and they also use gas, or electricity or coal, each one of which has its merits. It is not true to say, as one hon. Member said, that this duty is a complete contradiction of our general fiscal system. We are not here taxing a raw material, but we are taxing something which competes with our home-produced fuels.

The second point that I want to establish is that the competition of heavy oils for various purposes is becoming increasingly severe. If they are left out of taxation altogether, of course, they are favoured and the tendency is to use them more and more. Further, the tendency is to originate vested interests in them, as I think we may have seen by the Debate that has taken place this afternoon. It is very natural, and I am not blaming anybody, that when a firm or an industry has, on a review of the circumstances, installed a plant costing perhaps £4,000, which is suitable for the use of these heavy oils, it is going to resist anything in the nature of taxation upon the plant which it has installed, and therefore upon the return from the capital which it has invested.

Colonel WEDGWOOD

It is interference with vested interests.

Mr. CHAMBERLAIN

The right hon. and gallant Gentleman will no doubt take strong exception to that, but it is not without a blessing. The right hon. and gallant Member in moving the Amendment used language which, to put it mildly, is an exaggeration as applied to what is happening in this particular case. He continually spoke of our singling out particular industries and singling out particular firms for penal measures. We are not singling them out in making these proposals. They have singled themselves out, because they have chosen to adopt one particular method of carrying on their business in preference to another. We have not singled out any industry.

Colonel WEDGWOOD

Yes.

Mr. CHAMBERLAIN

No. We are proposing to put a tax upon a particular form of fuel which has hitherto escaped taxation. To talk about it as a gigantic imposition, a disaster, an iniquitous tax, a penal tax, is an exaggeration of the effect which it is likely to produce. The right hon. and gallant Gentleman said it was a 40 per cent. tax. A 40 per cent. tax upon what? Not upon manufacturing costs. The right hon. and gallant Member reckoned it as a 2 per cent. tax upon manufacturing costs.

Colonel WEDGWOOD

It is a 40 per cent. cost on the raw material.

Mr. CHAMBERLAIN

My right hon. and gallant Friend calls it a raw material; I call it a fuel. I say that it is not a 40 per cent. tax upon manufacturing costs. Fuel is only one part of the cost of manufacturing and while the proportion which the cost of fuel bears to the total cost differs very much in different industries, it may be more in one industry than it is in another, he would not suggest that he is going to scrap his furnaces because of this tax. Of course not. Do not let us therefore be led into thinking that the effect of this tax will be as he has described—to heap progressive burdens upon the industry which will lead them to destroy their furnaces and go back to old-fashioned methods. I hope the House will not be misled by the enthusiasm of the right hon. and gallant Gentleman. I have too much respect for his business ability. He will have to pay a little more for his fuel, and possibly it may add to his manufacturing costs.

Colonel WEDGWOOD

If you are making no profits, it will send you into the Bankruptcy Court.

Mr. CHAMBERLAIN

That may be, but the right hon. and gallant Gentleman has not been through the Bankruptcy Court. The hon. Member for Linlithgow (Sir A. Baillie) said that circumstances had changed. There is one circumstance which has changed, and it has not been mentioned; and that is that we have introduced a protective system into this country. We have added a 20 per cent. duty on the imported article. Is that nothing?

Colonel WEDGWOOD

It is nothing to us. We have no foreign competition in Wedgwood ware.

Mr. CHAMBERLAIN

The right hon. and gallant Gentleman has now given away his whole case. He has a monopoly; he is free from competition. How then can he pretend that he is losing money by this? But I must not be led away by the exaggerations of the right hon. and gallant Member into underrating the quite serious considerations which other hon. Members have brought to my notice. I do not for one moment imagine that where oil fuel has been found to be specially suitable to the circumstances of any industry or institution that the effect of ptuting a tax upon it is going to make that industry or institution turn round and scrap its plant anti go back to coal, or to gas or electricity, but I do say that in a world which is constantly changing, and where developments are going on in all directions, it is a consideration we should keep in mind that we should not encourage developments which proceed in the direction of using foreign imported fuels in preference to fuels which are produced by our own people, and which give employment to our own people. In so far as the imposition of the tax increases costs to industries in this country which are competing with foreign competitors, surely hon. Members will not forget that we have now a system under which there is an impartial Advisory Committee, before which industries can make application for an increase of the duty in the light of existing conditions. If we change the conditions in such a way that the duty which has hitherto been adequate now becomes inadequate to give the amount of protection which the Advisory Committee thought previously was sufficient, surely that is a new circumstance which the industry is entitled to take before the committee, and to which the committee is bound to give attention in considering whether a case has been made out or not.

Colonel WEDGWOOD

How does that help you in your foreign trade?

Mr. CHAMBERLAIN

It is of no interest to the right hon. and gallant Member because he is free from foreign competition.

Mr. HOROBIN

How does the answer of the right hon. Gentleman to the accusation of increasing costs help in our export trade when only, as far as the home market is concerned, you get extra protection? Is it the suggestion that we should have a rebate?

Mr. CHAMBERLAIN

The hon. Member is now raising an old subject of controversy between Protectionists and Free Traders, and as he is one of the latter he probably knows the answer already. In case he has forgotten it, may I say that it has now been shown by actual experience that if you can secure to firms a larger proportion of the home market the result is that their on-costs are so reduced that they are more easily able to compete in foreign markets. Let me deal with the particular questions which have been addressed to me. The hon. Member for Birkenhead (Mr. White) asked why oil used by foreign-going ships should be free of the duty whereas coastwise shipping did not enjoy such exemption. This is no new distinction as between these two forms of shipping. The basis for the exemption of the stores of foreign-going ships is that they are to be exported, but, on the other hand, coastwise shipping is a very important form of competition with inland transport, with road and rail transport, and it would be obviously unfair if coastwise shipping were given an advantage not given to road and rail competitors.

Mr. LUKE THOMPSON

May I remind the Chancellor of the Exchequer that foreign shipowners engage in coastwise trade, which is therefore menaced by foreign competition?

Mr. CHAMBERLAIN

In this matter we have not departed from the existing practice, and if we were to bring coastwise shipping into the same position as foreign-going shipping, we should have to subject coastwise shipping to the Customs restrictions, which would be found to be a considerable handicap. They can now pass freely in and out of our ports, whereas they would have to embark their goods under the supervision of the Customs authorities. The hon. Member for Central Southwark (Mr. Horobin) thought to spike my guns by giving in advance the answer I should give to the hon. Member for Birkenhead who said that this tax would be a great burden on the gas industry. The hon. Member for Central Southwark pointed out that the gas industry does not think so. It does not like everything in the proposal but, on the whole, it thinks it is going to benefit and not injure the gas industry. That is a complete answer to the hon. Member for Birkenhead, who said that the gas industry was being crippled or injured by these proposals. The hon. Member for Linlithgow (Sir A. Baillie) asked me about the Excise Duty which would apply to oil produced in this country. It would not apply to oil produced in this country, and if he will look at the next Resolution he will find that this is so.

Let me sum up my observations. I say that we want this duty for the purpose of completing our fiscal system. We want it for the purpose of giving us a substantial amount of revenue, and we want it also for the purpose of assisting our home industries of gas, electricity and the shale oil industry in Scotland. This is a Budget Resolution, not a Clause in the Finance Bill, but the passing of the Resolution will give us the duty as it stands to-day. I ask hon. Members to believe that when we come to the Clause in the Finance Bill I do not want to take up an absolutely rigid attitude and treat it as a duty which we must impose without having complete knowledge of all its possible bearings. It is evident that if we made full inquiries before the duty is proposed we should give away secrets of which advantage might be taken. I do not profess to have complete knowledge of all the aspects of the duty and, therefore, I shall be quite ready, when we come to consider the Clause in the Finance Bill, to consider any special case which may be made out on behalf of any particular industry, or any particular way in which this fuel oil is being used, and any cases where special hardship may be inflicted. Without making any promise or committing myself to any particular concession, I give that general assurance to the House, that I will listen very sympathetically to any representations which are made to me.

6.21 p.m.

Sir STAFFORD CRIPPS

This duty shows the difficulties which arise in attempting to apply a tariff policy in two different ways, first, through an independent tariff Advisory Committee and, secondly, through the Budget. Here you have a case in which the right hon. Gentleman says that one of the reasons why he has brought forward this particular Resolution is because owing to the accidental omission of this particular commodity from taxation it has been removed entirely out of the purview of the Advisory Committee. Therefore, they are not able to decide upon the advisability of the taxation, or the degree of taxation, or the protective measures which ought to be put in for particular industries. The right hon. Gentleman's reasons, besides the reason of the accidental omission, were twofold. First, he said he wanted to get an appreciable amount of revenue from this tax—that is to say he is imposing it as a revenue tax—and secondly, he said that he thought it would give certain protection to certain industries—that is to say it is to be used as a protective tax. He told the House that he had had representations from people who thought they would benefit from the tax, presumably the coal industry, the shale oil industry and the gas industry. But he did not tell the House and the House would be interested to know whether he considered objections from the various industries likely to be affected by the imposition of the tax.

I understand that a number of people are naturally anxious to have it. Like all taxation a number of people want it, and a number do not want it. The advantage of referring a matter of this sort to the Advisory Committee was always said to be that you would get an impartial decision as between those who wanted the taxation and those who did not. In the circumstances, does not the right hon. Gentleman think that the better way of dealing with this question is to refer it to the Advisory Committee in order that full consideration may be given to the objections of various industries which have not yet been considered. He will have secured the imposition of his tax for revenue purposes for the moment, and it can go on until such time as the Advisory Committee come to a decision as to whether limitations should be imposed, whether it should be an ad valorem or a specific tax and the other various questions which arise. I think the right hon. Gentleman's argument points to the logical conclusion that if this item has been left out accidentally and therefore has not come within the purview of the Advisory Committee, the proper thing to do is to bring it within the purview of that Committee and not to keep it outside their purview, by dealing with it as a Budget tax, and not an Import Duties tax. There would then be ample oppor- tunity for all those who object to it to have their objections duly and fully heard. That cannot be done in the House, or in Committee of the House on the Finance Bill where it is impossible to put forward arguments and figures such as would be carefully considered by the Advisory Committee.

Turning to the merits of the tax, it is hardly fair, I think, of the right hon. Gentleman to say that industries or businesses have singled themselves out for taxation. One cannot say that the right hon. Gentleman has singled industries out, but neither can one say that they have singled themselves out. I am not a capitalist, and do not know much about capitalist industry but I happen to know something about the pottery industry because I am in the fortunate or unfortunate position of trying to run a pottery for disabled ex-service men. That pottery has gone to enormous expense, at the particular request of the inhabitants of the district in which it is situated, to lay down a series of oil kilns because the inhabitants objected to the smoke. The pottery is in a rural district, at Ashtead, and the only way to gel over that objection was to go to the expense of converting the kilns or building new kilns for the consumption of fuel oil. That has been done and has entirely eliminated the smoke nuisance which is one of the greatest nuisances in connection with the pottery industry. Now, having done our best to be good neighbours and to make the industry efficient, we shall find ourselves saddled with this quite unexpected extra taxation as a result of our action. Had anybody warned us a year or two ago that this was likely to come, we should then have been in a position perhaps to move the factory somewhere else where the smoke nuisance would not be an objection. [HON. MEMBERS: "Stoke."] In Stoke of course smoke is permitted to issue from the chimneys, I think, every hour. I do not know what the exact time is but you are allowed to have a certain amount—

Sir JOSEPH LAMB

Not under Free Trade.

Sir S. CRIPPS

Yes, even under Free Trade there was a special regulation. I regret to say that as far as my experience goes, the pottery industry has not im- proved so far as a result of tariffs. I suggest that it is a matter to be considered gravely, that industries of this sort which have, for particular reasons, made large capital expenditure in order to consume fuel oil, should now be faced with this very serious tax. The quantity of fuel oil consumed in the pottery industry is very large indeed, and this tax will further hamper these industries just at a time when they are finding it sufficiently difficult to keep their heads above water.

There is another aspect of this question. There is a very large quantity of this oil which is not used for fuel purposes. As far as that is concerned, even the right hon. Gentleman would admit that it is a raw material. He is no doubt aware of the quantities used in the asphalt industry for the production of road surfacing. Nowadays, large quantities are used in that way, and at the present price of about £2 a ton which those industries pay for their oil, this proposal will mean a 50 per cent. tax on that raw material, which, when it comes through to the manufactured product, means an increase of practically 10 per cent. on the price of the manufactured product. That is a product almost entirely utilised by local authorities. I am sure the right hon. Gentleman will appreciate that where this material is used as a raw material it is not fair that it should be subject to this taxation.

I trust that in the full consideration which the Import Duties Advisory Committee are to give this matter at some time, they will consider exemptions where the material is used as I have described and not for fuel purposes. All the matters which the right hon. Gentleman mentioned, so far as protection was concerned, were in relation to its use for fuel purposes and nothing else. There is also the large range of industries in which it is used as a raw material and also for lubrication purposes. I do not think that, substantially, any lubricating oils are made at the present time from raw materials in this country. There, too, we have an essential material in nearly every industry and one which must increase the cost of production. I ask the right hon. Gentleman therefore to consider whether it would not be wiser, although this may have been an acci- dental omission, to leave it as an accidental omission. At least lie should give some warning or notice so that people may have an opportunity of adapting their mechanism to meet their needs. That is something which cannot be done in a day, or indeed in many months—to convert oil-burning apparatus to coal-burning purposes. If the right hon. Gentleman cannot do as I suggest, I ask him whether he will not exempt manufacturers raw materials and refer the whole matter to the Import Duties Advisory Committee so that everybody may have full opportunity of putting forward their arguments, of having them weighed in detail, and of having a just decision as between the various competing interests in this matter.

6.40 p.m.

Mr. ALEXANDER RAMSAY

I wish to add my appeal to the appeals which have come from practically all parts of the House to the right hon. Gentleman to modify his attitude even further than he gave us an indication of doing at the end of his speech. We are grateful to him for his promise to keep an open mind, and to see whether an adjustment cannot be made in the Finance Act to cover some of the points raised this afternoon. I beg of him for the sake of many of the industries of this country to be prepared to take a very liberal view when he is further considering this question. There was a discussion between the Chancellor of the Exchequer and the right hon. and gallant Gentleman who moved this Amendment, as to whether the oil which is the subject of this Debate was a fuel or a raw material. I draw the attention of the right hon. Gentleman particularly to cases in which this oil is very definitely a raw material.

We have heard mostly, so far, about oil which is consumed in furnaces, but we have a branch of industry in this country known as oil distilling. The oil distiller buys the crudest oil obtainable, which is totally unsuitable in its crude state for most industrial purposes. He distils it and, after distillation, he gets his benzol or his kerosene and is left with a substance—bitumen—which he sells for the covering of roads. That is a not unimportant section of industry. That very crude oil costs him about £2 a ton, and the right hon. Gentleman proposes to tax it to the extent of £1 Os. 6d. per ton, or over 50 per cent. of the cost of that raw material to the industry. What he proposes to do is to put that industry right out of business—an attitude which, I am perfectly certain, he will not maintain when he has had an opportunity of reconsidering the position.

I ask the right hon. Gentleman not to think that general industry, in the terms of this discussion, is to be measured by the case of Wedgwood pottery, because general industry, which is paying this tax, is subject to the fiercest competition and has to sell most of its products in foreign markets. We have heard of the case of glass, but glass is only one industry affected by the tax. I would direct the attention of the right hon. Gentleman or the Financial Secretary, to the case of the bolt and nut trade, in which nearly all the heating is done by crude oil, and which is up against fierce competition, from Belgium, and Germany and even Japan, in markets where some years ago we had more or less a monopoly. Many of these industries are "hanging on by the skin of their teeth" at the present moment, and the right hon. Gentleman, whether he calls this a raw material or a fuel, is proposing to tax a not unimportant part of the prime cost of their product to the extent of between 30 per cent. and 40 per cent.

Then there is the tube trade. This is a branch of industry which has had no benefits under tariffs and which indeed, if it wants to buy a billet from abroad has to pay 33⅓ per cent. upon it. Having paid that duty on the billet, they have to turn it into tubes and now they are faced with a new imposition of £1 per ton on their oil. So, one could go through various industries which are affected. The procedure under which this matter has been discussed to-day is open to certain objections. It is only a week ago that the right hon. Gentleman first made the country acquainted with his intention. That does not give the industries concerned time to pull themselves together, to work up their case and to present him with the facts which are within their knowledge if not within his. I would ask the Financial Secretary in the absence of the Chancellor, if he is requested to receive representatives of various branches of industry on this important point, to be good enough to endeavour to do so, and to hear the very important issues that I know they will put before him.

I would make one suggestion which, I trust, the Financial Secretary to the Treasury will take into consideration. One gathered from the speech of the Chancellor in opening his Budget that he had been influenced by considerations put before him by the coal trade and the railway and gas undertakings. I want to help him if I can, and it seems to me that a way could be devised whereby the Chancellor could get his duty on certain classes of oil, on kerosene, on lubricating oil, and on light fuel oils suitable for high speed Diesel engines on roads, and yet exempt all the heavier stuff, which is either the fuel of the heavy industries of the country or is very definitely a raw material. I would beg the Financial Secretary to consider whether, if he were to limit or bring up his classification into two sections, and say that oils of 0.9 or thereabouts specific gravity and below should be subject to the tax, and the other oils should not be subject to it, he would not get a working formula which would not create many difficulties in administration and would solve this issue to the general satisfaction of all sections of the House. I beg that he will take that point seriously into consideration.

6.47 p.m.

Mr. CLARRY

The last two speakers made some reference to the distillation of oils and the resultant product, bitumen. There is no commodity in this country to which there is not a satisfactory alternative, and I should like to draw attention to the particular uses of bitumen and its use as a surfacing material on roads. There is a British alternative, namely, road tar, which is a product of coal and in use to double the extent on British roads to which bitumen is used. I would like to support this tax, because, however small it may be, it has a tendency to help the coal industry, which is striving very hard at the present time. The growth of consumption of oil in this country has in its general effect, in my opinion, been a serious national menace. There have been many reasons, into which it is not desirable to enter at the present moment, for this very rapid increase in the consumption of oil, but it is sufficient to say that it has grown in a comparatively few years until we now consume 2,000,000 tons of fuel oil, and I refer only to those grades described as kerosene, gas oil, Diesel oil, end fuel oil, which enter this country every year, and £4,000,000 which goes out to foreign countries to pay for it. At the same time we have coal mines lying idle. Surely it is not beyond the wit of scientific men to be able to compose these differences in our national interest? There is no control over the supply of oil. We do not know how long the present quantity will be maintained, and we cannot tell when the highly organised oil interests will not decree that we should pay a penny or more per gallon, and there is no redress and no argument about it.

A great deal has been said in this Debate on the value of oil in industry. Coal is the basis of all our industries in this country, and if we allow the inroads of imported foreign oil to continue, we may get to a state when British industrial production is dependent on a pipe line, an oil pipe line, over which we have no control at all. The Minister earlier in the Debate made a statement with reference to the gas industry, with which I am closely associated and of which I have had some experience over many years. The gas industry is the second largest consumer of fuel oil in the country, and this penny tax will involve the industry in an additional cost of approximately £220,000 per annum. Obviously, you cannot expect the industry to rush forward and say, "We agree to this, and we welcome it," but I think it may be said that they are not raising serious objection to it, because they see the ultimate benefit not only to themselves but to the country as a whole.

Hon. Members might like to know why the gas industry use these large quantities of oil. There are two reasons. The first is to enrich the gas made from coal and to maintain it at the very rigid qualities which are enforced by statutory regulation. They also keep supplies of oil in hand to produce carburetted water-gas, the raw materials of which are coke, oil, and steam. This gas is used for emergency purposes and for auxiliary supplies, and I may here say that if it had not been for that auxiliary supply and the stocks of oil in 1926 during the General Strike, the industry would not have been able to maintain the efficient supply of gas which it did throughout that period, when the coal supplies were held up. I hope the Minister will give sympathetic consideration to the point connected with the gas industry, which by virtue of its statutory obligations, has of necessity to carry very large stocks of oil, far beyond those which are necessary in ordinary business concerns, and not in any way purchased for speculative reasons. As a matter of fact, I understand that the stocks of oil carried by the industry to-day amount to £100,000 on the basis of the penny duty,,which is retrospective, and I sincerely hope the Minister will consider that, having regard to the very special obligations on the gas industry to maintain gas supplies, it should not be penalised by a retrospective charge for those stocks.

A great deal has been said about coal not being able to replace oil. I am aware that there is a large number of special uses of oil which it is not possible at the moment, owing to geographical or other peculiar reasons, to replace by coal or gas, but there has been a vast improvement in the last few years in the technique of coal consumption and appliances, and I think the incidence of this taxation will be a further encouragement to make that more possible. In general terms and without regard to any specific case I consider that, when available, town gas can replace oil in nearly every case where oil is used, but hitherto the gas industry, has been precluded from coming into the ordinary competitive market on a question of cost, owing to statutory restrictions, but gas can meet the case which has been put forward several times to-day, for an exact control over heating, no dirt, and at the same time storage is not necessary. Gas is a British ally of coal and is the coal trade's largest individual industrial consumer.

For these reasons I think this tax is a further inducement to manufacturers and consumers to consider the possibility of using the British product as against the imported product. To summarise, I consider the risk run by industry as comparatively small and can be easily borne in special cases owing to the tariff and other arrangements that have been made for them while at the same time the opportunity for the future is considerably greater for coal. Last year I publicly advocated and carried a resolution at the Conservative Conference for a duty of 3d. on fuel oil, and I do not think industry would have suffered to any material extent whilst the depressed coal trade, employment and the Chancellor of the Exchequer would have benefited. I see no reason why the 1d. tax on lubricating oil could not be put up to 8d., which is the present tax comparable with petrol, because all these factors have a reaction in the right direction. Every 100 tons of fuel oil imported into this country replace 150 tons of British coal, and for that reason I think the House may regard this incidence of taxation of 1d. per gallon as only a commencement towards the desired end which we hope to attain towards increased employment at home and reduced payments for oil imports from foreign countries.

6.55 p.m.

Mr. HOLDSWORTH

Everybody must have been delighted to hear the Chancellor of the Exchequer say that he had not made up his mind on all the points which have been put forward to-day. I want to draw his attention to the burden which this tax will place on the textile industry, which uses tremendous quantities of oil for manufacturing purposes, not in the form of fuel at all. In the heavy woollen industry, whenever they are going to grind rags, they must use oil for the purpose—a layer of rag, a layer of oil, a layer of rag, and so on. This is not competitive with coal in any way, nor can you use gas for this purpose. There is one point that I want to bring home to the Financial Secretary to the Treasury. Where great quantities of oil are used, it is on the lower classes of goods, which are meeting the fiercest competition in foreign markets, and the proportion of tax in those classes is far greater than in the higher priced classes, which are not finding the difficulties of competition with foreign exporters of goods. I wanted to bring that point home, because it is similar to the point raised by the hon. Member for Dundee (Miss Horsbrugh).

This particular trade, the heavy woollen industry, is having probably the most difficult struggle of all sections of the textile trade to recover its export trade. The last speaker said that he did not think this penny tax on what is, after all, the raw material of the industry would affect seriously the cost of production, but the truth of the matter is that this industry has lost a tremendous proportion of its export trade, and I appeal on behalf of that industry that its raw material should not be increased in cost. Very little oil indeed is used as fuel in this industry, but oil is a very serious raw material of the industry, and I hope that between now and when the Finance Bill is introduced, serious consideration will be given to all those hon. Members who have brought forward the serious results of the increased cost of a raw material to many of our manufacturing industries.

6.57 p.m.

Mr. PIKE

I have noticed in this Debate that speakers from the benches opposite have avoided any reference to the advantageous effect of this duty upon the mining industry, and especially upon the mining communities who are dependent for their livelihood upon that industry. Figures have been quoted which show conclusively that some 2,180,000 tons of oil fuel alone were imported into this country last year, and according to the "Board of Trade Journal" of the 4th August last year, an additional 95,200,000 gallons, or 359,000 tons of gas oil, was imported. The hon. Member for Bodmin (Mr. Isaac Foot), when at the Ministry of Mines, in presenting the Mines Vote last year, said: The displacement of coal owing to the increased use of oil represents between 3,000,000 and 4,000,000 tons of coal in this country."—[OFFICIAL REPORT, 3rd May, 1932; Col. 968, Vol. 265.] If that is the position, in so far as the mining industry is affected by the importation of foreign oil, it is a position that should engage the more serious attention of the House than the issue with which it was confronted yesterday with regard to the new German Trade Agreement. If the British coal mining industry is suffering to the extent of a fall in demand of between 3,000,000 and 4,000,000 tons a year, at least 25,000 British miners are deprived of six months of permanent employment in every year as a result of these importations. Some 12,500 miners could be permanently employed for five working-shifts every week in our fields if this oil had not taken the place of coal, and the demand for coal had continued as hitherto. That is a problem which should have the serious consideration of this House, rather than the very secondary interests put forward in opposition to the tax. The average daily output of coal of a particular miner is some 22 cwts.

If we take as a basis that one ton of imported oil equals a day's working shift in the mine, the result is that the importation of oil has caused a fall in the demand for British coal and that some 12,500 miners are unemployed, at a cost of £350,000 a year to the State. That is the contribution of the State towards the maintenance of the unemployed, but their unemployment also places very heavy charges upon the localities. We have thus a problem which, in my opinion, will not only continue to present itself to the nation, as it does at this moment, but which, if unchecked, will become greater as the years roll by. As the hon. Member for Newport (Mr. Clarry) has submitted to the. House, we might ultimately find that we had destroyed the value of the coal trade to the industries of this country. I appeal to the Chancellor of the Exchequer to treat with a certain amount of grave suspicion many of the suggestions made to him this afternoon with regard to the remission of this tax. The importation of oil does destroy the employment of British miners in this country, and it also destroys the great difference which exists between the purchasing power of the State contribution to unemployment, commonly called the "dole," and actual wages. The difference between the two being so vast, it reacts very detrimentally not only upon the retail but upon the wholesale trade of the country, and also upon the producers of those goods which would otherwise be in more general demand. It is an important matter on which the Government should not give way easily.

I should like to draw the attention of the House to one or two definite conclusions recently drawn by the Coal Utilisation Council in their book, "Coal versus Oil," because I consider they give the answer effectively to some of the suggestions which have been made in favour of oil as against coal. This book states that coal heat is the cheapest form of heat. I have not heard from the benches here to-day any doubt as to the accuracy of that statement. If coal heat is the cheapest form of heat, and is the most effective form of heat for general purposes, it seems that the case for oil is considerably weakened. The next point the Council submit for consideration is that coal does require little skilled labour in its application in the production of heat. I have heard this afternoon that oil in its usage for the production of heat requires less skilled labour than does coal, and that has been put forward as a reason why oil should be considered in preference to coal. I am satisfied that in the vast majority of cases the need of skilled labour, required for the operation of the machines used for the purposes of oil heating apparatus, is much higher than that needed, usually, in the employment of coal. So far as one can calculate, it is more economic, generally, to use coal than oil.

As to the question of smoke and soot, I do not think it can he justly stated that oil apparatus is smokeless. One has only got to look in the City at two very big buildings, which we know have been put under oil, to see issue periodically from these buildings volumes of black smoke. These come out periodically either for the general and free consumption of the inhabitants of the City, or for those who do not attend there regularly. Anthracite, steam coals, gas, and furnace-coke burn with almost complete freedom from smoke and soot. Until it is proved otherwise by those who are attempting to urge us that coal must give way to oil, and that coal is in a weak position, we should stick to what we have had proved, and be on a solid foundation. It has also been found that coal and coke are more or less free from explosions, and that the same thing cannot be said regarding oil. I would urge the Chancellor to go forward with his scheme. I feel that if he goes forward boldly, a greater impetus will be given to the coal mining industry than has been given to it for a long time past. A larger number of men will ultimately go into employment through the demand for the getting and distribution of coal than the industry has been able to employ for a very lengthy period.

7.9 p.m.

Lieut.-Colonel MOO RE-BRABAZON

It is very seldom that one welcomes a new tax with any enthusiasm, but I never listened with more pleasure than I did to the Chancellor of the Exchequer when he, in somewhat apologetic words, introduced one of the most important and far-reaching taxes that have ever been found in a Budget. Perhaps I may be prejudiced because I have already made a speech in favour of a tax of this type. I made a very strong speech against the right hon. Gentleman the Member for Epping (Mr. Churchill) when he ran away from this tax some years ago, just before Lord Snowden got in with an Amendment. On a long train journey once with Mr. William Graham I think, if I had had another 100 miles, I would even have converted him. Behind this tax there is a tremendous significance in the help it can give to the coal industry. I am surprised that the Opposition, representing so many coal districts, have lost sight of the wood because of the trees, and have not seen the vast importance of this particular tax. I do not think anybody can deny that up and down the country there has been going on for the last 10 years an absolute conspiracy to oust our own home fuel in favour of the foreign fuel. It may be true that there are some industries in which oil is absolutely essential, and in which cases the Chancellor will run away. But I hope he will not run too far.

With regard to bitumen there is always tar, and in other industries gas instead of oil has equal efficiency. There are many hotels and buildings in London to-day which are being heated by oil when coal would be just as good. They are heated by oil because they are swung over by just a quarter of a farthing. This tax will just put them down on the right side, and make for the permanent use of coal. A big factory in the West of England, to which I could draw attention, is using coal under the boilers when, within four miles, there is a coal mine with thousands of unemployed men. That is an intolerable position. A number of speakers have asked the Chancellor of the Exchequer to exempt heavy oil—that is the very oil which is being burned under boilers instead of coal. If he does give way on that he is sacrificing many tons of coal which would be mined in this country.

There is, in many walks of life, a convenience in oil which is impossible in relation to coal, but for many years there have been many endeavours, from the scientific point of view, to turn coal into oil by a number of processes—sometimes by distillation, and sometimes by hydrogenation. Some of these processes are very nearly successful. They may swing just the right way by this tax.

Along these lines there is a great future for the coal industry. Lately the industry has been so poor that it has not been able to experiment. I hope this tax will be pursued right to its very end. I have visions of seeing, in the future, coal mines with busy miners and not one lump of the coal of these mines being sold. Coal as raised to the surface in a mine of that kind will be immediately distilled, and the gas pipe "lined" to where it is required. The residual fuel will be synthetically turned into petrol or alcohol. It is only by encouragement of this kind that we are ever going to get the millennium in dealing with a material which is so important to the country. There is nothing more important in the whole of our economic structure than to do something for our coal industry. Although this tax may penalise some in dustries I hope that the Chancellor of the Exchequer will stick to his guns. I feel that this tax will have a reaction greater than anyone imagines.

7.15 p.m.

Mr. MANDER

I am afraid that the speech made by the Chancellor of the Exchequer this afternoon will bring very little satisfaction to the manufacturers of this country, who will not be influenced by the no doubt very admirable arguments that he put forward, but rather by the fact that they are faced with a specific demand of a heavy nature in this tax as an addition to their working charges. It will be no satisfaction to them to be told, for example, that the tax is only on imported fuel oil, because there is no alternative internal fuel oil to which they can turn. The Chancellor at one time seemed to be blaming manufacturers for having done such a silly thing as to use oil, and I am afraid that that will only add to the bitterness that some of them are feeling because of this unexpected and heavy burden.

The Chancellor said one thing to which I hope my hon. Friend will reply. It seems to me that the Chancellor overlooked a point here. He said that if it were found that this additional burden made the existing measure of protection of industry in this country inadequate, they could easily go to the Import Duties Advisory Committee and bring the facts to their cognisance, and in a suitable case get an addition to the protective duty. But what about the people who come under the Anglo-German Trade Agreement and the other trade agreements? What about the hollow-ware manufacturers of my constituency and the Midlands generally, who, having had a duty of 25 per cent., and expecting a duty of 33 per cent., are now told that they are to have in future a protective duty of 20 per cent.? That may be all right; I am not arguing that point; but the Chancellor says that they can go to the Advisory Committee and get more protection. They cannot, for all those people who come under a trade agreement have no remedy. I hope, therefore, that the Chancellor of the Exchequer will bear that point in mind when he is dealing with this matter at a later stage, because it is clear that in cases of that kind some regard must be had to the very difficult position in which these particular manufacturers find themselves.

I want to call attention once again, as in duty bound, to special local circumstances. My right hon. and gallant Friend the Member for Newcastle-under-Lyme (Colonel Wedgwood) referred to the industries of North Staffordshire. I want to say something of those in South Staffordshire, which in their way are quite as important as those in any other part of the county. I am speaking of the industries throughout the Black Country. Manufacturers there are finding themselves in a serious difficulty. Fuel oil is used on a large scale throughout the Black Country for heating forging furnaces and in manufactures of that kind, and it is no unusual thing for a firm to use 10,000 gallons of fuel oil a week, and the tax will amount to something like £2,000 a year. As has been pointed out. with a cost of 3d. a gallon, the additional tax means something like one-third extra. Reference has been made to the question of the export trade, and I would point out that there are certain firms in the Black Country that I know well and are not far from my constituency which are selling a well-known brand throughout the world, and something like 95 per cent. of their business is export trade. They are having a tremendous struggle abroad and here they are to be called upon to pay another £2,000 a year. My hon. Friend the Member for Linlithgow (Sir A. Baillie) admitted, although he was supporting the tax, that in the case of export trades it was a penal tax. I hope that there, again, the Chancellor at a later stage will bear in mind the position and ease it, possibly by reducing the tax considerably in cases of this kind.

It is true that experiments have been made and are being made in connection with creosote oil produced in this country, but they have not arrived yet at a satisfactory position as regards quality, and it is available only in very inadequate quantities. I hope the Government are not going to run away with the idea that the only industry in this country that requires attention is coal. Last night we had an example where the only thing that seemed to matter was coal. None of the other industries got any benefit at all. The Chancellor told us to-day that one of the main objects of this tax is to assist coal, but there are many other industries in this country quite as important as coal which require the assistance of the State as much as coal. In many of the examples which have been given to-day of factories which are going to be affected by this tax, they cannot switch over to coal. Reasons have been clearly expressed why they must go on using fuel oil and they must bear the additional burden. The Chancellor of the Exchequer said that it was only 1d. a gallon, but that means £2,000 a year to many of the firms, which they will have to pay out of their pockets or as an addition to their working expenses. I join in the appeal that has been made to the Chancellor of the Exchequer. He has not shown himself unyielding, and I hope that at a later stage he will go a long way towards doing away with what, I think, he has realised, and certainly will realise during the next few weeks, is going to have a most serious effect on struggling industries in many parts of the country.

7.23 p.m.

Lord EUSTACE PERCY

The point I wish to make on this question is with regard rather to the amount of the duty than to the justification for a duty of some kind. The most extraordinary argument that has been used in favour of this tax as it is proposed is the argument of the Coal Utilisation Council that, because coal is a cheaper fuel than oil, therefore it needs to be protected by a 50 per cent. tax on oil. We are not discussing whether it is a good thing to burn coal or a good thing to burn oil. I entirely agree that there has been a quite unjustifiable flight from coal to oil, but the danger that I see in the present trend is that in our desire to protect the coal industry or one of our great staple industries, we are constantly hitting over the head any little new industry which begins to grow up and employ labour. The manufacture of oil-burners, for instance, is beginning to be a, new industry in this country, and it employs a certain number of people. It is the result of a certain venturesomeness on the part of individuals who have tried to start the industry. No sooner do they get their heads above the surface than the Chancellor of the Exchequer comes down with this tax.

It is perfectly justifiable to place a tax on fuel oil, but what should be the amount of such a tax? Surely it should be no more than the amount barely necessary to equalise competitive conditions as between coal and oil. There, I think, my hon. Friends from coal-mining constituences would agree. That is the only principle on which this House can tax in such a case. This tax, meaning as it does in the case of fuel oil, an addition of between 40 and 50 per cent. in many instances, is wholly out of any proportion to the competitive position as between coal and oil. As a matter of fact, as my hon. and gallant Friend the Member for Wallasey (Lieut.-Colonel Moore-Brabazon) said, the substitution of oil for coal for central heating is a nice balance of considerations, and, generally speaking, the only thing that turns the scale is a belief, whether justified or not, that thereby a, certain amount of labour will be saved. A small tax on fuel oil would be perfectly sufficient to tip the scale and to give coal a fair advantage. But this tax of a penny a gallon is a kind of savage rule-of-thumb use of the bludgeon in taxation which really cannot be justified by any scientific principle of taxation. I would ask the Chancellor of the Exchequer to consider it from that point of view.

7.25 p.m.

Captain HAROLD BALFOUR

The hon. Member for Newport (Mr. Clarry) stated the point of view of the coal industry, and, in particular, the gas industry; and I think that if ever we have heard a Debate of vested interests in this House, we have had it to-night on behalf of the coalfields and the gas industry. To try to compare, as did the hon. Member for Newport and the hon. Member for Attercliffe (Mr. Pike), coal and oil and the comparative cost of each, is to neglect the particular suitability of each particular fuel in certain sets of circumstances. Even the Noble Lord said that he wanted to see a tax on oil just so as to make competitive conditions approximately level with coal. What the Chancellor is doing in this tax is to put a heavy impost on industries which are using oil fuel and cannot use coal fuel for many technical reasons. I will take a particular instance. I am interested in a company, and if the Chancellor likes he can say that I am a vested interest, but it is trying to turn out a decent British article in competition with foreign articles, and if that is wicked vested interest, I would like to know what is endeavouring to be a sound industrialist.

We have certain horizontal furnaces and we can run them on oil fuel at the equivalent gas price of 11d. per 1,000 feet. We cannot get commercial gas at less than 3s. 9d. per 1,000 feet. I submit that the tax which is now put on our particular industry manufacturing stainless steel is not going to help equalise competition with coal. All it will do is to reduce our competitive power in relation to our foreign competitors. The point of the Chancellor that the Revenue must be safeguarded in view of the great swing-over from coal is a sound one, but I also submit that when new struggling industries in a world that is industrially depressed are rising, it is not a psychological moment in which to put heavier burdens on industry even from the point of safeguarding the revenue of future years. Let us wait until industry is in a more prosperous state, when it will be able to bear such additional imposts as will safeguard the revenue.

I want to say a word about the completely erroneous statement which was made by the hon. Member for South Croydon (Mr. H. Williams), whom I regret is not in his place, although I told him that I was going to deal with him. Like so many others, he over-stated the case for the gas industries by building up a case that if we removed Acts of Parliament from the gas industry which are putting burdens on the industry, we shall enable them to be in a more efficient position to compete with oil. He made the statement that the trouble is that Parliament has made quite sure that gas companies have to charge the industrial user of gas of 1,000,000 cubic feet at the same rate as they charge the private user using only a few hundred feet. I do not know whether the hon. Member has heard of a company in his own constituency called the Croydon Gas Company. It is evident that he has not. The company in which I am interested happens to take gas from the Croydon Gas Company, and it is erroneous to state that industrial manufacturers have to pay the same price for industrial gas as the private consumers. If he had studied the local conditions before he came here and made sweeping statements, building up a case on false facts, possibly his speech would have carried greater weight in the House than it will.

Mr. CLARRY

As the hon. Member for South Croydon (Mr. H. Williams) is not here, I would like to point out that the statement he made was a general statement, and the case which the hon. and gallant Member is citing from Croydon is undoubtedly an exception, or one of the exceptions. There, is no general legislation on the lines indicated by the hon. and gallant Member, but there are cases in which private undertakings have obtained special statutory powers, and Croydon is one of them. The hon. Member for South Croydon was referring to the general legislation of the country, which does not permit of the latitude of competitive bargaining.

Captain BALFOUR

General legislation may not permit that latitude, but any gas company can take steps to secure legislation which will enable it to deal favourably with its industrial consumers. In the case of Croydon the domestic rate for gas is 4s. 9d. per 1,000 feet, but if tomorrow I turned over my furnaces to gas I could buy that gas at 3s. 9d. per 1,000 feet, and if I liked to put various other appliances on to gas I should probably get the gas somewhat lower than 3s. 9d. per 1,000 feet. But however much the price of gas is lowered—unless there was an enormous reduction—I cannot get gas at a price to compete with my present fuel oil costs, and I submit that people who use fuel oil should not be condemned so whole-heartedly as we have been condemned to-night by the coal and gas interests, seeing that it is this oil which is enabling us to compete with the foreigner with some success at a time when industry is very hard pressed. I once more urge on the Financial Secretary to draw the attention of the Chancellor of the Exchequer to the fact that this duty will not equalise the position as between coal and oil, but will only make it harder to employ British men in British industry.

7.32 p.m.

Major PROCTER

I was very pleased to hear that the Chancellor of the Exchequer will consider granting certain exceptions from this tax on oil where it is a raw material or where no suitable substitute for oil can be found. I am pleased that he has made that concession, because it cuts the complaints from under the feet of the supporters of oil, which has been the gravest competitor to the coal industry. It is a competition which, if unchecked, would eventually destroy it altogether. It is a sound policy for any Government to make provision for the preservation of the coal industry, upon which the prosperity of all our industries has been founded. Coal is the natural fuel of this country. Coal has been the means whereby the industries of this country have made their mark in all parts of the world. It is only of recent years that oil has become a competitor. Owing to the lowering of price of oil, it is now endangering the prosperity of the coal industry, though without any doubt the burning of coal is still the cheapest method of producing heat. The greatest argument in proof of this is found in the fact that every oil-producing company in this country uses pulverised fuel for the refining of its petrol. They can get fuel oil at the cheapest rate, and yet the Anglo-Persian Company, and Shell-Mex use coal for producing heat. The quantity of heat in a pound of good coal is 12,000 British Thermal Units, and in oil 19,000 British Thermal Units. The cost of a ton of English coal suitable for use in furnaces such as the hon. and gallant Member for Thanet (Captain Balfour) has mentioned is 11s.; if it is pulverised at a cost of 3s. that brings up the cost to 14s. Oil costs £2 per ton. With 100 per cent. heat release in the furnaces, such coal is the cheapest heat producer in this country.

The trouble is that some of our manufacturers are more concerned with their commodities than with their prime costs in the boilerhouse. The average efficiency of the Lancashire boiler used in Lancashire to-day is somewhere in the neighbourhood of 60 per cent. Nearly half the coal is wasted, because it is not used efficiently. Industrialists have gone over to oil largely because of the lack of knowledge of the way to burn coal efficiently.

Mr. HEPWORTH

Does the hon. Member suggest that engineers in Lancashire do not know how to consume coal?

Major PROCTER

The trouble is that the engineers do not consume the coal. It is the stoker who consumes the coal. As regards the furnaces mentioned by the hon. and gallant Gentleman, there is a preventable loss in the ordinary hand fired reverberatory furnaces of over 40 per cent., simply because nobody takes an interest in how to burn fuel. If my hon. and gallant Friend would change his furnaces over from oil to pulverised fuel, which gives the same advantages as oil, he would be doing a great deal towards helping the prosperity of this country. The imposition of this duty will mean that all the great buildings in London which are at present burning foreign oil, which necessitates the export of money across the seas, will turn over to coal. One of the largest buildings in London is changing over because of this duty.

It is no good having a tax on oil which will just turn the balance as between oil and coal, as the Noble Lord the Member for Hastings (Sir E. Percy) suggested. If we want to get coal used in our large buildings there must be such a, tax as will enable coal still to have the advantage even after payment for the transport of the ashes has been taken into account. This duty will give a new impetus to our scientists in their efforts to liquify coal. Already we have the hydrogenation process, in which hydrogen, at a pressure of 3,000 lbs., is pumped into a cylinder at a temperature of 800 degrees, in the presence of a catalyst. At the moment the expenses of that process are too high. I do not think we are on the right lines in this country; the Belgians are nearer to success. But a method will be found, in the same way as it was found in the production of margarine, where they followed the same lines as in the present methods for the hydrogenation of coal—high pressures and high temperatures. They discovered a catalyst the presence of which cut out the high pressures and cheapened the cost enormously. So it will be in the liquifying of coal. A duty such as is now proposed upon oil will encourage our scientific men to search out some solvent for coal. It is not beyond the realms of possibility that the mining of the future will consist simply in washing down the face of the coal and pumping the liquid product through pipes into our cities. There are other suitable substitutes for oil, one of them being producer gas. There, however, there is a loss of 20 per cent. in the conversion, but even then it is cheaper than oil.

The use of town gas is out of the question for many industries at the moment, but there is a gas which could be used were it not for existing legislation. That is the gas from the low temperature carbonisation plants of this country. Under existing statutory provisions it is impossible to put a pipe line from one of those plants across the street in order to convey the gas to some industrial undertaking. Such restrictions should be removed. The Chancellor of the Exchequer is to give consideration to the exemption of oil from the duty where the oil is a raw material or where it is the only suitable fuel, such as in muffle or small furnaces. I therefore can welcome this duty. Its imposition is one of the greatest things we have ever done in the interest of our distressed mining areas and our workers in the coal industry, an industry upon which the prosperity of this country has been built up and on which for ever will depend.

7.43 p.m.

Mr. G. NICHOLSON

There is something almost shocking, almost deplorable, in the trend of this Debate, which has consisted of a more or less continuous series of pleas for special industries and vested interests. I may lay myself open to the charge of being a representative of another vested interest, because I sit for a mining constituency, but I wish to treat this question from the broadest possible national point of view. Sooner or later this country will have to face the issue of coal versus oil; we shall have to make up our minds whether we are going forward by the help of our home industry or whether we are going all out for the cheapest possible fuel, regardless of where it comes from, and of how many of our men are thrown out of employment. If we were still under a Free Trade regime I should not expect the House or the country to accede very willingly to any plea that attention should primarily be paid to the employment of British workers and British capital, but we have reversed our old attitude of mind. We have granted Protection to innumerable industries—whether rightly or wrongly is not the point to-day—and I submit that it is not unreasonable for the coal industry to lay before the country the actual issue as it appears to those who are engaged in it or who are in any way responsible for it.

The issue is, shortly, are we prepared at all costs to go for the cheapest fuel? That question must turn very largely on whether there are efficient and adequate substitutes. I venture to suggest that the recent advances in science and in the organisation of the coal and gas industry are providing substitutes that will prove entirely adequate for the majority of industries whose case has been raised to-day. There are, of course, many particularly hard cases. This question was not dealt with in the beginning, and it is inevitable that vested interests should have arisen, interests which will undoubtedly be harmed by any protective duty such as this duty.

The second issue before the people of the country is whether they are prepared to do the necessary harm to the interests that are at present involved, or whether they prefer to let things drift until the number of miners thrown out of work by the increasing use of oil reaches scores, if not hundreds, of thousands. It is not only a question of the miners who are involved. I ask the House to think of the number of hospitals, institutions, schools and bodies of that sort who have dismissed the men who used to stoke their furnaces, and have fitted automatic oil-burning boilers. The number of men who are concerned in this matter is not limited to the miners, but it concerns large numbers of other classes of workers. I beg the Chancellor, when he is reconsidering this matter, as no doubt he will, to look at it from the broadest national aspect; not necessarily from the point of view of the mining industry itself, but from the point of view of the value of the mining industry to this country, as a whole, and without any regard to the amount of capital or the amount of influence of the other vested interests.

7.47 p.m.

Mr. LOUIS SMITH

I should be very happy and quite willing to support hon. Gentlemen who have just spoken, if I felt that industry had to-day adequate supplies of fuel that would take the place of the material upon which the tax has been put. We have heard that an increased price has already been added to the cost of fuel. When we heard the Chancellor of the Exchequer in his Budget speech refer merely to a, penny per gallon we did not realise how much that meant. A penny per gallon is a very different thing from £1 per ton upon a £3-per-ton fuel. Had we reached the stage when there was an adequate supply of alternative fuel to go to those manufacturers who are using oil, I would be one to support the Chancellor to the full in his appeal for the duty, but in my opinion there is no adequate supply of alternative fuel, and though we have been appealing to the Government to give more help in the development of creosote or other coal oils, we have not reached that stage when we can say that there is an adequate supply. For that reason I am one of those who support the lowering of the tax.

During the last day or two I have received communications, not only from works who have had modern oil-burning plant, which is the up-to-date plant, but also from one or two of those new works that have been established, and which are just starting out, owing principally to the help of the Tariff. They have put oil-burning apparatus into their powerhouses and for their process plants, but now they see these new and absolutely up-to-date plants, with electrical control, probably having to be supplanted by coal-fired boilers again. We should be putting the clock back, because a, duty such as this is a handicap upon scientific development. I hope that the Chancellor will carefully look at it before he allows it to go forward. Listening to the Chancellor of the Exchequer this afternoon, I was very pleased to hear him say that he was open to consider suggetions from those who could give him information as to the effect of the duty. There are many ways in which the industries affected might help to avoid what might be a calamity in several trades. In the nut and bolt trade this duty would be a great blow. In my constituency practically every light trade is using oil to a very large extent. Even the safety-razor trade, which suffered somewhat at the hands of the Board of Trade yesterday, is very much affected. There is little doubt that if an inquiry were made by the Chancellor or the Financial Secretary to the Treasury they would find that the time is not ripe for this duty on heavy oil.

I might make an appeal that perhaps the oil used for road traffic might bear the duty and that differentiation might be made to safeguard the users of oil for industrial purposes. One hon. Member this afternoon mentioned that that difficulty could be overcome by separating the grades of oil into classes. I understand that under.9 specific gravity of the British Institute standard might be separated from the remainder, and that.9 might be the dividing point between the oils which are used for fuel purposes in industrial works and the oil that is used on the road. If in such ways, with the information which the various industries in this country could supply, the Chancellor were to avoid the heavy losses, which I am perfectly sure many industries will suffer, he would do exceedingly good work. I appeal to the Chancellor to consider very carefully lessening the new duty or doing away with it altogether on certain classes of oil.

7.52 p.m.

Colonel WEDGWOOD

As the Chancellor has promised to go a very considerable way towards getting something done before the Second Reading of the Finance Bill, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Ninth Resolution agreed to.

Tenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Sir S. CRIPPS

Might I ask the Financial Secretary to the Treasury to explain the implications of this Resolution?

7.55 p.m.

Mr. HORE-BELISHA

As the hon. and learned Gentleman will see, the rate of duty chargeable on British sparkling wines is to be increased to 7s. 6d. The present duty on British sparkling wines is exactly the same as it is on still wines, whereas in regard to non-Empire wines and Empire wines there is a surtax on the sparkling variety. We therefore propose to readjust the position so that all wines, whether non-Empire, Empire or home, shall have what is equivalent to a surtax on the sparkling variety. Accordingly, in future the duty will be 7s. 6d. on the home sparkling wine, 8s. 3d. on the Empire sparkling wine and 16s. 6d. on the non-Empire sparkling wines. The hon. and learned Gentleman will see that there still remains a small advantage in favour of the domestic sparkling wine. I am informed that in quality and in bouquet, as in appearance, this wine is growing more and more equivalent to the genuine champagne, and it will be a pity for this industry to grow up in the misapprehension that it is to be exempt from appropriate contributions to the Exchequer.

7.57 p.m.

Mr. McENTEE

I had on the Paper an Amendment to call the attention of the Chancellor of the Exchequer to what I consider a very important matter. It was referred to in words that were used by the Noble Lord the Member for Hastings (Lord Eustace Percy) at the end of the discussion on the heavy-oil duty. He used a remark to the effect that there are certain small industries which are just growing up and commencing to feel their feet, and that the moment they show any sign of prosperity the Government and this House come along and hit them on the head. It was complained, in regard to heavy oils, that the duty was an exceptional one, and that it was too heavy. If that was so, what can be said of the duty in this ease? Here is a little industry—let me in passing say that it cannot be known to many hon. Members that some of the finest wines in the world are made in Walthamstow, and that it is on account of that more than anything else that I am drawing the attention of hon. Gentlemen to the extreme difficulties that this small industry is going to suffer, if the Chancellor persists in putting on the heavy addition that is proposed in the Resolution. Those engaged in this industry were led to believe that they would be treated reasonably, and a tax of 1s. 6d. was imposed. Without any warning or indication, the Government and the Chancellor of the Exchequer raise that duty to 7s. 6d., which is an increase of five times. The industry to which I refer is not in my own constituency, but is in the other half of the Walthamstow borough, and I have been in consultation with the people who represent it.

This is the position: A man considerably advanced in years who has spent practically all his life in the wine industry in France, came back here, and, with the experience that he gained and with small financial aid that he was able to get from two or three local people, started a little wine industry. Without being in any way an expert in wine, I may say that I have had an opportunity of sampling the various wines that are made in this industry. The experience of the Englishman was obtained from France, but with local talent he has been able to make wines which are considered equal to many foreign wines, and he has put the industry into the very stable condition in which it is to-day. I am assured, however, by the people who own that little industry that not only in their own case but in the case of many other British wine manufacturers the crushing duty which it is now proposed to put on will make it impossible for them to carry on business at all.

The Chancellor hopes to get £10,000 out of this industry, but I think it will be safe to say that, because of the heavy imposition which it is now proposed to put on the small wine manufacturers of this country, many of them will close down entirely and the £10,000 which he hopes to get will in fact not be realised. I am speaking now just in order to ask the Chancellor, through the hon. Gentleman opposite, whether he will not, in view of the very small amount that he can get out of the industry, and in view of the fact that the duty will almost certainly crush out of existence many of the small home wine manufacturers, reconsider the whole matter with a view to putting on a more reasonable increase than that which he proposes to put on at the present time, an increase of five times the present tax. Personally, I do not suppose that I shall be very concerned with the drinking of any of the wine made in this country, or in any other country, but I honestly believe that, when a small industry has grown up as this one has, especially when the amount that anyone can get out of it is really small, a small duty should be imposed. I believe that I interpret the Chancellor's own view, and I hope he will agree that the smaller tax will realise almost as much as the larger one and at the same time preserve an industry which has recently grown up.

8.2 p.m.

Sir J. WARDLAW-MILNE

I do not always find myself in complete agreement on every subject with the hon. Gentleman who has just sat down, but I am bound to say that before I heard his more expert experience on what is going on in this new industry, this little industry of manufacturing sparkling wine, I was much surprised to see a very large increase in the size of the duty imposed by the Chancellor of the Exchequer this year. The hon. Gentleman the Financial Secretary described so charmingly the delightful experience he had had in examining and tasting these wines made in this country that I would ask him whether he thinks that an absolutely new industry of this kind is being fairly treated if the only advantage it gets over the Empire products, which have now been in existence for many years, is 9d., which is the difference between the 7s. 6d. now proposed and the 8s. 3d. which, he says, affects the Empire products.

Without putting it any higher or having any expert knowledge of the subject, I would suggest that it is very hard for new industries to feel, as they are bound to feel after an impost of this kind is put on them, that as soon as they get on their feet at all and see any signs of prosperity, the Chancellor of the Exchequer is to come down on them and put on a heavy duty before they have a fair chance of getting properly started. To anyone, even without special know- ledge of the industry, an increase from is. 6d. to 7s. 6d.—and, as I said, a mere figure of 9d. below the protective duty on an existing and well-established competing product in the Empire—is not giving the chance that we might give to a new industry in this country. For that reason I join with my hon. Friend in his very eloquent appeal that the Chancellor should reconsider a matter which is not of great importance to the Exchequer, and at the same time do away with the feeling that is growing up that the moment an industry gets on its feet the Chancellor of the Exchequer will look at it very closely with the object, if possible, of extracting revenue which in the less prosperous days of the industry it would not have yielded.

8.4 p.m.

Mr. PERKINS

I should like to ask my right hon. Friend, before he replies, what exactly is meant by the word "sparkling"? Does it include such wines as potato wine, dandelion wine, carrot wine, or even sugar-beet wine? These wines are made in my constituency in rapidly increasing quantities; they are made by villagers and are becoming very important village industries. They are being encouraged by the Women's Institutes and other bodies in the villages. I should like to know whether they are to be taxed under the new proposal.

8.5 p.m.

Mr. HORE-BELISHA

I have already addressed the House; my hon. Friend the Member for Walthamstow, West (Mr. McEntee) had not moved his Amendment, and accordingly I responded to the first invitation made to me, that of my hon. and learned Friend the Member for East Bristol (Sir S. Cripps), to explain the Motion. That I did to the best of my ability. I can only say a few words now by the leave of the House. It is with pleasure that I learn that Waltham-stow is such an important wine-making district. I am glad that my hon. Friend's constituents are deriving such a wholesome livelihood from the building up of this industry. If he will look more closely into the matter he will see that there is a distinct preference in favour of the home-produced wine. It has a preference of 9s. over the foreign wine and, if we are to believe my hon. Friend who said it was as good as champagne, then it will have no difficulty in competing with champagne. It is not in the least our intention to destroy this growing industry. I want to assure the hon. Member for West Walthamstow and the hon. Member for Kidderminster (Sir J. WardlawMilne) of that. We cannot, however, allow a source of revenue to be sapped by the growing use of a substitute for champagne, which is subject to a very high tax.

Mr. McENTEE

The hon. Gentleman is forgetting that the constituent parts of this wine have to be imported. There is a very heavy duty on the grapes from which it is made, which are, of course, imported; and also on the sugar, which is a large component part.

Mr. HORE-BELISHA

I am quite aware of that. The manufacturers do, of course, pay a certain amount in respect of the sugar content and on the import of the must, as it is called. But we have allowed for that. They have a preference of about 9s. over the champagne, and of 9d. over the Empire wine. The Empire sparkling wines do not come very much into this country, therefore the real competition is with the genuine champagne. I do not think that my hon. Friend will find that this important industry in Walthamstow will be obliterated. It is not our intention to obliterate it, and I hope that at the encl of one year's experience he will be able to come down to the House and say that the industry has been very much assisted, rather than penalised, by the extra taxation.

In answer to the question put by my hon. Friend, whether the beverages of which he has special knowledge are sparkling, I can only answer him quite compendiously, that that wine is sparkling which sparkles! If it has a sparkle in it, it is presumably sparkling wine. There is no legal definition I can give him; it is merely a question of fact, and hitherto the Customs and Excise officers have had no difficulty in distinguishing between what is still and what is sparkling.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Eleventh Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

8.10 p.m.

Mr. ATTLEE

I should like to ask the hon. Member whether he would explain the exact purpose of this Motion. It is not very clear on the face of it, and perhaps we might have a little explanation before we pass on.

8.11 p.m.

Mr. REMER

I rise, not in any way to criticise the decision of the Chancellor—and I have little reason for doing so, because during the Debates last year I several times pressed the Chancellor of the Exchequer to do exactly what he is doing in this Budget—but I am asked to say to the hon. Gentleman on behalf of the silk industry—and I hope that he will convey my words to my right hon. Friend—that there is considerable disappointment in the industry that so long a period as 12 months is sufficient for the Import Duties Advisory Committee to form a judgment on what are proper duties in this industry in time for the Budget Speech. The industry does not in any way wish to criticise or complain about the Import Duties Advisory Committee because the industry realises to the full the complex nature of the problem and the difficulties which the Committee has to face. Therefore, while they are very disappointed that the Chancellor was not able to make his announcement in his Budget Speech on what the final duties of the silk industry were to be, they recognise that it was better to have the matter put right by Treasury Order rather than to have to wait until next year's Budget, with the consequent delay.

I should like to impress upon the Chancellor of the Exchequer that this continued delay is having a very serious effect upon the silk industry throughout the country. It has led to uncertainty. Uncertainty always means difficulty in sealing the orders which are available. There are several people holding up orders at the present time because they know that the Chancellor of the Exchequer and the Import Duties Advisory Committee are considering this matter; and, furthermore, the industry has knowledge that there are several foreign firms who, in anticipation of new protective duties for the silk industry coming into effect, have actually works ready under option and are prepared to come over here and manufacture their goods in this country, if only the Chancellor of the Exchequer and the Import Duties Advisory Committee can get to work. I therefore ask the Chancellor to give this matter his speedy attention, and I hope that very shortly he will be able to make that Treasury Order to which I have referred. There is another reason why this matter is urgent, and that is the Japanese competition which is taking place at the present time, and which is so ruinous to the whole of the silk industry of this country.

There is only one other thing which I want to mention, and I want to ask the hon. Gentleman to be so good as to give some reply to it. Anxiety is felt in the silk industry about handing over this matter to the Import Duties Advisory Committee instead of leaving it in the Budget, as it was before. I presume that this matter will come under the purview not merely of the Chancellor of the Exchequer himself, but also of the President of the Board of Trade. There is this anxiety, that they know that, if France is negotiating as to a trade agreement, the very first thing that France will say to this country is that she wants some concession in connection with the silk industry. I would ask my hon. Friend to see to it that, when these negotiations are going on, the whole of this protective duty which the silk industry has been promised for so long, and which up to this moment it has not yet obtained, is not withdrawn—that the silk industry is not sold as certain other industries were sold last night. After all the meetings that have been held with the Import Duties Advisory Committee, and after all the time and money that has been spent by business men in attending these inquiries, I hope there will be no question of all that being wasted by some kind of arrangement made with a foreign country. The greatest need of all, however, is speed—to see that this Order is made as quickly as possible, so that the present uncertainty in the industry is removed, and business men can get on with their work and find employment for their work-people.

8.17 p.m.

Mr. LEVY

I want first to congratulate the Chancellor of the Exchequer on getting rid of this very complex question and handing it over to the Advisory Committee. I may say at once that the Silk Association have presented their case, have been received with all courtesy, and are looking forward with confidence to the report and recommendations. They feel that they have put forward such a case that they will receive comprehensive protection. I agree with the hon. Member for Macclesfield (Mr. Remer) that the essence of the matter is speed. There is no doubt that the delay is causing very great anxiety. I would also say, with great respect and humility, that, like the bon. Member for Macclesfield, I hope that this industry will not be used as a pawn to be sacrificed when other treaties come to be made. As far as the silk industry is concerned, the protection has been too long delayed. I want now to refer to the Japanese menace. The home market is flooded with these cheap goods, and not only the home market, but the markets of our Dominions and Colonies. In fact, I might say that the menace is worldwide, and it certainly does affect—

Mr. DEPUTY-SPEAKER (Captain Bourne)

The hon. Member is quite entitled to discuss the home market, but he must not go outside this country.

Mr. LEVY

On the 1st November last I made a speech in this House calling attention to the Japanese menace, and since that time the competition has become more and more intense. I am not referring in particular to the Japanese shantungs, pongees, honans, and similar classes of goods, that were always manufactured in the East and came into this country, but I particularly want to refer to those goods of which the Japanese copy the patterns, and which they imitate and send into this market at a ridiculously low price. Perhaps I may be allowed to mention that an international conference was held on the 5th December in Paris, at which England, France, Germany, Italy and Switzerland were represented. The president summed up the position in these words, which I hope, Sir, you will agree do affect the home market. He said that: The Federation should call the attention of each of the national representative associations to the gravity of the question, naturally leaving to each of them the task of approaching their own Government in such manner as they felt most suitable. The Silk Federation would emphasise the fact that Japan has placed herself outside the comity of the great industries by keeping to a working day vastly beyond one of eight hours. That seems to be a point which hon. and right hon. Members do not see sufficiently clearly. The first country to act upon the President's proposition was Switzerland. I hope I am in order in saying this, because I am going to ask the Government to take similar measures with regard to our home market. Switzerland passed an Act excluding Japanese silk goods entirely and absolutely, and, as regards the goods that I have already mentioned, that is to say, the Japanese shantungs, pongees and other goods which always were made in the East and imported into Western countries, they excluded 60 per cent., and the remaining 40 per cent. were only allowed to come in on condition that they came in in the grey, and that the printing and dyeing of those goods took place in Switzerland. No finished goods of any description are allowed to be imported into Switzerland from Japan. I am given to understand on authoritative information that Italy is taking similar but more drastic action.

I have here a piece of Japanese cloth. It has a British design; it was originally made in Macclesfield. In my constituency the yarn was spun for making this material. Now, because of the Japanese competition, since cloth made in this country is not being sold, my constituents are not called upon to make the yarn, and at the present time they are only working to a little over one-quarter capacity, and unemployment in the silk industry is increasing. I may be asked why that is so. Here is the answer. This particular cloth is sold in London to the shopkeeper at 2s. 9d. per yard, duty paid. The actual British cost for the warp and weft alone, plus the dyeing, is 2s. 9d. per yard. To this have to be added the operatives' wages, bringing the cost up to 4s. per yard, and, further, you have to add rent, rates, taxes, depreciation, staff wages, factory and warehouse supplies, and so on, bringing the bare cost of the English cloth up to 4s. 10d. per yard, before there is any question of profit. How is it possible for British manufacturers to compete when goods identical with those which they manufacture at a cost of 4s. 10d. per yard are imported and sold to the shopkeeper in this country at 2s. 9d. per yard, which is exactly what the warp and weft costs us?

You may ask how it is possible for Japan to produce these articles at this price. The reason is this: The average hourly rate of pay for the Japanese silk worker is 1½d. per hour. They work 60 hours a week. Their wages, therefore, are 7s. 6d. per week of 60 hours. I say that without any hesitation or fear of contradiction. They are working their mills, in consequence, double shifts. They are running shifts of 10 hours each for 20 hours out of the 24, which naturally reduces the overhead charges. We in this country work 48 hours a week and the average operative's pay is 35s. per week. It is impossible not only for this country but for any Western country to compete. This is the menace that has to be tackled. Japan now supplies 80 per cent. of the consumption of raw silk product. This is important, and it will become more important as time goes on. Let us take some figures. In 1928 the Japanese production was 6,500,000 lbs.; in 1929 it was, 25,750,000 lbs.; in 1930, 26,000,000 lbs.; in 1931, 46,500,000 lbs.; and in 1932, 65,000,000 lbs. Although we are getting a decline in industry generally in Europe, we get this colossal and continual progress in output in Japan owing to the ridiculously low prices at which they can compete.

So far I have dealt with the pure silk industry. I want to deal now with artificial silk. Rayon is now taking the place of the fine cottons that were manufactured in Yorkshire and Lancashire and, unless something is done soon, unemployment in those counties will become very great as it is ousted by this importation of rayon. In Yorkshire and Lancashire they used to make these fine cotton goods not only for bile home market but for our export trade, and this rayon is now superseding these fine cottons in the Malay States, Java, Indo-China, and British India, while in Australia, New Zealand, and all the African markets South-East and West there is the same tale. Neither we nor any Western country can compete with this Japanese menace. Japan exported to India last year 50,000,000 square yards, 5,000,000 more than we exported to the whole world. The total British export was 45,250,000 square yards. Japan exported 152,750,000 square yards—80 per cent. more than in 1930. May I give this quotation? Against the low production costs, due to the social and labour conditions of Japan, no Western civilisation can compete. What shall we do about it? Cotton, wool, silk, rayon, steel products, rubber goods, pottery and even chemical dyes—the list grows every year. Unless we take measures to prevent it, the Japanese menace will ruin one industry after another. Ordinary dumping measures are useless. But the most extraordinary part of it is that Japan herself has an Act of Parliament to prevent the very thing happening in Japan, if it were possible, that is now happening in this country, although they have never been called upon to use it. They had an Act of Parliament in 1910 and they had a supplementary law in 1921 which reads as follows: If by the importation of unreasonably cheap goods or by the sale of imported goods at unreasonably low prices it appears that detriment may be caused to an important national industry, the Government may schedule such articles, after investigation by the Anti-Dumping Commission, and may impose upon them for a certain period, in addition to the duties laid down in the annexed tariff, a surtax within the measure of the fair price. Would it be considered unfair if we bad a similar Act which would operate in a similar manner? Does not the House think that we should do something quickly about this menace? Let me give a few figures. I want to deal with the Empire market.

Mr. DEPUTY-SPEAKER

The hon. Member cannot possibly deal with the Empire market. There is no Resolution before the House which affects it.

Mr. LEVY

I hope the Government will find some means of combating this menace, which is a very real one to the silk and artificial silk industry as well as to all other industries which are in competition with Japanese manufacturers. Let us realise that they have industrialised themselves mechanically to 100 per cent. efficiency and, when it is a question of mechanism in manufacture, it then becomes the question of wages costs and hours of labour that makes the difference. Hon. Members opposite, as well as hon. Members on this side of the House, very properly want to see the standard of living raised in all countries of the world, and with that I agree. But while we allow goods to come into this country manufactured under the conditions of labour which now exist in those countries, I am sure that they will be the first to agree that, while those conditions exist, we ought to prohibit those goods from coming into this country in the hope that those countries will raise their standard of living. When they do that and come up to normality as we see it, we can decide as to whether we will accept their goods or not. I say to the Government with all sincerity that unless something is done one industry after another will be utterly unable to compete, unemployment will be created, and the object for which this Government was put into power will not be achieved.

8.37 p.m.

Sir SAMUEL CHAPMAN

As a considerable industry in the silk trade has sprung up in Scotland during the last eight years, I rise to say that we welcome the alteration by the Chancellor of the Exchequer that the Advisory Committee shall take charge of these duties. Those of us who know intimately the difficulties and intricacies of this question have marvelled at the excellent advice which has been given from time to time to various Chancellors of the Exchequer on this question. The silk industry have not been altogether satisfied or they would not at this moment be coming before the Advisory Committee, but they consider their case so strong that they welcome the move which the Chancellor has made. There has been so much uncertainty in the past that we hope that within the next few months, at any rate, a decision will be given which will regulate the silk trade in this country far many years to come. The three new factories in Scotland which I know so well have been established snore in anticipation of what is to happen than what is really happening as the result of any benefit which the present Silk Duties are giving them. They are all eagerly awaiting the decision of the advisory committee and are confident that, if fair play is given, great expansion will be carried out at the two factories established in the old city of Dunfermline—the linen trade having almost disappeared—and at the factory which was established a few months ago at Paisley. These factories are awaiting the decision with great eagerness, and I know of two additional factories which may be established in this country if fair play is given to the silk industry. We know that our case is strong and are confident that the advisory committee will give a decision which will result in greater employment in the silk industry in this country, and which will establish it upon a firm basis.

8.40 p.m.

Mr. HALES

I wish to associate myself with the hon. Member for Elland (Mr. Levy), because I can corroborate from my own personal observations every word which he has said as to the serious menace to the silk industry from Japan. It was my good fortune in the course of a 20,000-mile trip to see what Japan is doing, not only to us but to the rest of the world. I assure the House that I am not exaggerating in the least when I say that, we as a nation to-day are facing the greatest menace with which we have ever been confronted since we became an industrial nation. Now that the Chancellor of the Exchequer is here I should like to take this opportunity of expressing to him the sincere thanks of the manufacturers of North Staffordshire for the increase in duties on pottery which has saved the industry. He has at all times been approachable, and it is a great asset in a Minister that he can be approached and is willing to receive information and so be in a better position to express an opinion after he has had all the facts laid before him.

I would put before him a suggestion of what he has to face next year. Manufacturers after manufacturers in many industries are going into insolvency because of a competition against which nothing can compete. Sixty-six per cent. is the difference in price between goods manufactured in this country and similar goods offered by Japan. I ask him to give his earnest consideration to a matter which affects, not only the silk trade but many other industries in this country. He will do lasting good if he will give the matter his very careful, earnest and prompt attention and also give instructions to the Advisory Committee not to waste a moment on a matter which is so urgent, for time is the essence of this contract. If he does this he will help to stop the rot which is setting in, save many firms which are now on the eve of insolvency, and bring to them a future full of hope, confidence and help to restore the silk industry which is in sore need of assistance at the present time.

8.43 p.m.

Mr. MORGAN JONES

I had not intended to speak on this subject to-night, and it is the speeches of the hon. Gentle- men who have preceded me which have induced me to rise. What the hon. Gentlemen have just said to the House is in some respects true. I refer particularly to what they call the Japanese menace, but I wish that my hon. Friends on the other side of the House had awakened to the Japanese menace a little earlier. I speak to the hon. Gentleman the Member for Elland (Mr. Levy) rather than to the hon. Gentleman the Member for Hanley (Mr. Hales), who, as a matter of fact, has spoken on this matter before in the House of Commons.

Mr. LEVY

I made a speech in this House on 1st November with regard to the matter.

Mr. JONES

I recall that instance, but what I had in mind particularly was that if hon. Members had kept the matter of Japanese competition and Japan's future in the Far East clearly in their minds when we discussed foreign affairs as well as trade affairs, they might have been less faithful to the Government than they have been hitherto. These duties were originally introduced for Revenue purposes only. As I understand the position, the right hon. Gentleman is asking the Advisory Committee to recommend to him ways and means whereby the Treasury may be able to impose duties without having to wait for the Budget year by year. It looks to me as though we are departing now from regarding these as duties for purely revenue purposes and are going further along the road to pure Protection as such.

Mr. LEVY

Hear, hear.

Mr. JONES

I quite appreciate that the hon. Member opposite entirely endorses that direction of policy. The right hon. Gentleman must appreciate where the hon. Member for Elland desires to go, because from what he has said no Protective duties whatsoever will completely and adequately protect the home market from Japanese competition. He has asked to-night not for the addition of duties to those that may be in existence, but he has asked plainly for complete prohibition.

Mr. LEVY

I suggest that no comprehensive Protection that could be made Applicable to other countries would be of any value so far as Japan is concerned It would mean special legislation for Japan alone.

Mr. JONES

Yes. If I misinterpret what the hon. Member has said I apologise, but I gathered that he referred to an international meeting at which representatives of Britain, France, Switzerland and other countries were present, in Geneva.

Mr. LEVY

In Paris.

Mr. JONES

He informed the House that at that international meeting interested in the silk trade a decision was taken that the representatives of the various nations should go back to their homes and bring what pressure they could in any way upon their own national Governments. With what object in view? I understood the hon. Member to say that the intention was to try to bring each home Government to follow the lead of Switzerland.

Mr. LEVY

No. They had to go back and bring pressure to bear on their Governments with a view to legislation to correct this menace. I said that Switzerland was the first to take action and that it had taken more or less prohibitive action.

Mr. JONES

If the hon. Member reads his speech to-morrow, I think he will find that the OFFICIAL REPORT bears out what I have said, that he gave the House the impression that he was urging something on the lines of prohibition. Let me, deal with a further part of his argument, which was quite clear. He compared the cost of the production of silk goods in this country with the cost of production of similar goods in Japan and presented to the House interesting figures which disclosed the fact that on the basis of things as things now are it is almost impossible for Britishers to compete with the Japanese, seeing that the British employers pay such and such a figure, whereas the Japanese pay infinitely less. If he wants to deal with the elements of competition, the way to do it is not by the methods of adding adventitious duties here and there on this or that article but rather to seek the stabilisation of international conditions in regard to hours and wages, through an international agreement.

Mr. LEVY

And in the meantime, what?

Mr. JONES

You can get it as quickly as you like. Strive to bring about as quickly as possible an accord in regard to international conditions of labour and wages, and you need not bemoan the fact that too much time may be lost.

Mr. LEVY

May I ask, with all respect, what about the meantime?

Mr. JONES

No one on this side has yet issued a caveat in the discussion in regard to this particular Resolution, and I do not want the Chancellor of the Exchequer on some future date to be able to say that we allowed the Motion to go through entirely unchallenged. Our objection to remitting this matter to the Advisory Committee remains just as strong in its influence upon us as when we objected last year at the very beginning of this policy. We take the view that the effect of these tariffs must necessarily be, to a greater or lesser degree, to add to the cost of living. If that be true, it must inevitably add to the difficulty of life for the poorest people. I remember a previous Chancellor of the Exchequer, before he entered upon office for the second time during the lifetime of the last Conservative Government, using a significant expression concerning Artificial Silk Duties. He said that through the medium of Artificial Silk Duties we were taxing the fineries of the poor.

I think that was a sentence containing a great volume of truth, because everyone knows that of recent years, certainly in post-War years, more and more young people of both sexes have tended to use artificial silk in connection with their day-to-day apparel. The more artificial silk is taxed the more you tax a commodity which enters into the day-to-day apparel of the people and the more do the working classes through the Artificial Silk Duties become called upon to bear a larger share of taxation. I do not think the Chancellor of the Exchequer would desire to be unfair to us, but lest anyone else should think we had allowed this matter to go by default I have risen on behalf of my hon. Friends to state that our objection to this form of taxation which the Chancellor of the Exchequer desires to introduce through the medium of this Resolution remains as strong as it has ever been in the past.

8.53 p.m.

Mr. CHAMBERLAIN

The hon. Member for Caerphilly (Mr. M. Jones) has, no doubt, felt it necessary to indicate that the sparse attendance on the benches opposite does not indicate that they have ceased to oppose.

Mr. JONES

What about the sparse attendance on your own Front Bench?

Mr. CHAMBERLAIN

We take that as granted. The hon. Member has naturally put up the old argument which looks entirely to the increased cost of the articles which may be taxed, and pays no attention whatever to the increased employment which is given by the duties upon foreign imports. I do not think it is necessary for me to say more than a word or two in reply to the observations that have been made on the Resolution. Under this Resolution the Treasury will have power to give effect to recommendations made by the Import Duties Advisory Committee by means of the ordinary procedure of Order, and in due course no doubt that procedure will be brought into operation. It is true, as has been pointed out by the hon. Member for Elland (Mr. Levy) that in regard to this particular industry especially we find ourselves in the presence of competition of an entirely exceptional kind. The hon. Member for Caerphilly thinks that the best way of dealing with this exceptional competition is to have an international conference, at which he hopes we can persuade the Japanese nation to adopt western standards of wages and conditions of labour. I am afraid that we should have to wait some little time before we can get such a change as would reduce this particular competition to what one might call normal terms.

All I wish to say upon that subject now is that it raises questions which go far beyond the duties on artificial silk. It touches every industry in which Japanese labour and Japanese competition come into conflict with the industries of Europe. I agree that the ordinary methods of regulating the importation from competitive countries can hardly be said to be effective in the case of this particular and unusual kind of competition. What the remedy is I will not now suggest, because it would not be relevant to this particular Resolution, but my hon. Friends who are concerned in this matter may rest assured that the Government fully recognise the gravity of the case presented by them and are fully seized of the importance to the industries of this country of some sort of an arrangement in regard to this competition; and that the matter is engaging their attention at the present time.

Mr. REMER

Will the right hon. Gentleman answer the question which I put to him? Can anything be done to hurry up a decision of the Import Duties Advisory Committee because there is a great deal of anxiety, and a lack of confidence, in not being able to get a decision?

Mr. CHAMBERLAIN

I cannot give an affirmative answer, because the problem is of exceptional difficulty. There is not only the great complication of the industry itself, various sections of the industry are different and sometimes their interests are not the same, but there is also the question, which has to be borne in mind, that there is important revenue to be safeguarded here. The problem of obtaining the protective element which is required in the duties and at the same time preserve the revenue, and reconciling the different interests, is one which I think cannot be hurried. I understand the desire to get a decision as soon as possible, but at the same time I hope they will prefer to wait a little longer and get a right decision rather than hurry the Advisory Committee unduly.

8.58 p.m.

Mr. LANSBURY

What always strikes me in these discussions, which have taken place time and again, is that those who complain of this competition forget that a considerable amount of it arises because of the investment of British capital in these countries, the loaning of British money, which represents machinery sent from this country for the very purpose of creating industries in Japan, in China and in India which, because of the lower standard of life in these countries must set up a competition against which British workmen cannot stand.

Mr. LEVY

If the right hon. Gentleman had done me the honour to listen to my speech he would not now be making these observations. They are not relevant to my speech. I did not refer to any investments. I laid great stress on the rates of pay and the hours of labour which are worked as compared with those of British workmen.

Mr. LANSBURY

I have done the hon. Member the honour of behaving as an ordinary Member of the House in sitting here and listening to him putting questions and also putting his case. I know his case pretty thoroughly. I have been sitting here three hours this evening and I wanted some food. Unfortunately that time synchronised with the hon. Member's opportunity for speaking in the Debate. But, seriously, I want to put it to the House that the question of Eastern competition is vitally important, and I agree that you cannot brush it on one side in an easy way. It is a most difficult subject. There is the return on the money that has been invested by British capitalists and others, the return to small investors, whose money is tied up in these countries. If you prevent them doing business they will not be able to pay you. I hope that this question will come up at the Economic Conference and that we shall get some international control over investments in the future.

With regard to ourselves, whatever scheme is brought forward we cannot blame the Japanese, the Chinese or the Indians for this competition, because most deliberately we have set ourselves to develop capitalism, or, if you like, to foster the trade and industries of these countries, without any reference to their competitive effect on our own higher standards of life, or their effect on the markets of this country. Hon. Members always leave that side of the question out of account. It is our own doing that these countries are now in competition with us and, honestly, under a policy of a working competitive capitalism I do not see any way out of it. The Japanese have a right to compete in these markets if they are skilful enough and if our people are stupid enough to supply them with the machinery and capital to do so. Until the world adopts our policy of cooperative industry and co-operative sharing of the results of industry—

Mr. DEPUTY-SPEAKER

That is getting rather far away from the Resolution.

Mr. LANSBURY

I quite agree.

9.3 p.m.

Mr. E. CAMPBELL

As one who has lived for 21 years in Eastern parts, may I say that a great deal of the capital which is used in Japan is not British capital at all—

Mr. DEPUTY-SPEAKER

I think we had better follow the example of the Chancellor of the Exchequer and defer this Debate to a more suitable occasion.

Mr. CAMPBELL

You permitted the right hon. Gentleman opposite to make these accusations, and I was going to repeat that, as one who has local knowledge, they are not true.

Mr. DEPUTY-SPEAKER

I stopped the right hon. Gentleman; and I think it better that such discussion should cease.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Twelfth Resolution read a Second time.

Motion made, and Question proposed, "That this House cloth agree with the Committee in the said Resolution."

Mr. ATTLEE

I wish to ask the Chancellor of the Exchequer whether he can give us in simple language a statement of what this Resolution means. It is a splendid example of legislation by reference.

9.6 p.m.

Mr. CHAMBERLAIN

I think I can explain the effect of the Resolution by means of an illustration. Supposing that parts suitable for use in a motor car are imported and pay the McKenna Duty which is leviable upon the parts of a motor car, and that, after the arrival of those parts in this country, it is decided instead of using them in a motor car to use them in an aeroplane. In that case the duty which had been paid on the assumption that they were going to be used in a motor car would be repayable, but no duty at, all would be leviable upon them under the Import Duties Act as would have been the case if they had been originally imported as for use in an aeroplane. The Resolution is intended to remedy that discrepancy.

Question put, and agreed to.

Thirteenth and Fourteenth Resolutions agreed to.

Fifteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Sir S. CRIPPS

We are not quite certain as to the purpose of this Resolution. Apparently it is intended to make some alteration in the provisions of the Import Duties Act and the Ottawa Agreements Act and in the contents of the Schedule to the Import Duties Act. Can the right hon. Gentleman tell us what sort of alterations are in contemplation?

9.8 p.m.

Mr. CHAMBERLAIN

This Resolution is in connection with the ascertainment of whether goods are Empire products for the purpose of the Import Duties Act and the Ottawa Agreements Act. The Resolution is required in order to enable Clauses to be introduced into the Finance Bill to remove certain doubts with regard to the provisions of those Acts in that respect. It has been the practice under the regulations of the Board of Trade, since the introduction of Imperial Preference, to allow preference on goods produced or grown in the Empire, or when a certain proportion of the value of the goods, as prescribed by regulation, is shown to be due to work done in the Empire. For this purpose it has been the custom to aggregate the values contributed by any parts of the Empire where the prescribed proportion of value has been reached. But the definition of "British Empire" contained in these Acts does not include the United Kingdom, and therefore goods manufactured, part in the Dominions and part in the United Kingdom, are not actually given the preference unless the proportion of their value prescribed by the regulations has been supplied by the Dominions, without taking into account the parts contributed by the United Kingdom. As this is undesirable, it is proposed to introduce an Amendment to remedy the position. There is also some doubt as to whether, strictly speaking, the provisions of these two Acts will allow of the aggregation of values contributed by various parts of the Empire.

Mr. LANSBURY

We understand from the Press that the Prime Minister is shortly going to visit this country. We are now glad to know that England is going to be brought into the legislation which we pass here.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Sixteenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

9.11 p.m.

Sir S. CRIPPS

We are a little puzzled by this Resolution. We do not quite appreciate how if the form and character of goods have not been changed, they could be different goods when they are reimported. It looks on the face of it as if there were some curious process by which these goods were altered in some manner without changing their form and character. At the same time when they are reimported, apparently they do not fall into the same class and description as that into which they fell in the state in which they were exported.

Mr. CAPORN

May I ask whether it is not the fact that the absence of the powers dealt with in this Resolution has resulted in delaying a considerable number of cases now pending before the Import Duties Advisory Committee?

9.12 p.m.

Mr. CHAMBERLAIN

My hon. Friend the Member for West Nottingham (Mr. Caporn) is quite right. This is a difficulty which had not been foreseen and which has held up a number of applications. The Resolution deals with a comparatively narrow point. It refers to the case of articles which are manufactured in this country and then sent abroad to undergo a process of embroidery. If they came back embroidered they would have changed their tariff category and would be subject to the duty on such goods at their full value. The object of the Resolution is to enable such goods, on being re-imported after they have undergone a process of embroidery, to pay duty only on the increased value contributed to them in consequence of that process of embroidery to which they have been subjected.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Seventeenth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Mr. BROCKLEBANK

In the City of Liverpool there has been an arrangement for many years past with regard to transport on dock roads, which are not modern roads in any way, but were made many years ago for very heavy traffic, and I want to call attention to the fact that the new duty which it is now suggested should be imposed upon mechanically propelled vehicles will very heavily hit this transport. I hope the Minister of Transport will give it his further consideration, so that we might have some relief in the Finance Bill.

9.16 p.m.

The MINISTER of TRANSPORT (Mr. Oliver Stanley)

This was a point which was raised by the hon. and gallant Member for the Exchange Division of Liverpool (Colonel Shute), and I have had the opportunity of discussing it with him since. I should be only too glad, between now and the introduction of the Finance Bill, to discuss the matter with those interested, but I must point out to my hon. Friend that the principle upon which these increased taxes are largely based is the principle that those who use the roads should contribute a fair share of expenditure incurred on them, and these roads to which the hon. Member refers are, of course, maintained at the public expense. I am afraid there is, therefore, little case for making any exception for them, but, as I said before, I should be glad to discuss the matter further with the hon. Member or any other representative of the docks in view of the interest which I know is excited on this question.

9.17 p.m.

Mr. GROVES

While thanking the hon. Gentleman for the concession given to the showmen—

Mr. LANSBURY

What concession?

Mr. GROVES

The hon. Member has only half applied the Salter Report. Can he tell me why the said concession is not given with regard to trailers? There are 778 trailers on the road of over 4½ tons, and the Government propose an increase in the tax from £6 to £20. That means that a very large number of these showmen will be faced with an expendi- ture that they cannot meet. Therefore, I feel that the point has been overlooked, and perhaps the hon. Gentleman will receive a small deputation of Members of the House to make representations with regard to what we think should be a just remission on the trailers.

Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Eighteenth Resolution read a Second time.

9.21 p.m.

Mr. MABANE

I beg to move, in line 4, to leave out the words "five shillings," and to insert instead thereof the words "four shillings and sixpence."

A considerable air of depression has been on the House in these four days' Debate on the Budget, and I am moving an Amendment which I hope has in it at any rate some spirit of optimism. It is an Amendment to reduce the Income Tax by 6d. in the pound, and I should at the very outset like to say that it is not my intention, in moving this Amendment, to unbalance the Budget. There has been a great deal of talk about the project for unbalancing the Budget, but it is not my object to use this reduction of tax for that purpose. I am submitting it as a constructive suggestion, which I hope, if adopted, would convert this Budget from what I might call passive finance into constructive finance. My object in moving the Amendment is solely in order that some contribution may be made towards industrial recovery. I am not moving this reduction because I have any particularly soft spot for the Income Tax payer, but because I believe fervently that a reduction of Income Tax would contribute to industrial recovery in quite a surprising manner, and that it would provide employment in a manner that I hope to show a little later.

I feel that it is not fair to propose an Amendment to reduce the Income Tax to such an extent that there would be a loss of £24,000,000 on the Budget, without attempting to show how the deficiency thereby occasioned could be made good. Again, lest I be misunderstood, I should like to say that, although it is not relevant to this Amendment, I would, side by side with the reduction of the Income Tax, make another alteration in the general nature of the Budget for the same purpose as that for which I am proposing this Amendment. I would use the £14,000,000 which bas been given to beer to spread it over and to restore to the fullest possible extent the cuts which were made in 1931. I mention that to show that, in proposing this Amendment, I am not doing it merely to alleviate the lot of the Income Tax payer, but as part of a considered scheme for converting the Budget into something like constructive finance. In this respect there is a phrase in a leading article in the "Times" to-day that I think condenses the whole situation. The "Times" says: There has been as yet no break in the vicious circle in which enormous expenditure calls for oppressive taxation, oppressive taxation lowers the energy of industry, a debilitated industry gives less employment, and less employment calls for greater expenditure by the State. Let me now indicate how I believe a reduction of 6d. in the Income Tax would operate, could be made good, and would assist the recovery of industry. It would mean a loss to the revenue of £24,000,000, supposing it represented a, 10 per cent. reduction in the amount of £240,000,000 estimated for the year now current. You would, therefore, have £24,000,000 to find somewhere if you were going to balance your Budget. Well, £12,000,000 has been given to spreading over the Income Tax payment for this year, so that in July half of the amount due will be paid, whereas next January only a quarter of the amount due will be paid. I would take, first of all, that £12,000,000, and to that I would add £500,000 from the surplus of £1,291,000 that is provided for, making a total so far of £12,500,000. I am left with the sum of £11,500,000 to find. I do not think it is difficult to find it.

Last year the average unemployment throughout the year was 2,855,000. That, of course, was an enormous figure. The average cost per man to the State of these 2,855,000 unemployed was £27 10s. each for the year. I do not think it has been sufficiently realised that the estimate that the Chancellor has submitted to the House for the cost of unemployment during the current year, at the figure of £76,500,000, represents a number of unemployed scarcely less than the number last year. It represents a figure of 2,783,000 unemployed. I think it should be recog- nised by the House that the Government have, in this Budget, announced to the country that the average number of unemployed throughout the year 1933–34 will be 2,783,000. I suppose that might coincide with the somewhat gloomy estimate the Chancellor made on 16th February, but I fervently believe there is no reason why it should remain at that very high figure. There has been a reduction in recent months. There was a reduction of 72,000 in the March figure as compared with that of February, and if the reduction continues in the present month we would arrive at a figure of 2,700,000.

I see no reason for supposing that it would be bad finance if we were to estimate our figures of unemployment for the year now current, not at this very high figure of 2,783,000, but at a greatly reduced figure. Surely, if after two years of National Government unemployment is not to be reduced from that enormous figure, the National Government can scarcely claim to have performed the task for which it was elected. I do not think that if we were to look forward to a figure at the end of this year of 2,200,000 it would be a figure which was unduly small. That would mean a reduction every month of about 60,000. The average reduction per month for the year would be 360,000. If we have an average reduction of 360,000, we would have a saving on e estimated cost of unemployment of approximately £10,000,000. It must be remembered, moreover, that if you restore 360,000 to work, those people are contributing week by week their quota to the National Unemployment Insurance Fund. For 360,000 people that is approximately £1,500,000, so that we would save £10,000,000 by a reduction of 60,000 a month in the number of unemployed, and they would contribute this increased amount also every year.

Sir NAIRNE STEWART SANDEMAN

In extra spending power?

Mr. MABANE

They pay a certain amount of money for unemployment insurance to the fund, and in the course of a year these 360,000 people would contribute approximately £1,500,000. That is to say, you have this £10,000,000, and a further £1,500,000, making £11,500,000. If you add to that the £12,500,000 I have already, you reach a figure of £24,000,000, which provides for a 6d. reduction in Income Tax. I think that is a more constructive way of looking at the Budget, because surely if you are going to deal with the Budget on a figure of unemployment of 2,783,000, and you continue to demand that the country shall pay Income Tax to provide for them, there is no opportunity whatsoever for industry to develop by reason of reduced taxation, and thus reduce unemployment in consequence. I do feel that the influence of the reduction of taxation would not stop there. Surely there would be an influence on some other items of the Budget estimate? Estate Duty, undoubtedly, would realise more if there were this reduction of 6d., and Stamp Duty, too, would reach a higher figure if Income Tax were reduced.

There is one further point that I feel I should endeavour to show, and that is whether a change in the general nature of the Budget, such as I have suggested, would in fact provide any likelihood of such a reduction of the figures of unemployment. I have suggested a reduction in unemployment of 360,000 in the course of a year, and I have suggested also to provide for that 6d. off Income Tax—which is £24,000,000—a reduction in the estimate of £24,000,000. Taking the amount you have given to beer, which is £14,000,000, that makes £38,000,000, and I think there is very good reason for supposing that if £38,000,000 were to pass into expenditure you would have a reduction in the figure of unemployment such as I have suggested. Not very long ago the Minister of Labour, in reply to a question, stated that the cost of providing work for one man on relief work was about £250 a year. The cost of providing work of a productive nature is considerably less, and if you relate that figure of £38,000,000, which I have suggested should pass into the stream of trade, you would find there is very good ground for supposing that the money would provide work for something like the number of people I have suggested.

I do ask the Chancellor, even at this late hour, to consider this reduction in the Income Tax. It may be said that a reduction of 6d. is of no use. It seems from the construction of the Budget, as it is at present, that the Chancellor is looking forward to a reduction of 1s. next year. We should be very glad if there were a reduction of 1s. next year, because it is perfectly plain that, whereas in this year he is only going to receive three-quarters of the total amount of Income Tax, next year he must receive four quarters, and therefore he is going to get that addition to his revenue anyhow. From the construction of his Budget I think I may safely count on a reduction of 1s. next year, but I think it would be better for industry and the country if there were a reduction of 6d. this year. After taking off this 6d. the Chancellor would still be able to give us a 1s. next year. It is always jam to-morrow and never jam to-day, and I do ask, in the interests of industry, of unemployment and in the general interests of the country, that he should assent to this humble suggestion which I make for reducing the Income Tax this year by 6d. in the £.

9.35 p.m.

Mr. HAMMERSLEY

I beg to second the Amendment.

It appears to me that the question of the amount of Income Tax can be argued in two ways. It can be argued on the basis that any Income Tax may or may not be a burden on industry. If it be argued in that way, it would involve my making a lengthy speech. It can also be argued on the basis that the country is now agreed that Income Tax of more than a normal figure is in fact acting deleteriously to the interests of industry. It is on this latter basis that I propose to say one or two words. There is little diversity of opinion in the House that if Income Tax could be reduced it would be a good thing. The Chancellor of the Exchequer himself put forward that view, but his opinion was that he was doubtful as to whether or not such a course would be safe. His view is that safety first is essential. Rightly he has to protect his revenue, but can the Chancellor of the Exchequer by any figure of Income Tax that he may impose in times when trade is declining be quite certain that in fact his Budget is going to be balanced? He cannot. The history of the last two years has shown clearly that until trade revives, no matter at what rate the Income Tax may be imposed, the revenue will not come in. The bad trade which we are experiencing is costing the Revenue at least £150,000,000 per annum directly, apart from the injurious effects.

If trade were anything like normal, an Income Tax of 3s. in the £ would give us more than 5s. in the £ now, because not only should we have a better yield, but there would be less national expenditure in unemployment relief. Most of the arguments connected with this Amendment are admitted. Clearly trade does need the stimulus. We are faced with the basic fact that the export industries of this country have higher taxation than any other country in the world. Against that higher taxation they are unable to compete. The result is gradual and continuous weakening in the economic efficiency of this country. The Government are proposing to help industry by passing cheap money to industry. It is very doubtful if that policy is working out satisfactorily. I should be very happy to think that, in fact, industry was obtaining the benefits of cheap money. I have no personal experience, and I know of no industry which has any experience of the advantages of cheap money. The Chancellor has in fact recognised that some stimulus to industry is necessary. The argument which he put forward in his Budget speech showing how the return to two equal instalments would give a fillip to the Christmas trade is an argument which, if carried a little further, would induce him to agree to this Amendment. I cannot help feeling that if the Chancellor of the Exchequer were boldly to decide to help trade by leaving just a little money in the pockets of the taxpayers, it would enable the taxpayer to spend more. The improved yield which better times would engender would result in a Budget as securely balanced as this one.

9.40 p.m.

Mr. TINKER

The hon. Member who moved the Amendment said matters had been very dull in the House to-day, and he hoped to bring a bit of life into the proceedings. If he presses the Amendment to a vote, he will see me going into the Division Lobby with the Government. The Amendment has certainly brought some life into me. I have sat here all the evening finding very little interest in the proceedings, but when an Amendment like this is put forward I am ready for it. I listened carefully to the hon. Member because last week he spoke on the same point, but he did not then elaborate it as he has done to-night. I wondered how he was going to provide the Chancellor with the money required. The Chancellor would like to relieve Income Tax payers no doubt, as he would like to relieve other taxpayers, but what would he have to do if he did that? He would have to get money from some other source. The hon. Member was ingenious in his plan for getting it. A sum of £12,000,000 has already been given to the taxpayers in this Budget, but the hon. Member proposes to take that back. He would retain possession of it for a period. The Chancellor last week, in answer to a question from this side, said it was only available for one 12 months, and that it would not be there in the next 12 months.

Mr. MABANE

By the very nature of my case you would not need the £12,000,000 the second year because it would be provided for by the reduction in unemployment.

Mr. TINKER

That is, things would be so improved that you would not require it.

Mr. MABANE

That is the nature of my case.

Mr. TINKER

The hon. Member went on to argue that unemployment would be so reduced that we should be able to recover all this money. So far as I know, there is no shortage of money in the banks. Whenever any issue of capital is floated with anything like a decent rate of interest, tons of money are ready for it. There is no shortage of money anywhere.

Mr. MABANE

Surely the hon. Member will agree that there is a shortage of money in the pockets of the unemployed, and I am wanting to put money back into the pockets of the unemployed so that they can spend it.

Mr. TINKER

The hon. Member was trying to put before the House a scheme for freeing money to allow people to create employment. I am trying to show him that there is money lying idle in the banks that could be used for that purpose. It is not a question of rich men being short of money, but of how to use it. There are no brains in the country able to show how to use the money which is lying idle. There is money in abund- ance, but no one knows how to use it. Whenever the House of Commons can rise to the occasion and say to the unemployed that they will have another meal a day, another suit of clothes every 12 months, and an extra pair of boots, then is the time to say that trade will recover and there will be more work.

Mr. HAMMERSLEY

May I ask the hon. Member if he is quite satisfied that all the industries in his constituency have an adequate supply of capital?

Mr. TINKER

So far as I know, it is not a question of shortage of money. I have not heard of one case where they were short of money for development purposes. What they are short of is a market for their goods. If the hon. Member will go to any constituency he will find thousands of men and women who are poorly clad, short of food, and wanting many things. When we are able to give the unemployed what they require, then will be the time to talk about taking 6d. off the Income Tax and reducing other taxes. I say to the Chancellor of the Exchequer that whenever he has any surplus the first thing he ought to do is to carry out the pledges of the National Government, that is, remove the "cuts" upon the benefit of the unemployed, and remove the "cuts" from the wages of the teachers and all others whose pay was reduced. I hope the Chancellor will not accept this Amendment, and I cannot think the hon. Member has any expectation that it will be accepted. I do not know what position the hon. Member holds as regards Income Tax payers. Last Wednesday an hon. Member made a fervent appeal on the same lines and said he spoke as chairman of a society of Income Tax payers. I do not know whether my hon. Friend holds any position with that society.

Mr. MABANE

No, I do not hold any such position. I made it clear that I was not moving my Amendment on behalf of the Income Tax payers, but on behalf of the unemployed.

Mr. TINKER

The hon. Member is speaking for the unemployed from the wrong place. He will have to come across here if he wants to help the unemployed. If he went to any working-class constituency and told them that he was trying to help the unemployed by reducing the Income Tax the reply he would get from any one of the constituents would be: "I wish to God I could pay Income Tax. I would do it." Income Tax payers do not feel the pinch like men out of work. Anyone who has got to pay Income Tax ought to be glad to be in a position where he has to pay it. I speak feelingly. Before I paid Income Tax I was in a worse position than I am now. Ever since I have had to pay Income Tax I have never wanted for anything—always had a good suit of clothes, as much food as I want and everything that goes to make life comfortable. Those who do not have to pay Income Tax are not in that position, and I trust that hon. Members will not appeal for any reduction of Income Tax until they have put the unemployed in a better position than they are in to-day.

9.49 p.m.

Major HILLS

I know that it is beyond my power to persuade the hon. Member for Leigh (Mr. Tinker) and his friends that we who want a reduction of Income Tax are not thinking of the Income Tax payers, but are thinking of getting the unemployed back to work. He and his friends have tried their system and it did not answer, and the unemployed turned against them. He knows very well that by simply relying on the dole we shall not get people back to work. I do not expect him to give me credit for anything else than the selfish interest which is usually assumed to actuate most people who plead for a reduction of Income Tax, but I do it because it is the only way of getting the country out of the rut in which it now is. My hon. Friend the Member for Huddersfield (Mr. Mabane) put the case very clearly. If we took 6d. off the Income Tax the revenue would be down by somewhere about £24,000,000, and that sum has to be got back. In his Budget speech the Chancellor of the Exchequer dealt with the difficulty of getting his revenue if there were a reduction of 1s. in the Income Tax. I may say that I would quite willingly support a Resolution to take 1s. off the Income Tax.

When the Chancellor dealt with that question all the figures he gave were put forward on the basis that he would have to get the money back from Income Tax. Of course it is not so. The case for a reduction rests on the probability, and as I think almost the certainty, of getting back the money from two sources. First of all there would be an increased yield from all the consumption taxes—those on tea, sugar and beer. An increased yield from the Stamp Duty also depends upon prosperity, and the case is even stronger with the Death Duties, because if there is a rise in the value of securities all estates which are subject to Death Duties are increased in value. That is one source. But the real source of getting the money, as my hon. Friend very truly said, lies in the reduction of the £76,000,000 now going out for unemployment. Can we do that? If we can it is worth doing; if we cannot it is a dangerous gamble. It all depends on what will be done with the money left in the pockets of the taxpayers. Will that money be allowed to accumulate at the banks, and increase the amount of money, which already is more than business requires? Nobody is borrowing it, because there is no employment for money, even though the money is cheap.

I think a reduction in the Income Tax would so encourage business optimism that that money would get out into industry and do what must be done if we are to have an increase in industry and get the unemployed to work, and that is, bring about a rise in prices. I see no other way of getting 'a rise in prices except—. Well, I should say that this thing can be done in two ways. We can get what we want by a, drastic cutting of all wages and all other expenditure, or we can bring about the same effect by a rise in prices. I believe we could start that rise in prices by leaving money in the taxpayers' pockets, thereby getting the money out into industry. I think that would happen. The unemployed are unemployed because employers cannot make a profit, and they cannot make a profit until prices are raised, and my great criticism of my right hon. Friend's Budget is that I do not see that it affords any means of raising prices.

I do not see how that great benefit can come. He tells me that we must wait for the World Economic Conference, but I do not put quite the same faith in that event as he does. He may be right. I hope he is. I feel very strongly that unless we can help ourselves, and that unless we start some- thing in this country, we shall not get what we want. Again I may be wrong, and I hope that I am wrong. I am not wrong in believing that the optimism and the hope that could be engendered in this country by a cut in Income Tax—that is one of the things by which our administration will be judged—would have such an effect that it would react on industry and would in the end bring back money to the Exchequer.

The Budget statement was an honest, clear and able statement of the position of the country. It showed us our position and all our liabilities, and it was a good survey of the nation's accounts. My complaint against the present system which has obtained for some years is that Chancellors of the Exchequer look upon themselves more as auditors than as Chancellors of the Exchequer. The Chancellor of the Exchequer is much more a finance Minister. He is concerned with far more than the money side of the nation's accounts, and he has a tremendous influence upon the trade and industry of the country. Of late years the Treasury and succeeding Chancellors have been so pressed for money that they have got it without considering the reactions of taxation upon industry. I will give two examples of that, which apply very much to Income Tax, but can apply even more to Income Tax upon company reserves. Company reserves are money which is not spent by a company but is put back into the business. Under a proper form of taxation I should have thought that company reserves would have escaped. That money goes back to revivify the business. It is mostly spent on capital and not on consumption, which is the very sort of expenditure that we want. We tax capital very heavily in the Death Duties and in the Surtax; we are taxing it to disappearing point.

I would respectfully remind the Chancellor of the Exchequer that when you are administering a capital system you must not exterminate capital. The Government that called upon all industries to rationalise themselves are forgetting to rationalise taxation, and are not always considering the effect of taxation upon the different industries and its reactions upon all classes of the country. I confess that I regard with some dismay the position that we have to go through all this year, with no alleviation of Income Tax. We as a National party will be judged, and rightly judged, by unemployment. We were supported at the polls by the unemployed who were drawing the dole, and we have a very special duty to them. I do not see so large a fall in the unemployment figures as I should like to see. They are going down, but they are doing so remarkably slowly. There is the danger, unless some reduction is made in taxation and something is done to give hope and promise to industry, of the figures of unemployment being round about the 3,000,000 mark next Christmas. Again I hope that that will not be so, but I do not feel at all sure about it.

We have not got so very long. The term of all Governments is limited, and we have passed a certain amount of our time. Questions will be raised, and we shall be told that the capitalist system has had a good run, and unless it solves the unemployment problem and gets men back to work people will begin questioning the system. I regard this year as the critical year in the history of this country. I do not like the look of the future, either from the point of view of the country or from the smaller consideration with regard to the party. I believe that we are at the parting of the-ways, and that we can go one way which I believe will lead to greater prosperity. There are risks in any course of action, but I believe that in this case the risks of standing still are greater.

10.3 p.m.

Mr. CHAMBERLAIN

My right hon. and gallant Friend the Member for Ripon (Major Hills), in supporting the Amendment lectured me on the duties of a Chancellor of the Exchequer, and gave a general survey of the question of direct taxation, directions in which I do not propose to follow him. I wish to confine myself to the Amendment which is before the House. Everybody will be disposed to agree with the hon. Member for Stockport (Mr. Hammersley) that a reduction of Income Tax would be a good thing. I should commend that sentiment to the authors of "1066 and All That," and if they continue their labours I hope that they will add that to the memorable sentiments expressed in 1933. We have, in this Amendment, to consider a specific proposal, and in what that proposal involves us. My hon. Friend the Member for Huddersfield (Mr. Mabane) began by saying that he did not propose or desire an unbalanced Budget and that all he wanted to do was to take sixpence off the Income Tax. I listened with interest to know how he was going to do it without unbalancing the Budget, and I was disappointed to find that he was not going to do it without unbalancing the Budget. What he was going to do was to make a false estimate and then call it a balanced Budget. If I wanted to take sixpence off the Income Tax, I would rather do it, in present circumstances, by saying straight out that I was not going to balance the Budget, than by putting incorrect figures in. I did not know whether my hon. Friend was serious in his contention.

Let me call the attention of the House to what his whole position turns upon. It all turns upon the supposition that by taking sixpence off the Income Tax this year you are going to reduce unemployment on the average by 380,000 this year. Think what that means; 360,000 on the average. My hon. Friend, of course, does not imagine for one moment that the day after we took the sixpence off the Income Tax the unemployment figures would go down by 360,000. He does not believe that for a moment; he hopes to start off with small figures which would gradually increase. I must, therefore, assume that he hopes that by the end of the year he would reduce the unemployment by 720,000.

Mr. MABANE

I said 60,000 a month, making 720,000 in a year; 360,000 on an average a month.

Mr. CHAMBERLAIN

That is exactly what I said. I said that your argument was that to take sixpence off the Income Tax was going to reduce the unemployment figures by 720,000 in a year.

Mr. MABANE

Yes.

Mr. CHAMBERLAIN

If my hon. Friend believes that, he will believe almost anything. I must point out to my hon. Friend that he quite forgot one little feature of the Budget, of which I myself took some consideration and which I should like to bring to his definite notice. He complained that he got no alleviation of Income Tax this year. May I remind him that, under the proposal to revert to the equal half-yearly system: in Schedules B, D and E, we do, in effect, get for 2,800,000 taxpayers a substantial reduction of one-quarter of the whole tax this year.

Major HILLS

Next year; it does not operate until next year.

Mr. CHAMBERLAIN

It operates during this financial year. It does not make much difference whether you calculate your year to end on the 31st December or on the 31st of March for this purpose. At any rate, within 12 months from now it will operate. I do not think that the taxpayers will agree with my hon. Friend at all. They will be faced with the reality when next January comes and when, instead of having to pay three-quarters of the tax, they will have to pay only half. That is a substantial sum of money. Moreover, that money is going into circulation. If it is true that sixpence off the Income Tax is going eventually to benefit the Exchequer in. increased returns, all those benefits would also inure from the circulation of the sum of £12,000,000, which is not to be collected in January. That sum, of course, is the equivalent of 1s. 3d. as far as those Income Tax payers are concerned. That amounts to 1s. 3d. in the £ for the period of 12 months. I could not find, in my hon. Friend's proposals, any indication of how the windfall which he was going to bring into his Budget this year was to operate next year. In some way not clear to me, the reduction of unemployment was of a cumulative character and was to continue. It is wonderful how these snowballs roll up in imagination, under a very earnest desire to get sixpence off the Income Tax. I cannot help thinking that that desire must have been a great part of the motive force. I can only express astonishment at my hon. Friend's moderation. If all these benefits are going to accrue from a reduction of sixpence in the Income Tax, why stop there? Why not take off a shilling? Why not he bold, take courage in both hands, and come out with a bit of really imaginative finance? If the hon. Member took off a shilling instead of sixpence, the reduction in the unemployment figures, instead of being 700,000 at the end of the year, might be 1,400,000!

10.10 p.m.

Mr. MORGAN JONES

Of all the Motions standing on the Order Paper with regard to this Budget I confess that there was none in which I was more interested personally than the Amendment which stood in the name of the hon. Gentleman who has moved it. We have heard the position of the Treasury in this matter but, as I ventured to make some remarks on the subject last Thursday, I crave the indulgence of the House to allow me to return to it for a minute or two. I followed the arguments of the right hon. and hon. Gentlemen who supported this Amendment, and I confess that—with the Chancellor of the Exchequer—I found it extremely difficult to see what real arguments there were upon which this case could be founded. If I may be allowed to say so with respect, the Gentleman who last spoke in support tried to set up a, case but, so far as I could see, his main hope was that a reduction of sixpence in the £ would have mainly a psychological effect upon industry. I do not doubt that a reduction of sixpence in the £ might have such a psychological result, but I am afraid that Chancellors of the Exchequer cannot rely in the framing of a Budget on psychology; they must have finance to go on.

There were two points which the hon. Gentleman who moved this Amendment put before this House. He hoped that by a reduction of sixpence in the £ two consequences would ensue. One was that there would be a revival of industry which would show itself mainly through a reduction of unemployment or an introduction of employment. I asked last Thursday night, when trying to speak on the main discussion of the Budget, where the evidence was obtainable from our history since the end of the War that a reduction of Income Tax would lead to increased employment. I ask the hon. Gentleman once again where, in the figures which we have had presented to us by the various Departments since the end of the War, are the figures that go to support the proposition that a reduced Income Tax automatically leads to a reduction of employment.

Most of us, I suppose, have been Members of the House for a good many years, and many of us can remember the time when Income Tax was actually at the rate of 6s. in the £. I think it was so when the right hon. Gentleman the Member for Hillhead (Sir R. Horne) was Chancellor of the Exchequer. Even when Income Tax was as high as that, the unemployment figures were not higher than they are to-day, when Income Tax is lower. I submit to hon. and right hon. Gentlemen who support this proposition that it is up to them to prove that their proposal will operate automatically. They must not merely entertain a hope; they must not be guided by mere optimism; they must be able to show us and the Chancellor of the Exchequer, beyond peradventure, that what they propose will lead to a reduction in unemployment.

Mr. MABANE

But did not the reduction in Income Tax about the time of which the hon. Member is speaking—1922—result in two years in the lowest figures of unemployment since the War; and in 1923–24 did not the unemployment fund make a profit for the only year since the War?

Mr. JONES

The hon. Gentleman and I clearly have not been looking at the same figures.

Mr. MABANE

I had official figures.

Mr. JONES

So I supposed mine were; and it is therefore up to us to support our respective cases by reference to official documents. I will not attempt to do that at the moment, but I will say what happened under the Labour Government in 1924. The hon. Gentleman will recall that in 1924 Lord Snowden—Mr. Snowden as he then was—Chancellor of the Exchequer, did in point of fact give a reduction in Income Tax and other reliefs in various forms yet neither in that year nor in the succeeding year, nor again as a consequence of the reliefs given in 1925 in Income Tax, was there any consequential substantial reduction in unemployment.

I submit, therefore, that, even if the hon. Gentleman's case is proved, that in 1922–23 there was a reduction in unemployment, there are also two years on the other side, and that, therefore, it is still an arguable proposition whether a reduced Income Tax leads automatically to a reduction in unemployment. We, on this side, are concerned with the other side of this argument. Is there any assunance that, supposing a given number of millions of pounds were allowed to the taxpayer through a reduction in Income Tax, that saving to the Income Tax payer would be reflected in the unemployment figures? To put the matter in a crude way, let us suppose that through the medium of this Amendment, if it were accepted, £1,000,000 were returned to Income Tax payers in, say, Lancashire. Will any hon. Gentleman tell me that that extra £1,000,000 returned to Income Tax payers in Lancashire will of necessity add employment for one single extra soul? What is wrong with our factories and workshops? It is that people cannot buy the goods. You can go on adding to your factories and workshops, you can extend your barns as much as you like, but, unless people are able to buy your goods, unless they have purchasing power, it is no use extending factories or operating spindles faster. Consequently, our reply to hon. Gentlemen is that, although they may honestly believe that this Amendment is designed, as I daresay it is, ultimately in the interests of the unemployed, you cannot create or recreate work, you cannot create or recreate a market, unless the people constituting the market have the power to buy things; and the people who constitute a market are, after all, the millions of men and women up and down the country to-day who have no money to spend upon boots, clothes and other various commodities.

I want to put to hon. Gentlemen another proposition, because I submit to them that they are really unfair at times when they speak with such exuberance of a reduced Income Tax. If hon. Gentlemen will examine the last issue of the Statistical Abstract, comparing the year 1913 with the year 1930–31, they will find some interesting contrasts. I am controverting the claim that Income Tax should have the first consideration, as is suggested in this Amendment. The total amount of income liable to assessment in this country, in the year 1913–14, was £951,000,000, in round figures. The allowances in 1913, out of that £951,000,000, amounted to £159,000,000, that is to say, one-sixth of the total taxable income in that year. Will hon. Gentlemen be surprised when I tell them that in 1930–31 the proportion of allowances out of the total taxable income was, not one-sixth, but between one-third and one-half, and nearer one-half than one-third. That was 14 years after the War. With the enormous burden that is falling upon the nation, with the stupendous National Debt, Income Tax obtains an allowance of between one-half and one-third in 1930, when it only enjoyed an allowance of one-sixth in the year before the War. Hon. Members really must be fair. There are people in this country who are burdened in various ways, and I do not deny that the burden oh some people is very great, but, after all, the Chancellor of the Exchequer has to find a certain sum of money and the question that arises is, Where is it to be found? If hon. Members succeed in their Amendment and Income Tax payers are allowed to escape even to the extent of 6d., that 6d. has to be found out of someone else. Already in the lifetime of this Government there has been a steady process of pushing the burden of taxation, through indirect taxation, on to the shoulders of those least able to bear it.

Where, after all, is most of the money in this Budget to be found? This year Income Tax alone will find a sum of £228,000,000, and the National Debt will take £234,000,000. Who are the people who receive the interest on the National Debt? Mainly they are the people who are Income Tax payers. [Interruption.] Surely no one argues that persons who are below the Income Tax limit have any money in the War Debt. [HON. MEMBERS: "Certainly."] Suppose there are a few thousand who have. What is their share, after all, compared with the share of those who pay Income Tax and Surtax. It is negligible. The year before last, in September, the then Chancellor of the Exchequer roped in single working-class men down to a limit of £100 a year. [An HON. MEMBER: "Why not?"] Surely there must be some limit allowable to a man where he ought to be allowed to escape Income Tax altogether, and you have not allowed a single man, to escape even though he has slightly less than £2 a week. The Olen Chancellor said that in a full financial year he proposed to screw out of those men with incomes starting at less than £2 a week £17,000,000 a year. You have given almost that amount this year in returned profits to the brewers. Whatever the case may be for a reduced Income Tax, my simple point is that the Chancellor of the Exchequer must find the money and we must, in discharge of what we conceive to be our obligations to the poorest people of the land, demand that this burden shall fall upon the shoulders of those best able to bear it and, until hon. Members have shown that this money can be found elsewhere, other than through indirect taxation, they have no case for the proposition that they have advanced.

If you look at the other taxes that the Chancellor proposes in his Budget this year, in one form or another they are indirect taxes which will ultimately fall upon the shoulders of the vast mass of the people of the country. The tax on hydrocarbon oils will involve more and more expenses in this or that form of industry. Even concrete roads maintained by local authorities will cost more and local rates may go up. Therefore, the tendency still seems to be to force this country back in the direction of making a larger share of the taxation of the country flow into the Treasury through the medium of indirect taxation rather than direct taxation. We take the opposite view entirely. We declare without any fear whatever that there is still place through the medium of taxation for a readjustment of the distribution of wealth in this country, not merely as a social expedient, but because we take the view that until you have taxed those best able to bear the burden of taxation you ought not to throw larger burdens upon the shoulders of those who are unable to bear it.

Mr. MABANE

As the hon. Gentleman has challenged my figures and controverted statements which I made, that there is a relation between Income Tax and unemployment, does he agree with this? In 1921–22 the Income Tax was 6s. in the £ and in that year the deficit on the Insurance Fund was £15,000,000. In 1922–23 Income Tax was reduced to 5s., and in that year the Insurance Fund was in deficit only to the extent of £1,000,000. Next year, 1923–24, Income Tax was reduced to 4s. 6d., and in that year the Insurance Fund showed a surplus for the only year since the War of £9,000,000.

Mr. JONES

I will not controvert that observation at all. I asked him to go further in relation to the increase of the Unemployment Fund. If he takes the figures and percentages of unemployment for 1924, 1925 and 1926, he will find that there is no ground for saying that reduced Income Tax of itself automatically reduces employment.

Mr. MABANE

On the contrary, the figures were the lowest as to unemployment. They are here on page 197.

10.28 p.m.

Sir J. WARDLAW-MILNE

I do not think that my right hon. Friend the Chancellor of the Exchequer can have any complaint to make as to the treatment he has reseived in the rapid approval of the various Resolutions which have been before the House to-day, and consequently he will not complain if a few moments are spent on what is perhaps the most important matter which the country has to consider, in connection with his Budget, namely, the immense burden which Income Tax places upon the whole trade of the country. The hon. Gentleman the Member for Caerphilly (Mr. M. Jones) made some statements with which I should very much like to deal in detail, but it would take too long to go through the whole field. One thing which surprised me was the statement that people earning less than £2 a week paid any substantial sum in Income Tax. If he went into the matter thoroughly he would find, I think, that they did not pay Income Tax at all.

Mr. MORGAN JONES

Single men. The figure is £100 a year.

Sir J. WARDLAW-MILNE

I do not want to waste time however on the smaller points. The main point of his argument was summed up in the sentence that the Chancellor of the Exchequer must get the money. The point I want to put before the House is that it is more than likely that, in this way, he will not get the money. In the argument which the Chancellor of the Exchequer so very clearly put before the House the other day in connection with the proposed reduction of the duty on beer he made it perfectly plain, as I understood him, that he did not make that proposal because he desired to lower the price of beer particularly, but because he felt that it was a necessary concession from the point of view of the Treasury to enable him to secure the revenue which was essential. That is equally true in the case of Income Tax.

What is the exact position? In the description of the past year which the Chancellor of the Exchequer gave us last week it was stated that the Treasury had received £15,000,000 less than the Estimate on Income Tax alone. Let me give one other figure which is not perhaps so much in the minds of hon. Members, namely, that with an Income Tax 6d. higher than in 1930–31 we received £5,000,000 less last year than we received two years ago. It is perfectly clear, therefore, that the argument which the Chancellor of the Exchequer put before the House as to the reasons for reducing the Beer Duty are equally cogent in the case of the Income Tax, because unless he reduces the tax he will not get the money. Therefore, putting it on the very lowest basis—the hon. Member who spoke last seemed to think it was the most important—that of getting the revenue, the fact remains that there is a diminishing return from Income Tax, and it is perfectly clear that the rate of Income Tax, standing as it does, is on a basis that is bringing in year by year a smaller revenue. From no other point of view than that of getting revenue it is unwise to continue the tax at the present figure.

The hon. Member for Caerphilly referred to what happened in 1913 and made a great point of the figures, showing the collection of Income Tax in that year as against the amount of the National Debt, but there is a very much more important comparison with 1913 than that. The interesting comparison to be made with 1913 is, in my view, that in that year we collected £44,000,000 in Income Tax, whereas last year we collected £251,000,000. Does any human being believe that industry, which alone is carrying this burden, can continue to function under conditions of that kind? Out of a total of £745,000,000 raised in revenue last year no less than £389,000,000 was raised by direct taxes—In come Tax, Surtax and Estate Duty, or more than half the total revenue. Again, to put the matter in a different form, in the last two years 2,300,000 people in this country have provided over £818,000,000 in taxes; 2,300,000 out of the total population, and every penny of that money has come directly or indirectly out of industry. How is it possible that we can be in a position other than being faced with increased unemployment?

The present high taxation is definitely an intolerable burden upon industry and undoubtedly a direct cause of the great burden of unemployment in the country. While the British industrialist is endeavouring to sell his products in competition with other countries he is paying taxation at the rate of £16 8s. per head of the population of the country against his competitors who in France pay £9 8s., in Germany £5 15s. and in the United States just under £5. From the point of view of getting revenue in the future, which can only come out of industry, it is essential that industry should be prosperous. How industry can be prosperous under these burdens it is extremely difficult for anyone to see. It would not be in order to deal with the reasons for our very high taxation. They are connected with many matters such as the vast increase in our social services, many of which are no doubt absolutely desirable and perhaps necessary. Some of the arguments which have been put forward to-night, very interesting arguments, with which I should very much like to deal, were not strictly in order. There was the question whether a reduction of taxation will bring an immediate drop in unemployment. Nobody believes that it will do this in a moment, but it is clear that a drop in unemployment can only come from an extension of industry, and there can be no such development unless two things are certain, first, unless industrialists can look forward to a gradual reduction of the burdens upon them, and, secondly, until they are assured—a matter upon which we have been in some doubt during the last day or two—that the tariff policy a this country is fairly certain and settled for some time to come.

Let me give one other figure in connection with taxation. The total revenue derived from taxation since the War in this country is £13,000,000,000 raised from 45,000,000 people. Compare that with one of our greatest trade competitors, the United States, with a population of 123,000,000, nearly three times that of this country. They have collected £3,000,000,000 less than has been collected in this country! Is it any wonder that industrialists in this country feel that the burden of taxation is one which requires immediate attention?

Mr. MORGAN JONES

Have they a comparable War Debt?

Sir J. WARDLAW-MILNE

I am not dealing with the use of the money. I am not concerned as to whether it is desirable or necessary to raise the money; I am dealing with the position of the man who has to sell his goods with this burden upon him as against the position of a man in America who sells his goods without having to carry such a burden upon his selling prices. I am not concerned with the question of how the money is spent. If that point was to be considered it would bring me to the question of the social services, which is one of the largest burdens of this country. Whether the money is thrown into the sea, is wasted, or is well spent, does not alter the fact that the burden on the industrialist of this country is so heavy that it places him in an impossible position in competing with other nations.

The Chancellor of the Exchequer made a great point in his Budget speech of the fact that it was an honest Budget and he implied, although he did not say so, that it was a balanced Budget. These are matters of opinion. One may say that a Budget is balanced if you do not take certain things into account. I do not want to go outside the question of Income Tax which we are discussing, but it is clear that there is nothing in the Budget which is likely to put increased purchasing power into the hands of the people. It is true that there is a vast amount of money lying in the banks, but that is a totally different thing to a, vast amount of money being used in industry, and you will not get the full use of that money in industry until you deal with the question of taxation. It is extremely difficult to reverse the circle. We cannot get a reduction of Income Tax until we reduce our National costs and charges, and we cannot reduce our expenditure until unemployment comes down. My own criticism of this part of the Budget—and I cannot deal here with any other aspect—is that there is nothing in the maintenance of Income Tax at its present level which is likely to help to put purchasing power into the hands of the people of this country. I am tempted to follow some of the matters which have been mentioned, but I content myself with repeating that the burden is so heavy that there is no reason for us to find fault with industrialists who say that the question of direct taxation upon industry must be dealt with as the really urgent matter if we are to secure a return to prosperity.

10.40 p.m.

Mr. MACMILLAN

I do not think that the Chancellor of the Exchequer treated altogether satisfactorily the Amendment which is under discussion. It struck me that the right hon. Gentleman gave rather scant and airy treatment to a very serious proposition. I quite recognise that Amendments of this kind must be of a somewhat academic character. Everybody knows that they will not be carried, yet they are the recognised machinery for securing discussion on these important matters and it is not altogether in accordance with custom that they should be dismissed with a few jokes and a certain amount of persiflage however excellent. The right hon. Gentleman chaffed the hon Members who had brought forward this Amendment on having submitted an obvious truism in saying that a reduction of Income Tax would be a good thing, but no sooner had he chaffed them for stating this "truism' than it was promptly controverted by several speakers in other parts of the House.

If it comes to giving forth truisms, there is an obvious truism which Members of the Government, including the Chancellor of the Exchequer, have been constant in putting forward, and that is the statement that there should be a rise in the price level. They have not up to now been able to show how that is to be brought about, any more than the hon. Members who have submitted this Amendment have been able to show how it is to be brought about; but that does not deter them from continuing to make that statement, from repeating it on all occasions, both in this country and in other countries, without apparently being prepared with any definite proposition as to how that desirable state of affairs is to come into existence. The fact is that it is a fallacy to regard these calculations as purely static. It is not the case that there is an absolutely fixed sum out of which revenue can be raised to balance the Budget. These calculations must necessarily be regarded as dynamic and the question is how best to stimulate the national income out of which future revenue can be raised.

As the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) has just reminded the House, all those considerations which led the Chancellor of the Exchequer to recommend a reduction in the specific duty on beer, apply equally to the lowering of taxation when that taxation has ceased to be remunerative and is beginning to show alarming effects upon the revenue itself. It is too late to go in detail into all the questions which arise out of this Amendment, and indeed I am not one of those who are altogether dissatisfied with the Budget. I had the good fortune, unlike some Members of the Government, to be able to take a holiday during the Recess, and I heard the Budget, not in this House but in another part of the world. I am hound to say that.I was not disappointed. I never expected that we should have this reduction of taxation, or that we should have a very startling or what is called imaginative Budget. At any rate, we have not got a balanced Budget, and that is something. There is no chance of that. I was afraid that we would have had increased taxation in order to pay the Sinking Fund in full, and that we should remain upon that Gladstonian basis of finance which is now mainly supported on the Front Opposition Bench. At any rate, we have not had that. There is no pretence of that.

If you take the fact that we are raising something like £70,000,000 out of capital taxation by way of Death Duties, we have an unbalanced Budget of some £70,000,000, and the only question is to what extent in present circumstances it might have been safe to extend this system. Would it have been safe to have made a further inflationary reduction of taxation to unbalance the Budget further than my right hon. Friend ventured to go? That is the point. In the circumstances of the time, when we are living in this turmoil of monetary and financial difficulties in every part of the world, I think that if the right hon. Gentleman had been tempted in the direction of a more ambitious Budget, the events which took place immediately before the reduction of the Budget would have determined it. The events that took place in America may have made the right hon. Gentleman feel that this time it was better to strike a mean between an extremely bleak and rigid Budget, insisting upon maintaining the Sinking Fund at full, a truly balaced Budget, and, on the other hand, a more speculative Budget, such as seine of my hon. Friends recommend in this Amendment. I think that might commend itself to a great part of the House as not an unreasonable decision, but I feel that, taking the longer view, it is not possible for Ministers to be as sceptical as they appear to be of the recuperative powers of this country, if its industries and its people are given a chance, and as credulous, on the other hand, as they appear to be as to the beneficent effects of calling all the 60 or 70 nations of the world into a conference by which all these monetary problems are to he solved.

It seems to me that they are sometimes apt to lean too much upon the possible good effects of international solutions, hwever desirable they may be if they are successful, and not to lean enough upon what can be done by the intelligence and foresight and by the efforts of our own people, if they are given an opportunity, if industry can be given the opportunity of a reduction of the taxation upon it, if demand can be increased by way of reduction of taxation, direct and indirect, and if it can be stimulated by expenditure. In all those ways we are able at any rate in this country to do something to deal with our own difficulties, and whereas I quite recognise that in this particularly difficult time we might not perhaps venture to hope for much more than we have been allowed in the taxation that is levied, yet I hope that Ministers will remember the fact that we are in a vicious descending spiral of deflation. We cannot continue that, we cannot combine high expenditure and this deflationary financial policy. Sooner or later we shall get to the end. Sooner or later we shall reach a point at which the revenue itself will begin to fall, and fall alarmingly, and it may be that the moment has now arrived when the revenue could best be buoyed up and conserved by sonic alleviation of the hard-pressed taxpayers of this country.

Mr. MABANE

I beg to ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question, "That this House doth agree with the Committee in the said Resolution," put, and agreed to.

Nineteenth and Twentieth Resolutions agreed to.