HC Deb 26 April 1934 vol 288 cc1912-95

4.26 p.m.


I beg to move, "That the Debate be now adjourned."

Before that interlude took place I was explaining how seriously affected the cinema industry will be by this new tax. I am sorry that there is nobody representing the Treasury on the Front Bench now. Apparently, they do not think it important enough to give an explanation for imposing the new tax. Although we have a representative of the Board of Trade here, this is not a trade matter. It is the question of a new duty being imposed by a Budget resolution which will seriously affect thousands of people throughout the country. I am assured that this duty will impose a tax on the ordinary large cinema of over £10 a week. There is a great agitation from the trade to remove the penal taxation on the lower priced tickets for cinema theatres. This is the Chancellor's reply. His excuse is that the revenue will not

permit him to reduce the Entertainments Duty; instead, without a word of explanation and without bothering to issue a report, he imposes this new penal tax. I move the Adjournment of the Debate in order that this important matter should have adequate attention by the responsible Department. The Chancellor of the Exchequer, or at any rate his deputy, should give us the courtesy of his attendance.

Question put, "That the Debate be now adjourned."

The House divided: Ayes, 58; Noes, 219.

Division No. 213.] AYES. [4.30 p.m.
Adams, D. M. (Poplar, South) Greenwood, Rt. Hon. Arthur Rathbone, Eleanor
Attlee, Clement Richard Grenfell, David Haas (Glamorgan) Rea, Walter Russell
Banfield, John William Groves, Thomas E. Roberts, Aied (Wrexham)
Batey, Joseph Hall, George H. (Merthyr Tydvil) Saltar, Dr. Alfred
Bernays, Robert Holdsworth, Herbert Samuel, Rt. Hon. Sir H. (Darwen)
Bevan, Aneurin (Ebbw Vale) Janner, Barnett Sinclair, Maj. Rt. Hn. Sir A. (C'thness)
Brown, C. W. E. (Notts., Mansfield) Johnstone, Harcourt (S. Shields) Smith, Tom (Normanton)
Buchanan, George Jones, J. J. (West Ham, Silvertown) Thorne, William James
Cape, Thomas Jones, Morgan (Caerphilly) Tinker, John Joseph
Cocks, Frederick Seymour Kirkwood, David West, F. R.
Cove, William G. Leonard, William White, Henry Graham
Cripps, Sir Stafford Lunn, William Williams, David (Swansea, East)
Daggar, George Macdonald, Gordon (Ince) Williams, Edward John (Ogmore)
Davies, David L. (Pontypridd) McEntee, Valentino L. Wilmot, John
Davies, Rhys John (Westhoughton) Maclean, Neil (Glasgow, Govan) Wood, Sir Murdoch McKenzie (Banff)
Dabble, William Mallalieu, Edward Lancelot Young, Ernest J. (Middlesbrough, E.)
Edwards, Charles Mason, David M. (Edinburgh, E.)
Evans, R. T. (Carmarthen) Maxton, James TELLERS FOR THE AYES.—
Foot, Isaac (Cornwall, Bodmin) Owen, Major Goronwy Sir Percy Harris and Sir Robert Hamilton.
George, Major G. Lloyd (Pembroke) Paling, Wilfred
Graham, D. M. (Lanark, Hamilton) Parkinson, John Allan
Acland-Troyte, Lieut.-Colonel Chapman, Sir Samuel (Edinburgh, S.) Galbraith, James Francis Wallace
Adams, Samuel Vyvyan T. (Leeds, W.) Christie, James Archibald Ganzoni, Sir John
Agnew, Lieut.-Com. P. G. Clarke, Frank Gilmour, Lt.-Col. Rt. Hon. Sir John
Allen, William (Stoke-on-Trent) Clarry, Reginald George Glyn, Major Sir Ralph G. C.
Anstruther-Gray, W. J. Clayton, Sir Christopher Goldie, Noel B.
Applin, Lieut.-Col. Reginald V. K. Cobb, Sir Cyril Goodman, Colonel Albert W.
Balley, Eric Alfred George Colfox, Major William Philip Gower, Sir Robert
Baillie, Sir Adrian W. M. Collins, Rt. Hon. Sir Godfrey Graham, Sir F. Fergus (C'mb'rl'd, N.)
Baldwin, Rt. Hon. Stanley Calville, Lieut.-Colonel J. Gretton, Colonel Rt. Hon. John
Balniel, Lord Conant, R. J. E. Grimston, R. V.
Barclay-Harvey, C. M. Cooper, A. Duff Gritten, W. G. Howard
Belt, Sir Alfred L. Copeland, Ida Gunston, Captain D. W.
Blindell, James Cranborne, Viscount Guy, J. C. Morrison
Borodaie, Viscount Craven-Ellis, William Hacking, Rt. Hon. Douglas H.
Bossom, A. C. Crookshank, Col. C. de Windt (Bootle) Hales, Harold K.
Boulton, W. W. Crookshank, Capt. H. C. (Gainsb'ro) Hamilton, Sir George (Ilford)
Bowater, Col. Sir T. Vansittart Cross, R. H. Hannon, Patrick Joseph Henry
Bowyer, Capt. Sir George E. W. Culverwell, Cyril Tom Hartington, Marquess of
Boyd-Carpenter, Sir Archibald Davidson, Rt. Hon. J. C. C. Hartland, George A.
Brass, Captain Sir William Davies, Maj. Geo. F. (Somerset, Yeovil) Harvey, George (Lambeth, Kenningt'n)
Broadbent, Colonel John Denman, Hon. R. D. Harvey, Major S. E. (Devon, Totnes)
Brown, Col. D. C. (N'th'l'd., Hexham) Denville, Alfred Headlam, Lieut.-Col. Cuthbert M.
Brown, Brig-Gen. H. C. (Berks., Newb'y) Duckworth, George A. V. Hellgers, Captain F. F. A.
Buchan, John Dugdale, Captain Thomas Lionel Heneage, Lieut.-Colonel Arthur P.
Buchan-Hepburn, P. G. T. Duncan, James A. L. (Kensington, N.) Hore-Belisha, Leslie
Burgin, Dr. Edward Leslie Dunglass, Lord Hornby, Frank
Burnett, John George Eales, John Frederick Horsbrugh, Florence
Cadogan, Hon. Edward Edmondson, Major A. J. Hudson, Capt. A. U. M. (Hackney, N.)
Caporn, Arthur Cecil Elmley, Viscount Hurd, Sir Percy
Carver, Major William H. Emmott, Charles E. G. C. Hurst, Sir Gerald B.
Castlereagh, Viscount Emrys-Evans, P. V. Hutchison, W. D. (Essex, Romf'd)
Cayzer, Sir Charles (Chester, City) Erskine, Lord (Weston-super-Mars) Inskip, Rt. Hon. Sir Thomas W. H.
Cayzer, Maj. Sir H. R. (Prtsmth., S.) Erskine-Bolst, Capt. C. C. (Blackpool) James, Wing-Com. A. W. H.
Cazalet, Capt. V. A. (Chippenham) Evans, Capt. Arthur (Cardiff, S.) Jamieson, Douglas
Chamberlain, Rt. Hn. Sir J. A. (Birm., W.) Everard, W. Lindsay Jones, Lawis (Swansea, West)
Chamberlain, Rt. Hon. N. (Edgbaston) Fox, Sir Gifford Kerr, Hamilton W.
Keyes, Admiral Sir Roger Morrison, G. A. (Scottish Univer'ties) Shaw, Helen B. (Lanark, Bothwell)
Knight, Holford Morrison, William Shepherd Smith, R. W. (Ab'rd'n & Kinc'dine, C.)
Lamb, Sir Joseph Quinton Moss, Captain H. J. Smithers, Waldron
Leech, Dr. J. W. Muirhead, Lieut.-Colonel A. J. Somervell, Sir Donald
Leighton, Major B. E. P. Munro, Patrick Somerville, Annesley A. (Windsor)
Levy, Thomas Nation, Brigadier-General J. J. H. Soper, Richard
Lewis, Oswald Nicholson, Rt. Hn. W. G. (Peteref'ld) Southby, Commander Archibald R. J.
Lindsay, Kenneth (Kilmarnock) Normand, Rt. Hon. Wilfrid Spencer, Captain Richard A.
Lindsay, Noel Ker North, Edward T. Spender-Clay, Rt. Hon. Herbert H.
Lloyd, Geoffrey Nunn, William Stanley, Rt. Hon. Lord (Fylde)
Locker-Lampson, Com. O. (H'ndsw'th) Ormsby-Gore, Rt. Hon. William G. A. Stanley, Hon. O. F. G. (Westmorland)
Loder, Captain J. de Vere Patrick, Colin M. Stevenson, James
Lovat-Fraser, James Alexander Peake, Captain Osbert Stones, James
Mabane, William Pearson, William G. Storey, Samuel
MacAndrew, Lieut.-Col. C. G. (Partick) Peto, Sir Basil E. (Devon, Barnstaple) Sueter, Rear-Admiral Sir Murray F.
MacAndrew, Capt. J. O. (Ayr) Pike, Cecil F. Taylor, Vice-Admiral E. A. (P'dd'gt'n, S.)
McConnell, Sir Joseph Potter, John Thomas, Rt. Hon. J. H. (Derby)
MacDonald, Rt. Hon. J. R. (Seaham) Powell, Lieut.-Col. Evelyn G. H. Thomas, James P. L. (Hereford)
McKie, John Hamilton Ramsay, Capt. A. H. M. (Midlothian) Thompson, Sir Luke
McLean, Major Sir Alan Ramsay, T. B. W. (Western Isles) Thomson, Sir Frederick Charles
McLean, Dr. W. H. (Tradeston) Rawson, Sir Cooper Tree, Ronald
Macpherson, Rt. Hon. Sir Ian Reid, David D. (County Down) Tryon, Rt. Hon. George Clement
Macquisten, Frederick Alexander Rhys, Hon. Charles Arthur U. Tufnell, Lieut.-Commander R. L.
Maitland, Adam Rickards, George William Turton, Robert Hugh
Manningham-Buller, Lt.-Col. Sir M. Ropner, Colonel L. Wallace, John (Dunfermline)
Margesson, Capt. Rt. Hon. H. D. R. Ross Taylor, Walter (Woodbridge) Ward, Lt.-Col. Sir A. L. (Hull)
Marsden, Commander Arthur Ruggles-Brise, Colonel E. A. Ward, Irene Mary Bewick (Wallsend)
Martin, Thomas B. Rungs, Norah Cecil Wedderburn, Henry James Scrymgeour.
Mayhew, Lieut.-Colonel John Russell, Alexander West (Tynemouth) Weymouth, Viscount
Meller, Sir Richard James Russell, Hamer Field (Sheffield, B'tside) Whiteside, Borras Noel H.
Mills, Sir Frederick (Leyton, E.) Rutherford, John (Edmonton) Williams, Charles (Devon, Torquay)
Mills, Major J. D. (New Forest) Rutherford, Sir John Hugo (Liverp'l) Williams, Herbert G. (Croydon, S.)
Mitchell, Harold P. (Br'tf'd & Chisw'k) Salmon, Sir Isidore Willoughby de Eresby, Lord
Mitchell, Sir w. Lane (Streatham) Samuel, Sir Arthur Michael (F'nham) Windsor-Clive, Lieut.-Colonel George
Monsell, Rt. Hon. Sir B. Eyres Sandeman, Sir A. N. Stewart Worthington, Dr. John V.
Moreing, Adrian C. Savery, Samuel Servington
Morgan, Robert H. Scone, Lord TELLERS FOR THE NOES.—
Morris-Jones, Dr. J. H. (Denbigh) Selley, Harry R. Sir George Penny and Sir Victor

Original Question proposed, "That '5s. 0d.' stand part of the Resolution."

4.38 p.m.


I must apologise for the interruption, but there is a feeling outside that this duty has been smuggled through; and there is this justification for that feeling, that we have not been favoured with a White Paper or any kind of report, or even any speech, explaining this proposal. Then Ministers followed up that course of action by staying away from this discussion, and now they are adding to their discourtesy by carrying on a private conversation. Apparently they do not think this subject worthy of discussion, or perhaps they deliberately want to avoid discussion, would like to get this duty passed without comment, so that the public would know nothing about it. But we are not going to let them escape. I have no importance in this matter, I am only a Private Member, but the public outside are entitled to have a frank statement. The Government must not think that, because they have an immense majority, they have such control of public finance that they can smuggle through new duties, under pressure from private interests, without any comment in this House. The interests outside think they are being penalised by this taxation, and I think the attitude adopted by Ministers this afternoon rather confirms and justifies that impression. It it had not been for my intervention, apparently there would have been no explanation whatever from either the Chancellor or the Financial Secretary to the Treasury, whose duty it is, when a new duty is being imposed, to explain the reason for it. This duty was moved without even a word of comment from the right hon. Gentleman or his understudy, and I think we have good grounds for complaint. We here desire to maintain the traditions of Parliament, which controls taxation, and for that reason I felt justified in moving the Adjournment.

I have referred to the penal effect of this new duty on the cinema industry. Apparently the Chancellor has a grudge against the cinema industry. He is annoyed at their campaign against him because he has not found it possible to reduce the Entertainments Tax in the case of cinemas, and so he has slipped in this new duty which, as I explained in his absence and in the absence of his Financial Secretary, imposes a burden of £10 a week upon many theatres, in addition to the many other burdens which they have to bear in these difficult times. But there are other important industries which are also affected. There is the photo-process trade, a very big industry, which has grown enormously in the last 20 years. Not only does it do a very large home trade but, against competition from foreign countries, it is doing a considerable export trade. I have had bundles of letters on the subject. As soon as it was known that I was taking up this case various interests wrote to me. They assure me that they have made every endeavour to encourage the use of British-manufactured electric carbons. Most of these industries are in favour of Protection, and, being anxious to develop British industry, they have done all they could to give a preference to British-made carbons, but for some reason or other, which it is perhaps difficult to explain, they have found that in order to compete effectively with foreign countries it was vital to use the best quality electric carbons available and they have been forced to import the foreign article from France, Germany or America. It is necessary in the process of photo-engraving to have a carbon which is steady in burning and constant in intensity, and although the English article is 13 per cent. below the cost of the foreign it is essential for them, they have found, to use the foreign article.

I saw to-day the managing director of two of the largest engineering companies in the country, men who are not interested in politics and with no views on Free Trade or Protection but who are profoundly interested in maintaining the efficiency of their trade. I do not want to mention the names of those firms—there is no objection to mentioning their names—but I am prepared to give them to the Minister if he questions their reliability and their right to speak for the industry concerned. One firm are the largest manufacturers of electro-photo printing machines. They have endeavoured to make contracts with British manufacturers, but experience has shown that the result of using the British substitute has been a decrease in printing efficiency of 25 to 30 per cent. I have a letter from them here that I would be willing to put in in the course of this Debate.

I do not suppose that the Minister has bothered to make himself familiar with the article in question. Here is one of these carbons, apparently a very simple article of commerce. The tax upon it, as it will affect the photo process engraving houses is worth mentioning. I have here, upon the notepaper of the firm in question, the actual figures. Perhaps the Minister would like to be informed about them and made wise. If Ministers would take the trouble to study properly all such matters, perhaps they would not so lightly impose a new duty without a word of explanation to the House of Commons. This particular carbon is 18 millimetres in diameter and 12 inches long, and the cost, free of duty, is 2.52d. or, with the duty of one shilling per pound added, 5.52d. If you add the new duty, that the Treasury are now imposing without explanation, of 7s. 6d. per pound, the cost of the article to the consumer and the user to whom it is essential in photo-engraving is increased from the original invoice price of 2½d. to 2s. 1d. That is the effect of the increased tax. The Parliamentary Secretary to the Board of Trade nods; he confirms what I say.


The Parliamentary Secretary intimated that he would like to see the letter.


Then he has apparently not already informed himself of the facts. Here is the letter, and it will make him wise. [HON. MEMBERS: "Oh, get on with it!"] I do not want to bother the House with technical facts—[An HON. MEMBER: "Expose the ramp"]—or with technical workings with which the Parliamentary Secretary is no doubt familiar. There are at present 12,000 photo-printing machines in this country actually at work and dependent upon supplies of cheap and efficient electric carbons for doing that work. I am assured by the industries concerned that the new duty has come upon them as a staggering blow.

It may be, as the Government are not moved by the interests of the engineering trade or of the cinema trade, that they will listen to the point of view of the hospitals. Most of the up-to-date private hospitals, and some of our public hospitals, are now equipped with are lamps for therapeutic treatment. Immense progress has been made in the treatment of skin diseases such as lupus and rickets, and in order to get satisfactory results it is essential to have efficient carbons. I have had the advantage to-day of talking to the consulting engineer of the largest hospital in London. I did not propose to mention the name of the hospital, but as the Minister is so indifferent I will do so; it is St. Bartholomews. What I am about to say applies not only to St. Bartholomews but practically to all the hospitals in London. The consulting engineer assured me that he has made various experiments in order to use British carbons, but owing to various reasons, similar to those that I have given for the printing and cinema trades, he has not met with success. If the case is strong for the printing and cinema trades it is very much stronger for the hospitals. In the case of the hospitals, in order to get satisfactory results it is necessary to use a specially manufactured carbon to provide the ultra violet rays. An inefficient carbon gives variation and does not give satisfactory results.

The engineer assured me that it would be cheaper to buy British carbons, but, as a result of experiments, it was established that, whereas the British carbon lasted from four to six hours, the foreign carbon, which had been through very highly chemicalised treatment, lasted 12 hours. In 1933 this hospital used 516 lbs. of carbons, valued at £180. The extra duty, which may seem a small matter to hon. Members, will cost the hospital over £100 on that quantity. We need only multiply that £100 by the number of hospitals which are applying the treatment in order to see what a serious tax this will be upon those hospitals. I am also assured that, in spite of the extra duty, it will still be necessary for the hospitals to import the foreign article if successful results are to be obtained in the treatment. I think the Minister might have spent a little time in inquiring from the medical profession when he was contemplating putting on this new tax. Perhaps he will make himself wise between now and the appearance of the Finance Bill.

I am glad to see the First Lord of the Admiralty here. Maybe he is here by accident and not by design. I welcome him; he is a good example to his colleagues who represent the Treasury, because he has been very diligent in the discharge of his duty. That is not surprising, considering that he is an old Chief Whip. I am glad to see him here for very practical reasons. A case for a protective duty is put up in regard to certain industries because of the needs of national defence. The needs of national defence are always paramount, and if we could be sure that it is necessary to prohibit the importation of this article in order to secure that the necessary carbons were available for national defence, I should be the very last person to object. The Minister will correct me, I hope, if I am wrong, but I understand that practically all the requirements of the various Departments, such as for strategic purposes, searchlights for anti-aircraft purposes, and so on, and for the Navy, are supplied by the General Electric Company, and that we are independent of foreign supplies. The position is in no way interfered with by the foreign imports. The latter are imported not because of their price but because of their technical efficiency and because they meet the requirements of industry and trade. I am further informed that one month's output would meet the requirements for a five-year's war. The article is not perishable, it can be easily stored, and can be kept for a long time, and it does not require very much storage space. I want to say a word about the imported article. I am not going to put up a case for the importer. If, in the interests of national safety or of industry, one or two importers go to the wall, nobody in this House of Commons is going to shed many tears of sympathy.


Is that the new Liberalism?


No, that is not my ease. The importer is entitled to his point of view. He has been carrying on a legitimate trade. He found a ready demand for this article, and he was not undercutting the British article, and was not a party to dumping or to unfair competition. On the contrary, he was part of a trade organisation representing, I am informed, the interests of both producers and importers. The result of the tax so lightly imposed by the Government is that 300 men, mostly skilled engineers, have been thrown out of employment. Very large businesses have already closed down, and several men have been completely ruined without even the courtesy of a word of explanation, either when the Budget was introduced or upon the Report stage. They are taxpayers and they were carrying on business, paying their way and employing people, and they were certainly entitled to some consideration.

One very important firm had £1,500 of electric carbons held up by the Customs without any adequate excuse. For a couple of months the firm had been trying to pass those electric carbons through the Customs House, but all kinds of excuses were made and difficulties were put in their way until the day after the Budget Resolutions were passed. It may have been a mere accident or it may have been due to the skill of the Financial Secretary to the Treasury in preventing forestalling, but it was a curious coincidence—I hope that the Financial Secretary to the Treasury will listen to this—that on the day after the Budget was passed, in respect of this £1,500 parcel the firm received a debit note for duty of £10,000 under the new rate imposed by Resolution of this House. That is a little high-handed and means the closing down of that industry. We are living in a tariff country and this is one of the inevitable results of the tariff system, and perhaps we have no good grounds for complaint, but when the Government embark upon a new duty of this penal character Parliament and the country are entitled to some explanation.

When the duty was imposed before, there was a proper inquiry by a properly constituted Board of Trade committee, and a White Paper was issued so that the House and the industries concerned should be informed. During the last few years, new duties that have been imposed have gone by way of the procedure of the Import Duties Advisory Committee. Have the Advisory Committee been consulted in this case? Is it on their advice that the new duties have been imposed? If it is, it is a very remarkable thing that no evidence has been taken from the industries concerned, neither from the printing trade, the hospitals nor the importers. There is great suspicion of back-stair influence and that interested parties, who have aimed for a long time to get a monopoly, have very skilfully brought pressure to bear on the Minister. I am informed that the chairman of the largest manufacturers of electric carbons in this country admitted to a meeting of his association that he had been in constant contact with the Treasury. His advice had been given to the Government and, naturally, he was doing what he could to secure the imposition of this prohibitive tax. If I have done nothing else I think I have stirred up a certain amount of public interest. I think that the more inquiry and the more searchlight is turned on this subject the less justification there will be for this penal duty. I move the Amendment, which is of a rather negative character, to provide the House with an opportunity of dividing on the subject.

5.1 p.m.


I beg to second the Amendment.

It has been moved in such a comprehensive speech that it relieves me from the necessity of going over many of the points that have been made clear by my hon. Friend. Until he elucidated the matter the House was in complete ignorance with regard to the introduction of this tax, and we who are responsible for seeing the tax put on have the duty imposed upon us of finding out the reason and trying to realise what the effect is going to be. It is obvious that the tax is not imposed for the purpose of revenue. No question of revenue comes into it. The result of the imposition of the tax is simply the equivalent of a complete embargo. The total amount of carbons that have been imported from abroad does not amount to any very large sum in money values, and had the Chancellor of the Exchequer desired to raise some small amount by a tax imposed on the importation it would not have been in the nature of 300 or 500 per cent. tax, but something very much smaller. Therefore, I think we can put out of our minds the idea that there is anything in the nature of revenue in the tax.

Why has the tax been imposed? What is the object of suddenly keeping out an article which has been used for a great many years in this country, and which cannot be procured in this country? From such inquiries as I have been able to make, and as my hon. Friend has explained, in spite of the high duty of 60 per cent. which has been imposed on the imported article, entirely apart from the fact that we have gone off gold, which increases the difficulty of importation still further, the foreign article has always obtained a higher price in the home market than the home article. Therefore, it is perfectly clear that the consumers in this country have bought the foreign article because it was something which they could not get at home. They were prepared to pay a higher price for it than for the home article because it was necessary for the processes they had in hand, whether in connection with the cinema world or the hospitals.

With regard to the hospitals, I should like to reinforce what my hon. Friend said. He pointed out that in regard to Bart's alone, that hospital will have to pay an increase of £100 a year in the amount they spend in purchasing carbons, as the result of this tax. We ought to bear in mind that if the importation of these foreign carbons is entirely excluded it is possible that the price of the home article will go up very considerably, and therefore the price which Bart's will have to pay will be a good deal more than the £100 which they estimate they will have to pay because of the increased tax. In a ease like this where we have a home industry turning out carbons not as good as the foreign carbons—we have to admit that they are perfectly good for certain purposes but not equally good for other purposes—and where that industry has been built up behind a tax of 60 per cent., and there has also been the advantage given to it by our having gone off the gold standard, I cannot see that there can be any other argument for building up a further wall behind which the home industry can establish itself. The argument that is so often put up in tariff Debates is, that if you put up a wall high enough you give the industry behind the wall an opportunity to establish itself so firmly that afterwards the wall can be knocked down and the industry can meet opposition from abroad; but as a matter of fact when a wall has once been put up it is very seldom knocked down.

Here there is no case for that. Here is an industry which has had all that protection, which has entered into contracts to supply large quantities of carbon to many firms, but it has not succeeded in turning out carbons as good as those which can be procured abroad. Where an embargo has been put on foreign importation one result must be that there is less inducement for the home industry to devote its attention to turning out a better article. It rather inclines them to say: "You can take what we make, or go without." Therefore, there will be less inducement for them to spend money on fresh plant or chemical investigation in order to turn out an article as good as that that we have been getting from abroad. I am given to understand that the success which has attended the efforts of foreign chemists has been due to a variety of causes, possibly partly climatic, possibly partly due to secret processes with which we are not acquainted, and partly due to the long time that the foreign firms who produce this article have been engaged in the business, always going on improving their methods of manufacture.

That being the case, we are entitled to have a very clear explanation from the Minister why this tax has been imposed. So far as I have been able to come into contact with people who are interested in the use of this article, I find that the users as a whole are entirely in favour of the foreign article being allowed to come in under the same conditions as it comes in at present. That being so, one can only imagine that the urge to put on this tax has come from some other source, and naturally one looks to the home manufacturers. If, as a matter of fact, the urge has come from the home manufacturers, the more do we seek to know the reason that has impelled those representing the industry who have gone to the Treasury to put arguments before the Chancellor of the Exchequer for the imposition of this tax.

It is clear that there has been no public inquiry into the matter. I do not understand that there has been any reference of the matter to the Tariff Commission. Had there been such a reference, there would have been an opportunity given for all the interests concerned to put their case. There does not seem to have been any inquiry of any sort. The trade has been taken absolutely by surprise. Supplies which have been imported into this country are lying in the Customs now, and with the new tax imposed it is not worth while clearing them. My hon. Friend referred to the manner in which importers were looked upon by certain Members of the present House. It is not very long ago that the merchants of this country were held in high honour, even though they did import things from abroad. I hope that it is not because the articles really come from abroad that proposals are put forward for their exclusion from this country. The importers, who are carrying out their duty of supplying something that is needed in this country by the users of these articles, should not be penalised in this way, and it is the duty of Members of this House to ask for a full explanation from the Chancellor of the Exchequer why the tax has been put on.

5.11 p.m.


When a Budget Resolution comes before the House in this way, it is open to any Member of the House to ask for an explanation of the Resolution and to ask what is intended, and that explanation is very frequently given. An alternative opportunity is given to hon. Members to put down Amendments. The hon. Baronet has chosen the method of putting down an Amendment, and for the last hour and a-half the only thing that has stood between the House and the explanation has been the hon. Baronet's Amendment.


The hon. Member could have made a statement in moving the Resolution. It is the general custom to do so.


The hon. Baronet is not accurate in his statement. It is the practice to move the Resolution in the way that I have indicated. However, I am most anxious to give an explanation, more particularly as the two speeches to which we have listened bear very little reference to the facts of the subject matter under discussion. The hon. Baronet, as befits a debate on are lamp carbons, became almost incandescent in his wrath. Having very liberally indicated the way in which, in his judgment, Ministers had not looked up this matter, he fell into almost every conceivable error of fact, statement or deduction in connection with the proposed Resolution. I want to deal with the matter. Let me call the attention of the House, in the first place, to the fact that the hon. Baronet's Amendment suggests an increase in the tax. His Amendment suggests that the existing duty of 1s. should be increased to 1s. 1d.

The duty of 1s. was put on in the year 1926. What is the test of whether a duty is proving effective for the purpose for which it is imposed? Surely it has something to do with the imports which come in afterwards. You test whether or not your duty has been effective by seeing whether the foreign imports are still able to jump the barrier and come into the home market.


It depends on the purpose of the tax.


The purpose of the tax was to help the local industry and to some extent to keep out the foreign goods. In. 1926 when the Committee, to which the hon. Baronet has referred, reported, they said that the ad valorem duty had proved ineffective as a protection to the home carbon industry. In 1923, a little over 5,000,000 carbons were imported into this country, of a value of a little over £20,000. That figure has been rising. Sometimes it has been well above 6,500,000. In the year 1933, after this tax of 1s. per lb. had been 8 years in force, the number of carbons still coming into this country was only just short of 6,000,000, and the value had more than doubled since 1923, so that the duty of 1s. per lb. had proved to be entirely ineffective to stop the imports which it had been the object of the duty to keep out.


Did it not also show that, in spite of the tax, they were still coming into this country?


It might equally have shown, and it is the fact, that the stimulus to local manufacture had not been sufficiently great with a duty of 1s., but might, had the duty been increased, have been more effective. The hon. Baronet himself realises that national defence comes into this matter. Are lamp carbons are essential for searchlights and certain types of national defence apparatus, and it is, in the considered judgment of the Government, necessary that there should be a local are lamp carbon manufacture. What are the best means of encouraging that manufacture, and which are the industries that are most likely to be anxious to have a local manufacture in full operation? The hon. Baronet has referred a good deal to the cinematograph industry—


May I interrupt the hon. Gentleman—


Perhaps I might make my explanation first, and then the hon. Member can ask any questions. The matter involves a number of facts which I want to place before the House. The hon. Baronet made some observations which did not seem to me to be very complimentary to the Cinematograph Exhibitors' Association of Great Britain and Ireland. I understood him to say that he did not think that that body represented any large proportion of the cinematograph industry—


What I said was that I had heard that the members of the association knew nothing of the action of their secretary in having conferences with the Minister, that they were completely taken by surprise, and that the new duty came to them as a thunderbolt. It will be found that in a few weeks the Minister will hear about it.


I am sorry if I misunderstood the hon. Baronet; I thought that he was referring to the percentage of the industry which that body represented. It does in fact represent 86 per cent. of the industry, and it is not a matter of a secretary entering into discussions; there is a formal agreement with the cinematograph industry in the matter—[HON. MEMBERS: "With whom?"]—I am trying very hard to be allowed to finish my sentence. The cinematograph industry has entered into a formal agreement with manufacturers of British carbons, to the entire satisfaction of the cinematograph industry. The reason for entering into that agreement was that that big industry in this country was beginning to be seriously alarmed lest it might find itself entirely in the hands of continental manufacturers of are lamp carbons. The consumption of are lamp carbons is such that there is no room in a market for more than a few manufacturers. It is an essential commodity, but one which must, in order to be manufactured at a profit, be manufactured in a market that is assisted by a relatively limited number of people with guaranteed outlets for the supplies; and the are lamp carbon which is essential to this country's national defence is an article of which we as a country ought to encourage the manufacture here. The industry concerned and mostly wanting it applies to the manufacturers and asks whether, if British manufacture is encouraged, the industry can rely upon, first, a good quality article, and, secondly, an article at a proper competitive price.

No British manufacturer of this commodity has any cause to be grateful to the hon. Baronet or to the hon. Member who seconded the Amendment. Things were said about British carbons which I wish quite formally to deny. It was said that they were inefficient, unsatisfactory, and inferior. I am bound to say quite definitely to the House that the information at the disposal of the Government is that there is no purpose for which the British-made carbon is inferior to the foreign-made article. Hon. Members are ready to doubt the efficiency of British industry, but I want to make the statement—


Would the hon. Gentleman state why the industry pays a higher price for foreign carbons?


I will give the hon. Member a somewhat interesting answer. There is one of our great London hospitals which joined in the statement made by the hon. Baronet that they buy these continental carbons, but it turned out on further inquiry that the right hand of the hospital did not know what the left hand was doing, and that one department of the hospital thought it was necessary to have the continental carbons, while the other department of the hospital had for years been using British. The whole point is that it is very largely a matter of fact. If people have been used to particular carbons, they very often do not take the trouble to inquire whether an equivalent article can be made by local manufacture. It is very largely since 1931 that the possibility of supplying the home market from home manufacture has received adequate appreciation.

I want to make, in the first place, the point that the British carbon is not inferior, and, secondly, I want to make the point that the British cinema industry desires that this duty should be put on and is satisfied with the position. The third point I want to make is that an undertaking will be given that the price of the British are lamp carbon will not be raised. There are certain adjustments in manufacturing costs, but the undertaking will be quite definite, so that hon. Members who have spoken as to the effect of this tax in increasing the costs of a particular industry in a particular year are proceeding on the assumption, either that that industry will continue to buy the foreign article, or that the British article will be raised in price. I venture to think that very soon the industries in question will be buying the British article, and I want it to be perfectly clear that an undertaking will be given that the price of the British article will not be raised.

With regard to the letter to which the hon. Baronet referred, it is a little unfortunate that the price quoted in the few lines typed on the sheet of letter-paper which he handed to me is calculated at the, wrong rate of duty applicable to the size of carbons therein referred to. The House will appreciate that the carbons of larger size—the half-inch carbons—have the lower duty, and that it is the smaller types of carbon, below 14 millimetres in diameter, to which the higher duty is applied. These calculations have been carefully made so as to invert the duties applied, and, consequently, we can ignore those calculations.


I think we are entitled to know what the duties are. They are pretty high anyhow.


Does the hon. Baronet want to know what is the ad valorem incidence? It is perhaps rather high. It is in general between 60 and 100 per cent. of list prices, according to the size and nature of the carbon.


What list prices?


British list prices. The only other question with which I want to deal is the question of the hospitals. The hon. Member for Orkney and Shetland (Sir R. Hamilton) referred to St. Bartholomew's Hospital. I have a list of 300 hospitals, including great London hospitals, to which British carbons are not only supplied now, but have been supplied for many years.




Does the hon. Member mean, did they buy any foreign carbons? The information I have is that 300 individual hospitals, including most of the well-known London hospitals, and institutions and private users throughout the country, are supplied with British-made carbons. I do not know at all whether the hospitals in question buy other carbons, but the information I have is quite sufficient for my purpose. We cannot at one and the same time say that the home carbon is not fit for hospital work and yet record that there are 300 hospitals that use it.


What is the purpose for which those carbons are used?


If hon. Members really think that the purpose for which the are lamp carbon is going to be used is going to make a difference, I do not think they have studied the matter in detail. These carbons are used, as we all know, for the purpose of providing a stable and definite light during operations and other therapeutic work carried out in hospitals, and I am perfectly satisfied with the results of the inquiries I have made. Letters were received asking what the effect would be as regards hospitals, and the whole matter has been thoroughly looked into, and I can give an assurance to the House, firstly, as to quality; secondly, that the hospitals are using British carbons now; and, thirdly, as to cost. There is only one other thing that I need mention. There is a very special lamp, the Finsen Institute lamp, which is in great demand throughout the world. These lamps are very often supplied from Scandinavia, but the House may like to know that the carbons in them are supplied from this country. This lamp, which, with its particular reputation, is in great demand, is in fact fitted with carbons supplied from this country.

I think I have now disposed of all the points that have been raised, but the hon. Baronet will not mind my pointing out to him that a number of his suggestions appear to cancel out remarks that he made earlier in his speech. He asked why this duty was put on, and suggested that, if we wanted to keep these things out, we should have a complete embargo, and prohibition. At the end of his speech he made an impassioned appeal for the importer, who, he said, ought always to be taken into the picture and allowed to have a share in the trade. But the embargo and the importer will not go very well together. He spoke earlier of the inefficiency and lack of utility of the British-made carbon, but he ended by remarking on the admirable way in which the General Electric Company are supplying the Admiralty for home defence.

The point is this: Here is a British industry capable of considerable expansion, land capable of employing considerably more workpeople. It gives an undertaking that, if this duty is put on, the price at any rate will not be raised, and it satisfies the Government that it has a research department, which will keep up to date and not fob off on the public an article not in accordance with modern standards. We think that this duty will be a source of national protection, and at the same time will supply the great cinematograph industry with the carbons that it requires.


Will the hon. Gentleman deal with one point? He was asked whether the matter had been referred to the Tariff Advisory Committee. If not, will he state the reasons why not.


As the duty that we are discussing is a key industry duty, it is outside the scope of the Import Duties Advisory Committee. Under the Import Duties Act those matters are not referred to the Import Duties Advisory Committee which are already subject to duty under another Act.

5.31 p.m.


It seems to us that the explanation that the hon. Gentleman has given is an extraordinarily inadequate one—the sort of explanation that one would expect from an ex-Liberal, confusing embargoes with importers. The hon. Gentleman was accusing his old Liberal friend of putting a double argument, but he has failed to observe that the argument for once was an accurate one even though put by a Liberal. The argument as I understood it was that by putting on the embargo you put the importer out of business, which seems to be a perfectly accurate deduction. But, of course, the hon. Gentleman belongs to a Government which believes in the confiscation of property without compensation. I am bound to say that the longer this Government stays in the more I am tempted to adopt a policy on the same lines. What do these sudden impositions of duties mean? They mean that to-day Ian importer is carrying on his business, legitimately, allowed by the community, asked by the community, to supply them with certain kinds of ware. To-morrow morning we find that by the act of the almighty Government his business has disappeared. It does not exist any longer. It has been transferred by the Government to the General Electric Company, which in future will make the profits out of the supply of those commodities to the community which in the past the importer made. This is a principle that the House ought to consider seriously adopting in other matters as well. For instance, I should like to see the land treated in precisely the same way. Why should we not decide that the people who at the moment are drawing profits out of land should cease to draw them?

Viscountess ASTOR

Not much.


Then they will suffer very little. Therefore, we can transfer them to the hands of the community, which seems to me an excellent idea. I really think that, if the present Government go on much longer, they will at last induce the country to take some of these steps which some of us believe would be very wise steps to take. We were told two years ago that matters of tariffs were to be taken out of politics. That is to say, that cases of the imposition of duty were to be referred to some impartial tribunal in order that an inquiry might be carried out and the merits gone into to see whether, in accordance with the system of scientific tariffs, as I believe it is called, which has been introduced, it was wise that the article should have a tariff put upon it. There were certain articles excluded from that consideration. Take an article like silk, which was also excluded from that consideration? The Chancellor, when there was pressure to impose duties on silk, had the thing specially referred to the Tariff Advisory Committee, and he said he did not think it was right to impose a duty until there had been such an inquiry conducted and a determination come to. Why was not that done in this case? What is the urgency? We have not had one word from the hon. Gentleman as to the urgency of the taxation. Yet we find at the end of the Resolution: It is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, which means that it is a matter of urgency. I ask the Chancellor seriously, in order that we may know where we are, what was the feature that made it expedient to put on this taxation in this form without any previous inquiry whatever, because it is contrary to the avowed policy of the Government, which has been stated over and over again from that Box, that under the tariff policy you should have proper inquiries, that it should be done scientifically, and that there should be no chance of anyone accusing anyone else of backstair methods, as the Chancellor has been accused by the hon. Baronet who moved the Amendment.

There is another matter which I would ask the Chancellor to have specifically inquired into. A very serious accusation has been made against the Customs authorities. The right hon. Gentleman laughs. If what has been said is true, it is a matter of very serious importance.


Will the hon. and learned Gentleman state what his idea of the charge is.


That certain goods were purposely held up by the Customs for a period of two months in order that they might attract a greater Customs Duty, which the Customs would not have been entitled to charge if they had let them through in the ordinary course of business.


Will the hon. and learned Gentleman allow me to speak on that particular point without otherwise interrupting his speech. I hardly thought the House had taken the accusation seriously. It must be obvious that it is impossible for me, without knowing the port at which this consignment was delivered, to obtain detailed evidence, but I have not the slightest hesitation in saying here and now that I am certain that no official at headquarters ever gave instructions to the officials at the port to hold up this consignment in order that it might come under the increased duty when it came into operation.


I am sure that is what the right hon. Gentleman would feel about anyone in his Department for whom he is responsible, nevertheless a responsible Member of the House has made an accusation against the Customs Department. I think he is a responsible Member. It is a matter of extreme disquiet to anyone who cares for the proper administration of the Customs duties to think that such a thing could happen, and I ask the right hon. Gentleman to have an inquiry held into the matter and to satisfy himself and the House that there must have been some mistake, if there was a mistake.

As regards the further question of the advisability of increasing a tax of this sort, it seems to me that the House is hardly in a position to discuss that today. We have heard very powerful arguments put forward whereby one would judge that this is a most inadvisable tax. The Parliamentary Secretary has put forward some extremely weak arguments whereby one might think it was possibly excusable in certain circumstances. But what the House should consider, in my submission, is whether taxation of this sort, without even a mention in the Budget Speech as to its effect or its incidence, should be allowed to be brought forward when it should be referred to the Tariff Advisory Committee, as the Silk Duties were referred, for their report in order that we may know that all questions are being inquired into publicly, with a full opportunity for everyone to present his views, rather than a suggestion that someone has marched up the backstairs of the Treasury and got the tax imposed for the purpose of creating a monetary advantage to his benefit and a detriment to other people. I and those who sit with me will certainly vote in favour of the Amendment and against the Resolution on these grounds.

5.40 p.m.


The Parliamentary Secretary subdivided his reply into approximately four heads, the first of which was an explanation as to the reason for the original imposition of the tax and its effect. He said it was originally imposed, not for purposes of revenue, but in order to keep out foreign carbons and to give a stimulus to the industry here, but the tax had been found ineffective for that purpose, and consequently, the new tax here proposed was intended to give protection of such a nature as virtually to amount to an embargo—to erect a tariff wall behind which the Britsh industry could build itself up. I should be interested to know whether he received a representation on this subject from all the manufacturers of carbons. The largest manufacturers of carbons are a concern called the Ship Carbon Company, 50 per cent. of whose capital, incidentally, is held in Austria. I do not attach any importance to where the capital is held, but it simply happens to be a fact. The second largest is the General Electric Company, and the third and newest and, I am informed by those in the trade, the most advanced, and producing the best carbons, is the Morgan Crucible Company. Perhaps the hon. Gentleman could tell me later whether the Morgan Crucible Company also joined in the representation for a higher duty, because my information is that the only company which of late years has expended large sums in capital equipment for the production of these carbons is, in fact, opposed to the duty. I may be wrong, but that is my information. The only two companies that have desired this duty have been the Ship Carbon Company and the General Electric Company.

I would suggest to the hon. Gentleman when he speaks of the growth of imports or, at any rate, the failure to diminish imports, that that must in some degree be accounted for by the increase of the cinematograph industry. The industries that are using these carbons are not standing still. It is not likely that the demand for carbons would decrease but rather that it would increase very rapidly, and if, as I hope to show, the cinematograph industry, in common with all the other industries using carbons, prefers for certain purposes foreign manufactured carbons it is not surprising that even the high duty originally imposed has failed to diminish imports.

The second point, with which the Parliamentary Secretary only dealt very briefly, was the question of searchlights. He did not contradict my hon. Friend, who had said that, as far as he knew, the whole of the carbons used for Admiralty or War Office purposes were of home manufacture; nevertheless, he based part of his argument on the desire held in Admiralty and War Office circles for the promotion of greater manufacturing capacity of carbons in Great Britain. Why is that to be done? I am no expert on this matter, but I am informed, rightly or wrongly, that the type of carbons necessary for military or naval use is not of that refinement or delicacy which is necessary, for example, for cinema reflection or for the use of violet rays in hospitals or for photo-engraving purposes, and that therefore the Admiralty, the War Office, and the Air Ministry are well able to provide themselves with adequate carbons from the present British supply. If that be not so, I assume that, whenever the Minister winds up the Debate, the Government will inform us of it.

I should like to turn from that to the cinematograph. The hon. Gentleman has stated in very emphatic language that for all purposes, including hospitals, photo-engraving and cinematographs, the British carbons are fully equal to the foreign, and he chided my hon. Friend for endeavouring, as he said, to depreciate British industry, and trying to show in this House that the foreign manufacturer was, in fact, making an article preferred by users in this country. I acquit, of course, the hon. Gentleman of all attempt to mislead the House, but I have even now after this agitation, which has only been going on for 24 hours, such a mass of written evidence in my possession to the contrary, that I cannot help believing that it was a mis-statement. For example—I leave cinematographs for the moment and will return to them later—I have here a letter, to which my hon. Friend referred, from the largest users of these carbons in the electric photo-printing trade. It is addressed to their suppliers. They say, after some preliminary observations: We have a great desire to buy a British product and have gone out of our way to help the manufacturers of British-made carbons, but not at any time have we found a British carbon in any way equal to the Siemens carbons. Some 12 months ago we placed a contract with a British manufacturer but received so many complaints from our clients that we had to cancel this contract and return to the Siemens carbon. It will be nothing short of a tragedy to the engineering photo printing departments throughout this country if they are to be dependent upon British-made carbons. It it becomes necessary for us to have to notify the engineering firms that they cannot purchase the Siemens carbons except at a tremendously high price, there will be a very serious outcry against this embargo. These are not irresponsible people. They are not Members of the House of Commons, but people who are vitally interested in this question. Their bread and butter depend upon it. They are not, perhaps, so immediately and vitally interested as the registered importers, who have already dismissed their men and shut down their firms and are preparing to go into bankruptcy, but they are, at any rate, largely dependent upon this source of supply for a raw material. They have found it impossible—and I have a stack of letters here from perfectly reputable firms saying precisely the same thing—to get the article which they require. Even though this very high duty has been in force for such a long time, the stimulus of the duty has not promoted its manufacture in this country.

The same argument applies to cinematographs. The Parliamentary Secretary was very scornful about my hon. Friend's reference to the cinematograph trade, but I am informed this afternoon that the managing director of a group of Manchester cinemas, 48 in number, has telephoned, first of all, his astonishment because he was not informed of this projected tax and knew nothing about the application for it, and, secondly, his dismay. I have letters from individual cinema proprietors, first of all deprecating the duty on the ground that it will put up the price of this article, and, secondly, saying in every case that in spite of their endeavours to obtain an equivalent article of home manufacture they have been totally unable to do so. In the face of that evidence, which I am willing to show to the hon. Gentleman if he wishes, I cannot understand how he can stand up at that Box and say that, to his knowledge, the British carbon is in every respect as good as the imported one. It simply is not so.

He gave a very impressive list of hospitals which he said were all already using British carbons. But for what purposes are those hospitals using them? It really is idle to say that every purpose in a hospital for which a carbon is used is the same purpose, or that you need the same carbons for every possible use. It is not so. If the hon. Gentleman would make inquiries of those hospitals again he would find that, although there is no doubt that he is perfectly right in saying that in every case they are using British carbons, in every case they are using, for special work, a proportion of foreign carbons, for the simple reason that no British carbon is manufactured which will meet their convenience.

We do not expect or hope that at this stage the Chancellor of the Exchequer will withdraw or modify this duty, but there is a long interval now between the Report stage of these Resolutions and the introduction of the Finance Bill. I hope, at any rate, that he will assure the House this afternoon that before coming to the Finance Bill he will make further inquiries. We who have made inquiries into this subject have ground for believing that the reasons upon which he has founded this duty are not good reasons. I am certain that he thinks that they are good reasons, otherwise he would not have introduced the duty; but it is possible even for the Treasury to make mistakes. It is possible, especially when acting, as it must act, in secret and without inquiry, for the Treasury not to become acquainted with the views of all those who are interested in a specific trade. I think it would, at any rate, ease the minds of hon. Members if he would say in his reply, if he is going to reply, that before incorporating the new duty in the Finance Bill founded upon this Resolution, he will receive at any rate a deputation representative of individuals who are users in this country.

5.52 p.m.


In reply to the last observation of the hon. Member who has just addressed the House, he is, of course, correct in saying that there is now some interval between the Report stage of the Budget Resolutions and the introduction of the Finance Bill. During that interval it will be possible for persons, or firms, or concerns or institutions who are interested in this subject to make representations to the Board of Trade and to give any fresh information which may not have reached the Board of Trade, and I am certain that my right hon. Friend the President, or my hon. Friend the Parliamentary Secretary, will gladly listen to anything which they may say to them, and will weigh up the im- portance of any fresh considerations which may be put before them. But I would like to try to put to the House one or two points which seem to me to arise out of the last two speeches to which we have listened. It does not seem to be quite adequately appreciated, I think, that the duties in the case of these carbons are not in the same category as the bulk of the duties which make up the general tariff. The House is aware that the duty was originally placed upon the importation of these carbons because they were considered to be a key industry. Therefore that means that the duty was not put upon the imports in order to provide revenue or for economic reasons; it was put on for reasons of national interest connected with the defence of the country.

That is the major reason which has influenced the Government all through in considering what modifications from time to time should be made of the duties upon these carbons. It is a fact that in addition to their use for certain purposes outside the defence of the country there are quite a large number of other uses of the carbons, and it is impossible to protect adequately what I may call the key industry side, the vital side of these productions, without affecting to some extent the other productions in which they are used commercially. Nevertheless, in this particular case a good deal of trouble has been taken to make sure that those interests should not suffer. My hon. Friend has already informed the House that joint application has been made not only by the manufacturers, but also by the principal users of these carbons for commercial purposes, namely, the Cinematograph Exhibitors' Association. Of course, there may be individuals who disagree with what the body representative of their industry thinks or says, and who therefore try to make their representations. But though we cannot please everybody, I think that we are entitled to take an association of that kind, generally speaking, as representative of the trade.

There is one other point which I should like to make. The duty originally was an ad valorem duty. In its first form it was an ad valorem duty put on, I think, in 1921. In 1926 the whole of the key industries were revised, and the Com- mittee which reported upon the survey which they then made of the key industries reported that the ad valorem duty had not been effective for the purpose for which it was imposed, and they stated that in the light of it there should be a specific duty of 1s. a lb., which is the duty which has existed ever since. I would call attention to the fact that even in 1926 the Committee expressed the view that 1s. a lb. might not be found in operation to be effective for the purpose, so they anticipated even then that it might be necessary later on to raise the duty. But the factor which has really made the greatest difference is that the nature of these carbons has changed in the years which have elapsed since 1926. The value of these carbons is now much greater per unit of weight than it was in 1926, and, therefore, since the value per unit of weight has gone up while the specific duty has remained the same, it will be seen that the ad valorem effectiveness of the duty has continually decreased. That, I think, is the reason why it has been felt now that the duty ought to be increased again.

It has been suggested that this is a matter which should have been referred to the Import Duties Advisory Committee, but I think that the House will appreciate that, when the principal factors in deciding upon the duty at all are not those which are effective in the ordinary case of a duty, when it is a question of defence, it is really not an appropriate matter for the consideration of the Import Duties Advisory Committee. In the case of the Silk Duties to which the hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) referred, the matter is quite different. There the Silk Duties were originally out of the purview of the Advisory Committee because they had been Revenue duties before, but when that great complicated industry complained, as they did, and not without reason, that they, almost alone among the textile industries, were not allowed to have the benefits of protection which were extended to other branches of the industry, it was felt that we might properly refer that matter to the Advisory Committee, pointing out to them that, in any consideration of recommendations, they must bear in mind always the question of Revenue, which was so important in the case of the Silk Duties. There are no considerations of that kind in the case of this particular duty. The main feature of it is the defence side. What we have to do is to try our best to see that other interests do not suffer, and in obtaining from the manufacturers an assurance that the price will not be raised, we have, I think, protected them on that side.

It is true, as the hon. Member says, that British manufacturers can produce carbons as good as those made in any foreign country. Exactly the same was said about dyes, and it is perfectly true. The Germans for a long time had been developing the process and they started with an advantage with which it was impossible for British manufacturers to catch up at once, but, given a certain amount of protection, our experience has been that British manufacturers do not take long before they make themselves as efficient as any of their foreign competitors. I am prepared to admit that there might be some temporary inconvenience in certain particular lines of these carbons when it is more difficult to get them from

abroad, but I am sure it will pass away and that presently the consumers of carbons in this country will get just as good products from British manufacturers, in every line, as they can get from abroad.


The whole of the carbons, so far as we are informed, for the Admiralty and War Office are already made in this country. Is that so?


I understood the statement was that they were made by one firm. I have made special inquiries, and I am assured that the Defence Services feel that it is most important they should have in this country a sufficiently strong industry in this line to be able to expand rapidly in time of emergency and they consider that as long as there is this large importation of foreign carbons coming in, we cannot expect this country to be sufficiently safeguarded if we should require, suddenly, a large supply of carbons.

Question put, "That '5s. 0d.' stand part of the Resolution."

The House divided: Ayes, 237, Noes, 54.

Division No. 214.] AYES. [6.4 p.m.
Acland-Troyte, Lieut.-Colonel Clayton, Sir Christopher Gritten, W. G. Howard
Albery, Irving James Cobb, Sir Cyril Guinness, Thomas L. E. B.
Allen, William (Stoke-on-Trent) Colfox, Major William Philip Gunston, Captain D. W.
Anstruther-Gray, W. J. Colville, Lieut.-Colonel J. Guy, J. C. Morrison
Applin, Lieut.-Col. Reginald V. K. Conant, R. J. E. Hacking, Rt. Hon. Douglas H.
Actor, Viscountess (Plymouth, Sutton) Courtauld, Major John Sewell Hales, Harold K.
Bailey, Eric Alfred George Courthope, Colonel Sir George L. Hamilton, Sir George (Ilford)
Baillie, Sir Adrian W. M. Cranborne, Viscount Hartland, George A.
Balfour, George (Hampstead) Croft, Brigadier-General Sir H. Harvey, George (Lambeth, Kenningt'n)
Beauchamp, Sir Brograve Campbell Crookshank, Col. C. de Windt (Bootle) Harvey, Major S. E. (Devon, Totnes)
Beaumont, Hon. R. E. B. (Portsm'th, C.) Crookshank, Capt. H. C. (Gainsb'ro) Headlam, Lieut.-Col. Cuthbert M.
Belt, Sir Alfred L. Cross, R. H. Heilgers, Captain F. F. A.
Benn, Sir Arthur Shirley Crossley, A. C. Hore-Belisha, Leslie
Blindell, James Culverwell, Cyril Tom Hornby, Frank
Borodale, Viscount Davison, Sir William Henry Horne, Rt. Hon. Sir Robert S.
Bossom, A. C. Denman, Hon. R. D. Horsbrugh, Florence
Boulton, W. W. Denville, Alfred Hurd, Sir Percy
Bowater, Col. Sir T. Vansittart Drewe, Cedric Hutchison, W. D. (Essex, Romford)
Bowyer, Capt. Sir George E. W. Duckworth, George A. V. Iveagh, Countess of
Boyd-Carpenter, Sir Archibald Dunglass, Lord James, Wing.-Com. A. W. H.
Braithwaite, J. G. (Hillsborough) Eales, John Frederick Jamleson, Douglas
Brass, Captain Sir William Edmondson, Major A. J. Jones, Sir G. W. H. (Stoke New'gton)
Broadbent, Colonel John Elmley, Viscount Jones, Lewis (Swansea, West)
Brocklebank, C. E. R. Emrys-Evans, P. V. Kerr, Hamilton W.
Brown, Ernest (Leith) Entwistle, Cyril Fullard Keyes, Admiral Sir Roger
Brown, Brig.-Gen. H. C. (Berks., Newb'y) Erskine, Lord (Weston-super-Mare) Knight, Holford
Buchan, John Erskine-Bolst, Capt. C. C. (Blackpool) Lamb, Sir Joseph Quinton
Buchan-Hepburn, P. G. T. Evans, Capt. Arthur (Cardiff, S.) Leckie, J. A.
Burgin, Dr. Edward Leslie Everard, W. Lindsay Leech, Dr. J. W.
Burnett, John George Fermoy, Lord Leighton, Major B. E. P.
Butt, Sir Alfred Ford, Sir Patrick J. Levy, Thomas
Cadogan, Hon. Edward Fox, Sir Gifford Lewis, Oswald
Campbell, Sir Edward Taswell (Brmly) Galbraith, James Francis Wallace Lindsay, Kenneth (Kilmarnock)
Caporn, Arthur Cecil Gilmour, Lt.-Col. Rt. Hon. Sir John Lindsay, Noel Ker
Carver, Major William H. Glyn, Major Sir Ralph G. C. Little, Graham-, Sir Ernest
Cayzer, Sir Charles (Chester, City) Goldie, Noel B. Llewellin, Major John J.
Cazalet, Thelma (Islington, E.) Goodman, Colonel Albert W. Lockwood, John C. (Hackney, C.)
Chamberlain, Rt. Hon. N. (Edgbaston) Graham, Sir F. Fergus (C'mb'rl'd, N.) Loder, Captain J. de Vere
Chapman, Sir Samuel (Edinburgh, S.) Grattan-Doyle, Sir Nicholas Lovat-Fraser, James Alexander
Christie, James Archibald Gretton, Colonel Rt. Hon. John Lyons, Abraham Montagu
Clarke, Frank Grimston, R. V. Mabane, William
MacAndrew, Lieut.-Col. C. G. (Partick) Penny, Sir George Stanley, Hon. O. F. G. (Westmorland)
MacAndrew, Capt. J. O. (Ayr) Percy, Lord Eustace Stevenson, James
McKie, John Hamilton Pike, Cecil F. Stones, James
McLean, Major Sir Alan Potter, John Storey, Samuel
Macquisten, Frederick Alexander Powell, Lieut.-Col. Evelyn G. H. Stuart, Hon. J. (Moray and Nairn)
Magnay, Thomas Radford, E. A. Stuart, Lord C. Crichton-
Maitland, Adam Ramsay, Capt. A. H. M. (Midlothian) Sueter, Rear-Admiral Sir Murray F.
Manningham-Buller, Lt.-Col. Sir M. Ramsay, T. B. W. (Western Isles) Sugden, Sir Wilfrid Hart
Margesson, Capt. Rt. Hon. H. D. R. Ramsbotham, Herwald Summersby, Charles H.
Marsden, Commander Arthur Rawson, Sir Cooper Tate, Mavis Constance
Martin, Thomas B. Ray, Sir William Thomson, Sir Frederick Charles
Mason, Col. Glyn K. (Croydon, N.) Rickards, George William Todd, Lt.-Col. A. J. K. (B'wick-on-T.)
Mayhew, Lieut.-Colonel John Ropner, Colonel L. Train, John
Meller, Sir Richard James Ross, Ronald D. Tree, Ronald
Mills, Sir Frederick (Leyton, E.) Ross Taylor, Walter (Woodbridge) Tryon, Rt. Hon. George Clement
Mills, Major J. D. (New Forest) Ruggles-Brise, Colonel E. A. Tufnell, Lieut.-Commander R. L.
Mitchell, Harold P. (Br'tf'd & Chisw'k) Runge, Norah Cecil Turton, Robert Hugh
Molson, A. Hugh Elsdaie Russell, Alexander West (Tynemouth) Wallace, John (Dunfermline)
Monsell, Rt. Hon. Sir B. Eyres Russell, Hamer Field (Sheffield, B'tside) Ward, Lt.-Col. Sir A. L. (Hull)
Moore, Lt.-Col. Thomas C. R. (Ayr) Rutherford, John (Edmonton) Ward, Irene Mary Bewick (Wallsend)
Moreing, Adrian C. Rutherford, Sir John Hugo (Liverp'l) Warrender, Sir Victor A. G.
Morgan, Robert H. Samuel, Sir Arthur Michael (F'nham) Watt, Captain George Steven H.
Morris-Jones, Dr. J. H. (Denbigh) Sandeman, Sir A. N. Stewart Wayland, Sir William A.
Morrison, G. A. (Scottish Univer'ties) Savery, Samuel Servington Wedderburn, Henry James Scrymgeour-
Morrison, William Shepherd Scone, Lord Weymouth, Viscount
Moss, Captain H. J. Selley, Harry R. Whiteside, Borras Noel H.
Muirhead, Lieut.-Colonel A. J. Shaw, Helen B. (Lanark, Both well) Williams, Charles (Devon, Torquay)
Munro, Patrick Shaw, Captain William T. (Forfar) Williams, Herbert G. (Croydon, S.)
Nation, Brigadier-General J. J. H. Simmonds, Oliver Edwin Willoughby de Eresby, Lord
Nicholson, Rt. Hn. W. G. (Petersf'ld) Smith, Louis W. (Sheffield, Hallam) Wilson, Lt.-Col. Sir Arnold (Hertf'd)
Normand, Rt. Hon. Wilfrid Smith, R. W. (Ab'rd'n & Kinc'dine, C.) Windsor-Olive, Lieut.-Colonel George
North, Edward T. Smithers, Waldron Wise, Alfred R.
Nunn, William Somervell, Sir Donald Withers, Sir John James
O'Neill, Rt. Hon. Sir Hugh Somerville, Annesley A. (Windsor) Wolmer, Rt. Hon. Viscount
Ormsby-Gore, Rt. Hon. William G. A. Soper, Richard Wood, Rt. Hon. Sir H. Kingsley
Palmer, Francis Noel Southby, Commander Archibald R. J. Worthington, Dr. John V.
Patrick, Colin M. Spencer, Captain Richard A.
Peake, Captain Osbert Spens, William Patrick TELLERS FOR THE AYES.—
Pearson, William G. Stanley, Rt. Hon. Lord (Fylde) Captain Austin Hudson and Major
George Davies.
Adams, D. M. (Poplar, South) Graham, D. M. (Lanark, Hamilton) Mander, Geoffrey le M.
Banfield, John William Grenfell, David Rees (Glamorgan) Mason, David M. (Edinburgh, E.)
Batey, Joseph Griffiths, T. (Monmouth, Pontypool) Maxton, James
Bernays, Robert Groves, Thomas E. Owen, Major Goronwy
Bevan, Aneurin (Ebbw Vale) Hall, George H. (Merthyr Tydvil) Paling, Wilfred
Brown, C. W. E. (Notts., Mansfield) Hamilton, Sir R. W. (Orkney & Z'tl'nd) Parkinson, John Allen
Buchanan, George Harris, Sir Percy Rathbone, Eleanor
Cape, Thomas Holdsworth, Herbert Salter, Dr. Alfred
Cocks Frederick Seymour Janner, Barnett Sinclair, Maj. Rt. Hn. Sir A. (C'thness)
Cave, William G. Jones, J. J. (West Ham, Silvertown) Smith, Tom (Normanton)
Cripps, Sir Stafford Jones, Morgan (Caerphilly) Thorne, William James
Daggar, George Kirkwood, David Tinker, John Joseph
Davies, David L. (Pontypridd) Lawson, John James Williams, David (Swansea, East)
Dobbie, William Leonard, William Wilmot, John
Edwards, Charles Lunn, William Wood, Sir Murdoch McKenzie (Band)
Foot, Dingle (Dundee) McEntee, Valentine L. Young, Ernest J. (Middlesbrough, E.)
Foot, Isaac (Cornwall, Bodmin) McGovern, John
George, Major G. Lloyd (Pembroke) Maclean, Neil (Glasgow, Govan) TELLERS FOR THE NOES.—
George, Megan A. Lloyd (Anglesea) Mallalieu, Edward Lancelot Mr. Walter Rea and Mr. Harcourt

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

The House divided: Ayes, 229; Noes, 53.

Division No. 215.] AYES. [6.14 p.m.
Acland-Troyte, Lieut.-Colonel Blindell, James Butt, Sir Alfred
Albery, Irving James Borodale, Viscount Cadogan, Hon. Edward
Allen, William (Stoke-on-Trent) Boulton, W. W. Campbell, Sir Edward Taswell (Brmly)
Anstruther-Gray, W. J. Bowater, Col. Sir T. Vansittart Caporn, Arthur Cecil
Applin, Lieut.-Col. Reginald V. K. Bowyer, Capt. Sir George E. W. Carver, Major William H.
Astor, Viscountess (Plymouth, Sutton) Boyd-Carpenter, Sir Archibald Cayzer, Sir Charles (Chester, City)
Atholl, Duchess of Braithwaite, J. G. (Hillsborough) Cazalet, Theima (Islington, E.)
Bailey, Eric Alfred George Brass, Captain Sir William Chamberlain, Rt. Hon. N. (Edgbaston)
Baillie, Sir Adrian W. M. Brocklebank, C. E. R. Chapman, Sir Samuel (Edinburgh, S.)
Balfour, George (Hampstead) Brown, Ernest (Leith) Christie, James Archibald
Barclay-Harvey, C. M. Brown, Brig.-Gen. H. C. (Berks., Newb'y) Clarke, Frank
Beauchamp, Sir Brograve Campbell Buchan, John Clayton, Sir Christopher
Beaumont, Hon. R. E. B. (Portsm'th, C.) Buchan-Hepburn, P. G. T. Colfox, Major William Philip
Belt, Sir Alfred L. Burgin, Dr. Edward Leslie Collins, Rt. Hon. Sir Godfrey
Benn, Sir Arthur Shirley Burnett, John George Colville, Lieut.-Colonel J.
Courtauld, Major John Sewell Leckie, J. A. Rickards, George William
Courthope, Colonel Sir George L. Leech, Dr. J. W. Ropner, Colonel L.
Cranborne, Viscount Leighton, Major B. E. P. Ross, Ronald D.
Croft, Brigadier-General Sir H. Levy, Thomas Ross Taylor, Walter (Woodbridge)
Crookshank, Col. C. de Windt (Bootle) Lewis, Oswald Ruggles-Brise, Colonel E. A.
Crookshank, Capt. H. C. (Gainsb'ro) Lindsay, Kenneth (Kilmarnock) Runge, Norak Cecil
Cross, R. H. Lindsay, Noel Ker Russell, Alexander West (Tynemouth)
Crossley, A. C. Little, Graham-, Sir Ernest Russell, Hamer Field (Sheffield, B'tside)
Davison, Sir William Henry Liewellin, Major John J. Rutherford, John (Edmonton)
Denman, Hon. R. D. Locker-Lampson, Rt. Hn. G. (Wd. G'n) Rutherford, Sir John Hugo (Liverp'l)
Denville, Alfred Lockwood, John C. (Hackney, C.) Samuel, Sir Arthur Michael (F'nham)
Dickie, John P. Loder, Captain J. de Vere Sandeman, Sir A. N. Stewart
Drew, Cedric Lovat-Fraser, James Alexander Savery, Samuel Servington
Duckworth, George A. V. Lyons, Abraham Montagu Scone, Lord
Dunglass, Lord Mabane, William Selley, Harry R.
Eales, John Frederick MacAndrew, Lieut.-Col. C. G. (Partick) Shaw, Helen B. (Lanark, Bothwell)
Edmondson, Major A. J. McKie, John Hamilton Shaw, Captain William T. (Forfar)
Elmley, Viscount McLean, Major Sir Alan Simmonds, Oliver Edwin
Emrys-Evans, P. V. Macmillan, Maurice Harold Smith, Louis W. (Sheffield, Hallam)
Entwistle, Cyril Fullard Macquisten, Frederick Alexander Smith, R. W. (Ab'rd'n & Kinc'dine, C.)
Erskine, Lord (Weston-super-Mare) Magnay, Thomas Smithers, Waldron
Erskine-Bolst, Capt. C. C. (Blackpool) Maitland, Adam Somervell, Sir Donald
Evans, Capt. Arthur (Cardiff, S.) Manningham-Buller, Lt.-Col. Sir M. Somerville, Annesley A. (Windsor)
Everard, W. Lindsay Margesson, Capt. Rt. Hon. H. D. R. Soper, Richard
Fermoy, Lord Marsden, Commander Arthur Southby, Commander Archibald R. J.
Ford, Sir Patrick J. Martin, Thomas B. Spencer, Captain Richard A.
Fox, Sir Gifford Mason, Col. Glyn K (Croydon, N.) Spens, William Patrick
Galbraith, James Francis Wallace Mayhew, Lieut.-Colonel John Stanley, Hon. O. F. G. (Westmorland)
Gilmour, Lt.-Col. Rt. Hon. Sir John Meller, Sir Richard James Stevenson, James
Glyn, Major Sir Ralph G. C. Mills, Sir Frederick (Leyton, E.) Stones, James
Goldie, Noel B. Mills, Major J. D. (New Forest) Stuart, Lord C. Crichton-
Goodman, Colonel Albert W. Mitchell, Harold P. (Br'tf'd & Chisw'k) Sueter, Rear-Admiral Sir Murray F.
Grattan-Doyle, Sir Nicholas Molson, A. Hugh Elsdale Sugden, Sir Wilfrid Hart
Grenfell, E. C. (City of London) Monsell, Rt. Hon. Sir B. Eyres Tate, Mavis Constance
Gretton, Colonel Rt. Hon. John Moore, Lt.-Col. Thomas C. R. (Ayr) Thomas, James P. L. (Hereford)
Grimston, R. V. Moreing, Adrian C. Thomson, Sir Frederick Charles
Gritten, W. G. Howard Morgan, Robert H. Todd, Lt.-Col. A. J. K. (B'wick-on-T.)
Guinness, Thomas L. E. B. Morris-Jones, Dr. J. H. (Denbigh) Train, John
Gunston, Captain D. W. Morrison, William Shepherd Tree, Ronald
Guy, J. C. Morrison Moss, Captain H. J. Tryon, Rt. Hon. George Clement
Hacking, Rt. Hon. Douglas H. Muirhead, Lieut.-Colonel A. J. Tufnell, Lieut.-Commander R. L.
Hales, Harold K. Munro, Patrick Turton, Robert Hugh
Hamilton, Sir George (Ilford) Nation, Brigadier-General J. J. H. Wallace, John (Dunfermline)
Hartland, George A. Nicholson, Rt. Hn. W. G. (Petersf'ld) Ward, Irene Mary Bewick (Wallsend)
Harvey, George (Lambeth, Kenningt'n) Normand, Rt. Hon. Wilfrid Warrender, Sir Victor A. G.
Harvey, Major S. E. (Devon, Totnes) North, Edward T. Watt, Captain George Steven H.
Headlam, Lieut.-Col. Cuthbert M. Nunn, William Wayland, Sir William A.
Heilgers, Captain F. F. A. O'Neill, Rt. Hon. Sir Hugh Wedderburn, Henry James Scrymgeour-
Hore-Belisha, Leslie Ormsby-Gore, Rt. Hon. William G. A. Weymouth, Viscount
Hornby, Frank Palmer, Francis Noel Whiteside, Borras Noel H.
Horne, Rt. Hon. Sir Robert S. Patrick, Colin M. Williams, Charles (Devon, Torquay)
Horsbrugh, Florence Peake, Captain Osbert Williams, Herbert G. (Croydon, S.)
Hudson, Capt. A. U. M. (Hackney, N.) Pearson, William G. Wilson, Lt.-Col. Sir Arnold (Hertf'd)
Hurd, Sir Percy Penny, Sir George Windsor-Clive, Lieut.-Colonel George
Iveagh, Countess of Percy, Lord Eustace Wise, Alfred R.
James, Wing Com. A. W. H. Potter, John Withers, Sir John James
Jamleson, Douglas Powell, Lieut.-Col. Evelyn G. H. Wolmer, Rt. Hon. Viscount
Jones, Sir G. W. H. (Stoke New'gton) Procter, Major Henry Adam Wood, Rt. Hon. Sir H. Kingsley
Jones, Lewis (Swansea, West) Ramsay, Capt. A. H. M. (Midlothian) Worthington, Dr. John V.
Karr, Hamilton W. Ramsay, T. B. W. (Western Isles)
Keyes, Admiral Sir Roger Ramsbotham, Herwald TELLERS FOR THE AYES.—
Knight, Holford Rawson, Sir Cooper Lieut.-Colonel Sir A. Lambert Ward
Lamb, Sir Joseph Quinton Ray, Sir William and Major George Davies.
Adams, D. M. (Poplar, South) Griffiths, T. (Monmouth, Pontypool) Maxton, James
Banfield, John William Hall, George H. (Merthyr Tydvil) Owen, Major Goronwy
Batey, Joseph Hamilton, Sir R. W. (Orkney & Zetl'nd) Paling, Wilfred
Bevan, Aneurin (Ebbw Vale) Harris, Sir Percy Parkinson, John Allen
Brown, C. W. E. (Notts., Mansfield) Holdsworth, Herbert Rathbone, Eleanor
Buchanan, George Janner, Barnett Rea, Walter Russell
Cape, Thomas Johnstone, Harcourt (S. Shields) Sinclair, Maj. Rt. Hn. Sir A. (C'thnese)
Cocks, Frederick Seymour Jones, J. J. (West Ham, Silvertown) Smith, Tom (Normanton)
Cove, William G. Jones, Morgan (Caerphilly) Thorne, William James
Cripps, Sir Stafford Kirkwood, David Tinker, John Joseph
Daggar, George Lawson, John James Wedgwood, Rt. Hon. Joslah
Davies, David L. (Pontypridd) Leonard, William Williams, David (Swansea, East)
Dobbie, William Lunn, William Wilmot, John
Edwards, Charles McEntee, Valentine L. Wood, Sir Murdoch McKenzie (Banff)
Foot, Dingle (Dundee) McGovern, John Young, Ernest J. (Middlesbrough, E.)
Foot, Isaac (Cornwall, Bodmin) Maclean, Neil (Glasgow, Govan)
George, Major G. Lloyd (Pembroke) Mallalieu, Edward Lancelot TELLERS FOR THE NOES.—
George, Megan A. Lloyd (Anglesea) Mander, Geoffrey le M. Mr. Groves and Mr. D. Graham.
Grenfell, David Rees (Glamorgan) Mason, David M. (Edinburgh, E.)

Fourth Resolution read a Second time.


The hon. Member for Rossendale (Mr. Cross) and the hon. and gallant Member for Wellingborough (Wing-Commander James) have on the Paper an Amendment, the exact meaning of which I would like them to explain. It appears to me that it would have the effect of ante-dating the date of operation of the duty.

Wing-Commander JAMES

The effect of the Amendment would not be to antedate the operation of the duty, because I understand that so far from the Import Duties Advisory Committee having recommended the duty, they have not yet done so. Therefore the Amendment would apply to the future and not to the past.


Does the hon. and gallant Member move the Amendment?

6.23 p.m.

Wing-Commander JAMES

I beg to move, in line 1, to leave out "the eighteenth day of April, nineteen hundred and thirty-four," and to insert: a date when the approval of the Import Duties Advisory Committee may have been obtained. My satisfaction at the drubbing which the Parliamentary Secretary to the Board of Trade gave to the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris) just now upon the Third Resolution was somewhat reduced by the fact that I had to move this Amendment upon the Fourth Resolution. This Amendment has been put on the Paper in order to secure an explanation of what appears to be a rather unfortunate state of affairs. What happened was this: In the early part of last year the United Tanners' Federation applied to the Import Duties Advisory Committee for an increase of from 10 to 15 per cent. in the duty upon imported patent leather. The application was opposed by the Federation of Boot and Shoe Manufacturers and by the Rossendale Valley Association, who between them represent about 80 per cent. of the whole industry. The application was heard and was rejected. The manufacturing trade thereupon assumed naturally that the last had been heard, at least for the immediate future, of any increase in the duty, and they made their plans accordingly. They were astonished, to put it mildly, when in this year's Budget they found the duty put up to the very figure which had not been recommended by the Committee.

There are two points I wish to make arising out of that. First, there is no question here, as there was on the last Resolution we have discussed, of any complaints against duties qua duties. Nor am I going to argue the merits or demerits of the application. It is, however, relevant to remark that at the present time the boot and shot manufacturing trade is giving employment to something like 105,000 operatives, and the industry which produces in this country patent leather of various kinds, japanned, enamelled and varnished, is giving employment now to something like 1,000 people. There are no complaints about tariffs in general. All the complaint is that someone must have been very gravely at fault in allowing an inquiry to be carried out before the Import Duties Advisory Committee when in point of fact the subject into which they were inquiring had already been settled and finally settled in another place. It is to secure the ventilation of that difficulty and grievance that this Amendment is moved, and in order, furthermore, to re-establish that confidence in the functioning of the Import Duties Advisory Committee that industry has hitherto had and which might be shaken if this sort of thing were to happen again.


I beg to second the Amendment.

I wish to associate myself with the remarks which my hon. and gallant Friend has made with regard to this new import duty on patent leather. I understand that the object of the duty is to grant a preference to the Canadian tanners of patent leather, but my complaint is that no reciprocal advantage whatever is being obtained for the manufacturers in this country. In my own division I have a very large number of manufacturers of light shoes and slippers who are large users of patent leather, and they constitute a very important section of the trade. But this new duty is being put on at the very time when one of the biggest firms in that division has had to withdraw its representative from Canada because it is no longer possible to sell light shoes and slippers in the Canadian market owing to the great increase in Canadian tariffs in recent years. So that not only is the industry at this moment being given no advantage in return for this burden which has been put upon it, but it is actually being put at a disadvantage by the Canadians who are to benefit from this tariff.

I think that the manufacturers rightly and properly expect when an arrangement of this kind is made, that they should be given some quid pro quo. In this case it seems to me that all the quids are going to the Canadian tanner, and that there is no quo for the British manufacturer. I should like to put to my hon. Friend the Parliamentary Secretary to the Board of Trade a question which might take the form of a riddle, namely, "Why should the tanner have the quid?" It seems to me the sort of inverted practice which one might expect from hon. Members opposite rather than from my hon. Friends below me. I hope that my hon. Friend will answer this specific question and that, in doing so, he will be able to give an assurance that if British manufacturers are put at some disadvantage they will, at the same time, have some corresponding advantage to offset it.

6.31 p.m.


I desire to associate myself with this Amendment, and I do not see why any hesitancy should be shown in bringing it forward, merely because, in the opinion of any hon. Members opposite, someone may have received a drubbing in the preceding Debate. I would put my position on the matter in this way. When an effort, such as my hon. Friend on this side referred to, has been made to put matters of this description outside politics, why should the machinery brought into existence for that purpose be superseded in this case? Why should definite political action be taken in order to circumvent—using that word with certain qualifications—a decision arrived at by the Import Duties Advisory Committee? I listened with interest to the statement of the Chancellor with regard to certain items previously discussed here and the suggestion that the question of national defence arose in connection with those matters, and that that permitted the Government to go past the decision of the Import Duties Advisory Committee. In so far as patent leather is concerned, I do not think that factor enters into consideration.

In order to give hon. Members an illustration of what is being done, I would like to refer briefly to the investigation which took place before the Advisory Committee in regard to this matter. There was opposition to the application, not only in writing but verbally, by people who were competent to understand all the details of the trade. The boot and shoe operatives made a very effective case and I think it will be agreed that on this subject they knew something of what they were talking about. They strongly asserted that the British products could not be guaranteed to meet requirements in this country, either with regard to quality or what was Very important with regard to quantity, and they expressed the fear that if the Committee acceded to the request which was put before them, the patent leather industry would be inclined to build up behind the further protection afforded to it, solely at the expense of the users of the commodity in this country. They rightly made a strong point with regard to the Empire point of view that Empire claims and rights had been met, because it was shown that the imports from Canada had increased very rapidly since the 10 per cent. preference bad been granted, and that there was the capacity for further advance in that respect. They argued, therefore, that from the Empire point of view there was no need for the Advisory Committee to act as they were being requested to act.

Assertions were made at the inquiry which I have not heard anyone refute. It must be borne in mind that half the consumption of this kind of leather is in the manufacture of boots and shoes for women and girls and it was stated that a further 5 per cent. would mean that some firms, typical of the general productive units of the country, would have to meet an additional cost of £3,000. In addition, it was stated that there was the possibility that they would be forced to lower their standards in so far as the shoes were concerned, or what was perhaps even worse, endeavour to find a substitute material. That was the case presented and on 6th April last year the Advisory Committee rejected the claim. Apparently they were of the opinion that the case presented by the boot and shoe manufacturers and other interests was so strong that they could not admit the claim which was being made to them. Now apparently, by other means, the further 5 per cent. which was sought then is to be added to the duty.

I wish for information on three specific points. First, I wish to know whether by any means or any machinery this matter has again been brought before the Import Duties Advisory Committee and whether they have considered it afresh? Secondly, I wish to know whether before any recommendations were made there were any efforts by the Advisory Committee or by other representatives of the Government, to ascertain the opinion of the interests who opposed the claim in 1933? It would appear to be preposterous if this action is being taken by the Government without in some way covering the inquiry previously held as a result of which the claim was rejected. Thirdly, I would like to know whether the Government, having considered the matter, are now going behind their own impartial committee, if I may so call it, in adding another 5 per cent.?

Reference has been made to the position of Canada. As far as the protection already afforded is concerned, details were given at the inquiry which showed that the patent leather industry was going ahead pretty swiftly without any additional protection. It was stated that the production in 1932 had been 300,000 square feet and that at the time of inquiry, about March, 1933, it was at the rate of 1,500,000 square feet with the anticipation that by June of the same year the yearly rate would be no less than 6,500,000 square feet. Special reference has been made to the question of the Canadian imports. In 1932–33 the figure was 6,000,000 square feet, and according to statements by representatives of the tanners' organisation in Canada, if necessary that could be increased to 19,000,000 square feet. Apparently they are doing very well without further protection. I ask, therefore, that we should have some reasonable explanation as to why the Government are acting as they are doing in this Resolution, when the Advisory Committee after a comprehensive inquiry only last year rejected the representations then made for a further protection which is now being afforded through another channel.

6.38 p.m.


I hope to be able to satisfy the House that the picture which the hon. Member for St. Rollox (Mr. Leonard) has drawn of the Government going behind the report of the Import Duties Advisory Committee is inaccurate. Not only have the committee never rejected the application in the manner referred to but they found themselves unable, entirely for reasons other than those mentioned, to take cognisance of the matter within their own terms of reference. I shall deal with the subject on more general lines first. This is a proposal that an existing duty of 10 per cent. should be increased to 15 per cent. Dressed leather, apart from patent leather and glace kid, is already subject to a 15 per cent. duty at present, but patent leather is only subject to 10 per cent. The effect, I am told, of an increase from 10 per cent. to 15 per cent. will be to add to the cost of patent leather at most one halfpenny per square foot. That is the calculation given to me. Patent leather, an important material no doubt in connection with the boot and shoe and other industries, has not been successfully manufactured in this country to any considerable extent. Whether that is because patent leather requires to be dried in sunshine is a matter of opinion. I am told by those who have studied the subject that a quick drying sunshine is essential to it, and that that is why so many of our imports come from Canada, the sunny parts of the United States and Southern Germany.

Let us look for a moment at the figures. From all sources in 1933 the imports of patent, varnished, japanned and enamelled leather amounted to £750,000 sterling in value and of this, approximately half or about £368,000 worth, came from Canada, about 30 per cent. from the United States and 14 or 15 per cent. from Germany. I want the House to have the picture that half these imports came from Canada. I am told that almost all the Canadian exports are actually patent leather whereas the exports from the other countries include the other different kinds of leather to which I have referred. Why does this application come before the House in this way? Before the Ottawa Conference the United Kingdom leather industry and the Dominion leather industry had entered into discussions and on 5th July, 1932, an agreement was reached between the British leather industry and the Dominion leather industry that there should be a preferential rate of 15 per cent. ad valorem. That agreement was not known to the representatives of the United Kingdom in Ottawa at the time the Ottawa Agreements were made. Consequently, no increase of the duty on patent leather was made in this country. Representations have continued to be received. His Majesty's Government have received representations from the Canadian Government and have found considerable difficulty in dealing with the matter.

Of course, an agreement between the industrialists in the two countries was not binding upon the Government, but the conclusion was reached that there could not in any circumstances be any question as to our good faith and that it was most important to consolidate the relations between the Canadian Government and this country. Very important concessions have been made by the Canadian Government, particularly in recent times, to meet the wishes of the home Government in trade matters. The hon. Member for Rossendale (Mr. Cross) asked me, "Why should the tanner have the quid?" The real question is, to whom should go the pro quo? It is not necessarily to the British boot and shoe industry, but it is meet that when substantial trade concessions have already been given by the Canadian Government to British industry as a whole, that we should honour in the fullest possible manner agreements or understandings which have been arrived at but which for some reason or through some accident in the past have not been implemented. So the proposal is to enable the agreement made between the two sets of industrialists to be fully implemented. It is thus for the benefit of Canadian industry—a benefit which, being accorded to Canada in that respect, secures benefits to British industry as a whole in other respects.

What happened when the matter came before the Import Duties Advisory Committee? They were obliged to find on the evidence, in view of the relative smallness of the British patent leather producing industry and the very large share of that industry which was possessed by the Canadian manufacturers, that the object of this duty and of the preferential tariff was in substance not in the interests of trade and industry in the United Kingdom. They were advised, therefore, not to reject the application because they supported one side or the other, but they felt unable to make the Order because, under their terms of reference under the Import Duties Act, the matter did not come within their jurisdiction. In those circumstances the Government have felt it essential that any question of good faith should not be raised and that they must implement this understanding that had been arrived at. Let the House understand the position. All the imports of patent leather that come from the Dominions will, of course, not pay the increased tax, but will come in with the preference. That trade is already half the total trade, and there can be no doubt that when this tax is in full working order and the preference granted, the Canadian share of the trade will progressively tend to increase. It is in these circumstances, bearing in mind that it means at most a halfpenny per square foot, that we are implementing an understanding that has been arrived at, and that so large a percentage from the Dominions will not be taxed at all, that we ask the House to vote for the Resolution.

6.47 p.m.

Wing-Commander JAMES

In moving the Amendment I pointed out that I was not quarrelling with the decision of the Government or with the evidence put before the Import Duties Advisory Committee. I merely asked for an assurance that never again, if possible, should an industry be misled into submitting a case for consideration when that case is already prejudiced and indeed has been settled nearly a year before. Owing to somebody's mistake, you had a thoroughly efficient and well-organised industry that was entirely deceived as to the true situation, and I desired an assurance that sort of thing shall not occur again.

6.48 p.m.


I do not think that the explanation of the Parliamentary Secretary is very satisfactory. He told us that at present it is necessary for us to give substantial help to Canada because Canada is giving substantial help to British industry. I thought the picture of trade with Canada at the moment was that British trade with Canada was falling off rather rapidly and being replaced by American trade with Canada, owing to the dollar position. At least, when I was in Canada a fortnight ago, I was told by all Canadians whom I came across that that was the position. Therefore, it is not, as a matter of fact, the very moment when it is necessary to give Canada any very large concessions in this market.

As I understand it, the hon. Gentleman says that we must do this because the trade interests agreed, though they did not disclose the fact, apparently, at the time of the Ottawa Agreement. I am interested to know what the trade interests are. In the evidence given before the Import Duties Advisory Committee, it was stated that there was only one firm manufacturing patent leather in this country at the period of the Ottawa Agreement. Is one firm, turning out a very small quantity indeed—300,000 square feet—to bind all the boot manufacturers in Great Britain because it chooses to enter into an agreement with the Canadian manufacturers of patent leather? Surely, it is the most fantastic suggestion that we are bound to do this, in order to honour an agreement, the only representative of Great Britain who could have made that agreement being one small firm who were manufacturing patent leather at the time.

When the hon. Gentleman says that the Import Duties Advisory Committee had no power to do this, I suggest that that is a complete mis-statement of the fact. The Advisory Committee had every power to do it if they chose, only, on the evidence which they took, they found there was no case for doing it. It was not that they had no power to do it. On the 15th February, 1933, notice was issued by the Import Duties Advisory Committee of an application to increase the duty, and they stated that they proposed to deal with it. Written representations in opposition were handed in, they had an oral hearing on the 23rd March, at which evidence was given by both sides, an inquiry was conducted, and a number of questions were asked, and on the 6th April they communicated with the parties saying that they did not propose to make any recommendation at present with regard to the application for an additional duty on patent leather. They never said that they were not competent to undertake the inquiry. They were fully competent. The hon. Gentleman shakes his head, but what was there to stop them from entering on this inquiry?


The point is this: The Import Duties Advisory Committee have to consider the interests of trade and industry in the United Kingdom, and if the evidence before them shows that the benefits of granting the application would go to trade and industry in the Dominion of Canada, it is outside their powers.


Really, the hon. Gentleman is making a most extraordinary statement. It is not outside their powers to hear an application at all. If the hon. Gentleman goes into a court of law and cannot produce the evidence to make his case good, it is not because the court cannot decide his case that he loses it, but because he has not been able to produce the necessary evidence to substantiate his case. That is what happened in this case. The Import Duties Advisory Committee entertained the application, and they came to the conclusion that they were unable to make any recommendation. The Chancellor of the Exchequer now comes forward on the Budget and says, "Although we are bound to admit that this is not for the good of British industry, because we have not had any further inquiry and we cannot dispute what this impartial Advisory Committee has decided—we do not suggest that they were wrong; we admit that this is not for the benefit of British industry—yet because a patent leather manufacturer, at the time of the Ottawa Agreement made an arrangement with Canadian interests, of which he did not tell the Government, we are now bound, in order to implement that agreement, to put a tax on every boot and shoe manufacturer in Great Britain."

If His Majesty's Government are reduced to the stage that they cannot resist the pressure of a single manufacturer who entered into an arrangement with some Canadians, I think it is time they got a little bit more backbone in order that they can stand up against demands of this sort, and stand up in the interests, apparently, of British industry, because this Report says that what they are now doing is contrary to those interests; and the only excuse they have for doing what they are doing is that the Canadians have been very nice and kind to us and that this manufacturer made an arrangement. We certainly do not think that is a good enough reason to embarrass the British export trade in shoes or the home trade in shoes, and as a result we shall vote in favour of the Amendment and against the Resolution.

6.55 p.m.


I am wondering what is the duty of the Import Duties Advisory Committee and how many industries with which they do not deal can come behind their backs and, through another door, get what they want. The outstanding explanation of the Government on the previous Resolution was that these carbons were necessary for defence purposes. Any Member of the Government on the Treasury Bench has only to mention that, and his supporters will agree with almost anything. Having heard the explanation of the Government on the First Resolution, I was doubly interested in their explanation on the Second Resolution, and it is not very satisfactory. There are differences of opinion between the Parliamentary Secretary and my hon. and learned Friend the Member for East Bristol (Sir S. Cripps) as to what happened. The Parliamentary Secretary said that the Import Duties Advisory Committee could not deal with this question. The hon. and learned Member for East Bristol said they did deal with it, and he seemed to prove his case, but suppose we accept the hon. Member's point that they could not deal with it. Then the Government promptly deal with it themselves and give the industry what it wants because the Advisory Committee cannot.

That seems to be a very unsatisfactory state of affairs. When the Import Duties Advisory Committee was set up, it was the general impression that all industries that wanted a duty of any description would have to make out a ease on its merits before this Committee, but how far are we going from that principle? We have had two cases this afternoon which have departed from the principle entirely, and in both instances the reasons adduced by the Government have been very unsatisfactory. I suggest that if this goes on, even those who believe in import duties will soon lose their

faith in the methods that are being used in order to get them established where they cannot be established on merits. I was interested too to hear the speeches of the two hon. Members who moved the Amendment. I do not suppose carbons are made in their constituencies, because on the last Resolution they had nothing to say, and presumably they supported the Government; but, with regard to this Resolution, boots are made in their Divisions, and boot-makers are employed, and I think they fear that this duty might injure the big trades there.

Wing-Commander JAMES

I pointed out in moving the Amendment that I was not quarrelling with what was being done at all. I was only quarrelling with the way in which it was being done, and I do not think that this duty will do any harm whatever in my division.


I heard the hon. and gallant Member; say that he believed generally in tariffs, but it appeared from that statement that he did not believe in this particular tariff, which affected industries in his constituency.

Wing-Commander JAMES

The hon. Member must not misrepresent me. I said nothing of the kind.


If the hon. and gallant Member did not, I withdraw. I know he used the words "general" and "particular," and I thought that that was the deduction to be drawn, but in any event he has gone to the extent of putting down an Amendment designed to stop the coming into operation of this duty as it otherwise would do. He says it is to get the question discussed on its merits. I accept that, and he will agree with me in my criticism of the Government that to have put on this import duty in the way they have done is the wrong method, and that they would have been better advised to put it on as the hon. Members themselves asked the Government to do it.

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

The House divided: Ayes, 198; Noes, 47.

Division No. 216.] AYES. [7.0 p.m.
Acland-Troyte, Lieut.-Colonel Anstruther-Gray, W. J. Baillie, Sir Adrian W. M.
Adams, Samuel Vyvyan T. (Leads, W.) Atholl, Duchess of Balfour, George (Hampstead)
Albery, Irving James Bailey, Eric Alfred George Balniel, Lord
Barclay-Harvey, C. M. Gritten, W. G. Howard Peake, Captain Osbert
Beauchamp, Sir Brograve Campbell Guinness, Thomas L. E. B. Pearson, William G.
Belt, Sir Alfred L. Gunston, Captain D. W. Penny, Sir George
Blindell, James Guy, J. C. Morrison Peto, Sir Basil E. (Devon, Barnstaple)
Borodale, Viscount Hacking, Rt. Hon. Douglas H. Peto, Geoffrey K. (W'verh'pt'n, Bilston)
Boulton, W. W. Hales, Harold K. Potter, John
Bowyer, Capt. Sir George E. W. Hamilton, Sir George (Ilford) Powell, Lieut.-Col. Evelyn G. H.
Boyd-Carpenter, Sir Archibald Hannon, Patrick Joseph Henry Radford, E. A.
Braithwaite, J. G. (Hillsborough) Hartland, George A. Ramsay, Capt. A. H. M. (Midlothian)
Brass, Captain Sir William Harvey, George (Lambeth, Kenningt'n) Ramsay, T. B. W. (Western Isles)
Broadbent, Colonel John Harvey, Major S. E. (Devon, Totnes) Ramsbotham, Herwald
Brocklebank, C. E. R. Headlam, Lieut.-Col. Cuthbert M. Rawson, Sir Cooper
Brown, Ernest (Leith) Heilgers, Captain F. F. A. Ray, Sir William
Brown, Brig.-Gen. H. C. (Berks., Newb'y) Hore-Belisha, Leslie Rickards, George William
Burghley, Lord Hornby, Frank Ropner, Colonel L.
Burgin, Dr. Edward Leslie Horsbrugh, Florence Rosbotham, Sir Thomas
Burnett, John George Hudson, Capt. A. U. M. (Hackney, N.) Ross, Ronald D.
Butt, Sir Alfred Hurd, Sir Percy Ross Taylor, Walter (Woodbridge)
Cadogan, Hon. Edward Iveagh, Countess of Ruggles-Brise, Colonel E. A.
Campbell, Sir Edward Taswell (Brmly) James, Wing-Com. A. W. H. Runge, Norah Cecil
Carver, Major William H. Jones, Sir G. W. H. (Stoke New'gton) Russell, Hamer Field (Sheffield, B'tside)
Cassels, James Dale Kerr, Hamilton W. Rutherford, Sir John Hugo (Liverp'l)
Castlereagh, Viscount Lamb, Sir Joseph Quinton Samuel, Sir Arthur Michael (F'nham)
Cayzer, Sir Charles (Chester, City) Law, Richard K. (Hull, S.W.) Samuel, Samuel (W'dsworth, Putney)
Cazalet, Thelma (Islington, E.) Leckie, J. A. Sandeman, Sir A. N. Stewart
Chamberlain, Rt. Hon. N. (Edgbaston) Leech, Dr. J. W. Savery, Samuel Servington
Chapman, Sir Samuel (Edinburgh, S.) Lindsay, Noel Ker Scone, Lord
Clayton, Sir Christopher Little, Graham-, Sir Ernest Selley, Harry R.
Cochrane, Commander Hon. A. D. Llewellin, Major John J. Shaw, Captain William T. (Forfar)
Collins, Rt. Hon. Sir Godfrey Locker-Lampson, Rt. Hn. G. (Wd. Gr'n) Simmonds, Oliver Edwin
Colville, Lieut.-Colonel J. Lovat-Fraser, James Alexander Smith, R. W. (Aberd'n & Kinc'dine, C.)
Craddock, Sir Reginald Henry MacAndrew, Lieut.-Col. C. G. (Partick) Smithers, Waldron
Cranborne, Viscount McConnell, Sir Joseph Somervell, Sir Donald
Croft, Brigadier-General Sir H. McKie, John Hamilton Somerville, Annesley A. (Windsor)
Crookshank, Col. C. de Windt (Bootle) McLean, Major air Alan Soper, Richard
Crookshank, Capt. H. C. (Gainsb'ro) Macquisten, Frederick Alexander Southby, Commander Archibald R. J.
Croom-Johnson, R. P. Magnay, Thomas Spencer, Captain Richard A.
Cross, R. H. Maitland, Adam Spens, William Patrick
Crossley, A. C. Manningham-Buller, Lt.-Col. Sir M. Stanley, Rt. Hon. Lord (Fylde)
Davidson, Rt. Hon. J. C. C. Margesson, Capt. Rt. Hon. H. D. R. Stevenson, James
Davison, Sir William Henry Marsden, Commander Arthur Stones, James
Denman, Hon. R. D. Mason, Col. Glyn K. (Croydon, N.) Stuart, Lord C. Crichton-
Denville, Alfred Mayhew, Lieut.-Colonel John Sueter, Rear-Admiral Sir Murray F.
Dickie, John P. Meller, Sir Richard James Sugden, Sir Wilfrid Hart
Duckworth, George A. V. Mills, Sir Frederick (Leyton, E.) Tate, Mavis Constance
Dunglass, Lord Mills, Major j. D. (New Forest) Thomson, Sir Frederick Charles
Edmondson, Major A. J. Mitchell, Harold P. (Br'tf'd & Chisw'k) Train, John
Elmley, Viscount Molson, A. Hugh Elsdaie Tryon, Rt. Hon. George Clement
Emrys-Evans, P. V. Monsell, Rt. Hon. Sir B. Eyres Tufnell, Lieut.-Commander R. L.
Erskine, Lord (Weston-super-Mare) Moore, Lt.-Col. Thomas C. R. (Ayr) Turton, Robert Hugh
Erskine-Bolst, Capt. C. C. (Blackpool) Moreing, Adrian C. Wallace, John (Dunfermline)
Essenhigh, Reginald Clare Morgan, Robert H. Ward, Irene Mary Bewick (Wallsend)
Ford, Sir Patrick J. Morris-Jones, Dr. J. H. (Denbigh) Warrender, Sir Victor A. G.
Fuller, Captain A. G. Morrison, G. A. (Scottish Univer'ties) Watt, Captain George Steven H.
Galbraith, James Francis Wallace Morrison, William Shepherd Weymouth, Viscount
Ganzoni, Sir John Moss, Captain H. J. Williams, Charles (Devon, Torquay)
Gillett, Sir George Masterman Munro, Patrick Wilson, Lt.-Col. Sir Arnold (Hertf'd)
Glyn, Major Sir Ralph G. C. Nation, Brigadier-General J. J. H. Windsor-Clive, Lieut.-Colonel George
Goff, Sir Park Nicholson, Rt. Hn. W. G. (Petersf'ld) Wise, Alfred R.
Goldie, Noel B. O'Connor, Terence James Withers, Sir John James
Goodman, Colonel Albert W. O'Neill, Rt. Hon. Sir Hugh Worthington, Dr. John V.
Grattan-Doyle, Sir Nicholas Ormsby-Gore, Rt. Hn. William G. A.
Grenfell, E. C. (City of London) Palmer, Francis Noel TELLERS FOR THE AYES.—
Grimston, R. V. Patrick, Colin M. Lieut.-Colonel Sir A. Lambert Ward
and Major George Davies.
Adams, D. M. (Poplar, South) Griffiths, T. (Monmouth, Pontypool) Paling, Wilfred
Banfield, John William Halt, George H. (Merthyr Tydvil) Parkinson, John Allen
Bevan, Aneurin (Ebbw Vale) Hamilton, Sir R. W. (Orkney & Zetl'nd) Rathbone, Eleanor
Brown, C. W. E. (Notts., Mansfield) Harris, Sir Percy Rea, Walter Russell
Cape, Thomas Holdsworth, Herbert Rothschild, James A. de
Cocks, Frederick Seymour Janner, Barnett Sinclair, Maj. Rt. Hn. Sir A. (C'thness)
Cove, William G. Johnstone, Harcourt (S. Shields) Smith, Tom (Normanton)
Cripps, Sir Stafford Jones, Morgan (Caerphilly) Thorne, William James
Daggar, George Lawson, John James Tinker, John Joseph
Davies, David L. (Pontypridd) Leonard, William Wedgwood, Rt. Hon. Joslah
Dobbie, William Logan, David Gilbert Williams, David (Swansea, East)
Edwards, Charles Lunn, William Wilmot, John
Foot, Dingle (Dundee) McEntee, Valentine L. Young, Ernest J. (Middlesbrough, E.)
Foot, Isaac (Cornwall, Bodmin) Maclean, Neil (Glasgow, Govan)
George, Major G. Lloyd (Pembroke) Mallalieu, Edward Lancelot TELLERS FOR THE NOES.—
George, Megan A. Lloyd (Anglesea) Mason, David M. (Edinburgh, E.) Mr. Groves and Mr. D. Graham.
Grenfell, David Rees (Glamorgan) Maxton, James

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

7.10 p.m.


This House, since I have come into it, has never seen the Front Bench to less advantage than this afternoon. The Parliamentary Secretary to the Board of Trade, after his great display of knowledge, showed a most lamentable ignorance, and now we have this extraordinary reply that British trade is entirely to be sacrificed to the Canadian manufacturers. This is a most glaring instance of the fact that there is no limit to the greed of Canadian manufacturers and the weakness of the British Government. They have only to say that they will have a tax in this country, and this Government is the complete tool of whatever body in Canada says there shall be a tax. The Parliamentary Secretary to the Board of Trade, however, was unusually frank in telling us what was the reason for this tax. The fact is that for the last few years, so far from having given benefit to us, the Canadians have seized an ever larger proportion of our trade, and we seem to be getting an ever smaller proportion of theirs. Dealing particularly with patent leather, we see from the Trade and Navigation Accounts that in the last three years the United States exports have fallen from 18,000 odd cwts. to 7,000 odd cwts. and the Canadian have increased from 6,000 to 11,000. They seem to be getting a tremendous proportion of the market of

this country, and this is to increase it still more.

As has been said, there was a full inquiry a year ago and the Canadian claim was found to be untenable not only by the Import Duties Advisory Committee, but, I believe, by the Board of Trade itself which, after full inquiry, turned down the Canadian demand as absurd in view of the figures of trade which Canadian industry was carrying on. It seems to me that there is no small connection between the inside and the outside of the cow in this matter. The Milk Board is having difficulty in raising the price of what it is pleased to call surplus milk because on account of the complete muddle at Ottawa the Canadians can send as much cheese as they like, and to correct this we have to have some blandishment to offer the Canadians in return for some voluntary self-discipline on their part. I think that the whole thing shows how one protectionist muddle leads to another, first of all the muddle at Ottawa, and then the attempt on the part of the Milk Board to raise the price of milk, successfully as some think and unsuccessfully as they think themselves, and now the further unwarranted proposals to put the matter right. I hope that the House will have nothing to do with it.

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

The House divided: Ayes, 209; Noes, 45.

Division No. 217.] AYES. [7.14 p.m.
Acland-Troyte, Lieut.-Colonel Butt, Sir Alfred Duckworth, George A. V.
Adams, Samuel Vyvyan T. (Leeds, W.) Carver, Major William H. Dunglass, Lord
Albery, Irving James Cassels, James Dale Eastwood, John Francis
Anstruther-Gray, W. J. Castlereagh, Viscount Edmondson, Major A. J.
Astbury, Lieut.-Com. Frederick Wolfe Cayzer, Sir Charles (Chester, City) Elmley, Viscount
Atholl, Duchess of Cazalet, Thelma (Islington, E.) Emrys-Evans, P. V.
Bailey, Eric Alfred George Chamberlain, Rt. Hon. N. (Edgbaston) Erskine, Lord (Weston-super-Mare)
Baillie, Sir Adrian W. M. Chapman, Sir Samuel (Edinburgh, S.) Erskine-Bolst, Capt. C. C. (Blackpool)
Balfour, George (Hampstead) Clayton, Sir Christopher Essenhigh, Reginald Clare
Balniel, Lord Cochrane, Commander Hon. A. D. Evans, Capt. Arthur (Cardiff, S.)
Barclay-Harvey, C. M. Colfox, Major William Philip Ford, Sir Patrick J.
Beauchamp, Sir Brograve Campbell Collins, Rt. Hon. Sir Godfrey Fuller, Captain A. G.
Belt, Sir Alfred L. Colville, Lieut.-Colonel J. Galbraith, James Francis Wallace
Blindell, James Courtauld, Major John Sewell Ganzoni, Sir John
Borodale, Viscount Craddock, Sir Reginald Henry Gillett, Sir George Masterman
Bowyer, Capt. Sir George E. W. Cranborne, Viscount Glyn, Major Sir Ralph G. C.
Boyd-Carpenter, Sir Archibald Croft, Brigadier-General Sir H. Goff, Sir Park
Braithwaite, J. G. (Hillsborough) Crookshank, Col. C. de Windt (Bootle) Goldie, Noel B.
Brass, Captain Sir William Crookshank, Capt. H. C. (Gainsb'ro) Goodman, Colonel Albert W.
Broadbent, Colonel John Croom-Johnson, R. P. Grattan-Doyle, Sir Nicholas
Brocklebank, C. E. R. Cross, R. H. Grenfell, E. C. (City of London)
Brown, Ernest (Leith) Crossley, A. C. Grimston, R. V.
Brown, Brig.-Gen. H. C. (Berks., Newb'y) Davidson, Rt. Hon. J. C. C. Gritten, W. G. Howard
Buchan-Hepburn, P. G. T. Denman, Hon. R. D. Guinness, Thomas L. E. B.
Burghley, Lord Denville, Alfred Gunston, Captain D. W.
Burgin, Dr. Edward Leslie Dickie, John P. Guy, J. C. Morrison
Burnett, John George Dower, Captain A. V G. Hacking, Rt. Hon. Douglas H.
Hales, Harold K. Monsell, Rt. Hon. Sir B. Eyres Savery, Samuel Servington
Hamilton, Sir George (Ilford) Moore, Lt.-Col. Thomas C. R. (Ayr) Scone, Lord
Harmon, Patrick Joseph Henry Moreing, Adrian C. Selley, Harry R.
Hartland, George A. Morgan, Robert H. Shaw, Helen B. (Lanark, Bothwell)
Harvey, George (Lambeth, Kenningt'n) Morris-Jones, Dr. J. H. (Denbigh) Shaw, Captain William T. (Forfar)
Harvey, Major S. E. (Devon, Totnes) Morrison, G. A. (Scottish Univer'ties) Simmonds, Oliver Edwin
Headlam, Lieut.-Col. Cuthbert M. Morrison, William Shepherd Smith, Sir J. Walker- (Barrow-in-F.)
Hellgers, Captain F. F. A. Moss, Captain H. J. Smith, R. W. (Aberd'n & Kinc'dine, C.)
Hore-Belisha, Leslie Munro, Patrick Smithers, Waldron
Hornby, Frank Nation, Brigadier-General J. J. H. Somervell, Sir Donald
Honbrugh, Florence Nicholson, Rt. Hn. W. G. (Petersf'ld) Somerville, Annesley A. (Windsor)
Hudson, Capt. A. U. M. (Hackney, N.) Nunn, William Soper, Richard
Hurd, Sir Percy O'Connor, Terence James Southby, Commander Archibald R. J.
Iveagh, Countess of O'Neill, Rt. Hon. Sir Hugh Spencer, Captain Richard A.
James, Wing-Com. A. W. H. Ormsby-Gore, Rt. Hon. William G. A. Spens, William Patrick
Jones, Sir G. W. H. (Stoke New'gton) Palmer, Francis Noel Stanley, Rt. Hon. Lord (Fylde)
Lamb, Sir Joseph Quinton Patrick, Colin M. Stevenson, James
Law, Richard K. (Hull, S.W.) Peake, Captain Osbert Stones, James
Leckie, J. A. Pearson, William G. Stuart, Lord C. Crichton-
Leech, Dr. J. W. Penny, Sir George Sueter, Rear-Admiral Sir Murray F.
Lindsay, Noel Ker Percy, Lord Eustace Sugden, Sir Wilfrid Hart
Little, Graham-, Sir Ernest Peto, Sir Basil E. (Devon, Barnstaple) Summersby, Charles H.
Llewellin, Major John J. Peto, Geoffrey K. (W'verh'pt'n, Bilston) Tate, Mavis Constance
Lovat-Fraser, James Alexander Pike, Cecil F. Thomson, Sir Frederick Charles
Lumley, Captain Lawrence B. Potter, John Thorp, Linton Theodore
MacAndrew, Lieut. Col. C. G. (Partick) Powell, Lieut.-Col. Evelyn G. H. Train, John
McConnell, Sir Joseph Radford, E. A. Tryon, Rt. Hon. George Clement
McKie, John Hamilton Ramsay, Capt. A. H. M. (Midlothian) Tufnell, Lieut.-Commander R. L.
McLean, Major Sir Alan Ramsay, T. B. W. (Western Isles) Turton, Robert Hugh
Macmillan, Maurice Harold Ramsbotham, Herwald Wallace, John (Dunfermline)
Macquisten, Frederick Alexander Rawson, Sir Cooper Ward, Irene Mary Bewick (Wallsend)
Magnay, Thomas Ray, Sir William Warrender, Sir Victor A. G.
Maitland, Adam Rickards, George William Watt, Captain George Steven H.
Manningham-Buller, Lt.-Col. Sir M. Ropner, Colonel L. Weymouth, Viscount
Margesson, Capt. Rt. Hon. H. D. R. Rosbotham, Sir Thomas Williams, Charles (Devon, Torquay)
Marsden, Commander Arthur Ross, Ronald D. Wilson, Lt.-Col. Sir Arnold (Hertf'd)
Martin, Thomas B. Ross Taylor, Walter (Woodbridge) Windsor-Clive, Lieut.-Colonel George
Mason, Col. Glyn K. (Croydon, N.) Ruggles-Brise, Colonel E. A. Wise, Alfred R.
Mayhew, Lieut.-Colonel John Runge, Norah Cecil Withers, Sir John James
Meller, Sir Richard James Russell, Hamer Field (Sheffield, B'tside) Wolmer, Rt. Hon. Viscount
Mills, Sir Frederick (Leyton, E.) Rutherford, Sir John Hugo (Liverp'l)
Mills, Major J. D. (New Forest) Samuel, Sir Arthur Michael (F'nham) TELLERS FOR THE AYES.—
Mitchell, Harold P. (Br'tf'd & Chisw'k) Samuel, Samuel (W'dsworth, Putney) Lieut.-Colonel Sir A. Lambert Ward
Molson, A. Hugh Elsdale Sandeman, Sir A. N. Stewart and Major George Davies.
Adams, D. M. (Poplar, South) Hall, George H. (Merthyr Tydvil) Maxton, James
Banfield, John William Hamilton, Sir R. W. (Orkney & Zetl'nd) Owen, Major Goronwy
Bevan, Aneurin (Ebbw Vale) Harris, Sir Percy Paling, Wilfred
Brown, C. W. E. (Notts., Mansfield) Holdsworth, Herbert Parkinson, John Alien
Cape, Thomas Janner, Barnett Rathbone, Eleanor
Cocks, Frederick Seymour Johnstone, Harcourt (S. Shields) Rea, Walter Russell
Cove, William G. Jones, J. J. (West Ham, Silvertown) Rothschild, James A. de
Cripps, Sir Stafford Jones, Morgan (Caerphilly) Sinclair, Maj. Rt. Hn. Sir A. (C'thness)
Daggar, George Lawson, John James Smith, Tom (Normanton)
Dobbie, William Leonard, William Tinker, John Joseph
Edwards, Charles Logan, David Gilbert Wedgwood, Rt. Hon. Joslah
Foot, Dingle (Dundee) Lunn, William Williams, David (Swansea, East)
Foot, Isaac (Cornwall, Bodmin) McEntee, Valentine L. Wilmot, John
George, Major G. Lloyd (Pembroke) Maclean, Neil (Glasgow, Govan)
George, Megan A. Lloyd (Anglesea) Mallalieu, Edward Lancelot TELLERS FOR THE NOES.—
Grenfell, David Rees (Glamorgan) Mason, David M. (Edinburgh, E.) Mr. Groves and Mr. D. Graham.

Question put, and agreed to.

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

7.22 p.m.


Perhaps the House will expect a brief word of explanation of what are minor Amendments in the law but which involve no changes in the principle of the law. The Resolution, I think, may be accurately described as self-explanatory. It falls into three parts. It gives the Treasury power, on the recommendation of the Import Duties Advisory Committee, to make an Order imposing an additional duty simultaneously with the removal of goods from the Free List. At present a time has to elapse between the removal from the Free List and the Order imposing the additional duty. The second part of the Resolution is to revoke any scheme for the allowance of drawback. Curiously enough, there is no power under the law to revoke a scheme. The third part is to do the same with regard to drawbacks made under the second Schedule of the Import Duties Act, 1932. As will be gathered from the wording of the Resolution, it is doubtful whether any power exists to vary or revoke a drawback under that Schedule. The Resolution seeks to meet these defects in the law.

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

7.25 p.m.


I venture to rise to draw the attention of the House to some of the very unfortunate effects of this change in the standard rate of tax. I do not propose to weary the House with a repetition of the figures which I gave to the Committee when the Budget statement was under Debate. Since I gave those figures I have been astonished by the unexpected volume of correspondence which has reached me from all over the country from the class of people to whom I referred—salaried workers, clerks, shop assistants, civil servants, bank clerks and black-coated employés on salaries ranging from £200 to £500 or more a year—who feel that the method by which the Chancellor has chosen to implement a decision to distribute the major portion of the anticipated surplus by way of remission in Income Tax is not only a hardship but a gross and unjustifiable inequity. I think it will be generally agreed in all parts of the House that the more one examines the incidence of this decision, the more unjust and indefensible it becomes. I believe the sum involved is between £21,000,000 and £22,000,000, and the Chancellor decided to use that amount, the major portion of the anticipated surplus, for the purpose of reducing Income Tax.

That could have been done by restoring the allowances which were considerably withdrawn in the emergency Budget of 1931, or it could have been done, as it has been, by reducing the standard rate of tax. On the face of it, a reduction in the standard rate of tax would appear to confer a benefit on the community as a whole, but in fact it does nothing of the kind. Such is the incidence of the complicated application of Income Tax and allowances that the only class of people who benefit materially by a reduc- tion in the standard rate of tax are those with incomes well above the comfort line. Incomes of £1,000 a year or more benefit most by this concession, and the curious effect of it is—an effect, I am sure, which the Chancellor would not set out to achieve—that the larger the income the larger the proportion of the sacrifices restored. Not only is it an inverted form of equity when related to the size of the income, but an inverted form when related to family responsibility. It is an accepted principle of taxation, which makes the Income Tax the best form of taxation on the whole, that it can be adjusted and has been adjusted so that family responsibility is relieved of some burden of tax.

The effect of the Chancellor's decision to alter the standard rate of Income Tax is to give not only to the larger income the biggest share of the bounty and the biggest proportion in relation to the bulk, but to give to the smaller family a bigger proportion than to the larger family, and to give to the unmarried Income Tax payer better treatment than to the married. I do not wish to go over the figures which I placed before the Committee, but I will take one typical case, that of a family man with three children and an earned income of £500 a year. That man's total Income Tax was increased by the emergency Budget of 1931 from £3 4s. to £15, an increase of £11 16s. a year. Of that increased contribution to the crisis which was said to exist, all that is restored to that family, which is having a very hard time in existing circumstances, is a paltry 30s. But take the case of a married man with three children who is earning £2,000 a year. He gets a restoration of £33 of his increased tax. It was our complaint when the increased taxation was imposed that by withdrawing a large proportion of the allowances the Government imposed a heavier tax on the poorer and a lighter tax on the richer. That injustice was allowed to remain. Now the Chancellor is perpetrating a double injustice, in that having victimised these people when he applied the extra taxation he victimises them again when he removes it. It is remarkable that a family with £500 a year should get only 15 per cent. of its sacrifice restored, while a family with £2,000 a year gets more than 60 per cent. of its sacrifice restored.

The allowances to which I have referred are the allowances in respect of earned income, of marriage and of children; but there is another form of differentiation between the larger and the smaller incomes which seems to have escaped notice altogether. The Chancellor was good enough to answer a question which I put to him on, Tuesday. I asked him what it would have cost to restore the allowances instead of reducing the standard rate of tax. He said it would have cost £26,000,000. There is a comparatively small difference between the cost of restoring those allowances and thus conferring the major boon on the poorest section of taxpayers and the cost of the course which the Chancellor has chosen to take. In answering my question the Chancellor referred to the alteration in the earned Income Tax allowance. That alteration, taken side by side with the alteration in the amount of taxable income taxed at the reduced rate, was strongly in favour of the Exchequer and strongly against the individual. Pre-1913, under the old rates, five-ninths of the standard rate of tax was charged on the first £250 of taxable income. Under the 1931 Budget, half of the standard rate of tax was charged on the first £175 of taxable income. That apparently unimportant alteration, in addition to the withdrawal of the allowances which I have referred to, imposed still further burdens on this particular class of taxpayers.

It is most remarkable that the Chancellor having laid it down in his Budget Speech that the principle which was to guide him in disposing of his surplus was that the sacrifice should be restored as far as possible in the proportion in which it had been made, should have chosen the one way which would do exactly the opposite. I feel that that class in the community has a grievance against the method which the Chancellor has chosen. I noticed in the Debate on the Budget that hon. Members on the other side of the House put forward one after another a plea that the Chancellor should use his surplus to restore the allowances rather than reduce the standard rate of tax. My own view is that there are other claims which come before those of the Income Tax payers. I thought the Chancellor would have implemented the promise which he made, even at the beginning of his speech, to distribute his surplus to those who had contributed it, first of all to the unemployed, then to the wage and salary earners, next to the poorest taxpayers and that then, if there was anything left, the comfortably off, the people who, after all, have not felt the pinch of poverty as a result of national events, should receive the balance after these more pressing claims had been satisfied.

I do not know whether the Chancellor really appreciates the full magnitude of this injustice. One hon. Member showed me the other night some figures which had been worked out which actually demonstrated that every extra child in a family meant extra taxation to pay. Surely that is an anomaly which cannot be allowed to continue; this House would be false to its trust to those whom it represents if it permitted it to remain. But I anticipate that the Chancellor, in his reply, will either plead the same argument that he did the other day or fall back upon a second statement which he made that he had to have regard not only to the effect on the individual, but to the effect on the trade and prosperity of the country as a whole. If it were true that the method he has chosen will have a better effect on the prosperity of the nation than any other, that would be a reason to be seriously taken into account; but I submit with the greatest respect that the effect is the exact opposite.

What is most needed to stimulate industrial recovery at the present time is that those on the borderline of poverty shall be enabled to purchase more goods. Nothing is more rapidly reflected in improved trade and employment than an increase in the family income of the wage and salary earning classes. They go to the shops, they immediately expend their slightly augmented incomes in buying goods, and there is at once a reflection in greater trade and greater employment. That is not so when the bounty is distributed in the main to the wealthy classes. I think it would be right to say that people with incomes round about £2,000 a year have not, in the main, suffered a reduction of purchasing power. What they have suffered is a reduction in the surplus available for investment. The times are exceptional, but if one views the requirements of the nation as a whole it will be seen that we are not suffering from a shortage of investable capital, but that, owing to the lack of demand for goods, capital cannot find profitable sources of investment. The banks have record deposits, but are unable to find solvent borrowers; solvent borrowers are few because trade is scarce; and trade is scarce because the ordinary people, who make up the bulk of the population, are unable to buy the things they need.


Will the hon. Gentleman say a word about the record of investments, held by the banks, of that class of the community whom he has referred to as very depressed, the community earning between £500 and £2,000 a year?


I do not quite follow the hon. Member when he speaks of the investments held by the banks.


The investments of persons earning between £500 and £2,000 a year.


Obviously, the banks have no records, nor would they publish them if they had them, of the individual holdings of investments of their customers. The hon. Member must know very well that those figures are not available. But it is obvious that the £250 a year clerk or the £200 a year civil servant has not, after he has paid his rent and maintained his family, got a very large margin with which to acquire large holdings of investments to deposit with the banks. Such a person is concerned with keeping the wolf from the door and maintaining that appearance which it is necessary for him to maintain if he is to keep his source of livelihood at all. It is this class of the community, the small Income Tax payers, people who were brought under Income Tax for the first time in 1931, whose incomes previously had been regarded as so inadequate that it was not in the national interest that they should be asked to contribute to direct taxation, which is now, in proportion to its income—together with the working people, on still lower incomes—contributing the highest share of taxation in indirect taxation.

It is one of the unfortunate effects of the policy of His Majesty's Government at the present time that every year that goes by sees the contribution of the poorest people increased in proportion to their income. I suggest to the Chancellor that, difficult as it may be to make an alteration of this kind at this stage, the difficulty is not insuperable. Fortunately the amount involved in restoring the allowances is very near to the amount involved in reducing the standard rate of tax. If he saw fit, between now and the introduction of the Finance Bill, the Chancellor could adjust the incidence of this taxation so that the poorer people would benefit and not the well-to-do. I suggest, with the greatest respect, that if the Chancellor really has the interests of equity at heart and desires to use his surplus not only with some measure of justice but in the manner which will benefit in the most direct form the trade and the employment of the country, he should realise that the decision which he made is not only very unpopular but is also indefensibly unjust, and that he should reverse that decision and distribute the remission of Income Tax to those whose poverty and low incomes entitle them to the first claim.

7.47 p.m.


The Motion before us brings us entirely in opposition to hon. Members on the Government benches. We stand for direct taxation as against indirect taxation. The Income Tax reduction increases indirect taxation as against direct taxation, and once more we are trying to prove to the House of Commons why that kind of thing should be altered. Only to-day I obtained figures from the Financial Secretary in order to try to prove that point. I asked for figures from 1923 to the present time showing the proportion of direct to indirect taxation. In order to take two extreme points, I specified the years 1924 and 1925, which show that direct taxation had then arrived at 66.93 per cent. of the total taxation, and that indirect taxation stood at 33.07. The proportion has fluctuated since that time, and indirect taxation has gradually risen until last year the proportion was 60.28 direct and 39.72 indirect. To be sure of my ground in regard to the financial position, I asked the Financial Secretary to the Treasury a question on Monday last in regard to the present taxation, and I received final figures showing the position when this year's Finance Bill will have passed into law. They are, direct taxa- tion 58.8, and indirect taxation 41.2. It would appear that the National Government are reversing that for which we have stood all along the line. I believe that direct taxation should be 90 per cent. against 10 per cent. indirect taxation; certain commodities can hardly be taken out of the list. The National Government seem to want to arrive at 50-50; that is what I assume to be the aim which they have in view, because that is the drift of the present Budget. The plea which is put forward many times from the Government benches is that those who pay direct taxation ought to pay indirect taxation to some extent. That argument is worth examining. The ordinary household with an income of between £2 and £3 per week has to buy certain commodities which absorb the whole of their money. Those commodities are covered by indirect taxation, but there may be no comparison with the position of the rich. I assume that rich people buy very much the same kind of food as the poor, but no comparison can be made in regard to the effect upon their income.

I have been interested in finding out how the surplus was arrived at. To-day I asked a question bearing upon what the workers had paid in another form, and I tried to get figures of their contributions to the Unemployment Fund. At the time of the national emergency, when Income Tax was increased and other people had to pay something more, the insured person had to pay more to the Unemployment Fund. We must not overlook the fact that we raised the workers' contribution then from 7d. to 10d., and that since October, 1931, they have been contributing a larger proportion of that burden.

The figures which I obtained show the amount which has been paid into the Unemployment Fund since the contributions were increased. Since October, 1931, and until March of this year, the total amount of extra contribution has been £37,000,000. The employers have contributed this year £9,850,000, but the workers, who have paid 3d. as against 2d., have paid £14,800,000. The workers who are now shouldering the greater burden of indirect taxation have also contributed a greater proportion to the surplus than have any other section of the people. Reckoning it out in yearly income, and estimating about £15,000,000 for two and a-half years, they have paid £6,000,000 per annum. They already pay more than anybody else for the necessaries of life, yet at the same time they have to contribute £6,000,000 per annum on top of that to the Unemployment Fund, as the result of what was put on by the extra taxation of 1931.

We are trying to be fair and to equalise the burden which was put upon the community in that year. Greater regard ought to be given to the workers, from the lowest section up to a certain point. We are not proposing that anything undeserved should be given to those people, but only to pay back to them something that they gave in 1931. The argument would be, "We took from these people, as we did from everybody else, a certain amount of money in 1931, and we are only returning that, so why complain? We took extra Income Tax in 1931 and increased the standard rate to 5s.; we will make it 4s. 6d. We are putting back the cuts, so why should there be any complaint on the part of the Income Tax payers?" That would be a fair argument. If we were putting back everybody else's cuts, one could argue upon that, but the Chancellor has not done that. I question whether the workers will ever get back the extra taxation which has been put upon their shoulders, and we should be very unwise to allow this Resolution to pass without raising our voices in protest.

Many of the advocates of Income Tax reduction would have been here if the 6d. had not been taken off. The hon. Member for Farnham (Sir A. M. Samuel) and the hon. Member for South Kensington (Sir W. Davison) have been bothering on every occasion about the lowering of the Income Tax, but they are missing today. They are leaving their case in the hands of the Government. By this Budget, the Government have seen their way to back up the Income Tax payer more than anybody else. [An HON. MEMBER: "The big ones."] Yes, the big ones have seen to it. I do not know whether the Government will depend upon the big ones at the next general election. I hope that the workers are taking notice of what is happening now, and that they will pay due regard to the fact that the Government have only been class-conscious, and have only acted in one way.

7.55 p.m.


I want to follow the line of argument which was taken by the hon. Member for East Fulham (Mr. Wilmot), who has recently been in touch with the electorate. The Chancellor has introduced this reduction of 6d. in the standard rate of Income Tax as part of a policy which he described as one of equivalent restoration to those classes who made sacrifices during the national emergency in 1931. I want to call attention to certain figures which show more forcibly than any words could how that principle actually works out, unaccompanied, as the restoration of the 6d. has been, by any restoration of the cuts which took place in that year in the allowances for children and other dependants. The figures are very curious and striking. To make quite sure that they should be correct, I have had them confirmed by a firm of accountants who specialise in obtaining Income Tax rebates. I shall only trouble the House with certain figures from the table.

Take the class with earned incomes of £500. A single man without dependants had his tax raised by the emergency Budget of 1931 by £21; he gets back £5 6s. I am leaving out the pence. Roughly, that is one quarter of his sacrifice. A man with the same earned income of £500, but with a wife and three children to support, contributed an increase of £11 17s. additional taxation; he gets back £1 10s., or one-eighth of the sacrifice. If he has been rash enough to have five children, he gave £5 in 1931 and he gets back 10s., or one-tenth of the sacrifice. Next take the £750 class. They come off slightly better. The single man gave extra taxation of £24: 2s.; he gets back £10 6s., or slightly under one-half. A married man with the same income and three children gave £34 2s. and gets back £5 16s., slightly over one-sixth. A married man with the same income but with five children gave £24 2s. and gets back £3 16s., or slightly under one-sixth.

Now turn to the Super-tax payer with an earned income of £2,000. The Chancellor's scheme is much more generous to him. The single man with no dependants gave extra taxation in 1931 of £46; he gets back £37 16s., or slightly over four-fifths of his sacrifice. If the man with the same income has three children, he gave £57 5s. and gets back £33 6s.; nearly three-fifths. If he has five children he gave £59 15s., and he gets back £31 6s. Take the highest and the lowest of those figures. The man with an earned income of £500 per year, with a wife and five children, gets back one-tenth of his sacrifice. If a man is single, with no dependants, and he has an income of £2,000 a year, he gets back four-fifths of what he gave. As it is easier to grasp figures when one sees them, I have had them set out in tables and I should be glad to give to any Member of the House, or to the Press, copies of the statement showing the figures, so that they can see for themselves the figures of the intermediate groups.

We are told that this is part of a policy of equivalence of sacrifice and equivalence of restoration. If so, it is a curious application of that principle. The unemployed man gets back the whole of his cut in benefit, and nobody grudges him that, because, as I hope to show on another occasion, when it will be in order, as it would not be to-night, even the restoration of the whole of that cut leaves an unemployed man with the moderate-sized family of three or five children far below the level of primary poverty, if he has nothing but his unemployment benefit to live on. A man in the Civil Service gets back half of his salary cuts, and no one grudges him that, while the small Income Taxpayer if he comes in one of the lower grades, and has the heavy burden of a wife and five children to support, gets back only one-tenth of his sacrifice.

I should like to remind the House that this particular type of man, the middle Class Income Taxpayer, with burdens of family dependants, is very hard hit in other ways. There is no unemployment insurance for him. The attention of the country has been drawn a good deal lately in the Press to the hard case of the blackcoated unemployed man. He has helped to pay for the unemployment insurance system, but he gets nothing from it. If he is in desperate distress, he has not even the chance of resorting to the newly set up Unemployment Assistance Board. The Poor Law is not considered good enough for the agricul- tural labourer or the domestic servant, but it is judged to be good enough for the unemployed middle class taxpayer.

There has been a committee set up lately to try and press the claims of the children of the nation in a share of the nation's prosperity. As one who has been chairman of the committee, which has the support of a great majority of societies in this country especially interested in the welfare of children, I have to confess that not only have we apparently failed to make any impression upon the mind of the Government, but the children seem to have been especially left out throughout this Budget. I have shown that no special help has been given to the children of the unemployed. We can only hope that in the later stages of the Finance Bill, or when the Chancellor of the Exchequer has a little more of a surplus to spare, he will find time to remember the burden that rests upon those who are bearing the expense of rearing the future generation.

8.4 p.m.


Those of us who take objection to the effect of this Resolution are in somewhat of a difficulty by reason of the Rules of the House. If we moved to reduce the rate of tax we should be defeating our own purpose, because we believe in maintaining the rate of direct taxation at the old level. If we move the deletion of the paragraph, then there will be no direct taxation whatsoever, and the last case will be worse than the first. Therefore, we are reduced to speaking against the Resolution in order to put our point of view.

In the course of the Budget discussion I made some remarks which are worth recalling, and from a personal point of view I must recall them. I made the point, as other speakers have done to-night, that the abatement of the incidence of direct taxation at this stage is an occasion which, even if we take the reason given by the Chancellor of the Exchequer in its favour, will not produce the same benefit for the country as the form of action which we should take. That is to say, the Chancellor of the Exchequer has £21,000,000 or £22,000,000 with which to play, if I may use that expression, and we suggest that by using that money in other directions he could provide much greater benefit for the nation at large, and to trade in particular, than he will from the form of the Resolution which we are discussing. I will return to that point later.

I should like to refer to a passage in my speech of a week ago, because there was some little controversy about it. I used a phrase to which the Chancellor of the Exchequer took exception. I said that the Government had given pledges that they would restore, first of all, the cuts upon unemployment benefit, and the cuts in pay. That was controverted by the Chancellor of the Exchequer. Later, the right hon. Member for Darwen (Sir H. Samuel), took part in the Debate and, speaking as a member of the Government of 1931, used these words: There never was any promise on the part of the Government of that day that any of the burdens which had been imposed at that time should have precedence of any other."—[OFFICIAL REPORT, 18th April, 1934; col. 998, Vol. 288.] If I remember aright, the Chancellor of the Exchequer indicated his assent to what the right hon. Member for Darwen said. We shall have plenty of opportunity for controversy with the Chancellor of the Exchequer later on, and perhaps we had better keep the atmosphere as sweet as possible. Having made some researches since, I think my statement was rather an exaggeration. I do not think that I was quite justified in using the word "first," indicating that the restoration in cuts of unemployment benefit and of cuts in pay would take precedence. Even so, accepting the statement of the right hon. Member for Darwen, I still assert that the Government have, in point of fact, gone back upon what was generally understood to be the position of the Government of that day. There is in this Budget precedence given, and if that is to be accepted as being the ground of controversy I think we have a right to argue in support of that proposition.

What are the facts? There is a restoration of 6d. in the £ on direct taxation to the direct taxpayers. That restoration takes place as from the 1st April. There is also a restoration of pay cuts and unemployment benefit cuts. But the restoration of unemployment benefit cuts takes place on the 1st July, and the restoration of the pay cuts, which is only in respect of one half of the cut imposed in 1931 also takes place from the 1st July. It is argued by the Chancellor of the Exchequer, the Financial Secretary to the Treasury and supporters of the Government that one of the grounds of justification for the restoration of the 6d. to the Income Tax payers on the 1st April—and it is put forward as mitigation of the offence, if offence it be—that the direct taxpayer was mulcted in the 5s. in the £ Income Tax in April, 1931. That is true. I admit that the direct taxpayers were involved six months before the special Budget of September, 1931, but let me recall to the Financial Secretary another side of the proposition. Take the teachers as a case in point. We have heard a good deal of what are called Burnham Scale as applied to teachers. In point of fact, those scales have never yet been enjoyed by teachers all over the country. I believe I am well within the truth when I say that large numbers of teachers were suffering a cut of from 15 to 20 per cent. only off the Burnham Scale. May I also remind the House that not only had the teachers a cut in their salaries in September, 1931, but there was a consequential effect of that cut.

Mr. DEPUTY-SPEAKER (Captain Bourne)

I rather think the hon. Member's argument had better be directed to the Estimates of the Board of Education. We are now dealing with Income Tax.


With great respect, I am trying to show the incidence of the cut of 1931. The point that I am now making is directly involved in that. There has been priority in giving the abatement of 6d. to the direct taxpayers over and above other people who were similarly mulcted in cuts in 1931. If I am allowed to make my point a little further, the relevance of my argument will be seen. Teachers were involved in a out in salaries in 1931. But it is also true that their pensions were fixed upon the average salary enjoyed by them in the last five years of their active life as teachers, and teachers who have retired since 1931 will carry permanently throughout their lives the effect of the cut imposed upon them in 1931, by reason of reduced pension. On what ground does the Chancellor of the Exchequer argue that there is no priority, seeing what has happened in regard to the teachers, a section of whom will carry with them to the end of their lives in the form of reduced pensions the effect of the cut imposed upon them in 1931, while those still remaining in the profession will only have restored to them from the 1st July next one-half of the pay cut which they suffered two and a half years ago. Even accepting the statement of the position as it was put by the right hon. Member for Darwen, that there was no priority promised, I submit that the Government have failed to redeem what was well understood to be the intention of the Government in 1931. So far as I understand the position, the Chancellor of the Exchequer has taken very great care to keep the door open in regard to the future. I do not know what classes of people he had in mind, but let me read his words: The fact is that the cuts in the rates of unemployment payments and in salaries, and the additional taxation which was imposed at that time, were considered by the Government of the day as a temporary expedient to meet a temporary emergency. And then follow these somewhat ominous words: They were accepted by the people of this country in that spirit. I do not myself interpret that understanding so literally as to feel compelled to put everything; back exactly where it was before 1931."—[OFFICIAL REPORT, 17th April, 1934; col. 921, Vol. 288.] I do not know what classes of servants the right hon. Gentleman had in mind when he made that reservation. Having read that statement with some misgiving, I read this later statement of the right hon. Gentleman last Thursday night with very much greater pleasure: I would further say that, disappointing as it may be to the Opposition to find that we have put aside entirely all party conceptions, all class conceptions, and have simply made an effort in this Budget to restore as equally and as fairly as possible among those who suffered in 1931 what there is to distribute, at any rate to those who did make that contribution our action implies this further undertaking, that, if they have not had this year the whole of their sacrifices made up to them, they still remain with the first claim on our consideration."—[OFFICIAL REPORT, 19th April, 1934; col. 1265, Vol. 288.]


I am loth to interrupt the hon. Gentleman, but I must remind him that we are not discussing the Budget on this occasion.


I accept your Ruling, and I do not want to carry the discussion any further, beyond saying, if I may, that even that observation of the Chancellor of the Exchequer does not seem to cover what we regard as the means test position.

Suppose that the Chancellor has £21,000,000 or £22,000,000 to play with, is this the best way of doing it, or is there another and better way? While we on this side take no special pleasure in seeing increased taxation put upon anybody for the sake of putting it upon them, yet, if there is a sum like £21,000,000 available for national purposes, we submit that a much better way would be to use it in stimulating public development than to rely upon the chance benefit of some portion of the £21,000,000 going back into industry. I repeat that I am not convinced that by abating Income Tax by 6d. in the £ you can be absolutely sure that that abatement will necessarily find its way back into industry. It might, I admit, and of course it ought, but there is no assurance that it would. If you want to make an abatement of the incidence of Income Tax, I should much prefer the suggestion of my hon. Friend the Member for East Fulham (Mr. Wilmot) to restore the allowances; but, if that could not be done, I would suggest even a third alternative. It would be infinitely better for industry at large, and even, in the long run, for direct taxpayers, if this money were used for the development of public works.

Suppose that, of this £21,000,000, £2,000,000 were restored to employers in the Lancashire cotton trade, I venture to doubt whether such a restoration would stimulate to any considerable extent the cotton trade of Lancashire. It is not so much lack of money from which Lancashire suffers. What Lancashire suffers from, so far as the internal trade of Britain is concerned, is that the general mass of the people of Britain are unable to purchase the goods of Lancashire. My own people in South Wales, for instance, are very poor. In the prosperous days, every draper in my area was very busy, and, the more busy and prosperous he was, the more he sent orders for cotton goods to Lancashire. Now the depression has caught us, and the consequence is that there is no buying of new cotton goods in my area, or very little, and fewer orders than ever are going into the cotton mills of Lancashire. If we could visualise the use of this £21,000,000 in such a way as to stimulate the purchasing power of the mass of the people in various parts of the country, an inevitable consequence would be an increased flow of orders into the cotton mills of Lancashire and a demand for the putting of more money into the industry by those who are responsible for its conduct. Therefore, as compared with the potential benefit from £21,000,000 used for an abatement of taxation, I submit that a more certain benefit would be obtained if it were expended on public works.

For these reasons I consider that the Chancellor of the Exchequer has taken a wrong line of policy in this matter. As I have said before, I should take no special joy in seeing Income Tax put upon anyone. I would like to see everyone without any taxes to pay at all. But that is impossible. We have certain burdens to bear, and there are certain taxes that we must collect. That being so, I submit that they should be collected from those who have at their disposal the most income with which to pay. Therefore, I suggest once more that this policy is wrong from the standpoint of making a permanent contribution to the revival of industry in this country, and for these reasons I, for my part, express my disapproval of the merits of the Resolution.

8.24 p.m.


I little imagined, after the calm and uneventful discussion that we had on the previous Resolution, that the hon. Gentleman was going to give us the advantage of a Second Reading speech on the Budget. However, what he says is invariably interesting, though to deal with all the generalities which he has propounded would tax the patience of the Committee were I to undertake the task. We are dealing here with a very limited subject. The Government are proposing by this Resolution to reduce the standard rate of Income Tax by 6d., but such is the pass of ingratitude to which we have come that our very concessions are represented as robbery. I would defy any impartial spectator of this Debate, not knowing in advance the real facts, to draw from what has been said the conclusion that we are here actually benefiting almost every person in the community. Hon. Members opposite seem to imply in all their speeches that to exact from what are called working people any contribution towards the expenses of the State is an imposition. They regard it as being the duty of those whom they describe as rich to pay the taxes, and they wish to exempt the poor.


I am sure the hon. Gentleman will excuse me.


I was not referring to the hon. Member. I was merely indulging in that pastime which commends itself so much to hon. Members opposite—generalities. They, therefore, argue that the burden of what they call direct taxation should be increased and the burden of what they call indirect taxation should be diminished. The hon. Member for Leigh (Mr. Tinker), selecting his figures quite arbitrarily, said that over a certain space of time the burden of direct taxation had been diminished and the burden of indirect taxation increased, but he did not remind the House of a very important fact to which my hon. Friend the Member for Huddersfield (Mr. Mabane) called attention the other day, namely, that the burden of direct taxation has actually increased since the War and the burden of indirect taxation has diminished.

I beg the hon. Member, who is always impartial in so far as belonging to a political party allows one to be so, to consider one or two facts. The weight of direct taxation has been increased. The Income Tax in 1930 and 1931 was twice raised, by 6d. each time, the Surtax was raised, and yet the yield fell. I am sure the hon. and learned Gentleman who interrupted me will at least pay attention to this and answer it if he can, on some subsequent occasion I hope, when he has had time to reflect upon it. Using the figure in the way in which the hon. Member uses it, one would deduce from that fact that the burden of direct taxation had actually been diminished. Of course, it has not. The Surtax charge has been at the same rate since 1931, in which year it was raised, and yet the Exchequer receipts from the tax have fallen steadily from £76,700,000 in 1931 to £52,500,000 last year. But the tax is higher than it was. The yield is smaller because these people have lost a portion of their income; yet the hon. Member is arguing that, since the yield is less, precisely because these people have suffered more, therefore the contribution that they make to the community has diminished and should be increased. I am sure he will see how unfair it is to use figures in that way.

Take indirect taxation and see what happens. The lighter the burden on the indirect taxpayer the greater the yield. If indirect taxation were raised so high that goods were kept out of the country altogether and the burden upon the purchasing working class was intensified, the hon. Member would be forced to say that the proportion of indirect taxation had fallen. That is exactly the opposite of what he wants to argue. I am not in the least trying to make a false point, but I submit that these generalities ought to be analysed a little further, and, although I pointed out some of these considerations to the hon. Member for Caerphilly (Mr. M. Jones) two or three nights ago, I notice that he has not yet, despite his ingenuity, been able to provide an answer. But it is time that this argument of indirect versus direct taxation as a burden upon the community was abandoned or, at any rate, adjusted in accordance with reality.


Will the hon. Gentleman give the figures that I read out giving direct and indirect? I have the last figures that he gave me.


I do not in the least dispute the figures, because I provided them. I was commenting upon them. All that I am asking the hon. Member to do is to look at the figures with which I have provided him and then to look at my comments upon them, and his conclusions may be different from those that he has given to the House. The hon. Member for Caerphilly accused us the other night of having in some way gone back upon our pledges. I had forgotten the incident until he revived it, although I thought it was a little irrelevant, unless it was for the purpose of receding from the attitude that he then adopted. If that was his object, I respect and honour him for what he has done. There was no pledge about priority of restoration in favour of a particular class, and the hon. Gentleman has never been able to produce any pledge of that kind. The principle upon which we have embarked—it has been repeatedly enunciated—is that those who have the first claim upon any surplus are those who made the contribution in 1931. We are not concerned theoretically as to whether they are rich or poor. We are concerned with the question whether they made a contribution. If they made contributions towards a particular crisis, now that the intensity of the crisis has passed, and we have a surplus, we must restore in roughly the same proportions as those in which we took. That is at present the sole consideration. Hon. Members opposite have argued as if it were more beneficial to spend money in this way or that way, more beneficial to take this or that tax off. That is not the essential question. It is true that what we are doing will have certain influences upon shops and upon factories, but we are concerned with answering the question, "Who gave, and in what proportion," and we say we will restore, in so far as humanly possible, in those proportions.

When you come to Income Tax, it is true that you are confronted with alternatives. You can either restore the allowances to where they were, or you can reduce the standard rate. Whichever of those alternatives my right hon. Friend had chosen, he would have been criticised, because the mere fact that there are alternatives implies that some will disagree with the choice that you make. I do not in the least deny that the poorer class of Income Tax payer might on the whole have benefited more from a restoration of the allowances. That may be true, but my right hon. Friend felt that more good and more justice would be done by restoring equally the standard rate over the whole class of Income Tax payers. When the hon. Gentleman opposite says that he should not have done that but should have had regard to the revival of industry, he must bear in mind that an incidental effect of the reduction of the standard rate is to relieve the reserves of companies, and, as I would like to add, of co-operative societies. They derive an appreciable amount of benefit from the reduction in the standard rate. Psychologically, a reduction in the standard rate has a far bigger effect and provides far greater and more rapid stimulus towards revival.


The hon. Gentleman has used several times the phrase that the restoration was to be propor- tionate to the amount taken away. Will he explain to the House how that principle squares with the figures which I and other speakers have given? Does it carry out the principle of proportionate restoration, and, if so, how does it carry it out?


The hon. Lady made a speech, and it is quite true that in some sense I have replied to that speech. I have said, as she reminds me, that an effort has been made to restore the contributions as far as is humanly possible in proportion. When you come to the Income Tax payers—I hesitate to repeat this again—you have alternatives. You can restore allowances, or you can restore the standard rate. When we are confronted with those alternatives and we take one of them, of course, there are people who say that we ought to have taken the other. But the proportion of the cost of these two things is roughly the same. I do not in the least complain that we are criticised. In fact, I am grateful because should it so happen that next year we do restore these allowances hon. Gentlemen opposite will have provided us with a great deal of advance support. When we took off the Beer Duty last year at first they were tempted to criticise it, but when one looked at what they said before one found that they had advocated it. If this year the situation permits and my right hon. Friend finds it possible to distribute a surplus, which we all hope we shall have, in the way that has been advocated to-night, hon. Gentlemen will have had all their desires fulfilled. I can only apologise to them for the fact that we have not been able to fulfil them this year and simultaneously.


May I ask my hon. Friend to clear up one point? He said that by choosing the method which has been chosen, the Chancellor of the Exchequer may have selected one which did not serve the interests of the poorer section of the community so well. I am sure that my hon. Friend meant that only in respect of Income Tax, and that really what he meant to say was that, by choosing this method and by assisting industry to revive, the poorer section of the community would receive much greater benefit than by the method suggested by the Opposition.


I thank my hon. Friend for putting far more clearly and concisely than I could have done what was in my mind, and I am very grateful to him.

8.40 p.m.


The interesting speech to which we have just listened has impelled me to get on to my feet. The Financial Secretary is always interesting. I regard him as one of the most capable debaters on the Government Front Bench, and he is never more interesting and capable than when he is indulging in generalities. He has indulged in generalities to-night fully, and I believe that the whole House has enjoyed those generalities, but the defence of the proposals before the House has been most inadequate. He stated that one would have imagined that we were not talking about a concession, and that the concession had been represented in this Debate as a robbery. I regard it as a robbery under the conditions which at present obtain. During the years of the crisis the Exchequer came along and demanded cuts in the salaries of certain servants of the State, such as teachers, civil servants, post office officials and so on. In addition to that, they said that they were going to impose an additional range of Income Tax by raising the standard rate by 6d. Further, as my hon. Friend the Member for East Fulham (Mr. Wilmot) has clearly demonstrated in the two speeches which he has delivered, they have imposed the greatest burden on these classes of people by the adjustment of the allowances.

The State this year had a certain amount at its disposal; it had a surplus. That surplus arose largely out of the sacrifices which had been made by these people. The surplus of the Chancellor of the Exchequer of £31,000,000 was due mainly to the fact that teachers, civil servants, and the "cut" classes had made their contributions, and that the range of Income Tax had been increased. The lower middle classes and the wage earners who came within the Income Tax range owing to these adjustments had their taxation tremendously raised. Those are the sources of the surplus. One would have imagined that when such a surplus was to be restored, more regard would have been had to the sources from whence it had been derived, and how it had been derived. To come along with a surplus at disposal and not to adjust the burdens imposed upon the lower middle classes and the small wage-earners is a form of robbery. It is taking the surplus and giving it to people who made the least sacrifices in relation to their condition of life. It is giving to these people a surplus created out of the sacrifices made by poorer sections of the community. Therefore, those people who suffered cuts and the double sacrifice with regard to their Income Tax, and the generality of people who suffered owing to the allowances infliction can regard the action of the Government as, in a sense, robbery. They have made their contributions to the surplus placed at the disposal of the Government.

The hon. Gentleman tried to make out that the higher Income Tax people had suffered a great deal owing to diminishing incomes, and that this made the burden on these particular people all the greater. The unemployed man, who has not had his cuts restored, is suffering a far greater burden than people in the higher ranges of incomes, and in the proposal to reduce the standard rate by 6d. you have the great outstanding achievement, the great significance, of the Budget. The Chancellor of the Exchequer has at his disposal £29,000,000 and £20,000,000 are going to this class. It is just and fair to say that the proposal we are now discussing amply justifies the description of the acting Leader of the Opposition, that it is a mean and unjust Budget. This proposal, having regard to all the circumstances, shows that the Chancellor of the Exchequer and the Government have forged a class weapon in the Budget.

It has been said that the unemployed get the restoration of their cuts. The glory has already gone from that proposal. We know now that those who are suffering from the means test are not going to get anything like an adequate restoration of the cuts. The unemployed cut amounted to no less than £24,000,000 on the means test side. Where is the equality of restoration as between the unemployed and the persons who will be helped by a restoration of the standard rate? I can see no equity or justice in it. From the point of view of decency the Government should have said, "Well, in the crisis the unemployed suffered greatly and the small man in the lower ranges of income suffered greatly, much more heavily and severely than those in the higher ranges of income, and now that there is a surplus at our disposal those people who suffered the most, because their income was the least, shall have first consideration. It is not the people who have suffered the most because their income is the least who have the first consideration, the people who have most are getting most back, the people who could afford to make a contribution to the national emergency without reducing their standard of life or affecting any item of luxury are the people who, by this proposal, will get the most benefit. In normal times this would have been a most unjust and iniquitous proposal, but having regard to the fact that we are dealing with a surplus which arises in relation to the crisis which existed in 1931, it is even more unjust and more iniquitous.

I cannot understand, having regard to the economic policy of the Government, why they have not seen that the suggestions of the hon. Member for East Fulham are not only just but sound economically. The Government, as I understand, have determined to rest upon the development of the home market; the Chancellor said so in his Budget speech. Therefore, quite apart from any other policy, now that the Government have embarked on a close home market it seems to me that they would have realised that the purchasing power of our own people was more important than ever. If we are to depend for the revival and development of our industries more and more on our internal purchasing power then the Government should take steps to increase that internal purchasing power to the maximum degree possible. They have not done that by this proposal. It is not the spenders who are going to have 6d. relief, it is the savers; and it is not savers that we want at the present moment. We want spenders. The lower middle classes, the working classes and the unemployed, ought to have increased purchasing power. It would have been a far more effective economic action, a far greater contribution to the revival of trade, if the Chancellor of the Exchequer had given this £21,000,000 straight back into the pockets of the unemployed. The Government, of course, have to please certain sections of the community to whom they are indebted.

I suggest that as the Budget is more and more understood, as its unjust incidence is more and more appreciated, the more unpopular will the Government become. There has been such anxiety, such great interest, in the unfolding of the Budget this year, such keenness as to its proposals, that the reaction has been all the greater now that the proposals have been revealed. Numerous classes of people felt that they had largely contributed to the surplus and they sincerely hoped—not partisans of ours, not Labour people—that the Government would use the surplus in a fair and just way. The more they realise the way in which the Government have distributed this surplus the more the resentment has grown, and there is keen and strong disappointment. But not only is there resentment, there is fear and distrust that the Government do not intend to deal with the classes of people affected by the allowances.


I must remind the hon. Member that we are dealing with the Resolution, not with the Budget.


I am relating it in a moment to the proposal before the House. I am showing that the resentment arises not merely because the allowances have not been restored but because the surplus has been dealt with in the manner proposed. These people, who looked forward to an equitable distribution, remember that during the crisis the allowance proposals were justified not merely on the basis of the crisis but on the basis of the Report of the Royal Commission. I hope that the Government are not going to take that attitude. I hope they will realise that they owe it to the unemployed that the surplus should be given back to them. They owe it to the "cut" classes, and to those affected by the allowances. I do not know whether we shall have in this Debate any firmer promise than we have had. I hope we shall.

The proposals we are discussing undoubtedly embody most unjust provisions. They show that the Government have not reviewed the whole situation, that the Government have not had due regard to the real sacrifices that were imposed in 1931, and this particular proposal embodies a policy which is most iniquitous, which is not fair to these people, which is indeed mean, so far as the "cut" classes and the unemployed are concerned. I think we ought to resist it. I understand we are not going to divide against the proposal, but I wish we had an opportunity of doing so in order to show our disgust at the meanness of the proposal, at the wickedness of using a surplus got out of the sacrifices that I have enumerated, taken from the poorer sections of the community, and the period of restoration used in order to restore the money to the richer section.

8.57 p.m.


I rise only because the hon. Gentleman the Financial Secretary to the Treasury invited me to do so. He mentioned one or two matters upon which I would like to say a few words. He pointed out, I understood, that compared with pre-War times the taxation on the direct taxpayer has been increased. In view of the fact that we have had a little War since then it is not surprising that the person who in fact received the interest on the War debt in this country should pay back a larger proportion than when we had practically no National Debt at all. There is another matter which the Financial Secretary has entirely overlooked. When one is speaking of burden one has to recollect out of what the taxpayer has to meet the burden. The burden is the weight which falls upon him compared with his capability of bearing it. During the last few years the fall in wages has been measured in hundreds of millions of pounds. When one is considering the burden of indirect taxation one has to remember that there has been a vast fall in the wage levels, and that the burden, measured by these wage levels, has enormously increased.

But one need not really inquire into the exact figures, because this the Financial Secretary will not dispute: The whole purpose of the policy of the Government has been to raise or maintain price levels. The object in view is that the profits from industry may increase. That is the admitted objective of the Government. That means increasing the amount of money in the hands of the profit-owning classes and decreasing the amount in the hands of the consumers for a given volume of business. That is necessarily so, because if you do not achieve that end you do not achieve the very purpose that you set out to achieve, that is to say, to maintain profits in order that, industry being sufficiently profitable, you may be able to go on with your production. It is idle to suggest that that is not the means which is used by the Government to try to readjust the incidence of the profits on the one hand and the consumers' prices and the receipts of the workers on the otter. Take the wheat subsidy—


On the Report stage discussion is limited specifically to the Resolution before the House.


I was speaking strictly in reply to the speech made by the Financial Secretary to the Treasury, and on a point upon which he invited me to reply.


If I remember rightly the hon. Gentleman the Financial Secretary invited the hon. and learned Member to reply on some future occasion when the whole policy of the Budget would be open to discussion.


This is a future occasion, with great respect. Let me just complete what I was saying on that one point, that is, that so far as the reduction of Income Tax from 5s. to 4s. 6d. is concerned it is merely an attempt to relieve the profit fund of the sixpence tax and therefore to allow a further amount of the profits to remain in the hands of the profit owner, in order to try to stimulate production according to the ordinary capitalist theory of economics. The Financial Secretary said that the Government were merely looking at who had made the contribution at the time of the cuts, and that they were not concerned whether they were the rich or the poor. That is precisely what we blame them for, because the rich are able to bear things which the poor are not able to bear, and any Government in any community ought to have regard to whether the burdens of taxation fall upon the rich or the poor, and not be perfectly callous, as the hon. Gentleman stands up and boasts that his Government is at the present time.

Then the Financial Secretary went on to say that we must look at the proportions in which this contribution was made in 1931, and he conveniently forgot or did not take into account the whole of the incidence of the means test. The Chancellor of the Exchequer said that the means test was put on in 1931, but it was not part of the economy cuts—a most fallacious and misleading argument. Of course it was part of the economy cuts. I suggest that every one who was in the House when the provisions were passed imposing the means test, and when the statement was made as to the contemplated savings which would result from that imposition, was under the impression that that was part of the whole Economy Bill. Now, conveniently, it is said that that was a permanent arrangement. It is not going to be replaced even if we have a surplus next year.


We have to discuss the means test on another occasion.


I was again only dealing with a matter which the Financial Secretary put forward in his speech. But I will leave the question of the means test. The hon. Gentleman said that he agreed that there were these two methods by which the Income Tax remission might have been dealt with. Of that we only say that one is better than the other and that neither of them will be just, because there are other claims that come first, and next year it will not necessarily satisfy us if the Chancellor puts back the allowances on Income Tax, because there might still be other things that come first, and he may not have enough money to do the first things first.

Then the hon. Gentleman makes use of an extraordinary argument. He says in effect: "I agree that the poorer person under the Income Tax law will not get as good a share of the remission as the richer person, yet we have come to the conclusion that justice will be done by the remission." What is the justice which enables the Government to give better treatment to the rich Income Tax payer than to the poor Income Tax payer? I could understand expediency, but what justice is there in that procedure? We have had no explanation of why it is just, when you have this money to give back, that you should give more of it to the rich man than to the poor man. One is driven to believe that the real reason is not justice. It it not a return for the cuts that were made or the sacrifices that were suffered. It is just ordinary pedestrian capitalism operating in its ordinary, common, economic way on the principle that you must try to give back to the profit-earning class—not the lower middle class, but the profit-earning class—as much as you can in the way of profits, in order that the more they retain the greater may be their inducement to manufacture. That is the explanation of this Resolution and of this Budget.

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

9.10 p.m.

The ATTORNEY-GENERAL (Sir Thomas Inskip)

It is perhaps desirable that I should explain to the House the purpose of what at first sight appears a formidable Resolution. The purpose is to restore the law to the position in which it was always believed to be until a recent decision, which hon. Members opposite probably remember, known as the Normanby decision. The Resolution deals with the payment of mining royalties. There are one or two kindred payments to which it applies, but mining royalties form a convenient illustration, being the main payment to which the Resolution refers. If a mining concern earns sufficient profits to cover the payment of the royalties which it has to pay to the lessor no difficulty arises. The mining concern deducts the tax appropriate to the amount of the royalties payable to the lessor, and inasmuch as the profits concerned have already suffered tax, that mining concern retains the tax which they have deducted from the royalties paid to the lessor.

A different question arises when the profits of the mining concern are not equal to the royalties which have to be paid to the lessor. It may be that there are no profits at all. In that case the practice has been, in many instances, to deduct the appropriate tax from the sum paid to the lessor in respect of royalties, but inasmuch as those royalties are not paid out of profits which have already suffered tax, the mining concern accounts to the Revenue for the tax so deducted. In some cases where tax has not been so deducted the recipient of the royalty, the lessor, has been assessed to tax directly and, of course, has paid it as everybody expected he would be required to pay it. But by the decision given recently to which I have referred it has been held that the royalty-owner is not liable to be assessed directly to tax in respect of those royalties which he receives. The result is that the mining concern is not entitled to deduct tax from the payments it makes to the lessor when those payments are not made out of profits which have already been assessed to tax. By this result, in many eases, where mining concerns are carrying on business unprofitably, or only making a small profit, the lessor escapes tax altogether upon his mining royalties.

The House will observe, therefore, that the liability of the lessor to tax in respect of his royalties depends on the pure accident of whether the mining concern paying the royalties earns a profit equal to the amount of the royalties in the year or not. Nobody dreamt until recently that such was the law; nobody would contend that it ought to be the law and nobody will complain if the practice which has hitherto been carried out, in accordance with what was believed to be the law, is restored. I hope that the House will agree to this Resolution in order that justice may be done, no extra burden placed upon anybody and the position made what everybody hitherto believed it to be.

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

9.15 p.m.


This Resolution is concerned with a small Sub-section contained in the Finance Act, 1894, in connection with annuities or other interests which are provided by a deceased person and come into the possession of the beneficiary after the death. Sub-section (1, d) of Section 2 of that Finance Act, shortly and in un-technical language, provides that that interest shall be liable to Estate Duty in the hands of the beneficiary when the death takes place, at which date the interest first begins. It was always supposed until quite recently that the amount of the Estate Duty was to be estimated by reference to the full value of the beneficial interest, which begins immediately upon the death, but by a decision—it does not matter whether of a majority of the House of Lords or of the whole House—in the House of Lords it has been held that it is not the full value of the beneficial interest arising from the death which is to be taxed, but only the value of that beneficial interest after deducting the value of what is called the expectant interest before the death took place.

The practice of the last 40 years has been to value this interest that arises on the death in the way in which it will be valued if the House sees fit to approve this Resolution and pass the consequent Clause in the Finance Bill into law. Perhaps I may be allowed to say that there is no intention in this Clause of interfering with the decision in question, in the Adamson case, and the parties who were interested in that case will get the benefit of the decision. I am only asking that the House shall say that at any rate in future the law is to be what I venture to think 99 people out of 100 believe it to be, and what every solicitor practising has always accepted it as being.

9.17 p.m.


While I am very glad to hear that the result of the Adamson case is not going to be interfered with by this Resolution, there is a number of other cases, to my knowledge, where exactly the same point has been raised, and with great respect to what the learned Attorney-General has said, I do not think this Sub-section should really be applied to the type of case to which it was applied in the Adamson case. Actually the Adamson case was dealing with a particular point of trust, but there is a number of other trusts of very much the same kind in respect to which proceedings have been started, and if the Clause in the Finance Bill is brought in in exactly the same words as this Resolution, by making the basis on which the valuation should be considered for Estate Duty purposes retrospective, the whole of the costs incurred in those pending proceedings will be absolutely wasted. I hope, therefore, the learned Attorney-General will be able to give some assurance that where proceedings have been started they are not going to be made absolutely nugatory by reason of this Resolution and consequent provision in the Finance Bill.

9.19 p.m.


If I may be allowed to reply to my hon. and learned Friend, I do not want to give at the present moment a positive undertaking as to the precise extent to which we shall safeguard ourselves, which has not been determined. I have given a positive assurance as to the fruits of the Adamson case for the benefit of the persons engaged in it. It may be that it will be possible to safeguard, not merely cases in which litigation has been begun; it may be possible to go even a little further and safeguard all cases where the death has occurred before the Act was passed, but where the duty has not been paid. If my hon. and learned Friend and others who are anxious on the same point will be good enough to wait until they see the Clause in question, the matter is being considered, and full opportunity will be given of raising the point if the Clause is not satisfactory.