AMENDMENT OF LAW.

HC Deb 16 April 1935 vol 300 cc1689-815

Question again proposed, That it is expedient to amend the law relating to National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with finance." —[Mr. Chamberlain.]

3.29 p.m.

Mr. MORGAN JONES

My hon. Friend the Member for Limehouse (Mr. Attlee) yesterday conveyed on behalf of my colleagues on this side of the House, our congratulations to the Chancellor of the Exchequer. I may be allowed now to add my own personal word of congratulation to him. I find all the right hon. Gentleman's speeches characterised by a clarity of exposition coupled with a felicity of language, which make listening to his Budget statements very agreeable to us all. I have had the privilege of listening to some 14 Budget statements and on such occasions I have never been able to get out of my mind those lines from Goldsmith's "Deserted Village": And still they gazed and still the wonder grew, That one small head could carry all he knew. The right hon. Gentleman yesterday increased my wonder and having regard to the fascination which his exposition had for me, it is perhaps fortunate for me that there has been an interval between yesterday's discussions and to-day's. Now we are able to examine his statement free from that fascination and to look at it in cold print. The right hon. Gentleman opened his statement with a claim that this is the successor to a series of balanced Budgets. I am beginning to wonder, having heard that statement three or four times, what precisely is meant in orthodox circles by a balanced Budget, for if we were to take the standard which would be readily applied, I am sure, to a Labour Government, we can say with confidence that we have not listened to a balanced Budget from the right hon. Gentleman since he has occupied his office. I noticed, for instance, Yesterday, as my hon. Friend the Member for Bridgeton (Mr. Maxton) did, that there was a studied silence on the question of the external Debt.

If the same test were applied to this Government as is applied to Labour Governments, we should be told that this was not a balanced Budget. Let me give one or two simple facts. The last Labour Government, which all will agree passed through pretty difficult and strenuous times, paid in respect of the American Deb £79,500,000 in 2¼ years. This Government in four years has paid £42,250,000. There is no mention of any prospective payment, except possibly a token payment, in respect of the coming year. Of the amount which this Government has paid the Government expressly claimed that they reserved to themselves the right to treat £30,000,000 as a repayment of capital. I do not want the Committee to misunderstand me. I am not urging the retention of the system of war debts or war debt payments. All I am saying is that hon. Members opposite claim to be the exponents of financial purity and, as such, they are not entitled to say that they have discharged their full obligations. There is everything to be said in favour of the cancellation of war debts by agreement. I have always understood that the Government are against unilateral action in regard to international agreements, but action in regard to war debts is clearly unilateral. Unilateral action in fact means repudiation. Hon. Members opposite will not like that word, but it is a strictly accurate word to apply to this operation.

Hon. Gentlemen opposite have in the course of the last few weeks been pestering the Secretary of State for the Dominions to look after the interests of people who have financial interests in certain municipal loans in Canada. I do not complain. Others are asking whether the Government are watching British interests in South America. You cannot repudiate your obligations in America and ask that other people should not be excused their obligations. Once begun, repudiation is apt to catch on like a prairie fire. Once we embark on this business of repudiation the question arises what is to happen to internal debts. I do not know that the case is very different, so far as borrowers and lenders are concerned, as between American and British lenders. I put that proposition to hon. Gentlemen opposite, and, if they reiterate the cry that Britain is now on the road to prosperity, they must not overlook the fact that that cry may re-echo in America and an answering cry may come back, "What, then, about the debt you owe to us?"

May I turn from external debts to the question of our own National Debt. The right hon. Gentleman will agree that I do not over-state the case when I say that there has been practically little paying off of our Debt, except, of course, the statutory Sinking Fund and what is over by way of surrenders at the end of the year. Our National Debt stands, in round figures, at the ominous sum of £8,000,000,000. It is a terrible figure. It is a formidable and challenging figure, a figure that posterity will have to face somehow or other. When the right hon. Gentleman the Member for Epping (Mr. Churchill) was Chancellor of the Exchequer in 1928, he stabilised our Debt charges at £355,000,000. We have abandoned the right hon. Gentleman in this as in many other matters. Perhaps one more reason for leaving him makes little difference. The Chancellor of the Exchequer has taken care to emulate him in one particular. He has learned from him how to make a good raid. In that matter I am bound to say that he follows the right hon. Gentleman the Member for Epping with meticulous fidelity. We are now a long way below the amount at which the right hon. Gentleman the Member for Epping stabilised the Debt charges, and I gladly confess that that was substantially brought about by the conversion that was effected two or three years ago. Be that as it may, our Debt charges still remain at a formidable figure.

That is not all that gives us discomfort in connection with this annual statement. I must ask the Committe to allow me to make a reference to the question of increasing armaments. This year we are providing £125,000,000 in respect of the Army, Navy and Air Force. If we take £25,000,000 as equivalent to 6d. on the Income Tax, £125,000,000 is equal to 2s. 6d. in the pound. The total inland revenue is only £369,000,000, and our expenditure in respect of armaments is equivalent to one-third of that total, or 6s. 8d. in the pound. It is £50,000,000 more than was spent in 1913–14, the year before the War to end war. Moreover, hon. Members may perhaps overlook one or two facts in connection with that contrast. In 1913–14 the Income Tax was at the rate of ls. in the pound; to-day it is 4s. 6d. The National Debt was then about £8,000,000,000; to-day it is about £8,000,000,000. In pre-war days indirect taxation, as far as necessities were concerned, affected two main articles, sugar and tea, and two main luxuries, tobacco and alcohol. To-day, largely as the result of the policy deliberately followed by this Government, we are expecting a revenue of £187,500,000 from Customs and £184,400,000 from Excise.

The point of that argument is this: Here is this huge National Debt, which someone sooner or later must pay. We are apparently resolved to leave it to prosperity to face it, but it is a formidable problem. On top of that we pile up these awful bills for armaments. Further to that, we pile on indirect taxation, supplemented by increased subsidies in respect of wheat and other commodities. I ask this question deliberately What is to happen in a few years time to the taxable reserve of working and lower middle class people in this country? If we are going to avoid direct taxation, and to increase indirect taxation, and still meet these burdens, unless there is a very substantial change in the earning power of the people the prospects for the poor of this country are nothing short of alarming. Not only that, but I beg the Committee to remember also that Government debt enters largely into the finances of the country in various ways. It enters into the banks, it enters into insurance companies' resources, it enters into building society operations, it enters into friendly society operations; and with this vast accumulation of commitments in respect of debts and armaments and indirect taxation, plus these vast resources reposed in these banks and other like bodies, if some day the crisis should come and we should find ourselves once more engaged in war, then the calamity to all that we know by way of comfort and contentment in this country will be indeed appalling. In addition to that, the Government seem to, have embarked upon the policy of economic self-sufficiency, a policy which I confess is not, to me, within reasonable measure of full attainment.

May I once more seize the opportunity to protest as vigorously as I can, and no words can adequately express my own views nor, I am sure, the views of my colleagues, against the steady drift in the direction of increase in indirect taxation and decrease in direct taxation? Let the Committee not forget that seven-eighths of the families of this country have incomes of less than £500 a year. When I say £500 a year I speak of a sum that is almost fabulous to large numbers of working class people, they would be in a veritable EI Dorado if they received anything like £500 a year, and yet the right hon. Gentleman Lord Snowden, when he introduced his last Budget, did extend the ambit of taxation so as to include something like 2,500,000 extra taxpayers, and if I understood the reference of the Chancellor of the Exchequer aright yesterday he, I think, implied that his concessions, so far as they affect the lower zones of incomes concerned, will reach something like 70 per cent, of the taxpayers in those lower areas. That shows how very substantial is the nature of the burden imposed upon the workers of this country at this very moment. There was published last week-end the "Economist" Budget Supplement. I dare say hon. Members will have seen it, because a copy was, I believe, sent to us all. In that supplement on page 12, column 2, there appears this statement, with which I cordially agree: Indeed, when it is remembered that the introduction of Protection necessarily imposes a hidden burden on consumers, and that the practice is apparently growing of imposing extra-Budgetary taxes such as the beet levy, and that the average burden of local rates is still very high and unequally distributed, there is good reason for saying that the incidence of taxation is less fairly distributed at present than at any time since the War." That is a terrible statement to make, and yet I think it is an accurate statement; and if that be the case I think that the right hon. Gentleman has failed in this Budget to redress that inequality. In general, I would like to say this about the right hon. Gentleman's review of his anticipated surplus. Once again I venture to think he has been excessively cautious in regard to his prospective revenue. Last year I used these words, and perhaps I may be forgiven for directing attention to them I want to say a few final words concerning the Budget generally. The Budget statement propounded yesterday indicated excessive caution. I am pretty certain that in the ultimate issue the right hon. Gentleman will find himself in possession of a considerably heavier surplus than, in fact, he warned us of yesterday. I make that statement of course on the assumption of present expenditure.'—[OFFICIAL REPORT, 18th April, 1934; col. 990, Vol. 288.] I make the statement again to-day, for what it is worth, that in my judgment the right hon. Gentleman will, in fact, have a larger revenue accruing to him than he anticipated in his statement yesterday. I think I am entitled to base that prophecy, if I may call it a prophecy, upon another statement which I saw in the Commercial Supplement of the "Economist," issued in February of this year. They gave a summary of industrial profits in respect of 1,975 industrial concerns, and said: The reports on the 1,975 industrial concerns published in 1934 refer to the first complete trading year of Britain's domestic economy. For the first time for seven years reports coming from each quarter show increased net profits after paying debenture interest, etc., compared with the results of the same concerns published in 1933. The total net profits of those 1,975 concerns in 1934, on £168,800,000, was £24,000,000, 16.6 per cent. above the 1933 total. One is therefore entitled to assume that the right hon. Gentleman will get rather a larger measure of revenue than he somewhat conservatively estimates.

Perhaps I may now turn to a discussion of the fruits of the Budget. In the first place, there is nothing whatsoever in the Budget for the man below the Income Tax limit except in so far as he may benefit by the relief in Entertainments Duty. The right hon. Gentleman was therefore speaking in somewhat hyperbolic terms when he described this as the Budget of the working man. The poorest paid working man gets nothing out of the Budget, except as I have just indicated. The second point is as to the restoration of what are called the cuts. We must all rejoice that it has been found possible to restore the cuts this year. It is only an act of delayed justice, but it has been done—or at least it is to be done. There is the small fly in the ointment that the restoration does not take place until after the end of the first quarter of the financial year, so that until 1st July these people are still to be called upon to make a contribution of £1,500,000. I will not be unduly captious in the matter, however. The restoration is to be made, and we are all extremely glad. The right hon. Gentleman will find, as I believe he must have found last year, that the restoration of the cuts makes a very substantial contribution to trade recovery by adding to the purchasing power of a large number of people.

I would remind the House of two classes whose case has perhaps been overlooked directly in this matter. When Lord Snowden carried his Budget in September, 1931, there was imposed upon the employed workers of the country an extra weekly contribution towards unemployment insurance, and it has never been taken off. I have heard no hint suggesting that it is to be taken off. What does it mean? Some one tells me it is a penny, in respect of the workman. "What is a penny?" People will say, "It is not very much" In the year ended 31st March, 1933, it amounted to £2,800,000. In the next financial year it amounted to £5,900,000, in the next to £6,100,000 and in the last financial year, to the 31st March, this year, to £6,425,000. The employed workers made a contribution last year of about £6,500,000, through the medium of this extra contribution to the Unemployment Insurance Fund. Having regard to the fact that the Unemployment Insurance Fund is now approaching a more favourable position, the case is pretty strong for the Chancellor to consider whether the time has not come to do without that extra penny from employed persons. The more people there are employed, the greater is the revenue to the fund. The aggregate contribution since the beginning in respect of that is something like £21,250,000; not a small contribution by any means.

The other class which has been overlooked—I do not dwell upon this, but only mention it in passing—is of those for whom my hon. Friends and myself never tire of speaking, those who are still on what is called the means test and who are subject to its operation. Let the Committee not forget that the means test involves many people in the gravest possible financial hardship. It has meant that the Chancellor of the Exchequer has made a substantial saving. The two classes I have mentioned still require attention from the Chancellor of the Exchequer before he can say that he has, in the fullest possible measure, restored the cuts imposed in 1931. I regret that there was no mention yesterday by the Chancellor of the Exchequer of a scheme for providing unemployment insurance for agricultural workers. We anticipated, and indeed hoped, that that would be mentioned, because it would be a measure of great hope for the people in the countryside. Their case is strong and just, and merits attention and sympathetic treatment. I again express my regret that the right hon. Gentleman did not make provision for that.

The next item is the Entertainments Duty. With other people, I cordially congratulate the Chancellor upon having restored the position which existed before the supplementary Budget of 1931, in respect of the cheapest seats in the cinemas. In areas with which I am very closely acquainted, even the tax of one penny had a very heavy and unfortunate incidence, and I am very glad that the Chancellor has found it possible to remove it. I am exceedingly glad also that he was able to provide for those entertainments in which living artistes are employed. The Chancellor's method was a very dexterous one, on which he is to be congratulated.

I pass from those subjects to the Local Loans Fund. I know that no extra money is involved, and that the Chancellor merely intends a change of the law, but I would plead with the Chancellor, in the way I have done before-and I hope that he will not regard my argument as superfluous this afternoon-in respect of certain local authorities who have loans of two kinds. Local authorities struggle on in many parts of the country under heavy interest rates, and if a change could be made in interest rates it would represent a very substantial contribution to their finances. There are two sorts of loans. First, there are loans which have been advanced through the medium of the Local Loans Commissioners. There- fore, no change can take place without the removal of a Treasury minute. There may have to be some change in the law or in the work of the Treasury, which is perhaps not quite an open door, although it is not so closed as the other one. The other kind of loan does not concern the Treasury directly, but it is an important element in the finances of local authorities.

Let me give an illustration. I happen to belong to an area adjoining that of my hon. Friend the Member for Bedwellty (Mr. C. Edwards) and other of my hon. Friends where a big water reservoir had to be constructed before the war at a cost, if I remember rightly, of about £800,000. Owing to the war, Government action arrested it, and we had to resume after the war at a cost of £2,000,000 to complete the job. We had to borrow money— speaking from memory — at 61, 62 and even 7 per cent. The point I put to the Chancellor especially is that there is no sort of break in the agreement, and so this heavy burden goes on until 1960, if my memory serves me aright. It is an appalling burden; it is one that is almost intolerable to bear, and is really a very grave element in the weekly rent which the workers have to pay in our neighbourhood. I know that the right hon. Gentleman has no responsibility for it, but I would beg him to consider whether, with his great authority, he could not bring about some sort of relief either by compulsory or voluntary conversion, so as to relieve local authorities from this dreadful and intolerable burden.

I turn now to the piece de resistance of the right hon. Gentleman's Budget, namely, the Road Fund. I like the gay and pleasant attitude of the right hon. Gentleman. He is so jaunty. This was not a raid at all; it was only a transaction. I begin to wonder whether I could not propound a conundrum to the Chancellor: When is a raid not a raid? When he calls it a transaction. I rather thought, as he opened that passage of his speech that we were going to have a little snippet of a new deal. But it was not the New Deal, but a newer deal—a sort of Dick Turpin touch holding up the Minister of Transport, insisting that £4,700,000 should be handed over to the Treasury. Says the Minister of Transport, "When can I have it back?" and the kindly Dick Turpin says, "This is my answer: First of all you must prove that there is nothing left in your own till, and when you have proved that, I will graciously allow you to approach me with a request for its return." That is very kind of the Chancellor. It is prodigal generosity.

Mr. DENMAN

Sound finance.

Mr. JONES

The hon. Member for Central Leeds (Mr. Denman) says it is sound finance. When he was among us he did not call it that.

Mr. DENMAN

rose—

Mr. JONES

The hon. Member has already interrupted me. Let me take the merits of this proposition. I think the Chancellor will find that this involves some grave consequences. In the first place, I think it is going to cost local authorities pretty heavily. Many Members, I daresay, have been able to acquire information from various areas. I am told that this is the situation in London. I have not got this officially. I am using figures given to me second-hand, and possibly I may be wrong in some details, but I think generally they are accurate. The number of oil engine omnibuses owned by the London Passenger Transport Board at this moment is 600, I believe, and estimating nine miles per gallon of oil, the Board, I am told, would consume about 3,000,000 gallons per year. That means, if they are to pay the 7d. per gallon tax, £150 per omnibus which is a pretty stiff imposition. For 600 vehicles it means a cost of £90,000 a year. It is clear that this is going to involve a heavy cost not only to the London authority but to similar authorities up and down the country with much less favourable areas to serve than the London area, for in London, of course, you have your customers all along the routes, whereas in other parts of the country you have to pick up your passengers at points very remote from each other. I am given to understand that a large number of local authorities at a considerable cost have converted from the petrol-driven vehicle to the Diesel type of engine, because the Diesel system, if I may call it so, has proved cheaper than the petrol system. Now if it should prove that the petrol-driven vehicle is cheaper to run that the Diesel-driven vehicle they may still convert, but that, perhaps, may not be the event.

That, however, is not all the story. It is not strictly correct merely to compare the difference between the tax paid on the petrol-driven vehicle and the tax paid on the Diesel-driven vehicle, because I am given to understand that the initial cost of a Diesel-engine vehicle is considerably greater than that of a petrol-driven vehicle. I am told, moreover, that a petrol vehicle of a four- to five-ton type pays in taxation about £70 a year, but the Diesel engine, being of a heavier type than the other—a five- to six-ton type—pays in taxation about £120 a year. I am told, also, that the extra running costs will probably prove to be something round about id. Per mile. Then I am told that the licence on the Diesel-engine vehicle, as compared with the petrol type of vehicle, presents a very remarkable contrast. I had these figures dictated to me over the telephone last night, and so, naturally, I give them with some reserve, but I am informed that an 8 to 14-seater petrol-driven vehicle pays £24, compared with £42 in the case of the Diesel-engine vehicle; a 14 to 20-seater, £26 in the case of petrol, and £48 in the case of oil; a 20 to 26-seater £48 in the case of petrol, and £68 in the case of oil; and so the differentiation goes on right up the scale. It is clear, therefore, that there are many more elements in this argument than the simple one which the Chancellor of the Exchequer put before us yesterday.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

The hon. Gentleman has in mind that I was equalising the duty.

Mr. JONES

I quite agree. I have had a message sent to me since coming into the House this afternoon. I will read it as it was given to me: An order placed for ten Diesel engines was cancelled this morning by a well-known London company. Further information can be given you if desired. There is the statement. I cannot vouch for it yet, because I have not had time to verify it. I must now, therefore, put these points to the Chancellor: First, the incidence of this change is bound to be pretty heavy upon local authorities, and upon the smaller authorities who use the Diesel engine more perhaps than the more prosperous authorities. Secondly, there is bound to be a substantial discouragement, I think, to research in this matter. After all, experts have been at this business for a considerable time. They are rather proud of the evolution of this type of engine, and it is a discouragement to suggest that this departure should be embarked upon. I know the Chancellor said yesterday that he did not in any way want to cramp development. That is quite true, but whatever his intention may be, the event, perhaps, may be somewhat different from his anticipation.

I want to raise in this connection another question. Is this policy now being followed in the interest of one form of transport, namely, railways? Do not let the Committee misunderstand me. I do not want to do more harm to the railways— none whatsoever; but I do say that it seems to me to be a mistaken policy to be penalising one source to save another. Let me use a parallel if I may. In the Post Office we had the telegraph system. In due time there occurred an improvement in the method of communication—the telephone. Would it not have been folly for the Post Office authorities, when the telephone came, to impose upon the telephone an extra burden of taxation so as to impede development, or to save the telegraph? Suppose the same thing in connection with wireless. Surely it is a wrong policy. The right policy, I submit, is that you should tackle this problem as one big whole, and not in this patchwork sort of way. There is an overwhelming need for co-ordination of transport in this country, and if you must save certain services which cannot quite maintain themselves, then, with a well co-ordinated system, the paying service ought to be used to help the one that is not paying.

I ask the Chancellor another question. I believe that there is in being a Transport Advisory Committee. Were they consulted about this? Have their views been invited at all? We have a Tariff Advisory Committee. If we asked them to put taxes on, they would tell us, and we should of course subserviently obey, but in this case I wonder if this Committee has been consulted in any way whatsoever. Another argument against the proposal is that, where the Diesel engine is now in existence, it is bound to mean an increase in the cost of fares. I know that travel in many parts of the country is vastly cheapened because of the coming of the motor omnibus and the motor car. I think it is a little unjust to be putting another piece of indirect taxation again upon the travelling poor, who have to use this form of transport because they cannot afford the more expensive type. Therefore, I am sorry that I must feel somewhat critical of this proposal. I am not sure that the Chancellor will not find that, before he is very much older, a very deep resentment against the incidence of this change.

I sum up very briefly what I have to say about the Budget statement. The right hon. Gentleman rejoiced in trade recovery. So far as trade recovery is manifest in the country, we can all un-feignedly rejoice; none of us ought to be churlish about that; we all ought to be glad wherever there is a sign of improvement. But there are still hampering restrictions upon trade, and I am not sure that this country can ever expect complete restoration to prosperity until those barriers against international trade have been utterly and absolutely removed. Behind this picture of prospective prosperity is the grim spectre of unemployment. Two millions of our fellow subjects seem to be condemned, as far as I can see, to perpetual unemployment. What is done for these people in this Budget? The Chancellor of the Exchequer said that the time of need for curtailment of programmes is past. Where is there in this Budget any provision for any advance by way of programmes? Where is there any suggestion of a go-ahead policy by way of providing employment for our people?

I must ask once more what message of hope is there in this Budget for areas like my own and those of several hon. Friends of mine—those depressed areas which have contributed so substantially to the strength and stability of this State in the past, but are now enveloped in the shadows of depression? You have advertised from end to end that you are sending commissioners here, there and everywhere; what do you provide for them? Is there any hope whatsoever for the people in these valleys of depression through the medium of this Budget? Their burdens are grave— the burden of rates, the burden of poverty, the burden of unemployment. All these burdens fall like an avalanche upon the people in these valleys of South Wales and' elsewhere. I say that the Chancellor of the Exchequer has failed in his duty as a Chancellor of the Exchequer by not providing for planning on an adequate scale so as to restore these people to work and health and happiness. As regards the Budget itself, in the first place it is not a balanced Budget in the sense in which the Government ought to use that term. There is in it no policy as to debt burdens. The armaments provision increases, and it ought to be diminished. It aggravates the unjust incidence of unjust taxation, and it fails to remove inequalities of taxation as between the rich and the poor. The concessions so far as they go are welcome, but I venture to say that, the readjustment of the Oil Duties may cause burdens to fall upon the poorer people who travel, and upon the poorer local authorities that provide these vehicles. Lastly, but not least, it fails to provide any hope whatsoever for the areas that for so long have suffered depression in recent years. The right hon. Gentleman told us last year that he was passing from "Bleak House" to "Great Expectations." I have wondered what we shall find in "The Old Curiosity Shop" this time. We obtained nothing for the poor by way of "Great Expectations," and now they can anticipate nothing but "Hard Times." They are doomed to live for 12 months more in the "Bleak House" of unemployment, and, while the winds of adversity whistle round their homesteads, the Chancellor of the Exchequer has no word of comfort to give them.

4.20 p.m.

Sir HERBERT SAMUEL

The hon. Member for Caerphilly (Mr. Morgan Jones) has referred to the satisfaction which was felt yesterday in all quarters of the House with regard to the favourable factors in the national situation to which the Chancellor of the Exchequer referred at the beginning of his Budget statement; and outside the House throughout the country there is a feeling of great satisfaction that there are such favourable factors, and that there is a certain measure of economic recovery. The right hon. Gentleman referred to industrial activity, to the increased production of steel, of rayon, of motors, to the development of building, the growth of exports, the retail trade, and savings. All of these are facts, and they are all most welcome. But there was a certain discrepancy, I thought, between the beginning of his speech and the end. If the conditions are so favourable, if all is going so happily, how is it that the outcome of the Budget is such small and sparse favours for the taxpayers in general? His speech began fortissimo; it, ended piano.

The reason is that, in the survey at the beginning of his speech, he omitted, and I do not think he ought to have omitted, one of the most important and conspicuous of all the features in our present economic situation, namely, the number of people who are unemployed. When he spoke at that Box a year ago, the then latest official figures showed that there were 2,201,000 on the registers as unemployed. When he spoke yesterday, the official figures showed that there were 2,153,000. In spite of all this improvement to which he has referred, the figures of the unemployment register have gone down only by 48,000. For every 100 unemployed workers a year ago, there are 98 workers unemployed to-day. That is a fact which has a profound bearing upon our Budget, for not only does it involve so much misery to all these people, but it also means an immensely heavy burden upon the State.

When the right hon. Gentleman referred to the progress made in such industries as steel and motors, some of us had different feelings in our minds—we who represent constituencies which depend for their welfare upon cotton or upon coal. Again, when the right hon. Gentleman spoke of the increase of exports last year, amounting to £30,000,000, there was a general feeling of pleasure and satisfaction. Everyone thought that £30,000,000 was a good round sum. To the public at large it seems a vast expansion of trade. Let it be remembered, however, that in the three years from the beginning of the depression, from 1929 to 1932, this country lost in exports £364,000,000 of trade. In the short period of three years, our export trade was precisely halved we lost £364,000,000, and we retained only £365,000,000. In the following year, 1933, the figures were practically stationary. Last year there was this increase of £30,000,000, but it would take us 12 years at this rate to get back even to where we were in 1929. We should not be there until the year 1947. And the year 1929 is not really a year to be taken as a standard of prosperity.

The right hon. Gentleman spoke yesterday of returning to prosperity, and spoke of that period as though it were one in which we could take complete satisfaction. But, after all, we had 1,000,000 unemployed then, and the problem of unemployment was regarded as a most urgent and grave one. Moreover, with regard to those who are not unemployed, we can never consider that this country is really prosperous while there are so many millions of our people who are living at a standard of life below what is really proper in any civilised country. Therefore, all that can be said to-day with regard to our economic condition is that we are very definitely above the worst, but we are still a long way below the best, and that best, after all, was not so very good. The hon. Member for Caerphilly spoke of the Chancellor's reference to "Great Expectations." Some of us did not quite agree with him last year when he said that we had left "Bleak House," and had entered upon the first chapter of "Great Expectations." It reminded me of an Irish Nationalist Member who in previous Parliaments used to sit on these benches. He was asked, after Homewhich we could take complete satisfaction. But, after all, we had 1,000,000 unemployed then, and the problem of unemployment was regarded as a most urgent and grave one. Moreover, with regard to those who are not unemployed, we can never consider that this country is really prosperous while there are so many millions of our people who are living at a standard of life below what is really proper in any civilised country. Therefore, all that can be said to-day with regard to our economic condition is that we are very definitely above the worst, but we are still a long way below the best, and that best, after all, was not so very good. The hon. Member for Caerphilly spoke of the Chancellor's reference to "Great Expectations." Some of us did not quite agree with him last year when he said that we had left "Bleak House," and had entered upon the first chapter of "Great Expectations." It reminded me of an Irish Nationalist Member who in previous Parliaments used to sit on these benches. He was asked, after Home Rule had been established for some little time, whether the result had come up to his expectations. He said, "Well, I must confess that it has not, but then I never expected it would."

There are other omissions from the right hon. Gentleman's statement. After all, one of the most striking events in the financial history of the last 12 months has been the sudden, and to many people unexpected, fall in the value of the pound sterling. In the last year it has depreciated by no less than 12 per cent. I make that statement on the authority of Mr. Lionel Robbins in an article in "Lloyd's Bank Review," who has carefully collated the figures, and states that there has been a fall of over 12 per cent. in the value of the pound in a single year. [HoN. MEMBERS: "In gold?"] Yes, in the gold value of the pound. Perhaps I should have said that, but I thought it was obvious. That, of course, has a. considerable bearing on our trade situation. There has recently been a spurt in exports and a drop in imports, and that is attributed to many causes, but few of those whose references to the matter I have seen have related it in any degree to the fall in the value of the pound.

If other nations experience a depreciation of their currency, hon. Members in this House, and all those who are interested in industry, instantly say, "Look what has happened in Japan; look what has happened in Belgium. This is a very serious matter for our trade. The yen has fallen by 50 or 60 per cent., and the Japanese are able to sweep up our trade in many of the markets of the world through their depreciated currency. It is a very grave matter for British trade; what are the Government going to do about it?" When the Belgian currency was devalued a few weeks ago, there were many questions in this House on behalf of the brick industry and on behalf of the steel industry, asking what the Government were going to do in the matter, seeing that the depreciation of the belga greatly stimulates Belgian exports to the disadvantage of British exports. But when the pound depreciates by no less than 12 per cent., that is to say, by 2s. 6d., or one-eighth, no one, especially among Protectionist Members, ever refers to it. If exports go up and imports go down, which, as every economist knows, is a consequence of depreciation of currency, they choose to attribute it entirely to tariffs or some other factor of that kind. I protest against the Chancellor of the Exchequer also on almost every occasion upon which he refers to this, insisting upon relating such movements of trade to tariffs and hardly ever referring to the depreciation of the pound. Occasionally, it is true, in perhaps unwitting moments of candour, he does bring the two together, and in this House on the 22nd March, 1933, two years ago, he said: It is perfectly true that, owing to the imposition of tariffs and the depreciation of the pound, a number of industries have very much improved their position and are now employing a good many more people than they did before. —[OFFICIAL REPORT, 22nd March, 1933; col. 387, Vol. 276.]

But as a rule he ignores this factor, and yet it is a prime factor in all these trade movements, for obviously an industrialist who has in effect a bounty of 2s. 6d. in the pound on the export of his goods, is receiving a great stimulus. It is helpful to his trade. It is, of course, a temporary stimulus and an unwholesome state of things, and this recent little increase in exports, if it is to be attributed to that cause—and all these matters are extremely complicated, and it is difficult to disentangle one point from the rest, but no doubt they must have had some part in it—is not be to regarded as healthy. Nothing could be worse for the trade of the whole world than any kind of competitive depreciation of currency, Japan depreciating the yen, the United States the dollar, the Belgians the belga, and the British the pound, all of them causing confusion and uncertainty in trade. It is, as every economist and financier knows, one of the prime reasons for the low level at which the trade of the world still continues. I was sorry that the right hon. Gentleman in his survey made no reference at all to this important factor. I could have wished that he had, at all events, expressed a desire to secure a measure of stabilisation of the currencies, and that he had told us that some form of conference was contemplated with the United States, on whom, of course, fully as much as with ourselves, the decision rests, and with France, so as to prepare a way for a measure for the international stabilisation of currencies.

Nothing was said again by the Chancellor of the Exchequer with regard to the policy of national development which we on these benches have been urging so persistently for several years past. It appears now that public opinion is coming round to a policy of national development. It is distinguishing between that and relief work. The right hon. Gentleman said nothing on that head yesterday. Perhaps he is awaiting his interview with my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) which is to take place on Thursday, but meanwhile he apparently attaches so little importance to it that it was unworthy even of reference in his Budget statement. The only passing allusion which he made was a reference to a five-year programme for the roads, which, he said, was now practicable since the severe restrictions in the interests of economy were no longer so necessary as they have been. That was merely a few words of sympathy introducing his reference to the fact that he was going to sweep away the whole of the balance in the hands of the Ministry of Transport, and his words of sympathy were the kind of sympathy of "the walrus and the carpenter" towards the oysters. The whole of that £7,000,000 balance has been swept away, and yet, if the Government were really in earnest about a policy of national development, surely the roads must form a leading feature in it. It is years ago now since a Royal Commission, appointed by the late Conservative Government and presided over by Sir Arthur Griffith-Boscawen, after a most careful examination, recommended a very large expenditure in many directions for the improvement of our roads and for increasing their safety.

Then, again, the right hon. Gentleman said nothing with regard to the depressed areas. The £2,000,000 already voted seems to be the sum of the Government's contemplated assistance in that regard, and he said nothing on the very important matter to which my hon. Friend the Member for Caerphilly has just referred—the household means test. I am convinced that that system cannot stand as it is now, and that the people will not tolerate it. There must be a radical amendment of that means test, and to secure that some further financial assistance will be necessary. It is true that the right hon. Gentleman mentioned that further claims would come forward in the course of the year for beet-sugar, the cattle subsidy and unemployment assistance, and, while he hoped that there might be savings under other heads to be devoted to that purpose, he made provision to the extent of £4,000,000 against future needs for supplementary sums. But last year the Supplementary Estimates required were not £4,000,000 but £18,000,000, and last year provision was made for £7,500,000. Although there was such a provision, it was found that the Supplementary Estimates exceeded that sum by £11,000,000. What are we to think of the accounts for the present financial year, when only £4,000,000 is provided against the claims for beet, cattle and unemployment assistance, besides any unforeseen contingencies that may arise?

The right hon. Gentleman has a very expensive colleague in the Minister of Agriculture. Every few months a fresh claim is made by him. He is the deity who presides over agriculture, and he visits agriculture as Jupiter visited Danae in a shower of gold. The most expensive of all these subsidies, of course, is that for beet-sugar. I am afraid that on many former occasions I have worried the House with the pertinacity with which I have pursued this subject, but since the majority report of the committee appointed by the Government was issued I feel that that pertinacity has been fully justified. For that committee reports in definite, clear cut terms that this expenditure has been wholly unjustified, and that the results which have been achieved— and, of course, results have been achieved— are quite inadequate to warrant the cost, and they suggest that this experiment has failed in its purpose to create a self-supporting industry and should now be brought to an end. It has already cost the country, in subsidy and in rebate of taxation, a total of £47,000,000, and the provision that has been made for this year will soon carry that figure above the £50,000,000 mark. We should like to press the Government to say how long this expenditure is to continue. It is now running at the rate of £20,000 a day. Every day that passes, the British taxpayer, in one form or another, has to find £20,000 for the satisfaction of maintaining the beet-sugar industry.

In 1932, when some of us were Members of the Government, the Chancellor of the Exchequer promised in his Budget speech that a committee of inquiry would be appointed to report on the whole matter and give guidance to the Government, but two years went by and that committee was not appointed. At last, after that long delay, the promise was fulfilled, and the third year elapsed while the committee was investigating and reporting. During those three years, from the moment that the committee ought to have been appointed, until the moment when it reported, £17,000,000 of taxpayers' money has been spent upon this industry, which has been declared by an impartial inquiry, to be unjustified and unnecessary. But we cannot absolve the present Chancellor of the Exchequer from some measure of personal responsibility for that long delay, which has resulted in a large part of this unnecessary expenditure of £17,000,000. I would like to ask the Government what action they are going to take upon this report? If the report had been the other way and it had been in favour of the continuance of the subsidy, hon. Members opposite who favour it would say to me, "Now you have your answer, and for evermore be silent." But since the report is in favour of my contention and against theirs, I have no doubt that they will find every possible means to avoid its conclusions, like the story of the trade unionist who, after a Labour dispute said: "Call this arbitration? Why, he has given it against us."

How is it that the outcome of the year's finances in the form of benefits to the taxpayer have not been greater than what the Chancellor of the Exchequer yesterday was able to present? Partly because of the continuance of the immense cost of unemployment, over £70,000,000 a year to the State, besides the great charge to employers and employed; partly because the revival of trade has been very slow and somewhat partial; but partly also because of the enormous increase in the cost of the Supply Services. No less than £25,000,000 more, according to the White Paper presented yesterday, is to be provided for the Supply Services this year than was necessary last year. Of that, £l0,500,000 is for armaments, and, however necessary that may be in the present international situation, the trouble is that the international situation should be as we now find it. This House can take no satisfaction in a state of the world in which we are told that it is imperative for the very safety of the State and of the country that this vast increase should be made this year, with the prospect of further increases, similar or possibly greater, to be continued next year and in the following years. It is obviously due, on the face of it, to the failure of the statesmen of the world to achieve the objects which they have all set before themselves of securing disarmament and guarantees of peace. When, as a Parliament, we survey the national accounts of the year, we must regard this item of £10,500,000, however necessary we may find it to vote it at this moment and in circumstances as we find them, as the very worst feature in the accounts of the present year and most ominous for the finances of the future.

But in broad outline we find, first of all, in this Budget, no provision for any Sinking Fund in the Estimates for the following year. Last year in his Budget speech, the Chancellor of the Exchequer, dealing with this matter, said I came to the conclusion that it would not be unreasonable to proceed on the old Lines"— that is, not making the statutory provision for sinking fund— for one more year. He proceeded to say: I hope that the Committee will note my warning that assuredly a larger provision will have to be made in future financial periods."—[OFFICIAL. REPORT, 17th April, 1934;col. 912, Vol. 288.] Those were brave words spoken according to the best tradition of sound finance, and yet those words have not been carried into effect in the Estimates of this year, and once more there is no provision made for a Sinking Fund, nor has the right hon. Gentleman said anything with regard to the American Debt. And there I find myself very generally in agreement with what has been said above the Gangway by my hon. Friend the Member for Caerphilly, and it is a matter to which I referred in my speech on the Budget last year. I regret also that the right hon. Gentleman has not found it possible to do anything in connection with the Income Tax on moneys placed by industrial companies to reserve. It is a subject again, to which some of us have referred repeatedly in previous years. It is surrounded by technical difficulties, and yet I believe that a real effort should be made to overcome these difficulties in order to give an inducement to industry to put back into its businesses, at all events an adequate portion of the profits of each year. With regard to heavy oil, I have no doubt that some of my hon. Friends will speak on that subject, and therefore I will not do so to-day.

As to the beneficiaries whom the right hon. Gentleman is choosing for receiving such favours as he is able to distribute, I think that there is a general feeling in all quarters of the House that his choice has been right. He has selected those classes of the community which are most entitled, which have the strongest claim, to receive benefit in the present circumstances. The servants of the State are to have the remaining half of their cuts restored. That is quite right, because they have suffered more than any other part of the population from the effects of the crisis of 1931. They have had a heavier burden than anyone else merely for the reason that they are servants of the State. That is the only thing that differentiates them from the rest of the population, and, therefore, they have had heavy reductions in their incomes, while the rest of the population have only had to bear a somewhat heavier burden of taxation. We are very glad to think that the soldiers and sailors, the police, and the teachers should have their pay restored and that also their remuneration is restored to other meritorious classes, such as Judges, Ministers, and Members of Parliament.

Secondly, the allowances under Income Tax, which were greatly reduced in 1931 to those in the lower ranges of the scale of taxpayers, are now to be to some extent restored, but by no means wholly. Far from it. These classes undoubtedly have a very strong claim, and last year I ventured from these benches, with some of my hon. Friends, very strongly to urge their claim and to suggest that if it could not be met last year, it should have first place this year. We are very glad that the right hon. Gentleman has gone some way to meet that claim, which was addressed to him indeed from all quarters of the House. As I say, by no means full restoration has been made. For example, the right hon. Gentleman gave the case of a man with £500 earned income and three children. He said he was now paying £15 and that his tax would be reduced to £6, but before 1931 he was paying only £3. Therefore, he is still paying twice as much now as he was then. Similarly, a taxpayer with £750 earned income and three children was paying £24 before 1931, and now, after the right hon. Gentleman's concessions, he will still be called upon to pay £42, or nearly twice as much as he was paying before. The Entertainments Duty revision again is generally welcomed, and I think that with regard to all three of these measures of relief there is pretty nearly complete unanimity, both in this Committee and outside.

Let me, lastly, refer to the manner in which my right hon. Friend the Chancellor of the Exchequer is providing the funds, or, I may say, not providing the funds, to meet these three concessions. The tax allowances are costing £10,000,0130 in a full year, the restoration of the cuts £5,500,000, and the Entertainments Duty concession £2,750,000, a total of £18,000,000, but the right hon. Gentleman says, "It is not necessary for me to find £18,000,000, because this is not a full year, and in the present year I have to find only £10,500,000." But what is to happen to the other £7,500,000 next year and in the years to follow? No provision is made, and no indication is given. Nothing is set aside for that additional £7,500,000 which must be found by the Chancellor of the Exchequer next year and the years afterwards.

Then, with regard to the £10,500,000 which he has to find this year, how is that provided? Of that sum, £7,000,000 comes from the balance in the Road Fund. When I was speaking yesterday, having only just heard the right hon. Gentleman speak and saying a few words of congratulation on his Budget statement, I thought the sum that was taken was £4,500,000 and that the other was repayment of debt, but I find that the £2,500,000 is also swept into the year's revenue, regarded as income, and used to meet these new expenditures and reliefs; so that out of the £18,000,000 which these concessions are costing, £7,500,000 is postponed till next year and another £7,000,000 is provided by taking a capital sum lying in the Road Fund, which is a sum that can be taken once and for all, not an annual income, and which will not be found again next year or in the following years. Therefore, the Chancellor of the Exchequer in following years will have to find no less than £15,000,000 not provided in the present Budget in order to meet the expenditure which will devolve upon him of a sum of £18,000,000. As to the effect upon the roads, of course, if this sum was there, it would be used for the roads. The right hon. Gentleman has swept it away.

The hon. Member for Caerphilly spoke about Dick Turpin. This is very different, for, after all, Dick Turpin only stole from passengers on the highways, but the right hon. Gentleman is stealing the highways from the passengers. With regard to the provision that is to be made next year for the full £18,000,000, the right hon. Gentleman is simply waiting for something to turn up. He has raided the Road Fund, and he has made no provision for the requirements of a full year. The right hon. Gentleman has always been regarded as one of the champions of stern, sound finance. This is certainly not an example of it. He will have, however, the approval in this matter of, at all events, two exponents of finance. One is the right hon. Gentleman the Member for Epping (Mr. Churchill), and the other is Mr. Micawber.

The House will pass this Budget, with its faults and its deficiencies, grateful for what the taxpayers are receiving, regretting what must necessarily be withheld from them. We cannot but feel a grave responsibility in continuing year after year to lay upon the nation these enormous charges of over £730,000,000. Each year we take from the nation more than the whole amount of the capital Debt charge before the War. Every year we have to find for annual outgoings more than our fathers contemplated with dismay as being an enormous sum resting upon the nation as a National Debt. We can only hope that the conditions at home and abroad will in course of time have so modified, both political and economic conditions, that the day may come when we shall be able both to lighten this immense burden and to strengthen the national resources which support it.

4.53 p.m.

Major HILLS

The right hon. Member for Darwen (Sir H. Samuel), who has just spoken, has said several things on which I wish to comment. First of all, I am going to ask whether I heard him aright to say that he favoured the complete freeing of companies' reserves from Income Tax. It is a matter that I have always contended for, and I did not know the right hon. Gentleman was of the same opinion. I welcome him to the cause, and I hope that in the end we shall win a victory, if not complete, at any rate partial. The right hon. Gentleman before that criticised the Defence Estimates. He was very careful to say that they might be necessary in the circumstances, and then he went on to use a phrase which I think he will regret when he reads it. He said that the £10,500,000 increase in the Defence Estimates was the very worst feature in the Budget. How can it be the worst feature if it be necessary? Both those statements cannot be true, and the right hon. Gentleman knows very well what is the explanation of that £10,500,000, and that if we are to have defence forces, they must be modernised and up-to-date.

The right hon. Gentleman is entitled to crow over the beet-sugar report, but I have never yet heard any means to help agriculture which have not been attacked by the right hon. Gentleman, and I might also point out that, when he talked of the £17,000,000 expenditure from 1932 to 1934 as being a loss, he knows very well that it has saved many a farmer from bankruptcy. I express no opinion on that subject. We had a Debate here a short time ago, and I think the general view was that a subsidy of that sort required at any rate revision. It is not for me to say what form that revision will take, because that is a matter which the Government must consider.

Now I come to a point on which I want to join issue with the right hon. Gentleman even more distinctly. He said that the pound sterling had fallen by 12½ per cent. But has it? In what terms does he measure the fall in the pound? We do, not buy gold with our pound sterling. We buy the commodities that we want, and what is the bearing of the fall of the pound on gold value when the purchasing power of sterling has maintained itself, I think, with very great stability?

Sir H. SAMUEL

I was speaking entirely of international trade, and I think I made it clear, and obviously, in competition all over the world between ourselves and countries that remain on the gold standard, the fall in the pound makes a great difference.

Major HILLS

I agree. It is not a permanent advantage intentionally to depreciate your currency in order to gain an advantage in your export trade. I agree with that, and in fact the value of a depreciated currency to a country has often been very much over-stated. In the long run it means that you buy dear and sell cheap. But I want to point out to the right hon. Gentleman that what is happening is not a depreciation in sterling; it is an increase in the value of money in the gold countries and, therefore, a cheapening of all commodities. That is a very bad thing, and if it goes much further, it will bring those countries off the gold standard. That is perfectly certain. A man connected with the exchange market—one of the wisest men, I think, in the exchange market in London—said the other day that if the franc went as low as 67 to the pound, France would be off gold. The fall of prices in the gold countries is forcing up the value of their currency compared with sterling. I do not want to make any extravagant suggestion, but I think the right hon. Gentleman will see before very long, however, the devaluation of the Dutch currency, and, if that happens, it must be followed by the French and Swiss currencies. More important than exchange rates is continuity of value and purchasing power, and that sterling possesses to a greater extent than any currency in the world. The right hon. Gentleman complimented the Chancellor of the Exchequer on the restoration of the children's allowances. I join in that congratulation. I am not sure that we have really got the right end of the stick in these children's allowances. I am not sure that the adjustment ought not to be the other way, and that the allowances ought not to be £50 for the first child, £100 for the second and £200 for the third. That would be a real stimulus to overcoming the fall in the birth rate, and I hope the Chancellor of the Exchequer will give it his very careful consideration.

On the whole, what the right hon. Gentleman said was that the Chancellor of the Exchequer had over-stated the prosperity of the country, or, if he was right in putting it so high, he ought to have given us more in relief of taxation. The right hon. Gentleman surely knows where the money goes. It does not all go to the Army, the Navy and the Air Force, and it is very hard to find any sort of expenditure which can be cut down. These figures speak for themselves. I shall have something to say on two questions on which the right hon. Gentleman laid great stress— unemployment and the depressed areas. I do not know whether the right hon. Gentleman the Member for Darwen could have made a different Budget had he been sitting at that Box, and I am not sure that the hon. Member for Caerphilly would have made a different Budget. I have heard many attacks on different Chancellors of the Exchequer, but these are very mild attacks on the Budget and very favourable criticisms. The Chancellor of the Exchequer said last year that we had passed "Bleak House" and were opening a page of "Great Expectations" I am not sure that when he sits down to tea he will not hear a knock on the door and see the right hon. Gentleman the Member for Darwen and the hon. Member for Caerphilly come in and ask him to join with them in turning over the pages of "Our Mutual Friend"

Now one word about the speech of the hon. Member for Caerphilly. He amazed me by saying that it was wrong not to make an allowance for the American Debt and that that amounted to unilateral repudiation. Unilateral means one-sided and without the consent of the other party, and the Chancellor of the Exchequer has the statement of the President of the United States that our action is not repudiation. I am certain that the hon. Member for Caerphilly does not want to load the American Debt round our necks again. The point on which he attacked the Chancellor of the Exchequer was that the working-classes paid an undue share of taxation. It is always very hard to trace the incidence of any special tax. An indirect tax is not always paid by the person who consumes the goods, nor is a direct tax always borne by the person who pays it. It may not fall on him in all cases. Surely the figures all point to the increased prosperity of the small investor who puts his money into the Trustee Savings Bank or the National Savings Bank or the building societies—all these show large increases, and I think also, although I am not certain of this, that there is very large increase in National Saving Certificates. These do not look like an impoverished democracy, and I hope the hon. Member for Caerphilly will bear that in mind.

The Chancellor of the Exchequer has managed to produce a popular and fair Budget. He has had a very good Press, and a very good reception in this House, and he can congratulate himself. The Income. Tax allowances will help the smaller taxpayer and increase his purchasing power. I am not sure that the Budget will help industry as much as I should like to see industry helped. Take the increased taxation on heavy oil as an example. I do ask the Chancellor of the Exchequer to say whether he thinks it is fair suddenly to multiply the duty by eight. From a duty of Id. per gallon it is now raised to 8d. a gallon. Is he quite sure that he is not taxing efficiency a point to which I shall refer if I have the opportunity in later stages of the Budget discussions. The tax on light hydrocarbon oils at present stands at 8d. a gallon, the same as the tax on petrol. The reason given for the taxation of turpentine and white spirit is that you cannot discriminate between a light hydrocarbon industrial oil and a light oil that is used in transport; that you cannot exempt the industrial oil used in the paint and varnish business without the fear of some evasion of the Petrol Duty. May I point out to the Chancellor of the Exchequer that on the heavy oils he is making that very same exemption? The duty on heavy oil is 8d. a gallon for oil used in road transport, and only ld. a gallon on heavy oil used industrially. I am told that the discrimination of the different classes of oil used either for transport or for industry is far harder to make in the case of the heavy than in the case of the light oil. I hope that at some time the Chancellor of the Exchequer will consider that. It is a small point, but I thought I might be allowed to raise it now.

I agree with what the hon. Member for Caerphilly and the right hon. Gentleman the Member for Darwen said, that we can never afford to disregard unemployment; 2,000,000 unemployed are far too many, and I should like to see more done in this Budget to help employment. I agree so far with these two hon. Gentlemen, but I do not think they will agree with me in my solution. I believe that the best remedy for unemployment, the best means of increasing employment, would be 6d. off Income Tax. That would be a stimulus that nothing else could give. I know my hon. Friends opposite will not agree with that. Sixpence off the Income Tax would have given a tremendous impetus to industry, and after all it is by reviving industry in the present constitution of society that men can be put to work. How could this be done? I am quite unorthodox and open to the strictures of the Chancellor of the Exchequer. Suppose he had not put this £20,000,000 surplus of 1934 to Debt— it sinks in that unfathomable sea, and it does not help anybody very much. I do not think that the right hon. Gentleman opposite thinks that £20, 1300,000 off Debt would really keep up the price of Government securities and help Government conversions. It is too small an amount for that. There is no doubt that the position for conversion is not unfavourable. Suppose instead of that, the Chancellor of the Exchequer had carried forward that £20,000,000 and taken it off taxation. On, the general statement "off taxation" I shall carry with me the assent of hon. Members opposite, because they would like it taken off, perhaps, beer, tobacco, tea, or whisky. I should like to have seen that sum carried forward, and it could be done by a Clause in the Finance Bill, and 6d. taken off the Income Tax. I believe that would have given a tremendous stimulus to industry, and I am fortified in asking for that, and I am going to make it rather less unreasonable, by pointing out that it is possible that the Chancellor of the Exchequer in his present calculations is under-estimating revenue. I agree with the right hon. Gentleman opposite that Income Tax and Surtax can show largely increased yields than the, Chancellor of the Exchequer allows for.

Sir H. SAMUEL

I did not say that.

Major HILLS

I beg your pardon. I am really meeting the criticism of the hon. Member for Caerphilly. Part of the revenue used for these concessions this year is non-recurring revenue. I think when the accounts are balanced we shall find a large increase in the ordinary revenue of the country. If I am right, the Chancellor of the Exchequer will have a substantial surplus in. 1936. If he likes to pay it off Debt, then well and good; but there is a time and a season for all these things. At certain times it may pay to pay off Debt, but I do not think that it does now. I think you can use the money better to stimulate industry, and I think that 6d. off the Income Tax would have been an enormous stimulus.

5.15 p.m.

Mr. TINKER

I congratulate the right hon. Gentleman on his last Budget. [HON. MEMBERS: "Last Budget!"] Well, it all depends on how it is taken in the country. Perhaps the Financial Secretary to the Treasury will say whether or not it is to be his last Budget. We on this side of the House cannot view the Budget with the satisfaction that has been expressed by hon. Members opposite, because we realise that what are called the very poor have not received much benefit from it. What of the low wage earner and the men in the mine, who cannot earn more than £2 a week? It is no benefit to them. What of the unemployed man? There is no benefit for him in the Budget. For those on transitional payment there has been no removal of what we call the means test. One would. have thought that in the restoration of the cuts the Treasury would have sought to put everybody on the same footing from which they started in 1931. One would have thought that we should have been put back into the same position that we occupied in 1931 and that therefore the means test would have been removed. The means test was put on in that period, and I understood that it was imposed for the purpose of trying to bring financial stability to the country. Therefore, it would have been right to have removed it and to have allowed all to be placed on a fair footing.

I want to deal with one particular point and that is the position of the old age pensioners. In my experience in going round my constituency I have been met with the question from aged people "Do you think that anything will be done for us in the forthcoming Budget" Let us consider the position of these poor people. Yesterday the Chancellor of the Exchequer felt some concern about the fall in the population. I can understand that, because when the population begins to decrease, the population being the real wealth of the country, some concern must be paid to it. Where do the big families come from? They come largely from the working classes. They rear large families, and I want to give some idea of what is happening. They bring into the world large families and it takes all their energy, all their wages to keep anything like a firm footing. When those children reach maturity they leave their parents, marry and fulfil their destiny by bringing children into the world for the benefit of the nation. Their parents have had no chance of saving money, and when they reach the age of 65 they are driven to the old age pension. There are scores and hundreds of families in every constituency where in the household they have only one pound per week income, that is, the 10s.pension for the wife and husband. We know the desire of every family to have a house of their own. It is one of the great desires of our people. They have houses of their own and they try to keep them going. Another desire of our people is to keep out of debt and to pay the rent of their houses. If we take a moderate estimate, a rental of from 6s. to 8s. for the smallest house has to be taken from the income of £1 a week. That leaves from 12s. to 14s. a week for all the necessaries of life. In hundreds of cases I am told how difficult it is to live in these circumstances. This is no mere tale I am telling.

On the 10th April my hon. Friend the Member for Ince (Mr. G. Macdonald) put a question to the Minister of Health asking the position of the old age pensioners the number of persons over 65 years of age on public assistance who are also in receipt of old age pensions under the Old Age Pensions Acts, 1908 to 1925, or pensions under the Widows', Orphans', and Old Age Contributory Pensions Acts? The reply was: The total number of persons over 65 years of age in receipt of poor relief in England and Wales on 1st January, 1935, who were also in receipt of pensions under the enactments mentioned, was 201,729."—[OFFICIAL REPORT, 10th April, 1935; col. 1150, Vol. 300.] Those are the very poor of our land, the people whom the Chancellor of the Exchequer must have had in mind when he spoke about families and the need of a greater population. That is where the large families come from. The middle class and the rich class never have large families, probably because they realise what it would mean and what it would cost to make provision for them. At any rate, they never have large families. The large families come from the working classes. They rear these large families and when they get to the age of 65 and obtain the £1 a week pension for man and wife they find that it is not sufficient and they have to go to the Poor Law for help. Can hon. Members view with any degree of satisfaction that state of things?

The right hon. and gallant Member for Ripon (Major Hills) spoke about the need for a reduction of the income tax. He knows our feeling in regard to that matter. We cannot support any idea of that sort while there are so many poor in the country. I put a question last week asking what would be the cost of giving to those in receipt of old age pensions an increase of 5s. per week, to those in receipt of widows' pensions another 5s., and to those in receipt of contributory pensions, which is different from the old age pension, 5s. extra. The answer that I received was:

	£
Old age pension (including blind persons pensions) under the old Age pension Acts, 1980–1924	21,800,000
Contributory pensions to persons between the age of 65 and 70	9,600,00
Widows' Pension	10,100,000
	£41,500,000

[OFFICIAL REPORT, 15th April, 1935; col. 1614, Vol. 300.]

A pretty stiff figure, I admit, but if this money were given to those people it would be spent on useful things. The Chancellor of the Exchequer yesterday spoke with some pride about the increase of consuming power, of 80,000 tons more sugar and 6,500,000 lbs. more tobacco being used than in the preceding year, of the increased savings, the greater amount spent in entertainment, tea and beer. If we could give to these poor people something on the lines that I have indicated it would be only raising the status of the poor to more like a living level, and every penny of that money would be spent. Therefore, we should have more trade. We certainly need more consuming power in order that business may go round better than to-day. I would ask the right hon. Gentleman and the Committee to realise the lives of these poor people. Unless one raises the point to-day they will be forgotten until the next time and then they will be passed over again. Therefore, I desired to raise the question now although I know that we can do nothing with it day. The Budget has been settled. Whatever we say in regard to it it will go on very much on the same lines that were laid down by the Chancellor of the Exchequer yesterday. I am, however, raising my plea in the hope that the right hon. Gentleman may have his sympathies aroused and that the sympathies of other hon. Members may also be aroused and that when the next Budget comes along something will be done on the lines that I have mentioned.

There is one further point that I ought to mention, and that is that on these occasions we are accustomed to have a speech from an hon. Member who makes a good contribution to the debate, I refer to the hon. Member for Farnham (Sir A. M. Samuel) who I believe is in hospital. He has my sympathy and I am sure he has the sympathy of the whole House. On these occasions he speaks with great experience of the financial position of the country, although we generally get cross with him because, like my hon. and gallant Friend opposite, he always speaks about a reduction of the income tax and suggests that it would be better for trade. I do not agree with that. It would be much better to work in the direction that I have indicated arid to give people greater spending power than to reduce the income tax. I have never been able to follow the high canons of what is called taxation and finance and to understand that a reduced income tax means an increased volume of trade while an increased income tax means the opposite. Has the reduction of 6d. in the in income tax last year brought about a great increase in the volume of trade? [HON. MEMBERS: "Yes!"] I do not think so. If hon. Members followed the speech of the right hon. Member for Darwen (Sir H. Samuel) they would realise that the number of unemployed has not fallen appreciably. One would have expected that the reduction in the income tax would have brought about a greater volume of employment than has been the case and that we should have had a greater reduction of unemployment by this time. The figures show that that has not been brought about.

Major HILLS

If the hon. Member will look at the figures he will see that there is a very close connection between the standard rate of tax and the number of unemployed.

Mr. TINKER

I can only quote the figures given by the right hon. Gentleman the Member for Darwen, who when he makes a statement on this subject is generally correct. A deputation from various organisations waited on the Prime Minister only last week and pointed out that there was great distress in many areas where unemployment is. Prevalent. Therefore, the reduced income tax has not relieved unemployment to the extent that we had been told to expect. I have no further comment to make on the Budget. The Chancellor of the Exchequer has tried to do the best he could in the circumstances, and I hope that next time he will have some regard to what I have said to-day and will make an attempt to raise the present amount given to the pensioners, thereby giving them greater spending power.

5.29 p.m.

Sir WILLIAM ALLEN

I am very glad to have the opportunity to say a few words on the Budget and its reference to the part of the country from which I come. It is not often that we from Northern Ireland have an opportunity of appearing in the debates in this House. We feel a certain amount of responsibility with regard to our constituents, more particularly as the taxes which are levied in England, Scotland and Wales have also reference to Northern Ireland. With reference to the speech of the hon. Member for Leigh (Mr. Tinker), no doubt he is perfectly justified in his appeal with regard to the working people and the unemployed. I was present last year when the Chancellor of the Exchequer said that he was going to restore all the cuts that were taken from the unemployed, and that statement was received with cheers from all quarters of the House, and more particularly from hon. Members opposite. When we come to a fresh year there are fresh demands, and I do not know that any of us can take exception to such demands.

We must remember that there are others who are entitled to consideration by the Chancellor of the Exchequer, and I wish to thank him most sincerely for the step he has taken in regard to a great many helpless silent sufferers, who have no one to speak for them in this House except perhaps an odd Member of Parliament, no trade union; people whose incomes have been diminished but who have to keep up a certain amount of respectability, the War Loan being reduced from 5 per cent. to ½ per cent., and whose incomes, so far as railway stocks are concerned, have in my part of the country disappeared entirely. The concessions made by the Chancellor of the Exchequer have given them great consolation. I desire specially to thank him for that. There was a time when £100 of stock of one of the principal railways in Northern Ireland stood at £184. For the last few years that £100 stock could have been purchased for £10, and they were trustee securities. The people of an older generation than myself thought they were doing well for their children when they invested that money in these railways. That has gone, largely owing to the demand of the trade unions that railwaymen shall work not longer but shorter hours and that their wages shall be increased. I make no complaint about that, but one of its results is that these people have had their incomes from this railway company taken away, as they have paid no dividend for many years. At last there is a little sunshine brought into their lives. The Chancellor in opening his Budget last year used these words In 1932 many dark clouds still hung round the horizon. In 1933, although the outlook was distinctly brighter, there was no settled feeling that we were about to enjoy a spell of fine weather. To-day the atmosphere is distinctly brighter."—[OFFICIAL REPORT, 17th April, 1934; col. 995, Vol. 288.] After the castigation he has received because of his weather simile for next year, I hope that if he is spared to present another Budget, of a still more favourable character, he will refrain from using such language and relieve himself from the castigation he has received to-day. But, on the whole, those who have spoken against the Budget have done so in a way which is far from offensive, and the rather genial speech of the right hon. Member for Darwen (Sir H. Samuel) will not hurt the Chancellor very much. I cannot understand the argument against the provision for increased expenditure for the Supply Services. The Chancellor of the Exchequer has no responsibility for it further than that he is a Member of the Cabinet, and the real reason why we have to spend so much money on the Supply Services, the Army, Air Force and Navy, is because we have neglected them during the past five years, and have followed a unilateral policy in the depletion of these Services to the detriment of our position as a nation ready to protect itself.

There is a point with regard to Northern Ireland which I should like to put to the Chancellor of the Exchequer. When he comes into contact with the Finance Minister of Northern Ireland, I hope he will not use his powers in a way which will force the Finance Minister to put more taxes on our people than they are able to bear. During the past six months there has been a revaluation of properties in Northern Ireland, and, when the scheme was completed and the increased valuation arrived at the homes of the individuals, they were perfectly astonished at the increase. The Chancellor of the Exchequer either indirectly or directly has made suggestions which will relieve the poorest people of Northern Ireland, but I hope he will not take away with one hand what he has given with the other. That is the trouble in Northern Ireland just now. These people, these helpless sufferers, have had their valuations increased to such an extent that the Chancellor of the Exchequer will reap a harvest next year because of these increases. I understand that financial pressure has been put on the people of Northern Ireland with regard to a levy for educational purposes. That is all right. We do not object to the revaluation of property, but what we do object to is an increase to such an abnormal extent that the people cannot possibly pay.

We are in a different position in Northern Ireland from that of this country, which has resources, businesses, trades, the steel trade, and the coal business, which we have not got in Northern Ireland. Our resources are very small, and, when it comes to forcing additional taxes on Northern Ireland, I hope the Chancellor of the Exchequer and those responsible will remember that our resources are limited. We are prepared to pay our way, as far as we can, for everything that is right for the maintenance of the Empire and the upholding of our position among the nations of the world. We are prepared to tell you that as far as these Services are concerned we are satisfied that the Government are doing the right thing in utilising some of the income of the past year, or which will come from the taxes in the next year, for seeing that the British Empire is in a position to protect itself against any enemy which may attack it.

With regard to old age pensions, I should like to see the age reduced from 70 to 65. That is one of the things which will come in the future, and to some small extent it will help unemployment. It will be for the consideration of future Chancellors of the Exchequer, and I am sure it will be received with acclamation by these poor old people. I congratulate the Chancellor of the Exchequer on his statement and on the prospects for the future. He has struck an optimistic note this year and has been fully justified in so doing. I am sure that it is the hope of every one, no matter what claim we may have individually on certain portions of the national income, that progress will be steady and continuous.

5.24 p.m.

Mr. MABANE

The hon. Member for Armagh (Sir W. Allen) and the hon. Member for Leigh (Mr. Tinker) have referred to old age pensions. I am sure every hon. Member will echo their sentiments that it would be a good thing if old age pensions could be increased or if the age at which they are given could be lowered. Yet it must be borne in mind that between the years 1926 and 1934 the amount expended on old age pensions was almost doubled. In 1926 the amount was £28,000,000 and in 1934 £57,000,000. As the expenditure on old age pensions has increased so much perhaps the hon. Member for Leigh might extend his vision a little so that, while I agree with him that it would be a good thing if old age pensions could be treated in the manner he desires, he would also agree that it would be a good thing if the Income Tax could be reduced by 6d. at the same time.

Mr. TINKER

After we have dealt with everybody else, and if we have money to spare, certainly.

Mr. MABANE

That is a. concession which I value highly, and I hope that the hon. Member will later on join me in an Amendment to reduce the income tax by 6d. Before passing any compliments to the Chancellor of the Exchequer I should like to refer to the comments made by the hon. Member for Caerphilly (Mr. M. Jones) and the right hon. Member for Darwen (Sir H. Samuel). I could not follow the argument of the hon. Member for Caerphilly when he spoke about the repudiation of the Debt, but that point has already been effectively dealt with by the hon. and gallant Member for Ripon (Major Hills). He also deplored the fact that nothing has been done towards debt redemption since the present Chancellor of the Exchequer took office. The hon. Member is surely incorrect. In the last two years alone no less than £59,000,000 has gone in debt redemption. The hon. Member mentioned another point upon which must cross a statistical sword with him. He said the expenditure on the Services in the current year was £50,000,000 more than it was in 1913–14. I must refer him to the statistics, because he will find that the increase is £29,000,000, not £50,000,000, and of that figure no less than £20,000,000 is expended on the Air Force which did not appear at all in the Estimates for 1913–14.

The hon. Member again referred to the balance between indirect and direct taxation. Last year I pointed out that the position as between direct and indirect taxation was that the proportion of indirect to direct taxation had not yet recovered to the figure of 1913–14, which we may take as a normal figure. But in any case what does this proportion between direct and indirect taxation mean? How would he deal with this case? Suppose I suggested that instead of making the concessions proposed this year to income tax-payers which principally benefit those on the lower income levels, the 'Chancellor of the Exchequer had suggested that the tax on the horsepower of motor cars should be reduced by one-half. That would have the effect of altering the relationship of direct and indirect taxation in precisely the way the hon. Member for Caerphilly apparently desires. Would the hon. Member then get up and sing a song of praise because that had been done? Surely it is perfectly easy to show that this relation between direct and indirect taxation is very nearly a meaningless thing. Let me say something with regard to certain comments made by the right hon. Member for Darwen. I observed that he often objects to the use of percentages for statistical comparison.

Mr. MORGAN JONES

The hon. Member has challenged a statement of mine. If he will look at the "Economist" of 22nd March, on page 5 he will find a table which shows that in 1913–14 the total expenditure on the Navy, and Army was £77,179,000. There was then, of course, no Air Estimate. The expenditure for 1935–36 is £124,250,000.

Mr. MABANE

But the hon. Member has included the figure for War pensions in the last total. He has added £18,000,000.

Mr. JONES

The hon. Member is wrong. The £124,250,000 provided this year is for defence expenditure alone.

Mr. MABANE

I have here a total for the three Services of £106,000,000 in the present financial year. If pensions ought properly to be added to that total, then the difference is not £50,000,000 but £47,000,000 and my point still remains that £20,000,000 of that figure was for the Air Force, which it will be agreed was not provided in 1913–14. But I wanted to deal with some figures given by the right hon. Member for Darwen. He spoke of the reduction of exports between certain years. He, quite rightly, I am sure, objects to the misuse of the percentage comparisons. I am sure he will agree that it is better to take the comparative values adjusted to the changing prices, to compare the figures of exports in one year with the figures of another year. If he does that, and consults the figures as set out in the statistical abstract, he will agree that the fall was not as great as that which he indicated, but was, from 1924 to 1930, taking 1924 as a hundred, 80 per cent.; and from 1930 to 1932, taking 1930 as 100, a fall to 83.3 per cent.

Sir H. SAMUEL

I do not agree with the hon. Member's suggestion. The figures I gave were taken from the statistical abstract. I took 1929 because that was the year before the slump, and compared it with 1934. Between 1929, which is the year always taken, and 1934, we have lost half our trade, and although we have lost 50 per cent. we have recovered only about 5 per cent.

Mr. MABANE

I understood the right hon. Gentleman to take gross figures and not figures adjusted to the variation in prices of commodities. Is not that so?

Sir H. SAMUEL

Yes, as given in the statistical abstracts.

Mr. MABANE

If the figures were adjusted to allow for the alteration in values the decline in exports would not be quite as terrifying as the right hon. Gentleman suggests. The adjusted values are important.

Sir H. SAMUEL

Yes.

Mr. MABANE

So the decline is not so great. I am sure that the whole House will echo the congratulations so far passed to the Chancellor of the Exchequer on his Budget proposals. Last year he made certain concessions, but yet in general tone I thought his speech was gloomy. Yesterday he seemed to display a new quality, remarked upon by the right hon. Member for Darwen, who referred to the roystering manner in which the Chancellor opened his speech.

Sir H. SAMUEL

I did not use the word "roystering."

Mr. MABANE

At any rate, when I heard the Chancellor of the Exchequer refer to the 270,000,000 extra pints of beer which had been consumed last year, I thought that my adjective was not particularly inappropriate. But towards the end of his speech the Chancellor receded from his earlier jovial mood. He said: We must recognise that our further progress may be powerfully affected by events over which we may have little control. — [OFFICIAL REPORT, 15th April, 1935; col. 1637; Vol. 300.]

That can be said to be generally true. I should, therefore, like to say again, as I have said in the past, that some of us would like to see the Chancellor of the Exchequer look forward to the future with greater confidence than he does. We on this side are so convinced that he is such an entirely excellent Chancellor of the Exchequer and that this is such an entirely excellent Government, that really there is little ground for worry when we look forward to the future.

In the particular concessions that have been made the country will find great comfort. The restoration of the pay cuts will bring happiness to a great many, and an increase of spending power. The income tax adjustments surely are a very nicely calculated adjustment of very intricate financial machinery. It appears to me that those who have devised this scheme deserve the highest praise for distributing so widely such substantial benefits at such small cost to the State. The method of dealing with the Entertainments Duty so fully and generously has given cause for great satisfaction to those of us who have worked on this subject for years.

So much for the concessions that have been given. When one turns to the manner in which the surplus of £11,025,000, which made the concessions possible, has been contrived, comments cannot be quite so favourable. As I listened to the Chancellor of the Exchequer yesterday, when he was going in curious directions in search of revenue from this and that source, I was reminded of one of the poems of Mr. G. K. Chesterton. Yesterday surely was "The day we went to Birmingham by way of Beachy Head." It appears to me that in the national financial prospects there was staring the Chancellor of the Exchequer in the face a sufficient surplus to make the concessions he did make without reverting to practices which we supposed to belong to the pre-crisis era, practices that we were given to understand had led the country into disaster. That practice is the abstraction of £7,000,000 from the Road Fund, of which £4,470,000 was not in any case owing to the Chancellor of the Exchequer, adding it to the revenue of the year— adding, that is to say, a capital sum to the revenue— and then using it to make concessions that must be continuous.

Instead I really think that those who have, earlier in this Debate, said that the Chancellor has under-estimated revenue and over-estimated expenditure, have ample justification for their arguments. If instead of under-estimating revenue and over-estimating expenditure the Chancellor of the Exchequer had made his estimates a little more boldly, he surely would not have been driven to this expedient, which is at variance with every homily he has ever uttered on the virtue of honest Budgets. I and my right hon. and gallant Friend the Member for Ripon last year said that the Chanceller had under-estimated his revenue and over-estimated expenditure. I make no apology for saying it again. Last year, for example, I suggested that on the basis of the Budget estimates there was in prospect at the end of the financial year a surplus of probably £23,000,000. My right hon. Friend the Member for Ripon supported me in that view. We were dismissed as wild guessers by the Chancellor of the Exchequer; but the strange fact is that that figure has turned out to be right within a £60,000, which I do suggest is at least a remarkable coincidence.

At any rate, I do think that the Chancellor is being a little unjust to some of us when he suggests that we are wild guessers. With the limited information at our disposal we do make the best possible attempt to estimate the revenue and the expenditure, and it may be that because we are not cluttered with trees we are able to see the wood a little better than some officials. It may be that they have such a wealth of financial data at their disposal that they miss the main point. At any rate, the actual realised surplus was £23,060,000, and it is not so bad to get within £60,000 beforehand. That gives us a little more justification for saying that sort of thing again. I do support everything that has been said by my right hon. and gallant Friend the Member for Ripon and by the hon. Member for Caerphilly, in suggesting that the estimates are very conservative and might well have been considerably more favourable. I estimate, and I am prepared again to put my prediction into cold print, that the Chancellor could have estimated in such a way, without taking any undue risk that his total revenue, without taking £4,470,000 from the Road Fund, for £737,500,000, instead of the £734,500,000 of his Budget.

My right hon. Friend suggested that Income Tax is budgeted at a low level. The hon. Member for Caerphilly said that the "Economist" produced figures to show that the increase in industrial profits in 1934 represented an advance of 16.6 per cent. in 1933. Would it have been too much to have estimated the increase in Income Tax yield at 9 per cent.? Yet, so far as we can make out, the increase in Income Tax yield is budgeted at 7 per cent. increase. I think that an estimate more generous by £3,000,000 could have been made there. Surely also Surtax ought not to be at the figure shown in the Estimates. It should be increased, because the year on which the Surtax will be collected this year is definitely better than the year on which Surtax was collected last year, and I am really surprised to find that Surtax is estimated at the figure shown. Why should estate duties be £1,500,000 down? They ought to yield more this year, because the prices of securities are high and there is no reason why they should decline. One other part of the Chancellor's speech surely ought to lead one to the conclusion that the prices of securities must remain high. He is actually envisaging a conversion of the 3 per cent. Local Loans Stock. That means surely that the policy of cheap money is to be continued. That means that the price of securities must remain high. There can therefore be no reason whatever for budgeting a decline in the yield of the estate duties.

On the expenditure side, I would like to refer to one point. The Chancellor has made a provision of £224,000,000 for the interest and management of the National Debt. There is no provision in it, at any rate on the surface, for sinking fund. The right hon. Member for Darwen complained that no allowance had been made for sinking fund. Yet in that £224,000,000 there is hidden a large sum which must go to debt reduction. Last year the actual outlay on interest and management of the National Debt was £211,657,000. The Chancellor told us yesterday that the conversion operations during the year resulted in a saving, in interest, of £1,650,000. That means to say that, other things being equal, the cost of managing the debt would be £210,000,000. The only reason for an increase on that figure is that the rate on Treasury Bills might go up. Last year the Chancellor said it was almost certain that the rate would go up, but he has been disappointed in his pessimism. The rate did not go up but remained at an average of 12s. 6d. throughout the year. Nevertheless, he suggested again yesterday, less confidently, that it might go up. Suppose it did go up, by no less than 80 per cent., the result would only be that the cost of managing the debt instead of being £210,000,000 would be £214,000,000. That clearly shows that in that figure of £224,000,000 there is already provided £10,000,000 which is, in effect, for debt redemption. If money is to be provided for debt redemption I would much rather see it provided honestly and openly as a definite item in the Budget figures. Then we could see definitely where we stood in this respect.

If we make that allowance, we find that the alteration in expenditure makes the final figure £724,000,000 instead of the £733,000,000 budgeted for by the Chancellor. That is to say, he could have provided, after making all the concessions 'and without raiding the Road Fund, a surplus of £13,000,000, How should such surplus be employed Should it be applied to debt redemption or to further tax reduction? I would rather see it used for tax reduction. The Chancellor no doubt would rather see it applied to debt redemption and he will have his way. The result will be that at the end of this year, having taken £4,500,000 from the Road Fund, there will be a surplus of about £17,500,000 all to go to Debt redemption.

I think these continued surpluses are not good. They represent money taken out of the pockets of the taxpayer which would be better in the pockets of the taxpayer. In any case, occurring in the manner they do, one of the principal effects of these surpluses is to encourage the departments in additional expenditure during the year. I wonder if we should have had such a large number of Supplementary Estimates last year if the national finances had not been going so well?

There is one further point on which I should like to touch before I conclude and that is the manner in which the Chancellor, avoiding these obvious methods of revenue, has achieved the principal part of his surplus. He has done so by raiding the Road Fund and has then proceeded to apply capital assets to provide continuing concessions which will further require more money next year than this year—at least another £4,500,000. That sort of practice surely comes badly from my right hon. Friend. It is not the sort of thing that we expect from him after his past speeches—that he should take this £4,500,000 from the Road Fund. The money, we know, will be needed. We know also that it is not likely to be needed this year or next year, but probably in three years' time. We also know that once the money has been taken by the Chancellor it will be difficult for the Minister of Transport to get it back again. Moreover, this raid raises the question of the position of the Ministry of Transport. Has it been degraded to the position of a subordinate department? I noticed that yesterday the Chancellor used rather peculiar language in this connection. He did not say that he had been in consultation with the Minister of Transport over this proposal. He simply said that he had informed the Minister of Transport that he was going to take this money. If that is the proper attitude to adopt towards a Ministry of such a size, we must revise our views of the importance of a Department which in recent years has, I think, been controlling more capital assets than any other department.

I think it a great pity that this money has been taken from this source in this manner. I would prefer a surplus achieved by normal methods, by methods which could be described as the reasonable anticipation of the prosperity that is likely to come, instead of by a pessimistic depreciation of the future. Had the surplus been achieved in such a manner, the weak spot in this Budget would have disappeared. The concessions which have been made would have been sweeter if they had been made out of ordinary revenue and not by raiding the Road Fund.

In conclusion, I would say that those of us who have in the past urged the Chancellor to estimate boldly can look back on the past few years and feel that we have some justification for our view. There have been two large surpluses in the last two years. If those of us who think that another large surplus is going to accrue, prove to be correct, if a third large surplus in fact occurs, may not the House demand that it should be the last and that instead of budgeting pessimistically for depression the Chancellor should take his courage in both hands, realise that he is as excellent a Chancellor as some of us have been trying to persuade him he is and deal with the matter in such a way that taxes will be remitted, and a Budget produced, not for depression but for prosperity?

6.8 p.m.

Mr. JOHN WILMOT

I was surprised to hear so keen a critic as the hon. Member for Huddersfield (Mr. Mabane) express satisfaction with the manner in which the Chancellor of the Exchequer has seen fit to fulfil the promises of last year. Had he been, as I have been today, among people who had good reason to suppose that the tax burdens laid upon them in 1931 were at last to be lifted, he would realise how widespread is the dissatisfaction at the manner in which this business has been done. It is becoming true to say that the present, Chancellor's Budget speeches have little relation to the actual proposals which he discloses. Last year he said that the principle actuating him was that of making restoration for the sacrifices of 1931, in the manner and in the order in which those sacrifices had been made. He then proceeded to devote his surplus to the relief of the richest section of the taxpayers. Naturally, there were strong protests from all parts of the country, except from the well-to-do who were benefiting. The right hon. Gentleman practically said in the course of the debates on the Finance Bill that this year the small income taxpayer who had suffered so harshly by the withdrawal of the allowances, would be restored to his previous position.

When I heard the right hon. Gentleman yesterday so joyfully and glibly repeating that sort of statement I expected, as I think the Committee expected, that the small income taxpayer was going to have his allowances restored. Nothing of the kind has happened. When one disentangled the figures, after the rather skilful juggling with percentages and allowances which the right hon. Gentleman introduced as an innovation in yesterday's statement, when we got down to what all this meant in tax relief, we found that the small man had been tricked again. In fact, he is not getting the tax reduction which he was led to expect, right up to the publication of the tables last night. Even the tables published in the White Paper did not disclose the fact that some of the remissions made by way of the introduction of the one-third rate, are taken away again in the operation of the children's allowances and the relief with regard to income tax. It is a serious thing that for two years running there should be this wide discrepancy between the opening statement of the Chancellor and the actual effect of the Budget proposals.

Let us look at the manner in which the firm promises to restore the losses of the small Income Tax payer have been implemented. My right hon. Friend the Member for Darwen (Sir H. Samuel) quoted one case, but it would be wrong for the Committee to assume that case which he quoted is an accidental and isolated anomaly. Take the case of the married man with three children and an income of £500 a year. In 1930 before the emergency Budget he paid £3 19s. 2d. in taxation. He now pays £6 after this present Budget scale has been applied, so that the relief in taxation, the restoration of the sacrifices made by this hardly-pressed family, as a gift from the Chancellor, is an increase in taxation of 52 per cent. But that is not an isolated case. Take the case of a married man with two children and £400 a year. In

1930 he paid no Income Tax at all. He now pays £3 15s. Take a family with £500 a year and two children. In 1930 that family paid £8 4s. It now pays £9 15s., an increase of 22 per cent. on the pre-1931 taxation level.

We find the same thing continued if we pass into another range of incomes. I am most anxious that the Committee should not regard these as accidental anomalies. This is a deliberate policy, of not doing what one says one is going to do. Take a married man with one child and £400 a year. In 1930 he paid £4 16s. in taxation. To-day he is paying £7 10s., an increase of 56 per cent. on the 1930 scale. The married man with one child who paid £13 4s. in 1930 is now paying £20 5s., an increase of 54 per cent. in his taxation bill. It is not confined to the married men. It applies also to the single men. Just as last year the Chancellor Applied the vicious principle, "To him that bath shall be given," so this year he has applied the principle, "From him that bath not, shall be taken away even that which he hath." He has made the allowances more generous to the well-to-do than to the poor. Take the single man with £150 a year and the single man with £300 a year. The single man with £150 a year used to pay no Income Tax. Even after these concessions to the bottom dog, which we heard about yesterday, he now pays £1 10s. That is the case of the man with £3 a week— the workman.

The single man with £300 a year does not have his taxation increased as compared with 1930. He is the only one who gets a reduction. Of all the cases I have quoted, the one that can most afford to pay the tax is the only case that gets a reduction. The £300-a-year single man sees his tax, which used to be £15 in 1930, reduced to £11 5s. Upon what principle of equity and justice can these scales be justified or maintained? They vitiate not only the most elementary and universally accepted principles of fair taxation, but the Chancellor's own promises and statements. In future we shall have to regard the preliminary. Budget speech as a mere figment of his imagination and wait until next morning for a chance to work out the tricks and subterfuges by which he camouflages the real meaning of the figure he has given to us. This is not a restoration of the sacrifices made by the small income tax payer. It is a juggling with scales to give an appearance of restitution whereas, in fact, only a fragment of what was taken from him is given back in such a manner that the poorer do worse than the richer, the single do better than the married, and the small family does better than the big family.

I submit to the Chancellor that that was not the only promise that was vitiated in its performance. He said some moving words about the fall in the population. He repeated the old idea that it was time we began to provide an excess population for emigration and, may be, to feed the armies of the future. He said he would encourage those who had to bear the burdens of family life by giving them some help by way of remission of taxation. I am sure that every hon. Member anticipated that when the Chancellor said that, he would do it. In fact, he did nothing of the kind. When we examine what he has done we find that the £400 a year family with one child as compared with 1930 is paying £2 14s. more in tax; the £400 family with two children is paying £3 15s. more; and the £400 family with one child is not paying any more at all. When these figures are worked out, we see that the larger the number of the children the smaller the restitution, and the smaller the number of children the larger the restitution. The Committee has a right to ask the Chancellor to explain why, when he makes a statement of his intentions, they are not carried out. Surely it is fairly obvious to the Committee how it comes about that these apparent concessions are illusory, and why, when we work out what in practice is our total bill for income tax, it differs so much from what it was expected to be.

In reducing the rate to one-third on the first £135 the Chancellor has at the same time reduced the value of the children's allowances and the concessions with regard to insurance premiums. It is as well that the Committee and the country should realise that the effect of this change is to take away a large part of the value of these concessions. It means that for every pound paid in life insurance premiums there is a loss of 9d. because the rebate in allowances for premiums will be at the low rate of Is. 6d., and not 2s. 3d.

Mr. CAPORN

Would the hon. Member like it to go back to the 2s. 3d. rate?

Mr. WILMOT

It should certainly go back and be maintained at the old scale, for it is fatuous to give a concession with one hand and to take it back with the other. That operation will be responsible for peculiar anomalies and results. There will be a whole host of consequential effects of this innovation, the measure of which I am sure nobody has yet realised or calculated. To bring an innovation of this kind into a complicated and long-tried system of income tax naturally produces many anomalies, but the operation of this particular item is so consistent throughout the scales that the Chancellor must have known that what he was giving with one hand he was taking back with the other. It is as well for the small income tax payer, the clerk and his fellows, to realise that he is still paying very much more in taxation than he was paying before this Chancellor took office; that he is still paying proportionately more than his well-to-do friends; and that when he takes into account the allowances for his children and his life insurance, the benefits which he derives from the concession are largely taken away.

One cannot allow yesterday's statement to pass without calling attention to another vicious principle. So far it has not gone a long way, but it is the beginning of what might, perhaps, especially in the hands of a Government such as this, be a dangerous menace to accepted principles of taxation. I refer to the extension to investment income up to £125 a year of the same privileges which are extended to earned income. The earned income allowance is intended to represent the cost of earning the income— travelling and other expenses to which the earner is inevitably put in earning the income. The person with an income of £125 does not get it net and clear. There are the expenses of his occupation to be met before he can get it, and the earned income allowance is intended so to arrange things that the earner is taxed upon the net receipt. To extend that principle to the unearned income is to put a premium on that type of income. When you put side by side the earner of £125 and the drawer of £125 in dividends, it is obvious that you are giving to the latter a concession for which there is not the same justification. On these small sums probably no great harm will be done, but if the principle is to be extended it will mean in the end that the earners of income will have to pay more tax in order that the drawers of dividends shall be enabled to pay less tax. It is proper that the Committee should keep a vigilant eye upon any extension of that practice.

Something has been said already with regard to the heavy oil duty, but I would like to point out that the effect of this will go a long way. May I ask the Financial Secretary to tell us whether this duty will apply to oil which is being produced by the low-temperature carbonisation of coal? The Chancellor's words yesterday were very wide. He said that it was difficult to differentiate between one class of heavy oil and another, and that the tax of 8d. a gallon would apply to all heavy oil when used as fuel on the roads.

The FINANCIAL SECRETARY to the TREASURY (Mr. Duff Cooper)

It applies to imported oil.

Mr. WILMOT

If home-produced oil is exempted, I am satisfied. Nevertheless, the effect of this tax will be very far-reaching. The production of the Diesel engines and of the elaborate carburation machinery which is a vital part of it has been proceeding for a long time and is rapidly moving from the experimental to the commercial production stage in this country. It is a new industry for this country, and many persons and companies have expended large sums of money producing machinery which until recently was almost entirely of German production. The tax on heavy oil will destroy that industry, because the whole motive for using a Diesel engine will largely disappear. When one considers the other form of taxation to which this type of transport is subject, it is fairly obvious that the production, development and use of this promising form of transport, a form which both by rail and road might have given us a new and cheap method, will be checked and stultified, at any rate for a long time.

Something else is involved in the Chancellor's statement in this regard. The reason he gave for this crushing tax was that it was impinging on his receipts from motor spirit. Does that mean that the present taxation on petrol, which was emergency taxation, is to be regarded as permanent? Motoring is a very important industry. The use of motor vehicles is no longer confined to the well-to-do. People of reasonable means find recreation and health in the use of their own or public motor vehicles, and a crushing tax upon petrol is a tax upon a legitimate form of enjoyment, is a tax upon transport of every kind, and means an addition to the price of every kind of goods and services. It is most unfortunate that revenue should continue to be obtained from this especially penal tax upon this industry, and the fact that the Chancellor has seen fit to put this enormous increase on heavy oil merely because it formed some sort of competitor with the ordinary light spirit ought to cause a great deal of misgiving. Those who use the roads have a double reason to complain. Not only are the transport industry and transport fuel signalled out for special taxation, but the taxes which they have already paid for a specified purpose are diverted from that purpose, and the balance in the Road Fund is raided at the very time when that money is so badly needed.

These considerations justify the belief that this Budget, instead of being what it would appear to be from the Chancellor's rosy statement— the sort of patter which is talked by the confidence trickster in the hope that his victim will not notice the real character of his operations— will prove, if we get pencil and paper to work on the actual meaning of his proposals, to be a budget of tricks and subterfuges. The concessions made and the reliefs granted are not what they appear to be, and the new taxes are imposed in a very evil manner, which will carry with them very evil results. But, these things apart, I feel that no British citizen, reading that astonishing phrase that we have regained 80 per cent. of our prosperity, can do other than despair of the present Government ever doing anything to face up to the task for which they were elected. Eighty per cent. of our prosperity has been achieved— and we have 2,250,000 people, roughly, registered as out of work. Are we to understand that the Chancellor of the Exchequer will regard 100 per cent. prosperity as having been attained when the permanent pool of the unemployed has been reduced to the 2,000,000 mark? I can see no other meaning to impart to that statement. If the present number of the unemployed, which is 2,153,000, represents 80 per cent. recovery of prosperity, then about 2,000,000 unemployed will represent 100 per cent. Apparently the Government are complacently contemplating the time when our unemployed army shall have fallen to the 2,000,000 mark. They will regard that as normal, regard that as prosperity, and feel that they cart rest from their labours and assure each other that all is well, and that they have accomplished the task for which they were elected.

I feel sure that when the full meaning of that sinister phrase in the speech is realised this election Budget, if election Budget it is, will produce results very different from those which the Chancellor has intended. One might have hoped that at a time when the Government were drawing towards the end of their career, and when, owing to world changes, there was less necessity to keep such a tight grip upon public expenditure, something might have been done to face up to the appalling need of a permanent army of 2,000,000 unemployed. What are we going to do about it? One ought to have been able to expect from the Chancellor, in his fourth Budget, some statement on the policy to be adopted in regard to this dreadful and appalling poverty. We must not allow ourselves to drift, into the state of mind in which we regard as normal 2,000,000 idle men on the one hand and on the other hand an enormous proportion of the population short of the very things that those idle men should make; and we must devise means by which the unemployed can be got to work making the goods which would make the difference between poverty and comfort for the poorer sections of the population. One would have expected from a Chancellor having some vision, courage and imagination, who was faced with this situation but had no policy to meet it, some statement on the means he had in view to expand the consuming power of the great mass of the poorer people in order that they might be able to buy and consume the goods which the unemployed could make. But from all such considerations of real importance his Budget statement was entirely free. It is a barren Budget, it is a hopeless Budget, and he produces what is probably his last Budget with a signal to the country that the Government have failed, that they regard the unemployment problem as insoluble, and that, if it ever is to be solved, it must be solved by somebody else.

6.39 p.m.

Sir JOHN WARDLAW-MILNE

I think I should say to my right hon. Friend the Chancellor of the Exchequer that it is perfectly clear that the hon. Member for East Fulham (Mr. Wilmot)' does not like the Budget. It is clear to me, at any rate, that not only did he not like the Budget but that he had a conviction that my right hon. Friend was dishonest, and almost, as I gather, a common or garden thief; because he. made the remarkable statement—he made it over and over again-in connection with the Income Tax allowances that what the Chancellor had given with one hand he had taken away with the other. He amplified that a little later by saying that he had almost taken away rather more than he had given.

Mr. WILMOT

No, not quite so much.

Sir J. WARDLAW-MILNE

I am prepared to take his first statement that the Chancellor had taken back more than he had given; but does the hon. Member recollect that there is in the statement which the Chancellor put before us yesterday a clear and definite announcement regarding the cost of granting these allowances? It does occur to one that if the hon. Member is correct in saying that the Chancellor is taking back more than he is giving that it is a matter for consideration where this money has gone to or is to go to. Clearly somebody must be getting it. Somebody is getting £3,000,000 or £4,000,000, or whatever the sum is, and I suggest to the hon. Member that when he told us that the allowances would be of no benefit to anybody he might have gone further and told us what was to happen to the money—if he did not intend to convey that it was going into the Chancellor's pocket. I want to join in the chorus—I think it has been almost a chorus—of congratulation to my right hon. Friend from different parts of the House on the remarkably clear and lucid statement which he put before us yesterday, because I do not remember having heard a Budget state ment containing such a mass of figures put in so terse and concise a way, that all could follow it clearly. But I also want to congratulate him on what he has done, because in spite of all the criticisms of his proposals, almost all speakers, with the exception of the hon. Member for East Fulham, have begun, at any rate, by agreeing with the measures proposed in regard to the Income Tax and the restoration of the cuts, although most of them have made reservations about the oil duty and other points.

I entirely agree that the proposals to restore the income tax allowances, to relieve the taxes on the cheap cinema seats, to help the "living theatre" a little, and to make a restoration of the cuts are excellent, and I think they are exactly what was wanted following upon the Budget which my right hon. Friend introduced last year. There could not have been a better distribution of any possible surplus in a thoroughly orthodox Budget. From that last sentence perhaps my right hon. Friend will realise that I am likely to follow the example of some others in offering a litle criticism on the financial outlook of the country and some suggestions about it, but my remarks will differ from those of the hon. Members who have preceded me, because I do not attribute any of the difficulties to which I want to draw attention particularly to this Government, and certainly not to the work of my right hon. Friend, for whose management of the finances of the country in the past four years I have nothing but the greatest admiration.

I thought that the right hon. Member for Darwen (Sir H. Samuel), in his extremely interesting speech, such as he always gives us on these occasions, minimised, shall I say, the importance of the falling-off in the figures of unemployment. He seemed to think the reduction of 48,000 was a very small one, and that much more ought to have been achieved; and I gather that he also thought that the expansion of the export trade by £30,000,000 was a comparatively poor effort. What would my right hon. Friend have said if, four years ago, he had been told that all his speeches, and all the speeches of those who agree with him, about the dreadful consequences which were to follow from the institution of tariffs would be falsified right from the beginning? We were told that if tariffs were introduced exports must go down and the cost of living must go up, but all those predictions have been proved untrue, and it is a little ungracious of the right hon. Gentleman that he should belittle the partial but very valuable recovery that has been possible in the last few years. Incidentally it is clear at once that if we have not everything upon which to congratulate ourselves, we have, at any rate, the satisfaction of knowing that we are infinitely better off, owing to the work of the Government and the policy which the country is carrying out at the present time, than any other country in the world. Of that there is no possible doubt.

The right hon. Gentleman the Member for Darwen made one other statement to which I desire to refer. He dealt with the effect of the fall of the price of sterling upon our exports. Again I do not think the right hon. Gentleman told us the whole story. He did not point out that the bulk of our exports go to sterling countries, or to countries that are in convoy with sterling.

Sir H. SAMUEL

Yes, but they are affected because the competition of the countries of the gold bloc, such as Belgium, is handicapped compared with our trade in those markets.

Sir J. WARDLAW-MILNE

In that, of course, I entirely agree with the right hon. Gentleman. There is no question that the gold standard countries are affected by our competition, and I agree with him when he speaks about the disastrous effect of the depreciation of currency. The difference between us is that it is not correct to say that the fall in sterling has been the cause of the whole, or even of a very large part, of the improvement of our trade.

The Budget is as satisfactory as any Budget can be on what I call orthodox lines. I suggest to my right hon. Friend that there is still, however, a very deep and far-reaching problem which this country has not met and which the whole world will have to face before very long. It is a little doubtful whether a part, at any rate, of our prosperity is not at the expense of our neighbours. I am afraid that prosperity based on that foundation is not of a very lasting character. I do not want to be pessimistic, far from it, because the recovery that we have made is remarkable, and this country should he more than grateful to the National Government. That does not alter the fact that it behoves most of us to look very far ahead in these matters. The Chancellor of the Exchequer, and those who have the matters constantly under consideration, will not quarrel with me when I say that some of our prosperity is due to our having gone off gold, to the institution of the sterling blocand, to some extent, to the very fact which has just been mentioned, the inability of some of the gold standard countries to compete with us.

There is one point however in our present proposals to which I should like to refer. I do not know anybody who considers our annual Budgets as orthodox who will consider it right still to take £80,000,000 of the country's capital every year and treat it as income, as we do in the death duties. If we are going in for pure orthodoxy, that is a very remarkable thing for orthodox people to do. I do not suggest that we can alter it, or that it should be altered at this moment, but year after year Chancellors of the Exchequer go on using this capital sum as income. Another thing that worries me a little is the tremendous fall in the cost of the service of the national debt. Let me put it in another way. It does not worry me that there is that fall, but that we are balancing our Budget largely because of it. I have not the figures with me, but I think I am not far wrong in saying that if the cost of the service of the national debt to-day is taken as against five or six years ago even, there has been a decline of something like £80,000,000, largely the, of course, to the very excellent conversion operations carried out by my right hon. Friend, but of which to the extent—I speak from memory—of something like £16,000,000, the remarkably low rate at which the Government have been able to borrow on Treasury bills is responsible. That is a very remarkable achievement, but are there not two dangers? It has to be remembered, in the first place, that we have not saved that money but that we are spending it, largely on social services. I know that the House is responsible for that, and I do not want to be diverted into consideration of those services or as to the desirability or necessity for them. I agree that in some cases at least they are necessary. That is not my point. My point is that it has cost us something like £80,000,000 less than a few years ago on interest on the national debt, including the operations in connection with Treasury Bills and that that money has been spent.

What is to happen when interest rates go up again? Of course the actual conversion of the War Loan is an accomplished fact. That will not go back, but there may very easily be much higher rates for bills and that may be very awkward for a Chancellor of the Exchequer in the future. We shall not have higher rates of interest unless trade requires money, and unless the interest rates rise as the result of trade wanting money, there will not be prosperity. With prosperity will come those higher rates. We are spending money which we have been saving in that way. It may be argued that better trade will bring in money in other ways. Again, we are subsidising all kinds of industries, I do not say wrongly, but it is not to be wondered at that it crosses one's mind to ask how long we can go on subsidising, and who is going to subsidising the taxpayer.

I am sorry that the hon. Gentleman who preceded me has left the Chamber, but what he said about the high rate of Income Tax did not move my heart at all. I have never known Opposition hon. Members so interested in the Income Tax payers before. I have never heard them get into a state of excitement over the troubles of the Income Tax payer.

Mr. KIRKWOOD

We are evolving all the time.

Sir J. WARDLAW-MILNE

I have no doubt that is so, but the Opposition do not yet represent the taxpayers of England. Over £360,000,000 per annum, an enormous share of the taxation of the country, comes from about 3,400,000 people who pay the whole of the Income Tax—out of a population of 50,000,000 people. The number of those who come within the Income Tax limit is 7,230,000, and of these, 4,250,000 are exempt through various allowances. That gives us a figure of 3,400,000 who pay the whole of the Income Tax. If the hon. Gentleman who spoke before me is extremely worried about those people, the Labour party have entirely changed their characteristics. We are putting this tremendous burden upon the Income Tax payer. Not only that, but we are spending money which we have taken largely out of his pocket, because the conversion operations, desirable in themselves and remarkably successful as they have been, have meant a tremendous diminution of interest and income to a very large number of people in this country, and very often they are people with very small incomes. There are dangers, therefore, even in this orthodox Budget.

I am not sure that I do not feel that we have to look a little further than the present and to consider what is to be the position when we, with other countries, and I believe with the Empire first of all, tackle the question of stabilisation of currencies throughout the world. It is perfectly hopeless for the world to go on under the present idiotic system. "Poverty in the midst of plenty" is not an exaggeration, and it is largely caused by the hopeless inability of the nations of the world to get together on the question of the stabilisation of currency. I am not suggesting that the Chancellor, by a wave of the wand, can put the matter right, or that he is not watching it as Anxiously as anybody else, ready to use his influence and to assist when the right time comes. He has said over and over again that he believes that the best thing in the end would be for the world to get back to a gold standard —not necessarily the gold standard of the past, however—and only when the conditions for the establishment of such a standard are available. I do not quarrel with that, although I very much doubt whether—I am not fond of prophecy—when the time comes, it will be a gold standard at all.

Leaving aside the question whether it should be gold or some other standard, the main point is that we might, I believe, use our influence to a greater extent than we do, holding the unique position we hold in the world, to try to bring about a position of stabilisation. On more than one occasion it has been suggested that there should be international conferences. Of course there should be. I would like to put before my right hon. Friend the desirability of making a start within our own Empire. The details of the discussions which took place at Ottawa are not very encouraging. A sub-committee of the Imperial Economic Conference at Ottawa was formed to deal with monetary and financial questions, and the right hon. Gentleman was a member. The proceedings were held in private and a smaller sub-committee was appointed to draw up a report. The "Times" Ottawa correspondent on 9th August, 1932, made the curious statement that the work of the sub-committee was facilitated by a tacit agreement that the discussion of controversial issues like an Empire Central Bank, a common Imperial currency, and bimetallism should be ruled out. One begins to wonder what they met about. That meeting was followed by the Conference here. At the Imperial Economic Conference in this country a definite statement was made at the end by my right hon. Friend, after consultation with the Dominion Premiers who were there, and that statement ended with the following paragraph—I beg his forgiveness for drawing his attention to it once again— Periodical consultation on monetary and economic policy between the Governments represented that is, the Governments of the Empire"— was recommended, with a view to establishing and carrying out their common purpose. I would ask whether it is not possible to do a little more to carry out the spirit of that last passage. It may be true to say that my right hon. Friend and his advisers are continually in touch with those who are in a position to speak for the Dominions in these matters, but there is a unique opportunity this year. I am not very hopeful of international conferences at the moment. No doubt that will be the final issue, and the final and desirable result, but not yet, I fear, because there are too many cross-currents still between the gold countries and those who are off gold and too much suffering in the gold countries. It is pathetic to read of the conditions of the gold countries compared with the progress that has been made in the countries that have gone off gold. I do not know that we are to be congratulated because we went off gold: I think we were forced off it. The point, however, is that, at any rate, there is in the sterling bloc,and primarily in the Empire, a wonderful opportunity of giving the world a lead. I do suggest that there is a unique opportunity this year to call another Empire Conference for the carrying out of the actual spirit of the words of the last paragraph that my right hon. Friend read out at the end of the Economic Conference three or four years ago.

In conclusion, I heartily congratulate my right hon. Friend and the Government on the proposals in this Budget. I think that within the limits within which we are working they are the best proposals that could be brought forward, giving reliefs where they are badly wanted and giving to some extent a further impetus to trade. I believe firmly that trade will continue to improve, but I do suggest there is a limit beyond which that improvement cannot go under the present system. The great and vital world problem still remains— how the countries of the world are to exchange their goods and to cease making money a commodity. That problem still remains, and, also, why millions of people are suffering in the world in the midst of plenty; why governments all over the world think the only way of bringing back prosperity is to destroy half the products these people produce. It seems all wrong. However much we may congratulate ourselves and the Government on the position we hold in this country, I do not think that we ought to close our eyes to the tremendous problem that still lies ahead, one to which every thinking man must be giving attention.

7.3 p.m.

Mr. O'CONNOR

I feel that my right hon. Friend must be pleased at the reception of his Budget. It has really met with a cordial reception, not only within the House but by the Press outside. There have been criticisms, it is true, which have been more academic than charitable. I was a little bit surprised to hear the austere finance of the right hon. Member opposite, with which he has been infected no doubt by his next-door neighbour. The right hon. Member took a purely academic view of sterling and gold which is a novel departure for the Liberal party, and I hope he will not permanently be led astray by the hon. Gentleman who sits next to him. When you leave the gold standard, then gold should be treated as irrelevant, though some day it may become relevant if we go back to that metallic standard. To complain about a 12 per cent. fall in sterling when that is entirely in terms of metal seems most academic. The contrary is, I think, much more true, that we can look with the greatest satisfaction on the stable splendour of sterling in the markets of the world with a purchasing power not only equivalent in commodities but rather greater. This seems to show that really the market prices of commodities are probably much more governed by sterling than by gold itself. That was one of the striking lessons we have learnt by going off the gold standard.

I do not entirely agree with the right lion. Member for Darwen (Sir H. Samuel) or the hon. Member for Huddersfield (Mr. Mabane) in upbraiding the Chancellor of the Exchequer for raiding the Road Fund. It was put upon him that this was a departure from financial purity. I have never been able to understand why the Ministry of Transport should be the repository of this very large suns of money. Not so very long ago the May Committee recommended the abolition of the Road Fund, and I see no reason at all why it should not be merged in the ordinary revenues of the country. There is one speech to which I want to refer particularly, that of the hon. Member for East Fulham (Mr. Wilmot), who has, unfortunately, after inflicting 40 minutes of an intolerant tirade upon us, found it more convenient to be elsewhere. I have tried to put down with such accuracy as I can his remarks about the right hon. Gentleman the Chancellor of the Exchequer, which were that he was a juggler, a trickster performing subterfuges, and that he recognised the patter of the confidence trickster. That kind of observation in the secretary of a shareholders' association may be appropriate with the directors of fraudulent companies, but coming from East Fulham—I now see that the hon. Member has returned to his place and I will repeat his observations, where he described the Chancellor of the Exchequer as a juggler, as a trickster and a performer of subterfuges, referring to his speech as the patter of a, confidence trickster. That might be appropriate in the secretary of a shareholders' association in relation to the director of a fraudulent company, but it is hardly seemly with regard to the Chancellor of the Exchequer of this or any other Government. This came with singular ill-grace from one who owes his seat to the most fraudulent election campaign that history has on record— I am not accusing the hon. Member— in which there was the misuse of a campaign which sought to impose on his opponents the character of warmongers, whereas they were just as tolerant and earnest in search of peace as himself. I have scanned his election campaign with some interest in view of the peculiarly extravagant way it was conducted, to see if any disclaimer was made by himself on his position to a campaign that was waged on his behalf and was as discreditable as any I can recollect.

Mr. WILMOT

I made no such statement, neither did any one responsible on my behalf make any such statement, to which reference is made.

Mr. O'CONNOR

I think my recollection in this is to be preferred to the hon. Member's. I spoke in the course of that campaign and read many of the posters, which are, no doubt, in the recollection of many hon. Members. His campaign was the first of a series in which it was sought to suggest that those in the Government were warmongers, while those on the opposite side were the only true friends of peace. That was the beginning of a campaign that has done more harm to the cause of peace than anything else.

Mr. MORGAN JONES

The hon. Member will remember that we were accused of war-mongering because we advocated certain action in the Far East.

Mr. O'CONNOR

I certainly agree that the suggestion in relation to the Far East was extremely provocative to a friendly country. Since the hon. Member for East Fulham has thought fit to speak of my right hon. Friend in the terms he used, I should like to point out that the whole basis of his argument was entirely a misunderstanding of the position. When was it suggested that my right hon. Friend or anyone else said that the position as it existed in 1930 in regard to allowances would be restored? I have scanned my right hon. Friend's speech of last year on the Budget and there is no reference to that at all. I have also fortified myself with the speech that he made yesterday, and there is no suggestion of the kind on which is based this violent attack. All my right hon. Friend said was that he wanted to see the small taxpayer have his turn, and he put forward his proposals saying that, taken in conjunction, they would give a great deal of relief to families with small incomes, and other remarks of a like cautious character, of the kind of extreme caution one does expect from my right hon. Friend. There was, in fact, in no- part the patter of a confidence trickster. People who make that allegation ought to fortify themselves with something better than to treat 1930 as a standard, for there is nothing proposing to put back conditions as in 1930, to put surtax back as it was in 1930, and the general income tax payer as he was in 1930. Since 1930 has been taken as the yardstick, the hon. Gentleman should realise that surtax has been increased three times, twice by Mr. Philip Snowden, as he was then, and 10 per cent. in 1931, and I would suggest that he should treat all income tax on the 1930 level. In 1930 the income tax was 4s. in the pound, so that it is not comparing like with like—comparing a burden on the basis of a rate of 4s. 6d. with a rate of 4s. If I understand him, he was taking 1930 as the basis of his argument. I think that those who make attacks of this kind should really prepare for themselves a little less fustian.

Mr. WILMOT

Since the hon. and learned Member questions my figures, surely he appreciates I was not comparing rate with rate but the amount payable, which is the important thing to those with so little to pay and to whom a little means very much.

Mr. O'CONNOR

In order to support that argument the hon. Member compares 4s. with 4s. 6d. If he is comparing the effects of abatements on people with small incomes on the basis of 4s. 6d., surely it is unfair to compare that with the effect of these abatements when the rate was 4s. If the hon. Gentleman was arguing in favour of a 4s. rate as well, I am with him. There is one other matter that in the Debate with regard to the speech of the hon. Member for Caerphilly (Mr. Morgan Jones), who, speaking of Diesel engines, with others, seemed to treat this as a penalty upon new inventions. It seemed to me that his analogy did not support that reasoning. He drew the analogy of the telegraphs and the telephone, and said that, if an additional tax had been put upon the telephone in order that the telegraphs might be kept going, the telephone user would not have got the advantages that he has. But that is not a fair analogy at all. If the purpose of the tax were indeed to prevent the competition of a useful new fuel, I should agree with the hon. Member, but, as I understand it, the purpose of the tax is merely to prevent loss of revenue owing to the fact that one oil is being preferred to another, not on its merits, but because it does not bear the same amount of tax. The answer to the hon. Gentleman's argument is surely this, that, if the Diesel system is so economical at present, it will pay, tax or no tax, because the tax does no more than place two competitive fuels on the 'same footing.

There is one thing that I should like to hear from the Financial Secretary to the Treasury when he comes to reply. It seemed to me, from the Chancellor's statement yesterday, that, in regard to this new impost upon heavy hydrocarbon oils, the Treasury was departing from what has hitherto been spoken of as its principle. I have always understood that the principle of an excise duty was that you could not tax a commodity according to user, but that you taxed it in general, and that it would be impossible to trace the commodity to its destination. As I understood my right hon. Friend yesterday, there is no intention of taxing this oil for other than road purposes, and I hope I am right in that understanding. That means that the electric lighting set, the stationary engine, and so on, will obtain their fuel at the existing rate of duty, namely, I hope that that will be made clear when the Financial Secretary comes to reply, and also that there will. be some explanation for the benefit of users as to how they are to obtain their supplies for stationary engines without having to pay additional tax, and as to what safeguards are being erected by the Revenue to ensure that there shall not be fraudulent use of oil obtained ostensibly for one purpose and used for another.

My right hon. Friend will, I am afraid, recognise in me a somewhat persistent critic on general lines of the financial policy which he has pursued over the last four years. This afternoon I want, upon a longer view of the situation than this Budget discloses, to direct attention to one or two general circumstances which seem to me to give cause for a great deal of misapprehension. What are the facts, as I see them, of the financial position of the country? We have an internal debt of £6,885,000,000. As regards external debt, it has not been mentioned in my right hon. Friend's Budget speech; our debt to America is so academic that it has disappeared, apparently, from our financial consideration. We have no sinking fund; we have the highest direct taxation that we have ever had in peace-time in this country, with the exception of last year, when it was 6d more; we have a diminishing yield from every single form of direct taxation; we have an increasing expenditure upon every single form of social service with the exception only of the automatically diminishing War pensions; and 2,150,000 of our people are unemployed at the present time. Taking a. long view, I believe that, without the most radical treatment in the world, the structure of our society cannot stand what is happening now. I believe that something has got to go. And I am fortified in that contention by every analysis that I have made of the various factors which contribute to make up the revenue.

Let us take in turn three big elements of direct taxation. We have the Death Duties. They are bundled in as revenue— a thing that I have complained about every year. They are quite casual; and they are quite incalculable. No Chancellor of the Exchequer can get up at that Box in any year and make any estimate that is really watertight of what he is going to receive from Death Duties in the coming year. The pleas that they-should be treated as capital have been passed unnoticed by one Chancellor of the Exchequer after another, from whatever party he may have been drawn. Their variability is such that they can unbalance any Budget. A healthy season for millionaires, or the failure of the Chancellor's own cheap money policy, will cause such a variation in the Death Duties that it will be sufficient to unbalance any Budget. That was pointed out in an excellent letter in the "Times" this morning, in which it was shown that the dissolution of these estates inevitably reduces permanently the yield from the other two taxes, Income Tax and Surtax. Let us look for the moment at the figures. In 1928–29 we received £80,500,000 from the Death Duties. Since that date they have been put up twice; and not only have they been put up twice, but there has been a sensational rise in the value of gilt-edged securities, which must represent a considerable part of the estates that come under the Death Duties. Nevertheless, in spite of these two enormous factors, they are at the present time, roughly speaking, exactly the same as they were in 1929. The estimated yield is now £80,000,000, where it was £80,500,000 five years ago, before the duties had been increased twice and before the values of gilt-edged securities had gone up. One finds also, on looking closely into the figures, that 63 per cent. of the total yield of those duties in the last year for which there are returns, which I think is 1932–33, came from 426 people who left estates of over £100,000.

Mr. BUCHANAN

Hear, hear.

Mr. O'CONNOR

The hon. Gentleman who says "Hear, hear" really misconceives the horrible significance, from the point of view of the Socialist party, or of any party, of the fact that 63 per cent. of one of the main items that balance the Budget is obtained from 426 people of a disappearing race, namely, those who made great fortunes in the nineteenth century, and that we are relying to such an enormous extent on these people to balance the Budget by bringing in this money. Let us look at the Surtax, and see if the picture is any more cheerful. In 1927–28 we collected 260,000,000 from 101,352 people. There were then, as everybody knows, three rises in that tax, two by Mr. Philip Snowden and the third by the National Government. As a result of those three rises, the position now is that we can only estimate for £51,500,000 in the corning year, or nearly £8,000,000 less; while the number of people who come within the charge are only 84,175, as against 101,000 when the tax was at the lower level—and that although the level of income at which Surtax begins has, of course, been lowered. That is not very consoling. This is another tax of a direct character with a clearly diminishing yield. As regards the Income Tax, in 1927–28, when it was at 4s. in the £, the yield was, in round figures, £250,500,000, and within 50,000 of 5,000,000 people were assessed to the tax. In 1934–35, with a 4s. 6d. Income Tax, we are assessing 7,500,000 people to the tax, or some nearly 3,000,000 more, and the yield is only expected to be £232, 500,000. Therefore, over the whole range of direct taxation, which is the corner-stone of this financial edifice, contributing, as it does, £391,500,000 of the total of 2691,500,000, one finds on every head that there is a shrinkage of direct taxation; and the policy of cheap money must be maintained in order to keep the returns from the Death Duties even at the position at which they are at the present time. The Chancellor must also keep cheap money, not only in order to keep the Death Duties up, but in order not to increase his Ways and Means borrowing and his borrowing on short-term loans, if he is to have any semblance of balancing his Budget. It does not seem to me that this is a very happy augury for the future stability, not merely of the Budget for a year or so, but for the future stability of the system under which we live. There may have been economy, but economy is now as dead as mutton. The one object-lesson of the last four years has been the complete and absolute failure of economy as a method of democracy. You can either economise or expand, and I believe that, economy having failed, the only other policy that is practicable in order to keep the system going—and I believe it is right and proper and necessary for the well-being of the people that it should be kept going—is expansion.

I do not see many signs of expansion in this Budget. In fact, there is only one, and I welcome it with the greatest possible relief. I noticed with the greatest satisfaction that my right hon. Friend did not say one single word yesterday about the depressed areas. I make the following deduction from that curious and interesting lacunain his speech. Expenditure there must be upon the depressed areas in the coming year; no one doubts that for one moment; and I sincerely hope it means that my right hon. Friend's mind is moving in the direction of treating that expenditure as capital expenditure, and making it the subject of, a loan of a development character for the purposes of those areas, which will not impose the total charge upon the Budget, but will only impose upon it the charge relevant to the service of the loan. I hope I am right in that surmise. I do not expect that my right hon. Friend will give away his secrets with regard to what has been called the New Deal; but, whether it is called a New Deal or whatever it is called, I hope that at any rate development expenditure of that expansionist kind will find a place in the course of the next year.

I cannot understand why it was not done with housing also, or why, indeed, most of the items of the Budget that come under capital heads—such as the provision of large blocks of flats for the re-housing of people dispossessed from slums—should not also be the subject of capital expenditure and. brought into capital account. I cannot understand, either, why the building of capital ships is not dealt with in this way. It seems to be quite reasonable, and consistent with the utmost financial purity, that a battleship, which is to last 10 or 15 years, should be treated as a capital charge; and the same is true of air ports. Surely, if ever there was a proper subject for capital expenditure, it is the purchase of the actual soil upon which the aeroplanes land. Why should not these be capital charges, instead of being allowed to cumber up the annual Budget statement of revenue and expenditure?

No one knows better than I do that what I am saying cannot be pleasant to my right hon. Friend, because I think his outlook and mine differ fundamentally on these matters; but I feel that the time has come when we have to recognise that we cannot keep the structure under which we live going without expansion, and we have to do something to mortgage the future. If the future cannot look after itself, then the edifice is going to crash anyhow. [HON. MEMBER: "Come over here"] Hon. Gentlemen opposite would do exactly the opposite, because they would undermine all credit. They would provide no foundation for the credit which, I believe, this Government have restored and of which they ought to take considerable advantage at the present time.

My right hon. Friend said yesterday— and it is a great satisfaction we all share — that the savings in the smaller classes of ownership had shown an expansion of about £50,000,000 last year, which is a wholly desirable feature to anybody who believes in a property owning democracy. But what is being done to direct saving inside the proper channels along the lines of the savings banks and savings certificates? Something ought to be done at the present time, because it is the only class that is now able to save. The great Income Tax payers and owners of property no longer have the power of saving, and the habit and method of investment, safely directed, must be inculcated among these people if they are to replace the great investors of 10, 15 and 25 years ago. I should like to see the trustee list completely overhauled. It is absolutely obsolete at the present time. You can invest in a railway company if it cares. to conduct its functions in such a way as to give a nominal return on ordinary stock, and you can put money into a province of a Dominion on the verge of repudiating its debt. I should like to seer added to the trustee list the prior charges of some approved industrial undertakings and thereby enable those undertakings to borrow more cheaply both for their prior charges or for their preferential charges. The Chancellor of the Exchequer might, in addition, dovetail his activities in that respect into those of his right hon. Friend the Minister of Labour and surely say to an industry—and this applies especially to the industries which are well established and do not Suffer from a fluctuating market but have a protected home market, as, for instance, the, tobacco industry and various other industries one could name—" The Minister of Labour is negotiating with you for shorter hours of work, and conditional upon your agreeing within the industry upon a reduction of working hours, which everybody agrees is desirable where it can be effected, your prior charges shall go upon the trustee list." Some encouragement thereby would be given to the small investor to take a share in financing industry even in that very primitive and simple way.

I have ventured to speak upon general' lines, relating my remarks not so much too the mere pedestrian subject of whether we are going to balance the Budget this. year or not, but to the very much wider question of whether upon the lines we are going any Government will be able to cope with the constantly rising tide of social expenditure, which seems to have no limit. It thrives by what it lives upon, because the healthier we become and the more effective are our health services, the greater are the demands. How are we to reconcile that situation with the diminution of the considerable fount of our income, which is direct taxation. We cannot do that without either enormously increasing indirect taxation or by economy, which has failed, or, as I believe, by an expansionist policy prudently carried out and for which no Government could be relied upon better than the Government we have at the present moment. They command confidence. They have achieved cheap money. My right hon. Friend has a position which is unrivalled among recent Chancellors of the Exchequer for integrity and for caution. In his hands expenditure can, 1 believe, be prudently carried out, and, unless it is, I do not really see any way by which the repetition of the crisis of 1931 can be avoided in a period of seven or eight years.

7.37 p.m.

Colonel GRETTON

We have just listened to a most interesting and suggestive speech by my hon. and learned Friend the Member for Central Nottingham (Mr. O'Connor). I do not intend to follow him into the realms of finance, but I propose to travel for a minute or two along a path of a more prosaic kind. If one casts his mind back to the period, some 10 or 15 years ago, when the right hon. Member for West Birmingham (Sir A. Chamberlain) was Chancellor of the Exchequer, he will remember that we were discussing in those Debates an annual expenditure of about £600,000,000 in a standard year. We were then discussing also the prospect of the repayment of the National Debt by annual payments of some £50,000,000 a year in order to reduce it to manageable dimensions or to vanishing point within a period of some 50 or 60 years. All those hopes have gone, and to that extent I follow the reasoning of my hon. and learned Friend the Member for Central Nottingham. This Budget is based upon an increasing national expenditure. Last year the Financial Statement drew our attention to the fact that the estimated expenditure was £704,000,000, and the Supplementary Estimates brought the expenditure up to about £709,000,000, but this year the basis of the estimated expenditure is more than £729,000,000, or, in round figures, 2730,000,000, and we are faced with an increased expenditure for the current financial year of £20,500,000. It is a very serious state of things indeed. I will not attempt to dwell upon certain sources of income such as Death Duties and Estate Duties to which my hon. and learned Friend has called special and detailed attention, but the fact is, when one looks back into the past, that democracy or popular government has proved to be the most expensive form of government.

Within the limits to which the Chancellor of the Exchequer has confined himself this year, I think that his Budget will satisfy the great majority of people in this House and in the country. He is giving relief to the smaller income taxpayers. It was badly needed, and it will be very gladly received. He has adjusted certain other anomalies of taxation which, though not of great financial importance, give relief in one direction or another. I regret—and I hope that the right hon. Gentleman will not think that I am unduly critical—that he has not been able to give relief more in respect of Entertainments Duty to that part of the entertainment World described as the living stage. I am afraid that the adjustment of the smaller priced seats of 6d. and below will act as a preferential stimulus to cinemas which are much better able to look after themselves than other places of entertainment.

I have also a few words to say on the question of the Licence Duties. I have often addressed the House on questions relating to the Beer Duty, licensing and the licensed trade, and it is my duty to say there that the small remission of Licence Duty which the Chancellor of the Exchequer has been able to make is much appreciated. It is not a large sum— £75,000 this year, and £80,000 is the estimate for a full year-but it will be gladly received although it does not relieve the general body of retail licence holders. It has been a standing grievance that their licences are too high, based on the system upon which they are charged, and relief ought to have been given some years ago over the whole scale. Still we take the relief which the Chancellor of the Exchequer has given to us gratefully and trust that it is an augury that the in justices will be removed on a future occasion.

There is another matter arising out of this relief. It is asked: How can it be ensured that the relief will go to the people for whom it is intended, many of whom are tenants of brewery companies? I can confirm the Chancellor of the Exchequer's assurance of the Brewers Society that they will use their very best endeavours to see that the whole of the relief shall go to those people. I have had the advantage of talking to many brewers, and I find that there is a universal intention to carry out that undertaking, and I am confident that it will be carried out.

I do not intend to make a long speech, but I wish to call attention to one item in the national expenditure which may make a considerable difference at the end of the financial year, and that is the expenditure necessary for national defence. The provision made in the Estimates for the Defence Services is wholly insufficient and many of us think that further expenditure will be urgently required before the end of the financial year to make up the very great arrears that have accumulated. I thank the Committee for listening to my few remarks.

7.45 p.m.

Mr. CLEARY

I want to make a brief comment on one or two points which, I think, will prove to be elementary as compared with some of the matters that have been discussed to-day. One or two points that I want to deal with' have slipped from the silvery tongues of hon. Members who have preceded me, and I find that much of the ground has been covered. I have no hesitation in adding my humble congratulations to the Chancellor of the Exchequer to the paeans of praise that have been sung to him for the reliefs afforded by this Budget. It is merely a statement of fact to state that certain reliefs have been granted, but it must be remembered in conjunction with the reliefs that we have suffered from severe economies and harsh and ruthless cuts since 1931, and a depressed people and a distressed country will accept very thankfully and with very deep gratitude the smallest concessions that are granted. It is amidst that atmosphere of depression and economy that these belated concessions have been given to us. The first point that I want to touch upon is with regard to the Road Fund. It was noticeable that the Chancellor's approach to this question was apologetic and in striking contrast to the nonchalance with which such raids have been made previously by at least one right hon. Member of this House. A part of the surplus that is being distributed by the Chancellor comes from the Road Fund, and I am wondering what effect this raid will have upon local authorities which have been anticipating the development of very big road schemes. Perhaps that will be mentioned when we have a reply. On the question of the local authorities generally, it is worthy of note that just as we had a Budget statement yesterday, most of the larger local authorities had their budget statements some time last week, and most of those authorities had to declare an increase in their rates— in the City of Liverpool an increase of Is. and in some other areas much larger. There is one area which is the subject at the moment of a Royal Commission with a view to finding some kind of body to supersede the corporation in that area, so that the position in the depressed areas of this country is in striking contrast with the complacency which characterised the Budget statement in this House.

Another point which is relevant to the position in these depressed, areas is the tax on oil used in the Diesel engine. A fair number of municipalities have changed over from petrol-driven vehicles and omnibuses to the Diesel type. This new tax, therefore, will fall very heavily upon the local authorities, and not only so, but it seems to me that it is more or less sabotaging progress. Progress is measured by the benefits it confers on society, and society is entitled to those benefits, otherwise progress and advancement can be of very little avail, and development should not be handicapped by being brought back to scratch, otherwise there seems very little point in inventive capacity or scientific development. Again, there was no hope in the Budget statement with regard to the longstanding commitments of local authorities from the point of view of interest and loan charges. In the City of Liverpool a very appreciable portion of the general rate is paid by way of loan charges in general, and it is desirable that some hope will be given in the near future, so that facilities can be granted for conversion schemes or other measures which will relieve the local authorities of their very heavy commitments.

May I mention two other points which particularly affect the area that I represent? First, there is the duty on the soya bean. I am at a loss to understand fully the necessity for this duty. So far as I know, there is no question of competition. The soya bean is not grown in the Empire, and the new tax will detrimentally affect to a very great extent industries in the City of Liverpool and probably many thousands employed in those industries. The other point is the duty on rice in the husk. There the report from the City of Liverpool to-day is that the consequence of the new duty will be that this rice will be milled abroad, and again it is stated that the fresh tax will affect—I am quoting from the report received from Liverpool—thousands of workpeople employed in industries associated with this duty. Much of the money that could have been distributed to help in the directions I have named, particularly from the point of view of the distressed areas, has been diverted by the way of the increased Estimates for the Army, Navy, and Air Force, and that is particularly deplorable in view of the general condition of the country. The Chancellor's statement that we had arrived at a position of 80 per cent. prosperity, whatever that means, does suggest some kind of complacency, because the hon. Member for East Fulham (Mr. Wilmot) was correct when he calculated that on that basis 100 per cent. prosperity would leave us with 2,000,000 unemployed. That kind of complacent statement, when we are surrounded by the distressed areas of this country, crying and clamouring for some kind of relief, does not exactly encourage Members on these benches to fall at the feet of the Chancellor with regard to his Budget statement.

My main criticism against the Budget — and with this I will conclude— is that there is no answer in the Budget to the poverty problem of this country. I make no apology for mentioning that problem. It is the only problem worth mentioning— the problem of poverty living side by side with plenty. It cannot be challenged as a statement of fact that dire distress, intense poverty, terrible conditions are being experienced by many hundreds of thousands of people in this country, while at the same time there is plenty. Some answer must be made to that problem. Until we tackle that problem, there is nothing else really demanding our attention. That is the kernel of the whole situation, and because there is no answer to that problem in the Budget, Members on these benches must wait for some other, clearer policy from the Government, or continue their endeavours to ask for a Government which will at least tackle this fundamental problem and step by step endeavour to bridge the gulf between the plenty and the poverty which does exist, so that the whole of the people of this country may enjoy the bounties of Providence.

7.54 p m.

Mr. ANSTRUTHER-GRAY

I am afraid I shall hardly find myself in agreement with the hon. Member for the Wavertree Division (Mr. Cleary), who has just sat down, when I join with those who have congratulated the Chancellor of the Exchequer on the general lines of his Budget. This, I say, not only because in the country and in the Press it has been welcomed on the whole as a popular Budget, but because of the steps he has taken by restoring as far as he was able the cuts of 1031 to fulfil the pledges given by the National Government at the General Election. To my mind the merits or demerits of any such point as increasing the marriage allowances, which reduces the numbers of people who are direct income tax payers and thereby reduces the number of people who have a direct interest in preventing public waste, important as the consideration is, is as nothing compared with keeping faith with the electorate, and if there is one thing to which I look to preserve our democratic Parliamentary system when other countries have departed from it, it is that people should be able to rely on the Government or at any rate a National Government carrying out its general election promises.

There is another thing to which I think we may look to preserve our present Government and the capitalist system under which we are living, and that is the extraordinary recovery which the Chancellor's figures of an increase in industrial activity of 12 per cent. Last year and an in crease in exports of £30,000,000 during the past year shows, and I was surprised to hear the right hon. Member for Darwen (Sir H. Samuel) seek to belittle this achievement of increasing exports by £30,000,000.by saying that during the years 1929–31 exports had decreased by some ten times that amount. It occurred to my mind at once that during those years the country had been living under a system of free trade, for which he has always stood, and under the Government of the party opposite, and surely an improvement in the export trade of £30,000,000 is not to be despised, especially if one can go further and, in spite of the state of world affairs, point to a further increase of £10,000,000 during the first quarter of this year, and to the fact that there is every hope of that increase continuing throughout the year. Coupled with this, it was most refreshing to hear the Chancellor's statement that this year there have been fewer days lost through trade disputes than ever previously. Here surely we have positive proof that the working people of this country are feeling the benefits of our greater prosperity, a prosperity so much due to the efforts of the National Government There is one direction in which I must admit my conscience is not quite satisfied, and that is on the question of economy. Three years ago we talked a lot about economy, but in fact the Supply services have not only increased during the present year, according to the figures in the Budget, but if we take into consideration the fall in commodity prices, they have increased very much further. I think I am right in saying that if we take into consideration the purchasing power of the pound to-day compared with 1929, expenditure on the Supply services— that is, the civil services, war services, and revenue departments— in those six years has increased by no less than 75 per cent. It seems to me that there is a definite danger of the present Government submitting far too easily to this great increase. My hon. and learned Friend the Member for Central Nottingham (Mr. T. O'Connor), in. his admirable speech, said that economy was dead. That may or may not be so. Economy may be dead, but it must not, be forgotten. I know that £10,000,000 is needed to renovate the forces, and I do not complain of that, but I cannot help remembering that in 1932 a committee of about 100 Conservative Members of this House did look into the matter and recommended economies of many millions of pounds. Those recommendations, for one reason or another, were not taken very seriously, and some of them may have been mistaken, but there was behind them a good deal of common sense and careful thought and I would like to ask the Chancellor of the Exchequer to ask himself whether the pledge of economy has been carried out quite as faithfully as he would like, and whether, in view of the very real danger of taxation being stabilised at the present ultra-high level, he will not look into the question of economy once again.

There is one other criticism to which as a layman I should like to submit the present Budget. It is the continuation of the practice of using Death Duties as current revenue. It may be that I am not one to talk of the canons of sound finance, but surely it must be clear that the Death Duties are capital, and capital should not be expended annually as revenue. Like every Member of this House, I am delighted that the Chancellor has reduced the tax on the cheaper seats of cinemas. They may be luxuries, but we have reached a stage in the standard of living of this country when we can regard luxuries for the poorer sections of the community as pretty well necessities, and surely there is nothing that gives a person better recreation from the humdrum routine of daily life than a couple of hours in a good cinema. I finish as I began by congratulating the Government, first and foremost, on having taken a further step towards fulfilling election promises and in that way justifying the confidence which the people of this country have shown in a National Government.

8.2 p.m.

Sir WALDRON SMITHERS

Before I make the remarks which I wish to offer to the House to-night, I want to say one word about the speech of the hon. Member for Leigh (Mr. Tinker), who I am sorry is not in his place, in which he contended that the Income Tax reduction had no relation to the unemployment figures. He pointed out— and it has been pointed out by many speakers on both sides of the House— that we still have a few more than 2,000,000 unemployed in this country, but hon. Members who make that point always seem to forget that there are a great many more people corning into the employment area every month and every year; and the fact is that in 1933 the monthly average of employment was 9,600,000 in round figures and in 1934 it was 10,100,000. That goes to show that the argument put forward by the right hon. and gallant Member for Ripon (Major Hills), that a reduction of 6d. in the Income Tax did give a great impetus to industry as a whole and increase the employment figures is right.

I have heard this Budget criticised among many people I have met since it was introduced as being an election Budget—that it is playing down to the smaller people to try to catch their votes. There was never a more unjust thing said. The Chancellor of the Exchequer, whose continuous policy and integrity are known to us all, last year said that he would take 6d. off the Income Tax to help a revival in the general trade conditions of this country, and that if and when that revival came, as it has come in a very remarkable degree, he would relieve those people who had made sacrifices, caused by the crisis of 1931. It is a legitimate sequel to the Budget of last year that this year the Chancellor has continued his policy, kept his pledges of relieving those who contributed from their small means to helping out the country in the hour of need. The speech of the hon. Member for East Fulham (Mr. Wilmot) would have been a very good speech on a public platform or at a street corner in his constituency, but, in spite of all the arguments which he brought forth, the fact remains that. to the smaller taxpayers throughout the country, those who have so willingly submitted to the reduction of 10 per cent. in their salaries, £11,000,000 is going this year.

There is one occasion every year when one is able to talk on more general lines. Enough has been said to-night about the different points in the Budget. I want for a few minutes to speak about this country's Budget this year and the fourth Budget which the Chancellor has introduced on more general lines, and to try to see how this country is prospering in relation to the other countries of the world. I believe it is a fact that in all the countries of Europe, with the exception of Portugal, the Budgets are in deficit and most have big balances against them. Alone in the world this country, under the guidance of the Chancellor of the Exchequer, has been able to restore a measure of prosperity, to retain confidence; and, if you will look through the speeches of all the men who are responsible for big business, the big bankers and the Chancellor himself, they keep on repeating the necessity for maintaining confidence, especially in this country.

Why is it, how is it, that the Chancellor of the Exchequer of Great Britain has been able to lead the country quietly but steadily away from the precipice with which it was faced in 1931 owing to the presence in this country for two years of a Socialist Government? The first reason why the Chancellor has been able to restore confidence and to attain a great measure of success in a chaotic world is that he has refused to try any experiments. I do not think— I say it with respect— that Members of this House and the country generally realise how important and vital it is for this country to pursue a path of finance along the lines of integrity and on well-laid and well-tried foundations. You may try experiment, in other countries. America is trying one to-day. They have been trying one in Russia. You have got dictators, with various policies forced on the people, in different countries of the world. But if these experiments fail, in most countries they have still got enough to eat. I returned only 10 days ago from a short visit to France. I have known the people with whom I stayed well for 30 years. The outstanding thing that was brought to my notice was that fear, panic, distress and poverty are facing the people of France. They are frightened; there is no confidence in France. But whatever experiments they try, whatever experiments they try in America, if they fail, the people of those countries still have something to eat, speaking broadly. But if we try mad experiments in this country, if we lase confidence in this country, if our credit is damaged, in this country alone of all countries, we are faced with starvation in two or three months. That is a point which cannot be made too clear throughout the country. The Chancellor of the Exchequer and the National Government have achieved this measure of success because they have stuck to fundamental principles. The only principles that I know that can bring economic and material success are these: that you must maintain your institutions, you must preserve your Empire, and then and then only can you improve the conditions of the people. These principles I believe to be the only principles which will in the end bring success to this country.

What has been the record of this Government in the four years in which they have been in office? What was the first thing they did? They maintained our institutions. The King is on the Throne. The courts of law are open for justice to all people. We have not experienced dictatorship methods, as they have in Germany arid elsewhere. We are still living with our constitution intact and with a balanced Budget. A very important American said to me the other day: "I wonder if you realise what your greatest asset in England is?" I said: "No, to what do you refer?" He said: "Your King, not because of the tradition, not because of the loyalty, not because of the affections you have for him, but because you have a non-political head of the State, which enables you to carry on with your democratic institutions, knowing always that there is something above party."

What was the next thing which the Government did? They went to Ottawa to preserve the Empire. This is not the place to-night to go into the details of the Ottawa Agreements, but for the purpose of my argument they do not matter. The great outstanding fact about Ottawa was this, that in a chaotic world one-quarter of the world still owes allegiance to the King and over that part of the world still flies the Union Jack. It may be said that these are rather sentimental principles, but in my humble opinion they are basic to prosperity. Truth, honour, credit of the country, patriotism— for none of these things can you give figures in Board of Trade returns or Estimates, but they are fundamental to the success of Board of Trade returns or good Budgets. The important point to notice about these three principles is this: they must be applied in that order. Having maintained our institutions and preserved our Empire, the third one follows as a matter of course. The tangible things of life depend upon the intangible, and now slowly but surely an improvement in the condition of the people is being achieved. There was never a greater proof of the argument which I am putting before the Committee than the fact that during the two years that the Socialist Government were in power had principles were applied and bad results followed, but during the four years the National Government have been in power good principles have been applied and good results have followed as a matter of course.

The other day I published some figures, which I do not propose to enter into tonight, covering 'about 30 activities of the economic and national life of this country. Those figures were published in the "Times" of the 9th April, and I submit that they require to be studied. They cover the economic and financial life of this country, and in every instance they show a steady improvement throughout the country from one end to the other. There is one further point which I should like to make which is very vital to this country, and that is that our Budget should be balanced. One hears a great deal of talk to-day about depreciated currencies and purchasing power. We have heard hon. Members to-night on the Opposition benches saying that they demand a Government that will do this and that, get the unemployed back into work and remove other blots on our national picture.

I would remind the House and the country that this Government and the Chancellor of the Exchequer had to start their work by first salvaging the ship and then gradually, by the application of sound principles, getting the ship on to an even keel and leading it into smoother waters. [HON. MEMBERS "Hear, hear!"] That derisive "hear, hear," shows exactly how little hon. Members opposite appreciate the gravity of the crisis from which we have emerged. I happened to be in close touch with all that was going on. during that serious fortnight in August,]931, and unless men had been found then, whatever their past political history, whose allegiance to the nation was greater than their allegiance to their party, this country would have been faced with a crisis the consequences of which, had it been allowed to develop, would have been more serious to the country than the consequences of the War itself. The point that I want to make is the importance of our having a Chancellor of the Exchequer who will insist on a balanced Budget. Now that we are off the Gold Standard and the currency notes of this country are used for the daily purchases of our bread, our meat, the payments of our rents and the daily services of our life, it is of the utmost importance that those notes should maintain a stable purchasing power. If any hon. Member will take the trouble to examine the weekly returns of the Bank of England he will see that the security behind our currency notes, to the extent of £250,000,000, are Government securities. So long as those Government securities are securities for which provision is made in the Budget, so long as they have behind them the taxable power of this country, and those taxes are recoverable by the full force of law, they constitute the best security in the world. They have a market value, an international market value, and if for no other reason, whatever criticisms are made of the Chancellor of the Exchequer for not conceding this demand or that demand, he should set his face as a flint against any demand that would jeopardise the balancing of his Budget, because upon the balancing of the Budget depends the purchasing power of our currency.

I referred just now to the state of France and of other countries. The biggest asset that this country has to-day, upon which the material results of the Budget depend, is the fact that we have a Government which has won and must retain, if we are not to come to disaster, the confidence of the people of the country. The whole of the material advances that have been made depend upon the measure of confidence and the measure of trust that we have in ourselves and that the world has in us. The most important thing that this Government have done and the Chancellor of the Exchequer has done has been to maintain the credit of the country. It is a remarkable achievement that in a chaotic world my right hon. Friend should again this year have had a surplus of £11,000,000. Be it remembered that this Government, and indeed any Government, can only control the area over which it is elected. This Government cannot control the policies or the activities of Herr Hitler, President Roosevelt or the head of any other State, and yet their activities and policies have a more or less violent reaction upon the affairs, the destinies and the prosperity of this country.

It is for these reasons that the Government not only in their financial policy but in their foreign policy are doing noble work in trying to persuade the nations of the world to become more sane and more neighbourly. This Debate ought not to pass without some tribute being paid to the Foreign Secretary, the Prime Minister and the Lord Privy Seal for the marvellous efforts they have made to secure peace in the world. So long as we have our present Chancellor of the Exchequer I feel certain that we shall pursue the path of rectitude and of right dealing in our financial affairs. I venture humbly to congratulate him on the success that he has won for our country during the past four years. This Budget only follows the policy that he laid down last year. It is a marvellous achievement and should be supported without division by every Member of this House.

8.24 p.m.

Mr. BATEY

I have listened with interest to the speech of the hon. Member and have disagreed with almost everything that he has said. There are one or two of his arguments that one must deal with, but before doing so I should like to say that he defended the Government and its Members. The Government came into power in one of the most unmanly ways that any Government could ever have adopted in coming into power. It was no credit to the Government the way that they came into office. Since then they have bungled. They have bungled on foreign questions. No Government has bungled foreign questions so much as this Government, and no Government has done so badly in domestic questions. I will leave the Government's four year record there. It is scarcely worthy of notice. Whenever the Government dare to appeal to the country they will get the answer of the country on their four years' work.

The hon. Member also tried to reply to speeches by hon. Members on this side of the House who have contended that a reduction of 6d. in the £in the Income Tax does not stimulate trade. The only argument he has advanced is that more men are employed than there were last year. We do not deny that, otherwise the numbers leaving school at the end of every term would have increased unemployment enormously. But I should like him to justify the statement that those who have been employed are employed because of the 6d. reduction in Income Tax. I have always understood that the Conservatives claimed the credit of this for tariffs, but if a 6d. reduction of the Income Tax has this effect there is no need for tariffs. I should like some Member of the Government to tell us how a 13d. reduction of the Income Tax does stimulate trade.

I come from a different part of the country to the hon Member, and perhaps our views on the Budget and on public questions are coloured by the part of the country in which we live. I come from a distressed area, and the Chancellor of the Exchequer's jubilation about the increase in the prosperity of trade may be due to the fact that he is so much in London where unemployment is only 3 per cent. In the county of Durham it is 35 per cent. and in one of the Exdhanges in my constituency it is 56 per cent. and in another part of my division 42 per cent. So far as the improvement in trade and industry, which seemed to gladden the heart of the Chancellor of the Exchequer yesterday, is concerned, it has passed us by. I wish that before the Chancellor of the Exchequer had de livered his speech yesterday he could have gone into the county of Durham and passed through that distressed area. Perhaps he will do this before he makes his Budget speech next year; if he does I am certain that we shall not have a Chancellor of the Exchequer talking about the improvement in trade in the way the right hon. Gentleman did yesterday.

The right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) went up to Durham two or three weeks ago and made the wonderful discovery that there was immense poverty in Durham. We have been telling the House this for years and years, and if the Chancellor of the Exchequer before he delivers another Budget speech is compelled to go to Durham he will have a different story to tell and will not spend so much time on our improving trade. He talked yesterday about £50,000,000 having been saved and gave the impression that these say ings in the Post Office Savings Banks were the savings of the working classes. The story of £50,000,000 savings leaves us cold in the County of Durham. We know that the savings are not there, that the people have not saved money. When the right hon. Gentleman talked about sugar and tea he came much nearer home. He talked about 80,000 tons more sugar having been used to sweeten the lives of the people. I wonder how much of that was used in households and how much in manufactures. It would be interesting to know how much more has been used in households. My experience is that the poorer people, those on the means test, have had to do without sugar altogether. The Government by their policy have forced them to do without bacon, that is one of the things which is not told, how the Government have forced the poorer people to do without bacon in the morning and how they have made it impossible for them to buy milk.

Major PROCTER

Is it not a fact that bacon is cheaper to-day than it was under the Labour Government?

Mr. BATEY

I do not know where the hon. and gallant Member buys his bacon, but my information is that bacon is immensely dearer as a result. of Government policy. The poorest of the people have been debarred by the Government from getting bacon for breakfast, and by increasing the price of milk they have also made it impossible for the poor people to buy milk. And just where do we stand with regard to sugar? Over 80,000 tons more have been used. Has it been used in factories or in households? I think it has been used in factories rather than in households. When the Chancellor talked about tea he came right home to our people. It is more than a stimulus now, it is a food. They have nothing else to live on. It is tea for breakfast, tea for dinner, tea for tea and tea for supper. It does not surprise me in the least that there is an increase in the consumption of cups of tea. But that is no credit to a Government which forces poor people into such poverty that they cannot buy anything else but tea. I was interested in the statement about the prosperity of iron and steel. We were often told in the County of Durham, next door to Middlesbrough with its iron and steel industry, by tariff lecturers years ago that if tariffs were put on iron and steel every one of our men would be working, be cause more coal would be needed in order to produce the iron and steel. Where are we to-day? The Chancellor of the Exchequer says that iron and steel have increased by 30 per cent. but we are not one whit better in the County of Durham; we are just where we were. The prosperity of the iron and steel industry does not affect us.

The hon. Member also said that the Chancellor of the Exchequer has kept his pledge to relieve those who suffered in 1931. That is interesting, because the right hon. Gentleman has kept his pledges to everyone but two classes. He has not kept his pledge to the supertax payers by returning them their 10 per cent., and he has not kept his pledge to the unemployed, who suffer under the means test. It is rather strange that we should have those two classes bracketed together, neither of them worth the consideration of the Chancellor, except that he did extend his sympathy to the supertax payers. But there was no sympathy for those suffering under the means test. The right hon. Gentleman talked of those who were in the sunshine and those in the shadows. Those on the means test are never in the sunshine, they are always in the shadow. The Chancellor has not carried out his pledge to these men.

The means test was established in 1931 as a matter of economy. When the election took place in 1931 the industrial areas would never have agreed to the means test being established had they not believed that it was essential to help the country during a period of economy. Now when the Chancellor sees his way to restore everything else that was cut in 1931 the unemployed have a prior claim on him in regard to the means test. The Chancellor has finished the year with a surplus of £7,500,000. That is no credit to him, and no credit to supporters of the Government. If it had not been for the means test, if it had not been for the starving of thousands and thousands and thousands of unemployed men, there would not have been this £7,500,000 surplus. The Chancellor has the £7,500,000 that he has taken out of the poverty of the people and he has used it to pay off debt. It would have been immensely better for him to have given that money to the poor who are suffering under the means test. I want to give the House two or three cases which in my opinion are really hard cases. Here a man writes to me: I am a victim of the dole, but the trouble arises through my pension. I am a Colour pensioner, with nearly 18 years service spent in foreign fields for the upholding of the Motherland's prestige. I receive 8d. per day, or 4s. 8d, per week, paid quarterly £3 Os. 10d. Yet I am to suffer the injustice of a reduction. I want to know if they can class my pension as one week's earnings. Here is a notice issued by the Area Office of the Unemployment Assistance at Board Spennymoor:

"Quarterly Payments, Quarter ending, 31st March, 1935.

"Applicants are notified that quarterly payments to be received at the quarter ending 31st March, 1935, will be dealt with as follows; (a) one half will be ignored; (b) the balance will be treated as income and set against the needs of the household."

Do any hon. Members justify the action of the Government in saving £7,500,000 out of men like that, with 18 years' service? Here is a letter from the Secretary of the Spennymoor Branch of the British Legion: I am requested on behalf of the members of the above branch to bring to your notice the following case: Mr. George Henry Westgarth, of 10, Marmaduke Street, Spennymoor, is an ex-service man on Army reserve pay after completion of eight years' service in the Army. His reserve pay is £3 18s. 6d. per quarter. After drawing his reserve pay on 1st April he was informed at the Labour Exchange, Spennymoor, that there was no unemployment benefit for him, also that his father who is also unemployed would not receive any benefit. The result was that neither father nor son had any means at all, nor can they obtain any assistance from the public assistance committee. I may add that there are very many similar cases to the above in Spennymoor where the dole has been stopped the week the persons get their reserve pay.

And then the letter goes on— This ought not to be so. Yet this Government is doing it. Can hon. Members justify such a monstrous and mean thing as saving £7,500,000 by starving men and women?

Sir ISIDORE. SALMON

Has the hon. Member proof of any of the charges he has made?

Mr. BATEY

How do you mean?

Sir I. SALMON

The hon. Member has just given ex-parte statements without having examined them. Otherwise he would have been more careful.

Mr. BATEY

Does the hon. Member say that the Secretary of the British Legion branch is not telling the truth? That is what his statement means. I am prepared to believe the Secretary. Let me give another quotation, and this cannot be questioned. It shows the way the Government are saving money. It is an answer received from the Minister of Labour only to-day regarding a case that I sent to him. This statement must be authentic: Inquiries have been made of the Unemployment Assistance Board, and I am informed that the household consists of the father, who is the applicant, and the son. The needs of the household, after making the appropriate rent adjustment, amount to 24s. 6d. The son's earnings are 42s., and of these, under the Regulations, he is allowed for personal requirement other than maintenance, a sum of 12s. 2d. Accordingly 29s. 10d. remains to be set off against the needs of 24s. 6d., and a nil determination was made. It is mean on the part of the Government to take a balance of £7,500,000 last year for the repayment of debt, and to start this year with the intention of going on with the means test and saving money from these poor people, and then boasting that they are doing something that is worth while. Will some member of the Government tell me what the Budget will do towards providing work in the county of Durham? I see people there going on year after year, right down in the gutter. What will the Budget do towards the provision of employment for them?

We hear talk about a five years' plan for public works. That may be useful, but it will not solve the problem. The Government must do something far more than provide work for men on roads. The Government must set up industries, so that men can get back into industry. The Government must not be content with public works which will mean the expenditure of very little this next year. They appointed a Commissioner and sent him to Durham. They set aside £2,000,000 for the Commissioner. But the whole thing is a farce, and, what is worse, the Government knew it was a farce when they appointed that Commissioner. When an hon. Member wanted to know how many people had been provided with employment by the Commissioner he was told that it was not the work of the Commissioner to provide employment. If that was not the object of the appointment of a Commissioner, then

what was the object? What is the point of sending a Commissioner to Durham to do work which the local authorities could do? But the House understood that the Commissioner was appointed for the distressed areas, and the sum of £2,000,000 was set aside, in order to provide work for men who had been for such a long time out of employment. Yet here we are to-day no further forward than we were when that appointment was made. There is no intimation that the Government intend to increase the sum of £2,000,000. Indeed, they need not bother about it because that £2,000,000 will serve the Commissioner for a long time.

No, the Government will have to do something else if they are going to help the depressed areas. They will have to do more than merely rely upon a commissioner whose powers are so small that he can accomplish very little. I would remind the Committee that in Durham at present we have no fewer than 41,000 men receiving standard benefit and 80,000 men receiving payments under the Unemployment Assistance Board. In February we had 121,000 men unemployed in the county. Even worse than that, we had, according to the Minister's figures, 30,500 boys and girls unemployed in Durham. When the Civil Lord of the Admiralty made his investigation in Durham he estimated that in 1937 there would be a surplus of 31,000 boys. What are the Government doing to deal with that problem? What hope is there in this Budget that anything will be done for these young people. I may be reminded of the Jubilee Trust Fund which is being started. One has not much faith in that relief fund which has been started and is known as the Jubilee Fund. I know that it was started at St. James Palace and that all the mayors of the country were brought there to be addressed by the Prince of Wales. I know the Prince of Wales said: As I see it, youth needs three things.…It needs discipline, it needs friends and it needs recreation and interest. These three gifts are in our power. In Durham youth needs something far more than discipline, far more than friends, far more than recreation. It needs work. It seems to me that this Jubilee Fund is just started in order to attract the attention of people away from the real question of providing employment for these young people in our distressed areas. Coming as I do from a depressed area I look at this Budget from one standpoint. I ask what will it be for our depressed areas in Durham? When I regard it in that way, it leaves me cold. There is no hope in it. All we can hope for is that this Government will make up their minds to go to the country and give us the chance of replacing them by another government.

8.50 p.m.

Mr. FLEMING

I will not follow the hon. Member for Spennymoor (Mr. Batey) in what he has said, because I fear it would take me too long to deal with all the questions which he has raised. There are, however, one or two particular points which I wish briefly to bring to the notice of the Committee. One of these has already been mentioned by the hon. Member for Leigh (Mr. Tinker). That is the case of the 200,000 old age pensioners who are doing their best to live on incomes of £1 a week. I happen to come from Manchester; I know Lancashire very well, and I can say the case placed before the Committee by the hon. Member for Leigh is perfectly correct. I have had instances of it brought to my notice in my own division which is looked upon—if I may use a vulgar expression—as one of the "posh" divisions of Lancashire. Nevertheless we have plenty of old couples there who owing to changed circumstances and the slump in property are now trying to live on £1 a week. Some of these old couples owing to slum clearance schemes have had to move from the old houses in which they formerly lived and go into council houses. In some instances out of £1 a week they pay 9s. or 9s. 6d. in rent. Obviously, there is little left to keep body and soul together. I am particularly glad that the hon. Member for Leigh brought up the question. These old couples represent as I say something like 200,000 people, and I would remind hon. Members that, in many cases, their sons served in the Army during the War. We promised those young men that we would do our best for them if they came back. In many cases the boys did not come back, but the old people are there and it is for us to do all we can to make the evening of their lives as happy as possible. I am not finding fault with the Chancellor of the Exchequer. I know how difficult it is to do all one would like to do. In fact I take the opportunity of congratulating my right hon. Friend on what he has done and what he intends to do for the married people in the restoration of allowances and raising the limit of taxable income.

There is another instance of hardship to which I would draw attention. Again, I am speaking from direct evidence. It may be that there are not many cases of this kind, and I hope there are not, but, if so, it is all the more reason why this little matter should be remedied. I refer to the case of a young lady who is maintaining an invalid sister. Under Section 20 of the Finance Act of 1920 she is entitled to an allowance of £25. The example which I brought to the notice of my right hon. Friend last year was that of a young lady in professional employment who, after all allowances had been made, was still liable to something like £2 5s. per annum. That is a small amount, but we have to consider that that young lady is doing her best to maintain an invalid sister who bad previously been in employment herself but is now entitled to no relief from any source whatever. A reference to the tables on page 17 of the Financial Statement will illustrate my point. This young lady's income was something like £175 a year. If that income were divided between the two, they would each receive something like £80 odd, and, if it were being paid to them in those proportions, both would escape taxation.

All that I am asking is that my right hon. Friend should extend his generosity to cover such a case as he has done in the case of children. He has now made the income tax allowance for children £50. I take it that the basis on which that amount is allowed is that it costs something like £50 up to the age of 16 to feed, clothe and educate a child. If a young lady takes upon herself the duty — as I consider it, the Christian duty— to look after an invalid sister who is an adult, it cannot take less than 250 a year to carry it out. I would ask my right hon. Friend to grant in instances like that the same allowance as he is allowing in respect of a child. I know that there are certain arguments against such a proposal, but I feel that my right hon. Friend is of the same opinion as myself. I take this opportunity of thanking him for what he did on behalf of this young lady when he remitted the whole of the tax. I am glad that he did that, because, from inquiries that I made, I found that the position of that household was becoming so desperate that desperate remedies might have been taken by the invalid sister to relieve the employed sister of the weight which she thought was hanging round her neck. I earnestly ask my right hon. Friend to consider some extra allowance being made in cases of that nature.

Everybody hopes that, as time goes on, the rates of taxation will be reduced, because, in spite of what some of my hon. Friends have said with regard to the reduction of Income Tax, I am convinced that if there were a further reduction of 6d., or better still of is., it would cause greater prosperity throughout the country and would help to increase trade and employment. If my hon. Friends on the Labour benches who have raised this matter would like to get an expert opinion on that question, the best people to whom to go are the practical experts, the small business men such as shopkeepers. They will tell you that when they reach the limit where they have to pay Income Tax any increase is such a burden on them that they almost wish they had never entered into business. Men in my division who were employed as workmen in days gone by and saved sufficient to go into a little business have told me that since the War Income Tax has so increased that they have regretted ever having left employment to go into business on their own account, because they feel that they are being crippled by the tax. When the hon. Member for Caerphilly (Mr. M. Jones) was referring to the employed being called upon to pay an extra Id. under the Unemployment Insurance Act, he forgot that the employers were also called upon to make a contribution.

Mr. MORGAN JONES

I have verified the figures since I spoke, and the facts are that the employer paid 2d. and the workman 3d.

Mr. FLEMING

I accept the hon. Gentleman's figures, but, when he made his first statement, he forgot to refer to the fact that the employer made some contribution as well as the employed. I want to refer to what is a sore point with everybody, particularly those from the industrial areas, namely, the means test. If I thought it were possible, I would like to see the household means test abolished entirely. I have, however, had a first-hand instance of the means test where I think it works admirably., It was the case of a man who used to be my next-door neighbour. He lived in a house which was at least £500 or £600 more valuable than my own. Through the fortunate circumstance of his being occupied as a clerk during the War he found himself after the War entitled to go on to unemployment insurance. Eventually, I saw him going down to Stockport every Friday morning to draw his benefit. I agree he paid towards it. When his benefit was expired, he was entitled to go on transitional payment, although he had not paid for that. He had not the slightest need to go on drawing the benefit, to which I agree he had paid, and no right whatever to draw transitional payment. He was a man in affluent circumstances, and it can be understood why I objected to such a man drawing money out of the Unemployment Fund. However, I am told by actuaries that if the means test were abolished, the extra cost of getting rid of the bad feeling which it has caused among my ex-service comrades would be so little that I would be willing to see it go. I join in the congratulations which have come to my right hon. Friend from all sides on his present Budget statement, and I can only hope that when he comes to make his Budget statement this time next year it will be better still.

9.5 p.m.

Mr. GURNEY BRAITHWAITE

There is a well-disposed person who every morning inserts a text in what is known as the agony column "of" the "Times" newspaper, and when I read this morning's announcement I could not help wondering whether my right hon. Friend was the person in question, for it reads as follows: Weary not thyself to be rich;…For riches certainly make themselves wings, like an eagle that flieth toward heaven. I could not help thinking how appropriate it was that when beginning a general debate on the Budget resolutions we should have for our text that extract from, I believe, the Book of Proverbs I think it is applicable to some of the speeches to which we have listened to-day from hon. Members opposite, because we have had from them a number of interesting and admirable suggestions of what they would have done with this surplus if they had had the opportunity. We had from the hon. Member for Leigh (Mr. Tinker) a sincere and admirable plea for the old age pensioner. We had from the hon. Member for East Fulham (Mr. Wilmot) a statement that he would like to see the duty upon petrol reduced. We had from the hon. Member for Spennymoor (Mr. Batey) a somewhat unexpected dissertation upon the hardships of the surtax payer; and we of course had from more than one speaker, some observations on the means test. But the Committee will do well to bear in mind that so far as hon. Members opposite are concerned the question of distributing a surplus does not arise. There has been no occasion when they have occupied the Treasury Bench when they have produced a surplus for distribution. It is true that on more than one occasion they have inherited a surplus prepared for them by some predecessor at the Treasury, but, as all the country knows only too well, we have had the opposite of a surplus in the Budgets produced by Labour Governments.

Mr. TINKER

I made the same plea when Lord Snowden was Chancellor of the Exchequer as I have made to-day, and he turned upon me on that occasion and said he could not find the money.

Mr. BRAITHWAITE

That rather underlines and emphasises the point I was trying to make. I am sure that the hon. Member has been most consistent in his advocacy of that reform, but he has just told us that he was informed by the Labour Chancellor that there was no money available for the purpose, and the Chancellor might have added, and perhaps did, because I was not in the House then, that he was in fact faced not with a surplus of £7,000,000 but with a deficit of some £170,000,000. I think that emphasises what, after all, is the preponderating fact, that my right hon. Friend, through the methods of sound finance, has produced once more a Budget surplus. I agree with my hon. Friend the Member for Huddersfield (Mr. Mabane), the right hon. and gallant Member for Ripon (Major Hills) and others who have said to-day that the estimates of revenue for the current year, if they err at all, err on the side of being unduly conservative. That may well be the case, but in any event the Committee should not fail to realise that a surplus is again in sight as a result of the financial policy of the Government.

I would join with those who have expressed their pleasure at what has been done in the matter of family allowances and the other help given to small Income Tax payers. The hon. Member for Withington (Mr. Fleming) said something about ex-service men and the war period. I regard the small Income Tax payers as the non-commissioned officers of industry and commerce, the very backbone of the trade of the country, and I am glad to think that many of those in the Government service, both on the civil side and in the fighting forces, who have had cuts restored to them will benefit not only from that restoration but also from the fact that they will come within, the ambit of the Income Tax concessions. I hope that my hon. and gallant Friend the Financial Secretary will allow me to add that I think the picture will not be entirely complete until some scheme is passed into law for extending unemployment insurance to black-coated workers with incomes up to approximately £500 per annum. I believe that investigations are being made to that end, and I very much hope it will be possible to bring them within some scheme of insurance before long. I am grateful for the abolition of the entertainments duty on cheap seats and what has been done for the theatres; and perhaps I may be allowed also to express the gratitude of a very large section of people who are not cinema "fans," as the expression is, or even theatre "fans," but who enjoy sport as a spectacle. Perhaps I may be allowed to say that as the Member for a Division which is providing one of the finalists for the English Cup at Wembley Stadium—

Mr. G GRIFFITHS

You must watch the Throstles.

Mr. BRAITHWAITE

The hon. Member is hardly in order in raising that point in this Debate, but he can take it from me that the closest watch will be kept on them. On behalf of a large number of people who support amateur football clubs, and who have had to pay 7d. for admission to the matches, may I say that the reduction in the entertainments duty will be a very great boon, much greater than appears on the surface, because the round sum of 6d. is much more convenient to find than the broken sum of 7d. May I also add my praise to my right hon. Friend for what, as I said last year, is the greatest achievement of his term of office, the fact that the purchasing power of our paper pound internally has remained stable. Hon. Members opposite have told us how grave would have been the situation of our working classes and the unemployed had there been any great depreciation in the internal value of the paper pound during the past two or three years.

The Chancellor spoke yesterday of the methods adopted by other countries in their endeavours to overcome the present depression, and the right hon. Member for Darwen (Sir H. Samuel) also referred to that subject this afternoon. Perhaps the gravest task with which the Government are now confronted is that of maintaining our trade in the face of fluctuating currencies in other countries, which constitute the greatest possible handicap to our manufacturers who are seeking to secure foreign contracts. We have often hoard from hon. Members opposite, including the hon. Member for East Edinburgh (Mr. D. Mason), who has referred to it more than anyone else, perhaps, with the exception of the right hon. Member for Darwen, of the evils of economic nationalism. It seems to me that we have now passed into an era of monetary nationalism, which in its way can be equally damaging. In a speech in this House in July, 1933, I referred to the situation which would arise through the de-valuation of currencies or a currency war, which, in my submission, can be in its effects as damaging as actual warfare by force of arms, if carried to a sufficient length— not damaging in loss of life and bloodshed, but in economic distress and the paralysis of trade.

During the last week or two we have seen Belgium attempting what might be regarded, perhaps, as a de factostabilisation of her currency. That has undoubtedly caused disquiet and discomfort to other countries. The Government have dealt with that situation from our point of view by raising the steel duties to 50 per cent., in an attempt to counter the devaluation of the belga. An attempt is undoubtedly being made upon the Dutch guilder. I do not think it is an exaggeration to say that France is making preparations for what I would describe as a financial Verdun. The franc is in grave danger from an attack which, ii successful, may cause an extremely serious unheaval in France which might well have repercussions here.

The hon. member for Kidderminster (Sir J. Wardlaw-Milne) said earlier this afternoon that the primary need of the world was some form of stabilisation, however temporary. We should be a little churlish if we did not pay a tribute to those who, in 1933, did what they could at the World Economic Conference in London to deal with that problem. Hon. Members will recall how the conference was torpedoed by the President of the United States, who was anxious to tinker with his own currency and to introduce his new deal. Now, two years later, with wages and prices at artificial levels in his own country, he sees prices falling, despite all his efforts, and wages, having been fixed, presenting him with a problem which will be very difficult politically to overcome. Before me are very much older there may be a request from the United States for the holding of a new world economic conference, and, if there is, I hope that this country will not be slow to respond.

The difficulties of stabilisation are enormous. One can imagine all those 66 nations reassembling for the purpose of stabilisation, all agreeing that it is essential and urgent, but all disagreeing as to the figure at which stabilisation should take place. If I may use a vulgarism, what would be done at a conference of that kind would be an attempt to pass the buck to one another, through the medium of stabilisation, the buck being our unemployed and our unemployment problems. The difficulties, as I say, are enormous. America is already flying signals of distress as to her financial position. Knowing what we do about the finances of that country, and of that country's unbalanced budget, we should be extremely unwise to stabilise with the dollar at present. We must wait until we see a little more clearly the outcome of the Roosevelt experiment. In these days of new deals and de-valuation in other countries, my right hon. Friend's Budget, conforming as it does to orthodox methods of finance and a credit balance, will cause sterling to appreciate in terms of foreign currency for the next few weeks, and that will mean a handicap to us in some of our export markets.

As the representative of a large industrial constituency, I emphasise the absolute importance of protecting the employment and the wage standards of our people during the period of devaluation abroad—not that I think it necessary to do more than mention this, because I am sure that the Government are alive to it. It must be the first consideration of the Government, without regard to anything else. The country, although welcoming the progress which has been made during the last three years, looks to this House to maintain the standard of living to which our people are accustomed. I see opposite the hon. Member for Mansfield (Mr. C. Brown). I was profoundly moved by the speech which he made the other evening on the Adjournment, when he said, with obvious sincerity and in a whole-hearted manner— I think the discussion was upon the increased importation of hosiery— to what length he as a Labour man would be prepared to go to prevent foreign goods coming into this country in such a manner as to undermine the standards of Jiving and the wage levels of our people. The hon. Gentleman undoubtedly spoke the opinion of the House and of the country when he said that.

But what a lamentable sequel took place on the following day, when the Government proceeded to do that by raising the duty on steel from 33⅓ per cent. to 50 per cent. in order to deal with that actual question of de-valuation. I do not know whether the hon. Member for Mansfield was present, but his party divided the. House against the proposed increase of duty and proceeded, so far as their votes were concerned, to take action which, if successful, could only have resulted in creating unemployment, and possibly lower wages, in the steel industry. Cuts have not only been restored by the Government during the last few months, but Government policy has made it possible for a large number of private firms in the iron and steel industry to restore cuts which they enforced at the time of the depression. When the hon. Member for Spennymoor was speaking on the subject of bacon, he said that the Government had made it impossible for the unemployed and the lower-paid wage-earners to eat bacon for their breakfast, but I could not help remembering that 20s. now buys essential foodstuffs which would have cost 23s. 9d. in 1930, when his friends occupied the Treasury Bench.

The Budget introduced yesterday points one emphatic moral, which is that it has required four years of hardship and sustained effort to recover, even partially, from the situation in which we found ourselves in 1931. I hope and believe that the electorate will not readily venture again upon that slippery Socialist slope which leads to first-class financial crises, Budget deficits, cuts, hardships and sacrifices, and to a lower standard of living for the workers of our land.

Mr. GEORGE HALL

In the course of the opening remarks of the hon. Member he suggested that at no time had a Labour Chancellor produced a surplus. I am sure that he does not desire to mislead the Committee. I would therefore like to refer him to the opening remarks of the Chancellor of the Exchequer who succeeded the Labour Government of 1924. Those remarks paid great tribute to the accurate finances of the ex-Chancellor of the Exchequer. I do not want to take up the time of the Committee by reading the whole of the paragraph, and it will be sufficient for me to read this: ‖ the right hon. Gentleman has been fortunate as well as far sighted, the final and general result may justly he laid to the credit of the careful and scrupulous finance by which his administration of the Treasury was distinguished."—OFFIcIAL REPORT, 28th April, 1925; col. 49. Vol. 183.]

Mr. BRAITHWAITE

I, too, am anxious not to take up the time of the Committee, but I am sure that Lord Snowden will appreciate that tribute from a somewhat unexpected quarter at this moment. The extract which has been read makes all the more lamentable the fact that what the hon. Gentleman for Leigh advocated was not done.

9.25 p.m.

Mr. STOURTON

The Chancellor of the Exchequer is to be heartily congratulated on once again balancing his Budget and thereby setting an example to the whole world of financial honesty and integrity. The substantial surplus which he has achieved demonstrates to all who are interested in these questions the benefit of maintaining sound financial principles. Now let me say a word about the surplus of £22,000,000. Taken into consideration with the surplus of the previous year this brings the two up to a round figure of about £50,000,000. I am bound to say that I regret that this money has gone to debt redemption. Admittedly this has done a great deal to improve British credit, but I have been one of those who has always chafed at the over-cautious policy of the Chancellor of the Exchequer in matters of taxation. It would have been better if the Chancellor could have seen his way to use the sum represented by this surplus for reducing the standard rate to 4s., thereby stimulating trade, while postponing the payment of debt until more prosperous times. There is a great deal to be said for this contention as I will now show.

I have noticed that there is a tendency to a fall in the yield from direct taxation. I will quote one or two figures. In the year 1929–1930 the amount of Income Tax received was £238,000,000 with a 4s. rate, but in 1934–1935 the amount decreased by £7,000,000 to £229,000,000 'with a 4s. 6d. tax. Surtax figures show similar results. For the year 1929–1930 the receipts from Surtax were £57,000,000. Last year they were down to £51,000,000, a decrease of £6,000,000, although there was a 10 per cent. increase in 1934–1935 which was not operative in 1929–1930. To my mind, these figures indicate that the taxable capacity of this nation has been reached if not, exceeded, and I think if the occasion ever arises for an increase of taxation in a time of emergency it may well be found that the increase defeats its object. I believe the time has now come, 15 years or so since the War, when there are no more hen roosts left to rob, and when very little scope remains for further conversion. Therefore, it behoves the Chancellor of the Exchequer to move warily, in case we ever have substantially to add to expenditure. Having pointed 'a warning finger to the fall in yield from direct taxation, I cannot go on to another subject without first referring to the crazy finance advocated by the Socialist party with regard to social legislation. As the general election draws nearer, we find their promises advancing by leaps and bounds. I would venture to quote an extract from what the right hon. Gentleman the Leader of the Opposition said in this House on 14th February. I am sorry to see he is not here to-night. Speaking of the unemployed, he said I believe you will never deal with this question properly until you give the man who is out of work through no fault of his own enough to maintain himself and his children on the best standard of wages that there is in the country."— [OFFICIAL REPORT, 14th February, 1935; col. 2103, Vol. 297.] I think it is high time these frauds on the electorate were exposed. I propose to prove that such a promise could never possibly be fulfilled. I will assume for the sake of argument that the unemployment figure is 2,250,000. We will call the average wage £3 a week, bearing in mind that many are drawing more, but many also less; by a simple calculation we find that it would cost to subsidise the unemployed on this scale £350,000,000 a year, or approximately 50 per cent. of the Budget total. Unfortunately, the right hon. Gentleman the Leader of the Opposition is not here, but I would propose that at some future date he should take the opportunity of answering these five connundrums I desire to put to him. First of all I would ask, by what means he proposes to raise this vast sum of £350,000,000? Then I would enquire, how many industries would survive the attempt to collect this vast sum through direct or indirect taxation; how many more millions would be added to the unemployed if this attempt were put into practice; and, yet again, what would the agricultural labourer, who draws a great deal less than £3 a week, think when he found that those who are idle were drawing a great deal more than he? Last of all, I would ask any Socialist Member above the Gangway to explain how any working man could be expected to take work if he could get £3 a week for doing nothing? I think the country is entitled to an arswer to these questions, since such statements are being put about the country from all quarters of the Opposition benches. There is another favourite scheme which the Socialists adumbrate, and that is an increase of old age pensions and a reduction in the qualifying age. It has been suggested by some that the age limit should be reduced to 60, 'and the pension increased to £1 a week. It requires no great mathematician to work out that this would cost the country £220,000,000, rising to £280,000,000, in 20 years time, which, added to the £350,000,000 already mention, comes to £630,000,000 —not far short of the complete Budget total. Such a fraudulent prospectus could hardly mislead the most ignorant elector.

Now a word about Death Duties. The receipts were in the neighbourhood of £85,000,000, which was £5,000,000 in excess of the Estimate. Millionaires have been departing this life like flies in winter. I think this interesting species is worthy of preservation, if only for the same reason that the ant supports and nurtures the green fly, in order that sustenance may be derived therefrom. I believe than all this money drained by the Death Duties should be allocated to capital purposes (since these moneys have been raised from the accumulated savings of the people), namely, to such purposes as debt redemption or other capital expenditure. The question arises as to how, if the sum raised from death duties were allocated to capital purposes, the equivalent revenue could be raised elsewhere? I venture to lay before the Committee one or two suggestions which, I think, might be of assistance. In the first place, there is the question of reducing taxation to stimulate trade and create an expanding revenue. I will say no more about that, as I have already spoken in reference to it. The next point that I would raise in this connection is that of reducing taxation where the law of diminishing returns has become increasingly obvious in the case of indirect taxation. The tax I have particularly in mind is the whisky duty— a hardy annual in this House. I was surprised that the Chancellor of the Exchequer did not reduce the duty this year. I may say at the outset that I have nothing whatever to do with the trade, and merely regard it, as no doubt the Chancellor does, as a substantial source of revenue, which should be safeguarded.

One or two figures are worth quoting on this subject, because they are extraordinarily illuminating. In 1919, when the duty was only 50s. a gallon, the Chancellor of the Exchequer of that day estimated the revenue at £52,000,000, and actually received £59,000,000. In the following year, when the duty was increased to 72s. 6d., the Chancellor budgetted for the enormous yield of £85,000,000, but received only £71,000,000.It is clear, then, that the adverse effect upon the revenue coincided with an increase of the tax. By 1929 the receipts from this source had fallen to £45,000,000, and they are now down to about £30,000,000, or less than half what they were in 1919. Surely this is obviously a case of over-taxation, and I hope the Chancellor will give it consideration in his next Budget. Not only is the distilling trade badly hit, but the effect spreads much wider. There has, for example, been an enormous reduction in the acreage of barley grown in Scotland during the last dozen years or so, and I feel therefore that the Chancellor should do something about this tax before people lose the whisky habit altogether, and the whisky duty ceases to be a source of revenue.

I am now going to mention what, I think, is a novel point in this House by way of a suggestion for economy, and I hope the Financial Secretary will be good enough to make some reference to it in his reply. It is that something should be done to see how expenditure could be cut down in Government Departments. I believe it could best be done by what is known as an investigation of labour utilisation. There are engineer consultants who specialise in this work, and investigation has been made by such consultants for many of our great industrial companies with startling results. The average saving has been 22 per cent. and in one case a gigantic firm, the name of which I could mention, and which is a household word, no less than 28 per cent. has been saved. If these results can be obtained in the instance of great public corporations which are run for profit, how much greater opportunity would there be in State-run departments where, as far as I can see, time and money are no object and labour is remunerated solely by the taxpayer. I venture to suggest that here would be an opportunity for Government enterprise which would be well rewarded.

I have no wish to say anything against the Civil Service of this country. I know very well, as every Member of the Committee knows, that we have the finest Civil Service in the world. But is is undoubtedly an expensive luxury. Apart from Post Office salaries, I believe the cost is something like £50,000,000 a year. It may interest the Committee to know what a large number of highly-paid civil servants we have in Government employment at the present time. There are 1,795 drawing salaries of over £1,000 up to £1,500 a year; 390 of them are drawing salaries between £1,500 and £2,000 a year; 30 are drawing salaries between £2,000 and £2,500; and 22 are drawing very high salaries of from £2,500 to £3,000. An additional fact is that these salaries are pensionable at two-thirds rate, which makes the advantage of being a civil servant very great over most other forms of employment. I think that here would be an opportunity for the Chancellor of the Exchequer to save say, £12,000,000 here.

The next point that I wish to suggest in the direction of economy is the withdrawal of wasteful subsidies, and I propose, time being limited, to take as my one example the beet sugar subsidy. I regard this subsidy as a public scandal. In 11 years no less than £47,000,000 of public money has been squandered upon it, and I believe the figure is £7,000,000 for the present financial year. In my humble submission this industry is totally uneconomic, never has justified itself and never will. I believe it is an example of a gross piece of favouritism to one section of agriculture at the expense of the rest of the community, and that its existence is resented by everyone outside this particular section of the agricultural industry. One extraordinary argument put forward by those who support the granting of the subsidy is that it kept 32,000 people in work during 1934 who otherwise would have been out of a job. If that be so, it is going to be a very expensive business to get our unemployed people back to work, because I reckon that at that rate it would cost £21,000,000 to put 100,000 people back to work, or in other words for the trifling sum of£420,000,000 a year we might solve our unemployment problem. I believe it to be a luxury that we simply cannot afford. My solution of the problem would be as follows: I would suggest that the subsidy should be withdrawnin totoand that the suggestion thrown out in a leading article in the "Times" the other day should be adopted, namely, that there should be a duty on foreign sugar with a preferential rate for Empire produce. That, I believe, would be treating the matter from a saner angle that at present. I believe that the price of sugar would not necessarily be increased to the consumer because of the heavy subsidy on foreign sugar.

I come to the last point which I propose to raise. Perhaps it is the most important of all. I refer to what I would describe as a selective expansionist policy. Ever since I have been in this House, which is not very long, I have advocated a combination of sound economy, that is, where economies can be made by cutting out wasteful expenditure, and, at the same time, Government enterprise being carried on where private enterprise needs stimulation. I believe that the two policies are not incompatible, but complementary. As regards economy, I do not think that the Government have shown the enterprise they should have done. They seem to have forgotten the Economy Committee Report of 1932, but in the direction of an expansionist policy I give them credit for having done a good deal. Their housing policy has been a great success. It is being vigorously carried on. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), who is absent to-night, has suggested that the Government might expand further in this direction and accelerate the rate at which houses are being built. He suggests also that we require 2,000,000 houses. I am not prepared to dispute his figures, but I am very much in doubt whether it would be possible to accelerate the rate of building processes in this country at the moment, for the simple reason that there is a shortage of skilled building operatives. The Government are also to be commended upon their enterprise in enabling the "Queen Mary" to be built, and I hope that at no distant date they will announce the laying down of a sister ship. With 2,000,000 unemployed, neither the Government, nor indeed any Member of this House, can afford to be complacent. I, and many other Members of this Committee, maintain that more vigour is needed behind the Government's punch. We have 2,000,000 unemployed with whom to cope, but the problem is not as grave as some hon. Members above the Gangway would make out for political purposes. It is well known that the hard core of unemployment in this country is only about 400,000, that is, men who have been out of work for periods of more than two years consecutively. Again, there are many people included on the register who should never be there at all, because through some physical disability they are not able, and have never been able in the past, to do a full week's work.

I should like to make one or two suggestions to the Government for carrying out a more intensive policy of reconstruction. The first suggestion I make is the electrification of the suburban railway services of this country. Actually the Southern Railway Company is capable of looking after itself, because it is a comparatively prosperous concern and is carrying out electrification on a large scale on its own initiative. But I submit it is essential that there should be some Government aid given to the other lines, notably to the London and North Eastern, which is in a parlous way financially in as much as it has not paid any preference dividend for years nor, of course, any dividend on its ordinary capital either. I believe that here would be a splendid opportunity for an investment of £50,000,000. I would suggest that if all hon. Members would take the trouble to go to Liverpool Street Station and observe the teeming hundreds of thousands of the populace being decanted each day into the City, and the great discomforts they suffer, even the doubters as to the possibility of taking action in this direction would becomes advocates of some such scheme. A Government loan could very easily be raised on a 23, per cent. basis, and I hope that the Chancellor of the Exchequer will recommend the Government to do something on the lines which I have suggested.

Now also is the acceptable time to get a move on to provide for a proper supply of water all over the country. In rural districts medieval conditions still prevail. I know of many small country towns and large villages where there is no proper water supply at all, and no form of what is considered to be civilised sanitation. There may be another drought this year or there may not, but in any case it would be a real investment, and would show some return on the money expended. Therefore, I have no hesitation in humbly submitting it as a proposition to the Government. There is something to be said for the land drainage policy of the right hon. Gentleman the Member for Carnarvon Boroughs, and here, again, I think that there would be a return on the money expended. There is also the question of new road construction and the development of existing roads. I apologise for having detained the Committee for so long, but it is very difficult to boil down these important matters into a short speech. In conclusion, I would say that if the Government proceed with such policy the endorsement of the great bulk of the population of this country will follow and the National Government will be returned at the next general election with a great majority.

9.53 p.m.

Mr. LOGAN

I istened with pleasure to the remarks of the hon. Gentleman the Member for South Salford (Mr. Stourton), who said in the earlier stages of his speech that he had six problems, conundrums or questions to put to the Leader of the Opposition and that be was sorry my right hon. Friend was not present. In listening to his speech I should imagine that the whole of it was a problem or a conundrum. In one particular phase of it he dealt with the idiocy of Members on these benches who put forward a solution in regard to the unemployment problem. He dealt with the question of statements being made that so much per week should be paid to the head of a family to keep on the home. I agree that to keep people without work for all time would be idiotic, but the hon. Gentleman went from the sublime to the ridiculous, and mentioned that in the Civil Service there were men getting not 30s. or £2 a week, but £1,500 per annum. He said that they retire with two-thirds of their salary, which is £20 a week for doing nothing. He said that he had some problems to put to the Leader of the Opposition, but I should have thought that the hon. Gentleman ought to examine his own position. If a person receiving £1,500 per annum can retire on £1,000 a year, surely there should be some claim on behalf of those people who work casually, and have a family to maintain, and who have no pension to which to look forward. We will get right away from the sublime and the ridiculous and deal with facts. My point in rising is not to eulogise the Chancellor on his Budget. I remember a little Irishwoman who once said, "God help the poor man, he could'nt do any better, so don't blame him." Therefore, I am not going to blame the right hon. Gentleman, but I will make the humble criticism that one would think that, on the day of stocktaking, as yesterday was, in regard to the affairs of the nation, debit and credit accounts would be taken into consideration. He is a bad shopkeeper who goes into a place of business and looks only at his stock. Any business man should look at the hands inside his shop, because very often stocks are wrong because you have not got the right bands in the shop to handle them. Stock must be taken in a nation not only of its finances, but of its men, women, and Children. I am not decrying the concessions that have been made. In regard to the management of the affairs of a house, the mother, who is the chancellor of the exchequer, spends her money to the best advantage in the majority of cases, but doubtless in a family there is criticism as to how the money is being spent, and in this House, when it comes to the settling-up day, and when we are dealing, not with incomes of £500 per annum, as I heard mentioned to-night, but with those who are down and out, men and women who are absolutely at starvation point, we have a right to ask how these people are faring.

We are told that we have 2,100,000 unemployed, and it looks as if there is very little chance of many of them finding employment. Only a year ago, the Chancellor of the Exchequer said he felt that for the next 10 years there was likely to be a depressing time in this country; and this question of 2,100,000 unemployed has got to be dealt with either nationally or locally. With this vast army of unemployed that is demoralising the finances of the country, it is impossible to say that the depressed areas are or should be willing to bear all the burden, and if it be said that the depressed areas have no right to claim to have their burdens lifted, I think we have a right to say, when there is this immense Budget, that something should be done for them. The Chancellor of the Exchequer said that he was making a concession in regard to small incomes, but that is not the problem that confronts most of us in the industrial areas, where the people have no incomes, so I am surprised at hon. Members even on our own benches talking about the poverty of people with incomes of £50C per annum.

There is no question of poverty where there is an income of £500 per annum, but where there is only £1or 24s. a week to keep a man and wife, there you have poverty that calls for redress in a nation which can be munificent in giving away concessions. I contend—and from the speeches that I have heard to-night I think I shall be in a minority—that a nation has no right to make provision for those who have the good things of life until it has made provision for those who have not the necessaries of life. There is no moral law which justifies doing that sort of thing. In all the industrial areas where depression is most rife and the people are not getting properly fed, the allowances given to the homes are insufficient for the spending powers of the people. If they had the money, the spending power would enable works to go on, and 'instead of talking about the pound being able to look the almighty dollar in the face, we should solve the problem with the spending power of our own people.

The right hon. Gentleman the Chancellor of the Exchequer said yesterday that he was making provision for those who have large families and giving them an opportunity, but what opportunity is there to-day, in regard to the depressed areas, that the family life shall be retained— nay, even that life itself shall be retained— by the people who are underfed? Concessions are to be given to those who have means, but no concessions are to be given to keep body and soul together to those who have not the means of life. Therefore, I wonder why it is that we hear it said that if £50,000,000 could be given as a subsidy to the railway companies, the situation would be much better, and that if shares were paying better dividends, all would be well. What solution is the question of dividends to the 2,100,000 people who to-day are asking for the means of life? I think this Budget has been tackled in the wrong way. I am fully convinced that if any mother or father of a family, whether rich or poor, were to look round and ask, "What shall we do, from the point of view of our exchequer, in the expenditure of the money that we have at our disposal?" the first thing they would say would be, "Mary wants boots," or "Tommy wants a new suit of clothes," or "Some provision must be made for one of the others to become convalescent and go into the country." I am sure they would not say that to those who have we will give what we have got, and to those who have nothing, nothing shall be given.

What provision has been made in the Budget with regard to the poor of this nation Will there be any relief to the distressed areas, or will there be any removal of the means test, or has the Chancellor made any provision for the forthcoming year to ease the burden of the different localities I see hon. Members with a smile on their faces, when I am getting a little heated in regard to this discussion, but if those hon. and right hon. Members could accompany me to the place where I live and see these cases, they would understand the realities of the situation, not from the point of view of dividends. I know I am heated, but when I see these things, as I do, in the city of Liverpool, with men of sterling value, good honest men and women, not able to get the necessaries of life, I am compelled in the British House of Commons to raise my voice, no matter how I may hurt the feelings of those who are getting concessions. The burden of the depressed areas must call for consideration, and to-night is a night when an opportunity is given to speak straight and honestly to the one who represents the financial adjustment of the affairs of this nation. If ever a case was made out for the distressed areas of the country, it is now. It is essential, with the obligations that are being placed upon those areas, that some extra relief should be given and some means found, in the Budget, of making provision for the distressed areas.

I will give only one quotation. My hon. and gallant Friend quoted a moment ago the case of a man who could retire with a £1,000 a year. Yet we are told here— and these figures cannot be disputed— that a man with a wife and one child, having to pay rent, can get only a sum of 30s. per week from the Unemployment Assistance Board. Knowing the housing problem as I do as a member of the Liverpool Housing Authority, I know that a house cannot be rented at under 10s., 12s. or 14s. per week. Putting the rent at 10s. per week, which is a very low rental for a Corporation house, that means that the man, wife and child have got left to live on only 20s. per week. There is no Member of this House who would dare get on his feet and say that that is too much to pay to an unemployed man with a wife and child. You could not go back to any of your constituencies and make such a statement. It is nonsense for hon. and right hon. Gentlemen in this House to deal only with stocks and shares and with questions of concessions already made without ever taking into consideration the human element—that element which means the rise or fall of the prosperity of this country.

There is another point that I would like to put to the Chancellor of the Exchequer. I know the Chancellor is making an allowance, through some change in the formula, in regard to the education grant. That I think is good. But there is one other point that I would like him to take into consideration and that is the question of the police rate. I believe it is going to be on a fifty-fifty basis. If that be so, that is maintaining the status quo, but it is an extra liability to be borne by the different boroughs, and the local authorities will have to carry that extra amount. I put that point to the right hon. Gentleman. With the new responsibilities coming along, with the increase of cases coming from transitional payments on to Poor Law relief—and these cases will have to be carried until there is some form of employment found for them—we are burdening and crippling most of the industrial centres of the country. Therefore, I should like to know from the Chancellor of the Exchequer what prospect there is for some readjustment of this particular grant. It is all right to make concessions in the way of Income Tax allowances and the other concessions given in the Budget, but what is the Chancellor of the Exchequer doing for the depressed areas and for the depressed people who are unemployed? My contention is that whatever your Budget may be this year, next year or in any other year any Budget of any Government, whether Labour or National, that fails to realise its obligation and duty to the living is failing in its manner of government. Be- cause of that I express my dislike—I will not say disgust, because many points in the Budget are good—of this Budget. It has not taken the human element into consideration. I trust that the Chancellor of the Exchequer, before he has finished with the Budget and when he has examined his inner conscience, will consider the question of the depressed areas afresh and that he may find some reason to give an extra grant to get them out of their difficulties.

10.10 p.m.

Sir ISIDORE SALMON

In listening to the speech of the hon. Member who has just sat down one was amazed to hear the way in which he is criticising the Budget now before us. Were it not for the fact that the Chancellor of the Exchequer is a realist and has taken the view from the time when he brought in his first Budget of the importance, first, of balancing the Budget and, secondly, of dealing with what after all was the most important and pressing of national affairs, we should not have had to-day a Budget surplus. You cannot, as the hon. Gentleman who has just spoken seems to think, deal with unemployment unless you have the money for dealing with it and for helping the unemployed; and the suggestion that nothing has been done for unemployment seems to me to he far from the truth. The hon. Gentleman seems to forget that the mess which his colleagues made of things in 1931 and the fact that it has taken a number of years to try and get the position normal again. When he said that the Chancellor of the Exchequer and the Government had made no provision for dealing with unemployment he must have been aware that they have dealt with it in what is the most practical way of all-which is to try and get people back into the industries they understand rather than merely paying them the dole. When you study the affairs of the country today you find yourself up against a very large number of practical difficulties.

It is remarkable, I suggest, to think that we have found ourselves to-day in the satisfactory position— so far as it goes— of having a Budget surplus. The best proof of what the people outside this country think of the methods of the Government is to be found in the applause given us by the President of the United States, and also by the Prime Minister of France who pointed out the ability of this country in the way it has dealt with the situation during the last four years. It is a little unreasonable and unreal for the hon. Gentlemen who have criticised to say that nothing has been done for unemployment. If one spends money on such things as housing and roads, that, I think, is very remunerative expenditure. But I heard an hon. Gentleman to-day suggest that we should have a loan and start building ships. It strikes me that to have anything which is of a wasting character can scarcely be called of capital value. Therefore, I think it would be a mistake to attempt to create a loan for the purpose of building ships— and especially warships. It strikes me that if we want to create a loan at all it would be much better that it should be for the purpose of building houses and re-housing those who live in the slum areas.

I do feel that we are not looking for the Chancellor to come along with a spectacular Budget or spectacular programmes. What we want is real common sense. It is most important to realise the effect of the Government's programme a year hence, and the public and industry must have confidence in the Government. I believe that the reason trade is better to-day is entirely due to the fact that the people of this country have confidence in the Chancellor of the Exchequer and the National Government. That is reflected in many walks of life. The only way that you can get success is by working for it. Some people seem to think that luck does it. If you want to be successful, you must understand your job and not be afraid to work in it. The hon. Member opposite criticised the salaries of civil servants. I was a member of the Economy Committee and chairman of a sub-committee, and in my opinion many civil servants are not paid at all too high. In many cases they are not paid sufficient, especially in view of their great responsibilities.

Mr. LOGAN

I did not say that the Members of the Civil Service were paid too much, but I contrasted the position of the civil servants, with salary and pension, with that of the unemployed man who has not the means of existence.

Sir I. SALMON

A member of a trade union expects to get trade union rates, and, if you give certain responsibilities to a civil servant or to anyone else, he is perfectly entitled to be paid according to the responsibility of the class of work he does. I should like to refer to another criticism made this evening. The hon. Member for East Fulham (Mr. Wilmot) severely criticised the statement, of the Chancellor of the Exchequer yesterday that we had already reached 80 per cent. of prosperity. Some people have very short memories. Four years ago the members of the party opposite would not face up to the position. They ran away. They ran away because they could not see their way clear to give 80 per cent. of prosperity or even 20 per cent. It is remarkable that in such a short space of time we have been able to get a return of 80 per cent. of prosperity. It does not mean that we are stopping there. My view is that if we are prudent in our expenditure and do not go in for any large new deals—the mere effect of spending money is not in the end going to prove of permanent value to the country—we shall see still greater improvement. The great thing that we must try to do is to secure more export trade and to increase our home trade. It has been said, with a great deal of truth, that we must have not only national trade but international trade if we are to reduce unemployment generally. While I am a great believer in tariffs, there is a limit to the height that a tariff can be. The people of this country and of any country have a limit to their spending power. If we do not watch that we shall unquestionably suffer. Reference has been made to the means test. While I am in favour of a test, a means test, I think its application could be improved upon. When you are giving public money away it is necessary to have some check, but it all depends on the way you apply that check, and the regulations that are laid down. I feel that there is room for improvement in the application of the means test.

There is one thing which occurs to me as a way in which we might help industry at home and abroad, and that is by the introduction of a system of decimal coinage, which will bring about a general simplification of accounts and allow a more ready handling of figures, with consequent economies. I can assure the right hon. Gentleman from experience that there is a material cash benefit to be obtained therefrom. I am aware that in 1920 a commission was set up on the question of decimal coinage and that its report was unfavourable. But 15 years have passed, and there has been a general speeding up of things. In this matter we are lagging behind; we are practically the only country without such a system. Fifty-seven other nations have adopted it, and they cannot all be suffering from a delusion in the value they place upon it. I do not think that our position of splendid isolation is one of which we can be proud. The community at large are in favour of it. It may interest the House to know that the Chancellor of the Exchequer has already been approached by the Empire Congress of Chambers of Commerce, the Associated Chambers of Commerce of Great Britain, the Federation of British Industries, and the Congress of the Trades Union Council.

The material benefits to which I have referred which will accrue to the Government in its administration applies equally to industry itself, and I would ask the Chancellor of the Exchequer to give favourable consideration to the setting up of a small committee to advise him on this matter. It is perfectly obvious that on such an important matter, and having had an adverse report 15 years ago, it is necessary to re-investigate, and I believe that we can save a large sum of money in general administration. What I mean is that by our legislation we are always throwing more work on to Civil Servants, but we can do under this system much more work with the same number of officials because it would simplify the method of handling figures. It would also be of enormous saving to business houses and a benefit to customers abroad of this country who are trying to do business, because they are all using this system. We should thus fall into line with the rest of the nations of the world.

I do not desire to detain the House very long on the general position, but I should like to say that I think we have every reason to be thankful for what has been done up to the present. The future is going to be very difficult. We have been living upon stock, so far as the Navy and the Army are concerned, and we have had to spend more money on the Services. Of course international affairs may make us spend still more money in the future. Therefore, one has to consider how this extra expenditure is to be met. The right hon. Member for Darwen (Sir H. Samuel) suggested that we were incurring for a whole year certain liabilities for which no provision had been made. I believe that sufficient provision has been made, in the same way as provision was made during the year just closed to meet the £17,000,000 of Supplementary Estimates. I believe that there will be sufficient money available as a result of the Budget which the Chancellor introduced yesterday. But we do need to have great care when we talk about expansion. There is a limit to what we ought to spend. There is a limit to our income. But I am certain of one thing, and that is that no one realises more than the Chancellor of the Exchequer the importance of seeing that we do not enter into commitments and embark on schemes which would again bring this country into the state in which it was in 1931.

10.28 p.m.

The FINANCIAL SECRETARY to the TREASURY (Mr. Duff Cooper)

The hon. Member for Caerphilly (Mr. M. Jones) said, in opening his speech, that he was glad he had not been compelled to reply yesterday to the Chancellor of the Exchequer, but had had 24 hours to think over his answer and to get rid of the natural influence which the Chancellor's eloquence had produced upon him. I am sure that the hon. Member was sincere in that statement. I had the agreeable duty yesterday of sitting opposite hon. Members and watching their faces as my right hon. Friend opened his Budget; and it was an agreeable and pleasant duty. A more cheerful, a more smiling, a more good-tempered and more pleasing group of faces, I have never watched. The only faces that occasionally looked anxious were those of Members on the Front Bench opposite, who were aware that it would fall to their lot to oppose this Budget and to make the principal speeches to-day. I think I even detected the hon. Member himself once trying to restrain one of his hon. Friends from cheering too loudly when the restoration of the cuts was announced. The impression that my right hon. Friend's speech made on hon. Members and their supporters in the country is plainly shown to-day by the fact that it is announced in some of the papers that support the party opposite as "an election and a vote-catching Budget," and that at the same time it is denounced by sonic of their most zealous supporters in this House as a Budget that is doing no good, as a trickster's Budget and a deceptive Budget.

It is for these reasons that most of the speeches we have listened to to-clay have had to deal rather with general principles, and have had to fall back upon our many discontents, upon the evils from which this country is still suffering. The criticisms we have heard are those that are brought against any Government, in order to spend the time which they felt it was their duty, as Members of the Opposition, to devote to the annual Budget. We have had the subject of foreign affairs dragged into the Debate this afternoon and I think almost the only item of national expenditure that has been criticised is the increase of £10,000,000 in the expenditure on the defence services. That increase is being devoted really to the re-equipment of the Army and Navy and a little strengthening of the Air Force. The hon. Member for Caerphilly deplored that expenditure and so did the right hon. Gentleman the Member for Darwen (Sir H. Samuel). But they did not say that it was unnecessary. They did not even suggest that it could be avoided. The right hon. Gentleman the Member for Darwen said it showed the state at which the world had arrived. He regretted that it should be so and we all regret it. Who does not? Does any hon. Member suppose that it gives the Government any pleasure to spend £10,000,000 on armaments? It is true that a great part of that sum will give useful employment to people in this country, a fact which is sometimes lost sight of, and though I do not deny that I would rather give them a different kind of employment, it is a fact which ought to be borne in mind.

The right hon. Gentleman the Member for Darwen did not go so far as to say that the Government were to blame in this respect. He said the statesmen of Europe were to blame. To a large extent I agree with him, but he himself is one of the statesmen of Europe. During many important months he held high office in the present Government. I do not know whether he is prepared to take his share of the blame. I, for one, am prepared to acquit him of all blame. I am prepared to go further and acquit His Majesty's Government of all blame in this matter. I cannot see why we should appear in. sackcloth and ashes. I have no feeling of guilt whatever. I think no other Government in the world has done as much to promote the cause of peace and set an example of disarmament as His Majesty's Government. That this expenditure is necessary we all recognise, but I do not admit that our Government have to bear any part of the blame for the situation which makes it necessary.

If hon. Members really think that this shows that things are as bad to-day as they were before the War and that we are spending now the same proportion of the national revenue on armaments as we were spending then, I would like to give some figures to correct a wrong impression which may be too prevalent. In 1913–14 we spent on the Army and Navy £70,000,000, which represented 40 per cent, of our total ordinary expenditure at that time. In the present year we are estimating for an expenditure of £106,000,000 which equals 14 per cent. of our total expenditure. That is an extraordinary fall. Making allowance for the increased cost of everything, it shows how much more we are spending on other services such as social services than we were spending at that time. While we regret that this expenditure has been increased, even in figures, the percentages show how enormously it has been decreased in comparison with the expenditure of the country as a whole.

Turning from foreign affairs, hon. Members opposite naturally spoke at some length upon the greatest of our domestic problems, namely, unemployment. I am sure that nobody resents or criticises hon. Members who represent constituencies which are suffering severely from that evil, for raising the subject upon every available, every excusable and every possible occasion. We cannot be too often reminded of that great national tragedy, but, at the same time, I would say that it is not the business of the Treasury as a Department to come forward with schemes for finding remedies for the problem. It is our duty when schemes are presented to do our best to support them and to make sure they are solid, sound and workable schemes which will bring the benefits they are recommended to bring. When, however, the Chancellor opens his Budget it is not part of his duty to combine the annual statement of accounts and arrangements of taxation with any great scheme of social reform. It is my own view that there is not any quick way, any quack remedy for unemployment. I believe that the only way in which unemployment can be cured is by a gradual restoration of prosperity, a gradual improvement in our trade and industry; and this Budget has shown that improvement does exist, that our industries are more profitable and successful and producing more to-day than they have been doing for a long time, and that our trade and commerce is improving. I believe that on those lines alone the real remedy for unemployment lies. Tragic as is the situation, it is not made better by anybody exaggerating the gloom and depression that exists. The right hon. Member for Darwen, for instance, gave the impression, and he actually used the words, that there were 2,000,000 permanent unemployed. Such a statement gives the impression that there are 2,000,000 people in this country who are continuously and always out of work.

Sir H. SAMUEL

I did not say "permanently."

Mr. COOPER

I am sure that the right hon. Gentleman did not mean to convey that impression, but it is an impression felt in the country that, because the figure is 2,000,000, the 2,000,000 unemployed are always the same people out of work. It is important to realise that there are not 2,000,000 or 1,000,000, or hardly 500,000 people who have no hope of employment and are continually out of work. It is bad enough, but, bad as it is, it is no good to exaggerate the evil. If the shadow of Charles Dickens were this evening in the House, for which in his lifetime I am afraid he had scant, if any, respect, he would be pleased at the number of times his name has been quoted and his characters have been referred to. The right hon. Member for Darwen compared the Chancellor to Mr. Micawber. On the other hand, the right hon. Gentleman always prefers the less pleasant role, in my opinion, of Mrs. Gummidge. To correct the impression of gloom he produced we had two sturdy Mark Tapleys on our side of the House who, so far from thinking the Chancellor of the Exchequer was too great an optimist, were prepared to condemn him as an incurable pessimist. The right hon. and gallant Member for Ripon (Major Hills) and the hon. Member for Huddersfield (Mr. Mabane) both regretted that he did not take more cheerful a view of the future and congratulated themselves on having proved such accurate prophets in the past.

The hon. Member for Huddersfield deplored the fact of these continuous surpluses, and said they were a great evil. I do not suppose the hon. Member would suggest that it must be a good thing to have continuous deficits. He has been successful this year in, if I may say so, naming the winner. Everything he prophesied a year ago has come true, and, as usual on such occasions the man who named the winner before the race is very prominent afterwards in reminding people of the fact, whereas the many other people who gave contrary advice are never so prominent. So far as experience goes one might be inclined to take the risk of following the advice again of one who has proved fortunate on one occasion. On the other hand, it does not necessarily follow that the man who has won the big "sweep" last year is equally certain to win it in the year that is to come. I only hope that the prophesy of success and of surplus will be, to some extent at any rate, fulfilled. But I can assure the hon. Member that while he is very glad to see his horse passing the post first, there have been moments in the 12 months' race when it did not at all look as if things were going to turn out according to his prophecy, and when the favourite was going through considerable difficulties, and it is only really since it got into the straight and in the last few hundred yards that it has come home in the way he prophesied it would.

The hon. Member for East Fulham (Mr. Wilmot), whom I do not see in his place, was the only Member who really made a violent attack on the Budget. I understand that he was answered, though I had not the privilege of listening to the answer, by the hon. and learned Member for Central Nottingham (Mr. O'Connor), and perhaps he has had all that he wants for one night and is not

returning to hear any more. If there was one speech to which exception could be taken in the Debate this evening it was the speech of the hon. Member. He had the temerity to suggest that the right hon. Gentleman had misled the Committee by saying that he was doing a lot of things which he was not going to do. The hon. Member used the words "trickster" and "confidence trickster" and used every kind of word of abuse, though I must say he met with very little encouragement from the Committee. He provoked no animosity, because it was so idle and so vain and so foolish, on the part of anybody on this side of the Committee, and it did not even stir a single cheer from one of his own party. The gravamen of his complaint was that the Chancellor had said that he was restoring to the small Income Tax payer everything that had been taken away— that that was a misrepresentation— and that now, on a study of the facts, anybody could see how far the Chancellor had misled them, It has never been the Chancellor's intention, as he made plain a year ago, to restore all the cuts to exactly what they were at the previous time. He said in his speech last year— I do not myself interpret that understanding "— the understanding that the cuts would be restored— so literally as to be compelled to put everything back exactly where it was before 1931. That would be to fetter the discretion of the Chancellor of the Exchequer in a way that goes far beyond what is reasonable."—[OFFICIAL, REPORT, 17th April, 1934; col. 921, Vol. 288.] That was a year ago, and the hon. Member might be pardoned for having forgotten it, but he was here yesterday and might have listened to the Chancellor's speech. Before coming to this particular question of the Income Tax allowances the Chancellor said I have now to make some proposals about Income Tax allowances which involve some change of method. There was not a word about restoring everything to what it was before: The old reliefs were never scientific, nor are they sacrosanct. They were imposed at a time when the cost of living was high, and some of them were afterwards increased at a time when the cost of living was falling"— [OFFICIAL REPORT, 15th April, 1935; col. 1632, Vol. 300.] He went on to explain exactly what he was doing and to give figures of what the results would be. Of course, when you introduce a new system of income tax it is quite possible that anomalies will arise and that there will be hard cases. I listened with interest and expectancy, thinking that perhaps the hon. Member would produce such a case, but he did not produce one to show that a man would be worse off by a single penny under the new reforms, compared with a year ago. He went back to 1930, but he mentioned the state of 1930 as seldom as possible, and anybody listening to him would have thought that all the people he mentioned were going to be worse off this year than they were last year. If anybody has been guilty of attempting to deceive the Committee the hon. Member for East Fulham did his best to deceive them this afternoon. Fortunately he was so little successful that I do not think he took in any hon. Member.

Mr. DAVID GRENFELL

I do not think that that can be allowed to pass I think the Financial Secretary to the Treasury will find that my hon. Friend three or four times made comparison with 1931.

Mr. COOPER

I was referring to 1930. The impression that he gave to a great number of hon. Members was that people are going to be very much worse off instead of a great deal better off. The facts he gave as to what the figures are, only bore out the Chancellor's statement that the old system was unscientific and that the new system would be much better. The Chancellor was prepared to spend only a certain amount of money on those reforms, but the hon. Member for East Fulham suggested that we should go back to the income tax as it was in 1930, which would mean restoring to all classes of income taxpayers what they were then receiving in allowances, instead of doing what the Chancellor decided, to spend the whole sum which he had available on the small payers of income tax. The hon. Member sneered at those benefits and suggested that they were a treacherous subterfuge, and tried to persuade the Committee that they were no benefit at all, whereas they are going to cost the Treasury £10,000,000 in a full year.

He voiced also the difference between earned and unearned incomes, and com- pared unearned income of £125 a year with earned income of the same figure. He grudged the unearned income owner— that wealthy man drawing £125 a year, probably as a result of his own savings—the benefit which the Chancellor is giving, and he suggested that the earned income owner has certain expenses which do not apply to unearned income. What expenses, I should like to know? I I wish the hon. Member for East Fulham were here to answer it. Anybody who incurs expenses in connection with his trade or business has the right to claim for them, and ought to be aware of that fact. Anybody who knows anything of life in this country can answer for himself the question as to who is in the better position. In 90 cases out of 100 it is the man in work drawing£125 a year, with very likely the prospects of better work and in the full use of his health and strength, if he is employed at that rate, and not the recipient of £125 a year unearned, from savings or from some nest egg which he might have saved up for a long time, a sum which is already reduced, in all probability, by the conversion of War Loan from 5 to 3i per cent. I think the hon. Member for East Fulham was wise, like Pilate, not to wait for an answer.

There has been a good deal of criticism and question in regard to the new Heavy Oils Duty. There has, again, been a good deal of misunderstanding on the subject. The hon. Member for East Fulham, needless to say, misunderstood entirely that the Customs duty will not apply to indigenous oils. Perhaps the Committee would feel that one or two facts about this duty would be worth while. In the first place, it will apply only to heavy oils imported under Customs duty. It is mainly to meet a loss of income that the Exchequer suffered in consequence of the competition of Diesel oil engines with light oil engines. During the last year the increase of goods vehicles made to run on Diesel oil has been 304 per cent., the increase of similar petrol vehicles only 3 per cent. The number of vehicles carrying passengers, such as omnibuses with eight seats or more, driven by Diesel oil was about 50 per cent. more, while there was actually a falling-off of 4 per cent. in the number of similar vehicles run on petrol. That shows that competition so large could no longer be disregarded. I think it is a very fortunate thing it has been dealt with at this stage, before people were more committed to these new engines, before vested interests were created on the understanding that they were going to pay this extremely low duty.

Hon. Members have talked this evening of the penalisation of the Diesel engine. Really the opposite is the case. The petrol engine has been penalised at the expense of the Diesel at the tremendous extent of paying 8d. as against a ld. Even now under the new system the Diesel engine will have considerable advantages, the licence rates having been reduced for Diesel to the level of petrol engines, so that in fact the Diesel only pays an additional 5d. a gallon. I do not think this is a tax on inventions, as the right hon. and gallant Member for Ripon suggested. As I said, the Diesel will still have the advantage over competitors, and it is surely more stimulating to inventions not to have too great an advantage, otherwise there would be little incentive to enter into new developments. This does not apply to any engines except those on the road. The hon. and learned Member for Central Nottingham asked about the collection of the duties. As he is not here I will not enter into details, but I would assure him that this has been gone into most carefully and it does not present insuperable difficulties. There have been considerable criticisms, in comparison with the rest of the Budget, among Members about the decision of the Chancellor of the Exchequer to include the surplus of the Road Fund in this year's expenditure.

The hon. Member for Huddersfield waxed eloquent, almost tearful, over the position of my hon. Friend the Minister of Transport, who, he seems to think, has been treated with a certain lack of respect. I hope he will feel assured, by the presence of my hon. Friend by my side, that he is labouring under no such grievance. As a matter of fact, the Minister of Transport has never had the free disposal of this Road Fund, and he has no grievance. He is not being put in an inferior position; it is really for the Cabinet to decide. The Minister is not in a position to spend money without the consent of the Chancellor of the Exchequer. No Minister in this country can indulge in expenditure, though no doubt many wish that they could, without the consent of my right hon. Friend. No doubt my hon. Friend will no longer have the comfortable feeling that there is a large balance to his credit, but a feeling of that kind is considerably diminished when the owner of the balance is in the position of a minor, and knows that he cannot draw upon it without the consent of his parent or guardian. While, however, my hon. Friend no longer has the feeling that he has this balance to his credit, he knows as well as any of us— at least, I hope we are all seized of this fact— that that is no reason why any scheme of road improvement which would have been feasible while that balance was standing to his credit should not be undertaken at the present time. He has only to put forward any scheme to the Chancellor of the Exchequer, and the scheme would of course be considered in exactly the same spirit and with exactly the same prospect of favourable consideration as before.

Mr. MABANE

May I remind the hon. Gentleman of the regret expressed by the Chancellor that the Minister of Transport had not quite behaved as the dying Sir Philip Sidney did?

Mr. COOPER

If the gesture of the Minister of Transport did not quite come up to that of Sir Philip Sidney, it was not because he had any reproach against the Chancellor of the Exchequer. As the hon. Member will recollect, Sir Philip Sidney did not have the cup of water taken from him on that occasion. He was not told by the dying soldier, "My need is greater than yours." He simply said, "Your need is greater than mine," and handed the cup over. It was not incumbent upon my hon. Friend the Minister of Transport to make such a gesture, since it was not within his right to dispose of this balance.

The conclusion of this evening's debate must, I think, show that the hon. Member for Caerphilly was right when he realised that his task in criticising the Budget was going to be difficult. While I congratulate him and other hon. Members opposite and below the Gangway on having done their best, and on having brought forward sensible criticisms and even some constructive suggestions, I think that the majority of Members will go away with the feeling that this has been a night of great pride for my right hon. Friend. It is not an easy matter to open a Budget. Too many people are inclined to regard the Chancellor of the Exchequer as a kind of spring Santa Claus, who is bound to bring benefits to a great many people, and too often hopes are raised which have to be disappointed. On this occasion, after the experience we have already had, I think we can feel that this Budget is one that has aroused little criticism and no resentment but has conferred real benefits on a great many people and a feeling of renewed confidence on all.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Captain Margesson.]

Committee report Progress; to sit again To-morrow.