FINANCE BILL.

HC Deb 21 May 1935 vol 302 cc187-315

Order for Second Reading read.

Motion made, and Question proposed, "That the Bill be now read a Second time."

3.17 p.m.

Mr. PALING

I beg to move, to leave out from "That" to the end of the Question, and to add instead thereof: this House cannot assent to the Second Reading of a Bill which continues to cast an unfair burden of taxation upon the indirect taxpayer, encourages the limitation of production, and embodies no provisions for securing to the people that improvement in their standard of life which the increased productive capacity of the nation has made available. The Chancellor of the Exchequer has received the usual congratulations upon the production of his Budget and I think I am right in saying that on this occasion the right hon. Gentleman has received rather more than the ordinary congratulations. I do not think that is because he has done anything very imaginative or brave or anything which is likely to affect the prosperity of the people of this country. Generally speaking, I think it is because he has distributed whatever surplus he had more or less in accordance with the expectations of most people in this House and in the country. In any event, he has not imposed any fresh taxation and whatever he had to give away has been given—in accordance with the practice usual in the last few years—to his friends in the Tory party. I am bound to say that one thing which he did really surprised me and I think it also surprised a great many hon. Members on his own side. That was the increase in the duty on heavy oils. I have read the various speeches made on this matter with great care and also the memorandum which has been sent to us by the people affected. Without going into details, it appears to me that those people are suffering from very heavy taxation today. It has been said, I do not know with what truth, that there is a desire on the part of some people to drive heavy traffic off the roads. Some people, it appears, hold the view that the railways are the right means of dealing with such traffic and it is suggested that this kind of heavy taxation is an indirect way of achieving that object. I do not know. whether that is the intention or not but, if it is, I doubt whether this method of taxation is the best method or is the honest method. If the object of the Government is as I have described, it would be better for them to say so and to deal with the matter accordingly instead of trying to deal with it by this indirect method.

Everybody will admit that the Diesel oil engine has proved a very necessary and desirable thing. It has been for a good many years in the experimental stage—for a longer period than most other things of that kind. Tremendous difficulties have had to be overcome in connection with it. The worst of those difficulties I understand have been overcome. I do not think anybody would say that all the difficulties and troubles connected with this engine have yet been surmounted. A tremendous amount of research works still remains to be done. In view of that, it was a rather cruel blow to impose this 7d. tax on heavy oil, for it must hit the production of these engines very seriously. The Chancellor has said that his revenue was being interfered with and that he was bound to take some steps. I dare say that was true to some extent, but he will be the first to admit that if people find that business directed into one particular channel costs a tremendous lot, and if directed into another channel costs less, they are showing business enterprise if they change the channel—an enterprise which hon. Members opposite laud to the skies. In the present instance, the people who have shown individual enterprise by directing their labours into another channel which gave them better profits and by carrying out the principles with which hon. Members agree have received a blow which seemed very hard, particularly as it came from the present Chancellor.

I do not know the first thing about engineering, but I watch with some interest the development of these new things. I have watched the development of the Diesel engine from two or three points of view, and one of the things which appeals to me as a man in the street is the fact that, if this engine were developed and became of general use, it would mitigate the risk of fire which occurs with the petrol engine. When a crash occurs one of the greatest risks is the danger of fire, due, in the main, to the inflammatory nature of the petrol. That risk is almost entirely eliminated in the case of the heavy oil engine. That appears to be a tremendous advantage, and it ought to be encouraged from that point of view alone. Another factor which I should have thought would have been present in the mind of the Chancellor was the carrying capacity of heavy oil engines as compared with petrol engines. When we are looking forward to long-distance flights and know that one of the chief handicaps of the aeroplane is the fact that on long flights a. heavy load of fuel has to be carried, that is a factor which the Chancellor should have taken into consideration. As hon. Members opposite are supposed to encourage enterprise of this description, it seems to me that this is an entirely unnecessary tax to place on industry.

Our Amendment refers to the question of direct and indirect taxation. I have been in the House 10 or 11 years and for some years this question cropped up in connection with the Budgets. There was always a difference of opinion as to how much should be raised by direct taxation and indirect taxation respectively. The people who paid direct taxation were in the main firm in their belief that they paid too much, and the people who paid indirect taxation were firm in their belief that they also paid too much. I remember the right hon. Gentleman the Member for Epping (Mr. Churchill) speaking on this question about 1925, and he said that the balance as between indirect and direct taxes had been disturbed, that it had lost its equilibrium, and that it was his duty to restore it. Other Chancellors have also spoken in the same terms. I have always wondered what the equilibrium was and where it would be reached, and I have made it my business to go through the Budgets from that time. I find that the percentage of direct taxation in 1924–25 was 66.9 per cent, and of indirect 33.1 per cent. That was about the time when the right hon. Gentleman the Member for Epping said that the equilibrium had been disturbed, that direct taxation was bearing too much, and that some must be put on indirect taxation. In 1931–32 direct taxation had come down to 65.8 and indirect taxation had gone up to 34.2. In 1934–35 direct taxation had dropped to 58.8 and indirect had gone up to 41.2. I have calculated that this year, 1935–36, direct taxation will again go down to 57.3 and indirect up to 42.7. I would like to ask the Chancellor whether in his opinion we have yet reached a state of equilibrium

We had a series of Budgets under Conservative Governments, we had two under a Labour Government, and we have had four under this National Government, which is again a Conservative Government; and the Conservatives have used their power all the time in the direction of increasing indirect taxation, which, in the main, is borne by the poorer people of the country. In view of what has been said so often about the necessity of reaching a state of equilibrium, it is due to the House that the Chancellor should tell us whether this state has yet been reached or whether he intends to continue to act on the principle that the proportion of indirect taxation should be increased. Looking at it in terms of pounds, the amount raised from Customs and Excise in 1931–32, was £255,000,000, and in 1935–36 £295,000,000. The biggest contribution to this amount would probably be from the import duties, and the people who make the biggest contribution to those duties are the working-class. A question was asked in the House yesterday as to how much in taxes on food was raised this year as compared with three or four years ago, and the reply was that the amount had increased from £14,000,000 to £234,000,000. Most of this was raised from the poor. Does the Chancellor desire to go on with this process, or have we reached equilibrium'? Will he endeavour to keep the proportion of direct and indirect taxation as it is now?

When this question is discussed most Members take refuge in the statement that the worker has got the benefit. For instance, the social services are always mentioned, and we are told to look at the increase in those services since the War. That is true, but there has been little or no increase, rather, indeed, a reduction, in the amount spent on the social services since 1931–32, in spite of the fact that the indirect taxation upon the workers has increased so heavily. If we look a little further we see that so far from the workers having benefited from these Budgets they have probably lost tremendously.

Sir BASIL PETO

I thank the hon. Member for so courteously giving way to me to allow me to put one question. In his investigation, will he go far enough to include the increase in employment? Surely that is of benefit to the workers.

Mr. PALING

I shall have a few things to say about employment before I sit down, and I am sure that the hon. Baronet will hear as much about it as he wants to hear from me. Money has been spent in subsidies—on milk, on marketing schemes, shipping, sugar beet, and £9,000,000 for the Cunarder; but none of this money has gone to the working class directly and very little of it indirectly. We are told that subsidies percolate from the people who get them to the working class in the form of wages, but since 1931 the wages of the working class people have not increased but, in the aggregate, have decreased, so the working people have not got it from that source. Not only are they paying more in indirect taxation but other impositions have been put on them. I would ask the Chancellor of the Exchequer whether it is his intention to take off the 2d. a week extra which was put on to the premiums under unemployment insurance. There was a cut in the benefits, and that has been restored, but the increased contribution remains and so far as I know there has never been a word said as to whether he has any intention of taking it off.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

Surely the hon. Member is aware that any increase in the contributions in respect of unemployment insurance would not be a matter for the Budget at all, but the Unemployment Insurance Fund?

Mr. PALING

I did not say it came out of the Budget.

Mr. CHAMBERLAIN

You said that the Chancellor of the Exchequer had never said whether he was going to reduce that contribution.

Mr. PALING

I beg pardon, I am making the point that in addition to the increased taxation put upon the workers this was another, shall I say, imposition which they still have to pay. Since 1931 the whole tendency has been for the working classes to pay more and get less, whereas in the case of the friends of the right hon. Gentleman the tendency has been for them to pay less and receive more. It has been said that a Tory Government always looks after its friends, and this National Government is in the main a Tory Government, and any one who studies the Budgets from 1931 to the present time will admit that this Government has lived up to that standard. Now I turn to Clause 24 of the Bill, which introduces a new principle. I think I am right in saying that no mention of it was made by the Chancellor in his Budget speech. Clause 24 is evidently intended to bring into operation a system of rationalisation. Sub-section (2, a) reads:

that the primary object of the scheme is the elimination of redundant works or machinery or plant from use in an industry in the United Kingdom. During Budget Debates I have frequently heard the argument put forward, mainly from the Liberal Benches, that money which was put back into an industry with the object of developing it and increasing production should not be subject to Income Tax, and I think one can agree that it is a fairly good logical argument, though I do not think it has ever met with much response. Though everybody agreed that it was desirable, nothing has been done. Now we are going to the opposite extreme. Now we are going to relieve of Income Tax employers in an industry who will agree that so much of their plant is redundant and who will scrap it, not necessarily because the plant is inefficient or old but merely because it is redundant. If employers in an industry can agree, as an industry, that there is a certain amount of redundant machinery and make a contribution towards compensation for those who scrap that redundant machinery, the amount they pay as a contribution is not to be subject to Income Tax. In other words, there is to be a subsidy of 4s. 6d. in the £, in the main, to people scrapping what, I think, would mostly be efficient plant.

The argument in the past has been in favour of an allowance to employers who put back money into an industry in order to develop it, but now they are to have the equivalent of a subsidy for the destruction of machinery and the restriction -of production, a very curious thing indeed. I should like to ask whether this Clause is based upon the experience of a scheme which has been before the country for some time now concerning redundant spindles in Lancashire. The President of the Board of Trade has intimated time after time that redundant spindles must go, and has been doing his best to encourage the industry to get rid of them, but they have been a long time in coming to an agreement. Evidently there were a great many difficulties, and those in the industry could not reach an agreement. Now, in order to help them to reach an agreement, they are to have a subsidy, as I put it, of 4s. 6d. in the £, which may help them to reach an agreement sooner. Further, I should like to know whether, when redundant plant or machinery is scrapped, any compensation is to be paid to the workers who will be displaced. When cattle which are diseased are ordered to be destroyed compensation is paid to the owner of the cattle, and it has been argued here time after time that compensation ought also to be paid to the workers who lose their jobs when the cattle are destroyed, but nothing has been done to meet that claim. Compensation is still paid only to the owners of property and not to the men who lose their jobs. If a subsidy is to be paid to those who scrap what is called redundant machinery will the workers who are necessarily displaced get any compensation? Is the decision as to the redundancy and the scrapping of machinery to be left entirely with the employers, or are the trade unions to have any say in the matter Who is to decide which workers shall be declared redundant and be consequently thrown out of work Are the trade unions to be consulted in that respect?

What is likely to be the effect of this movement, and what are the Government driving at? It appears to me to be almost certain to cut down the number of people working in productive industry. There have been several cases of rationalisation applied to industry, and in nearly every case the result has been workers thrown out of employment. Have the Government taken that into consideration, and are they prepared to displace workers in that way A certain amount of rationalisation has been attempted in the agricultural industry, which has received subsidies of almost every description to help it. Nobody would say that the policy pursued has been a success, but last year between 28,000 and 29,000 workers lost their jobs in that industry. In the mining industry, in which there has been a certain amount of rationalisation, the number of workers employed has dropped by hundreds of thousands. If the proposal in Clause 24 be carried out, it is certain that a number of men and women will lose their jobs as a result.

I wonder whether the Government have considered the present state of productive industry. In 1930, the census of production provided us with a lot of information as to the state of production in this country. I remember it showed that at that time 8,400,000 people were engaged in productive industry. Included in that figure were 700,000 people engaged in administrative, clerical, technical and advertising services. There are in this country about 21,000,000 people engaged in gainful occupations. In other words, out of 21,000,000, only just over 8,000,000 people are engaged in productive industry, or little more than one in three. Nearly two people are engaged in dealing with and transporting one worker's output. I want the Government to consider that position, because the present tendency is for the disproportion between productive and unproductive workers to increase. I am informed from the same source that the number of people engaged in the distributive industries since the War has increased by over 2,000,000. You cannot go on indefinitely in that direction, and some attempt must be made to bring about an equilibrium between productive and unproductive industry. The tendency is all in one direction, and, instead of helping to restore the balance, Clause 24 may produce an even greater disproportion.

Are the Government seeking to decrease production by that means We hear a great deal about over production and of poverty in the midst of plenty; is it the Government's view that there is too much over production and that the sooner over production is reduced the better, and is the policy of restriction which is indicated in the Clause intended to achieve that result? If so, I would refer the Government once again to the census of production in which I find that the value of the aggregate industrial output of Britain in 1930 was £1,500,000,000. There are 45,000,000 people in this country, and dividing the production figure by the figure of population reveals that we produce in this country at the present time £34 worth of products per head of the population. Can anybody say that that is over production Are we really producing more goods than we can consume, and is the problem not rather one of under consumption If the Government hold the view that there is redundancy and over production, do they expect to correct the situation by reducing the number of machines and cutting down production instead of spending their energy in the opposite direction and trying to find out how people may consume more?

In my own industry, what might be done in that direction were the Government to apply their brains to the question of under consumption rather than to the giving of subsidies for the restriction of production and the cutting down of redundant machinery and redundant workers. I know a bit about coal. We are supposed to suffer from over production in the coal industry, but I doubt whether that is actually true. We live in a cold, wet climate; will anybody say that if our people, in their 11,000,000 homes, were given sufficient warmth, light, heat and power, there would not be a tremendous demand in the coal industry, and that the amount which we are producing at the present, so far from being too much, would not soon prove too little? Is it not the case that we do not allow people the purchasing power to buy these things, and that we go to the other extreme and endeavour to cut down production in order to equalise the market I am told in the census of production that in the woollen trade we produce a very small amount in proportion to what the people can consume, and that observation applies to every product; too little is produced rather than too much, and yet the Government are endeavouring to restrict production rather than to increase it.

I want to turn to the question of the national debt. The Chancellor referred in his Budget speech to the fact that we have made a large to-do and a lot of shouting about the question of the national debt. I read with a certain amount of alarm that he stated that we had said a lot about balanced budgets and about the fact that we have paid the American debt while the present Government did not pay it. He went on to say that the Government had actually paid as much as we had paid in that direction. I would like to ask whether it is the intention of the Chancellor to restore the payment at any time in the future. The Lord President of the Council a few years ago, having made a settlement with regard to that debt, which some people thought was a bad settlement, came back to this country and indicated that it must be paid: and the right hon. Gentleman the Member for Epping, in 1928, said:

No country has ever made the exertions which this country has made since the War to pay its debts and meet its obligations with strictness and punctuality, and few countries have reaped a more tangible reward. Now we are told by the Chancellor of the Exchequer that that debt cannot be regarded in the same light as a commercial debt, which seems to indicate that he is not going to pay it in the future. Does that difference between commercial debts and war debts only apply internationally, or does it apply at home also At home we have achieved a debt of between £7,000,000,000 and £8,000,000,000, which also was contracted in war-time. If this differentiation between war debts and commercial debts is to apply internationally, is there also to be the same differentiation between debts in this country which have been accumulated or contracted during a time of war and debts contracted in times of peace If so, it may be that this country will have to apply the same methods to its internal debt which the Chancellor at the present time is applying to outside debts, and to the American debt in particular.

I have seen some rather alarming figures with regard to our debt. In the Budget of March, 1919, the first after the War, our debt stood at £7,434,000,000; now it is £7,800,000,000. I read that we have paid £4,000,000,000 in interest, but, in spite of that fact, we owe £400,000,000 more than we did in 1919. The Chancellor of the Exchequer, attending a bankers' function a week or two ago, said something about the fact that we dared to be happy. I should think the bankers did dare to be happy in face of the fact that we had a debt in 1919 £400,000,000 less than we have at the present time, in spite of the fact that we have paid £4,000,000,000 in interest. Is it because of these facts that the right hon. Gentleman boasts about our having reached 80 per cent. of prosperity We have, first, a tremendous increase in indirect as compared with direct taxation. Secondly, we have the attitude which the Government are now taking up towards rationalisation, which means the giving of something equivalent to a subsidy for the purpose of destroying machinery and contracting production. Thirdly, with regard to our debt in this country, which has actually increased since 1919, will the right hon. Gentleman in the future apply the same considerations to our internal debt as he is applying to external debts, and admit that internal debt in this country which has been contracted during the War can in no circumstances be considered in the same light as commercial debts or debts for development purposes?

3.55 p.m.

Sir ROBERT HAMILTON

By the custom of the House, the Second Reading of the Finance Bill offers an occasion on which we pass in review the general financial position of the country. It is a sort of annual stocktaking. We have the Measure before us: we see the accounts of the past year: and we have the Estimates for the year that is ahead of us. At the present time, however, I think it is of particular importance that we should try to look, so to speak, below the figures and find out what they represent, because there is no doubt that there is a great feeling of optimism abroad, due in part to the wonderful success of the Jubilee. There is what we might call the Jubilee spirit abroad, which may possibly give rise to an undue idea of the state of the country, and to the thought that everything is well and prosperous, whereas, if we look more closely into the position, we may find ground for serious consideration. I would, therefore, ask the indulgence of the House for a short time while I try to bring before it certain aspects of the situation which I consider deserve its serious consideration at the present time, and more particularly since the appointment of the right hon. Gentleman the Member for West Woolwich (Sir B. Wood) as minister for propaganda in the National Government. I must say I regret, and I think many other people in the country regret, that a Cabinet Minister should have been appointed to this position. It is rather foreign to our traditions and ideas in this country. We all of us distrust and discount propaganda. We know its tendentious character, and we also know that the short sentences of its slogans so often represent what are really half-truths. Half-truths are the last things that we want when we are considering the financial position of the country: we want the truth, the whole truth, and nothing but the truth. Be that as it may, the right hon. Gentleman the Member for West Woolwich has thrown himself into his taskcon amore,and I see he is preparing for the information and delight of the public a screen representation of the Cabinet, in which, of course, the Chancellor of the Exchequer takes a leading part. I understand that a private view has already been given. I have not had the opportunity- and pleasure of seeing it myself, but I take from a London evening paper a short account of what its representative saw when he was invited to this first presentation. The Chancellor of the Exchequer evidently took the bouquet that night. The reviewer says:

Mr. Neville Chamberlain was the best screen figure of the Cabinet. He goes on to say: Mr. Chamberlain was almost ebullient. The first sight of him was as he threw himself back in his chair, smiled broadly, and exclaimed, What another surplus? The right hon. Gentleman undoubtedly is a consummate actor. He is surprised at finding another surplus. After all the Supplementary Estimates he has had to meet, after all the subsidies he has been paying away, and the way he has made his surplus appear by putting his hand into the Road Fund, he is surprised to find that there is another surplus. The notice goes on: He spoke of reduced Income Tax and cheaper beer. It is a poor heart that never rejoices, with beer at 4d. a glass and Income Tax at 4s. in the £. [HON. MEMBERS: "4s. 6d."] Yes, 4s. 6d. That was the Chancellor in lighter vein.

I would now refer to some statements of the right hon. Gentleman on a far more serious occasion. Only last week, I think it was, speaking to the Association of British Bankers, in the course of his speech he propounded a very serious And very proper question that a Chancellor should ask himself. He said: Is the present appearance of prosperity solid and genuine? Is it possible that we are living in a fool's paradise, and that presently we shall wake up to find that we are deceiving ourselves with convictions which have no solid basis in fact? Having said that, he laid himself out to put before his audience those indications which showed that there was an improvement in the state of the nation's affairs. I do not think that the instances he quoted were really very serious proofs of improvement. The instances which he quoted were the building trade, pig iron output, rayon and electricity. We all know that the building trade is receiving enormous subsidies at the present time; it is being pushed with great financial assistance. Electricity and building are both what we might call sheltered industries, as they are not in competition with the rest of the world. Pig iron and rayon have also undoubtedly improved, we are all delighted to know, but improved very largely behind sheltering tariff walls. [HON. MEMBERS: "Hear, hear!"] Hon. Members who cheer will realise that I was about to say that the improvement those industries show is entirely within our own country, and does not affect our export trade. It was only what we might call internal domestic improvement to which the Chancellor was able to point.

Another instance he quoted was that of the advances which bankers have been able to make during last year. There was an improvement over the previous year, but when you look at his figures, although they undoubtedly show some improvement, it only amounted to one and a-half per cent. I do not think that the Chancellor could have been altogether happy if those were the only instances he could quote as showing improvement in the national state of affairs. Then he went on to say that our tariff system had been successful in securing us an entry into the markets of other nations. Now we all know that Protectionists are very fond of arguing that tariffs are a weapon by which they can obtain entry into foreign markets, but I would like to remind the House of an answer given on this question a couple of months ago by the President of the Board of Trade. He was asked what alterations had been made in the tariffs of foreign countries affecting United Kingdom goods, and he gave a long list of the countries which had made alterations—I will not read them all, but they began with Belgium, Bulgaria, China and Estonia—and he added: In most cases the general tendency was in an upward direction."—[0FFICIAL REPORT, 12th March, 1935; col. 177, Vol. 299.] I am afraid that that rather knocks the bottom out of the argument that by means of tariffs you can secure a more satisfactory entry into foreign markets. As the Chancellor, on the occasion to which I have referred, was talking to the Association of Bankers, well knowing the free trade inclinations of the bankers all over the world, especially in this country, he was bound to say he was "not a fanatical protectionist." When a protectionist says he is not a fanatical protectionist, I think I understand what he means. He means that he is not fanatical about the protectionist duties of the foreigner. He wants to see them come down, but not his own. In fact, I have a recollection of the Chancellor saying, not very long ago, that if the whole world went free trade, Great Britain would still remain protectionist. If the Chancellor can say that, it is a little difficult to make it agree with his statement that he is not a fanatical protectionist.

Another argument which he put forward as showing that the country had advanced during the last year were the advantages which had been obtained from cheap money. We all know that the Chancellor is very well satisfied with his policy of cheap money, and what it has been able to achieve. The great advantage of cheap money, of course, is in the service of the national debt. What I should like to ask him is, what other uses has he made of cheap money? As the House knows, there are a great many important works which need to be done in the country at the present time, and one would have thought that the present time was most suitable when there are lots of idle hands and lots of cheap money about. Many of us regret that a policy has not been adopted of making a better use of this cheap money by equipping the country and making it more efficient for the time, to which we all look forward, when there will be a far more complete recovery than anything we have seen at present, or perhaps are able to dream of at present. Of course, money is cheap at the present time because trade is bad. When trade is good, money is dear, and when trade is bad, money becomes cheap. But it is when money becomes cheap through bad trade that it gives the Government the opportunity of putting it into the best use in equipping the country for better times ahead.

The Chancellor, admittedly, said that the advantages of cheap money were not to be compared with an international trade revival. He must know, as well as anybody, that it is on the trade revival, and through the trade revival, that this country must look for any real improvement. We, the greatest trading nation in the world, have been most hit by the chaotic conditions of world trade. A very interesting answer was given in this House to an hon. Friend of mine two days ago on this very question of world trade, showing the figures, in 1929, 1931 and 1934, of exports of United Kingdom goods and of re-exports of imported merchandise. The answer was given by the President of the Board of Trade, who said that the declared value of the exports and re-exports of merchandise from the United Kingdom during the years I have mentioned was—I will give only round figures—in 1929, £839,000,000; in 1931, £454,000,000; and in 1934, £447,000,000. That is to say, as hon. Members will note, 1934 was considerably below 1931.

Sir WALDRON SMITHERS

The hon. Member leaves out the intervening two years.

Sir R. HAMILTON

I am giving the answer to the question that was put, showing the difference between 1929, 1931 and 1934. There has been considerable satisfaction expressed on all sides that last year showed a considerable improvement over the preceding year. That is exactly one of the half-truths to which I object in the propaganda to which I have referred. It is in taking only a single year like that which may be so misleading. In order to get a proper perspective of the whole position we must go back over a series of years, and what I am trying to bring to the notice of the House is, that our export trade at the present. time is not only very considerably less—about half what it was in 1929—but that it has not yet regained the position in which it was in 1931. That is a very serious item on what we may call the debit side of the national account, and inter-related with that are our large figures of unemployment.

Everybody, I think, in the House and in the country to-day realises that the only method by which those large figures of unemployment can really be brought down is by a revival of international trade. You may have palliatives applied. By the expenditure of money in one direction or another you may be able to reduce the figure to some extent, but there will be no real, solid reduction in those figures of unemployment until we get an improvement in our international trade. We have our depressed areas in Wales, in Scotland and in England, in the coalfields and in the shipping areas on the Tyne and the Clyde, and I am sure that when the time comes, as we all hope it will—and the sooner it comes the better—when international trade does improve, we shall see that solid core of unemployment beginning at last to give way.

I will not refer particularly at the moment to what one might call the human side of unemployment, the loss in character and in vigour to the nation as a whole, because I am dealing with the hard ledger side of it. We have this large number of people unproductive, a dead weight carried on the backs of the other industries which are striving to get along. It makes it extremely difficult, as everyone realises, for the industries that are struggling to have to carry on their backs this dead weight of unproductive unemployment. Added to that, as the hon. Member who preceded me said, they have the lowest powers of consumption that it is possible to imagine—a large body of people who are being kept alive, but who have very little margin of expenditure. If that margin could be increased; if those people were earning money which they could spend, we should see a very vast improvement in the country in a very short time. Any delay in remedying the present situation is particularly serious for us.

I referred just now to our own position, and that any delay in the recovery of international trade hits us more than anybody else. It is due, of course, to that unfortunate and widespread policy of economic nationalism which has seized on so many countries like a disease. It is impossible to say to what extent that economic nationalism acts and reacts on national fears and jealousies. The greater the freedom of trade the less causes there are of friction, and the greater the peace of the world. That is an axiom which, I think, is pretty well admitted, though it is often forgotten. There is nothing which causes more ill-will between nations than economic disputes, and the more you can get rid of economic disputes, and the more easy you can make the interchange of international trade, the greater are your chances of international peace. The world to-day is undoubtedly in a state of economic warfare. In addition to that, we are threatened in the Estimates with increased expenditure on armaments. It was only the other day that Sir Percy Bates, the Chairman of the Cunard Company, made a very striking reference to the position in which the world finds itself. He said: There is war to-day, a universal war, and the weapons are not navies, armies, or aeroplanes, but tariffs, quotas, and shifted currencies. There is no authorised standard of international money exchange, and each change in a tariff, a quota or currency is nothing other than a move—a hostile move—in this war. The worst of it is that the situation is not officially recognised as a war. In my humble opinion, the greatest help that could be given to-day to the cause of international peace would he to put an end to the present economic war, and for that purpose action is required. It is not enough to sit still and wait for something to turn up. I am afraid that there has been too much waiting for an opportunity. The world now is coming to the conclusion—one sees indications on every side—that the time has come when some action should be taken. Here we are with our pound with no secure anchorage, at the mercy of every wind that blows, and even an unexpected little breeze will make the ship heel over to a most dangerous extent. The advantages of going off gold that we had originally are very quickly countered as the Chancellor knows, and our dangers and difficulties, which must exist with an unstable pound are likely to increase rather than diminish.

In the meantime we are pouring out a costly set of subsidies. I do not know what is to be the future of the beet subsidy. We are subsidising beef, shipping—a terrible thought that we in this country should have to subsidise our shipping—paying large sums for what is called deficiency payments on wheat, and other subsidies. What hope is there of decreasing taxation in present circumstances? I hope that when the Chancellor replies he will be able to give us some indication of the lines on which he thinks that it is possible that he may be able to reduce taxation in the near future. The time is not very long past since the people of this country held up their hands in horror at the idea of a possible 2s. 6d. Income Tax. Are we going to be absolutely hardened to a 4s. 6d. one; have we to live and die with a 4s. 6d. Income Tax? Do we not know that the greatest fillip that this country could receive, and the greatest benefit to our hard-working courageous, and patient industrialists would be a reduction of the Income Tax? I hope that the Chancellor of the Exchequer will be able to say something in that respect.

I was sorry to see the other day an unfortunate indication that the cost of living is beginning to go up. I am not putting very much stress upon it, but this is the time of the year when one expects the cost of living to show a downward tendency rather than an upward tendency. The figures which were given the other day were that the all-in cost is 2 per cent. over that of May, 1934, and food 3 per cent. over that of the same date of last year. One hopes that that will not continue. A rise in the cost of living and food will be a serious thing for a great many people in the country to-day. In these circumstances, I ask what is the real answer to the Chancellor's question: "Is the present appearance of prosperity solid and genuine?" The Chancellor himself has remedies; he knows the remedies. He told the audience at the meeting to which I have referred what those remedies were. Iagreewith every one of them; they are perfectly sound. The first essential, he said, was that there should be a rise in the price of primary commodities. But how is that to be done? Are we to obtain that rise by a policy of restriction and causing a scarcity and forcing up prices. His second essential was the lowering of excessive tariffs, the removal of quotas and exchange controls. Is the Chancellor of the Exchequer lowering any of our tariffs; is he removing the quotas, and is he still working the exchange control? The third essential was the stabilisation of currency on an international gold standard. That, he said, was his ultimate objective. It is a perfectly sound one, and I ask: What steps he is taking towards it now? His fourth objective was the resumption of international lending. There again we are all agreed that the best use to which we can put our money now that we can make money would be to lend it abroad, but, if we lend it abroad, we must take the return in goods. If we take the return in goods, we must see what the tariffs are in order to let those goods come in. Has not the time for action come? We see in different parts of the world signs that sanity is returning. In some rather unexpected quarters people are beginning to see the need for doing something. The Prime Minister of France the other day declared that it was time that nations began again to exchange their goods, and said that the present state of affairs should not continue. The quotations which I am going to give to the House are all from statements which have been made within the last few weeks. The Chairman of.11a,mbro's Bank last week said that:

The chief concern of all should and must be so to arrange the commercial relations between countries that trade harriers and exchange restrictions can be gradually obliterated. The report of the Bank of International Settlement at Basle on 13th May concluded with the statement that slowly and painfully some little progress is being made towards the restoration of economic equilibrium, but the world is still waiting for a Courageous move in the shape of a return to an international monetary system based on gold. The International Bank claims to be a common centre of counsel and collaboration and stands ready to play its role in assisting the resumption and maintenance of a sound monetary system between nations. The last quotation I am going to give to the House is from a review that was made by Dr. Anderson, of the Chase National Bank in the United States, which appeared in "Lloyds Bank Monthly" the other day. He made a very close analysis of the position, and ended with these words: The lowering of tariffs by important countries, with or without reciprocity, would help currency stabilisation everywhere in the world. Steps toward the adjustment of any of these problems that is, the problems to which he had referred—

will help to solve all of them. No forward step is premature'. That is a statement that we may well take to heart—no forward step in the right direction is premature. Does the hon. Gentleman who laughs think that it is premature to take a step in the right direction? Last of all and perhaps most important are the statements recently made by Mr. Morgenthau and Mr. Cordell Hull in the United States of America, where they definitely held out what might be called an invitation to co-operate in some system of stabilisation. The Chancellor of the Exchequer shakes his head. I hope that he has been in close consultation with these gentlemen to find out exactly what they meant. Perhaps when he answers he will give us the result of the conference he has held with them, and, if he has not held any such conference with them, it would he desirable to find out definitely what they did mean. I take it that the Secretary of the Treasury of the United States, and the Secretary of State, Mr. Cordell Hull, did not make statements of that sort without having some reason behind them.

It would be impertinent for me to suggest that the Chancellor of the Exchequer is art keeping the world situation under review. I am sure he is. He said in the speech to which I have been referring that he was watching things, but that the time had not yet come for action. There are a great many people in this House and outside who think that the time for action has come. [An HON. MEMBER: "What action"] Taking a step in the right direction. The step in the right direction which I would humbly suggest that he might take would be to consult in the first instance with the representatives of the United States to see if they are ready to join with us in leading the world to a stabilisation of monetary currency. I am afraid that if that step is delayed it will be more difficult to take it later on. Events may take charge of us, and then the answer to the question of the Chancellor of the Exchequer will be disastrously clear.

4.26 p.m.

Captain WATERHOUSE

The House will not be surprised that the hon. Member for Orkney and Shetland (Sir R. Hamilton) dwelt on the task of propaganda. Anybody who has had to deal with the propaganda of any party knows that the task is a very difficult one, and one can well realise that propaganda on behalf of the group of which he is a member would need greater brains than theirs. The Postmaster-General is happily not faced by such difficulties. Quite by mistake the hon. Member let out that the improvement in the pig-iron trade was due to the policy of His Majesty's Government, and quite by accident he happened to mention that, although we were the hardest hit of any country in the world, to-day we are the most prosperous. Finally, he went on to say that the greatest necessity was a reduction of Income Tax, probably having forgotten the fact that my right hon. Friend the Chancellor of the Exchequer was the only man to reduce the Income Tax in this country during the past five or six years.

Sir R. HAMILTON

I was not referring to putting back part of the cuts. I was referring, when I said reduction of Income Tax, to a reduction below 4s. 6d.

Captain WATERHOUSE

The hon. Member will remember that there was a rise which was necessitated largely owing to the action of the hon. Member's friends during the calamitous years of 1929 and 1930 and that the Chancellor of the Exchequer reduced the tax by 6d. last year. The hon. Gentleman the Member for Wentworth (Mr. Paling) spoke of the fact that the Chancellor of the Exchequer had done much for his friends. Of course he has clone much for his friends because he realises that anything he might do for taxpayers or others in the country would be action taken for his friends. The Chancellor of the Exchequer has so many friends in so many parts of the country that he is bound to help his friends. I am not surprised that the hon. Member should be rather upset in thinking of the number of friends that we have, when he realises how soon we are going to appeal to those friends to send us back again here. I am sure too that among the many congratulations which the Chan- cellor of the Exchequer has had he will not for a moment have forgotten that the success of his Budget is due primarily to the efforts of the individuals in this country in trade and industry. It is only because of the steps and the great efforts that they have made in the last two or three years that the policy of real value which he and the National Government have put forward has been as successful as it is. He has taken a further step in the right direction in this Finance Bill.

Clause 24, which was so ruthlessly and superficially criticised by the hon. Member opposite, is to me one of the most important innovations in the Bill. Governments in the past, Liberal, Labour and Conservative, have all advocated reorganisation for many years. They have given much lip-service to it, but they have not really taken steps to help reorganisation. They have said: "Let us get rationalisation," but as soon as it came to finding tangible assistance nothing was done. That is true of old Conservative Governments, old Liberal Governments and the Labour Governments. For the first time the Chancellor of the Exchequer has had the courage and the foresight to make this most useful innovation. The safeguards are laid down in the Clause itself. The hon. Member may not have read paragraph (b) which stipulates that one of the conditions on which the Board of Trade must satisfy itself is that any scheme certified is in the national interest and in the interest of the said industry as a whole. No one, surely, will imagine that the interests of "the said industry as a whole" are exclusive of the interests of the workers. Therefore, the hon. Member has got the very point he wants. If he could induce his trade union friends to get together in their industries and confer with the employers with a, view to rationalisation and reorganisation inside the industry, no one would be more pleased than the employers.

If we are right in thinking that reorganisation is necessary and if we are satisfied that provision such as that embodied in this Finance Bill is sufficiently safeguarded under the Board of Trade, then is it not right and natural that we should give relief from taxation in respect of contributions paid to rationalise industry. That has been called a subsidy, but it is a stretching of the meaning of words to refer to it as a, subsidy. It is remission of taxation. When the co-operative societies were not taxed the hon. Member would have been very much annoyed if he had been told that they were subsidised. In the same way, it would be wrong to say of the smaller Income Tax payers who have had a remission of taxation this year that they have had a subsidy from the Government. We must keep within the ordinary meaning of terms, and the use of the word "subsidy" in such a, connection seems to me to be, to say the least of it, misleading. I do not know when the Treasury were first approached in regard to this matter. I approached Mr. Snowden with a similar suggestion in 1930, and he replied in a very courteous letter in which he said that probably the least said would be the soonest mended, because if we were not careful we might not only have the levy taxed but it might be taxed again in the hands of those who were receiving the levy. That was the help given to industry by the Socialist Chancellor of the Exchequer and industries, whether they have enjoyed the "Pleasures of Planning" or not, will bear in mind the two attitudes when they come to weigh up the matter at the next election, which is not very Liar away.

While thanking the Chancellor of the Exchequer for having dealt with this particular need of industry we are sorry that he has not felt able or willing to deal with the almost equally desirable point, at which the hon. Member opposite sneered, that of the reserves set aside for replacement of machinery. On machinery under the present system per cent. is allowed for depreciation and 64 per cent. on fixed motive plant, but that has always to be calculated on the reduced value. If the Chancellor of the Exchequer would make a small change and allow the depreciation to be taken on the cost value so that this machinery could be renewed every 14 or 16 years as the case might be, it would be of tremendous value. If he would do this second thing as he has done the first I do not think that it would mean a total loss of revenue, because the revenue lost would itself be expended in finding fresh work and in reducing the cost of production, thereby increasing competitive power and enabling the Chancellor of the Exchequer to draw upon increased profits, so that in casting his bread upon the water it would in due course return to him again. I hailed Clause 2 with surprise when it was introduced in) the Budget Resolutions, but I am not quite so sure now that the motives of my right hon. Friend were quite so pure as I, as an admirer of his, would have wished. I have noticed in some organs of the Press that there is a great deal of reference to prospecting for oil, and I wonder whether this is the first manifestation of the Government as a royalty owner and whether he is starting to rig the market in favour of prospective concessionaires. Perhaps my right hon. Friend can assure us that such a thing was far from his mind.

As the hon. Member for Orkney and Shetland said, this Debate gives an opportunity for a general survey of the finances of the country, and it is impossible to divorce employment and trade from finance, because they are the very essence of each other. I am not going to be bold enough to enter into a discussion of the theory of money or high finance. I will leave my hon. Friend the Member for East Aberdeen (Mr. Boothby) and the hon. Member for East Edinburgh (Mr. D. Mason) to argue this matter at their leisure My brain is not perhaps sufficiently astute to take in all these nice points. Although I read the speech of the hon. Member for East Edinburgh with the greatest care I was not quite clear as to the exact meaning of the definition of inflation that he put before the House. The point that I want the House to consider on the general question of national finance is that the Treasury in arriving at a fair basis of taxation must divide the country into many divisions and sub-divisions, and I should be surprised if they did not make a division between those who by not spending all their incomes produce capital goods demands and those who by their expenditure produce consumption goods demands; in other words, the savers, mainly payers of high direct taxation, and those who by their expenditure produce consumable demands—the lower classes of Income Tax payers and the payers of indirect taxation. If we allow ourselves to forget in this connection the extraordinary change which has taken place in direct and indirect taxation in the last three years we shall fall into the error which the hon. Member for Wentworth has fallen into in his comparisons.

In making comparisons between direct and indirect taxation we must not forget that until two years ago indirect taxes were raised for revenue purposes, and now they are raised for industrial purposes, and the payers of the indirect taxes reap very material advantage in the protective nature of that indirect taxation and in the fact that they thereby get higher wages and wages for longer periods than they otherwise would have done. It seems to me that if the taxation of either of these sections of the community, either the section which is the saving section or the section which is the spending section, mostly goes back to that same section, it does not make very much difference to the nation as a whole. That is to say, if the Super-tax payers, the large Income Tax payers and those who pay Estate Duties have their contributions to the National Exchequer coming back to them in interest on the National Debt, then the money is just re-allocated among that same section, and if on the other hand those who pay indirect taxes receive in return benefits in the form of educational grants and in social service benefits, there is not any great change taking place in the national balance. I believe that the real interests of both these sections are identical.

Mr. PALING

The wage-earners pay for their own benefits.

Captain WATERHOUSE

I do not for one moment agree with the hon. Member opposite that the wage-earner has to pay for any benefit that the wage-earner gets. Both these sections thrive or fall together.

The Chancellor of the Exchequer must always bear in mind that during the last 10 years about £130,000,000 a year has been saved in the service of the debt and at the same time the higher grades of the taxation have increased. Therefore the balance has been altered more in the last 10 years than in any other period of our history with the exception of the period of war. We have to realise that this process is not over by any means. We know that we shall have to face a largely increased charge for the Defence Services, and that there are other great demands coming to the Government from various sources. For example, we have the demand of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) for a large increase in national expenditure on what he calls his new deal. I was not clear whether the hon. Member for Orkney and Shetland was in favour of the new deal or not. At one moment he referred to it as a palliative and the next moment he referred to it as a desideratum. Whichever way we look at it, it is going to cost the nation a tremendous sum of money and we must make sure that the spending of that money would accrue to the benefit of the nation as a whole. I do not feel that it will do much good.

The right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) has based his argument on the fact that there are over 2,000,000 of unemployed and that our problem is to deal with rather over 2,000,000 unemployed. On that fundamental point I join issue with him. Take London and the South Eastern areas. Is there much unemployment in those areas Is there any unemployment Is it not a, fact that those two areas are undergoing to-day a virtual boom? In the last couple of years about 100,000 men and women from other industries have been brought into London and the South Eastern areas, yet unemployment has not increased. The number of the unemployed has never got below 8½ per cent. and never above 11 per cent. I believe that that represents the amount of unemployment which we would have in this country however prosperous trade was. It is made up of three or four various categories: Those mentally or physically incapable of going into jobs and holding them down at all, those in casual employment, and those who leave their jobs in the ordinary course of a life's work. It also includes those who are played off for a few days. None of these would, I think the House will agree, have been represented as unemployed in the trade union returns of pre-war days. If trade in pre-war days had been as it is now in that area the trade union returns would have shown a negligible amount of unemployment.

The trades of the London area are not essentially seasonal trades as some north of the Trent are seasonal. This is a fresh element of unemployment which we find in Lancashire and Yorkshire which we do not find in the Southern Counties. However prosperous trade becomes we are going to have about 10 per cent. unemployed shown in our figures in the way that the figures are at present calculated. Thus the Chancellor of the Exchequer's problem is not to deal with 2,150,000, but something under 1,000,000, and about half of these are mainly concentrated in the depressed areas. What we want are not great lavish schemes embracing the whole of the country and pouring out money, but much less ambitious ad hoc schemes designed to deal with the needs of a particular locality or a particular section in a particular locality, schemes of transference for example, which are by far the most promising of any way of dealing with this problem. In comparatively small ways of that sort should this problem be approached, and not on the broad and costly lines such as my hon. Friend the Member for Stockton-on-Tees (Mr. Macmillan) and the right hon. Member for Carnarvon Boroughs would have the House adopt. I beg my right hon. Friend to remember—and in so doing I am not assuming that he has forgotten—that he is the traditional guardian of the nation's purse, and that he should furnish himself with the heaviest cudgels he can find to guard this purse against the many attacks which are being made upon it. We ask him to be very cautious in dealing with any scheme for fresh expenditure which is put before him, and to cut down expenditure wherever possible.

Mr. THORNE

Expenditure on armaments.

Captain WATERHOUSE

I suggest he should start off by abolishing the Road Fund which is merely an invitation to any Minister and to any local authority to spend. The May Committee said that the fund should be abolished, and, if he would take his courage in his hands and brave the indignation of the Minister of Transport, I think he would receive the thanks of the House as a. whole.

Mr. THORNE

Highway robbery.

Captain WATERHOUSE

It is better to risk a little highway robbery than to have the taxpayer annually robbed for the benefit of the highways. Finally, may I suggest that he should consider the possibility most seriously of replacing subsidies—because none of us like subsidies—with a good straight honest duty. Do not let us be misled into the idea that these subsidies are wholly for the benefit of the people in the industries. That on beet sugar, for example, is to a large extent a subsidy to sugar consumers necessitated by an entirely uneconomic world price. Exactly the same thing is happening in regard to beef to-day. If he removed these subsidies and replaced them by duties he would be attacked by parties opposite, but on grounds of such attacks we would have far more pleasure and confidence in fighting for him than in the defence of subsidies which we do not like. I hope that at no very distant date he will be able to announce some further remission of taxation to this overburdened country. I agree with the hon. Member for Orkney and Shetland when he said that it was only by a reduction of taxation that we could get back to that industrial well-being which is the first essential of prosperity.

4.51 p.m.

Mr. TINKER

In my criticism of this Finance Bill, I am bound to admit at once that there are certain features with which I agree. Clauses 18, 19, 20 and 21 are on the lines I would have advocated. I would also agree with the reduction of the Entertainments Duty up to 6d. I think that is a step in the right direction. Those are points one can agree with, and it makes our task difficult in criticising this Bill. There are, however, a number of other things of which the House ought to be warned. In our Amendment we have down three features to which we think the attention of the House should be called. The last one states that the Bill. embodies no provisions for securing to the people that improvement in their standard of life which the increased productive capacity of the nation has made available. That to my mind is a most important feature that this country will have to face. I did expect some years ago that the warning given by the Lord President of the Council might have been considered. Speaking on 23rd June, 1932, the Lord President of the Council, dealing with the question of trade and unemployment, said. I may say here—and possibly the right hon. Gentleman may have something to say upon this later on—that you have the rather curious phenomenon that the figures show that, in spite of what is happening in the world, upon which I will give one or two figures later, the actual volume of production in this country is holding its own or is slightly increasing, and yet at the same time you have an increase in the unemployment figures. That is probably due to the appalling condition of the export coal trade and to the fact that in a great many industries which are getting to work now, they have been getting greater production with fewer men at work."—[0FFICIAl. REPORT, 23rd June, 1932; col. 1297, Vol. 267.] That is taking place all over the country—increased productive capacity with a consequent reduction of a large number of workers. Nothing is done by the Government of the day to meet that situation. Until this country starts on those lines we shall always be faced with the appalling difficulties of extreme poverty, and no solution for it. That is the most fundamental feature of our Amendment. It calls the attention of the country to the need of doing something to provide employment for those who are being cast out of work. We are faced with this constantly in the mining industry. Improvements in the technique of the production of coal are said to benefit the community, and yet at the same time we realise that in every mine, whenever those improvements come along, a number of men are thrown out of work. It is very difficult to say to the people, "Inventions are for the benefit of mankind," when the poor man is thrown out of work and asks you, "What is the benefit to me?" The Government have not attempted to do anything in that direction. It is true that the Minister of Labour is getting employers together to see if he can bring about any reduction of the hours of labour by agreement. But that is not sufficient. The House of Commons ought to set itself to try to meet the position by regulating hours of labour so that everybody can be brought into employment.

We want to increase consuming power, and unless you do that by giving decent wages we shall always be faced with this difficulty. I appeal to the House of Commons to watch that point of view. I would like to refer to the propaganda of the Government. They are putting to the people what they have done while they have been in office. I have always found that if you are doing a good action there is no need to shout it from the housetops. People will hear of it. If the work of the Government is such that it is felt all over the land, why is there any need for all this intense propaganda work? Last week there appeared some pictures in a newspaper, under one of which it said, "An appreciative audience." At the top was the picture of the Prime Minister beaming on the people, and in a second picture was the right hon. Gentleman whom I see opposite, and he was actually smiling. That is a thing which he does not often do. The Chancellor of the Exchequer was really smiling in that picture. The tragedy of it is that in the same paper on the same page and in the next column appears a statement about conditions in South Wales. It stated that a university conference has been held in South Wales, and went on to say: Half the population of Wales, which numbers at the present time something over 2,000,000, live in the county of Glamorgan, and practically half of the insured population in the special area 'are without work, while in some of the villages the figure is as high as 90 per cent. To study this problem, and to inquiry into the means being taken to alleviate it, the International Student Service organised a conference at Cardiff just before Easter. I would ask the Conservative Members who are doing all this propaganda work, if they really have anything to say, why do they not go to the distressed areas and tell them there what they have done? Ask them if they are satisfied with the work of the Government and with this Finance Bill. That is the real test, not to go before a well-fed audience at the Carlton Theatre, well-fed and well-clothed people who have never known what poverty means, but who have all the best that life can give. Naturally they will believe what the Government tell them. To get the real sense of the people, go down where they are unemployed and tell them there about the benefits of the Government. They will say to the Government, "Does this mean prosperity? Is this the great work you are doing—vast numbers of unemployed, and no hope of work in the future?" You have a majority behind you that has never been known in history before. With the means at your disposal, cannot you increase productive capacity? What have you done for these people? There are 2,000,000 unemployed. People are not suffering from unemployment here in London and the South as the people are suffering in Durham, South Wales and other parts of the country. It is to those people that Ministers should go to tell what the Government have done. They would quickly get their answer—as they will get it when an election comes.

These are the matters in the Finance Bill to which the Government ought to pay great attention. They should realise that a great number of people are in want and are looking to them to alleviate their distress. Our Amendment also deals with the question of indirect and direct taxation. I was somewhat puzzled by the argument of the Liberal speaker. He referred to cutting down expenditure, and I should like him to tell me where expenditure could be cut down. He also talked about the reduction of Income Tax. It is all very well to talk about that, but the money has to be found from somewhere; and, when people talk about cutting down the Income Tax, I should like them to say from what other source the money is to be found. When Income Tax is cut down extra money has to be raised by indirect taxation and that is what is being done under this Budget, as I shall proceed to show. In 1931 direct taxation accounted for 65.77 per cent. of the whole, and indirect taxation for 34.23 per cent. That meant that out of each £100 then raised in taxation just over £65 was raised by indirect taxation and just over £34 by indirect taxation. But when we come to the year 1935–36 we find that direct taxation has fallen to 59.77 per cent. while indirect taxation has increased to 40.23 per cent. These figures were given to me by the Financial Secretary to the Treasury. This means that of every £100 now raised in taxation the indirect taxpayer has to pay £6 more while the direct taxpayer pays £6 less.

The estimated receipt from taxes under this year's budget is £697,000,000 If we had been raising this amount in taxation in 1931 the direct taxpayer would have had to pay £460,000,000 and the indirect taxpayer £237,000,000. This year owing to the increase of indirect taxation 2418,000,000 will be raised by direct taxation and £279,000,000 by indirect taxation. Following up that line of argument, I would point out that the indirect taxpayer has to pay £42,000,000 extra because of this turnover from direct to indirect taxation, and most of that has been put on to Customs duties. A question was asked, in the House yesterday by an hon. Friend of mine as to the approximate amount of Customs duties collected on foodstuffs in 1931 and in 1934. From the answer given by the Financial Secretary to the Treasury, we find that in 1931 the amount of taxation collected on foodstuffs was £14,460,000 while in 1934 the amount had gone up to £32,590,000 which is an increase of £18,000,000 to the indirect taxpayer through the taxation of his foodstuffs. That is the trend of the policy of the Government. They are throwing more of the burden of taxation on to the indirect taxpayer, and we on these benches do not like that method.

I agree that money will have to be found to carry on the work of Government. I am not in favour of cutting down any useful services. Whether for defence purposes or anything else once the House of Commons has decided on the need for expenditure the money has to be found. But I do argue that the only fair way to the electorate and the public is to do it by the method of direct taxation. Let people know that they have to pay for all the services they get and do not provide for these services by taxing the food of the poor. When you tax food poor people bear a proportionately higher burden of that taxation than other classes. The richer people have money to spend on many other things than foodstuffs, but in the poor household nearly all the money is required for foodstuffs, and for that reason the poor person pays a greater proportion of taxes on foodstuffs than the rich person. Therefore, the rich person does not have to bear the same burden of indirect taxation as does the poor person.

Captain STRICKLAND

I take it that the hon. Member includes among the rich people all those who pay Income Tax? If so, I should hesitate to describe the lower grades of Income Tax payers as rich people.

Mr. TINKER

No, I do not include among the rich all those who pay Income Tax. I am referring to the higher grades of Income Tax payers. I think that to put direct taxation on a proper basis the lower grades of Income Tax payers should be eliminated. I would exempt from taxation altogether an income of the amount that might be regarded as necessary to maintain an ordinary household. That amount might be put at £250 or £300 a year, and that would be outside the field of taxation altogether. When I had provided for what would be regarded as the needs of the ordinary household, direct taxation would then commence on a graded scale on all higher incomes. When I got to the very rich it would be very hard for them for I should make the taxation very heavy. I claim that in doing that I should be doing the rich a good service; for the very rich have so much money that they are tempted to spend it in all kinds of wrong directions and by taxing them more heavily I should be helping them to a more useful turn in life. I cannot hope that my arguments will prevail much in this House of Commons, but we are putting forward our arguments in the hope that they will make some impression in the country, so that people may feel that the work of Parliament can be conducted in a more efficient manner than it is being done at present. These arguments on the broad issues of this Bill are submitted for the purpose of getting before the public our views as to what we should do if we were in power. I hope it will not be long before the chance comes for us to show people what we can do when we are in power.

5.9 p.m.

Mr. LAMBERT

When I listened to my non. Friend the Member for Orkney and Shetland (Sir R. Hamilton) I wished that he could have been with me to see the film that he described. He would not then have been in such a gloomy frame of mind. There is one point about references to the film with which I heartily agree and that is the admirable presentation of the Chancellor of the Exchequer. He seemed to be quite a film actor, and I was very much astonished at his ability in that direction. I understand there are some rumours going about to the effect that there is to be a reconstruction of the Government. Before my right hon. Friend goes to Hollywood I hope he will introduce another Budget in this Government, for that is the greatest compliment we can pay to him. He has introduced four Budgets now: they have been devoid of all fireworks, but they have been substantial contributions to the national welfare. My right hon. Friend said in his Budget statement what I more humbly have been endeavouring to impress upon the community, that "confidence is the mother of enterprise." And I would say to the hon. Gentleman opposite that unless you have confidence in the country you will not have enterprise, and unless you have enterprise you will not have employment. The Budget is balanced, as all the right hon. Gentleman's previous Budgets have been balanced, and yet there have been remissions of taxation.

I think it is perfectly marvellous how the country has been able to respond to a period of settled government. I hope that my right hon. Friend will go on with his policy of cheap money. After all the Government must be the directors of national finance; they cannot leave this to the Bank of England or to any group of men. My hon. Friend the Member for Orkney and Shetland talked about the unsafe pound, but the pound is safer than any currency in the world to-day, and it is more stable in terms of commodities. No one could envy France or America their great stores of gold; they might as well have great stores of lead in their vaults. I am glad that this fetish of worshipping gold is passing. The Amendment submitted by the Members opposite talks about the failure to secure to the people. that improvement in their standard of life which the increased productive capacity of the nation has made available. When I first entered the House public expenditure was very much less than it is to-day, and I am amazed that the country is able to spend so much on what I would call unproductive expenditure. Take widows' and old age pensions. I am not condemning them because I was a member of the Government which helped to pass the Old Age Pensions Act. We are paying £81,000,000 a year in widow's and old age pensions.

Mr. BATEY

Absurd.

Mr. LAMBERT

If the hon. Member wants the figures I have them here.

Mr. BATEY

Let us have them.

Mr. LAMBERT

I have given them, and I have taken them from the Return dealing with Public Social Services, issued by the Government, Command Paper 4749.

Mr. BATEY

It is not the fact that the expenditure on old age pensions is £43,000,000 and the expenditure on widows' and orphans pensions £14,000,000.

Mr. LAMBERT

The figures are:Widows, Orphans and Old Age Contributory Pensions,40,844,000; and Old Age Pensions,240,448,000;total of£81,000,000 as I said. My hon. Friend had better examine these figures again for himself. Unemployment insurance, £154,000,000. Excluding education, which costs £100,000,000 a year, the country is providing £390,000,000 a year in social services; an amazing total. The Debt charges amount to £224,000,000 a year. Altogether the country in pensions, insurance, social services and Debt charges is providing £614,000,000 a year. These are staggering figures, but these large sums of money are distributed throughout the country, and they increase the consumptive capacity of the people. Therefore, it cannot be said that the Budget embodies no provision for improving the standards of life of the people. The amount. of 2600,000,000 is distributed; it represents consuming power, and probably there are consumed by the recipients of this £600,000,000 about £200,000,000 of foreign imports, food, clothing and the like. In my early days one always considered that an import was balanced by an export, but here imports are not balanced by a single export. The producers of the country are penalised and, therefore, I regard tariffs as inevitable. That is where I differ from my Liberal friends. You have to regulate imports seeing that you have increased the consumptive capacity of large masses of our population by this enormous distribution of public money.

The hon. Member for Wentworth (Mr. Paling), who made such an admirable speech, will agree that were it not for the regulation of the production of coal the prices of coal would drop. I have calculated that the coal industry to-day is getting an indirect subsidy of something like £30,000,000 by the restriction of output. A great deal has been done for the coal industry. In the case of iron and steel there is an import duty of 33⅓ per cent., and that helps the coal industry.

I come to an industry in which my constituents are interested, agriculture, which has probably suffered more titian any other. I want the Chancellor of the Exchequer to direct his attention to this point. I have had to deal with some trustee securities and among them was the Conversion Loan, 32 per cent., issued in 1921 at a price of £65. To-day it is worth £108, an increase of about 60 or 70 per cent. If anyone had invested £100 in Conversion Loan in 1921 it would be worth to-day £165. Suppose you had invested that amount of money in agricultural land in 1921, I doubt whether it would be worth £70 to-day. I ask the Chancellor of the Exchequer to consider this: On the one hand are holders of Conversion Loans. All they have done is to draw dividends, they have not lifted a finger. On the other hand are owners of land, and one-third of the land is owned by owner-occupiers, who have cared for the land, cultivated it, produced food for the people, working 10 and 12 hours a day on weekdays and six and seven hours on Sunday—you have to work seven days a week on the land. They have had a reduction in their capital value of 30 per cent., whereas others have had an increase in their capital value of 65 per cent. It is very much like feeding the drones and starving the bees. Hon. Members opposite complain of unemployment. Plenty of men could be employed on the land provided it was profitable to employ them. They will not come there unless conditions are as good as they are in the towns. I agree that if you like to make it profitable people will live on the land—

Mr. G. GRIFFITHS

I thought one had to rest on the Sabbath day.

Mr. LAMBERT

The hon. Member must realise that we are dealing with nature. Animals have to be attended on Sundays just as the hon. Member eats on Sundays. I have often said that it would be a great asset to the agricultural industry if some Government would produce a national cow which did not have to be milked on Saturday afternoons and Sunday mornings. We have to take the world as it is. In addition to the risks of falling prices there is also the risk of uncertain seasons. - In his Budgets the Chancellor of the Exchequer has taxed agricultural necessities which every farmer has to use. Super-phosphates of lime 10s. a ton duty; sulphate of ammonia 20 per cent. duty; sodium nitrate 20 per cent.; churns 15 per cent. ad valorem; ploughs 15 per cent. ad valorem; wire 33⅓ per cent.; wire nails £3 a ton; galvanised wire netting £8 a ton; vegetable oils 15 per cent. ad valorem; linseed oil £3 10s. a ton. These are articles and commodities which agriculturists must use.

The question I ask is why, as all other industries have tariffs, they are denied to the agricultural industry? Agriculture has been sacrificed on the altar of Imperial trade. The Secretary of State for the Colonies made a defence the other day of the soya bean duty, and asked the House to approve it as a great piece of Imperial policy in return for the tremendous benefit which was being given by the Colonies to the textile trade of this country. Agriculturists are to be taxed in order that the textile trade of the country may benefit. I only ask that agriculture shall receive the same treatment as other industries. We have to carry a good many things, but we cannot carry on our backs the textile industry. The Chancellor of the Exchequer, I am sure, knows that livestock is the backbone of the agricultural industry. Our feeding stuffs are taxed in order, as we are told, to benefit the textile trade of Lancashire. This is not fair, and agriculturists do not think it is fair. At Ottawa the Government bound themselves not to impose certain duties. I beg them at the earliest moment to resume their fiscal liberty and let us do what we please here.

At the moment we are bound by agreements and cannot do this and that. I should like the Government to get into a position that they can impose tariffs. Our competitors abroad are not too scrupulous in the methods by which they assist their products getting here. They have depreciated currencies: Denmark, Argentine, Australia and New Zealand all have depreciated currencies. What would the iron and steel industry say if they were faced with a competition from a depreciated currency? Our competitors subsidise their products. Butter in Australia is sold dearer than it is in London. As agriculturists we say that this is not fair. We are told that unless Australia and New Zealand can send their products here they will not be able to pay their debts. You cannot expect the agricultural industry to shoulder not only the textile trade of Lancashire but the debts of Australian bondholders. I was in the House of Commons when the Chancellor of the Exchequer's distinguished father initiated the idea of Imperial trade, and I say to my right hon. Friend that unless we can get fair play there will be a great sense of hostility to Imperial trade in the country districts. I hope we shall get it and that there will not be any hostility, but I would point out to the Government and to the House that no farmer will hoist the Union Jack or sing "Rule Britannia" if the bailiffs are in his backyard.

In the agricultural industry we have been fobbed off with marketing boards. I am not a great believer in marketing boards [Interruption] The first marketing Act was set up by the Socialist Government in 1931. Ottawa was a product of the Socialist Government. I would try to keep the Government away from Socialist legislation; I am not at all enamoured of it. At some time when hon. Members opposite have had more experience they may become competent to govern the country, but at the moment they are not really competent. These marketing schemes I regard as emanations from the fertile brains of unpractical theorists—emanations from Whitehall. I have no faith whatever in Whitehall, I have never believed in Government interfering with industry. We have had these marketing schemes thrust upon us. They have failed. Then the marketing boards have to come to the Chancellor for a subsidy—the milk subsidy and other subsidies. As the hon. and gallant Member for South Leicester (Captain Waterhouse) said, we do not like subsidies. I do not like them. This idea of so-called doles for the agricultural industry is very objectionable indeed. We do not want doles; we want fair play. I say that emphatically. I hope that my right hon. Friend will not be asked for any more doles to boost up impracticable schemes. They, too, are temporary schemes. They depend on the whim of a Chancellor of the Exchequer. They cannot give that confidence which my right hon. Friend wishes; and more than that they weaken the Exchequer.

Let us take import duties. There were meat imports in 1934 to the amount of 30,000,000 cwts. Ten shilling a cwt. would have brought in £15,000,000. By that means the Chancellor could give a preference to the Dominions and would be strengthening the Exchequer. Take the Case of eggs. The other day I was astounded when my hon. Friend the Financial Secretary told us that the Government had collected nearly £1,000,000 in duty on eggs last year. Eggs were never cheaper in this country. I must admit that my political philosophy has been turned upside down. Eggs were never cheaper, and yet the Chancellor collected £1,000,000 in dty. If you really propose to make tariffs a reality you must use them for extorting concessions from other countries. I am in cordial agreement with the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), when he said "Use your tariff ruthlessly." This is the only food market in the world. The food comes in. The Government should say to the Dominions and to Denmark, or whoever it may be, "Reduce your tariffs: otherwise you will be penalised in this market." Thereby you will contribute to freer trade.

There is one other aspect which I put to the Chancellor, and that is in encouraging agriculture he will add greatly to the security of the country. The Financial Secretary told us the other day that in the last 40 years we had spent on armaments £1,122,000,000. That is an amazing sum. It is £112,000,000 a year for 10 years. Yet we are told that our defences are insecure. There is something wrong. All Governments are responsible. I am not responsible. I have not been in a Government for about 20 years. I cannot be called to account. I understand that there is to be a large increase in the Air Force. I put it to the Government—and I speak with some experience in this matter, having studied the problem and having had it studied while I was at the Admiralty—that the greatest security for this country would be to provision it by the production of more home-grown foodstuffs. In April, 1917, 850,000 tons of shipping were sunk, and as Lord Tweedsmuir has said in "The King's Grace," one in four of every merchant ship that left these shores never returned, our western approaches were cemeteries for merchant ships, and there were only six weeks' supply of corn in the country. Therefore, I say to the Government that one of the greatest securities for the country would he to increase the agricultural production.

To-morrow we shall have a Debate on defence. There will be too many experts present for me to take part in that Debate, but undoubtedly the advent of aircraft has rendered this country infinitely more vulnerable. The advent of aircraft may paralyse the Port of London. I ask hon. Friends who represent London whether, if anything should happen to dislocate the food supplies of the people of London, it would not be a very serious thing indeed. Aircraft would damage seriously the transport of our food supplies and would make it almost impossible for supply ships to come up the Channel. Then there is the Navy. Aircraft could paralyse the Navy by destroying its fuel supplies. I do not want to be too gloomy, for I hope and pray and believe that war will not come in my time or in the time of any Member of this House, but I do ask my right hon. Friend the Chancellor of the Exchequer to think of these problems for dealing with the agricultural industry. I do assure him that to provision this country would be the greatest asset for its security. I am not asking for any favours for the agricultural industry, but I am asking for fair play, and I hope that the policy of the Government will terminate what are called doles for agriculture.

5.37 p.m.

Mr. GARDNER

I wish to support the Amendment, and in doing so to ask the Chancellor of the Exchequer to take out of the Finance Bill the increased duty on heavy oils. It means only £800,000 this year, and £1,200,000 in a full year. It is therefore a small thing for which to ask. Man will ride. There is an anecdote of a small boy who went to work on a farm. One of the jobs done in midwinter was the taking of a horse down to the farrier. The boy insisted on being hoisted on the horse's back. When he had got some way down the road a farm labourer met him, and found that the boy was crying. The man asked, "What is the matter?" and the boy blubbered, "I am cold." The man said, "Get down and lead the horse," to which the boy answered, "I will freeze first." That is the attitude of mankind towards riding. It was said by an American writer who amused me a great deal in my youth, that a man who has travelled fast once never wants to go slow again. He said that in the days when a trotting horse that could cover one mile in two minutes was reckoned to be a very good horse. Of course that is not speed in these days. As men will ride and will ride fast, and we cannot change human nature, our task is to coax human nature's activities into the least harmful channels. I do not think that the Chancellor is aware of the full implication of this tax on heavy oil, nor do I think that the House was aware of its implications when it passed the Budget Resolution. The duty on oil has been treated wholly as a revenue matter, but I want to introduce other considerations. The right hon. Gentleman said on 15th April. I certainly have no desire to cramp the development of the Diesel engine."—[OFFICIAL REPORT, 15th April, 1935; col. 1627; Vol. 300.] From the Exchequer's standpoint all engines and all oils are taxable. I ask the House to approach the matter from the standpoint of the comparative safety and danger of the two forms of liquid fuel. Petrol is highly dangerous. Our regulations for storage, our general safeguards for using it, are so effective that we are hardly aware how dangerous petrol is. It is specially dangerous in aircraft. The Air Minister informed me that 96 accidents occurred to civil aircraft in 1934, and in nine cases fire followed. I have not asked for Army and Navy figures, but there was a military plane burned only yesterday. The danger of fire in such accidents would be almost negligible if heavy oil were used. I know that the Minister is only withdrawing the rebate in case of road transport, but that withdrawal may act as a check on the development of the Diesel engine. Every check on the Diesel engine postpones the day when additional safety will be given to flying. A faulty petrol pipe may cause fire; so will a forced landing or a faulty landing.

In war, a bullet through a petrol tank means the end of the flier and the machine. In Iraq on 9th May an aeroplane was shot down in flames. Nothing should be put in the way of added safety for these bravest of young men who pilot our flying machines. In the case of road transport the danger of fire and explosion is always present. We have tanks on wheels running about our business streets, some of them carrying probably as much as 500 gallons of spirit. There is always the danger of collision and fire, and if, as may happen, a tank turns over as a result of an accident, you may not only have the trouble caused by the petrol running about the street, but also the danger of vaporised spirit in drains and sewers. We have been very fortunate in not having any serious fires of this character in built-up areas, but I remember a case in East Ham in which a lorry loaded with tins of petrol caught fire. Nothing could be done except allow it to burn out. Luckily, it happened to catch fire at a point where there was vacant land on each side of the road. I also know of one case of a tank catching fire, and I think that supplies another reason why the use of heavy oils should be encouraged.

My third reason for allowing the rebate to remain is a stronger one. We think we have tamed petrol because we have caged it. It is still untamed and in an emergency it, may get loose. If it does, our regulations and precautions will look ridiculous. There has been a tremendous increase in motor traction. In August, 1922, the number of licences for vehicles was 975,783, and in 1933 there were no fewer than 2,271,699 licences in existence. There were not many licences for Diesel engine vehicles among those. I understand that it is a later development. Motor spirit imports rose from 100,858,000 gallons in 1913 to 1,073,114,000 gallons in 1933. That is to say, the imports increased 10 times. Motor vehicles are everywhere, garages are everywhere and petrol storage is everywhere. Most petrol pumps have a 500-gallon tank somewhere near, often buried in the ground. I may be asked what is the point of all this. We read nowadays about gas masks, about the possibility of air raids, about bomb-proof shelters, and experiments in the darkening of towns. But one bomb in a petrol tank would provide a beacon to light destruction on, because if hostile aeroplanes ever come here at all, they will not come singly but in numbers.

I asked the Home Secretary recently for certain figures about petrol storage. He could only give me the figures for the London County Council area and those figures disclosed the fact that there are in that area 3,594 licences to store petrol up to 1,000 gallons. Nearly every one of those covers a danger point. There are 1,162 licences for storing over 1,000 gallons and I would say that every one of these licences covers a special danger point. The London County Council area does not contain all the danger spots. Every city and every town has its danger spots. The people of West Ham live in exceptional danger but then we have always done so. Our district was part of the air raid area during the war and suffered the Silvertown explosion. I saw that explosion and I saw the wreckage which it caused. In the very last air raid which was made on this country, four bombs fell in West Ham—and we have licences there to store petroleum.

In West Ham there are 197 licences to store petroleum up to 500 gallons. That is quite ordinary and represents petrol pumps and so forth. But there are 45 licences to store from 500 to 1,000 gallons. There are 45 licences to store from 1,000 to 10,000 gallons. There are eight licences to store tens of thousands of gallons up to 100,000 there are six licences to store from 125,000 gallons up to 950,000 gallons and there is one licence to store 1,900,500 gallons. We are living with magazines of potential disaster all round us. It can be said that we could set the Thames on fire because some of this storage is alongside the river and with what is contained in our area we could illuminate from Beckton's gasometers and the Royal Arsenal at Woolwich up to the Tower Bridge, and the dome of St. Paul's. This is a very real danger. I am not scare-mongering, and I do not exaggerate the possibilities.

I ask the Chancellor to make inquiries at the War Office as to what happened at a base munition stores camp on the Somme on Whit Tuesday of 1918—the day following the last raid on London. The Germans used their aeroplanes there to some advantage. About 10 o'clock at night an exploratory bomb found this stores camp which was so well camouflaged that it was not visible from the air in the day time. The bomb fell into a hangar filled with small arms ammunition and set it on fire, and the fire disclosed what could not be seen from the air during the day time. From the time when the first bomb took effect until 4 o'clock next morning there was a regular service of German aeroplanes every 10 or 15 minutes, dropping bombs on that store camp. They blew up the shell dumps, and the shells exploded from the bombs and from sympathetic concussion until in the places where the shell dumps had been there were only holes in the ground, and all the shells were gone. Tremendous damage was done, and it all resulted from the fact that one bomb caused a fire.

I use that as an illustration of what might happen in London or any other large town in this country. I have seen petrol alight. It burns mostly with very little smoke and a bright clear flame. I have seen heavy oil alight. It burns with a heavy woolly pall of smoke. Foam fire appliances have some chance with it. When petrol is alight in bulk there is no chance of dealing with it. It has to burn out. Only last Saturday a factory caught fire in Somerset and one of the factors which prevented that fire being dealt with was the existence of petrol tanks on the premises. The streets round about had to be cleared by the police. The people had to be moved out of their houses in the vicinity and the fire brigade were quite helpless. They had to keep away from the fire because of the danger of explosion. I ask the Chancellor not to do anything to check the development of the Diesel engine but to do all he can to encourage the use of heavy oil. It is important for the national well-being and safety that this should be done. I do not ask him to go in for anything extraordinary. I do not believe that we are going to have war to-morrow or next week. But while things are as they are, war is always possible, and if we could get rid of petrol from our midst it would be a tremendous advantage.

5.55 p.m.

Sir ARTHUR MICHAEL SAMUEL

I hope the hon. Member for West Ham (Mr. Gardner) will forgive me if I do not follow him into a discussion on the subject of which he spoke. I was very much attracted by the earlier speech of the hon. Member for Orkney and Shetland (Sir R. Hamilton). He spoke airily about stabilisation, and about a recent speech on it made by Mr. Morgenthau. It seemed to me that he spun himself into a cocoon of stabilisation mumbo jumbo, but gave no thread which we could get hold of which would lead us to any definite conclusion as to what he thought should be done or to any solution of the problem. With an ambiguity worthy of a priestess, of Apollo the hon. Member said that we must take the right course. May I, for a moment, survey the dollar-sterling exchange stabilisation problem We know that the merchant in doing business must have certain knowledge of what is represented by a yard, or a ton, or a gallon or a kilogramme or a litre in order that he may know exactly the weight or measure of what he is buying or selling. Equally he must know for certain what value in money he will have to pay or what value in money he may have to receive.

Without stabilisation of exchange-money values full restoration of international trade is, of course, impossible. It is a trite truism, and it does not require the hon. Member for Orkney and Shetland to tell us, that we can never rehabilitate our international trade without a stabilisation of money or currency. But the hon. Member now comes along and tells us that we must take the initiative with the United States because Mr. Morgenthau has made some public statement which may mean something or may mean nothing. We know that our friends the Americans are really children in the matter of pure economics. They do riot know what they are doing, what they have done, or what they are going to do. They are merely reeds shaken by the wind of political pressure. It is true that we must eventually stabilise, but I would put this question to my hon. Friends and ask them to consider the answer to it. Dare the President of the United States stabilise at the present moment? I say that he dare not. He is faced to-day with the prospect of inflationist pressure such as would not permit him to stabilise.

It is no good Mr. Morgenthau saying that he is ready to shake hands with our Chancellor of the Exchequer over some arrangements for stabilisation until we know whether the pressure in the United States in favour of heavy Government expenditure, which must be of an inflationary nature, is going to succeed or not, and whether proposals of that kind are going to be put through by the legislature of the United States or not. If that pressure is to succeed, the President of the United States cannot stabilise for the present, whatever arrangement Mr. Morgenthau may advocate. The inflationists will not let him. Neither can he withdraw now from the silver-buying policy, while it is part and parcel of his political programme. Is he going to give up the silver policy which hat wrecked Chinese trade and injured us so greatly oontrary to the forecasts of those people who said that if one only put up the value of silver it would make the teeming millions of China so prosperous that they would buy more from us. That very silver policy which is part of American recovery or monetary policy is directly or indirectly concerned with the question whether to stabilise or not to stabilise. It is wrecking the power of China to come into the markets.

Mr. DAVID MASON

For exports, not for imports.

Sir A. M. SAMUEL

It is difficult for us to buy Chinese products if silver is dear. If China cannot sell her products, it is difficult for China to buy of us and others. It is making it very dear for us and others to buy of China, and it is injuring China. China has already protested to the United States Government against their action in putting up the price of silver, and has put an export tax on silver to stop China being drained of currency. It is not for.me to discuss the silver question at any length now. I merely say that the silver problem in America with the pressure of the silver votes behind it is so great on the Government of the United States, that the President cannot think of stabilising unless he has satisfied the silver people and the inflationist. I do not know what is in the Chancellor's mind. He may have the same view as I have, which is that it is no good thinking of stabilizing until the time is fully opportune. We had better wait until after 1936 or 1937 when the President has been re-elected or defeated. We shall have to wait until the United States have had an electoral clean slate and a President who will not serve a third term or a new President with no pledges to fulfil to inflationists or silver mine owners. If he stabilised now, what would happen? He would at once break the European gold bloc or break the finances of France, Holland and Switzerland. The mere fact of America stabilising now would render it possible and probable that gold would at once pour from France, Holland and Switzerland into the United States for investment and throw those three European countries off the Gold Standard with the risk of revolution.

Stabilisation in any case ought not to take place between us and the United States as the two protagonists until and unless some de-valuation has taken place in France, Switzerland and Holland similar to that which has taken place in Belgium. It would be a very unfriendly act on our part if we did anything by stabilisation to upset the currency arrangements of those three friendly countries. It is all very well Mr. Morgenthau saying in a nebulous way that we should stabilise. Has he taken that proposal to its logical conclusion? If we stabilise, is he prepared on behalf of his Government to say that they will lend abroad? Is he prepared to do what is the duty of every creditor country and lend to creditworthy customers some of the overseas trade credit balance? The next thing we have to ask is, if Mr. Morgenthau stabilises, will he allow the world to send goods to the United States? They are three pre-requisite points that must be put to Mr. Morganthau before we can talk about stabilisation. I do not want to attribute any unworthy conduct to the United States, but they are like children playing with fire; they are injuring themselves and are injurying the rest of their neighbours. The President to-day is like Joshua trying to make the sun stand still, and he is failing to do so. John Law tried to do the same thing in the time of Louis XV that the President of the United States is doing now, and he failed. We are gravely interested in the recovery of the United States, for a prosperous United States means everything to us. We are deeply interested that they should prosper. Unfortunately the monetary schemes of the United States Brain-storm Trust have failed and are hindering recovery in the United States. We must not forget that at the time of the World Economic Conference of 1933, while our Prime Minister was on the way to America to talk about things and the United States delegates were conferring with us here, Mr. Roosevelt deliberately went off the Gold Standard and destroyed the Conference.

Something has happened in the last few months which has made me chary of supporting proposals about coming to any stabilisation decision with the United States Government while the President is in his present frame of mind. Think of the foolish things that are being pressed on the President by his supporters. There is the silver pressure; then, for example, the pressure of the Louisiana senator and of the radio priest; they will get hold of many votes at the next election. Then there is the war veterans' bonus; then the inflationists. You may one day find that the greatest industry in America, the motor industry, will say to the United States Government: "If you want to increase employment in America, we shall not vote for you unless you provide five billion dollars to buy out all the worn-out Motor cars and put them in store like you put gold and silver. This is a good recovery scheme and will increase employment." We are dealing with people who are like children in the handling of monetary problems.

The decision of the United States judges on the gold question is merely that words in a contract have no meaning. What a position 1 The verdict destroyed the terms of every contract expressed in explicit language and operative in the United States. That verdict altered contracts which were expressed in explicit terms relating to gold payment. United States judges have decided that definite words and terms of a contract do not mean what is stated in writing. It makes us pause a moment. If any proposal should be made by Mr. Morgenthau to our Chancellor about stabilising, the decision on the gold clause destroys for me any reliance upon any contract of the United States Government upon which to base that stabilisation of exchange, which is essential to the restoration of international trade. That gold clause decision has done a great deal of harm to commercial morality in the United States and shaken confidence in whatever arrangement may be come to between the United States and England.

My view is that, anxious as I am to: see stabilisation of currency so that we may know the nett result of what we are buying and selling, we should certainly wait until after the Presidential election in 1936 or 1937 before we can hope for a mutually satisfactory arrangement. When the time does come to make some advance towards Mr. Morgenthau or his successor, we must also lay down two or three pre-requisite conditions. The United States must be prepared to lend abroad and play the game with credit-worthy countries and customers, and they must be prepared to take a proper amount of the goods of other people who buy from them. I do not know how this further safeguard can be obtained, but we must be put in such a position that the world shall have a guarantee that no change of electoral opinion or political pressure in the United States will again compel the Government of that country to do to other nations what Mr. Roosevelt has done with his monetary experiments. They have not only failed, but have injured the whole world. We must be put in a position to see that whatever arrangement is made between us and the United States it shall be of such a kind that good faith in the stabilisation contract shall be kept and the agreed working secured against every risk. But in no case while the United States legislature is in its present mood should we enter into any stabilisation contract as hinted by Mr. Morgenthau. Let us wait perhaps a couple of years, much as we need and desire a dollar-sterling stabilisation. The ground will be safer.

6.9 p.m.

Mr. CHAMBERLAIN

I believe that I shall be only speaking the simple truth when I say that no Budget in recent years has won such immediate and general acceptance as that which is embodied in the present Finance Bill. So much is that the case that the Opposition must have found themselves in considerable difficulties in choosing the ground on which, as they were bound to do, they could find their opportunity of attacking it. It will be seen on examination of the Amendment which they have put down that they are not attacking the Finance Bill for anything that it contains, but that they are obliged to suggest that it is worthy of condemnation because it does not contain a number of things. Of course, the difficulties of the Opposition are now reflected in myself. There is so little criticism that there is very little for me to say in reply. Although I think that there is general satisfaction with the Finance Bill, 1 will try to make one or two observations on some of the comments which have fallen from hon. Members in the course of the discussion. Two hon. Members have dealt with individual items, although they seem to have very little relevance to the Amendment. We have, in fact, had rather a discursive discussion. We have discussed agriculture, tariffs, cinemas and cinema stars, but I found very little to which I can reply.

I am sorry that the hon. Member for Orkney and Shetland (Sir R. Hamilton) is not in his place at this moment, because I should have liked to congratulate him upon the three resounding platitudes which he put before the House in substitution for anything more substantial. The first was that unemployment was a regrettable phase in the life of any nation, and a considerable disadvantage to the person who is unemployed. The second was that the way to establish peace was to put an end to war, and he added to that the observation that general peace was good for trade. His third and supreme platitude was that a step forward in the right direction was never premature. The hon. Member was trying to keep up the reputation of the Liberal party for introducing a note of gloom into a situation in which cheerfulness will, keep breaking in. It seems to be so much pain and distress to them to hear these constant references to the prosperity or the well-being or the improvement of the country that they feel it their duty, like the skeleton at the Egyptian feast, to remind us that we are all mortal, and that if we only took pains to look round we should find some indication somewhere in the country that things were not so good as they might be. They are having a difficult task just now, but they are doing their best, and I hope we may hear some further contributions from them in the course of the Debate, when they may make a better case for melancholy and gloom than was made by the hon. Member for Orkney and Shetland.

Now I come to one or two more detailed matters. We had a speech from the hon. Member for Upton (Mr. Gardner) which was entirely devoted to the duty on heavy oil, and in his endeavour to bring a little fire into a somewhat lethargic discussion, he went to France and spoke of bombs and fires in hangars and a great many other things which I should never have thought were connected with the duty on heavy oil. That duty is a matter which we shall be discussing in Committee, when, no doubt, the hon. Member and others who object to it will have an opportunity of putting before us in full and extended detail, and with such geographical additions as may occur to them, the difficulties to which they take exception. On the Second Reading of the Finance Bill, I venture to think, it is hardly necessary for me to do more than repeat what I said when we were discussing the Budget Resolutions and the subject came up. I then pointed out that in this case the revenue was beginning to suffer from, the competition of heavy oil with a light duty with light oil with a heavy duty, and that that loss of revenue was beginning to take on dimensions which were formidable and which I could not, out of consideration for the revenue, allow to grow. That was the reason, and the sole reason, why I proposed to equalise the duty on heavy oil with that on light oil; and the House will recollect that I have at the same time equalised the vehicle licence duties, seeing that this increase in taxation is confined to oil which is used for vehicles on the road. Moreover, the heavy oil engine still has an advantage of greater mileage per gallon.

. The hon. Member for Wentworth (Mr. Paling) singled out Clause 24 for special attention. He appeared to find in it some new principle, and certainly founded upon it a series of questions which seem to me to be entirely irrelevant to the Finance Bill, because this is not a Bill for the rationalisation of industry. This is a Clause which has reference to the Income Tax, and it is only as the process of rationalisation, or incidents which may proceed from rationalisation, are connected with Income Tax that the subject has any relevance at all for us. What is the position with regard to Clause 24? The hon. Member, rather fantastically I thought, described the provisions of Clause 24 as a subsidy to the Tory friends of the Government. In fact, we are considering a possibility that we may, after certain conditions have been fulfilled, impose by statute upon an industry the necessity of contributing by means of a levy to a fund to be used for the purpose of buying up redundant plant and machinery in the industry. That is a process which is to be carried through for the benefit of that industry.

Sir STAFFORD CRIPPS

There is nothing in the Clause, that I can see, which makes it necessary to have any statutory arrangement. It authorises the allowance in the case of voluntary arrangements.

Mr. CHAMBERLAIN

I am sorry, but I had not completed my argument or my exposition. The hon. and learned Gentleman is perfectly right. There is nothing in this Clause which limits it to cases where there is a statutory imposition, but I want first to take the case of a statutory provision by which an industry may be compelled to pay a levy towards a fund for this particular purpose. I do not know whether that is what is referred to in the parenthesis in the Opposition Amendment which speaks of a "limitation of production." If that is so, as I gather, I am sorry that I did not appreciate earlier what the point was as to the limitation of production. That being so, I pause for a moment in my exposition of the processes which have led to the production of Clause 24 to point out that that contention is a complete misapprehension on the part of the Opposition. There is no question of limitation of production here, but a limitation of productive capacity, which is quite a different thing. It does not mean, taking the cotton trade as an example, that where there are a large number of redundant spindles and you buy up some of those spindles, you are going to reduce the production of the cotton trade. It merely means that you concentrate the production of the cotton trade on a smaller number of spindles or a smaller number of factories and thereby reduce the cost of production. There is no limitation of production at all.

I return, then, to my proposition and ask the House to consider this: In the computation of profits in a business for the purpose of the Income Tax we allow a deduction of certain expenses necessarily incurred in making those profits. Is a levy of this kind such an expense In the case that I have suggested it is obviously an expense which is imposed upon the industry by Government action by statute. It would obviously be unfair to say to the industry, "You must pay Income Tax upon this as if it were a profit," when it is an expense which they cannot avoid because it has been imposed by Parliament. That is the case of the statutory provision. Now take the case of another industry which does exactly the same thing by agreement; because the House will remember that in the hypothetical case which I have mentioned the reason for the Government intervening is that the majority of the industry agree that this reduction of redundant plant ought to be made, but a minority stand out, and thereupon the Government come in and put compulsion upon the minority. But suppose there is no minority. Suppose there is universal agreement. Can it possibly be said that it is equitable to say that that which is a trade expense in the one case is not a trade expense in the other? How can you possibly distinguish between the two cases? The second case is, if anything, that of an industry which is more virtuous than in the first case. The first industry had a minority who were not virtuous, but the second industry is unanimous. I say that there is obviously and in equity a case, and an unanswerable case in my opinion, for allowing this levy to be treated as a trade expense which can be deducted from profits for the purpose of assessment for Income Tax. The case is amply safeguarded by other paragraphs in the Clause. The removal of the redundant plant must be in the interests of the industry, and the national interest, too—there must be a certificate from the Board of Trade that it is in that interest—and in the circumstances I think the House will be prepared to agree that it is really stretching words far beyond their possible meaning to describe that as a subsidy.

We are told once again in this Amendment that the Bill continues to cast an unfair burden of taxation upon indirect taxpayers. The hon. Member for Wentworth told us that he had taken the trouble to go through a large number of Budgets and to work out What were the percentages of direct and indirect taxation. I tell the hon. Member that he has wasted his time. It has been an investigation which is futile and a comparison of things which is impossible. The comparison of these percentages of direct and indirect taxation used to be of interest, and, indeed, may be said to have been of some importance, in the old days of so-called free trade, when indirect taxation was practically confined to a few articles of general use, things like tea, tobacco and so forth. Now we have changed the whole situation. We have a tax now upon nearly every import into this country. That has completely altered the significance of the figures, and it is no longer possible to take the product of taxes upon imports and to think that indirect taxation on that scale is in any way to be compared with the indirect taxation of the pre-protectionist system.

Sir HERBERT SAMUEL

What is the difference.

Mr. CHAMBERLAIN

I am sorry that the right hon. Gentleman should ask that question, but I will try to point out the difference to him. In the first place, these are taxes not merely on those things which everybody uses or which are articles of household consumption and form, therefore, so large a proportion of the expenditure of certain classes of the community. These taxes are now attached to every article which each of us uses, if it is imported from overseas. In the second place, these taxes were not put on solely for revenue. Certainly there was a revenue element in them, but, as will be remembered, when the import duties were first imposed a variety of reasons were given, the first being that we wished to check our imports. In the third place—and this is perhaps the most important point of all—you have only got to look at the cast-of-living figures to see that the fact of imposing these taxes has not added to the cost of living, but that the tax has been very largely paid by those who have imported goods into this country.

Sir H. SAMUEL

If the tax were abolished, would not the prices be reduced?

Mr. CHAMBERLAIN

In a great many cases they certainly would not, and ultimately they would be increased. Take motor cars as an example. There is a heavy duty on motor cars, considerably above the average level of the duties in this country, and yet compare the prices of motor cars to-day with what they were before the duties were imposed. But I do not want to be drawn into a discussion of the old arguments, because I know that nothing one can say, and nothing in the way of facts which one can produce, will in any way alter the right hon. Gentleman's conviction of his theoretical correctness. But he has, in fact, accepted the position, and it is not the slightest use his kicking against the pricks, because if he were Prime Minister tomorrow, with a majority behind him, he would not propose to go back to the old system of free imports. That being so, I say again that the whole question of the proportion between direct and indirect taxation has ceased to have any significance. It is purely of academic interest, and contains no principle which should or, indeed, can govern the national fiscal proposals of any Chancellor of the Exchequer to-day.

No allusion has been made to-day by hon. Members opposite to the fact that I have clearly announced the principles which have influenced me in framing the last two Budgets. Just as I have been satisfied, whatever hon. Members and right hon. Members may say about indirect taxation, that they would not, if they were returned to office, be prepared to abolish those duties, so, too, I doubt very much whether they would care to declare that they are opposed to those principles, which, I may once again say, were to recognise that the new taxes and the cuts imposed in 1931 were special emergency measures—

Mr. EDWARD WILLIAMS

And the means test.

Mr. CHAMBERLAIN

I am confining myself to my own statement, and not to that of hon. Members opposite—devised for the purpose of meeting a special crisis, and that when that crisis was over I thought that the people of this country would expect that the first to receive relief should be those upon whom those special burdens had been then imposed. I was fortified in that view by the fact that it was expressed by Lord Snowden who was, in fact, the Chancellor who imposed those burdens. The success of those general principles, to which I have just alluded, of the present Budget, is, I believe, largely to be ascribed to the fact that they are in accordance with the general sense of fairness on the part of the public, and that I have coupled with them the other principle that, having taken something off the standard rate of Income Tax last year because I believed that in that way one could best stimulate the revival of trade, this year it was the -turn of the poorer classes of taxpayer to have some relief. A further point to which the hon. Member for Wentworth made allusion in his -opening speech was in regard to the American debt. As to that, I would like to remind him once again, for he seemed -to have forgotten it, that the debts are not all on one side, and that we in this country, in our treatment of the war debts, always said that while we did not want to make a profit out of war debts, at the same time we did expect that so much of the debts due to us would be paid as would relieve us of any liabilities in respect of the debts that we in turn owed. Before we began to reduce the amount of our payment to the United States to a token payment which, as the President at the time said, he did not regard as a repudiation, we had already suspended the payment of the debts clue to us. We could not contemplate again resuming the payment of the debts that we owe to others unless, at the same time, we could find provision for the resumption of the payment of the debts due to us which would leave us without any debit.

The hon. Member expressed a concern at the growth of the National Debt. I am delighted that any Member of the Opposition should remember that there is such a thing, and should go so far as to express concern at its growth, which no doubt means that when they come back they will devote special attention to the reduction of our burden in the shape of the National Debt. I have had occasion to say before that the burden on the taxpayer does not depend on the nominal amount of the debt, but upon the interest and management charges. If you apply that test to what has happened to the interest and management charges on the National Debt, the National Government have no reason to be ashamed of their policy.

What is the last part of the Amendment of the Opposition? They say that the Bill embodies no provisions for securing to the people that improvement in their standard of life which the increased productive capacity of the nation has made available. Take this Finance Bill. It might perhaps be examined and analysed, and it might be difficult to point to a particular Clause on which you might say that it has improved the purchasing power of the people, to use a phrase employed by the hon. Member for Leigh (Mr. Tinker).

Sir FRANCIS FREMANTLE

Cinemas.

Mr. CHAMBERLAIN

I am not going to depend for what I have to say upon any Clause in the Finance Bill. I rather take the general policy of the Government in finance since we have been in office. I say that the effect of the Government's policy since we have been in office has been most definitely to increase the purchasing power of the people. I do not know whether hon. Members happened to read, as I did, the speech by the chairman of a company owning a well-known series of distributing stores throughout the country. As with many other stores this year, I am glad to say there has been a record profit. In his speech he pointed out that, owing to the fall in the cost of living, the people of to-day had a great deal more to spend than they had only a few years ago. I am not going to make myself responsible for the figures which he used, but I have no doubt that the broad principle that he stated was correct. What he said was that the people of this country spent every year in consumable goods and services £1,900,000,000. He said that in 1934 they could buy the same amount of consumable goods and services as they bought in 1929, and still have over £190,000,000 to spend on something else. That is the answer to the. hon. Member for Leigh. The standard of life of the people has improved. They may not spend all their £190,000,000, if that be the correct figure; they may save some of it. In fact we know that the savings of the working class have increased during the last few years. If they choose to put something by for a rainy day in case the opposite party ever gets into office, I can only applaud their wisdom and their prudence. So far as we are concerned, we are glad that we have been able to give them the opportunity.

There is no question that when the hon. Member for Orkney and Shetland told us that trade was bad he was saying something which would not obtain acceptance in any part of the country. Trade is not bad. In many cases it is booming, and in many districts the great difficulty of the employer is not to find work for the unemployed, but to find unemployed who have the qualifications necessary to do the work which he has to offer [Interruption.] I do not say that there is a shortage of unemployed, but that there is a shortage of skilled men. [An HON. MEMBER: "Where"] The hon. Member ought to know. There is a shortage in many trades throughout the country, and I am certain that that will be one of the difficulties which this Government will have to face in the coming year.

We are still in the middle of our debates upon the Finance Bill, and I do not know whether anything more damaging to the Bill will be found later in the evening than has been found up to now. Up to the present, the Bill remains in all the glory of its fresh plumage, without having lost a single feather. I would thank the House generally for the kindly reception which has been given to it, and in the course of the Debate which we shall have I can assure hon. Members that we shall give that attention which is always given by this Government to any observation or suggestion that may come from any quarter.

6.43 p.m.

Mr. DAVID MASON

The right hon. Gentleman has spoken this afternoon with a complacency that has never been equalled from that bench. He has replied to various points that have been submitted, but he has not replied to the very admirable survey of my hon. Friend the Member for Orkney and Shetland (Sir R. Hamilton), whose speech he referred to as a series of platitudes. I will recall to the House the points made in that speech, so that hon. Members may judge for themselves whether they were platitudes or points of real substance. My hon. Friend first referred to the right hon. Gentleman's speech at the banker's dinner and what be said in regard to stabilisation. Does the right hon. Gentleman consider that as a platitude I My hon. Friend went on to say what was confirmed by the right hon. Gentleman himself, that the improvement in trade has been largely internal and has not been in our export trade. Does the right hon. Gentleman suggest that trade is booming in shipping, in the cotton industry or in Durham, where there are 25,000 unemployed skilled craftsmen, including shipwrights and others.

The right hon. Gentleman said that the trouble to-day was not to find men seeking employment but to get men to do skilled jobs. Everybody knows—and I appeal to Opposition hon. Members—that there are many unemployed skilled engineers in this country who are perhaps the finest in the world, and who are anxious for jobs if the right hon. Gentleman would produce them. Then the hon. Member for Orkney and Shetland spoke of trade and unemployment, and the relationship between free trade and peace. I think it will be admitted that if we could have universal free trade—many tariff reformers would agree, although they may subscribe to tariff reform—it would undoubtedly lead to more peaceful relations and less animosity between the governments as the Chancellor has admitted. He has admitted that he is not a fanatical protectionist. He must recognise the effect of quotas, restrictions and rivalries between nations, and of retaliation as a weapon. The very term "retaliation" suggests something other than amity among the nations. Of course, even the most extreme tariff reformer would agree that, if we had universal free trade, it would be likely to lead to amity and good feeling throughout the nations of the world.

My hon. Friend also alluded, in connection with the subject of currency, to a speech of Sir Percy Bates, the chairman of the Cunard Company, who referred to a currency war among the nations of the world. Does the right hon. Gentleman regard that as a platitude? It is, perhaps, the most important question that is before the world at the present time, and, if the House will allow me, I should like to say something a little later with reference to it. My hon. Friend also spoke of the unsafe pound, which, of course, is a part of the question of stabilisation. I venture to suggest that the right hon. Gentleman was hardly fair in his references to us on these benches. While we may be small numbers, it is not the size of the man or the size of his party that ought to carry weight, or does carry weight, in this House. In the case of my hon. Friends who sit on the bench below me, and who have only a party of three, if any one of them contributes in debate anything worthy of consideration the House is always prepared to give their speeches due audience and, if they make any points, to appreciate them. The way in which the right hon. Gentleman has treated us has been, if I may say so, hardly in accordance with the dignity of the position which he occupies.

I would like to refer to the speech of the hon. Baronet the Member for Farnham (Sir A. M. Samuel), who raised the question of stabilisation; but before I do so I might perhaps refer to some of the other speeches. Mention was made in a number of them, including that of the Chancellor of the Exchequer, of the enormous increase in our taxation, and on this occasion I would like to raise again the tattered banner of economy—I am sorry that the right hon. Gentleman the Member for Epping (Mr. Churchill), who, I think, was the author of that phrase, is not here at the moment. Apparently no one to-day subscribes to the doctrine of economy, but, in view of certain figures which the Chancellor was kind enough to supply to my hon. Friend the Member for South Kensington (Sir W. Davison) and myself, I think that this most important question of the enormous increase in our taxation is worthy of the consideration of every Member of the House, to whatever party he may belong.

Hon. Members above the Gangway ought to be, and I think are, equally interested with us in this matter. I think one of them said that, if a reduction of the Income Tax were possible, he would welcome it, but he did not know where the money could be obtained. It is very difficult to know where the money could be obtained, but there is one way, and that is by avoidance of waste and reduction of expenditure, which is a much better way of getting it than seeking for further sources of taxation. Cicero wrote, a long time ago, Magnum vectigal est parsimonia—economy is a great revenue. In America there is an idea on all sides that you can spend your way back to prosperity, but a more insane or ridiculous remark made by men who are not bereft of their senses I have never heard. Is it possible for an individual to live beyond his income and still retain his prosperity? Is it possible for him to show a surplus if he spends freely in every direction and finally indulges in a veritable orgy of expenditure? Are nations really any different in this respect from individuals? Nations are merely aggregates of individuals. Apparently, however, in these days no one believes in economy; no one believes that it is a great revenue. The United States have incurred expenditure to the extent of £1,000,000,000, but what is the last report? It appeared in the "Times" of the 6th of this month: Business activity continues to decline. The downward movement was accelerated recently by a sharp decline in car loadings when a rise is customary. In the week ended April 27 they decreased 52,019 to 558,886, the loss being due partly to a previous rush to ship goods and materials before a rate rise went into effect. Steel production has declined to 46 per cent. Motor car output is still high, but strikes of a serious character are reducing it, and any way the seasonal peak has been passed. Apparently the forward movement has disappeared. That is one example. It is not necessary to argue that you cannot go on with this vast expenditure. The Chancellor has to meet an expenditure of £729,000,000 this year, and for that purpose he has drawn up a financial statement providing for £735,000,000; and, in addition to that expenditure, we have to carry a debt of between £7,000,000,000 and £8,000,000,000. There is no doubt that some people made money as a result of the War: nobody denies it; but does anybody outside an asylum believe that a country which formerly had a National Debt of £700,000,000, and now has a National Debt of £7,000,000,000 is richer We have certainly an accumulation of debt and of paper money, but has £7,000,000,000 of wealth sprung into existence during these intervening years? What does it represent? No doubt it was necessary in our own interest to contract this debt, but it went off in shot and shell. There is nothing to show for it. We are poorer to-day than we were, and the world is poorer: but the world to-day is engaged in an orgy of expenditure and high taxation. This is confirmed by some figures which, through the courtesy of the right hon. Gentleman and his Department, I am able to submit to the House. On the 16th May last, I asked the right hon. Gentleman: whether he can inform the House of the taxation per head in the United Kingdom for 1913–14 and that for 1933–34; also the corresponding figures for France, Germany. Italy, and the United States of America."—[OFFICIAL REPORT, 16th May, 1935; col. 1870, Vol 301.]. The figures are amazing. I am bound to say that the right hon. Gentleman pointed out that one must not be too severe in drawing deductions from these figures, because of the confusion which now exists in the world, the depreciation of currency, inflation, and so forth; but nevertheless one gets from these figures an idea of the trend. What is the trend? I will only deal with the taxa- tion of the central governments, because these large expenditures obviously involve high taxation. In this country, in 1913–14, the taxation of the central government amounted to £3 11s. 5d. per head of the population. It rose last year, 1933–34, to no less a sum than £15 4s. 8d, per head. That taxation has fallen upon 45,000,000 people who are impoverished by the fact that they have to carry a debt of £7,000,000,000. In the case of France, the taxation amounted to Frs.100.36 which last year had risen to Frs.958.5. I am reminded that at the present day we have to deal, of course, with a different franc from that of 1913–14, but my object in bringing these figures before the House is to show the trend. I do not for a moment desire to mislead the House in any way, and I quite agree that the value of the franc to-day is very different from what it used to be. It is, indeed,. very difficult to calculate the exact state of affairs as it exists to-day. In Germany the taxation per head in 1913–14 amounted to 24.34 Rentenmarks, and it has now risen to 105.44. In Italy, in 1913-14, it was 56.32 lire, and has now risen to 369.3 lire; while in the United States it has risen from 6.96 dollars to 23.50 dollars. I will now give the figures showing the central government taxation per head for the year 1933–34 in the various countries, stated in our own currency, which the Treasury have been good enough to calculate for me at the current exchange rates of the day.

		£	s.	d.
United Kingdom	…	15	4	8
United States	…	4	15	3
Germany	…	7	14	4
France	…	12	9	10
Italy	…	6	2	2

Therefore, this country is the heaviest-taxed country in the world at the present time. I am no pedant. I have supported hon. Gentlemen above the Gangway, perhaps more often than many of my hon. Friends, in any movement for a palliative in the shape of public works, the assistance in the construction of the new Cunard steamer, and so on, because it is no use talking about economy when men are in need of work. I supported the Chancellor of the Exchequer in his proposal to assist the Cunard Company to the extent of £9,500,000, because we have to deal with things as they are, and cannot be too extreme. But there is no power on earth, in this House or out of it, that will enable a country to continue with impunity to pursue a profligate course in finance. If the British manufacturer has to contend with a taxation of £15 per head in addition to his overheads and other charges, that handicaps him in the markets of the world. This excessive and heavy taxation is one of the causes which cripples us in competing as regards manufactured goods in other countries throughout the world.

All parties desire to get out of the present impasse. We all desire to restore our foreign trade. The Chancellor of the Exchequer asked my right hon. Friend (Sir H. Samuel) whether, if he came to power, he would bring in free trade to-morrow. Everybody, whether he is a free trader or not, knows that if a progressive Government, a combined Labour-Liberal or Liberal-Labour Government came into power to-morrow any reduction of tariffs would be gradual, believing as we do that in getting rid of restrictions, quotas and tariffs we should restore our trade. It is only necessary to read the history of our country. If you go back to the period after the Napoleonic Wars, Peel and Gladstone were also faced with a tariff system. Free trade was not brought in with the first budget Mr. Gladstone introduced. Tariffs were gradually reduced. If it should be our good fortune, or the good fortune of others who may follow us, that a free trade Government comes into power the reduction in tariffs will be gradual

Mr. MAGNAY

As a free trader myself, may I call the hon. Gentleman's attention to the fact that 100 years ago we were then the workshop of the world. Is not the position entirely different to-day?

Mr. MASON

I do not want to be drawn into a long discussion on what has happened during the last hundred years. What I was discussing was the remark of the Chancellor of the Exchequer to my right hon. Friend as to what he would do if returned to power to-morrow. The answer is that of course he would not bring in a free trade system at once. No one, having regard to the investment of capital and to the fact that we have a protective system, could do other than recognise this fact, and, although we may have our ideals and desires for the future and live and hope for a reduction of quotas and restrictions, nobody in his senses would suggest that we could bring in free trade to-morrow. I have shown what Peel and Gladstone did 100 years ago. Let me also point the analogy between the conditions that existed after the Napoleonic Wars and conditions to-day. The same distress, the same problems, were before Members of this House then, and there was great disappointment at the non-realisation of what many people looked forward to—just as we did—an enormous demand after the War arising on the Continent. There was no such demand. Obviously the impoverishment of the Continent is reflected in the lessened demand for our export trade. Whig and Tory vied with one another in advocating economy after economy. They had tried in their way expenditure on public works, and they were driven back to this old deal. We hear a great deal about a new deal. Let the right hon. Gentleman the Member for Carnarvon (Mr. Lloyd George) bring any scheme before this House, and it will receive consideration arid be welcomed by all. As I say, Whig and Tory vied with each other in advocating economy. There is a particularly interesting quotation from Sydney Buxton on "Finance in Politics" in which he said.

The years between 1825 and 1840 were the halcyon days of economy in finance—a period to which Mr. Gladstone has more than once adverted in fond reminiscence, to point a moral against modern extravagance, as the time when Tory and Whig alike strove and strove successfully to reduce public expenditure and to maintain a balance on the right side. We are suffering to-day from the same malady. Two years ago I drew the attention of the House to the extravagance in administration, which I do not suppose has been altered since, and, although it is a very bold thing to do, I would like to quote from my own speech. I said that I had given some study to this question recently, with reference to administration costs, and I found that the the Treasury had two and a-half times as many people employed then than before the War and cost the public three times as much; the Foreign Office had a staff four times as large and cost three times as much; the Home Office had a staff twice as large and cost the country twice as much; and the Scottish Office expense was three and a-half times more. That is just an indication. Hon. Mem- bers may say what trifling things these are—the salaries of a few clerks in the Foreign Office—but if you have the spirit of economy running through your administration in the Foreign Office, the Home Office and the Scottish Office, it will run through your whole administration. There was a case of a clerk at the Foreign Office who had died. It was a sinecure post, and it was not necessary to fill it. Mr. Gladstone, and I commend this again to the Chancellor of the Exchequer—if the right hon. Gentleman the Secretary of State for the Dominions wishes to continue to talk to the Chancellor of the Exchequer, who is doing his best to listen to us, perhaps he might have his conference at some other time—Mr. Gladstone, as showing how possessed he was with the spirit of economy, wrote four pages to Lord Palmerston to impress upon him that if he could save £250 a year it was worth doing. That should be impressed on the Chancellor of the Exchequer and on the House. It is not a joke. If we have in our administration this spirit of trying to save, if we can pursue that policy in the Foreign Office, the Home Office, the Scottish and in the Dominions Office, it will enter into our national finance. We will then appreciate the fact that this spirit of complacency that all is well cannot continue. Nobody who has come into contact with the poverty and with the terrible struggle in the North of England among the women particularly, who are carrying on hoping against hope for a revival of trade when there is no revival, can be complacent. There is no revival of trade in shipping. We have still 2,000,000 unemployed and the aggregate figures of world trade, and of this country's foreign trade, in the last few years have fallen by something like £199,000,000. It is childish for the right hon. Gentleman to come here and complacently to tell us, who after all have some element of common sense and are able to put two and two together, that all is well and to assail our speaker as a mere speaker of platitudes [Interruption.] I have tried not to get angry with the right hon. Gentleman because he is so very courteous, and it is refreshing to see the way he prances at that Box and tells everyone that we are going ahead and that everything is well. It is not the case.

I may be asked, how do you make out that economy is a revenue? I have supported anything that will give employment. I do not think for a moment that the Labour party, as against the Conservative party or my own friends, have a monopoly in representing the working classes. We all make claim to represent them. You may ask how can economy be a revenue? It is a revenue in this way. First you have a reduction of the burden on industry. That will stimulate industry. To-morrow we are going to have a great debate on defence. If we should be faced with war on the Continent, there is nothing more important to armaments than maintaining a financial reserve. When you know that the pound is worth only 11s. or 12s. in Paris, how could you finance an army on the Continent What position are you in, with this enormous debt and with this vast expenditure, to incur another European war? It is essential that you should bear in mind economy, the building up of financial reserves and the reduction of taxation, so that you may have some margin should you be faced with trouble on the Continent

Then there is the vast and general increase in the national wealth in human happiness which results from a large amount of loanable capital. There is a difference between loanable capital and cheap credit. There is not such a vast amount of capital seeking investment as people imagine. There are many people who have suffered a reduction of income who are by no means with capital to invest. There is cheap money in the City of London because of the restriction of trade. If we had economy, and if we accumulated capital, and that was then used, as it might be, for various industries that would widen the area of employment.

Stabilisation is, perhaps, the most important question, and I know that it is appreciated by the Chancellor of the Exchequer. He said it was the objective of his Government, but there have been a number of speeches made to-day which seemed to indicate that you must first find out what the United States of America are going to do. Why should we take account of them? When we stabilised in 1821 and came back to gold we did not consult Hamburg or France as to what we should stabilise the pound at. If the right hon. Gentleman, the Treasury, and the Bank of England believe that the time has come, having regard to the state of the exchanges, to Lave, say, a de facto stabilisation—I am riot in a hurry and it is obvious you must move very cautiously—it has nothing to do with Mr. Morgenthau or any other human being outside this country. All the Chancellor of the Exchequer has to consider is the state of the exchanges and whether, in his estimation and in that of those whom he may consult at the Bank of England and the Treasury, the time has arrived to take this step. It is not necessary to see what Mr. Morgenthau says, although I was very pleased to see that he stated. The world should know that when it is ready to seek stabilisation Washington will not be an obstacle. Washington cannot be an obstacle as to whether the right hon. Gentleman and the Bank of England want to stabilise. It can only be an obstacle if it were to engage in vagaries of finance and an inflationary policy, and other things which the right hon. Gentleman and his colleagues in consultation might not think advisable for Great Britain to stabilise at that particular time. But Great Britain decides for herself what measure she is going to have, and what standard she shall have.

I do not think that there is a publicist at the head of a great concern, who, in snaking his speech as chairman of the meeting, does not refer to this outstanding fact that, if we wish to restore foreign trade, the time has arrived to take some such action as that which I suggest. If the United States are unwilling to take the lead, what an opportunity for Great Britain and for the right hon. Gentleman. The opportunity might not occur again. We are at the parting of the ways. On the one side you have the pathway of acquiescence and of letting things alone and of drift, the backward path which may lead to poverty and decay. On the other side you have the pathway which requires skill, knowledge and courage, but if we take that path I believe that other nations will follow. To this country has come a call from the rest of the world, and the people of this country look to the right hon. Gentleman and to the Treasury to give them such a, lead. At first it may be like the summer breeze that ruffles the surface of the lake, but I believe that it will grow in intensity. Whereas in this House my voice has been like a voice crying in the wilderness, I now find that in the Lobby Members in all parts of the House say to me, "It is all going your way." They are kind enough to say that stabilisation, which formerly was looked upon as the act of a madman, has now entered the sphere of practical politics. Therefore, 1 believe that if the right hon. Gentleman has the courage and skill to go forward with this movement, he will find, both in this House and in the country, a support which will redound to his honour and also to the credit of the whole country.

7.18 p.m.

Lord APSLEY

I am sure that the Chancellor of the Exchequer will be horrified at the thought that anything that he said should be considered as an insult to Scotland or to the Liberal party, or to reflect adversely on the weight of any of the arguments which have been put forward by their champions on these benches. But it would appear that the main weight of the arguments of the hon. Member for East Edinburgh (Mr. D. Mason), like those of the right hon. Member for South Molton (Mr. Lambert), who is or was a Liberal too, lay not so much in what he said but in what he omitted to say. The hon. Member urged economy. We have often heard economy urged before on both sides, but we have not had anything clearly laid down as to the exact lines upon which economy should be urged. The hon. Member, it is true, confined himself principally, not to the question of economy in public works or to any other form of the liberal spending of money, but to economy in administration. I should have been glad if he had gone a little further and had given us more detailed suggestions. I believe that there is a great deal that could be done in that direction.

We hear a great deal about co-ordination and rationalisation in industry, and are told how marketing boards and organisation, whether of primary or secondary industries, will help to bring us back to prosperity. I wonder if there is not an opportunity for more co-ordination of Government Departments, and whether a May Committee, or even a Geddes Committee, could not be brought into being in the near future to consider whether there could still be very considerable economies in Government administration. It appears to an ordinary private Member to be anomalous that, for instance, the Minister of Agriculture should be responsible for some and not all of the Fisheries, and that he should also administer buildings and be responsible for, and in fact the owner of, buildings in Regent Street. There are a great many other Departments which are in an equally anomalous position. The Postmaster-General had the courage to call in an independent firm of auditors to go into matters of the Post Office. He was wise and bold enough to take the decision, and he acted a great deal on their advice with the most remarkable results. A really well constituted committee might be brought into being in the near future to see whether similar results could not be obtained in the saving of expenditure in a great many, if not all, Government Departments.

The Chancellor of the Exchequer complained—and I think that his complaint was very justified, although from the brilliant reply that he made, it did not seem to upset him in any way—that his trouble was that the Finance Bill had not given sufficient scope for criticism to the Opposition or to anybody else. That is quite true, but I wonder whether the real cause is not that many hon. Members who have spoken this afternoon have failed to understand the main characteristic of the Finance Bill, though curiously enough that characteristic has been embodied in the Amendment moved by the Opposition The main characteristic of the Finance Bill as I make it is the beginning of what I hope is to be a continued programme of taxation reduction starting from the bottom. The relief of the poor people in this country and of the small taxpayer. This would appear to render nugatory the Amendment put forward by the Opposition, unless, indeed, it be the case that the Opposition are urging that it is not so much the fact that the Chancellor of the Exchequer is relieving the small taxpayer as that the effect of these reliefs are not showing the true result on the life of our people. That indeed, as a purely economic contention, might well be urged.

I should like to make a comparison in that respect on the economic side alone, for I am dealing here neither with politics nor sentiment. Not very long ago Mr. Lyons, the Prime Minister of Australia, came down to this House and made a most interesting speech to Members of the Empire Parliamentary Association, and he told us how Australia met her troubles in the depression, and how, having taken probably more severe economic measures than we took and balanced her Budget, she proceeded to return to prosperity. What interested me in his speech was that Mr. Lyons had taken exactly the opposite economic course to that which the Chancellor of the Exchequer has taken. He did not relieve taxation from the bottom, but started from the top. The first relief he gave—he did not mention the fact at the meeting of the Empire Parliamentary Association—was in respect of the salaries of Members of Parliament. There was, of course, an outcry and an uproar—I was in Australia at the time that that was done—but Mr. Lyons seemed to know very well what he was doing. Possibly he knew that the restoration of the cut would immediately be transferred to the very poorest members of the constituencies of the members concerned. Anyway, be that as it may, when the election came only a year after, Mr. Lyons was returned to power, having lost very few seats. The measure which no statesman in this country would dare contemplate taking, proved actually to have remarkably little effect on the electorate.

The next measure he took, and it impressed me enormously, was that he reduced the land tax by 50 per cent., a pretty severe reduction. The land tax was a tax, like some of the taxes which we still have in this country, imposed in ancient days. It was not an economic tax but was put on largely for political reasons. Mr. Lyons decided that the tax should be reduced by 50 per cent. at once in order to assist agriculture to recover from the slump. We have no tax analogous to that very heavy land tax in this country, but the burden which agriculture has to bear, consisting of tithes, rates on buildings, land tax, Income Tax, Schedule A, and Schedule B, Surtax and Death Duties amount, with-any doubt, to a very much more considerable burden than anything that is imposed in Australia by means of the direct land tax.

The right hon. Member for South Molton (Mr. Lambert) made a most eloquent appeal and one which we have often heard from all sides of the House on behalf of agriculture, but he did not tell us a word as to how he would restore agriculture. He begged the Government to do it, but he said nothing that would give them an indication of the methods he wished them to pursue. He disliked subsidies and marketing boards, but all that he could produce as far as I could gather was that he wanted the import duty on nails, barbed wire and corrugated iron to be reduced. You cannot restore agriculture by reducing the duty on corrugated iron. Far greater measures must be taken. The first of these is to remove something of the considerable burden which agriculture bears. An hon. Member on these benches mentioned that butter was being sold in Australia cheaper than it could be sold in this country. Why? Because of the enormous burden which land in England still has to bear. If hon. Members could go round the country—and it is not sufficient to go round in a closed motor car where you only see the country beside the roads, but you must go either on horseback or fly low in an aeroplane—to see what developments are taking place, they would see the results of the present policy which was introduced originally almost entirely for political reasons.

The whole of the question of ribbon development—in respect of which a Bill has been introduced in another place, which I do not think will have any effect at all on the particular subject—is bound up with the problem of agricultural land in this country. Ribbon development is caused by landowners having to sell their land. Land near a road has greater value for building purposes. Land speculators come along and buy the land from the landowner whose economic position compels him to sell, and houses are built along the roads. Landowners have had to get rid of land in some way or another in order to pay debts with probably Death Duties still owing, and perhaps Surtax as well. Large areas of land have been bought by speculators and resold in small plots. Yesterday I was in Wiltshire, but if really thought that I was in Northern Australia in the midst of an aboriginal camp. There were humpies, as they are called in Australia, built all over the place, and shacks so badly built that the wind might almost blow them over. There were old railway carriages and waggons with wheels off, and almost any form of house which could not possibly conform to any health regulations, growing up almost haphazard surrounded by barbed wire. The inhabitants eke out a slender existence by farming pigs and chickens. Land had been bought by the speculator and cut up into small patches and disposed of to anyone who cared to take it on without any control. No landlord would be allowed to house tenants in such conditions but these were freeholders now. Doubtless the Minister of Health will in future try to deal with them.

But that is not the way to deal with the problem of the land. The only people who can administer land properly and see that it is properly farmed are the landowners. You can work through the tenants and the landlords and keep the land in a proper state, and in no other way. That is well witnessed by what is happening with regard to farmers who bought their farms some years ago. Some are still buying their farms, although there are not many of them who can afford now to raise the money. During the last 10 or 15 years we have seen a continual falling back in the maintenance and repair of these freehold farms. They have been compelled to save labour; they have had to do it. One finds gates tied up with wire, wire put into fences, no proper drainage, no cutting of hedgerow timber where necessary. All these things which it is the duty of the landlord to look after are not done in the case of many small farmers, who find it sufficiently difficult to make a living at all, even though they and their families are the only people working on the farms. Very considerable relief could be given in this respect, and I hope that that will be done.

There is a further effect of this very heavy taxation, which was mentioned by the hon. Member for East Edinburgh and that is the effect on industry. The effect of taxation, particularly of the Surtax, on industry, is much greater than is commonly understood. I advance this further argument which I think is cogent, and that is that the Surtax has a particularly bad moral effect because it has to be paid in cash, in a lump sum and between certain dates. Hon. Members will notice that every year the unemployment figures go up heavily from January to March. That is a season when in- dustry ought to be going at full swing but it is the time when unemployment is at its worst, and that is the time when Surtax is being paid. Apart from the very considerable economic effect of this great mass of money flowing from the Surtax payers to the Treasury, there is the very considerable moral effect that from the 1st January private individuals, purchasers, who are the mainstay of production, say: "We cannot afford to buy." The distributors, the salesmen, in turn say: "Nobody is buying, and therefore we cannot give any orders." The producer, whether he has a big factory or a small one, says: "It is no use producing at the present time because no orders are coming in." Consequently, the works are half closed down and large numbers of men and women are turned out of employment and have to receive benefit for two or three months.

That happens every year and a great deal of good could be done if there was some mitigation of this heavy taxation. If these heavy burdens cannot be reduced owing to the financial condition of the Treasury and until further economy has been made, if some other relief could be given or a greater length of time could be allowed in which the taxpayer has to pay the Surtax, it would be very helpful. That might be done by making the payment date as between January and October instead of January and March. That would give the taxpayers two more quarterly dividends out of which to pay their Surtax. By spreading it over through the summer the moral effect would be very considerable and we should not be faced with this continual and regular annual resurgence of unemployment during the months of January to March. Personally I do not care about graduated Surtax from the economic point of view. When it was first introduced by Sir William Harcourt no doubt it had its value, but it was very small in size. I do not believe that any of the old Liberal statesmen of those days visualised the heights to which Surtax would be raised, and I do not believe that the people of the country to-day are really conscious of the effect and the dangers of heavy Surtax so far as unemployment is concerned. The saying that the taxes of the rich are paid by the poor is so old that it is trite to repeat it and very few people pay any attention to it. I believe that it has been attributed to the days of ancient Greece and that Solon was the first to discover it. He left behind him a reputation of being the wisest of men but modern historians in the process of what is called "debunking" have found that he was not the wisest of men; he was in fact a Liberal politician. He had one of those meteoric careers which from time to time flash across the pages of history.

He might well be compared to his modern compatriot M. Venizelos, or Mr. Theodore, or Mr. Hughes in Australia or the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), while in South America and the United States their numbers are legion. Suffice it to say that among his many popular reforms was the establishment of the first graduated Surtax. After a time, however, when the Athenians realised that their vineyards and cornfields were wasting, when the artisans in the bazaars realised that trade was failing, when the workmen in the shipyards realised that the shipping trade had gone to bits, they acted with quicker political conception than the people of this country and rose in their wrath and drove him from the city. Whereupon he went into exile for 10 years, most of which time he spent writing his memoirs. It was from the material afforded by these memoirs doubtless that the historians, who were mostly Liberals, not only in Greece but in Rome, France and this country, came to the conclusion that Solon was the wisest of men. The effect of a graduated Surtax was, however, proved by trial and error. In this country any Chancellor of the Exchequer would be afraid to put on a flat rate of Surtax because it would entail such a gigantic loss that it could not be entertained. The only way of getting nearer to the economic truth of the matter would be as time goes on to reduce the actual scale and weight of Surtax and to allow more generous time in which it can be paid.

There is one further question. The Chancellor of the Exchequer mentioned that in making provision with respect to the contributions paid for the removal of redundant plant the Government thought that it would be fair to allow the amount to be charged against profits for the purpose of reducing the amount of Income Tax to be paid. Is this not analogous to the amount paid by the owners of mineral royalties on Mineral Rights Duty and miners' welfare levy? If industries are given the right to put in the amount paid towards the reduction of redundant plant as a return in order to get a reduction of Income Tax, I do not see how it can be refused to any other companies who may own mineral rights and pay the miners' welfare levy. I should be glad if that question could be considered in order that these things could be put on a level. The Chancellor of the Exchequer mentioned last year that the Government were considering the matter. It is only equitable that what a, company or a private individual has to pay in the form of a levy should be allowed to be deducted as a necessary expenditure claim for the purposes of Income Tax and Surtax. I should be glad if the Chancellor of the Exchequer would look into these matters.

7.40 p.m.

Mr. E. WILLIAMS

The Chancellor of the Exchequer must be delighted with the variety of speeches we have had on the Finance Bil, and particularly for the depth of historical knowledge which has been displayed by speakers in trying to prove their particular point. The Noble Lord who has just spoken will excuse me from following him in his arguments. On these benches we are not accustomed to paying Super-tax and we cannot claim to have much detailed knowledge of the subject. I desire to raise a matter to which I should like the Chancellor of the Exchequer to give consideration. He made a delightful and breezy speech and said that he had very little to reply to in the first half of the Debate. He would be correct in saying that the sting has been taken out of the Debate in that most hon. Members were delighted to find that in his Budget speech he had restored the cuts to a very large number of people who had made great sacrifices since 1931. But in restoring the cuts to the teachers, the civil servants and other persons he left outside a category of people who have suffered most and who could least sustain the burden that was placed upon them. I refer to the unemployed persons who were in receipt of transitional payment when the National Government came in.

I think I am correct in saying, from the answers which the Chancellor of the Exchequer has given to questions, that the application of the means test to persons in receipt of transitional payment has yielded about £14,000,000 to £15,000,000 a year. Therefore, the right hon. Gentleman has something for which to thank the unemployed because they have helped to balance his Budget. The amount of money that he got in this way was one of the means of preventing a certain amount of expenditure. In addition, there was the 10 per cent. cut that was applied to the unemployed generally, which was estimated to represent over £60,000,000, It should not be difficult for any man—I am not casting any reflection upon the Chancellor of the Exchequer's business capacity and acumen —to balance his Budget if expenditure is reduced in that way by £60,000,000 from the unemployed in receipt of unemployment benefit and £15,000,000 a year from those in receipt of transitional payment. It is by those means that the National Government have been able to balance their Budget and ultimately to obtain sufficient revenue to restore the cuts on teachers and civil servants and on the unemployed who were and are in receipt of unemployment benefit. To be just and equitable the cuts ought to be restored to those who were in receipt of transitional payment, the persons to whom the means test applies to-day.

One cannot make reference at any length to Part II of the Unemployment Act of last year and the standstill order that operates in the country. One can only make a passing reference. It is true that this present day standstill order has prevented a out of many shillings per week in counties like Glamorgan and Monmouthshire. It is true that the application of a standstill order may have meant in one county here and there a little more than was paid to those persons when the public assistance committees were administering assistance. But throughout the country it certainly means on the average a reduction below that which they would receive if they were in receipt of unemployment benefit. The Government have benefited greatly by the millions of pounds gained by the application of the means test to some hundreds of thousands of persons in this country who have suffered far more greatly than any other members of the community. In the first place, they have to be idle for a very long period before the means test applies to them. They have already used up all their savings. They have to a large extent depended upon the rest of their family who may have been working in order to attain some measure of relief beyond the mere destitution level. All that has taken place during the time that they have been living upon the means test.

Surely at this stage the Chancellor of the Exchequer ought to wipe that out. The Government ought to be prepared to remove the whole of the cuts so long as the means test applies to a substantial number who are unemployed owing to circumstances admitted by every Member in this House. The last speaker, the Member for one of the Edinburgh Divisions, and most of the speakers in this Debate, have been stressing such factors as inflation, deflation, world prices and things of that kind. The fact that those factors are mentioned of itself proves that unemployment in this country cannot be attributable to the man that is unemployed. He cannot be charged with having caused his unemployment. Surely therefore he ought not to be made to bear the burden of his unemployment. That ought really to be a State obligation. I am therefore hoping that the Chancellor of the Exchequer will do what he can to wipe out this very grievous wrong that is perpetrated upon the unemployed in the continued application of the means test.

When I listened to the Chancellor making that very happy speech an hour or so ago I was obliged to reflect on the state of things in my own constituency. Except for the teachers and some members of the Civil Service, there is no evidence that this Budget has brought prosperity to my constituency. It is true that the annual wage paid to the miner this year is about £4 more than last year. It is about £3 to £4 less than it was in 1929. It is still at the very low figure of about £115 a year. That is the annual wage paid to the miner in this country. That is what the miner receives for working underground seven and a-half hours per day, on top of which he has his walking time and the winding time that is allowed to lift the miners from the bowels of the earth. That is what he is paid for the risk to life and limb involved in winning the coal. You cannot expect such a person, receiving such a miserable wage for such an ardu- ous occupation, to feel very happy when such a Budget speech or such a financial statement is made by the Chancellor from time to time. What we, representing constituencies of that kind, are anxious to know, is when will this prosperity that may be like the tail of a comet, touching a large number of people all over the country, when is that to reach the South Wales coalfields? When is it to reach Durham? When will it reach the distressed areas? When is it to reach South Yorkshire and the mining community for whom the annual wage to-day is £115 a year? I am reminded that that question would equally apply to the agricultural labourer who is in receipt on the average of less than 30s. a week. When is it going to reach him.

I should like to meet the point that the right hon. Gentleman stressed in reply to my hon. Friend the Member for Wentworth (Mr. Paling). I think he was very clever and scored a good debating point, although I suspect he endeavoured to skim over the point entirely when he referred to the American debt. He said that the President is quite prepared to accept whatever was paid as a token payment. What my hon. Friend had in mind when he referred to the American debt was this. If it was morally right to ignore the debt to America, would the creditors in this country to whom we owe our national debt be prepared also to accept a token payment.

I would like to pass on a word to the hon. Member for East Edinburgh (Mr. D. Mason). We are also concerned, of course, about reducing taxation. But I would have the hon. Member remember that £224,000,000, I think, of the present Budget is for the repayment of interest upon war debt. It is true there has been a substantial reduction since the Chancellor's conversion scheme from £355,000,000 to £224,000,000. But will the Chancellor and the hon. Member bear this in mind? When those loans were contracted the cost-of-living figures were well over 100 per cent. If you took the average cost-of-living figure for the period of the War it would be well over 100 per cent. When the money was borrowed the commodity value of that money would not be more than about half of what they are now paying, and since post-war years the rentiers have received practically 200 per cent. in commodity values more than the actual investment during the War time. The cost of living stands to-day at about 42 to 44 per cent. [An HON. MEMBER: "It is 39 !"] Thirty-nine. It means, of course, that the persons who advanced money during the War have been able during the post-war years to receive in commodity prices, owing to the fall in the cost of living, practically 200 per cent. more than its former value. 1 submit to the Chancellor of the Exchequer that that was one of the main causes of the crisis in 1929 and in 1928 in the -United States. It is still one of the problems that this Government should face. I put it to the hon. Member for Edinburgh, East, that that is the way to reduce taxation, and surely the Chancellor of the Exchequer should have met the point, because it represents about 30 per cent. of the present Budget. I should think every Member in this House would be prepared to agree to this if he would face up to the real commodity prices, the real value of the money that is now paid to the rentier in this country.

Mr. DINGLE, FOOT

May we know if this is the policy of the party above the Gangway?

Mr. WILLIAMS

I am speaking for myself. I do not think I differ from any person who speaks from the Liberal Benches on this point. I wonder if the hon. Member who puts the question would endorse the opinion expressed in the speech of his colleague. The rentier in this country has had a very good time indeed, because the cost of living has been falling. We can understand why there has been a policy in this country of reducing prices all the time. We think it has been substantially done to increase the interest and the values to the rentier.

In our Motion, we have a, reference to direct and indirect taxation. I do not know whether these figures will be correct, but they are used from time to time. It is said that the national income is £4,000,000,000, of which about 38 per cent. is paid in wages. However much we may analyse this Budget, certainly substantially more than 38 per cent. of the revenue coming into the Budget is paid by way of indirect taxation. Certainly upon any principle that may be applied, the poor of this country are paying substantially more than they were years ago in proportion to the amount that is paid in direct taxation by the wealthier classes. I think that was clearly stated by the hon. Member for Wentworth. The Chancellor never endeavoured to face up to that statement at all. He said that through the import duties you have a greater variety of articles being taxed. It is equally true that a greater variety of articles are being consumed by the working classes, and they consume the cheaper articles. The Chancellor never endeavoured to meet the case that was put up by the hon. Member for Wentworth, who stressed the heavier burden by way of taxation that is falling by indirect means upon the working classes.

The main thing which I should like to put to the Chancellor of the Exchequer and to the Financial Secretary is a. plea to remove the means test which applies to the unemployed. That is my main plea. I do not want to follow other Members in mere debating points. I want to plead for my own constituency and for the constituencies of my colleagues in the depressed areas. I want the Government to endeavour to be as generous to these persons as they seem to be to their own friends. They have taken from the mass of poor people enormous sums of money. They have taken £15,000,000 a year through imposing a means test for the unemployed, and they have handed those millions in subsidies to shipowners, sugar-beet growers and other persons who, with proper organisation, can carry on very well without any subsidies at all. That is certainly iniquitous, and I trust the Government will face up to that and remove the means test as quickly as possible, so that the distressed areas of South Wales and elsewhere may see some semblance of prosperity.

8.2 p.m.

Lieut.-Colonel MOORE-BRABAZON

I will not follow the hon. Member who has just spoken—that is obviously the duty of the Financial Secretary—but I wish to raise one point though not in criticism of the Chancellor of the Exchequer, because he is a pillar of rectitude in finance. If he has made any error, it is an error of omission rather than one of commission. I have always regretted that in the Budget speech he did not make one word of reference to the American debt. I think that when we are owing a sum of £1,000,000,000 you cannot ignore that liability in a speech which has the importance of the Budget statement. I am one of those who think that the relationship between the United Kingdom and the United States of America is far more important than the relationship between any one country and another in Europe. And on this particular question there is the very grossest misunderstanding on the other side of the Atlantic. We in this country, I think, understand the position better than the Americans do, but we have got to realise what is their state of mind. They are in very grave difficulties, and they have had to raise £1,000,000,000 in order to finance works for relieving unemployment—a sum of money just about equal to that which we owe them. Of course, it is natural for the ordinary American to ask repeatedly why that money is not and cannot be paid.

In this country we know perfectly well why it is. We know that we never were lent money; we were supplied with goods. As a matter of fact, we were not supplied with goods but goods were supplied to the Allies, and we stood as guarantor for them. We know that there is no way of repaying that debt except by way of goods again, and that it is impossible to pay such a sum of money. The method of paying by goods is refused by America. She has undermined the world structure of trade by indulging in unilateral trade, in which she is allowed to export and never to import. That has spoiled world trade and has ruined such countries as South America. She will not accept services either. The only way, apparently, in which she thinks she ought to get repayment of this debt is in money, and we know perfectly well—and this should be stressed at every opportunity—that there is not the money in the world that could go over to America to pay this debt. I think we must not miss opportunities of letting the citizens of America know the position we are in, because we in this country do not want to be dubbed defaulters throughout the whole of North America. It is not that we are not willing to pay, but that it is a physical impossibility to do it.

To-day we have a National Government of tremendous power; and in America there is a President who is almost omnipotent and who has the whole country behind him. Surely there never was a more favourable opportunity of doing something to settle this question once and for all. I believe that if America still wants this gold that we could make a gesture and offer her a certain sum. I believe that even now we could pay her £100,000,000 or so in gold. It would be a great strain on the resources of the world, but, if it is a benefit for America and she thinks this payment would be welcome, let us do it; and in return let us get a cancellation of all the debts of all the countries throughout the world. That would have a curious effect on the gold bloc; and I believe it would have a fundamental effect on stabilising those exchanges which we are told upset world trade to-day. I think it is time for a gesture of some sort in an attempt to settle this difficulty once and for all. It is a growing sore on the other side of the Atlantic. If you talk to anybody up and down that country, they say, "Why don't you pay us?" and it is difficult to explain in a few words why we do not. I think it is the duty of the Chancellor whenever he is making a national statement of the importance of the Budget always to put our point of view and our difficulties. If before another general election this Government could come to grips with this problem and come to an arrangement with the President of the United States to settle this debt question once and for all, I believe that settlement would be of enormous benefit to these two great countries and to the world.

8.8 p.m.

Mr. BATEY

When the right hon. Member for South Molton (Mr. Lambert) was speaking earlier in the evening he reminded Members on these benches of the amount of money paid out in old age pensions. He mentioned a figure with which at the moment I disagreed. He asked me to go and look at a Command Paper so that I might have the correct figures. Instead I went and obtained a copy of the Financial Statement for this year, and I have taken out the figures. It is there shown that this year the amount to be paid for old age pensions is £43,000,000, and that the amount to be paid this year on the Widows', Orphans' and Old Age Contributory Pensions Account is £14,000,000. That makes a total of £57,000,000. The right hon. Gentleman implied that we should be satisfied with the amount of money which is being paid out in these pensions. But we are not satisfied. We believe that the working-classes are entitled to a far larger share of the national income than they are receiving at the present time. This year, according to the Financial Statement, the Government budgets for a total expenditure of £730,000,000. Of that sum £57,000,000 is to be paid in respect of widows', orphans' and contributory pensions and in old age pensions, while there is to be paid for past wars and in preparation for future wars no less than £390,000,000. A sum of £224,000,000 is provided for interest on the National Debt, while £124,000,000 is the cost of armaments this year, and £42,000,000 is to be provided for war pensions. I rather gathered that the right hon. Gentleman was adding the war pensions figure to that for old age pensions, and that is not fair. The war pensions figure, in my opinion, ought to be placed to the proper account. When this figure of £42,000,000 for war pensions is added to the £224,000,000 for interest on the National Debt and the £124,000,000 for armaments, that makes up a total of expenditure for this year of no less than £390,000,000. When the country can afford to pay for past wars or in preparation for future wars no less than £390,000,000, we are entitled to complain in the name of the working-classes that they are only receiving £57,000,000 for pensions.

I think that we are also entitled to complain that the working-classes are paying far more than they are receiving. The Financial Statement shows that this year there is to be raised as a tax upon beer £58,000,000, as a tax upon spirits £33,000,000, as a tax upon tea £4,000,000, as a tax on sugar £12,000,000, as a tax on tobacco £67,000,000, and as a tax on matches £4,000,000, a total of £178,000,000. If you add £57,000,000 for pensions, £6,000,000 for national health insurance and £75,000,000 for unemployment, that only brings the total to a little over £130,000,000, so I consider that we are entitled to complain that the working-classes are not being given their fair share out of the revenue of this country.

When the Chancellor of the Exchequer has money to give away then the working classes have a claim upon him before he repeats the benefits that have been given to the capitalist class. The Chancellor seemed very happy to-night, even more happy, I thought, than he was when in- troducing his Budget. He seems abundantly satisfied with the Budget. I am prepared to admit that after the Budget was delivered it was described generally as "a prosperity Budget." The sun of prosperity may have been shining ore various parts of this country, but it has not been shining on the North of England. In the county of Durham we are no better off for the past Budgets of the Chancellor of the Exchequer or for the four years of National Government. So far as we can judge from what the National Government is proposing to do for the distressed areas, it seems that we shall be no better off when the lifetime of this Government has expired. When the Budget was introduced there was no mention of some things that we find in this Finance Bill. We find in this Bill a further proposal to help capitalists. The Chancellor to-night tried to treat this as if it were a small matter, but to some of us it is an important matter, because it is a new way in which the Chancellor is seeking to help the capitalists of this country. After all is said and done the Government has been a real friend to the capitalists and it has been an enemy to the working classes. Somebody says "No." Well, the Government have taken from the working classes by the means test £15,000,000 or £20,000,000 a year_ The figure of £20,000,000 was given by the late Minister of Labour. The Government have taken this £15,000,000 or £20,000,000 a year from the working classes by the imposition of the means test and have given it to their own friends.

Mr. BUCHANAN

That is not all.

Mr. BATEY

I agree with my hon. Friend, but it is sufficient to be going on with. In this Finance Bill the Government are proposing to help capitalists in a new way by making a provision for them to deduct from profits contributions paid towards the rationalisation of industries. We can understand the method of tariffs and quotas, but this way of helping the capitalist is just the limit. Rationalisation may be in the interests of the capitalists, it is certainly not in the interests of the working classes. The Government propose to encourage rationalisation, indeed, they propose to pay the capitalists to pursue it. A few years ago it was like an epidemic, it was a new idea and spread rapidly, but during later years it has been dying down. Now the Government propose to revive it and make it worth the while of employers to carry rationalisation further than it has ever been carried before.

Generally the policy of employers is to close what they consider redundant works, and in the Bill the Government propose to make it worth their while not only to close redundant works but to eliminate machinery and plant. It is to be left to the employers' organisation to decide what machinery and plant shall be scrapped. We strongly object to that. We claim that the workers should have a voice in any such decision. At the moment they are dumb, but they are the people who have to suffer. In addition we have the amusing spectacle that when it has been decided to eliminate some machinery or plant the employers are to be compensated. There is no compensation for the workers. We also strongly object to that. It seems to me that this new policy of the Government is to increase unemployment. Bad as the Government are, we thought that they did really want to increase employment, but it seems clear that they want to increase unemployment, because if machinery and plant are scrapped the workers will find it extremely difficult to get employment and will be thrown on the scrap heap. Why should the employers' organisation have the sole right to say what machinery and plant shall be scrapped I There is no justice in such a proposal.

In addition to the question of the elimination of machinery and plant, there is the larger question of the elimination of what are called redundant works. It means that the employers are going to be encouraged not only to scrap machinery but to scrap shipyards or collieries; and again the workers are not to be consulted. This is a most important matter for the working classes. It may be that hundreds and thousands of men, women and children are dependent upon a colliery which it is proposed to scrap. Why should the employers' organisation have the right to close a colliery without any regard to the interests of these men, women and children? But in this rationalisation policy the employers claim not only the right to close a colliery or a shipyard but the right to prevent the re-opening of that shipyard or colliery. Before any such process takes place the Government should hold a public inquiry into Shipbuilding Securities Limited, which was started by the shipowners for the purpose of rationalisation; for the purpose of closing shipyards. Shipbuilding Securities Limited have already close eight shipyards, only five are now working. The Government are encouraging them as though they seem to think that this is not sufficient and that five shipyards working are too many. They seem to say that they will make it worth the while of shipowners to close some of the others. The fact that eight shipyards have been closed and only five are working should have made the Government pause before they encourage any further rationalisation.

In 1921 there were 358,000 men employed in the shipbuilding industry, now there are only 158,000; a reduction of 200,000 men. The Government, apparently, are going to encourage shipowners to close more shipyards and add more men to the number of the unemployed. Have they ever heard of Jarrow? The shipyard there has been closed by Shipbuilding Securities Limited, and they have prevented its reopening. Efforts have been made by well-intentioned gentleman in the South of England to help Jarrow and reopen the yard, but they have found it extremely difficult, and so far the yard remains closed and is likely to remain closed. If the Government had really thought the question out they would not have put this proposal in the Finance Bill. In the City of London the number of unemployed is 2.3 per cent.; the figures for Jarrow are 75 per cent. In the County of Durham the percentage is 35.

Mr. BUCHANAN

Does that include Seaham?

Mr. BATEY

I am giving the figures for the whole of the county; we have some exchanges with 58 per cent. unemployed. I did not take out the figures for Seaham. In my opinion, the experience that we have gained, in seeing shipyards closed by Shipbuilding Securities Limited, ought to have made the Government pause before they proposed to take this step in this Bill. But it does not mean only the closing of shipyards. It means the closing of collieries We have had plenty of them closed, and we do not want the coalowners to be encouraged to close more. It would be interesting to know whether the Financial Secretary noticed last Saturday a most interesting report of the previous day's proceedings before the Railway and Canal Commission. Some of the Yorkshire collieries are appearing before the Commission, and they want amalgamation. I notice from the report that Mr. Justice MacKinnon said: If you shut down a redundant mine and transfer its quota to the efficient mines, it is fairly obvious that would be to the national interest and the advantage of the mines to which it is transferred. I am not so sure that it would be to the national interest. If we close down a mine the miners have to be kept, and they are not kept by the coalowners, but by the community, the public. So that in my opinion it is not to the national interest to close down any mine. Then there is the statement: It would be to the advantage of the mines to which it is transferred. It would be, or it might be, to the advantage of the mine to which the quota was transferred. But what of the mine from which it was transferred? We hold that the closing of collieries is a big responsibility. Once employers of labour sink a coal mine and bring thousands and thousands of men together and they become dependent on that coal mine, there is a public responsibility resting upon the coal owners that the mine should not be closed. It should not be closed unless it is absolutely worked out. There is another aspect of the question, and that is whether capitalists should get more relief. This Government has done much for them. The question is whether the time has not come when the Government should cease looking after their friends and stop relief to the capitalists. We cannot forget that it was the present Chancellor who passed the 1929 Act, which gave relief from local rates to the capitalists. They were relieved of three-quarters of their local rates. We have had the intervening years of experience to show whether that was beneficial or not. So far as the coal industry is concerned it cannot be said that it did any good.

Lieut.-Colonel HENEAGE

The industry might have been much worse off without it.

Mr. BATEY

I do not know that we could be worse off. The coal industry has received no benefit from that scheme. In 1929, when that step was taken, the output of the mines of this country was 258,000,000 tons. To-day it is 220,000,000 tons. In 1929 the men employed numbered 939,367 and in 1934 the total was only 772,831.

Mr. LAWSON

The figure is now 768,000.

Mr. BATEY

That makes it worse. Then the wages of the miners are less to-day by ls. ld. per week. Figures given by the Secretary for Mines on 9th May show that in 1929 the average weekly wage of the miner was £2 5s. 6d., and that now it is £2 4s. 5d. That is a reduction of ls. 1d. per week. For the County of Durham a return has just been issued which shows that the average wage is 8s., and the average number of days worked per week in 1934 was 5.05. That is £2 a week as the average weekly wage in Durham. The steps that the Government have been taking are doing no good for the industry. I have been interested in reading a pamphlet called "Planning" issued on 17th March. It is not written by Socialists, but by what I think are advanced Tories. The publication states: Relationships between the State and industry are always changing, but they have rarely, if ever, changed as fast as at present. One of the more conspicuous recent developments has been the rapid growth of subsidies, rebates, loans, guarantees, levies, tariffs, quotas and indirect or direct financial assistance of various kinds. In fact a large section of British industry has become to some extent dependent for its existing equilibrium on one or more of these devices. A great part of them have originated in the past four years. In addition to that they state: Manufacturing industry enjoys privileges which (except for the uniform three-quarters exemption from local rates) are so complicated and variable that their value seems impossible to assess.The current total of direct and indirect subsidies, rebates and levies to agriculture alone is, therefore, running to more than £15,000,000 a year, without taking into account substantial tariff and quota protection, and the complete exemption from local rates of agricultural land. Then they sum up by asking: How much of the taxpayers' and the consumers' money is being spent directly and indirectly in these ways?

Mr. LEES-JONES

Will the hon. Member say who is behind that organisation? Is not one of its chiefs an out-and-out Socialist.

Mr. BATEY

I have to judge "Planning" by the men who write in it. Generally, the writers have been Members belonging to the Government. Hon. Members opposite ought not to run away from the document in that way. They ought to stand by their own. folk. If this Government really want to solve the unemployment problem they must know that they can never do so by steps such as they are taking in this Bill. They will never solve it by giving a free hand to employers of labour to close down any colliery or shipyard, any machinery or plant they care to select. The time has come when even this Government will have to consider very seriously the whole question of machinery. Even some of my own friends may not agree with me on this subject and I wish it to be understood that I am speaking for myself. I believe the time has come when we must face the question of machinery. If the machine is to supplant men and put men out of employment as it is doing to-day, then in my opinion, instead of giving relief to employers we ought to consider whether the machine could not be made to contribute some share towards the maintenance of the men whom it is supplanting.

I would like to see an inquiry into the question. I have my own doubts whether the use of the machine is, in all cases, worth while and whether the article produced by the machine is really any cheaper, when we reckon in the capital cost of the machine and also the cost of its maintenance. I would like to see an inquiry which would cover the whole question of the installation of machinery, in the interests of the men who are being thrown out of employment. I do not think it is necessary for me to tell the Chancellor of the Exchequer of various ways in which the money at his disposal might have been better spent than in encouraging employers in what is called rationalisation. In my opinion, the working-class people of the distressed areas have an immense prior claim upon any money which the right hon. Gentleman has to spare and their claim ought to be considered, before that 'of the employers. In spite of what the Government have done in the sending of Commissioners to the distressed areas, nothing has been accomplished. We are in the same position to-day as we were in before the Commissioners were sent to those areas. But the Government must recognise that they will have to deal with the distressed areas and will have to find money for the distressed areas. If they ceased giving money to their own friends and devoted it where it is so much needed they would be making a better use of the resources at their disposal.

8.38 p.m.

Mr. DINGLE FOOT

The discussion to-day has fallen into two parts, one dealing with what is in the Bill and the other with what is not in the Bill and the amount of discussion under the second head has greatly exceeded that under the first. Before passing to the more general issues which have been raised to-day I would like to break with precedent and address to the Financial Secretary to the Treasury one or two specific questions on particular Clauses of the Bill. First I would like to ask him a question about 'Clause 1 which deals with the reduction in the Entertainments Duty. Sub-section (2) provides that the duty shall cease to be charged on payments not exceeding 6d. Am I right in assuming that that provision applies to all entertainments, including cricket matches and the like, and not merely to stage plays?

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

Mr. FOOT

I understand from the Financial Secretary that that is so and I am grateful for the information because there has been some doubt on this point especially among junior football clubs. Then Sub-section (3) of the Clause applies the lower scale of duty set out in the First Schedule to certain entertainments and in this connection I wish to put in a plea for football and cricket clubs. I have never been able to see why a distinction should be drawn between one form of entertainment and another. It does not seem to me that the man who spends his Saturday afternoon watching a football match as I frequently do, is any worse than the man who spends his Saturday evening in a music hall. I wish to ask whether the Government would consider extending the benefit of this reduced duty to football and cricket matches and athletic and sporting events of all kinds. It is not a question which affects professional clubs only. It also affects a large number of amateur clubs which are not run for profit.

My next question to the hon. Gentleman relates to Clause 10. It sets out a new way of valuing imported goods for the purpose of ascertaining import duty. Certain methods of valuing goods were laid down in the Import Duties Act of 1932. It was provided there, as it is provided here, that the first criterion was to be the open market value of the goods but a number of other tests could be applied under the 1932 Act. Here the open market value is the only test which is to be applied and on reference to the Second Schedule we find that the relevant part of the Act of 1932, namely Subsections (2) and (3) of Section 15 are being repealed. So far, we have not had any explanation of the proposed change and as it is a matter of some importance to the commercial community I should be grateful if the hon. Gentleman could tell us the reasons for it and also if he would say something as to the effects of Clause 15 which deals with the power to require the production of documents relating to imported goods.

I am not going deeply into that question but it appears to me that this Clause gives considerable powers to customs officials—powers of search, powers of examination and powers to call for books and to require information. I think the powers here conferred are more considerable than any that have been conferred in any previous measure on customs officials and some explanation ought to be given to the House. I know that we live in times of perpetual encroachments by the Executive when more and more power is being given to Government Departments and officials of all kinds. But when a provision of this kind is inserted in an important Measure like the Finance Bill the House is entitled to know why these additional powers are considered necessary.

During a very wide discussion to-day hon. Members have raised a variety of topics and great difference of opinion has been shown as to the state of the country at the present time. Hon. Members above the Gangway have pointed out that the recovery to which so many references have been made is only partial—that it only applies to certain parts of the country. I think it is true that the recovery, such as it has been, has chiefly affected those parts that were least in need of it. The Chancellor of the Exchequer, speaking on the Budget Resolutions, referred to 80 per cent. prosperity. It is the case—and there is no use in trying to gloss over the figures—that last month there was a very substantial fall in the unemployment figures of over 100,000 as compared with the figures of 12 months previously. Members in all parts of the House rejoice that there should have been that reduction, but even if that rate of progress were maintained, it would take us practically 10 years to get back to the unemployment figures of 1929.

When we are told of the fall in the unemployment figures, it is relevant to take into account the other side of the picture—the Poor Law figures, in which there has been a considerable increase between 1931 and the present year. I put some questions the other day to the Minister of Health and the Secretary of State for Scotland to find out what had been the increase in the Poor Law figures in the last four years. I was told that in England and Wales the number in April, 1931, was 1,022,000, and on the corresponding date this year 1,333,000, an increase of something like one-third. That is the figure of applicants and dependents as well. In Scotland there has been a much steeper rate of increase. The total figures of applicants and dependents in April, 1931, was 188,000. The com parable figures for April of this year is 354,000. If my arithmetic be correct, that makes an increase for the four years in the number of people receiving Poor Law relief in England and Wales of 30 per cent., and in Scotland of 88 per cent. Hon. Members above the Gangway are justified when they say that such recovery as there has been has been of a very partial and limited character. My hon. Friend the Member for Orkney and Shetland (Sir R. Hamilton) drew attention to the unemployment figures and was rebuked by the Chancellor for uttering platitudes. If we look at the state of the country, in spite of the recent improvement, and when we look at what is happening in the depressed areas, I prefer the platitudes of my hon. Friend to the beatitudes of the Chancellor of the Exchequer. The right hon. Gentleman, in speaking of the Finance Bill last year, used these words in describing the policy of the Government: I can claim that we have done, and are still doing, all that I believe any Government can do to assist in the stimulation of trade, and in that alone is to be found the real solution of our problem." —[0FFICAL REPORT, 16th May, 1934; col. 1833, Vol. 289.] The words to which I wish to call attention are "assist in the stimulation of trade." If that were a correct description of the policy of the Government, we on these benches would certainly feel much more friendly towards the Government than we do, but can it be said that the various measures which they have taken during, say, the last 12 months are measures designed to stimulate the recovery of trade? For instance, when they imposed their veto on the Red Star project and boats were allowed to be handed over to Germany to employ German seamen, was that a contribution to the stimulation of trade in this country? In this Bill they impose a tax on soya beans. We had the testimony a few days ago of various agricultural Members that there was no real substitute for soya beans. When a tax is placed on one of the raw materials of agriculture, is that a contribution to a stimulation of trade In an interesting speech to-day my right hon. Friend the Member for South Molton (Mr. Lambert) gave a long catalogue of the various raw materials of the agricultural industry upon which a tariff had been placed by the present Government. We were given to understand by the Chancellor that the consumer really only paid a small part of the import duties, but that evidently was not the opinion of my right hon. Friend the Member for South Molton, because he made the most bitter complaint of the burdens that have been placed on agriculture, which have had no corresponding tariff on the things that they had to sell. We remember also that the Government introduced the Agricultural Marketing Act of 1933, which contained the obnoxious principle of quantitative limitation of output. It is a misnomer to describe the policy of the Government as assisting in the stimulation of trade.

In the view of the party on these benches, there are three ways in which the Government could in fact stimulate the recovery of trade. First, we believe it could be done by taking every possible opportunity of restoring world trade and thereby restoring our overseas markets. Again, no doubt, we shall be accused of uttering platitudes, but we think there are a number of platitudes that ought to be constantly uttered in this House because the truth of them is not realised on the Treasury Bench or by hon. Members opposite. There has been lately a perfect avalanche of testimony to the effect that without a recovery of world trade there can be no permanent or real prosperity in this country. There was the quotation that was given earlier in the Debate by my hon. Friend the Member for Orkney and Shetland, who referred to the words used by Sir Percy Bates at the annual meeting of the Cunard Steamship Company. If I may remind the House of another famous quotation, there was the opinion given in the report of the Commissioner of the depressed areas for Scotland who said: It is perhaps a platitude to say that world conditions are chiefly responsible for the position of affairs in Glasgow, and the long-term view is that reduction in tariffs and other hindrances to international trade would go far to remedy matters, and posibly that is the only real solution. There is an even more remarkable observation made by the President of the Board of Trade a few days ago, when he used these words in a speech reported in the "Times" of the 2nd May: We, of course, realised that trade was not only mutual but also triangular and even multi-angular. It could, therefore, be fully balanced between individual countries. The purchasing power of many others of our customers outside Europe was dew-Indent on European markets, which could only be maintained if we admitted the goods of those markets. I have no doubt that if that had been said by my hon. Friend the Member for Orkney and Shetland, or if I had said it in this Debate, we should have been accused by the Chancellor of uttering platitudes. Whenever we raise this question we are referred to the trade agreements, and we are told how much has been done by means of the Government's trade agreements to free the channels of trade. I made an estimate some time ago in the House, and put it to the Secretary to the Overseas Trade Department on two occasions in debate, and he has never denied it. It was that even when you get the full effect of the trade agreements with foreign countries even if we reckon the maximum increase of trade which can be extracted from those agreements, the maximum cannot be more than £14,000,000 increase. I am not suggesting that that amount is worthless, but surely it is a tiny contribution when we compare it with the enormous loss in our export trade that this country has suffered as compared with 1929.

These trade agreements—and I am not criticising them as far as they go—have been made with countries who have come to us. I do not think it is a very wonderful performance because some of those countries, such as Denmark and the Scandinavian and Baltic countries, were so dependent on the British market that they practically had to take any terms that we chose to offer. Be that as it we have dealt with those countries which have come to us. Perhaps the Financial Secretary will be able to say how many countries we ourselves have approached in order to make trade agreements. Why is it—and I have never yet been able to get an answer to this question—that although more than 12 months ago. President Roosevelt took powers from Congress to reduce tariffs by 50 per cent. in making trade agreements that the British Government have made no attempt to avail themselves of that opportunity to reach a trade agreement with the United States of America? There is one of the greatest markets in the world, bigger than that of all the Baltic and Scandinavian countries put together, a market with more than 100,000,000 people with a high standard of living and, consequently, a very high purchasing power, and the executive takes power to reduce tariffs in order to make trade arrangements. Yet the British Government make no endeavour to avail themselves of that opportunity. Perhaps we may get some information as to why this chance has SO far been lost.

Major MILNER

But would a defaulting debtor like the British Government get a second chance?

Mr. FOOT

I think it is questionable whether we are regarded as a defaulting debtor, but, even if that were so, we are not peculiar in that respect as against the United States. If they were to refuse to make trade agreements with every country that had not paid its debts they would be confined to a trade agree- ment with Finland. The second method which we believe could be adopted with advantage is that the Government might do rather more than they have to facilitate the re-equipment of British industry. I agree with the remarks uttered earlier in the Debate by the hon. and gallant Member for South Leicester (Captain Waterhouse). We are rather disappointed that the Government have not found it possible to be rather more generous in their wear and tear and obsolescence allowances. I think there is a growing opinion in this country that our present system is entirely unsuited to modern needs. In the 19th century plant and machinery lasted very much longer than they do now, they were a much more long lived asset, and industry depended a great deal more on skilled labour than at the present time. Everybody knows that the life of a machine is nowadays very much shorter than it was 50 years ago. Under our present system there is a wear and tear allowance each year, which is a matter of arrangement, and then, when the life of the machine comes to an end, and when it is given up, it is followed by an obsolescence allowance which is only payable, as every one knows, if the machine is, in fact, replaced.

Those are two respects in which our system compares very unfavourably with that prevailing in some other countries. Firstly, the wear and tear allowance is very much less generous than that which is given in most European countries. I cited figures on this matter some time ago, and I hope hon. Members will forgive me if I repeat them. There is no fixed rate of wear and tear allowance in this country, but the average would be about 7½ per cent., arid in the Budget of 1932 an extra 10 per cent. on that was given, bringing it up to 8¼ per cent. on the declining value. France, Belgium and Italy each give 10 per cent. on the original value. Germany gives 20 per cent. in the first year, and afterwards 8 per cent. on the declining value; and I am told that within the last 12 months a special arrangement has been made in Germany with regard to loose tools and accessories so that the whole value of them can be written off in a single 12 months. Those figures are sufficient to show the enormous difference between the allowances made in Continental countries and the allowances made here.

With regard to obsolescence, the chief weakness has always seemed to be that unless the machine is actually replaced no obsolescence allowance is given at all. Very often it is a matter of dispute between the Inland Revenue authorities and the industrialist concerned as to whether one machine is really a replacement of another. Would it not be possible for the Government to consider the adoption of a system which prevails in a good many other countries whereby the allowance is made when the life of the machine comes to an end, whether or not it is replaced? That system prevails in Australia and, I think, in some of the other British Dominions. It may happen that plant or machinery is needed in these days in order to manufacture some specified article, and if that is so its use would naturally end when the article is made, and the plant or machinery is then left on the manufacturer's hands. He does not require to replace the machine, but is quite unable to get any advantage under the obsolescence allowance scheme.

There are a good many people who share the views of the hon. Member for Spennymoor (Mr. Batey) when he denounced the effects of rationalisation and new machinery. I do not believe that is historically true. I think, taking it over a longer period, that it is almost always true that in the long run new machinery tends to find fresh markets, and to create further employment, and though I have not the figures to bear out this statement, if we were to take things over the last few years in this country, from 1931 to 1935, we should find that some of the industries which have been most ready to introduce new machinery are those which have been able to lead recovery in this country.

Thirdly, we believe the Government should be ready to adopt a far bolder policy of national development. We are told that this was tried in the last Parliament. I am rather doubtful whether a policy which can be described as national development ever was adopted in this country. What was adopted in the last Parliament was a system of glorified local development, a writing-round to the local authorities to ask whether they could not find some useful or desirable work which they would like done. It does not seem to be anybody's business at the present time to survey all the various projects that are put forward from a national or regional point of view. Like some other Members in the East of Scotland, I have been concerned in putting forward particular projects, the work of building road bridges over the Forth and the Tay, and other Members have no doubt put forward other projects in their districts. It all depends on how effectively one can pluck at the robe of the Minister of Transport, who has all the local authorities on his doorstep endeavouring to attract his attention. It all depends, in the first place, on the initiative of the local authority. Surely there must be a great many schemes which have not only a local but a regional and a national value, and it should not be left to one or two local authorities to determine whether or not those particular schemes should 'be carried out.

In conclusion, I think the Chancellor of the Exchequer summed up the policy of the Government with regard to trade and unemployment the other day when he said, "Our policy is to go on as we have been doing." There are a great many people in all parts of this House who think we ought not to wait upon a trade revival, which is the policy indicated in, that statement, but that we ought to and can take active steps to bring it about.

9.5 p.m.

Sir A. SHIRLEY BENN

I should like, first of all, to say something about what the Chancellor of the Exchequer has done for us. Those who are engaged in carrying on the industries of the country must congratulate him on the position of the national finances. He has restored confidence, and I hope that we shall receive more and more of those benefits day by day, because our trade depends upon confidence. Manufacturers and traders are some of the largest contributors to the national revenue. There is no question that if trade is bad the conditions at home, not only for employment but for revenue, are also bad.

As representing a large industrial centre, I know that any concessions which the Chancellor may make to trade and business will be appreciated. There is a feeling, as the hon. Member for Dundee (Mr. Dingle Foot) said a few moments ago, that more encouragement ought to be given to manufacturers and producers by way of allowances and reliefs of Income Tax. The Income Tax system of this country is rather ancient, as it is over a century old, and it is not perfectly adapted to modern conditions. One of the results of the war was that countries whom we had never considered as competitors in world markets went in for manufacturing on their own account, bought plant and began to provide the goods needed in their own countries. Such goods are today competing with our own in the markets of the world. Modern machinery in the foreign factories enables those competitors to compete very seriously with us in almost everything that we export. I have no doubt that hon. Members will agree with me when I say that we should do everything we can to increase the production of our mills and our factories in order to manufacture at a reasonable price and find work for our people. That effort will be made by all of us. If there is up-to-date machinery in our factories we can compete with anybody, but if there is obsolete machinery we cannot do so.

Several of our industries have been reorganised, and, as a result, production has been increased, profits have been good and prices have not gone up but have remained reasonable. Some of us were disappointed that the Budget contained no reference to obsolescent machinery on the lines recommended by the Royal Commission on Income Tax. In a modern factory the plant must be maintained in the highest degree of efficiency if the products are to be of first quality and reasonable in price. There must, therefore, be ruthless scrapping of plant, not only on account of age, but when it is obsolescent compared with modern machinery hope that the Chancellor will be able to afford adequate relief in that direction. I suggest that where modern machinery has been installed to enable production to be maintained, the cost of the plant should be charged against the profits earned during the life of the plant. The cost to the Exchequer of a revision of the law in that respect would be small, but the encouragement which it would give to expenditure of capital upon the re-equipment and modernisation of plant would be great, and it would have a good effect upon the problem of unemployment. I hope that the Chancellor will see his way to render some assistance in this matter.

The hon. Member for' Dundee spoke about the Norwegian, Swedish and Danish markets. I was in Scandinavia a few months ago. Before we arranged our trade agreements with those countries they burnt inferior coal, but now that the trade agreements have been made, we have a coal trade in the Scandinavian markets. The hon. Gentleman also spoke about a trade agreement with America. I know America well, and I should like very much to see a trade agreement between the two countries. But in what commodities could we have transactions with America? We buy wheat and cotton and we are quite prepared to buy what we cannot get more cheaply from other places; but what can America take of ours? I have had to send stuff to America in the old days, but to-day there is little room for selling there except at a loss. The Americans can produce in very large quantities all that they need. They have an enormously rich country. Their President is a man of energy, ability, courage and honesty. We do not know how he is going to come through, but we hope that he will bring his country back into a position as one of the great trading countries of the world, and one with which we shall be able to make trade agreements.

9.14 p.m.

Major MILNER

The hon. Member for the Park Division of Sheffield (Sir A. Shirley Benn) seemed to think that all that was necessary to produce 100 per cent. prosperity in this country was for manufacturers to have up-to-date machinery. I should not have thought there was a great deal of difficulty in obtaining that, in view of the amount of money in the banks and of engineering knowledge in the country, as well as the great influence which, one knows, the hon. Gentleman and his friends have in the councils of the Government. The mere introduction of up-to-date machinery, however desirable in itself, will not bring prosperity to the 2,000,0001 or so unemployed people of this country, although it may conceivably bring larger profits to the pockets of the owners of the machinery. I do not, however, propose to follow the hon. Gentleman in all that he said.

I want to deal with one matter in the Budget which affects my constituency to some extent, and in which possibly I may have the sympathy of the hon. Gentleman who has just spoken. I refer to the withdrawal of the rebate on heavy oil used for Diesel engines. That impost has, I think, been received with something akin to consternation by manufacturers of Diesel engines used for road transport work, and by their employes. In the first place, it is unquestionable that the withdrawal of the rebate and the substantial increase of the tax on heavy oil used for this purpose has already resulted in a falling off, if not a complete cessation, of the orders coming to engineering works which manufacture engines of that type, and I have little hesitation in saying that, if the Chancellor persists in increasing the duty, very considerable unemployment will be caused in a number of towns in this country, and not least in my own City of Leeds, where a very 'promising industry has, if not fully established, advanced very far technically, and only needs a little further advantage to enable it to reap the full fruits of the money, work and energy which have been put into the business in the last three or four years.

We have the Chancellor of the Exchequer and other Members of the Government handing out money to the beet sugar industry, the shipbuilding industry, and so on, in order to keep these industries on their feet. In these cases it is not so much a matter of establishing new industries as of keeping existing industries on their feet. The manufacture of Diesel engines is, however, an infant industry which has hardly had time to find its feet, and yet, before even the money expanded on research, development and so on has been in any way recouped, the Government come 'along in this Budget and strangle that infant practically at its birth. The reasons given by the Chancellor in his Budget speech were, in substance, two. In the first place, he stated that, if the taxation on oil used in Diesel engines were not made equivalent to the taxation on the petrol used in. petrol engines, his revenue would be endangered. In reply to that statement I would point out that the Chancellor himself, a few Minutes previously in his Budget speech, indicated that, so far from his revenue from the Oil Duty being endangered, he was budgeting for an increased revenue from that source of something like £1,000,000. Therefore, it is obviously not correct to say that, if an alteration were not made in the taxation on the oil used in Diesel engines, the revenue would be endangered. His second argument was that the Diesel engine would still have an appreciable advantage over the petrol engine. I would ask the Financial Secretary to be so good as to look into this matter, because I feel confident, from information in my possession, that the Chancellor is wrongly informed in that respect. It is true that the petrol engine road vehicle and the Diesel engine road vehicle are now taxed on approximately the same basis, but that is not the point. The point is that the Diesel engine industry, in its present state of development, is not able to stand the same taxation as the petrol vehicle, and I will indicate to the Financial Secretary how that comes about.

In the first place, considerable funds have been expended on research and development. I know of one firm alone in this country—and I may say that, apart from having the industry in my constituency, I have no personal interest in it in any shape or form—has expended some hundreds of thousands of pounds in research and development, and has not so far been recouped to the extent of a single penny of that money. Therefore, until some opportunity has been given to the industry to recover some of the money which has been expended in that way, it is not fair to place this additional tax upon it. That state of affairs does not exist in the petrol engine industry, which has now been going for some 20 or 30 years, and has had ample opportunity to get back at any rate the capital which has been laid out. Petrol engine methods of manufacture have remained constant for many years, and there are in that industry no heavy development charges such as there are in the case of the Diesel engine. The Diesel engine, though highly developed technically in this country, is still costing very large sums for development and improvement, and it is admitted on all hands that that engine, technically, has not reached anything like finality.

Another reason why it is not true to say, as the Chancellor did say, that the Diesel engine vehicle will, under these proposals, have an advantage over the petrol engine, is that the cost of the Diesel engine is appreciably higher than that of the petrol engine. For example, the crank-shaft of a Diesel engine costs exactly double as much as that of a similar petrol engine, while the fuel injection pump on a Diesel engine is something like £20 dearer than the carburettor and coil ignition apparatus used in lieu thereof on a petrol engine. There are other reasons which I could give, if time permitted, to indicate how the capital cost of a Diesel engine considerably exceeds that of a petrol engine. I repeat in the presence of the Chancellor of the Exchequer, who is now in his place, that it is not true to say that the Diesel engine still has an advantage over the petrol engine.

Another point is that the manufacturers of Diesel engines have been building up during the last two or three years a rather new line of road transport vehicles so far as Diesel engines are concerned. Hitherto, Diesel engines have been used largely in very heavy vehicles, but recently, by research and development carried out at considerable cost, a business has been developed in the manufacture of Diesel engine vehicles capable of carrying two or three tons weight. Those vehicles are very suitable for competing with the imported vehicles made by the General Motors Corporation and others in America, which, as one knows, are supplied at comparatively small cost in this country. The capital cost of a Diesel engine vehicle is much greater, and therefore no user of road vehicles will purchase a Diesel engine vehicle capable of carrying two or three tons when its capital cost is of necessity higher than that of the petrol engine vehicle, merely because there is no saving in running under load in such a light weight vehicle as that. There is a very small saving, I believe, on the heavier Diesel engine vehicle, but there is no saving on the smaller vehicle and, the capital cost having been greater, the result of that has been that to all intents and purposes the two or three Conner using a Diesel engine is dead in this country. This is a particular industry which is likely to have, when fully developed, a great export trade, and it is difficult to understand why the Chancellor in the period of development and research in this industry should put on this tax which, as I say, will to all intents and purposes prevent these vehicles being made or being sold in the future.

I am informed that there has been little, if any, consultation with those who are fully aware of the differences between the petrol and the Diesel engine vehicles, and, indeed, very little if any consultation with the trade on the matter of this additional duty. I should like to ask the Chancellor whether he has had or is about to have consultations with those in the industry, because if he is to consult with them I feel confident that, if he makes a fair and independent examination of the merits of the whole matter and if he remembers that he said that his revenue would be endangered if he did not increase this tax, whereas he has budgeted for his revenue going up apart from this tax, and if he finds out, as I feel confident that he will do, that the Diesel engine has not now the advantage which he thought it had over the petrol engine vehicle, he may find it possible even at this late stage to do away with or modify in some form this particular tax. It is surprising that the Chancellor, expressing as he did in his Budget speech a desire to stimulate British trade, should at this stage, before this particular industry has really got on its feet, seek to destroy it, as in effect I am assured he is likely to do, by insistence on this increased oil duty. I very much hope that even at this late hour, in view of the unemployment which is likely to be caused, the loss to the industry and the fact that it is a new industry which has not had time to justify itself fully, he may think it right to modify or adjust the tax.

9.29 p.m.

Mr. HALES

This is one of the rare occasions that we business men have of putting our views before the Chancellor of the Exchequer, and I very much appreciate the opportunity given me to-night of saying a few things the reply to which, I have no doubt, will clear not only the doubts in my mind but in the minds of thousands of our fellow countrymen in the industrial centres. We hear so much to-day of all sorts of experiments and expedients for improving trade and reducing unemployment, and of new deals across the Atlantic which attempt by an artificial prosperity to bring about a better state of things, but which in themselves are doomed to failure because they neglect the fundamental principle of supply and demand. But I would like to ask the Chancellor, who is so intimately and closely connected with the industries of the Midlands, has he not in his hands the Aladdin's lamp which will open the cave of prosperity by the simple process of rubbing And I want to ask him to-night to rub that Aladdin's lamp and bring about prosperity in the manner which, with all deference and respect, I will put before him.

This afternoon, in reply to my question on the tremendous increase of imports of American cars into this country, he made a reply which, I think, he knows does not answer my question. He says that he does not think that the importations of cars affect our industry seriously, as they are still very small in comparison with the output of British cars. Let us look at it. The excess of cars brought in represents a small army of 8,642 men rendered permanently out of employment through this importation of cars, which we could make equally well in this country. The importation of one article, be it ever so small, is one factor in causing unemployment, and is that small leak which tends to widen and bring about the destruction of one of our few industries which are showing a good return. Imagine this army of 8,642 men, four deep, marching through the Strand with banners saying, "We are out of employment because you will not protect our industry." That would not be received with equanimity. It would be the talk of the country; every paper would have large placards and headings: "The Cause of Unemployment." Surely it needs no great stretch of imagination to say that we will not import into this country articles which we can make for ourselves until other countries appreciate the position and buy goods from us equal to what we purchase from them. Taking the motor industry as an example, which is only one of many others, there is the possibility, and the probability, and I will go as far as to say the certainty, of putting half a million more men into employment in the next few months if we will adopt the policy of protecting industry by keeping out goods which we can make ourselves.

The matter causes the average business man and the man-in-the-street to be in a state of bewilderment as to why this obvious cure of this great problem of unemployment is not applied immediately. There may be reasons concerned with our pacts with foreign countries which prevent immediate alterations of duties which now exist. The McKenna Duties of 33 per cent. have been in existence for a considerable number of years, and have hitherto been adequate for their purpose. But a change comes over the situation. America goes off the Gold Standard and then in the last budget the horse-power tax is reduced with the obvious intention of enabling us to supply foreign countries with what they require. The Budget had the opposite effect. It allowed American cars to come here at reduced taxation, and nullified the very benefits which the Budget was supposed to have produced.

The position is serious. We cannot afford to disregard it. It is undermining our trade, and other countries are now resorting to means of preventing this importation above the normal. In Java Japanese competition threatened to overwhelm the whole country. How did they deal with it? They could not make a direct attack on a particular country, but they did a very wise thing. They introduced a quota to date back from the year 1930, when the Japanese competition was very small. On that basis the present quota prevents the Japanese from proceeding on their onward march, and it has caused consternation among the manufacturers in Osaka and Tokio. We have to face this problem. There is no evading it. The Chancellor of the Exchequer will be confronted in the very near future with the need for a tremendous augmentation of our revenue in order to protect us. Here is an opportunity for him without always having to look elsewhere for a remedy. I hope that if he cannot see my point of view and adopt my suggestion, he will, at any rate, give the reasons why these simple expedients cannot be introduced, when the whole country is saying, "Why do you not protect us with the machinery at your disposal?

One wonders why there has been no reduction of the death duties. When one realises how some of our greatest industries are seriously jeopardised if there should be two deaths in a family within a few years, it makes one think that we are killing the goose which lays the golden eggs, and draining away the lifeblood of our industries. I endeavour as far as possible to avoid bias, but speaking as a business man—and I pride myself upon being a business man rather than a politician—we have sooner or later to face the problem, and to protect our industries from unfair competition, which like a tidal wave from the East is sweeping along. I see it because I go out to these places, but you will not realise it until a little later when the effects are felt in our own market. We are being cut out of all our foreign markets. Slowly but surely, by degrees, our trade is going. If we cannot find new markets, we must, at any rate, protect our own. I ask the Chancellor of the Exchequer to give his earnest attention to the obvious remedy which can save us, when we are faced with a world opposition and a serious state of affairs on the Continent such as we have never been confronted with in our generation.

9.39 p.m.

Mr. McCORQUODALE

I wish to add my word of congratulation to the Chancellor of the Exchequer on his exemplary and exceedingly dull Budget. The dullness of it is evident by what I might call the lack of ammunition which the Opposition can find to shoot at the Chancellor of the Exchequer. That same reason bears out the excellence of it. I do not think that there is any complaint from any side of the House really against the Budget which the Chancellor of the Exchequer has produced. I listened with interest to the speech of the spokesman of the Liberal party, the hon. Member for Orkney and Shetland (Sir II. Hamilton). He wound up with the remarkable suggestion to the Chancellor of the Exchequer that he must take a step forward in the right direction, but Unfortunately he did not stop to tell us which was the right direction. The right hon. Gentleman the Member for South Molton (Mr. Lambert) was led to remark that he had no faith whatever in Whitehall, but he went on to make a remark which, I hope, the Postmaster-General, who has been mocked at for becoming the propaganda Minister of the Government, will take to heart. He said—and it is very true—that confidence is the mother of enterprise, and that without enterprise there is no employment. That is the banner under which we can fight and win the next election.

I would ask the Chancellor of the Exchequer two questions on the Finance Bill. He has removed—and we are very glad of it—the tax on cinematograph seats under 6d. Has he a definite assurance from the trade that the tax remission will be passed on to the general public? I am pleased to see that the Chancellor of the Exchequer agrees with me. I dislike his raid on the Road Fund. I would much rather that he would abolish the Road Fund altogether. It is surely an, anachronism that we should have this special taxation of one kind for one specific object. All the taxation in the ideal State should go into the common pool and be used as it is required by the State, and not for one specific object. I hope that next year he will abolish the Road Fund and absorb the money into the general Exchequer, and pay it out where it is required.

The Exchange Equalisation Fund, I believe, already amounts to something like £350,000,000. Does it pay any interest on that money? If it does not, why not? We hear many guesses as to how much profit the Exchange Equalisation Account has made. Some people put it, I am told, as high as £70,000,000, and others at more modest figures, but I have never heard anyone suggest that those who are operating the Exchange Account have made a loss. It is confidently stated in the City that the operators from this end have managed to secure a large proportion of the money which the United States put up for their equalisation fund. If that is so —and we all hope it is—then surely the Equalisation Account should pay at least 3 per cent. per annum to the Treasury for the loan of the money it has borrowed? That would bring in some £9,000,000 or 10,090,000 of useful money to the Chancellor of the Exchequer. He need not then raid the Road Fund, and he would have a little extra money which is so badly needed at the present time. I do not expect to get an answer as to how much profit has been made by the Exchange Equalisation Account, but I should like to know if anything in the way of interest is charged by the Treasury.

We have heard to-day a good deal about the new deal of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), and a certain amount about public works, but it seems to be forgotten by many speakers that the Government have engaged in the last three years in one of the largest schemes of public works that any government has ever undertaken in their housing scheme, their slum clearance programme, and now their overcrowding proposals. They are making a definite and constructive effort in public works in encouraging public expenditure by local authorities in respect of housing and have made a very large inroad into unemployment in the building trade. I think that what other public works will be necessary for dealing with unemployment should be of local and not national character and should be designed to attack unemployment in the distressed areas rather than great national schemes which we understand the right hon. Gentleman for Carnarvon Boroughs is putting forward.

Apart from public works and sound policy the methods for tackling the unemployment problem in this country are those which we understand are going on in the conversations between the Minister of Labour and industry as to the shortening of hours, schemes for raising the school-leaving age, which are supported by a great number of Members on all sides, and schemes for taking the old people out of industry by means of pensions. On those three lines I believe that the unemployment problem of the future will be solved. I should like to end as I begun by congratulating the Chancellor of the Exchequer not only on his Budget but on the financial policy which the Government and he have directed. When the history of the great recovery of Britain from the depths of 1931 is written, the chief praise will be given to the Chancellor of the Exchequer and the Treasury for the financial policy which they have steadfastly pursued and which has brought us so well on our way towards prosperity.

9.48 p.m.

Mr. CLEARY

I want to raise two points of importance which affect the City of Liverpool and my constituency in particular, the duty on the soya bean and the duty on rice in the husk. With regard to the first matter, it has been represented to me that the experiments to grow a crop of soya beans in Europe have failed and that we are therefore dependent upon foreign imports. I should like to suggest on behalf of the various interests in the City of Liverpool who are affected from different points of view that a duty of this character which affects them and is causing in some industries grave unemployment should have come to the Import Duties Advisory Committee rather than be sprung upon the various interests in the City of Liverpool and the country generally, who feel that if it had come from that source they would have been able to make their representations in a proper manner.

With regard to the second point, the duty on rice in the husk, it is felt in Liverpool that some hundreds and perhaps thousands of people will be thrown out of work because of this new duty. This is not the time to argue the point at great length but I am given to understand that certain representations have been made either in writing or by deputation to the Board of Trade or the Chancellor of the Exchequer. If my information is correct on that point, I should like to know the nature of the representations and the reply that can be made from the Government Bench. It was only these two points in the interests of the City of Liverpool that I wished to raise.

9.50 p.m.

Sir STAFFORD CRIPPS

The Chancellor of the Exchequer, in a charmingly humourous and light-hearted speech, said that he did not wonder at the fact that we were in difficulty as regards our opposition to this Budget, and therefore he had no difficulty in answering our opposition. I should like to hand the torch back. The right hon. Gentleman has really created the difficulty by producing what one of his followers has just described as an extremely dull Budget, quite un-creative, in fact a typically Conservative election Budget, one which attempts by various means, which might bring some people to the Old Bailey, to collect a surplus and then to spread it thinly over as large a proportion of the population as possible, in order that they may be deluded into the belief that the Government are doing something for them. The Chancellor of the Exchequer is, as usual, put into the unfortunate but rather comic situation of always trying to point out his failures as a reason why he ought to be congratulated. We all remember that the Government announced their strong determination to remain on the Gold Standard, but they turned round a few days later and asked for applause because they had gone off the Gold Standard. In the same way they have had an avowed policy for some years of raising prices, somehow or other, and to-day the Chancellor of the Exchequer said: "Look how clever I have been. The cost of living has not risen, and because prices have not risen and my policy has failed you ought to congratulate me upon it.

He is always urging that it is extremely desirable to get private industries to take up capital in the market and make use of it. The failure of that programme is marked by the low rate of interest which money commands at the present time. Therefore, the Chancellor of the Exchequer turns round once more and says: "Look how marvellous I am. The interest charge on the National Debt is remarkably low. My policy of getting private industry to take up capital has completely failed and therefore the rates of money have fallen to ridiculously low depths." It is a great advantage when one can always bring forward one's failures as reasons for applause and congratulation. I said that the Chancellor of the Exchequer had scraped together a fortuitous surplus in order that he might dress his window with these little packets of sweets which he proposes to distribute largely through the propaganda Minister at the time of the election. How fortuitous the surplus is one may see from an examination of what he has done.

First of all, there is no provision in the Budget for the payment of foreign indebtedness. I do not take the view that either he or any other Chancellor of the Exchequer is ever likely to pay the American debt, but I am bound to say that when I was in America a few weeks ago and the Chancellor of the Exchequer's Budget speech came through Americans had considerable pleasure in drawing my attention to the fact that the Chancellor of the Exchequer would soon be well enough off to resume the payment of the American debt, and that the cheerful atmosphere which he was creating in this country was likely to be reflected in their own hearts as soon as they saw the gold. By so doing the right hon. Gentleman has put himself in an advantageous position compared with the Chan- cellor of the Exchequer in previous Governments. He has not been loaded with the payment of £40,000,000 or £50,000,000 a year which other Chancellors of the Exchequer had to meet before they balanced their Budget. To that extent he is able either to give remissions or to increase expenditure. He is continuing to make no provision for the payment of the statutory sinking fund which he has done on former occasions by taking powers to borrow in order to meet the payments if necessary. Again, I should have thought, a thoroughly unsound form of finance for so orthodox a financier as the Chancellor of the Exchequer. Of course a disreputable Socialist might be able to do that sort of thing and be excused, but the Chancellor of the Exchequer surely not.

Then he makes a raid on the Road Fund. Raids are also all right for disreputable Chancellors of the Exchequer, but one also has to recollect that raids are generally non-recurring items of revenue, and when you set off against a casual raid a recurring concession, it does not seem to be a very sound basis of finance. I do not think there is any harm in an unbalanced Budget if it is desirable or wise for the country to have it, but I do think it is better to be honest about it wihen it is not balanced, and instead of making great professions of financial rectitude and orthodoxy, just to say, "I am not going to balance the Budget." But the Chancellor of the Exchequer does not balance it, and then makes the profession, and for that we venture to criticise him if we may criticise anyone who is so obviously right-minded financially. Those concessions which have been made we naturally welcome, as anybody always welcomes any concession.

If the Chancellor of the Exchequer would continue in his principle—the only principle, apparently, which he has as regards the Budget, that is, to try to get back to the pre-1931 position as soon as possible, no doubt if he is still there next year we shall be welcoming the remission of the means test and other matters which still have to be put back in order to reach the levl of 1931. But there remain, over and above any concessions that have been made in this Budget, certain burdens which have been imposed since 1931, and which this Bill, as we say in the Motion which I am supporting, does nothing to relieve. I am not going to enter into the details of the Income Tax concessions. That is a matter which may be dealt with better on the Committee stage. I do not desire to call attention to the growing injustice as regards the incidence of direct and indirect taxation. The Chancellor of the Exchequer told us this evening that it was now purely an academic question. I do not follow why, and I wonder if he really thinks that the direct taxpayer thinks it a purely academic question that £290,000,000 should be raised by indirect taxation. If one were to say, "We will not have any more indirect taxation. We will put the £290,000,000 on the direct taxpayer," does the Chancellor of the Exchequer suggest that would be looked upon as a purely academic question? I suggest that some of the Gentlemen on the Government Benches would tell him something different. They would say it was a very important matter, and a matter of profound principle as to this enormous increase in the load of direct taxation. The Chancellor of the Exchequer might just as well say what is the fact—that it is the policy of this Government to take as great a load as is practicable off the profits of industry and put it on the consumer.

Mr. REMER

On the foreigners.

Sir S. CRIPPS

The foreigner does not pay the wheat, the sugar beet, the beef, the milk or the bacon subsidies. Those are all revised in forwarding a policy to reduce the profit fund in order that the consumer can make a greater contribution, and whether it is done through direct or indirect taxation, or some other method, does not make any difference in carrying out the theory of the relief of the profit owner, but it does make that theory of relief a very profound difference, especially to the poorer consumer. It is no good the Chancellor of the Exchequer saying that the poorer consumer is not hit in the same way now that there is a general tariff as he was in the days when there were only a few articles taxed. If you add the subsidies, which are, of course, in a manner indirect taxation, to the tariffs, he is hit very much harder now than ever he was under any taxation, which is shown by the amount of taxation which is being raised on foodstuffs at the present time compared with what it was in the pre- tariff period, leaving out of account the taxation of luxury articles or manufactured articles of all kinds. This large and growing sum which is being distributed indiscriminately among farmers, shipbuilders and others quite regardless of their needs is an added burden which is not shown in the Bill at all. It is to be added to the increased percentage of indirect taxation of which figures have been given this afternoon, and all this incidence has been gradually piling up the weight upon the shoulders of those who are less able to bear it, and for the purpose of relieving the shoulders of those who are better able to bear it

The Finance Bill, so far from correcting that tendency which is now spreading over the life of the National Government, so far as it does anything, slightly increases the incidence of indirect taxation. I suppose the Chancellor considers he is bound so far as possible to continue with this theory, because he looks upon the individual profit owner as the real motive power of our industrial system, and all the time he is in fact encouraging the very disparity between profits and wages which is, of course, inherent in any private ownership system, and which is actually a factor that to-day is preventing the effective distribution of those products which might be manufactured in this country had we the means of distributing them from the factories.

There is another incidence of this method of taxation, and that is the encouragement that it necessarily gives to luxury production as against necessity production. The profit boom or boomlet such as we are experiencing in this country to-day, and which they are also experiencing in America at the moment, naturally creates confidence among the people who are getting the profit. That is not very difficult to understand. It also creates an air of prosperity in those areas where the money is spent which comes from that profit boom—that is to say the west ends of the larger cities in the country and perhaps in some rural districts, but it leaves completely untouched—and that undoubtedly is the experience to-day—the hardships of the workers in those great areas where there has been substantially no improvement at all in conditions of employment or unemployment. There is, in fact, no corresponding increase in the improve- ment in the conditions of the workers and that of the private owners in a boom such as we are now experiencing. Precisely the same is true as regards conditions in America.

The means test was proposed as a temporary measure in 1931. Now it has become a permanent part of the legislation of the country, and there is no indication from the Chancellor of the Exchequer, in spite of the 80 per cent. recovery, that 80 per cent. of the people who have to take the means test are to be relieved of it. The more confidence and cash that the profit owner has as a result of the boom, the more it is liable to extend as confidence is recreated among his ranks, and as a result there is a demand, not for necessaries by the people who need them urgently, but for luxuries and semi-luxuries from those who have the money to spend. What we want to see is some device by which that productive energy that is being expended to-day in the manufacture of luxuries and semi-luxuries can be diverted into the manufacture of necessaries that on the flimsiest observation are seen to be wanted in every village and town throughout the country. We certainly are not satisfied with a Bill that does absolutely nothing towards righting the balance of production as between necessaries and luxuries.

The condition of the distressed areas particularly has apparently completely been overlooked, except for a phrase at the end of the right hon. Gentleman's Budget speech, but I rather suspect the people of the distressed areas want something more than a phrase in a Budget speech to help them through the coming year. I realise that it is impossible to redistribute wealth by taxation. That has been tried before, and has proved a failure. Certainly you cannot cure the evils of the present economic system either by trying to spend your way or starve your way into prosperity. That also, I think, has been tried, and has proved itself a failure. If you try to increase taxation you create more difficulties for the system, and therefore it is quite logical that the right hon. Gentleman should attempt to lower taxation as far as he can. The only chance you have of increasing taxation heavily in a private profit system such as we have is just during that period of transition when you have decided to scrap it and you propose to substitute something else for it. Then, of course, you can give yourself free rein with regard to taxation, and you will not do it any harm. [How. MEMBERS: "A first-class crisis !"] I am glad to hear hon. and right hon. Gentlemen opposite understand what I mean. What one hopes is that, in spite of these Budget crumbs that are being thrown from the table of the right hon. Gentleman's supporters to the people as a whole in this country, they will realise before very long that this is at the best one of those sickly booms which come, and always have come, within the system, and it is not going to prevent the depression which inevitably is bound to follow, and that they will therefore take some steps to change a system which has proved in the past, and is certain to prove in the future, highly unsatisfactory from the point of view of the standard of life of the workers of this country.

The second part of the Amendment deals with the question of Clause 24 that has already been fairly fully explored. The importance of Clause 24 is that it links up with steps that have already been taken towards what is euphemistically called planning capitalism. Of course, you cannot plan chaos. [An How. MEMBER: "What about Russia?"] They changed the chaos first to a system that was capable of planning. You cannot plan a system which is inherently chaotic and that is what Mr. Roosevelt is discovering every day to his great distress. There is a profit boom certainly going on in America, just as there is here. The conditions in industry are equally chaotic in both. As I understand the idea behind Clause 24, it is that if you control competition and the volume of production to such a level as to give you a moderate degree of scarcity in your market, you can then maintain your price, and when you have once reached the point of being able to maintain your price by regulating production to consumption and not consumption to production, by rationalisation and further mechanisation you may be able to decrease cost, and so decrease price, and so spread the area of your distribution. That is, as I understand it, the theory which lies behind what is set forth as the desirable end of Clause 24, and for this purpose now, for the first time, Income Tax is to be used as an indirect inducement to try to bring people to enter into arrangements, either voluntary or statutory, for the purpose of getting rid of redundant machinery and thereby reducing, as the right hon. Gentleman quite rightly said, the capacity for production in a particular industry or of a particular article: that is to say, limiting your production to the present demand, not to some contemplated future demand. Your criticism for redundancy is your present market, and you are therefore attempting to stabilise at your present productive level.

That we regard as completely the wrong way of attempting to tackle the problem. The object before everybody should be to raise productive levels by raising consumption levels. This is an attempt to reduce productive capacity to existing consumption level, and, if that is carried out, as far as we can see it is bound to lead to a further degree of unemployment and to a general lowering of the standard throughout the whole country. Then, of course, in a typical way which is common with all the actions of this Government, there is absolutely no provision of any sort or kind for dealing with those people who are displaced and thrown on the industrial scrap-heap by this process. One would have thought that experience in the shipbuilding industry would have been sufficient to induce even this Government to incorporate some device for compensating people who were put in that position. You compensate a spindle which is thrown out of work. There is nothing more for it to do, so you buy it out; but when a man who is working the spindle is thrown out of work—well, he can just go on unemployment benefit until he has exhausted that, and then he can go to tie Unemployment Assistance Board.

It is only typical of the attitude of this Government to property on the one side and human life and endeavour on the other side, that they deal fully with the compensation of property and completely ignore the compensation of the human element. This actually now is not only being allowed to happen, as in the case of shipbuilding and Jarrow, but it is being encouraged to happen by the Government. We shall certainly most strenuously oppose this system of using remissions of Income Tax for the purpose of organising a diminution of productive capacity and the consequent suffering which inevitably will come upon men associated with different productive units. If the Government want to plan as they should the great industries of the country, let them take them over and plan them as one organised whole. Then they can accept the responsibilities, which the private owner refuses to accept, for the man displaced. The private owner is ready enough to run to this House hat in hand for some subsidy or remission of taxation, for tariffs, to increase his profits, and ready enough to disown his obligations to society when it comes to a question of the people who are thrown out of employment; when it is a matter of putting this or that factory out of business in order that the profits of a particular industry may be increased.

This is the line of policy disclosed in Clause 24, the only constructive thing in the Budget, and it is not a step forward but a step backward; it is, however, the only step that is being taken. The various attempts which have been made by remissions of taxation and subsidies to bribe the private owner to continue production is the wrong way of going about it. Nominally a small amount of control is taken by the Government in cases where subsidies are given or remissions of taxation made, but as soon as that feeling of confidence returns, to which reference has been made, it has always been the experience that this control is thrown off lightly by the people upon whom it has been imposed and there is a tendency to return to laisser faire; the capitalist much prefers it except when he wants to dip his hand into the communal pocket. The only thing which survives is the monopolistic features of this control, that is the creation of corporations, or combines or cartels in particular industries, which bring about all those undesirable features which were at one time aimed at by the Trust Act in America. There is no progress in a policy of that kind, and it can only be entered upon by people who believe that they are going to carry through some temporary emergency and will find themselves back again in the good old capitalist pre-war trade cycle, and they will continue to rotate in that cycle for ever.

We believe that the Bill contains no attempt at all to deal with what is admittedly the underlying economic problem of to-day; the problem of combining pro- duction and distribution under such a system that you are not obliged to keep large numbers of your population unemployed and others making goods which are pure waste, since they are luxury goods, while necessaries are still required. Perhaps the most dangerous feature of all which faces us in this situation is that we are creating an apparent prosperity by entering upon more war preparations. Everyone will agree that that would be a grave misfortune and a way in which nobody would desire to create apparent prosperity in this or any other country. That describes, I hope, the objections that we have to this Bill, its complete lack of any plan which could deal with the basic troubles of to-day, its objectionable approach to the matter of redundant business, and the continuance of the unfair distribution of taxation as between consumer taxation and direct taxation. We believe that none of these expedients which are being tried by the Government can do anything but bring some temporary relief to the system, and we are day by day, from the experience in this and other countries, becoming more and more convinced that the only solution is to scrap the system and substitute a new one.

10.21 p.m.

Mr. COOPER

The hon. and learned Gentleman compared the Chancellor of the Exchequer's speech to that of a cinema star. In so far as it was well received, entertaining and commanded almost universal applause, that was no doubt an accurate description of my right hon. Friend's speech. The hon. and learned Gentleman's own speech, I thought, resembled the production of a gentleman, an extremely intelligent gentleman, who sitting for an examination, and finding a question which he cannot answer, and having time and paper to spend, fills up the paper with some interesting and illuminating remarks upon an entirely different subject. In the course of his speech the hon. and learned Gentleman made one or two admissions which really constituted and reaffirmed the case for this Finance Bill. He gave us a foretaste of the kind of finance that any Government to which he is likely to belong will treat the nation to, and he confessed that. short of such drastic measures as he proposed, sweeping away the whole system—that was one of his phrases—there was very little that could be done better than the present Finance Bill. He said it was folly to suppose that you could redistribute wealth by taxation. The Finance Bill is an instrument of taxation, and, if there was any complaint against it, it was that it failed to redistribute wealth, which the hon. and learned Gentleman himself admits to be impossible. He said that you cannot plan chaos. It was in the first Book of Genesis that that was done.

Sir S. CRIPPS

The hon. Member is not suggesting that he is the Lord God Almighty.

Mr. COOPER

I would not he so irreverent; but it is our duty to try to emulate the example that we are set in that Book. The hon. and learned Gentleman was shocked at some of the irregularities of my right hon. Friend's finance. He referred to the fact that we are paying nothing to the American debt this year, and said that that was a great advantage which previous Chancellors of the Exchequer did not possess. I suppose he was referring to those who were Chancellors in the Governments in which he served. That statement made me think that he had not really learned his lesson and had not attended to previous debates on this question.

My right hon. Friend the Chancellor of the Exchequer who replied to that point when he wound up the first Debate on this subject, pointed out that so far from that being the case previous Governments and previous Chancellors of the Exchequer, in 1929 and in 1930, received large sums in payment of international debt—sums greater than they were paying out. Exactly the reverse has happened in this case. The present Government have received nothing from abroad and have paid out a considerable amount. In that respect, therefore, we have been worse off than the Government of which the hon. and learned Gentleman was a member. He complains that there is nothing in this Finance Bill about the means test. There is no reason why there should be. In fact, there could be nothing in the Finance Bill about the means test. That test has been imposed in connection with the policy which is being pursued in dealing with the relief of unemployment. I am not here to defend or argue that policy now. I should be out of order if I were to do so. It may be right or wrong to apply a test as to the means possessed by people who apply for unemployment relief, but if it were possible to remove that test it would not be done by a Finance Bill because it was not imposed by a Finance Bill. Therefore, I suggest that to raise that point is to seek to drive us into a discussion which is really out of order on this occasion.

The hon. Member for Dundee (Mr. Dingle Foot), in the course of an interesting and suggestive speech, asked me some direct questions. First, he asked whether the abolition of the Entertainments Duty on 6d. seats applied to all forms of entertainment. The answer is in the affirmative. He asked me also why the relief which is being accorded in the case of the higher-priced seats should not be extended to football and cricket clubs. My right hon. Friend in opening his Budget explained why this differentiation had been introduced. It was directly intended to benefit those people who have been most adversely affected by the new cinema industry, namely, those concerned in what we call, for want of a better phrase, "live performances"—stage plays and entertainments of that sort. They have been very hardly hit and are suffering increasingly, as the cinema industry grows. But that is not true of athletic clubs which do not come into competition with the cinemas, and I think that is a sufficient reason for maintaining this differentiation in the manner in which it has already been applied.

Then the hon. Member asked me two questions with regard to Clauses 10 and 15. He, of course, is not in favour of duties on imported goods, but I am sure he will agree that while such duties are levied it is important that they should be fairly levied and that they should not be evaded. The real reason for both Clauses is the prevention of the unfair evasion of taxation—to prevent foreign firms setting up agencies in this country, solely with the object of invoicing goods to themselves at any values which they care to put upon those goods, far below the real values, thereby defrauding the revenue of income which is due to it. Clause 15 only makes sure that a practice which has long been in use is perfectly legal, its legality having been questioned. When goods are imported the value given by the importer is accepted at the time, and inspection of books, if thought necessary, is demanded afterwards. There is some doubt as to whether that is perfectly legal and whether, once the goods have been imparted and the duty paid, the books can then be inspected. Obviously from the importers' point of view as well as the revenue point of view it is preferable to do it in that way rather than detain the goods and hold up the business while the books are inspected because the books are often not available. This Clause, therefore, is only intended to make sure that in future that custom shall continue and shall be perfectly legal.

The hon. Member also questioned the revival in trade and asked how many countries we had approached with a view to concluding trade agreements. The information on that point is that we have already secured 17 different agreements and that there are several more now in negotiation. The question who makes the first approach in any case is one I cannot answer off-hand, and it is not one of very great importance. It really does not matter very much when a bargain is struck who is the man who first suggested it. It is probably in every case the man who thinks he has got most to gain by it.

The hon. Member and also the hon. Member for the Park Division of Sheffield (Sir A. Shirley Benn) drew attention to the grievance which they said existed in regard to the allowance made for wear and tear and for obsolescent machinery. If that be unfairly treated, they have only to bring cases of unfairness to the notice of the necessary authorities. There has existed for many years a board of referees to hear any industry—I do not think an individual employer—but an industry which thinks it is suffering in this way through an insufficient allowance for wear and tear. In the whole time it has been in existence not a. single application has been determined by the board. Any comparison with foreign countries as to the rates given in this matter will not bear inspection because the whole system on which industry is taxed in those countries—in Germany, in particular—is so different from ours that the bearing of this particular item does not stand comparison. The hon. and gallant Member for South-East Leeds (Major Milner) returned to the question of the Diesel oil tax and raised points which, I think, have all been raised before and have been answered. Diesel oil still enjoys considerable advantage over petrol, as has been shown again and again, and so far from orders for Diesel engines having ceased all over the country, I have information to the opposite effect, that many large orders have recently been given and tenders asked for.

The hon. Member for Spennymoor (Mr. Batey) is, I think, the most reactionary Member of the House. I always listen to his speeches with satisfaction on that account. They remind me of my youthful days when I was less progressive than I am now. Not only is he against rationalisation, but he is extremely suspicious of machinery. Yet is not his own county of Durham a tragic monument to the lack of rationalisation, and a moving and living appeal for more He again dealt with Clause 24, as did the hon. and learned Member for East Bristol (Sir S. Cripps). The hon. Member for Spennymoor misrepresented that Clause, no doubt unintentionally. He said we were giving to the employers a free hand, so that they could scrap anything they liked and then demand benefit for it. We are doing nothing of the kind. The whole thing is in the hands of the Board of Trade, which has to be satisfied, not only that it is in the interests of the industry, but that it is in the interests of the State. Can the hon. Member, if he be a Socialist—and I suggest he is nothing of the sort—suggest any other tribunal than a Government Department? Socialists wish to put the whole world under Government departments and to put every movement of our daily lives under the control of the bureaucracy. Here we are introducing this reform to put the Board of Trade in command. I have not the Clause before me, but there are four or five tests which they have to satisfy before they can obtain permission from the Board of Trade to close down a mine.

Mr. BATEY

The Board of Trade certify the scheme, but once they have certified it the employers have a free hand.

Mr. COOPER

When the employers have shown to the satisfaction of the Board of Trade that the primary object of the scheme is the elimination of redundant works, that the scheme is in the national interest and in the interest of the said industry as a whole, and that such number of people engaged in the said industry as are substantially representative of the industry are liable to pay contributions in furtherance of the primary object of the scheme—when they have satisfied the Board of Trade about all that, surely we must allow the employers to go on with the work; or would the hon. Member then insist on a Board of Trade official standing at their elbow and saying "Stop, that is far enough"?

Mr. BATEY

Oh, that is begging the question. Once the Board of Trade have certified the scheme have not the employers a free hand to close redundant works as they like?

Mr. COOPER

Not even that, because if the hon. Member reads the Clause ho will see the statement that the Board of Trade shall cancel any certificate granted if they cease to be satisfied as to any of the matters referred to in the previous paragraphs. Does the hon. Member call that begging the question? One of the things shown in the report drawn up by my hon. and gallant Friend who had charge of the inquiry in the County of Durham was the haphazard way in which one mine was allowed to go out of use and another retained in use, and one of the pleas he put forward was that it should be regulated and done according to plan, which is the very thing we are endeavouring to encourage by this Clause. I really was surprised to find the hon. Member for Spennymoor and the hon. and learned Member for East Bristol criticising that scheme. Then the hon. Member for Spennymoor went on to say that he is extremely doubtful whether machinery ought to be introduced at all, whether we should not set up a board of inquiry to find out whether, in the long run, any new machinery that is introduced is going to prove profitable. Surely he will agree that the people who manage those businesses, the employers and owners, of whom he perhaps takes a less favourable view than I do in some respects, can be left to judge in their own interests whether a certain procedure in their own business is going to be of benefit.

Mr. BATEY

An employer simply considers whether it will be better from his point of view to put in a machine, but does not consider the people who will be thrown out of employment.

Mr. COOPER

I cannot think the hon. Member really believes that the interests of the employer are entirely different from those of the people whom he employs. He wants to make his business pay, granted, but to make it pay he has to make it efficient, and to make it efficient he must have the latest machinery. He is in competition with other countries. We rely upon export trade. We could not come to an agreement to abolish machinery, because we should not be able to compete with the rest of the world. It is to the interest of the employer and to the interest of the man whom he employs that the business should be as efficient as possible, so that his goods are able to compete with any produced in any other part of the world.

The hon. and learned Member for East Bristol sneered bitterly at the Government because in this Clause they make no proper provision for the people whom such improvements in industry may throw out of work. We must all agree that when an improvement in machinery is introduced it is very likely, at first, for a short time, to cause unemployment, by substituting machinery for human hands. That has been so since the first machine was introduced. Surely we all agree that, in the long run, machinery also benefits the worker as much as it benefits the employer. How could even the hon. and learned Member praise a Clause which should put people who are proved to have lost their work owing to the introduction of machinery, into a different category from the rest of the unemployed How is one to define them, and if one did define them, where would be the fairness or the justice of it? A man who has been in work, perhaps taking home good wages for several years, falls out of work, owing to the introduction of machinery. The hon. and learned Member suggests that he should be put into a better category and treated far more generously than some unfortunate man who has been out of work for a number of years.

Sir S. CRIPPS

The hon. Member will recognise that that is done in many cases, such as in electricity Acts and in railway Acts, where people who have been displaced are specially provided for.

Mr. COOPER

It would lead to great confusion and to considerable injustice. Hon. Members have spoken about the incidence of direct as opposed to indirect taxation. They fail—even the right hon. Gentleman the Member for Darwen (Sir H. Samuel) seemed to fail—to appreciate the point made by the Chancellor of the Exchequer that in the past, when we were a free trade country, indirect taxation represented the contribution of the poorer people to the revenue through the tea, sugar and tobacco and other duties. Those duties were levied with one object. It was not considered that the consumption of tea, tobacco or sugar was reprehensible, and that it was desirable to decrease the consumption of them; the taxes were levied solely for the purposes of revenue. The whole situation was changed when we ceased to be a free trade country and were no longer wedded to the fetish of free imports. We then introduced duties on imported goods, with the object of restoring our balance of trade, and in order to have a means of concluding trade agreements and carrying on negotiations with foreign countries leading to the conclusion of such agreements. It is no longer true, if it was ever true, to say that direct taxation is the taxation which is paid by the rich, and that indirect taxation is that which is paid by the poor.

Mr. D. MASON

The effects are the same.

Mr. COOPER

In this connection I will refer to a remark made by the hon. Member for Spennymoor, because I think it is in the minds of so many people at a time when any Budget is opened, and it is the basis for many wrong conclusions and much confusion of thought. The hon. Member said that the Chancellor of the Exchequer had something to give away, and that the only question was to whom he was to give it. The Chancellor of the Exchequer does not have money to give away. He has to administer the finances of the country. All the money belongs to the people in the country, and what the Chancellor of the Exchequer has to consider is how best that money may be directed, and how it may best be collected and expended for the benefit of the people as a whole.

The hon. and learned Member for East Bristol said that we had done everything we could to put taxation on to shoulders least able to bear it, and to relieve those best able to bear it. There never was a Budget which gave less justification for such an untrue statement. Can the hon. and learned Member point to one Clause of the Bill which benefits the very rich? As a matter of fact, the whole problem of taxation is to find out how best you can levy the necessary money, incurring the minimum of hardship, and there is no tax of which it could be confidently asserted that in the long run it would be paid only by the rich. Part of the tragedy of taxation is that in the long run it all falls upon the poor. That is why it is, and should be, the duty of every Government to make the burden of taxation as light

as possible. If hon. Members opposite are ever able to put into force the plans that they have sometimes foreshadowed for wiping out the rich class altogether, they will be the first to discover that, although the rich men disappear, it will be the poor who will really suffer. In framing his Finance Bill, it has been the object of the Chancellor of the Exchequer so to distribute the burden that it will bear most lightly on those least capable of bearing it, and so to distribute those benefits which have accrued as the result of four years of wise financial administration that they will confer the greatest good upon the greatest number.

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

The House divided: Ayes, 265; Noes, 47.

Division No. 209.]	AYES.	[10.47 p.m.
Acland Troyte, Lieut.-Colonel	Cobb, Sir Cyril	Griffith, F. Kingsley (Middlesbro', W.)
Agnew, Lieut. Com. P. G.	Cochrane, Commander Hon. A. D.	Grimston, R. V.
Albery, Irving James	Colman, N. C. D.	Guest, Capt. Rt. Hon. F. E.
Allen, Lt. Col. J. Sandeman (B'k'nh'd)	Conant, R. J. E.	Guinness, Thomas L. E. B
Amery, Rt. Hon. Leopold C. M. S.	Cooper, A. Duff	Gunston, Captain D. W.
Anstruther Gray, W. J.	Copeland, Ida	Hales, Harold K.
Apsley, Lord	Courthope, Colonel Sir George L	Hamilton, Sir George (Ilford)
Aske, Sir Robert William	Craven Ellis, William	Hanbury, Cecil
Astor, Maj. Hn. John J. (Kent, Dover)	Crooke, J. Smedley	Hanley, Dennis A.
Bailey, Eric Alfred George	Crookshank, Col. C. de Windt (Bootle)	Hannon, Patrick Joseph Henry
Baillie, Sir Adrian W. M.	Crookshank, Capt. H. C. (Gainsb'ro)	Harbord, Arthur
Baldwin, Rt. Hon. Stanley	Cross, R. H.	Hartington, Marquess of
Baldwin-Webb, Colonel J.	Crossley, A. C.	Harvey, George (Lambeth, Kenningt'n)
Barrie, sir Charles Coupar	Cruddas, Lieut-Colonel Bernard	Haslam, Henry (Horncastie)
Beauchamp, Sir Brograve Campbell	Davies, MaJ. Geo. F. (Somerset, Yeovil)	Haslam, sir John (Bolton)
Beit, Sir Alfred L.	Dawson, Sir Philip	Henderson, Sir Vivian L. (Chelmsford)
Benn, Sir Arthur Shirley	Denman, Hon. R. D.	Heneage, Lieut. -Colonel Arthur P.
Bernays, Robert	Denville, Alfred	Herbert, Major J. A. (Monmouth)
Bevan, Stuart James (Holborn)	Dickie, John P.	Herbert, Capt. S. (Abbey Division)
Birchall, Major Sir John Dearman	Duckworth, George A. V.	Hills, Major Rt. Hon. John Waller
Blindell, James	Duncan, James A. L. (Kensington, N.)	Holdsworth, Herbert
Boulton, W. W.	Eady, George H.	Hope, Capt. Hon. A. O. J. (Aston)
Bowater, Col. Sir T. Vansittart	Eastwood, John Francis	Hore Belisha, Leslie
Bower, Commander Robert Tatton	Ellis, Sir R. Geoffrey	Horobin, Ian M.
Bowyer, Capt. Sir George E. W.	Eimley, Viscount	Howard, Tom Forrest
Boycs, H. Leslie	Emrys-Evans, P. V.	Howitt, Dr. Alfred B.
Bracken, Brendan	Erskine-Boist, Capt. C. C. (Blackpool)	Hudson, Capt. A. U. M. (Hackney, N.)
Braithwaite, J. G. (Hillsborough)	Essenhigh, Reginald Clare	Hudson, Robert Spear (Southport)
Brass, Captain Sir William	Evans, R. T. (Carmarthen)	Hume, Sir George Hopwood
Broadbent, Colonel John	Fermoy, Lord	Hunter, Dr. Joseph (Dumfries)
Brocklebank, C. E. R.	Fleming, Edward Lascelles	Hunter, Capt. M. J. (Brigg)
Brown, Col. D. C. (N'th'l'd., Hexham)	Flint, Abraham John	Hurst, Sir Gerald B.
Brown, Brig. -Gen. H. C. (Brks., Newb'y)	Fox, Sir Gilford	Hutchison, W. D. (Essex, Romt'd)
Browne, Captain A. C	Fraser, Captain Sir Ian	Jackson, Sir Henry (Wandsworth, C.)
Buchan-Hepburn, P. G. T	Fremantle, Sir Francis	James, Wing-Com. A. W. H.
Burghley, Lord	Fuller, Captain A. G.	Johnston, J. W. (Clackmannan)
Burgin, Dr. Edward Leslie	Ganzoni, Sir John	Jones, Sir G. W. H. (Stoke New'gton)
Butt, Sir Alfred	Gibson, Charles Granville	Jones, Henry Haydn (Merioneth)
Cadogan, Hon. Edward	Gilmour, Lt.-Col. Rt. Hon. Sir John	Jones, Lewis (Swansea, West)
Campbell, Sir Edward Taswell (Brmly)	Glossop, C. W. H.	Kerr, Lieut. Col. Charles (Montrose)
Campbell, Vice-Admiral G. (Burnley)	Glyn, Major Sir Ralph G. C	Kerr, Hamilton W
Caporn, Arthur Cecil	Goff, Sir Park	Keyes, Admiral Sir Roger
Carver, Major William H.	Goldie, Noel B.	Kimball, Lawrence
Castlereagh, Viscount	Goodman, Colonel Albert W.	Knox, Sir Alfred
Cayzer, Sir Charles (Chester, City)	Gower, Sir Robert	Lamb, Sir Joseph Quinton
Cazalet, Thelma (Islington, E.)	Graves, Marjorie	Latham, Sir Herbert Paul
Chamberlain, Rt. Hon. N. (Edgbaston)	Greene, William P. C.	Law, Sir Alfred
Churchill, Rt. Hon. Winston Spencer	Grenfell, E. C. (City of London)	Leckie, J. A.
Clayton, Sir Christopher	Gretton, Colonel Rt. Hon. John	Leech, Dr. J. W.
Lees-Jones, John	Orr Ewing, I. L.	Somerville, D. G. (Willesden, East)
Leighton, Major B. E. P	Patrick, Colin M.	Soper, Richard
Lennox-Boyd, A. T	Peake, Osbert	Southby, Commander Archibald R. J.
Lewis, Oswald	Pearson, William G.	Spencer, Captain Richard A
Lister, Rt. Hon. Sir Philip Cunliffe-	Penny, Sir George	Spender-Clay, Rt. Hon. Herbert H.
Lloyd, Geoffrey	Perkins, Walter R. D	Spens, William Patrick
Loftus, Pierce C.	Petherick, M.	Stanley, Rt. Hon. Lord (Fylde)
Lovat-Frater, James Alexander	Pickthorn, K. W. M	Stevenson, James
Lumley, Captain Lawrence R.	Power, Sir John Cecil	Stones, James
Lyons, Abraham Montagu	Pownall, Sir Assheton	Storey, Samuel
Mabane, William	Radford, E. A.	Strickland, Captain W. F
McCorquodale, M. S.	Raikes, Henry V. A. M.	Sugden, Sir Wilfrid Hart
Macdonald, Sir Murdoch (Inverness)	Ramsay, Alexander (W. Bromwich)	Sutcliffe, Harold
Macdonald, Capt, P. D. (I. Of W.)	Ramsay, T. B. W. (Western Isles)	Tate, Mavis Constance
McEwen, Captain J. H. F.	Reed, Arthur C.(Exeter)	Taylor, C. S. (Eastbourne)
McKie, John Hamilton	Reid David D. (County Down)	Thomas, James P. L.(Hereford)
Magnay, Thomas	Remer, John R.	Thompson, Sir Luke
Makins, Brigadier-General Ernest	Rhys, Hon. Charles Arthur U.	Thorp, Linton Theodore
Manningham-Buller, Lt.-Col. Sir M.	Rickards, George William	Titchfield, Major the Marquess of
Margesson, Capt, Rt. Hon. H. D. R	Roberts, Sir Samuel (Ecclasall)	Todd, A. L. S. (Kingswinford)
Martin, Thomas B	Ropner, Colonel L.	Touch, Gordon Cosmo
Mason, Col. Glyn K. (Croydon, N.)	Rosbotham, Sir Thomas	Tufnell, Lieut.-Commander R. L
Mellor, Sir J. S. P.	Ross, Ronald D.	Turton, Robert Hugh
Mills, Major J. O. (New Forest)	Ross Taylor, Walter (Woodbridge)	Wallace, Sir John (Dunfermilne)
Mitchell, Harold P. (Br'tf'd & Chisw'k)	Ruggles-Brise, Colonel Sir Edward	Ward, Sarah Adelaide(Cannock)
Mitcheson, G. G	Russell, Alexander West (Tynemouth)	Wardlaw-Milne, Sir John S.
Molson, A. Hugh Elsdale	Russell, R. J. (Eddlebury)	Warrender, Sir Victor A. G
Monsell, Rt. Hon. Sir B. Eyres	Rutherford, Sir John Hugo (Liverp'l)	Waterhouse, Captain Charles
Moore, Lt.-Col. Thomas C. R. (Ayr)	salmon, Sir Isidore	Wayland, Sir William A.
Moore-Brabazon, Lieut.-Col. J. T. C.	Samuel, M. R. A. (W'ds'wth, Putney).	Wells, Sydney Richard
Moreing, Adrian C.	Sassoon, Rt. Hon. Sir Philip A. G. D.	Whiteside, Borras Noel H.
Morris-Jones, Dr. J. H. (Denbigh)	Shakespeare, Geoffrey H.	Williams, Charles (Devon, Torquay)
Morrison, William Shephard	Shaw, Helen B. (Lanark, Bothwell)	Williams, Herbert G. (Croydon, S.)
Muirhead, Lieut.-Colonel A. J.	Shaw, Captain William T. (Forfar)	Wills, Wilfrid D.
Munro, Patrick	Shute, Colonel Sir John	Wilson, Lt.-Col. Sir Arnold (Hertf'd)
Nail, Sir Joseph	Simon, Rt. Hon. Sir John	Windsor-Clive, Lieut.-Colonel George
Nation, Brigadier-General J. J. H.	Smiles, Lieut.-Col. Sir Walter D.	Wise, Alfred R.
Nicholson, Godfrey (Morpeth)	Smith, Bracewell (Dulwich)
O'Donovan, Dr. William James	Smith, Louis W. (Sheffield, Hailam)	TELLERS FOR THE AYES.—
O'Neill, Rt. Hon. Sir Hugh	Smith, Sir Robert (Ab'd'nK'dine, C.)	Lieut.-Colonel Sir A. Lambert Ward and Sir Walter Womersley.
NOES
Adams, D. M. (Poplar, South)	Gardner, Benjamin Walter	McEntee, Valentine L.
Addison, Rt. Hon. Dr. Christopher	George, Major G. Lloyd (Pembroke)	McGovern, John
Attlee, Clement Richard	George, Megan A. Lloyd (Anglesea)	Maclean, Neil (Glasgow, Govan)
Batey, Joseph	Graham, D. M. (Lanark, Hamilton)	Mainwaring, William Henry
Bevan, Aneurin (Ebbw Vale)	Greenwood, Rt. Hon. Arthur	Owen, Major Goronwy
Brown, C. W. E. (Notts., Mansfield)	Grenfell, David Rees (Glamorgan)	Parkinson, John Allen
Buchanan, George	Griffiths, George A. (Yorks, W. Riding)	Salter, Dr. Alfred
Cleary, J. J	Griffiths, T. (Monmouth, Pontypool)	Smith, Tom (Normanton)
Cocks, Frederick Seymour	Groves, Thomas E.	Strauss, G. R. (Lambeth, North)
Cove, William G.	Hall, George H. (Mrthyr Tydvil)	Tinker, John Joseph
Cripps, Sir Stafford	Jenkins, Sir William	Williams, David (Swansea, East)
Daggar, George	Jones, Morgan (Caerphilly)	Williams, Edward John (Ogmore)
Davies, Rhys John (Westhoughton)	Lansbury, Rt. Hon. George	Williams, Thomas(York, Don Valley)
Davies, Stephen Owen	Lawson, John James
Dobbie, William	Logan, David Gilbert	TELLERS FOR THE NOES.—
Edwards, Charles	Lunn, William	Mr. John and Mr. Paling.
Foot, Dingle(Dundee)	Macdonald, Gordon (Ince)

Question put, and agreed to.