AMENDMENT OF LAW.

HC Deb 23 April 1936 vol 311 cc317-421

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

3.32 p.m.

Mr. McGOVERN

I could not help noticing during the concluding stage of the Debate last night that the Government were again experiencing a rather difficult time with their own supporters. One naturally expects the Government to be opposed by all the various sections which form the Opposition, but when the Government are attacked by their own supporters as has been the case in these Budget discussions, it seems to show that the policy which is being pursued in the Budget is no more popular than the rest of their policy which has been so much criticised and condemned by their own supporters in the last few months. A number of the proposals in the Budget are being subjected to criticism. The Budget proposes to increase taxation on various sections of the community in order to raise a certain amount, mainly for what is called national defence but, before dealing with that part of the subject, I wish to allude to what I conceive to be certain very serious omissions from the Budget. Some of these have already been mentioned by various Opposition Speakers, but I desire to extend my criticism to a wider field than has been covered yet and to bring up matters which form the basis of real grievances on the part of sections of the workers.

During the so-called financial crisis of 1931—I do not intend to enter now into the question of whether it was real or sham—legislation was passed in a period of 12 months which involved a large section of our people in considerable suffering and sacrifice. We were led to believe by the then Prime Minister and his colleagues that those sacrifices were temporary and that when prosperity returned the Government would make good the losses which the people were being asked to bear. First, then, we have the question of how this affected social reform. We have always been led to expect that, in a period of prosperity, additional social reforms will be provided out of the increased productivity of the nation. As a result of the so-called crisis of 1931 social reform seems to have been relegated to the background, and since 1931 no first-class Measure of social reform has been passed in this country. Previous Governments after passing various social reforms have always allowed a waiting period in which to examine how the new reforms worked and whether there were any rough edges on them or not and whether they involved any hardships to any people. This enabled amending legislation to be introduced where necessary and during a period which is claimed by the Government to have been a period of prosperity, one would have expected extensions and improvements to have been made in various existing social reform measures.

Let me mention, first, the case of widows' pensions. We have in this country a system of widows' pensions which was instituted, I think, by Members of the present Government. One of the great contradictions in the public life of this country is that social reforms are always pioneered by one section and opposed by another, but are generally carried into operation by the party which first of all opposed them. Widows' pensions were established by a Tory Government and were extended, I ought to say in fairness, by a Labour Government, but to-day a large number of widows in this country are deprived of pensions. Once a widow's youngest child comes to the age of 14, she loses the pension both in respect of the child and in respect of herself. I had occasion to draw attention recently to the case of a Scottish widow who came to Luton from the North to secure employment but was unsuccessful. She had three children, two of whom were unemployed and on the third child reaching the age of 14 she lost the pension both for the child and for herself and had to apply for Poor Law relief in order to exist.

The number of widows affected is not very large, being a few thousand all told, and one might have expected that after a long period of experiment with widows' pensions, anomalies of that description would have been wiped out, and that every widow who had been conceded a pension would have been guaranteed it during her widowhood. Not only should these anomalies be wiped out, but every working-class widow without a decent income ought to have the power of drawing a pension without the qualification of stamps or anything else. Great hardship exists and a tremendous amount of tragedy and suffering is being caused to these people, and surely the Government might have conceded the right of a pension to this small section of widows. If there were any credit to be got from it, I would not be prepared to deny it to the Government.

There is also the question of the men of 65 who, if they draw pensions, lose the money they are drawing from the Employment Exchanges, and are worse off as a consequence. The pension at 65 was instituted with the idea of giving some comfort in old age, but in the result it causes added hardship. In common with many Members, I think that this pension should be increased by a Government which says that we are on a wave of prosperity which will become greater in the next 12 months. I have had a visit from one of these old age pensioners who lives in Glasgow. His son was on the means test and had his allowance cut because the father, who drew the old age pension of 10s. a week, had an additional pension of 10s. from his late employers whom he had served for a long period. In order not to cause hardship to his father, the son came to London to look for work. He was reduced to the lowest possible level of existence, and, after wandering round London, he was received into hospital owing to starvation. He died within the last few days. The old man, whom he had sought to protect, was compelled to borrow money in order to come to London and bury his son. He is now wandering round London seeking help in order to take back the body of his son to Glasgow. In that case we have a victim of the means test and the inadequacy of the old age pension.

I would urge the Chancellor and the Government to give serious consideration to this section of the people which is being denied the right of living in comfort in a capitalist State that can boast increased production and prosperity. Out of that increased prosperity the people who create it by their productive powers ought to have increased social reforms and greater opportunities of a life of comfort. Are the National Government going to tell us that the period of social reform is at an end? I have a strong suspicion that that is the attitude of the National Government. If, as we are told, we are living in prosperous times, the Government ought to concede to this section of the people the rights to which they are entitled. The very basis of prosperity is the man-power and the energy of the common people to produce. Every person contributes his part to the general well-being of any economic system. Therefore, we are entitled to ask the Government whether they are weary of well-doing and do not intend to bring in any further social reforms.

I do not know of any question about which there has been so much shilly-shallying and shuffling as the means test. We are told from all side of the House that it should be dealt with; the Government spokesmen have stated time and again that it will be dealt with; and the right hon. Gentleman the Member for Epping (Mr. Churchill) has expressed views about the hardship that is caused by the means test. The right hon. Gentleman does not, however, go as far as we do in urging the complete elimination of the test. If the Government supporters have given pledges that it will be tackled in a definite way, they ought to get on with the business and end the policy of drift and shuffling that has been going on. We are told that drastic changes are in contemplation. If the fund shows a surplus, if the Government are willing and Members are anxious to pass the legislation, why is it not presented? This controversy has gone on since 1931, and, in the meantime, the means test has been causing tragedy and suffering in the homes of countless thousands of workers. Cases have occurred of women actually giving birth to children in homes where there were no blankets and sheets on the bed, and being denied the little luxuries and nourishment which they ought to have during the period when they went down the valley of death bearing a new life. The Government remain callously indifferent and unable to make up their minds about what changes should be made in the means test. I ask the Government to give us a definite date when these changes are to be brought before the House.

I pass to a point in connection with national health insurance. Changes were made by the Act of 1932 that took the right of maternity benefit from a large number of wives of unemployed men, and also took away medical rights, actual benefits. Surely we ought now to annul those extreme measures taken in 1932 and give these people the security to which they are entitled. Surely the nation's financial stability is not so much affected that it is compelled to take away the grant of £2 to an unemployed man's wife during the period when she is bringing new life on the earth. The policy of the Government is one of National Defence, and if I could agree, which I do not, with the expenditure of vast sums on National Defence I should still say to the Government, if I were an enlightened Conservative "If you are going to provide armaments wherewith to defend this country, then you ought to give to these women, producing the children who may in the future provide cannon fodder, some comfort and security in their hour of need and darkness." The maternity grant ought to be given back as a right. The children are guilty of no offence, and the husband is unemployed, and if the State is unable to find work for the husband it ought to provide income, nourishment and assistance for the wife.

We were told when these economies were brought into operation that it was necessary to prevent the national health insurance scheme from getting into the financial muddle of the unemployment insurance scheme, but if more people are now in work and more contributions are coming into the insurance funds, surely the Government might loosen their purse-strings and give these people back their rights. It would cost only a paltry £2,000,000 or £3,000,000. These matters ought to have the serious attention of the Government. If they cannot restore these social reforms let them go to the workers and say "We do not intend to restore them, whether there is prosperity or not, and we are going to build up armaments for National Defence"; and if National Defence means only the defence of the bank balances and investments of the ruling classes, the working class are entitled to say "We will give no service to the country when it gets into extreme difficulties."

Let me pass to the subject of National Defence. I do not want to say a great deal about it, because I have time and again given, the point of view of the party I represent. We say that the prosperity of a nation depends not on the number of guns, battleships and aeroplanes which it can collect, but on its happy citizens, on a contented working class and on the opportunities given to child life to develop into manhood and womanhood on a healthy and decent basis. Nobody knows the amount of money which is ultimately to be spent on National. Defence. We have a Government who are incapable of giving a definite answer to the many questions put to them on the point. They seem, every one of them, to be infected with the attributes of the late Prime Minister, who was unable to give a definite answer to any single question. Just as people become contaminated by association with smallpox victims, so the Government seem to have been contaminated by the influx of the National Government supporters into their ranks.

On the eve of the Election I listened to the Prime Minister and heard him say definitely, "You will be told in the many speeches which will be made attacking the Government that the sum will be £200,000,000 or £300,000,000, or some other., figure, but whatever amount is stated it will be wrong. Disbelieve those statements because they will all be guess work." The one man who could tell the country the sum required was the man speaking on the wireless on that evening, but, of course, as he had earned the reputation of being an honest man he could proceed to do all the dishonest things that the usual crafty politician can do, and he avoided telling the country what sum would be required. I ask again, probably with no hope of success, but as a duty, whether the Government will tell us the amount which is to be expended. We have been told that it will be £200,000,000, £300,000,000 or £400,000,000, and I see that an Australian paper puts the sum at £500,000,000. It is suggested in many quarters that it is such a fabulous sum that the Government are afraid to announce it, for fear of sickening and frightening the country.

What is the policy on armaments? A year or two ago it was a policy of collective security. Now we have a combination, we have the collective security system nominally in operation, but we are building for the day when this country, with certain allies, will be expected to go into war in defence of the investing class in the country. No modern war is undertaken for the defence of the working class; it is undertaken to protect the trade, the bank balances, the investments and the property of the ruling class. I believe in the story told of a man living in a, model lodging house in Glasgow who was asked to enlist during the late War in order to defend the country, and who refused. He said, "I have a feeling that if the Kaiser came over here this old model lodging house would still be here, and I should still be in it." I believe that that represents the position of the working class. They get in any country the standard of living and of freedom for which they are prepared to fight. They are not conceded to them as a right by a benevolent ruling class, but are only conceded after the ordinary struggles that go on in this country and other countries.

There need be no doubt in the minds of anybody about this—that we in this party will neither vote for this policy of National Defence nor assist in the employment of Defence Forces, nor will we encourage any man in the country to give his life in defence of the investing class. That is definite. There is no shilly-shallying about it. It is an open declaration of hostility to the Government and to the capitalist system, which we are not prepared to defend. There is in this House an almost unanimous opinion in favour of the defence of the capitalist State—almost unanimous agreement from the Trade Union Congress, the Labour party, the Liberal party, the Conservatives, the National Labour party, the National Liberal party, and all the odd sections which make up the National Government. Every section is agreed on the policy of national defence of the capitalist system. The policy in our party is that we will defend a working-class State in which economic power is held by the working classes and used by the people for the people, but we will not take part in a war to defend the looters against those who are robbed and plundered in the community.

In connection with this policy of the piling up of armaments, we know that there is a day coming when these arms will be used in deadly warfare, when young men will be expected to bear the brunt of the struggle against the enemy. The teams have not been picked so far, although the sides have been ranging themselves more definitely. The working class will be expected to shoulder the guns. They will be expected to be blinded and disembowelled and driven insane, to have their legs and arms blown off and their bodies shattered in defence of the ruling class. We welcome the fact that the Secretary of State for War has said that recruits are not coming forward in the way that the Government would like. The Government are hounding on employers of labour, almost to the point of the dismissal of men who refuse to join the armed forces of the Crown. Firms are putting it to their men that they must join the Territorials, and if they are not prepared to join they are treated accordingly. It is an insidious method of conscripting the youth of the nation.

Deadly warfare is bound to ensue. Every nation says that arms are only for the purpose of defence and that, arms will ensure peace. We know that they do not ensure peace. The armies of Germany and Britain and France and Russia did not ensure peace in 1914. Therefore, we welcome the fact that the youth of the nation, those who have been placed on the means test, are refusing to serve in the armed forces of the Crown. We welcome that refusal as the dawn of intelligence in the ranks of the working class. In spite of the fact that every political party in the country is applying the utmost pressure to them the working class refuses to enlist. The working class says to the ruling class, "We have been the victims of your capitalist system during the period 1931 to 1936, we endured suffering from 1914 to 1918, and we refuse again to become the cannon fodder of the ruling class." In this House the policy of national defence and the provision of large sums of money for it are treated in a happy-go-lucky manner, but when it is a question of the salvation of human life the most niggardly, cheese-paring, brutal and cold policy is enunciated. When prosperity returns to the country these people have no share in what they have created for the idlers of the country. We have made undoubted progress, both mental and physical, amongst a large section of the people in the last 100 years. We have marched through a period of evolution. We have trained the primitive feudal worker and brought him from the mud hut into the Park Lane establishments of this country; but during that time, while that evolution and social change and uplift have been taking place and have resulted in the ascendancy of a certain class, a large submerged mass of the people have remained in poverty and slumdom.

In Glasgow recently the Monarch of this country paid visits to the slums. He found 13 persons in a single apartment living in the most miserable conditions—children living in boxes, and four, five or six to a wooden bed. When a birth takes place the members of the family have to go out of the house for days in order that the ordinary forces of nature might operate in some decency and privacy. People of that class have never changed their economic position; they are down to-day in the depths of poverty and slumdom just as they were in prewar days. If you talk to me of prosperity, I reply that in Glasgow there are hundreds and thousands of cases of people who are living 13, 12, 11, 10, 9, 8, 7 and 6 in a room. If Members of the Liberal party or of the Tory party were living under such conditions they would start a social revolution within 24 hours. If the right hon. Member for Epping (Mr. Churchill) were compelled to live under such conditions he would set himself at the head of an insurrectionary movement in order to get justice for the class he represents.

I content myself to-day with saying, "Go on with your war preparations; go on with your battleships and submarines and destroyers and torpedo flotillas, your aeroplanes and airships and bombers; go on with the arming of the Navy, the Army and the Air Force; pile on large sums of money made out of the suffering and poverty and cruel tyranny of the people, but one day that system will come to an end." The ghouls are at work to-day taking advantage of the nation's necessity and making fabulous profits, in order that the working class may be thrown on the battlefield at some distant date. But the system will come to an end. When before the French Revolution freedom was suppressed and every radical advocate in France was under lock and key, the army officer, the politician and the Monarch spread it abroad that this action was taken as a measure of freedom. But on the following day revolution broke out in France and swept away the whole of the bombastic ruling class, which paid a terrible price. We do not want the ruling class in this country to suffer the indignities and hardships and poverty from which the workers suffer, but we do say, "If you want to maintain even a semblance of power in this country, do not count on the fact that you can keep the people in subjection." Reason is on the move.

If in this country there is a continuance of this capitalist preparation for war, we say, as representatives of the working class who address large sections of the people every other day, that if war should be declared they should use the weapons and use their power to sweep out the ruling class, to end the poverty and indignity of slumdom, and to give the working class real economic power for the first time in the history of this country.

4.10 p.m.

Mr. CHURCHILL

I think that the hon. Member who has just addressed us with such a mass of information and wealth of imagery must make the hon. Member for West Fife (Mr. Gallacher) rather anxious for his laurels. I know that there is a great gulf between the hon. Member for Shettleston (Mr. McGovern) and the hon. Member for West Fife. There is another great gulf between him and those who sit above the Gangway on the Labour benches. But I am bound to say that it seems to me that the hon. Member has all the qualifications, the aptitude, the modes of speech, the inexhaustible vivacity and rhetoric which would qualify him to deprive the hon. Member for West Fife, at any moment he chose, of the leadership of the Communist party. I know that he will forgive me if I do not attempt to deal with all the points in his statement, but I have no doubt they will be very carefully considered in all quarters of the Committee.

I have listened to a deal of this Debate on the Budget. It seems to me that it has followed the usual course of Budget Debates. As I remember Budget debates the Chancellor of the Exchequer always makes a very good speech, which is very well received. The House hangs with bated breath on his words until he reaches the concluding stages of his oration. Then always, for the next two or three days, there is one long dreary drip of disparaging declamation, if I may paraphrase an expression of Mr. Glad-stone's. All those who have been benefited by the Budget naturally remain silent, lest worse things should occur; all those who have been injured by the Budget are clamant and vociferous; and all those who are not affected one way or the other are disaffected.

To-day I am not going to join in the chorus of captious criticism. I am not even going to criticise my right hon. friend's treatment of the Raid Fund—I mean the Road Fund. That is the sort of thing that slips off one's tongue in an unguarded moment, but I agree with the Chancellor that it is a monstrous assertion that any important body of taxpayers should claim proprietary rights over the particular quota of taxation which they contribute, and that all should not be brought into an area freely justiciable by the House of Commons. The pioneers who blaze the trial are those who suffer. I was lacerated by the thorns and bruised by the falling branches, but I opened the path along which the right hon. Gentleman has advanced with great dignity and general acceptance. To some the dust, to others the palm. But I do not begrudge him, because I think that in this matter he has taken a course which will commend itself to the good sense of the Committee and which is also in the public interest.

Not having for a good many years taken part in these Budget Debates I was naturally interested to see what changes had occurred since the time when I used to be responsible for the finances of the country. We usually look back to the previous year, but sometimes there is an advantage in looking back over longer periods, because one can see the whole scene. I will not say that distance lends enchantment to it, but if you step back a little way you can see the whole scene. By going back a few years you get a broader base for triangulation. You can judge more clearly where you have gone and where you are going by taking a glance back into the past. Therefore, I will venture to offer to the Committee a few comparisons between the state of affairs in 1929 and those which prevail to-day.

Since 1929, not only the entire structure but the whole character of British finance has been transformed. Controversies disputed for generations have been settled. Practices hitherto condemned have been adopted by general consent. Vast new sources of revenue have been opened and expedients have been adopted for regulating the exchanges by secret processes —and have been successfully adopted. We have shaken ourselves entirely free from the whole Gladstonian structure and tradition of finance, for good or for ill, but no one would deny that we have done it. Principles universally accepted and generally observed in this country down to 1929, all of them so far as I can make out, have been abandoned. What was the old plan? The old plan was Free Trade; no taxation except for revenue; lowering the cost of living by every means that the Minister of Agriculture could conceive; the Gold Standard, of blessed memory; an enormous Sinking Fund, and strict and punctual discharge of international obligations. All these were features of that vanished scene. All are gone, "unwept, unhonoured and unsung." All those rules by which all the Chancellors of every party, except in wartime, were rigidly bound, have now been swept away. How Mr. Gladstone, Sir Stafford Northcote and Sir Michael Hicks-Beach, gifted, all of them, with very forceful modes of expression, would have received the information which these Budget Papers convey! How they would stare if this could all be explained to them!

I am going to reveal a mystery to the Committee. I was the last orthodox Chancellor of the Victorian epoch. I cannot admit the claims of Lord Snowden. That episode I regard as a deplorable interlude. I feel that I am entitled to ask the Committee to recognise in me the last of the Mohicans. You did not think so at the time, but judge these matters in the calm light of the future and in retrospect and you will see that the claim, perhaps a melancholy one, which I put in, ought in justice to be conceded. Look at the changes since 1929. Now we are a Protectionist country. We have a substantial Tariff, which no doubt we shall raise higher as the years pass by. The Gold Standard is not only dead, but it has been relegated for a long period to purgatory. We have no Sinking Fund, except the somewhat fortuitous balance of the last year's surplus. We have greatly increased our taxation, and we have dealt with the American Debt liability in a manner which, I am bound to say, no one would have tolerated in the years for which I was responsible. Those are very remarkable occurrences. Merely to recount them makes one rub one's eyes.

But let us look at the causes which have forced, and which have facilitated, these astounding changes. Since 1929, in common with many other countries, we have sustained prodigious misfortunes in the financial and economic sphere. In a catalogue they produce a staggering effect: unemployment is doubled; our foreign trade is halved; our carrying trade, shipping and shipbuilding, is woefully reduced; Lancashire is broken; the cotton trade to India, once the glory of our exports as a whole, has fallen to a quarter of what it was in 1929—only yesterday. A dark cloud of economic privation envelops the once brilliant North. The income from foreign investments, that steady flow which yielded such a nourishment to our revenue and was a noticeable feature in supporting our incomparable social services, has shrunk by more than 25 per cent. If the Treasury of 1929 could have foreseen the tremendous financial and economic misfortunes which were coming upon us, which were about to fall upon us in common with other countries, I believe they would have felt that the difficulties, looked at in their advent, were insurmountable.

To-day, we meet in circumstances when we can say that they have been surmounted. Our Budget is balanced; the Chancellor presents a surplus realised and prospective; credit was never higher; the rent of money has fallen to levels rivaling the palmy days of Queen Victoria; the cost of living, in spite of some well-meant efforts to the contrary, remains low relatively to wages; banks are gorged full with unprecedented accumulations; London is again, after the scandalous crisis of 1931, and in spite of the treatment to which I have been forced to refer about the American Debt, still regarded as the safest asylum for international credit and for cosmopolitan gold. Our feeling to-day should be one of broad thankfulness. I certainly feel that. I do not think that, in that thankfulness, we should fail to include the Chancellor of the Exchequer, who has not only presided over that recovery but has contributed to it in notable ways, both negative and constructive. My right hon. Friend has had several rough years to go through, and several rough years to make us all go through, but we have little doubt, and latterly it has become quite clear and is admitted and felt in all parts of the House, that his stewardship of the National Finances has been a high and memorable success. We rejoice that in his fifth Budget he is able to present a position of exceptional financial strength to meet an exceptional public danger. If anything like the same forethought and circumspection, the same indifference to changing gusts of superficial opinion, the same search for truth and the same contact with reality had been shown in the maintenance of our defences and in the conduct of our foreign affairs, I believe it is no exaggeration to say that not only our own condition but the condition of all Europe would be far better to-day.

I do not suggest that our financial and economic structure has not suffered injury. We have recovered, but we bear the scars. I will try to make a few comparisons in detail between the actual receipts of 1928–29, the last year for the full results of which I was responsible, and those of 1935–36. It is rather remarkable that the total Inland Revenue for those two years is almost identical. It was £406,000,000 then and it is £404,000,000 now. It is very remarkable, after all that has happened, that that same figure should be maintained. But there is a certain qualification to which I must draw the attention of the Committee. My right hon. Friend got £238,000,000 last year out of Income Tax, against my £237,500,000, but he has to charge 4s. 6d. in the £ to get it, whereas it was yielded by 4s. in those bygone days. My right hon. Friend got, in Super-tax and Surtax. £51,000,000 against £56,000,000 which was obtained by a lower rate of Surtax, and without the additional and usually—I would say invariably—forgotten, except by those who pay it, additional Surtax of 10 per cent. Therefore, you have a higher rate but a substantially smaller revenue.

It seems to me that there are various explanations, but one of them stands out very plainly, and that is that the enormously high rates at which Income and Super-tax now stands do not yield the same proportional result as they did upon the lower rate. The higher you have to go, the greater the burden imposed upon the taxpayer; yet you get a less yield to the Exchequer. If, for instance, the times were happier and we were able substantially to reduce the Income Tax and the Super-tax, it is my personal belief—I have thought about it a good deal and had some experience—that the loss to the Revenue would be far less than the gain to national well-being and employment. It would be a help to the Committee if my right hon. Friend when he winds up the Debate this evening could tell us what are the comparable yields per ld. on the Income Tax, between the last year of the late Conservative Government before the great tumult of our financial and economic affairs took place, and at the present time. It is clear that the yield has markedly declined.

For this reason, if I were seeking to criticise, I might deplore what is called "that threepence," and I might wonder whether my right hon. Friend might not have taken a more expansive view of the Revenue—it was pointed out by my hon. Friend the Member for Huddersfield (Mr. Mabane) that the right hon. Gentleman last year under-estimated it by nearly £20,000,000—and could have left the standard rate unchanged until the great re-armament expenses came home, or until the inevitable Defence Loan is floated. I do not wish to set my judgment against his. I admired very much some years ago his standing against the currents of opinion in these matters, and now we see he gets the advantage of having done so; but we may be sure that whenever a Chancellor of the Exchequer does an unpopular thing he is probably right, and you may be absolutely certain that, whenever he does a popular thing, he is invariably wrong. Therefore, I am not going to set my judgment against his, and I do not feel that this is a time when anyone can offer resistance to taxation which is undoubtedly required for national defence.

I have been dealing with the Inland Revenue, but it is when we look at the Customs and Excise that we see the most striking changes. My right hon. Friend got last year nearly £80,000,000 more in Customs Duties than I did in 1928–29. That, of course, is due to the fact that we have become decisively what is called a moderate-tariff country. I am sorry that the Leader of the Liberal party has now gone out of the House; or rather I should say I am glad, because I am sure he would not like what I am now going to say. It seems to me to be probable that protection of the home market has been decisive in enabling an increased fertility of internal trade to compensate us for the curtailment of oversea trade, even if it has at the same time somewhat aggravated that curtailment. Thus, from the point of view of the internal market, and from the point of view of providing us with an immense revenue which anyone can see we could not possibly do without, the reversion to a general system of Protection appears to me to have been fully justified by the times in which we live. Moreover, as one who for the greater part of his active life has been a convinced Free Trader, and still reasons as one, I am one of those who whole-heartedly support the Protectionist experiment, without divorcing myself in theory from Free Trade. No one doubts for a moment that we have definitely taken up our position as a moderate-tariff country, and it is folly to try to re-open the question at this time. I hope and trust that, now that we have embarked on Protection, the Government will try to make a success of it—that, now that we have embarked upon Protection, they will apply a scientific study to it, and that they will do what they think is right in science, and not just think how far they can carry certain Free Trade members of the Government with them. There is no scientific point in that. I do not understand at all those who suggest that in the present circumstances we should have as little of it as we can. There is no sense in that. Let us have whatever is the best interpretation of the new theories which are now established, and which are going to last all our lives—which are not going to be removed in our lifetime. [An HON. MEMBER: "Oh, yes."] The hon. Member is a very young man. They certainly will not be removed in the lifetime of any of the older Members of the House, and it is essential that they should be given as fair a chance as were the strict theories of bygone years. It seems to me that this system has been justified, and there is this admission that ought to be made. I gladly admit that the fears that we had in bygone years about corruption, lobbying and monopoly creeping in in the wake of a tariff have been unfounded, and that the apparatus of the Tariff Board—[An HON. MEMBER: "They are knocking at the door all the time."] They do not come to me, and if at any time the hon. Gentleman is molested, pray let him invoke the support of his fellow Members to free himself from any entanglements into which he may be led. The apparatus of the Tariff Board has worked with the cleanliness, healthiness and decency which characterise so much of our British administration. If all this be true, as I think it is, it certainly conduces to the credit of my right hon. Friend in a manner that is not only personal but hereditary, and must, therefore, be a double source of satisfaction to him.

There are two other changes which I must note. The Budget of 1928–29 had a Sinking Fund of about £60,000,000. That is still suspended. Where has it gone to? I am not, of course, asking about each identical one of these millions which may have been transferred to another part of the Budget, but where, broadly speaking, has this £60,000,000 that we used to give to the Sinking Fund gone? It has gone in unemployment insurance—the right hon. Gentleman may shake his head at me; I am only a private Member; but he cannot shake his head at arithmetic. No dictator, even, can say that two and two shall not make four, and the right hon. Gentleman is not a dictator. In my day, £12,000,000 was provided as our quota towards unemployment insurance, and another £12,000,000 was borrowed on the resources of the fund; but £75,000,000 has now to be found for this purpose by the Exchequer. If you look at the Civil Votes since the time of which I am speaking, it will be seen that they have risen by nearly £130,000,000, from £223,600,000 to £352,000,000. That is where the Sinking Fund, and a good deal more, has gone to. We must look at these facts. The Chancellor of the Exchequer spoke with pride the day before yesterday about the increasing growth of our social services. I share in that feeling. I will only say about our social services, with the creation and development of which I have been connected off and on for many years, that they must not be considered as a weakening of the strength of the nation, On the contrary, I believe they have greatly added to our strength; I believe they have given us that foundation which is essential to national unity, and without which it would be hopeless for us to attempt to make headway against the many perils which are moving towards us.

I come now to a much graver aspect of our affairs as they were reviewed by the Chancellor of the Exchequer in his Budget speech. We heard a great deal of talk, before Parliament met, about a £300,000,000 loan to put our defences in order, and, above all, to give us air parity with neighbouring countries. In the Defence Debate I pointed out that, owing to the restrictions which were imposed upon us by past neglect on the part of His Majesty's Government—neglect to take heed of the warnings which were so plainly given by Members in many parts of the House—the Government, however urgent their need, however sincere their desire, would not be able to spend any very large sum this year, because the contractors would not be able to earn it. I remember very well that when I said I doubted whether they could spend more than £50,000,000 over and above the current Estimates, I saw a look of incredulity on the faces of many Members of the House. But at the present time it is not £50,000,000 that they can spend; it is only 220,000,000 that can be spent on the air and on the other two branches together. Only £20,000,000 can be spent this year in addition to the Estimates. When the Chancellor announced that the Supplementary Estimate would not in his opinion exceed £20,000,000, he proclaimed the failure and the inadequacy of our defence effort this year. One is told that you cannot spend more under peace conditions, however great the need may be, without disturbing the economic and social life of the country; and I noticed that my right hon. and learned Friend the Minister for the Co-ordination of Defence a few days after he had taken up his office, made a very important pronouncement. He explained that he was working under peace conditions. I was much concerned at that statement, and thought it premature for my right hon. and learned Friend to commit himself so early to such a limitation upon his powers.

Surely, the question whether we should continue working under peace conditions depends upon whether working under those conditions will give us the necessary deliveries of our munitions—upon whether the gun plants and the shell plants and, above all, the aeroplane factories, can fulfil the need in time. If they can do so, then peace conditions are no doubt very convenient; but if not, then we must substitute other conditions—not necessarily war conditions, but conditions which would impinge upon the ordinary daily life and business of this country. There are many other conditions apart from war conditions—preparatory conditions, precautionary conditions, emergency conditions—and these must be established in this country if any real progresss is to be made, and if Parliament and the nation are not to find themselves deluded in the future by mere paper programmes and promises which in the result will be found to be utterly unfulfilled. I think my right hon. and learned Friend would have done far better to wait until he had ascertained the actual facts about our defence industries before committing himself to such a very serious contraction of his functions and facilities, and I hope he will not be bound by what he has said if, on further study of the matter, he feels that more facts have been brought to his notice.

All these questions we must examine when we come to the debates on Defence, and I trust that we are going to have proper debates on Defence this year. We independent Conservatives who take an interest in these matters are in a very forlorn position as regards being able to bring to the attention of the House the matters in which we are particularly interested, but the Leaders of the two Oppositions have great facilities, and I trust the right hon. Gentleman opposite will not fail to rise to the level of his public responsibilities and make sure that his authority in the allocation of the different Supply Days is exercised in such a way as to cover, not merely the special views of his party, but the general wishes and requirements of the House of Commons.

Mr. ATTLEE

The right hon. Gentleman will realise that during the last four years, when we have been in Opposition, we have always done that, particularly in regard to matters of defence.

Mr. CHURCHILL

I gladly welcome the right hon. Gentleman's accession to the appeal that I have made to him. I have no reason to cavil at anything that he has said about what has happened in the past. I also hope that, when the Supplementary Estimates come on, they will not be interpreted in a narrow sense but will be so used by the House as to throw open a broad discussion on these matters so vital to our safety. When these opportunities come, we shall have to examine the programmes; we shall have to examine how they are being executed and how far they are falling short either of what was planned or of what we need. If there have been neglects in the past, we must endeavour to establish accountability, and we have to look back upon a record of many squandered weeks and months. If the Minister for the Co-ordination of Defence had been appointed list year, when Parliament asked for it, he would have had a great advantage to-day in the work that he has to do. If a separate Ministry of Supply or Ministry of Munitions had been set up a year ago, it would have been working actively now. Nothing has been done. Even now no steps are being taken. I read in a paper to-day that no meeting had yet taken place between the Government and trade unions in regard to questions of apprenticeship and dilution and transference, without settling which you cannot possibly expand your munitions production. You cannot do anything without a working arrangement with the trade unions and here we are on this day of April, 1936, and it is said that no meeting has yet taken place upon that matter. Nothing effective has been done about profiteering. I regard it as impossible to carry out this process of putting our affairs in good order and our defences in a state of security without the co-operation of the trade unions. You will not get the effective co-operation of the working people unless you can make sure that there are not a lot of greedy fingers having a rake-off. We are still drifting and dawdling as the precious months flow out.

Meanwhile what is happening abroad? The Chancellor of the Exchequer used a most grievous expression when he said we could already feel the heat of the flames upon our faces. That is a formidable expression to be used by a Minister who is characteristically restrained in his language on the important occasion of the opening of the Budget. I have for a long time past made what I consider grave and startling statements about Germany's expenditure on warlike preparations. I obtained my information originally from a source which I cannot divulge. I have, however, attempted to check it with a great many other points of view from every possible quarter, and I will give the Committee the result of my labours, in which I have been assisted by very able people, in good faith. A private Member has not the resources that are open to the Government, but I give the results for what they are worth.

From the end of March, 1933, to the end of June, 1935, the official publications of the German Government show an increase in the public debt to a minimum figure of over seven milliards of reichsmarks, to which must be added the yield from increased taxation in that period, which has been used for Government expenditure, and which amount to five milliards. Therefore, the minimum expenditure for 2½ years above the preceding Budget expenditure is 12 milliards, or £1,000,000,000 at the official rate of exchange. That is all that is acknowledged, but there are two other lines of approach which suggest that that figure is far below the actual fact. A veto prevails in Germany on all expansion of private plant for purely economic purposes. The capital expenditure of Germany other than for residential buildings may, therefore, be regarded as almost exclusively devoted to warlike preparations, in which, of course, I include the preparation of those great military roads where four columns of troops can march abreast, which may play a greater part in a future war than the fortifications that are being built.

Again, taking the figures from German official sources, the expenditure on capital account, deducting the expendi- ture on residential buildings, has been as follows In 1933, nearly five milliards of marks; in 1934, nearly eight milliards of marks; and in 1935, nearly 11 milliards, a total of 24 milliards, or roughly £2,000,000,000. I am taking the rate of exchange at 12 marks to the pound, and I am thus making allowance for the fact that armament production is much cheaper in Germany than it is here. [An HON. MEMBER: "Why? "] Wages are much lower. Look at those figures—five, eight and eleven for the three years. They give you exactly the kind of progession which a properly developing munitions industry would take.

There is a second line of approach to these figures. There is a marked increase in the German national income. Again I take this from official German figures. The increase in the national income has not gone into consumption. Wages have remained unchanged and the cost of living, if anything, has risen. Therefore, the increase in the national income has gone into constructional work, the bulk of which is represented directly or indirectly, I am led to believe, by armaments. Look at these figures of the increase in the figures of the German national income—in 1933, 1,200,000,000 reichsmarks; in 1934, 7,000,000,000 reichsmarks; and in 1935, 11,500,000,000 reichsmarks—exactly the same progression as I showed in the previous calculation. That is exactly what you would expect from an industry getting on its feet, opening out and finally coming into full blast. These figures make a total, since Herr Hitler came into power, of nearly 20,000,000,000 reichsmarks. The year 1935 shows, on this calculation as well as on the previous one, the same figure of over 11,000,000,000, which is considerably over the £800,000,000 which I have for some months past been bruiting about the country.

There are other means by which this progress can be checked. There is the number of persons employed in the armament and cognate industries and in the military forces. There has also been an elaborate investigation into the number of stamps which have been affixed to the three months' bills which are used for effecting this extraordinary process of internal inflation, but that is too complicated to trouble the Committee with now. They will see from what I have said that there is very considerable justification for the startling statement that I have advanced, and to which I most strictly adhere, that £800,000,000 was spent on warlike preparations in 1935 alone. Even if you take off £200,000,000, it does not alter the fact for any purpose with which we are concerned. There remains a disconcerting and alarming figure. Do the Government contradict these figures? Unless my right hon. Friend is able to contradict them specifically and can show reasons why they are wrong, I think my statement might be allowed to stand, and might be taken into the general currency of thought on this topic.

The Chancellor of the Exchequer used an argument about how expenditure would rise to a peak, then fall a little and then remain level but at a much greater height than at the present time. That is not the future as I foresee it. I cannot believe that, after armaments in all countries have reached a towering height, they will settle down and continue at a hideous level far above the present level, which is already crushing and that that will be for many years a normal feature of the world's routine. Whatever happens, I do not believe that will. Europe is approaching a climax. I believe that that climax will be reached in the lifetime of the present Parliament. Either there will be a melting of hearts and a joining of hands between great nations which will set out upon realising the glorious age of prosperity and freedom which is now within the grasp of the millions of toiling people, or there will be an explosion and a catastrophe the course of which no imagination can measure, and beyond which no human eye can see. I believe also that a strongly armed Britain, resolutely and valiantly led, seeking to make for peace but ready to run risks for peace, may conceivably turn the scale between the blessing and the cursing of mankind.

4.59 p.m.

Mr. MORGAN JONES

The right hon. Gentleman always interests us when he addresses us and very frequently entertains us, though I am not sure that on all occasions he convinces us. None the less, we welcome his intervention into the Debate because he always assists us. He has made reference to some four or five main topics. He made, first of all, what was a vivid contrast between the situation as he saw it in 1929 and the situation as he sees it now, and I shall propose to attempt something of the same sort myself presently, taking, however, a different starting point. Secondly, he made reference to the fiscal revolution which has taken place in this country, and in regard to that I do not propose to follow him at all. I should like to return later to a thesis on which he touched, namely, the incidence of direct taxation upon our national well-being, and I venture to say now to him that I shall take very strong exception to the conclusions at which he arrived. Fourthly, he paid what I consider to be a very glowing tribute to the services given to this country by our social reform institutions, and I should like to say how very glad I was to hear the right hon. Gentleman pay that tribute to our social services. The point which he raised at that stage in his speech is, in point of fact, raised in this Budget itself, and it is, in my judgment, the fundamental difference between us on this side and those on the opposite side in the approach which we make by way of criticism of the Budget. Lastly, the right hon. Gentleman devoted a very eloquent passage in his speech to the subject of armaments, and there again he is at one with us at least to this extent, that we regard the armaments policy of the Government as accounting in very considerable measure for the demands made upon us in the Budget.

The first point which the right hon. Gentleman made was the contrast between the condition of affairs as he left it, as Chancellor of the Exchequer, in 1929 with the situation as it is to-day. The right hon. Gentleman the present Chancellor of the Exchequer developed to us the day before yesterday a Budget statement which was so characteristically lucid that it is almost superfluous to express appreciation of it, but we are grateful to him none the less for that statement, because it was presented with such clarity. Now let us take another contrast to that presented to us by the right hon. Gentleman who preceded me. I think it can be accepted by us all that the Budget statement was not hailed with unmitigated delight in any part of the House. It was somewhat doleful and depressing—doleful to his friends, not because it was full of doles, but because it was not, and depressing because it gave none of us any hope in regard to the future.

Three years ago the Chancellor of the Exchequer was inviting us to leave "Bleak House" and to entertain "Great Expectations." The day before yesterday he seemed to have abandoned those "Great Expectations," and we were most clearly back on the way towards "Bleak House." It rather reminded me of that humorous cartoon of Leech's some years ago, in which he depicted two country yokels who met in a country lane, and one said to the other, "Where beest thee going?" The other said, "I bain't going nowhere; I be coming back." That is precisely the position of the Chancellor of the Exchequer. Three years ago he was basking in the uncertain glory of an April day; Which now shews all the beauty of the sun, but two days ago he was conscious of the cloud that had taken "all away." That is a very substantial change to take place in three years, but what else could we expect? The Chancellor of the Exchequer, after all, has been in charge of the till in the "Old Curiosity Shop" for some time past now, and the shareholders clearly are bidden to expect "Hard Times." No wonder the Benches opposite two days ago presented the aspect of a depressed area. Indeed, if hon. Members opposite will forgive me for saying so, they looked to me for all the world like a congregation of undertakers' mutes. There was once an occasion when my fellow countrymen were holding a Welsh National Eisteddford. There was a very distinguished visitor expected, and the bards were all invited to be there to do honour to the expected guest. They were given instructions what to do. They were to stand in two files, through which the visitor was to progress, and they were expected to cheer, but when the visitor arrived and was making his progress down the line, nothing seemed to happen, until the escorting bard lost patience with them, and in Welsh, so that the visitor should not understand said, "Cheer, you devils." I felt like shouting that yesterday to the right hon. Gentleman's supporters, there was such an oppressive silence on that side of the House.

That was a different picture from that which we had some years ago. My hon. Friends on this side will remember the Budget of September, 1931, and they will not forget the great scene which we had when, at the end of Mr. Snowden's second Budget, hon. Members stood up in their places, waved their Order Papers, and cheered because at last the crisis, as it was then alleged to be, was going to be tackled and an intolerable burden was to be dealt with by the new National Government. Indeed we had been told—and this is a most important point—some months before by the May Committee that this country was face to face with a staggering burden, and, of course, the May Committee presented its arguments in favour of the case just the day before Members went away for their holidays. I think I can never recall an occasion when a number of old hens hatched their eggs more in accordance with the appointed time than that happened.

What is the contrast that I should like to make? The Leader of the Liberal party yesterday afternoon called attention to what was, after all, a very important point of difference between the situation as we found it in 1931 and the situation as the right hon. Gentleman found it this year. I will quote the figures used by the Leader of the Liberal party. He said: To-day, nearly three years later, the Chancellor's economy policy lies in ruins. To paraphrase the Chancellor's statement so as to bring it accurately up to date, whereas our total ordinary expenditure in April, 1931, including all sums borrowed in respect of roads and unemployment, was £785,000,000, our estimate for the current year is £798,000,000, which compares with £697,000,000 in 1933, an increase of £100,000,000, in three years, which wipes out the result of the policy of 1931 and restores our expenditure to the crisis level of that year."—[OFFICIAL REPORT, 22nd April, 1936; cols. 172–3, Vol. 311.] Now in 1931, let the right hon. Gentleman observe, out of that sum which we then budgeted for we provided for £360,000,000 in respect of the National Debt services. This year, out of a larger estimate, the right hon. Gentleman is only providing for £224,000,000 in respect of National Debt services. In our time unemployment was very much heavier than it is now, and yet when our estimated national expenditure was less than is now proposed, they raised a cry of panic in the land. As the right hon. Gentleman once said, I think, it was largely a manipulated panic. Now why was there a panic then? The estimate of expenditure is much greater this year than it was in 1931. The only conclusion which one is driven to is that, in the view of the hon. and right hon. Members opposite, too much was being spent in 1931 upon the poor and the social services, unemployment was being provided for—at a heavy cost, I admit—health services were being expanded, and education was being expanded. There is no panic now. Then there was a demand for a committee of inquiry; there is no such demand now.

Mr. MABANE

indicated dissent.

Mr. JONES

There is no demand now, except a feeble voice here and there, but officially there is no demand whatsoever. I would venture to say this, however, that once this luscious fruit that is garnered from the armaments harvest has passed, then there will be a demand for an inquiry. The hon. Members who, in isolated places in the House yesterday, were demanding an inquiry in a few years from now, get plenty of friends, and another sort of May Committee will undoubtedly be appointed and another demand made for cutting down the social services in order to meet the expenditure which we are now incurring upon armaments. Let those, therefore, who demanded an inquiry yesterday take courage. They have only to wait a very short time before they will find plenty of friends on their own side.

I want now to make one or two references to particular matters, and I want to join with the hon. Member for Huddersfield (Mr. Mabane) in the very strong and, I think, legitimate protest which he made yesterday against what has become the habit, on the part of the Treasury and the Chancellor of the Exchequer, of under-estimating revenue. The hon. Gentleman yesterday said that there has been under-estimating in the last three years to the tune of something like £74,000,000. The hon. Gentleman did not cavil at all at the fact that that money went in the end to the redemption of debt, but he did say—and I agree with him—that the point at issue is not whether it is right or wrong that this money should go, if it is available, to redemption of debt, but rather as to whether the Chancellor of the Exchequer is or is not guilty of under-estimating. The importance of it lies in this fact: I, personally, take the view that there was not the slightest need, for instance, for the right hon. Gentleman the day before yesterday to ask us to approve of the Tea Duty if his estimating were a little more close than in fact it is. I am convinced—and I believe the Chancellor of the Exchequer must be convinced too—that he stands to have at the end of this year a surplus again, and if that be so, it is clear that the Tea Duty is an unjustifiable tax and ought not to be imposed at all.

The hon. Member for Huddersfield spoke, I will not say with very great asperity, but strongly, upon the matter yesterday and he asked the Chancellor of the Exchequer if he would be good enough to-night to give some defence of the fact that the £74,000,000 has accrued, as we think, through the medium of under-estimating, to the Sinking Fund. The hon. Gentleman the Member for Huddersfield is not alone in this matter. I believe that other hon. Members last year and the year before, and I myself in a modest way ventured to express the same view. It is a matter of some importance because after all, to put it in a general way, people are being taxed too heavily if our contention is right that there has been under-estimating.

The other point I want to make is not so much a party point, but a Commons point. There is on the Order Paper this afternoon a Resolution dealing with the question of an advance to the Post Office Fund out of the Consolidated Fund. I do not want to make heavy weather about this, because I quite understand that it is only an advance and that there is no reason to anticipate that anything more than the total appropriate sum would be issued from the Consolidated Fund. But it is well known to Members of the House that issues from the Consolidated Fund have to be made with very considerable exactitude, and the Auditor-General has to assure himself that any calls upon the fund are, in fact, justified by the decision of Parliament itself. In due time the Public Accounts Committee will make it its business to look at this matter and to watch it with very great care, but at the moment I merely say that one expresses a little reluctance to agree to the extension of a principle which seems to have grown, not perhaps exactly in this form, in regard to some recent acts of the Government.

The Financial Secretary last night admitted that Defence gives this Budget its peculiar character, but it is also important to remind the Committee that not only does Defence give the Budget its peculiar character, but to some measure—I will not put it too highly—armaments give a peculiar character too to the industrial revival in the country. There are many towns and industrial areas in this country nowadays which are enjoying a temporary industrial boom simply because of the armaments campaign. If the right hon. Gentleman's anticipations are realised and hearts become melted and hands are clasped in friendship soon, it may well be that this armament boom will pass, and the artificial character which the armaments boom gives to the industrial situation will also pass to that degree. Therefore, it is very important that any calculations we may make in regard to the future shall not be based upon the fallacious assumption that this prosperity is something which has come to stay and is of a permanent character in so far as it rests upon armaments.

I do not propose to discuss the question of armaments policy any further, because its relation to foreign affairs has already been amply discussed by other speakers. But we must remind hon. Gentlemen who have already taken part in this Budget Debate, that they cannot have their cake and eat it. If they demand an armaments expenditure they must face up to the fact that the bill will come in, and when the bill is delivered the question that will arise in our politics will be, Who is to pay that bill? Though I am not a prophet, I venture to prophesy that in our internal discussions the problem as to who is to pay for armaments will speedily dominate our domestic policy.

This was raised in a discussion which was initiated by the hon. Gentleman the Member for South Kensington (Sir W. Davison) yesterday. I have been in this House since 1921, and I have heard, therefore, every succeeding Budget speech since that year. Whether the demands of the Chancellor of the Exchequer be higher or whether they be lower, every year hon. Members have raised the cry that Income Tax should be reduced in the interest of the country at large. The theory underlying that is that a high Income Tax is inimical to the national interests, and that a low Income Tax is conducive to the national interests. I do not deny that a financial crisis like the one we had in 1931 did in fact visit very serious consequences upon individual people. That is obvious to anybody who cares even to look at it in a summary way, but I deny, none the less, that the possessors of wealth generally suffered to the extent that has been suggested. I think that it has been grossly exaggerated.

If one wishes to have any proof of that one need only turn to the 78th Report of the Commissioners of Inland Revenue. If hon. Gentlemen will look at Table 18, on page 27 of that report, which is the last available report, they will find that the net capital values of estates liable to Estate Duty have shown practically little of the effects of the slump. They did, it is true, just in one year, but with the exception of that one year they have shown a very remarkable buoyancy. They recovered with extraordinary quickness. If hon. Gentlemen will look at it more closely, they will find that, if they take the year 1925–26 as their standard, we have never slipped back in that matter, even in the days of slump, to the 1925 basis. Mark you, in that time we have had heavy taxation, heavy Income Tax, heavy Super-tax—there is no doubt about that—but the total effect upon the capital value of estates liable to Estate Duty has been, I was almost going to say negligible, with the exception of one particular year. Not only is that true with regard to Estate Duty, but it is also true with regard to Income Tax as well.

I have frequently heard hon. Gentlemen in this House argue, "Oh, but this country is handicapped as compared with other countries, because its Income Tax is so much heavier than that of other countries." It depends how you make that comparison. If you take the figure of Income Tax imposed, 4s. 6d. or 4s. 9d. in the £, and compare some equivalent figure, say in France, of so much in the £ the foreign figure may, in point of fact, be less than ours. I submit that that is not the way to make a comparison. You have to take out of our 4s. 6d. or 4s. 9d., as the case may be, a calculation in respect of allowances, and hon. Gentlemen should note this point. If you take the year 1931–32, you will find, after taking out the allowances and such considerations from the nominal rate per pound, that the 5s. in the £ Income Tax imposed in that year was reduced to an effective rate of 24.1 pence—2s. That was the effective rate of Income Tax, and in the year 1932–33 the nominal rate was still 5s. in the £, but the effective rate, after allowances had been taken out, was 23 pence, that is, a penny less. Therefore, if you are to compare Income Taxes you can do so only after taking out the allowances in respect of remissions of taxation and so on. I pause to make this point, that the allowances given in this country are very considerable indeed, and therefore we are entitled to argue that it is fallacious for people to say that because there is an Income Tax of 4s. 6d. or 4s. 9d., therefore the burden is too staggering to bear.

Mr. MABANE

Surely the hon. Gentleman is not suggesting that any allowances are given to industrial concerns? That is the point.

Mr. JONES

No, no; the point is this: Hon. Gentlemen taking part in these Debates in the past have put this point—if you put Income Tax upon individuals the effect will be that they will have less money to return into industry out of their own private resources, so to speak. May I turn to this year's proposals? I acknowledge that the concessions made to married people are substantial, and I am very grateful. It is foolish to look a gift horse in the mouth, but I should like to make an appeal for a class of people for whom no appeal has been made. Let us not forget that we have in recent years reduced the level of taxability for the unmarried person. The unmarried man or woman, as the case may be, ofttimes has very serious family burdens and discharges a function in relation to the family equally onerous as compared with that discharged by the parent to his family. They may have parents, brothers or sisters dependent upon them, and it is not quite fair to assume that because a person is unmarried he or she can easily afford the extra 3d. in the pound Income Tax, if he or she is subject to it. Therefore, I plead that the unmarried person should not be allowed to escape attention or sympathy by the Chancellor of the Exchequer.

Turning from the Income Tax, I should like to say that the Chancellor of the Exchequer has under-estimated his revenue, and on that account I believe the Tea Duty is wholly unnecessary. I also object to that Duty on the familiar ground that we are steadily altering the proportion of direct and indirect taxation. In 1931–32 the percentages of direct and indirect taxation were as follows: direct, 61 per cent., indirect, 38.7 per cent., 1935–36 direct, 55.5, indirect, 46.5. That means an increase in indirect taxation of about 8 per cent. This indirect taxation falls, in the main, as we all know, upon the poor.

Sir ARTHUR MICHAEL SAMUEL

Customs Duties provide employment.

Mr. JONES

Whether they increase employment or not my point remains that these taxes add to the cost of commodities, and someone has to pay them. Let me remind the Committee and the Chancellor of the Exchequer that through the medium of the means test there is still applied to the poor a very heavy burden. The present President of the Board of Education stated, a month after last year's Budget was introduced, that from November, 1931, to January, 1935, some £45,000,000 were saved by the Treasury at the expense of those who had to suffer the application of the means test. In addition, the present Minister of Labour said that the increased contributions to Unemployment Insurance between October, 1931, and December, 1935, amounted to another £24,500,000, while the reduction in benefit between the same dates amounted to another £15,000,000. I should not be surprised if I found that the means test has probably, up to date, mulcted these people in something round about £50,000,000 to £60,000,000. That is a tax upon the poor, a tax upon them in their poverty. Therefore, it is important that when we discuss this question of the justice or otherwise of the scales as maintained in the Budget these elements should not be left out of our calculations.

I should like to make a special reference to that portion of the Budget statement which dealt with the Special Areas. My hon. Friends and myself from South Wales and other areas like it are deeply interested in this proposal. The Chancellor of the Exchequer, naturally, was not able to give us the fullest details of the scheme, and I do not complain of that but, broadly, I understand that he is going to establish a sort of company with £1,000,000, and out of that fund local industries may be assisted in one way or another. I take it that this fund will be available simply for productive concerns. Is this to be assistance merely for productive businesses and not merely for purely distributive businesses? I am entirely in agreement with my hon. Friend the Member for Bishop Auckland (Mr. Dalton) when he said last night that we do not want assistance given in such a way as to multiply a large number of small businesses, which will employ only the family proprietors in them. What we want is the creation of industries on a bigger scale. My hon. Friend last night spoke of Billingham, in Durham. We are not asking for the multiplication of Billinghams in the sense of the same sort of works being established all over the country. But why not even multiply Billinghams? If we are to establish industries do let us see to it that we establish industries that are competent to absorb labour. If you are going to give assistance only to Jones and Jones's sons and daughters and nothing more, then clearly you are not going to make much of a contribution to the solution of the unemployment problem in these areas. If that is the idea, it will be futile.

There is a limit of £10,000, I understand, which may be available for any one particular concern. I will give an illustration from my own experience recently. There is a firm, which shall be nameless, which is going round among various authorities in South Wales, my own included—a very big firm, which asks: "Can you help us to establish a branch of our firm in your area?" Of course, every authority says: "Certainly. Let us have the facts." What are the facts? They are a firm that will require millions of gallons of water per day. That would mean enormous difficulties in some areas, arising from the problem as to whether the pipe lines for water in those areas can take the normal demand for water, plus the new demand which the firm would make. To meet that demand £10,000 will be nothing. In addition, the firm would require an enormous pipe line to be laid down to take away the waste material from the factory. That, again, would require a great expenditure of money. Areas where, ob- viously, it would be to the interest of the locality to welcome the firm, simply cannot do it under these conditions, because they are too limited and too hampered. The Government must do more than is outlined. They will not revive these areas by tinkering with the problem in this niggardly kind of way.

I want to put another point to the Chancellor of the Exchequer, which I have put before. He can help local authorities very substantially in another way. I am speaking of areas which I know very well and whose case I have put before. The thing that cripples so many authorities in South Wales is that they are weighted down with loans which are a legacy of the War period and to which they cannot put an end by any conversion proposal. I know of authorities in my area which had to borrow in respect of water undertakings about £2,000,000, and they have had to pay 6½, 6½ and even 7 per cent. interest upon the principal, and there is no break clause in the terms of the loan. They must go on paying this 6 to 7 per cent. in some cases until 1960. While all over the country—and the Chancellor of the Exchequer is doing it—everyone is throwing his cap in the air because of the benefits of cheap money, we are simply bound to the earth by these terrible burdens, which we did not create but which the national policy of the War involved us in. The Government stopped us from going on with these undertakings when the War came. They used their power and said: "You must not go forward with waterworks; you must not finish your sewerage system," and now we are saddled for another generation with a burden which otherwise we should have got rid of long ago.

The Chancellor of the Exchequer could help these local authorities very substantially if he would use his undoubted influence with these people to release these authorities from these onerous terms, even if he stepped in to make a grant or to give compensation for releasing the authorities from these heavy charges. I suggest, therefore, that the right hon. Gentleman's proposal is not adequate. I am grateful for what it involves. Let us be thankful for small mercies in these days, because perhaps beggars cannot be choosers, but if this is the Government's contribution to the solution of the situa- tion in the Special Areas, then it is merely tinkering with the problem and is hopelessly inadequate.

I attended a conference at Easter at which a friend of mine delivered a presidential address in which he referred to these distressed areas as a creeping desert. Year after year we have made our appeals in this House, but the right hon. Gentleman cannot claim that the response has been unduly generous. These distressed areas, for some unaccountable reason, are looked upon askance by the Treasury and by private manufacturers. We sometimes wonder what we have done to offend all these people, who seem to regard us as being beyond redemption and are prepared to abandon us to our fate. But something must be done, because this desert creeps on. Whatever revival there may be in Birmingham or elsewhere passes us by; we do not share in it. These people are as much entitled as any other section of the community to as generous a consideration as the Government can possibly give them. The Financial Secretary told his friends, who he thought were unduly depressed, that there were two sorts of Budgets. He said that this one was of a special character and will take a long time to appreciate. It certainly will!

5.46 p.m.

Sir ASSHETON POWNALL

I want first of all to allude to a subject which in my 17 years experience of this House I have never heard mentioned in connection with the Budget, and that is an apparent leakage during the last few days immediately before the Budget of one or two Budget secrets. Hon. Members know that people can insure against risks such as an increase in the Income Tax. The normal rate last week was from five to ten guineas, but on Monday there was such a sudden rush to insure against this risk that the rate went up to 15 guineas per cent. On Tuesday morning the rush was so great that brokers came apparently with instructions to pay any amount of premium on any amount of money, and the rate went up to 45 guineas. I have been myself to Lloyds with regard to this matter; it has already been dealt with by one or two newspapers. I have verified the facts given in the newspapers, and I suggest that the Chancellor of the Exchequer should get in touch with the committee of Lloyds, who no doubt make inquiries and find out who has profited most improperly by this kind of special information. If there has been a leakage, for the first time in my many years, of Budget secrets of this nature, I have no doubt that the Chancellor of the Exchequer will do everything he can between now and the next Budget to see that such a thing does not happen again.

Let me say a few words in regard to the Budget as a whole. I rather agree with the last speaker that the Chancellor of the Exchequer has shown an undue measure of pessimism. His opening words on Tuesday were: Some of my hon. Friends will think it is a demonstration of something else, namely, the excessive and unnecessary caution of the Chancellor of the Exchequer in estimating the possibilities of revenue expansion."—[OFFICIAL REPORT, 21st April, 1936; col. 37, Vol. 311.] He was speaking of the figures for last year, which were £15,000,000 to the good on his Budget figures. After the raid on the Road Fund we are £15,000,000 short on this year's figures. It is rather a remarkable coincidence. The right hon. Gentleman's pessimism last year involved us in. taxation of £15,000,000, and I rather think that his pessimism with regard to this year is really responsible for the extra taxation in Income Tax and Tea Duty which are being put on. My own view is that with prosperity returning as it is, larger figures might have been taken for Income Tax and other sources of revenue, and that we might have avoided the need for increasing taxation in these two respects, which hit large numbers of people in the country. The hon. Member for South Kensington (Sir W. Davison) in whose constituency I happen to reside, spoke of a loan yesterday. I entirely disagree with much that he said. He spoke of a large Defence loan at 1 or 2 per cent. It is true that you can borrow large sums at 1 or 2 per cent. A large amount was borrowed last year at 2 per cent., and short-dated loans can be borrowed at 1 per cent. The Treasury loan interest has been down to 12s. or 13s. per cent. and, therefore, it is obvious that a loan could be borrowed at a low rate of interest.

But what people forget is that while it is all very well to borrow money the loan would have to be repaid in the fairly near future, and repayment would obviously mean extra taxation. To my mind it is extremely unsound finance, when a great deal of this money will be spent on such wasting assets as aeroplanes, with a life of three to five years, and on battleships with a, life of 20 to 25 years, to borrow money for these purposes. There is an old saying, what has posterity done for us? We have done a great deal for posterity. We are leaving a little matter of £6,000,000,000 or £7,000,000,000 to posterity. We are certainly paying off £10,000,000 to £15,000,000 each year, but the War Debt will not be paid off for at least three generations, that is presuming there is no major conflagration in the next 50 years, which may be rather an optimistic surmise. The War Debt will not be liquidated until the year 1982, that is in the time of our grandchildren, and that we should in times of peace borrow large sums for wasting assets provokes my financial ire.

I agree that so far as aerodromes are concerned you will get a permanent-asset for the nation. We have always been such financial purists in this country. No one who has ever served on the Public Accounts Committee will fail to realise the immense influence of the Treasury in keeping the House of Commons up to the mark in these matters. The Treasury officials are simply invaluable in matters of public expenditure, and if we were now, in times of peace, to borrow large loans for defensive purposes every few years, it would not be in the best interests of the country. If it means further taxation in the next few years I would much prefer that to a large defensive loan of £200,000,000 or £300,000,000, as has been suggested.

With regard to the concessions which the Chancellor of the Exchequer has made to the small man, as he is called, in my constituency there are many thousands of such individuals. Most people think that the cuts made and the allowances taken away in 1931 have all been restored. That, of course, is not the case. The married couples' allowance prior to 1931 was £225. It has been put up from £170 to £180, and I acknowledge with gratitude the concession which the Chancellor has made to those with children. But there are many cases now of hardship because of the difference of £45 between the married allowance of £225 in 1931 and the £180 allowance now. I would urge upon the Chancellor of the Exchequer that the alterations made in 1931 should be regarded as a financial debt of honour to those who have had to pay the extra amount during the last five years, and I would press upon him the need to redeem this debt of honour to those who have been making sacrifices for the last five years and to restore the limit to £225 at which it stood in 1931.

5.57 p.m.

Sir FRANCIS ACLAND

I begin by what has now become a commonplace, and that is to refer to the fact that the Budget has had rather a depressing reception. One can almost feel the same chilly wind inside the House as that which is making things so unpleasant for everybody outside. That is not the fault of the Chancellor of the Exchequer. It is because people did not realise the true position of affairs. They find, rather unexpectedly, that after a year which showed a considerable nominal surplus, and a revenue so expanding that it is reckoned to produce an extra £24,000,000 in the coming year, they have, nevertheless, to meet a deficit of £21,000,000, mainly by fresh taxation. It is salutary that people should realise this, but it was rather chilling. The reason, of course, is that things are costing more than they used to cost, particularly under the head of armaments. I have been considering the movement of some of these important items of expenditure.

I have worked out the cost of the Defence Services, reckoned per man on Vote A, in the last year before the War, and now. The figure of £77,000,000, which we spent before the War, represented a cost of £235 per man, and it provided for the contemptible little Army, which was extraordinarily efficient, and for the Navy, which kept the seas throughout the War. Looking ahead, and taking a figure at which we shall get very soon—assuming that after the threatened peak the expenditure will run down to some sort of a level basis—£185,000,000, which is a, moderate figure because we are now spending £178,000,000 this year, and assuming that there is an increase of 10,000 in the strength of our armed forces, which are now 20,000 below pre-war level, we get a cost per man of £583, compared with £235 before the War, or nearly 150 per cent. increase.

There is, of course, the explanation of higher pay, mechanisation and so on, but I think the figure is a remarkable one. I do not wish simply to concentrate on armaments, for there is another figure which I have worked out on the civil side and which in a way is even more remarkable. In the last pre-war year, a child in an elementary school cost, if we add national and local expenditure together, £4 15s., but this year, according to the best estimates I can get, the cost will be probably £14 15s., an increase of nearly 210 per cent. compared with the pre-war figure. In view of figures of that kind, which no doubt could be multiplied in many departments of expenditure, it is no wonder that Customs and Excise have had to go up in the same period four and a-half times, and that Inland Revenue has had to go up nearly five times what it was.

I wish to say two things about one department of that expenditure, the armaments side. I would like, in the first place, to put again the question asked by my right hon. Friend the Member for Caithness (Sir A. Sinclair) yesterday, but not answered. I know the Financial Secretary was hurried and could not deal with everything in his speech last night. I would like to ask whether we can have, with regard to that part of the White Paper policy which is to be carried out this year but which is not in the printed Estimates, the same information that we would undoubtedly receive automatically if it were in the printed Estimates? I very much hope, as the right hon. Gentleman the Member for Epping (Mr. Churchill) said, that we shall have a really live and useful debate on different departments of this enormously important Defence problem; but at any rate we surely have a right to know, not perhaps the ultimate figure to be covered by the whole White Paper policy—which no doubt must still be fluid and cannot be given—but to what we are being committed by the expenditure which will come up for payment this year. Normally, when an instalment for, say, shipbuilding or barrack construction is to be paid for in any year, we are given in the Estimates as printed the total estimated cost, even though it will not be covered for many years. I think in this case we have a right to ask for that, whether it refers to ships, mechanisation, aeroplanes or anything else. I beg my right hon. Friend to observe that I am not pressing for the total White Paper Estimates, but only for the total cost of that which has been begun in the year upon which we are now entering. What are we involved in so far?

The second point I would like to make is that it would be much easier for those of us who find difficulty in attuning our minds to the Government's Defence policy if the Government, in referring to that policy, did not always use what seems to me to be a wholly false and misleading phrase as things are at present, that it is a contribution to pooled security. Whenever I hear that phrase I am reminded of that official, well known to the British Constitution, the Judge Advocate-General, who is neither a judge nor an advocate nor a general. Similarly, if we call our Defence policy a contribution to pooled security, I would say that there is at present no contribution, there is no pool and, in consequence, not a great deal of security.

As was pointed out very definitely, very clearly, and I thought extraordinarily forcibly by the right hon. Gentleman the Member for Epping and the right hon. Gentleman the Member for West Birmingham (Sir A. Chamberlain) in the Debate which preceded the Easter Recess, we are now tending to halt between two courses, and therefore to get the worst of both of them. It seems to me that we ought to be told soon whether we are really going to take one road or the other, either to back the League right through and be prepared for the consequences—undoubtedly they might be serious and we should have to face them—or to depend on a series of special alliances. In any case, the country ought to be told clearly which it is. It is not only rather a fraud on this country, but it is extraordinarily confusing to those who wish to be our friends in other countries if we pretend to back up the League in our armament measures but are ready to desert it as soon as a crisis occurs, if a major Power is involved, which is what we have seemed to do in recent months. If we are to use the phrase "pooled security" at all in connection with armaments, it seems to me that the only true way to use it is to describe our armaments as an insurance against the absence of any system of pooled security. As such it is probably arguable that they are necessary, but I think the Government do a bad service to their own cause by continually using a phrase which is so devoid of actuality.

To return to the question of our total national burden, I think my right hon. Friend who spoke yesterday was right in making the point that with so heavy an annual burden in front of us we cannot have that broad, elastic margin of resources which served us so extraordinarily well during the last War, but which will obviously be very much restricted if any similar crisis comes. Arising out of that, I wish to say that in these times, which are relatively favourable compared with what has gone before and what is certain to come afterwards, we ought to be making—perhaps I am old-fashioned in saying this—some attempt to reduce our dead-weight debt. It would look well at any rate, even though not much could be done, seeing how enormous the debt is. On Tuesday the Chancellor said that these are not normal times. I have never known a Chancellor confess that any time was normal if he wanted an excuse for doing something which he ought not to do. It is always easy to show abnormality either because things are going to be better later or worse later—and they are sure to be one or the other; but it is really somewhat startling to look, as I think nobody has yet done in these Debates, at the actual debt figures.

I think I am making a comparison of like with like, which is not entirely easy, when I compare the total National Debt figure noted on page 5 of the White Paper with what is called the total deadweight debt in the annual return which the Financial Secretary presents to us generally in July. If that be so, the present figure of £7,916,000,000 is nearly £90,000,000 higher than the previous highest of £7,828,000,000, which was in 1920, and there are adjustments to be made. I am not taking into account the £120,000,000 Victory Bonds waiting cancellation, which were only £2,000,000 in 1920. Nor do I take into calculation the other unpaid liabilities, as they are called, which were under £50,000,000 in 1920, and are over £100,000,000 in the latest figure available. But that terrible figure of nearly £800,000,000 will have to be dealt with somehow and some day; it stands between us, as a national corporate entity, and complete solvency, and therefore I think we ought sometimes to think about it.

I want to point out, although it has been mentioned before, that although we managed to devote £10,500,000 out of the £224,000,000 which we devote to the service of the debt to the Sinking Fund last year, that was very largely the Chancellor's good fortune rather than his deliberate planning, and was due rather to the low rate for Treasury Bills. The House will see that when the figure for Treasury Bills and Ways and Means advances is somewhere near the £800,000,000 mark, a relatively small movement in the Treasury Bill rate—which might happen if there were anything like a real return to prosperity and a real boom in trade—say by one per cent., would very largely wipe out almost all chance of that comparatively small amount which we are able to contribute to the Sinking Fund in the present favour able position of cheap money. As is obvious, this will be the last year for very many in which there will be any prospect of debt reduction, and it seems to me rather a pity that that reduction is left to the chance of incidental surpluses on the Estimates and to the uncertain surplus on the fixed debt charge. We ought to try to get things a little better before they so definitely become a good deal worse, as they are apparently bound to do.

On the subject of debt, the last point I wish to make is that surely it is not right that we should have Budget statements which contain no reference to our debt to the United States. I still regard that as a liability which we are honourably bound to face, quite apart from the obvious common sense of keeping on good terms with that country. If we cannot pay—and it may be that we cannot—the Chancellor ought to tell us in his Budget statement why it is we cannot. If we cannot pay in the way in which the United States want the money, it may be that we might offer to pay it in some other manner. I think we ought to make some beginning to do it. An argument which is used against us with enormous strength by our friends, or those who ought to be our friends, on the other side of the Atlantic, is that we ought not to be spending enormous sums on armaments and not making any attempt to repay what we generally undertook to pay back to them. I do not want our nation to be permanently written down in the ignoble company of debt defaulters.

One of the few remaining brief points I wish to put forward concerns the practical extinction of the Road Fund that is proposed. In general, my opinion is that it is bad finance to assign special revenues to special purposes, and we on these benches shall probably have something to say about that when the Government propose to allot the yield of protective food taxes to different departments of the Ministry of Agriculture. It has, however, surely not been bad finance, but good finance—otherwise it would not have been repeated so often by many Chancellors—which has induced every Chancellor since 1909 to regard the yield of Motor Licence Duties as being to some considerable extent allocated for road development and maintenance in a special fund. I thought it was quite sound to do as the right hon. Gentleman the Member for Epping did, and to divert a part of the revenue into the Exchequer, which brings in a very useful sum. There is even something to be said for raids in times of special emergency. The Committee will remember the big raid made during the War, and very largely repaid, and the more recent raids of 1927 and 1928 will come to mind. But to extinguish the Road Fund altogether, except in name, is I think a mistake in the Chancellor's appreciation of national psychology and sentiment. It was not contemplated apparently even by the right hon. Gentleman the Member for Epping in his wildest moments, which is saying a good deal.

My suggestion is that taxes are only burdensome when we feel them to be burdensome. Many thousands of people must have paid the rather heavy Motor Vehicles Duty with greater cheerfulness—and, therefore, must not have felt it to be a burden—because they knew that there was considerable certainty that much of it would go directly into a special fund for road development and improvement. I have heard it said dozens of times by motoring friends, "After all, it goes back to the roads." I think the Chancellor has been lacking in imagination, in ignoring that feeling, and I hope he will reconsider the matter before he forces his new idea on the House.

As regards the Special Areas Reconstruction Association, I think whoever christened it showed an ingenious sense of humour to use for a thing so small the word "Reconstruction" which should, surely, be regarded as the special prerogative of my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) as applied to his great schemes. It is as if one were to christen a very small black kitten, "Europe" or "Universe" or some such grandiloquent name. But I do not think that the title will be much used. We shall probably soon call it "Sara," like "Dora," and, calling it Sara, we shall remember its Biblical namesake who, on an important occasion, occupied the tent door. It will occupy the modern counterpart of the tent door, namely, the shop window, but will not be of great assistance in relieving the position in these distressful districts.

As to the extra 50 per cent. on the Tea Duty I think that there, too, the Chancellor's imagination did not quite rise to the occasion. It will not produce very much. The revenue could have been found without too great difficulty elsewhere, and it does not add much to any one annual household budget. But tea is the drink of the poor people. It is their consolation, and often their only consolation, in difficult times and I think the right hon. Gentleman the Member for Epping was right when he swept away the Tea Duty altogether in 1929, as he then thought for good and all and when he said: There is no other comfort which enters so largely into the budget of the cottage home, or the still humbler budgets of the old, the weak and the poor."—[OFFICIAL REPORT, 15th April, 1929; col. 63, Vol. 227.] I do not know whether that passage has been quoted already in this Debate, and if it has been, I apologise, but I think it is worth quoting again because it is profoundly true. The Committee may not know the Westmorland story illustrating that point. It concerns a widow who was rebuked for her too exuberant grief at her husband's funeral and who said: I'se roared all t'way to the funeral and I'se roared all t'way back and when I'se got myself a nice cup of tea I'se going to roar again. That story brings out the human view of the cup of tea as a little comfort in adversity. Seriously, I think there are too many people unemployed and too many people helping those who are unemployed, in the generous way in which they do it, and too many people on the verge of unemployment, to justify increasing the burden on tea even by a few pence in the year. One thing, surely, can be said about this Budget without fear of contradiction. It suits, as I said at the beginning, the weather outside. The chill of the Budget may be salutory in teaching the country at the beginning, what they are rather slow to learn, namely, that one cannot eat one's cake and have it—as the speaker who preceded me said. The only comfort we can take from it is the rather cold one that things have to be much worse—with the continuance of the present regime at any rate—before there is any chance of their being better, and, with that, I suppose we must be content.

6.20 p.m.

Captain GUNSTON

I thought the right hon. Gentleman the Member for North Cornwall (Sir F. Acland) made a rather ungracious reference to the Government's efforts to obtain pooled security. He said we ought to face the issue of whether we were going to back the League or not. Surely the right hon. Gentleman does not think that that conveys a true representation of the facts. He must be aware that this country, more than any other, at any rate in the last six months, has been pressing as far as it possibly could the principle of collective security and has got itself into a certain amount of trouble by doing so. Surely he also realises that the best way of describing the Government's rearmament programme is to describe it as an attempt to make pooled security possible. I believe that it will be recognised at such and that, as such, it will have the acceptance of the country.

The right hon. Gentleman also made reference to the raid on the Road Fund or what the right hon. Gentleman the Member for Epping (Mr. Churchill), with his wonderful gift for making apt slips of the tongue, described as the Raid Fund. The right hon. Gentleman the Member for North Cornwall said it was wrong that any special fund should be made up by the payments of any section of the community. At the same time, he thought that the existence of the Road Fund had caused many taxpayers to pay willingly. He said many motorists did not mind pay- ing the taxation because they knew that it would be spent on the roads. That is a very dangerous doctrine. I think many motorists do believe that because they pay taxation on their motor cars they are entitled to say how the money should be spent. That, of course, is contrary to our democratic principles in the raising of finance and I, personally, am delighted that the Chancellor of the Exchequer has, once and for all, removed this anomaly from our system.

The hon. Member for Caerphilly (Mr. Morgan Jones) in a very interesting speech suggested that it was rather hard that we should have attacked the Labour Government of 1931 on the ground of very high expenditure, when, to-day, our expenditure was of similar proportions. I think he forgot the fact that our attacks in 1931 and the apprehensions of the country on that occasion were due not so much to the greatness of the expenditure as to the fact that it was considerably in excess of revenue. Now that revenue has expanded, expenditure can expand as well.

We have also had to-day a very interesting speech from the right hon. Gentleman the Member for Epping, and I do not think the Members who were privileged to be present will easily forget the right hon. Gentleman's description of himself as the last of the orthodox Chancellors. At the same time he rather suggested that if he had been Chancellor on this occasion he would not have imposed the extra 3d. on the Income Tax. I think it is very unlikely that if the right hon. Gentleman had been Chancellor he would have done so. He then went on to say that in his experience of Budget speeches, he found that everything went very well on the first day, but that, afterwards, people began to find pitfalls in the Budget, and in the end the Chancellor had not such a good reception for his proposals as he received when he opened them. I think the right hon. Gentleman was looking back into his own history. He always opened his Budget with a speech which was a classic of English. To-day any hon. Member can read those speeches and find in them wonderful examples of the written word.

The present Chancellor of the Exchequer has judged the country from a different point of view. He thinks the right thing to do is to tell the country the truth from the very beginning. The country feels, I think, that if they know the worst they will be better able to put up with it. What the country is nervous about is being given a little pill to-day and told that it will not be very hard to swallow, but that there may be worse to come next year. If the right hon. Gentleman the Member for Epping had been Chancellor and had not put this 3d. on the Income Tax—or even if he had been driven to do so—the country might have felt that there was something worse to come next year. As it is, the country feels that the present Chancellor has let it know the position which has to be faced. The country feels, especially after the reassuring broadcast statement of the Chancellor, that unless there is a change of Government or some other unfortunate circumstance arises, the present addition to taxation should be able to carry us through the next few years.

The hon. Member for East Edinburgh (Mr. Pethick-Lawrence), who opened the Debate yesterday, expressed surprise at the frankness of the Chancellor. Probably he was casting his memory back to the Budget of 1931. If he had advised his chief on that occasion to be a little more candid with the country, much of the disaster of 1931 might have been avoided, and his party might have been saved from disaster. I suppose that there has never been a Budget Debate in which less attention has been paid to the Budget itself than in this Debate. We had from the right hon. Gentleman the Member for Caithness and Sutherland (Sir A. Sinclair) a lament on the death of Free Trade. I remember the speeches of the right hon. Gentleman and other Members of his section of the Liberal party when Protection was introduced. I do not think they can feel now that any of their gloomy forebodings have been fulfilled. The right hon. Gentleman the Member for Epping reminded us to-day that one thing which was anticipated in some quarters has never happened. Corruption has not come in with Protection. That is largely due to two facts—to the machinery set up by the Chancellor of the Exchequer and to the innate honesty of the British politician. The hon. Member for East Edinburgh tried to comfort himself with the reflection that our prosperity was not due to Protection but rather to going off the Gold Standard. Does he really think that if we had gone off gold with an unbalanced Budget such as there was when he was Financial Secretary to the Treasury, we could ever have achieved an era of cheap money or prosperity?

I ask the hon. Member to clarify something which he said yesterday. If I read it aright, a question which he put to the Chancellor indicates a change in the policy of the Labour party. The hon. Member asked the Chancellor a question in regard to the connection between the Treasury and the Bank of England, and said: If he feels that, I take it he thinks that he has a de facto control over the banking system of this country, a control which, when put forward by Members on these benches, has been derided as rank Socialism, but which, if it is de facto if not de jure carried out by the Government, has achieved in large measure the purpose for which we wished to see it carried into effect."—[OFFICIAL RETORT, 22nd April, 1936; col. 167, Vol. 311.] Does that mean that the hon. Gentleman, knowing how sensitive people are of the fear of Socialist control of banks, and knowing that, whilst that fear exists, his party is never likely to get a majority in the country, feels that he has now got a way out and can go to the country and say, "The connection between the Treasury and the Bank of England is so close that it gives us what we desire and we no longer intend the nationalisation of the banks" I shall be glad if one of the hon. Gentleman's colleagues will say whether the Labour party has abandoned that disastrous election manifesto.

Mr. PETHICK-LAWRENCE

Certainly not.

Captain GUNSTON

I am glad, from the point of view of party politics, that it has not abandoned it, but from the point of view of the country which may one day be governed by a Labour Government, I am sorry to hear it. One or two hon. Members who spoke yesterday criticised the Government for delaying putting our defences into proper order far too long. Although one may not agree with many things said by the right hon. Gentleman the Member for Epping, I think that, as things have turned out, the country owes him a debt of gratitude for fixing the attention of the public on this matter for so long. I was one who was for a time rather in favour of delaying action. It is all very well for people to blame the Government for not taking measures earlier, but they must remember that public opinion to a great extent controls the action of any Government in this country. It was not until we saw dictatorships set up in Europe and the line that they were taking that public opinion demanded that our defences should be put in order. I do not believe that democracies are as likely to go to war as dictators, or that dictators want to go to war, but all through history—and history does repeat itself—we see that dictators are inevitably driven to war for the reason—and this is why I hope we are not too late—that unlike a democratic Government, a dictator can never go into opposition. He has either to go on or to fall, and the fall of a dictator is very different from that of a leader of a democratic party in this or any other country.

In the past dictators held their power by force. It may be said that they do to-day, but dictators have in their hands weapons far more powerful than the mere weapon of force. With a control of the wireless and the Press it is very easy for dictators to sound the advance. With the aid of science they are able to control public opinion in a way that it has never been controlled in the past, but I doubt whether dictators can sound the retreat. As in the past, when things are uncomfortable at home they are inevitably driven to action abroad, and no one can say that we are not seeing that repeated to-day. The only way to stop it is by the collective action of democratic countries, and I believe that a dictator may see reason if he knows that an aggressive act on his part will be met by the only weapons he understands. That is why it is so necessary that we should get on with the Government's expansionist programme of Defence.

No one admires the Chancellor more than I do, but I was a little upset at his reference the other day to the Mandated Territories. I fear that dictators, knowing that they may have to keep their power by foreign adventures, may feel that they must always dangle something in front of their people; and it is fatal for us to give any idea to the world that we would ever consider handing over the people in our Mandated Territories to Nazi rule. We do not want to close any avenue which may lead to world peace, but let us face the fact that public opinion for many years—I doubt whether it will be in our lifetime—will never consent to handing over to Nazi rule the peoples for whom we are guardians. The Government would make a, great mistake if they felt that the people of this country and Members of this House would ever agree to such a policy. I hope that we are not too late in our rearmament programme. I do not think the- Government are in any way to blame for the slowness of its coming into action, and I do not criticise the Chancellor, as the hon. Member for Huddersfield (Mr. Mabane) did yesterday because he thinks the Chancellor is taking too pessimistic a view and has under-estimated the revenue he is likely to receive. I hope in another sense that my right hon. Friend is taking a pessimistic view and that our rearmament programme can progress at an accelerated rate, so that, if there is a surplus, it can be absorbed this year by some of the extra rearmament.

I am a little disturbed when I hear hon. Members speak, as the right hon. Gentleman the Member for Epping did to-day, about a big rearmament loan. It is all very well hon. Members saying the Government should take advantage of cheap money and that if a great rearmament loan were floated nobody would feel it. If, however, a loan large enough to make people nervous were floated we would find in a very short time that we had lost the advantage of cheap money. I hope the Chancellor, when he speaks of the possibility of a loan, means that it will only be floated in a, peak period, that we should pay for the increased cost of maintenance and for a large part of the acceleration programme by taxation, and that only in the peak period should the expenditure be met by loan. I hope that my right hon. Friend means that, as the Chancellor is rightly regarded as a high priest of orthodoxy, and he has followed a policy which has brought this country round, and he is so trusted in the country that it is only necessary for him to say that he will only consent to a loan of very moderate dimensions to reassure very many people in the City and elsewhere.

May I remind the Committee if it had not been for the necessity of spending this extra money on Defence, we could have looked forward this year to having no less than £30,000,000 remission of taxa- tion, if our expenditure had been the same as in the Estimates last year? That is a remarkable achievement, which reflects the wonderful recovery of the country, and it is a great tribute to the financial policy which the Chancellor has followed with such courage and steadfastness.

6.41 p.m.

Mr. JAMES GRIFFITHS

I am sure that Members of the Committee will accord me the generous indulgence which is always given to new Members who rise to address it for the first time. I listened yesterday with interest, as did every Member, to the statement of the Chancellor of the Exchequer. I listened last night to the speech of the Financial Secretary, and I listened this afternoon to the picturesque speech of the right hon. Gentleman the Member for Epping (Mr. Churchill). They all seemed to speak with a great deal of pride, with a glow of pride and with a satisfaction that almost amounted to complacency, about the recovery which the country has made since the Government have been in power. I cannot help but contrast this feeling of satisfaction and pride with the grim realities of the situation in the area which I represent, where we find, not satisfaction or pride, but people who day by day are living in a dreaded sense of insecurity. I heard the Chancellor claim that in a large measure this prosperity of which he was so proud was due to what he described as two main pillars of his policy and the policy of the Government, namely, tariffs and cheap money.

What the Chancellor and the Financial Secretary forgot to tell the House was that there is another side to this medal. Just as it may be true that for a temporary period the tariffs have assisted some industries, there are other industries which have been injured and areas which have suffered considerable injury because of the policy of the Government. I want to put it to the Government that if they are going to claim credit for having restored some measure of prosperity in some areas by tariffs, they cannot escape responsibility for the areas which their tariffs have injured. I come from South Wales, from an area which during the last 100 years has contributed as much to the national treasure as any area of comparable size in this country. A continuous stream of trade has gone from the valleys and ports of South Wales to every part of the world, and the prosperity of this country was in no small measure in those days built upon the foreign trade to which South Wales contributed. For the past 10 years that trade has been declining. Since 1931, the year of foreboding, the year of disaster, the year when things seemed to be so bad, that trade has seen a serious decline.

Many Members here have spoken almost with horror about the possibility of a return to 1931. South Wales would welcome a return to 1931. South Wales would like to see as many men in employment in 1936 as there were in 1931. South Wales people would like to see even the prosperity of 1931 restored. I would remind the Financial Secretary that since 1931 the export trade of the Bristol Channel ports has declined by 2,500,000 tons, and as a consequence of that no fewer than 12,000 men have been put "on the road," have lost their employment. It is generally agreed in South Wales—it is not only the view of the members of the party to which I belong, the coalowners in South Wales have said it, the chambers of commerce have said it, industrial leaders have said it, and there are Members opposite who will not deny it—at least they will not deny it in South Wales—that the tariff policy of the Government is in no small measure responsible for that decline of 2,500,000 tons since 1931. Within the last three weeks a representative deputation from South Wales, accompanied by hon. Members of every party representing Welsh constituencies, waited upon the President of the Board of Trade to point out to him the effects of the tariff policy since 1931. They pointed out what had been caused by the tariff and the repercussions of the tariff, because when a country like ours becomes protectionist other countries do not tie down, they hit back and hit back at the coal trade first of all.

That deputation represented to the President of the Board of Trade—and I wish to add my word—that since the policy of the Government has injured and damaged South Wales the Government owe reparations to South Wales. If they claim credit for the other areas in which trade has been restored, then they should accept full responsibility for the area to which they have brought further poverty and devastation. It is the view of every one in South Wales that the Government should accept their responsibility, and that they owe reparations to South Wales for the irretrievable damage they have done. We were told this afternoon by the right hon. Member for Epping, and it met with the assent of, at least, hon. Members opposite, that we were now permanently a Protectionist country, that the tariff could not be removed. If that be so, then the export trade of this country, and the coal export trade, must suffer still more. The right hon. Gentleman urged the Government, or so I understood, to raise the tariff. As it is increased other countries will hit back at our coal trade, more pits and more ports will be closed in South Wales, and further poverty and destitution will be brought to the homes of our people.

May I quote another authority as to the damage done to South Wales—at least by implication and inference? The other day the right hon. Member for Hill-head (Sir R. Home), speaking as chairman of the Great Western Railway Company, said that unless trade improved in South Wales they would be compelled to close one of the ports in South Wales. That, again, is in no small measure due to the policy which the Government have pursued. Therefore, I urge upon the Government that since they are determined to retain the tariff, since they cannot deny that the tariff hits the export trade of this country and since they cannot deny that the Special Areas are hit still more badly by that policy, they owe it to those areas to give them some compensation for the damage that policy has caused.

I shall be reminded that the Chancellor has already proposed to do something for the Special Areas. When I heard him say that he proposed to set up the Special Areas Reconstruction Association Limited I began to wonder what was coming. That title is an indication of one thing at least, and that is that the Government are at last convinced that the Special Areas must be reconstructed. We have not had that admission before—that the Special Areas are areas whose economic, social and in- dustrial life is so broken and injured and damaged that they must be reconstructed. I also say that the formation of this company is an admission that the Special Areas cannot be reconstructed by private enterprise, an admission that capitalism holds out no hope for South Wales or any other of the distressed areas. It is an indication that the present capitalist system will leave the Special Areas to the tender mercies of the Government. I know that hon. Members from the Special Areas, like myself, will not spurn any offer that comes, because the need is so urgent, but I tell the Chancellor and the Government that their proposal is really a fiddling while the Special Areas are burning. It is a crumb from the rich man's table thrown to areas which, in the last 100 years, have in no small measure contributed to making this country rich, powerful and great.

A company is to be set up with a capital of £1,000,000—not for one of the Special Areas, but for all the Special Areas. For Durham, for South Wales, for the Clydeside and for Tyneside—£1,000,000. The other day I heard the Minister of Labour speak with very great pride about the fact that he had been able to hand over to the Treasury £2,000,000 which had been saved from the Unemployment Insurance Fund. I thought the Government might have devoted that £2,000,000 to the Special Areas—that £2,000,000 saved at the expense of the unemployed, that £2,000,000 which might have gone in increased benefits to the unemployed, that £2,000,000 which was badly needed in the homes of the unemployed; but all we find is that the Chancellor has taken £1,000,000 for the Special Areas and the other £1,000,000 will, I suppose, be the contribution of the unemployed to the rearmament policy of the Government.

I wish that any words of mine could bring home to all the Members of this House and to the whole nation the magnitude of the problem of reconstructing these Special Areas. I have lived all my life in South Wales, and come from mining forebears on both sides. I see now a South Wales vastly different from the South Wales of my youth. I see a coalfield which has been cut in halves in a little more than 10 years. Ten years ago there were 260,000 persons who found em- ployment in the pits there, and they were employed, in the main, for five or six days a week. Now it is reduced to a coalfield with less than 130,000 persons, and nearly half of those do not know what it is to have a full week's work and a full week's wage. It is a coalfield in which the percentage of unemployment is more than double the average for the whole country, an area in which there are townships, valleys, whole communities reduced to poverty. This is the area that the Government propose to reconstruct; but to form a company, to give it a capital of £1,000,000 and to limit its expenditure on any one experiment to £10,000 is to trifle with a great problem.

I think it is generally agreed that the coal mining industry in its present form will never recover its past glories, and that if it is to survive and live it will live and perhaps regain a new glory by the development of what is known as the scientific side of the industry, the extraction of other and what are in these days perhaps more valuable commodities from coal, including oil. If the Government want to help the Special Areas, Durham and South Wales in particular, they ought to pay attention to this problem. If they want to find out whether it is possible to rebuild this industry by establishing these by-product plants are not these the areas for that experiment? The Financial Secretary and the Government will know perfectly well that with £1,000,000 capital, and only £10,000 to be spent on any single experiment, nothing can be done on those lines. I urge upon the Government, and in making this appeal I am not speaking merely for my party, but for the whole of the people in South Wales, the necessity of doing something far more tangible, something which will show that they have some realisation of the size of the problem.

What is the good of the Government forming this company and setting out to try to attract new industries to South Wales if they sit down and permit South Wales to lose its present industries? I represent Llanelly, and the people in that division derive their livelihood from two great industries, the anthracite coal trade and the tinplate trade. The whole of that township, of that area, is now living under the threat that its tinplate indus- try may be transferred to Northamptonshire. The firm of Richard Thomas and Company have indicated that they propose going to the City, of which I have heard so much, to raise further capital —there is talk of £5,000,000, £6,000,000 or £8,000,000—to erect a new strip mill at Irthlingborough in Northamptonshire, and everyone knows that if that is done it will close the whole of the tinplate industry in West Wales and that 20,000 men will be "put on the road."

It is not merely the men who have jobs in the tinplate trade there who are concerned. There are in that portion of South Wales and West Wales a large number of collieries which exist because there is a demand from the steel works and tinplate works close at hand, for their coal. If industry is removed to Northamptonshire those collieries will close and the whole of that community, which has maintained a relative prosperity for the last 10 years, in spite of the devastation which has generally overtaken South Wales, will be rendered hopelessly derelict, as are the other communities.

If the Government are desirous of assisting the Special Areas the first thing they ought to do is to use their influence with the firm which is now planning to leave South Wales. I am told, and it will be claimed by hon. Members opposite that that firm has been restored to great prosperity in the last four years by the protection which the Government have afforded it. If that firm is enjoying the protection of the Government, then the Government are entitled to go to it and tell it to recognise its social obligations. I hope the Financial Secretary to the Treasury will make a note of that. The right hon. Member for Epping urged on the Government the necessity of consulting the trade unions immediately, of securing the co-operation of the trade unions, and as one who has for many years been connected with what is still one of the greatest trade unions in this country may I ask why it is only now that you want to consult the trade unions? Why do you come to the trade unions when you want to build a bigger Navy, Army and Air Force? Why did you not come to the trade unions 12 months ago before you produced your means test? If you think that their co-operation for warfare is desirable, why not seek their cooperation for peaceful ends as well trade unions and trade unionists have memories. I can remember 1914–1915 and 1916, the last time the trade unions were asked to sacrifice their rights, to make sacrifices for the nation; I can remember the promises which were made to the trade unions, and I remember how those promises were broken.

Mr. E. J. WILLIAMS

By the present Home Secretary.

Mr. GRIFFITHS

I urge the Government to consult the trade unions on other aspects of their policy—on the means test, for instance. Is increased provision being made in this Budget for unemployment assistance or do the Government intend in their regulations to reintroduce the household means test? I want to appeal to the Chancellor of the Exchequer to look beyond the areas which are prosperous, to look to the Special Areas, South Wales, Durham and the rest—the areas which have been laid waste by the policy of the Government. They have a duty to make reparation to those areas which they have damaged by the policy which they have pursued.

7.3 p.m.

Mr. HENDERSON STEWART

It is only a few years ago that I went through the ordeal through which the hon. Gentleman who has just sat down has passed. I recollect, and shall not soon forget, that I was followed by a Member of his party, who showed great kindness in referring to my hesitating remarks. If I could refer to the hon. Gentleman in the same way I should be happy. He has addressed us with eloquence. He comes to this House with a great reputation, and we have seen something to-day which makes us realise that that reputation is well deserved. He has offered to-day the co-operation of his great trade union and others, and I have no doubt the Government will be ready to respond to that offer.

The Financial Secretary to the Treasury said last night that Budgets could be divided for practical purposes into two classes. I think the Budget proposals could equally be divided into two main groups. There is, first of all, what might be termed the small bricks of the financial structure of the Budget, such devices as we have seen in this Budget for meeting the deficit due to increased expenditure—the tax evasion plans, the Tea Duty, the raid on the Road Fund, the increase of 3d. in the £ in Income Tax. Not one of those is in itself unimportant. Indeed many of them are very important and are of the widest possible interest to the nation; but compared with the second group I do not think that they count for any more than fitting-in pieces. The second group might be described—to use an old Scottish term —as the fundamentals, the broad pillars on which the Budget is made to rest, which ultimately, whatever the character of the upper storeys, determine whether the building shall be strong, stable and able to withstand the hurricanes that may beat on it. We are living in times of hurricanes—unexpected, unprecedented hurricanes. It is right therefore that the foundation of a Budget should always be sound.

I wish to deal principally with that second group, but I would say a word or two on two items in the former class. Like many other hon. Members I do not like this Tea Duty. I think that it is a small, unwise and unnecessary tax. It is intended to raise £3,500,000 of revenue, out of a Budget of £800,000,000. That is something less than a half of 1 per cent. of the total, a comparatively small sum, yet a sum which, I would like the Chancellor of the Exchequer to believe will cause a quite disproportionate amount of trouble, which will upset the carefully arranged preference for Empire goods, which will fall most heavily on those least able to bear it and will lead to grumbling and complaint on the grounds of unfairness and injustice in the homes of many millions of patriotic British citizens. I recognise the force of the case of the Chancellor of the Exchequer, that the cost of Defence which is for the safety of all should be shared by all. That is perfectly right and just, but I contend that this Tea Duty does not meet those two conditions. Because it is to be paid mostly by poor people, it will be regarded as neither just nor right in those particular homes, and that is not the kind of tax which, I think, the present Chancellor in particular ought to ask the country to bear, because lie is of all the Chancellors we have had since the War perhaps the most kindhearted and generous.

Let the tax of 2d. in the lb. remain on China and other foreign teas. These are mostly consumed by rich people, and they are perfectly well able to pay the 2d. But on the Indian and Ceylon tea, which is used 90 per cent. by working class folk, let him reduce it to a ld. or less. If you make it ld. you restore the Imperial Preference of 50 per cent., and in that way you pursue also good politics, good business and achieve social justice. One makes that suggestion to the Chancellor of the Exchequer in the friendliest way with the single desire of removing from this Budget one feature which can fairly be described as an unjust burden on the poor people.

I wonder if the Chancellor would give those who support him, but who are a little anxious about this matter, some further assurance about road improvements. Some further statement is necessary in addition to that which he made during the Budget speech. I hope that the Committee has observed what is happening. It is not only that the fund has again been raided. That has become quite a commonplace, as regular as the Budget itself in the last few years. We regard it now as almost inevitable. But something much bigger is foreshadowed, which is nothing less than the extinction of the fund altogether as a separate account. Every speaker in this Debate has recognised that there is a great deal to be said for the proposal that road expenditure should come before Parliament in a series of Estimates like every other kind of expenditure, and that Parliament should exercise more direct control over that part of the Government's work. I see a good case for that, and on paper and on the soothing lips of the Chancellor of the Exchequer himself it sounds fine. But the more I consider it the more concerned do I become. Under the present system the Minister of Transport makes recommendations for individual schemes, the limit of which is more or less the limit of the Road Fund. It is true that each grant has to be approved by the Treasury, and I have no doubt that the Treasury, being wise and careful people, take care that there is something left in the kitty to which they can help themselves when the Budget date comes along. But the figure to which the Minister of Transport works at present, and to which even the Treasury works at present, is the total of the Road Fund, which is a large and ever growing fund.

Something very different is going to take place in the future. There is to be no Road Fund as a separate account. Instead, the Minister of Transport will be presented by the Treasury with a maximum figure over which he may not spend, and I have serious, genuine doubts as to whether that figure will be arrived at in accordance primarily with the needs of the roads. It is only natural that that figure will be arrived at in accordance with the exigencies of the national Budget. It is no longer going to be a case of the Treasury saying, "Here is the Road Fund. How much shall we leave in it for the national Budget?" Now it is going to be, "Here is the Budget. What is the minimum grant that we can give for road improvement?" That seems to me to make a, great difference. I do not forget the assurance of the Chancellor of the Exchequer that he had no intention of interfering with the five-year plan for the roads. That was comforting. But with great respect to him I do not think that that is quite enough of an assurance. I have never heard of a five-year plan, in Russia, America or anywhere else which has not come to a ghastly, premature end long before the five years have finished, and I do not see why this plan should be expected to go on.

What is to happen if the Road Fund proves inadequate? It does not need very much imagination to foretell its inadequacy. There are in country districts miles of roads serving villages and towns and upon which people have to travel with bicycles or in vans. There is no grant for them from any source whatsoever. These roads are pot-holed and under-surfaced, as I know from experience in my division, and almost impossible to traverse. I speak with some feeling on this matter because, a few days ago, I was asked to take part in a concert in my division Where I had to sing in order to raise money to repair one of these roads. It is an extraordinary thing that a Member of Parliament should be called upon to contribute a song, in addition to his other duties, in order to take the place of the Road Fund.

Mr. GRANVILLE GIBSON

I suppose we may take it for granted that the roads were private roads?

Mr. STEWART

Perhaps in bygone days that road may have been a private road, but it is no longer private. It is used by everybody, but there is no fund, from the county council, the Government or any local authority, from which money can be drawn for its improvement. It is an amazing situation, and there may be hundreds of roads of that kind in the country. As long as that kind of road exists there is need of aid from the Road Fund. I invite the Chancellor to reply to the plain question whether the new proposal means more money or less money for road development in the future, bearing in mind the rapidly expanding traffic on the high roads and the deplorable state of many roads. I hope that his reply will be commensurate with the needs of the nation and with the reasonable demands of those who pay road taxes.

But important as are these matters and others to which reference has been made in the course of the Debate, they pale into insignificance before the amazing, rock-like foundations upon which this Budget and recent Budgets of my right hon. Friend have been based. Much as those subjects may exercise our minds in these preliminary debates, what we do with the Road Fund, the Sugar Duty or even the Income Tax, is not what matters to the security of this nation. They are but the trimmings of the Budget. The big, vital and lasting consideration in a British Budget is that it shall maintain and strengthen the credit of this land. It is impossible to exaggerate the importance of credit in a country like this which depends so much upon foreign trade. Credit means the faith, the integrity, the good name, the very honour of Great Britain. Tarnish that credit by the merest blot, weaken it by the least suspicion of unsound financing, and you may destroy overnight a great part of the recovery which we have won in the last three or four years. That is why it has been difficult for me to listen with patience to hon. Members who have criticised the Chancellor for what they call excess of caution and lack of imagination in estimating with more optimism an increase in revenue.

What is the chief factor that has brought about the amazing recovery since 1931? Is it not that very caution of my right hon. Friend and of others throughout the country who have followed his example? Is it not this dour, determined balancing of Budgets year after year, and not at the end but at the beginning of his financial year making that balance sound? I wonder if it is not the longer imagination which, scorning the criticisms of some of his friends, has kept the country safe financially in these difficult years. What kind of mess should we have been in if the imaginists had had their way since 1932? To-day we are budgeting for an automatic increase on the present taxes of £23,000,000 in the next year. Suppose that the Chancellor were to say, "I will give way. I will budget for another £15,000,000 increase in the ordinary taxes." What would hon. Members say, and what would every financial interest in the country say, to budgeting of that kind? Would they not say: "This is dangerous. This is concealing deficits. This is dishonest budgeting"? They would be entitled to say that. How easy it is to counsel cheap courage! How much greater is the courage sometimes which seems merely to hang on. You dare not play with the Budget of this country. The national balance-sheet must square, and must patently square to the eyes of the whole world.

I do not think anybody particularly likes this Budget. It is a disappointing, and in some ways a grim picture of the years that are ahead. Few of us do not regret that the recovery so hardly won in these years, and at so much sacrifice, should so soon and so cruelly have been robbed of its fruits for distribution among the people; yet I can see no alternative to this Budget. As long as wolves prowl around the nation's gates, so long must we fortify the homes of the people and ask them to bear the cost of it. It is a hard course, but it is, I believe, the right one and if pursued with courage and endurance may yet lead this country to prosperity. May I finish on the great lines: Not once or twice in our rough island-story, The path of duty was the way to glory. The Chancellor is pursuing the path of duty, and I hope he will have the good fortune to lead this country to its share of glory.

7.25 p.m.

Mr. ELLIS SMITH

I want to deal with two aspects of the Chancellor's statement, but first I would deal with the effect which the foreign policy of the Government is having upon the financial position, and with the proposition that home affairs, foreign policy, armaments, defence and finance are inseparably linked together. Before I proceed with those points I want to place on record, in answer to a number of hon. Members who have spoken from the other side, the fact that this party, and the greater movement of which this party is a section, believe in maintaining adequate Defence Forces for this country. We are very much concerned about the present international situation. The class from which I come have bad to struggle and sacrifice during the past 100 years in order to achieve the present position. It has been no easy path along which we have travelled, and no rose garden. Women who lived near the place where I was born were batoned by the Duke of York's yeomanry 120 years ago, when they were demanding the right to vote, and a little more than 100 years ago the pioneers of our great trade union movement were deported from places like Dorchester because they had the courage to demand the right to organise. As the years rolled by we developed from the stage that we were in then, until our party is now the alternative government to the present Government.

We therefore realise that, speaking relatively, and particularly within the framework of Capitalism, that we are in a good position, and we want to maintain that position. We are therefore very much concerned with the foreign policy which the Government are pursuing. I attended a conference about five months ago at which nearly all the speakers were Noble Lords, Sirs, professors or people in similar categories, and everyone approached the present situation from the same angle as that from which they would have approached the last pre-War situation. There is no analogy or comparison between the last pre-Wax situation and the pre-war situation in which we now find ourselves. We are concerned about the building up of the League of Nations, the principle of collective security, the maintenance of a real League policy, and pooled defence resources.

The greatest potential aggressor in the world is the one which the right hon. Gentleman the Member for Epping (Mr. Churchill) has pointed out in several speeches made during the last few months. That potential aggressor has now a great air force and, as a result of illegal conscription, is now organising personnel. It has adequate armies, with the exception of heavy tanks and heavy artillery, and is therefore proposing to the Powers of the world that they should disarm in heavy tanks and heavy artillery because it realises that it is not yet adequately provided with them. They are now taking steps to do with the roads what they have already done with the air service. They are not sufficiently provided with roads to meet modern strategical needs, and it is said on the authority of the "Manchester Guardian" and the "Times" that men are working night and day on some of the new roads in Germany, preparing for the next period of aggression. The Prime Minister, speaking on 18th April, said: Hitler, the Dictator in Germany, has it in his power to-day. from his position, to do more at this moment to lift that black shadow of fear from Europe than any other man living in Europe I say he has it in his power. God grant lie may have the will. If he has the will, nothing that this country can do will be left undone. That speech is an encouragement to Hitler in Germany. All speeches of that description that are now made in this country, from whatever side, are an incentive and encouragement to Hitler to engage in further aggression.

Let us examine whore the next aggression may take place. I remember, a few days after the Germans had marched into the Rhineland, speaking in corridor after corridor, smoking room after smoking room, and saying that in my opinion Britain and France, through the League, ought to have taken the necessary action at that time. I found that in all parties there was a strong anti-French feeling developing, that in all parties there was a tendency to take his proposals at their face value. We cannot consider any suggestion that Germany makes on the basis of things as they are at present; we can only reach correct conclusions by considering the background of the last three years, and the policy which Germany has pursued. This brings us to a considera- tion of the importance of this aspect of the international situation from the point of view of what I am concerned about most, namely, the effect upon the class to which I belong. In Germany they have batoned, first of all, the members of our own movement. They have dealt with the trade union movement and the co-operative movement. They proceeded to deal with all the Liberals that were left, and then with the Jews; and what they have done internally in Germany they are now prepared to do externally, internationally. Where, therefore, is it that the next aggression may take place?

People in Europe now, and particularly students of international affairs—people representing all political parties—are very much concerned about the preparations that are being made to do in Austria and elsewhere what has already been done in the Rhineland, and, therefore, I would ask the Government to take notice of their own back benches with regard to this matter, to take notice of the mandate that they got from the Peace Ballot, and the mandate that they got at the last General Election, because the people who voted for the National Government at the last General Election thought they were voting in favour of peace. It is true that many of them have since become disillusioned; it is true that many of them have seen the betrayal of our proposals; but, despite that, we feel that the Prime Minister, who is the leader of this country, and who has still great prestige and credit in this country, should go to Geneva at the next League of Nations Conference and speak on behalf of this great country, and should make an attempt to organise the Powers that stand for peace and give a great lead in the way that this country has done in years gone by. Several hon. Members opposite have expressed concern during the last few days because of the attitude taken up by the Secretary of State for the Colonies. I have here an article which appeared in the "Observer" of the 12th of this month, some extracts from which are well worthy of consideration by the House. Here is one of them: When Chancellor Hitler coupled his offer to return to the League with the expectation that the question of Colonial rights would be cleared up within a reasonable time and in a peaceful manner, he purposely linked up two important political items: Britain's urgent wish to get Germany back to Geneva; and Germany's urgent demand for the return of her former Colonies. …. Most German Colonial propagandists declare that the restoration"—

The DEPUTY-CHAIRMAN (Captain Bourne)

We have had a very wide Debate on various matters coming within the terms of this year's Budget, but, so far, the hon. Member has not connected one of his remarks with the proposal before the Committee.

Mr. SMITH

All that I am doing is showing, as I did at the beginning, the effect of the foreign policy of the Government on the financial position of this country. The right hon. Gentleman the Member for Epping gave us a lead in that direction this afternoon, and I am only following his example. I shall certainly, however, observe your Ruling. In Berlin at the present time there is a large exhibition showing the territory owned by Britain which before the last War was owned by Germany, and gradually an atmosphere is being created that will lend itself to a demand for the return of those Colonies.

I turn now to the question that was dealt with by the Financial Secretary last night. He said that he wanted to deny a rumour which had been raised in a question by myself, and he went on to deal with it. I accept his interpretation within the limits within which he dealt with the matter but some of us, having followed and analysed the financial columns of a number of the newspapers, have been concerned about this matter. We put a. few questions upon it to the Chancellor of the Exchequer, but we have not been successful in eliciting the information that we desired. The Financial Secretary, however, dealt with the matter last night within certain limits, and I want to pursue it a little further. Europe is now an armed camp. Germany deliberately defaulted in the payment of her post-War debts, and this has enabled her to re-arm. Britain's financial policy is wrapped up in this policy which has been pursued by Germany. How did Germany get into her present position? First of all she was propped up by American capital, and then, having become a Fascist State, she proceeded to refuse to pay her debts; and wages were reduced in that country until now 55 per cent. of those employed in Germany are working for less than 26s. a week. With the money with which she should have paid her debts, she first of all bought raw material, then she extended her factories, and then she rearmed.

Who has been responsible for this? Not the Bank of England it is true, but the acceptance houses in Britain have been very largely responsible for this position. The acceptance houses in London borrowed money from the United States and others and lent it to Germany, and this is the result of that policy. Up to 1933, Germany paid the interest on her indebtedness, but in March, 1933, when the Fascists came into power, Dr. Schacht saw his chance, and he now refuses to pay more than is necessary to keep the acceptance houses from bankruptcy. Germany is now re-armed. I have already referred to the exhibition that is taking place in Berlin with a view to creating the necessary atmosphere for demanding her Colonies back. The next step, we are informed, will be a proposed loan. It is true that that suggestion has not been made officially, and we want to say, while there is time, that, if there is to be a loan, if this country is again to agree to a foreign loan, the loan should be a loan for peace, and not a loan to encourage Fascist aggression, as we have been doing during the past two years. If there is to be any loan, surely the great need is for home development. The hon. Member for Llanelly (Mr. J. Griffiths) has shown how the whole of South Wales has now become a derelict area. Surely, with all the cheap money that is available, any loans granted should be used for home development and not for the encouragement of Fascist aggression. Therefore, so far as this aspect of the financial position is concerned, this movement stands for the. League, for the principle of collective security, for the building up of confidence among the peace-loving countries; and it hopes that this will become the policy of the Government.

I want now to turn to home affairs. A great deal has been said about the effect of the improved financial position on industry as a whole, but not one speaker from the opposite benches has mentioned the position of the widows, the position of the ex-soldiers, or the position of the old age pensioners. Most of these people only receive pensions of 10s, a week, after having served in industry, many of them for 40 years, and after having given of their best. With the rationalisation that is taking place in industry, many of them, who are over 50 years of age, can no longer hold their own, and they find themselves in the position of having to manage on less than 10s. a week. We have seen Money Resolutions introduced, we have seen. Bills introduced, for the purpose of dealing with anomalies among well paid people, for the purpose of dealing with anomalies among ex-civil servants who are already receiving good pensions; but no suggestion is made, even with the improved financial position, for dealing with the anomalies among poor people.

The serious effects of the Government's policy are being felt among the local authorities, in the North in particular. Take the position of the Trent Catchment Board. In 1936, the overflowing of the Trent, and its effects, cost the City of Stoke-on-Trent £4,631, and in 1937 it is going to cost them £7,020. It is not the fault of a local authority that it has a river of this kind running through its area, and this should be a national charge. The right hon. Gentleman the Member for Epping this afternoon asked where the £60,000,000 had gone to that used to be put into the Sinking Fund, and he stated that it had gone in payment of unemployment insurance. Had he read page 8 of the White Paper, he would have seen that the charge in the current year is £68,000,000 and not £75,000,000, the figure that he used.

May I deal for a moment with the serious effect that the Government's policy is having, on the North in particular? The average number of unemployed in the North is much greater than in the South, and the result is that local authorities are in a very difficult position when budgeting. Prior to the last general election Minister after Minister, especially the Lord President of the Council, said that within a reasonable time they would take steps to make the maintenance of the unemployed a national charge, but we have been back five months and no step has been taken to bring that about. Not a word has been said from those benches about the betrayal of the pledge by the Government that within a reasonable time the means test would be dealt with. Income Tax payers have had a certain amount of relief. Different sections of the community have had relief after relief. We have had jokes about the spring, simply because the Government have not yet introduced the new Regulations. I want to give a few examples of the effect of the means test upon our people. There was a man employed by a local authority in snow shifting. He received on 24th January 9s., on the 25th 5s. and another payment on the same day of 2s. 4d. He paid 1s. 8d. for National Health Insurance and 9s. 4d. was stopped by the 1934 Act, so that he received in all 5s. 4d. for that week's work. I have letters from all over the country asking us to raise the question of the means test. Some of us took the opportunity of raising it on the Adjournment and since then I have received a pile of letters. One from the Midlands deals with a case in which a young man committed suicide and the police found in his pocket a piece of paper on which was written, "Nothing to live for." That is typical of what is happening throughout the country.

Unless the Government deals with the means test very soon it will be faced with a similar position to that with which it was faced not very long ago. Throughout the country, particularly in the North, men are being driven to suicide and domestic friction is being created unnecessarily. Young men and women who have their lives before them and are looking forward to being married are having to keep their fathers and mothers because of the brutal way in which the means test is being administered. I ask that there shall be a drastic change in the administration of the means test and that the Unemployment Regulations shall be introduced as soon as possible in order that local authorities may be able to deal with their local budgets, knowing the policy of the Government on unemployment.

7.50 p.m.

Sir WALDRON SMITHERS

The Chancellor of the Exchequer yesterday, quite rightly, took measures to stop the gaps through which certain Income Tax payers were escaping their full responsibility. I want to show him how he can get another £3,000,000 if he wants to. He said the two main pillars of the success of the last five years have been tariffs and cheap money, and he referred to the increase in saving bank deposits of £150,000,000. The increase in deposits in savings banks is not necessarily a sign of increasing prosperity. These means of saving, which were really meant for the small investor, are being taken advantage of by larger capitalists because they yield a rate of interest which is higher than can be got in the market. In March, 1935, deposits in trustee savings banks amounted to £186,000,000 and in March, 1936, that figure had increased to £200,400,000. In the case of the Post Office Savings Banks the figure of £363,400,000 in March, 1935, increased a year later to £402,000,000. There are £602,000,000 of deposits on which the Government are paying 2½ and in some cases 2¾ per cent. That facility is being used as largely as possible by capitalists. If the interest rate on that amount was reduced by a half per cent. it would not only save the Government £3,000,000 per annum but it would compel those people to invest in Government securities, keep up the price and help the Chancellor with his next Conversion Loan.

There is another small point, though very important to some people, dealing with the importation of horses from Ireland. There have been a great number of very sad cases lately in the courts because dealers have been bringing horses in from Ireland and evading the tax. I hold no brief for them. They broke the law and they were punished. But this class of horse is only bred in Ireland on the limestone deposit and cannot be obtained anywhere else. I hope the Government will see their way to taking off the duty and will not allow the breeding of those horses to be stopped.

For the fifth year in succession the Chancellor of the Exchequer has produced a balanced Budget. I wonder if the country realises what it means to have a balanced Budget. It is vital to the poorest home in the country. We are different from every other country in the world in that we do not produce enough food and raw materials for our wants and are compelled to import them. If you built a wall round France and nothing came in or went out the people, though they might have to go without coffee and American motor cars, could live fairly well. There would be enough food for them and a good bottle of wine to wash it down. In short, France is self-supporting, and to some extent the same can be said of Germany. But if the credit of this country was destroyed, as it would be if the Budget were not balanced, we could not import the necessary food and raw materials and we should be faced with starvation in two or three months. It is a vital necessity for every home in the country that the purchasing power of the £ sterling should be maintained and that we should be able to pay for the food and raw materials that we require. The most important thing to us is that our credit should be maintained at all costs.

Until it is realised that the tangible and material things of life depend upon having a foundation of the intangible things of life we can never make great progress. Material results depend upon putting into the foundations of our national life those intangible things that we call confidence, stability, and credit. You cannot go into a shop and ask for six ounces of confidence, or 2 lbs. of stability or half a ton of credit, yet those things are fundamental to the prosperity of the country and to the happiness of every home in it.

Mr. Disraeli laid down three principles of good government. The first was to maintain our institutions, the second, to preserve our Empire, and the third, to improve the conditions of the people. Those principles are only right if they are applied in that order. You cannot have improved conditions for the people unless you first have your institutions maintained and, in the case of this country, your Empire preserved. We have had before us in the last seven years in this country a complete proof that those principles are right and true and the only principles upon which prosperity can be based. From 1929 to 1931 we had two years of Socialist Government, and at the end of that time there was an unbalanced Budget of £70,000,000, with a prospective unbalanced Budget for the next year of £170,000,000, and the Unemployment Insurance Fund got up to a debt of £110,000,000 or £115,000,000 and was running into debt at the rate of £1,000,000 a week. Whatever ideals or theories were behind that policy, it had this effect—and it will always have this effect —that it destroyed the credit of this country at home and abroad.

London is the great financial centre of the world. Many foreign institutions, banks, and countries have deposits in the City of London to finance their world trade. The French and the Germans knew from experience, and other countries also had seen what it meant voluntarily to depreciate the currency of those countries, and the whole world at the end of 1931 was frightened that this country was going to do the same thing. Suddenly the whole world began to withdraw their balances from London, and although we had enough gold to facilitate the movement of ordinary trade, we had not enough in the country to withstand this sudden rush. That was, in a nutshell, the crisis of 1931, and unless this National Government had then taken office—this is not a political point, but I believe it to be sheer, stark, cold fact—and unless something had been done to restore the credit of this country, the people here would have been faced with starvation in two or three months. I am sorry the Leader of the Opposition is not in his place, but it is no use his broadcasting, as he did last night, and talking about what we had done and had not done. If the Socialist Government had continued in power in 1931 and the National Government had not taken over the reins of office, there would have been no improvement whatever, but disaster and ruin would have come to every family in the country.

I have taken the trouble to get out some figures to show what I believe to be the results of the restoration of those intangible things, credit, confidence, stability, and balanced budgets, on this country. I will not bother the Committee with many figures, but the recovery under the National Government, because they have restored the credit of the country, is nothing short of a miracle worked in a world of chaos. For instance, taking comparable figures, between 1931 and 1935 the monthly average of employment has gone up from 9,420,000 to 10,370,000; the industrial production of the United Kingdom—taking the index figure in 1930 at 100—has gone up from 90.8 to 113.5; the estimated total cost of all building plans passed has risen from £63,000,000 to £114,300,000. One of the most remarkable recoveries is in the pig iron and steel industry of this country. Pig iron has gone up in production from 3,770,000 tons to 6,500,000 tons, and steel ingots and cast- ings have gone up from 5,200,000 tons to 9,841,000 tons. May I repeat that all this is due to the policy of the Government, and in some measure to Protection, which have brought confidence and credit to the people of this country and to the people abroad?

Mr. G. GRIFFITHS

The hon. Member has quoted the figures for iron and steel. Will he now give us the coal figures since 1929?

Sir W. SMITHERS

I have not got them from 1929, but in. 1931 the amount of coal raised in this country was 219,000,000 tons; it went down in 1932 to 208,000,000 tons and in 1933 to 207,000,000, but in 1935 it is back at 222,000,000 tons.

Mr. GRIFFITHS

There are no more employed now compared with 1931.

Sir W. SMITHERS

Take another national index. The electricity generated by various undertakers—in millions of units—has gone up from 11,400,000 units to 17,500,000 units. There is also one general figure that I should like to give at the end, and that is the British Empire's share of the world trade, which has gone up from 26.7 per cent. to 30.7 per cent. I wanted to give those few figures. There are some districts in the country which, through force of circumstances, have lagged behind, but pick any bad spot you like, the general recovery of this country in the last five years under the stable and confident atmosphere created by the National Government has been a miracle created in a world of chaos.

There is another reason which I think is not generally recognised, but it ought to be mentioned, why it is vital to this country to have a balanced Budget. How many Members of this Committee look every week at the Bank of England returns 4 The Bank of England is divided into two parts—the issue department and the banking department. In the issue department the Bank of England act as agents for the Government for the issue of our currency notes. On the debit side, last week, I think it was, we had £420,000,000 of notes in the pockets of the people and £40,000,000 note reserve.

Mr. G. GRIFFITHS

Hear, hear!

Sir W. SMITHERS

I am trying to make a serious point, and I am always met by the crass ignorance which will not face the facts, I do not think the hon. Member knows anything I am talking about. I represent just as poor and just as hard-up people as do hon. Members opposite, and I want to tell the Committee in all seriousness that the point I am making now affects the weekly wage and the weekly living of every man, woman, and child in this country. I am not making a political point, I can assure the hon. Member. On the left-hand side you have £460,000,000 of currency notes. Why is it that during the last few years the purchasing power of those currency notes has never varied except for a penny or two? It is because the security behind those currency notes is solid and good. Of the £460,000,000, £260,000,000 is secured by Government securities and is called the fiduciary issue. As long as those Government securities form part of a balanced Budget and have a market value at home and abroad, they are secured upon the taxable capacity of the people of this country, the finest security in the world, and the Bank of England is only allowed to issue paper notes against paper security up to £260,000,000. After that, as hon. Members may or may not know, they can only issue notes against gold, but that is the reason why it is vital to this country to have a balanced Budget, so that that backing of our currency notes shall be unquestioned.

If any Members of this Committee have had any experience of Germany since the War, they will know that Germany did a thing which our Chancellor of the Exchequer would never do. They printed currency notes to meet expenditure, and it was necessary to have a Gladstone bag full of notes to get your boots cleaned, so much did the value of those notes depreciate in purchasing power. Let me remind hon. Members that that was exactly the danger here in 1931, and unless confidence had been restored by the National Government, you had a moment of dreadful danger of a sudden depreciation in the purchasing power of the currency notes of this country, bringing disaster and starvation to our people. That is another reason why it is vital to have a balanced Budget, so that we shall have a proper, secure backing to our currency notes which will, through all crises, both at home and abroad, maintain our purchasing power. Every week when a working man brings home his £2 or £3 of wages, his wife can go to the shop and be certain that she can get the same amount of bread, butter, cheese, and meat week by week.

Mr. G. GRIFFITHS

And margarine.

Sir W. SMITHERS

That is the kind of trivial point that is made, when one is endeavouring to make a serious point, so that you can get away with it with the ignorant part of the electorate.

I want to congratulate the Government on their policy of cheap money. It is a long subject, which I do not propose to enter on to-night, of the differing values to a country of inflation, deflation, and reflation, but the word "inflation" is used very loosely. Inflation, as I have said, can be the printing of notes instead of raising money by taxation for the current expenditure of the nation. That is bad and vicious inflation, but the policy of the Government has been to increase the credit of the country by maintaining a policy of cheap money, and that, the Budget being balanced—and it all depends on that—is a healthy and normal process. I hope the Government will continue that policy of cheap money, because it gives all industry a better chance to get going, to enlarge its activities, and to absorb more men into employment.

The opposition to this Budget is shown by the small attendance here to-day. There is no real opposition to it. Everywhere that I have been in the City and elsewhere during the last two days I have found the Budget welcomed. It is realised that the Chancellor of the Exchequer has put 3d. on the Income Tax and 2d. on tea so that the people of this country might realise to the full the seriousness of the situation and that we cannot have an increase in our defensive armaments unless we are prepared to pay for them. We expect the Opposition to object to the Budget and to the Government, but it cuts no ice at home or abroad. I wish my words could reach more of our own party. I beg the rest of our party in these critical times to rally their ranks and to unite themselves behind the Government, especially the Foreign Secretary and the Chancellor of the Exchequer, in the very difficult and unprecedented tasks which they have before them. The influence, the power, and the action of England to-day mean so much to the world; and when we are squabbling about our own small difficulties at home, let us remember the effect of any division in the constitutional ranks of this country on the world as a whole. So much depends on England, and I appeal to all the constitutionally minded people of this country to rally to the support of the Government, to see the Budget through, and to back them up to the hilt in their foreign policy.

8.15 p.m.

Mr. SEXTON

I have listened with very great interest to many speeches in this Debate, including the maiden speech of my hon. Friend the Member for Llanelly (Mr. J. Griffiths), and I will try to pay my tribute to him in suitable language. If I had been possessed of the oratory of a Demosthenes or the rhetoric of a golden-mouthed St. Chrysostom, I would have been enabled to pay the tribute to the hon. Member's speech which it deserved. The fabric of the speech was made of the warp of logic with the woof of human qualities. His was a speech of warm, human feeling, and had my hon. Friend been present I should have liked him to have heard my little tribute to him. On the question of the Budget, we have not heard very much from hon. Members on the other side about the evasions of taxation which have taken place during past years. The Chancellor of the Exchequer referred to one method of evasion by taking out what was called an educational trust deed. I as an educationist seriously deplore the fact that people in the sacred name of education are dodging their obligations, and, at the same time, very likely taking advantage of the touts fee of 10s. 6d. for sending along their friends names. We were accused by an hon. Member speaking last night from the opposite side of the House of having malicious minds. I wonder what kind of minds those people have who have exploited educational trust deeds to bring up their children thoroughly and well. I wonder what they think when they smile inwardly at having done the Revenue and the Budget out of certain moneys which ought to have been paid. It would be very interesting to see the black list of those, perhaps including Members of this House, who have exploited these dodges.

There are other ways, I understand, of getting round, under. above or through the Budget. There are insurance policies. I received a letter this morning from a quarryman in the district which I represent saying that during the first half of the Financial Year he had been fortunate enough to be at work, and was mulcted in Income Tax. During the last half of the Financial Year he has been on the dole, and he has asked me how he should set about reclaiming what he has paid. I have written to tell him that he should apply to the Chancellor of the Exchequer for some of the wonderful circulars which have been issued in order to show people how to reclaim or how to dodge Income Tax.

In looking through the Budget I find very little to lift the clouds of poverty from the Special Areas, one of which I represent. Here we have a magnificent Budget of £800,000,000, and only £1,000,000 is set aside on behalf of the Special Areas, only half of what was paid in Tramp Shipping subsidy. The financing of small businesses will do very little towards solving the problems of the Special Areas. The more excellent way would have been to finance works schemes. In West and South West Durham, deplorable areas, we have men who have been unemployed for five years. We have the very kind of land needed for afforestation, and I should have liked to have seen in the Budget that more money was to be spent on afforestation. I was present at the Newcastle Forestry Commission Conference only a week ago, when it was pointed out on behalf of the Forestry Commission, that rough forest land was needed. We have all that in the Western part of Durham. We have the finest trees to be found anywhere in the country growing a thousand feet above sea level. We have the right type of land, and the right type of men too. They are partly agriculturists and are used to navvying, digging and trenching—the very men that could be employed upon a large scheme of afforestation. We have in the County of Durham ample room for extending the roads and bridges. The county council of Durham has put a programme before the Government time and time again, and that programme has been turned down or belittled or cut down so much that the people in the County of Durham are wondering what the National Government represents.

A good way of using some of the money would have been to experiment in the equalisation of poor rates in this country. The Chancellor of the Exchequer has had experience of an Equalisation Fund, and he ought to have extended the principle to the poor rates. In the West of Durham we have a range of hills called the Pennines where for 100 years and more lead and silver, in small quantities, have been extracted. At the present time many of the lead mines are derelict. Some of the money that is to be expended on armaments might as readily have been spent on prospecting among those hills for those everlasting natural riches, in trying and find new work for men who are out of work, to increase work and wages, instead of bolstering up small business organisations that are tottering to their ruin.

I looked in the Budget for something that was to be done for the old people of this country. It is a tragedy when you think that there are 600,000 old men and women, 65 years of age and over, tottering off to work when, at the same time, we have huge numbers of young virile and strong men standing at the street corners. It would not have cost very much to have taken those old people out of industry. It would have been a real Budget if the Government had started to tackle that problem. The young people would then have been provided with work, and I do not think it would have cost the Government very much money, because it would have been merely the transfer to the so-called dole of the old people who are now going to work.

This is St. George's Day. The Chancellor of the Exchequer had an opportunity to be a right valiant St. George. He could have looked round at the many dragons that are there to slay him under the capitalist system, the dragons of poverty, distress and destitution. He looked around, and the dragon he attacked was in the shape of the poor widow, the old age pensioner, and the unemployed man who is on unemployment assistance. Instead of being full of ginger and attacking a big and a real dragon, he has been a gingerbread St. George and has tackled the poor by taxing their tea. Yet we are told that even with all the poverty and distress that we know of here and read about, the workers of this country are better off than the workers in any other country in the world. I expect that the Governor of Durham Gaol will say that about his prisoners, that his prisoners are better fed, clothed and housed than the prisoners in any other gaol. I would remind hon. Members that they are still prisoners, and so long as Budgets are framed as this Budget has been, the workers of this country will to a large extent remain the wage slaves that they are. The hon. Gentleman the Member for Chislehurst (Sir W. Smithers) spoke about the National Government restoring this country from ruin. I wish he would come with me into my Special Area. I would show him there the ghastly "restoration" that has taken place under the National Government. There the people are all distressed, not knowing which way to turn, and some of them at least have looked to this Budget for help to relieve them and to lift the clouds of gloom and poverty and set them on the highway towards those higher heights and nobler thoughts for which we all long.

8.25 p.m.

Mr. LYONS

The hon. Member who has just spoken will forgive me if I do not attempt to traverse many of the statements he made, with which I profoundly disagree. I do think, however, that it ill becomes any Member of this House in these times to suggest a comparison between any section of the community in this country and those whom he described as prisoners. The Budget statement this year must necessarily embrace many considerations both of a national and international character, and, as was said so aptly last night by my hon. and learned Friend the Financial Secretary to the Treasury, the financial statement this year has an unusual background. We ought to remember that it is a background which has been forced upon us by sheer national necessity. I think the country as a whole can congratulate the Chancellor of the Exchequer and congratulate itself that the realities of the situation can be met and dealt with by the rising industrial tide and what the Chancellor of the Exchequer described as the real buoyancy of our revenue.

We all know that international times are not normal. It is known perfectly well by hon. Members opposite and by those from whom they seek support in the country, as well as by ourselves, that at this serious moment in national and international affairs there are certain inescapable facts which must be faced. One fact is that there is no change of policy by this Government, or the preceding Government, in regard to their desire for real disarmament. Our course in this country to-day, however, has been undoubtedly impelled by the fact that other nations have given nothing more than lip-service to the ideals of our own peaceful teachings. We have to face that fact. I am glad to think that many hon. Members in this Budget Debate have admitted the responsibility which must fall upon any. Government of the day to see that the security of this country is properly provided for.

At the outset of any survey of our financial position we can make one or two observations which are highly satisfactory. We are paying our way. We have reached a stability which is the envy of all. By the sane, strong, financial policy which has been directed by my right hon. Friend the Chancellor of the Exchequer we have reasserted confidence from a chaos which a little time ago was bordering on catastrophe. In the last few years we have met and overcome difficulties which are without precedent. Our national Budgets have all been balanced, and that has been done in a plain, straightforward way, without any financial trickery, without any covering up of things or resorting to any device to obscure the true position. These facts should be stated, and we perhaps are the only people who are in this position in the world to-day. By the prudent direction of the Chancellor of the Exchequer, the British Treasury is to-day recognised as the greatest Government Department in the world.

Every hon. Member must realise that a Budget of £800,000,000 is a staggering figure. It represents in taxation a burden which is great, but the inevitability must be accepted, and when we consider the services embraced by this responsibility let us remember that each year there is an increase in the services for which we cater. Compared with 10 years ago, the additions are enormous. Even since 1932 the Chancellor of the Exchequer in his Budget statement said—there is an increase of something like £17,000,000 in the major services of unemployment, pensions, housing and education, and a reduction of £50,000,00) in charges that the public then had to pay. Even this year with the taxes which have to be accepted, and which nobody likes, well over 1,000,000 taxpayers will actually have some reduction, and that reduction will be spread over the taxpayers to whom the charge seems the greatest because of the limitation of their purses.

It must be generally conceded in this House—where the responsibility cannot be evaded—that whatever financial burdens have to be borne, in comparison with the insecurity that might otherwise follow the cost may be cheap. Certainly, we can take courage from the fact that the bill can be presented to-day by the Chancellor of the Exchequer and met because of the last five years of national control and regulated balancing of the national Budget. It was indicated by the Chancellor of the Exchequer on Tuesday that while he thought fit that some part of the immediate cost of defence should be borne by those contributing for the immediate present, yet in future he adumbrated that a big balance would later be borne by a national loan. The Chancellor of the Exchequer might have taken a risk this year. He might have begun to borrow immediately. Suggestions have been made to that effect by those who in the past have been most effusive in support of his orthodox financial policy. It is said that the Chancellor of the Exchequer might deliberately have budgeted for a deficiency, but not one of those things would have been in keeping with the years of prudent national finance which the country has had from the right hon. Gentleman who presides over the financial destinies of the country.

I have no doubt that with the country as it is, with money cheap as it is, with confidence and credit standing as high as they do, that if and when the time comes a loan might well be launched, so that those who are to benefit in the future will pay towards the liability which must be incurred for the future defence of the country. For many years the Government have been urged to provide more defences. There have been increasing demands for more ships and more aircraft to defend ourselves and our Empire and to maintain our position and responsibility in the system of collective security. Even the Socialist minority have urged time and time again the adoption of a foreign policy which if carried to its logical conclusion would necessitate a very substantial increase in armaments, even though, according to them, it might not be necessary to use those increased armaments for the defence of our own Empire. Be that as it may, and I do not want to dilate upon foreign policy, the Government year after year have taken the lead in an attempt to bring about disarmament. It would be futile to turn one's eyes from the position to-day and to leave the country without adequate defences and not be able to play the part which we must take in supporting the collective responsibility for peace throughout the world.

It is desirable that every section of the community should be made keenly aware of, and immediately interested in, the preparations going on in this country and throughout the world. No one desires to shirk his proper share of responsibility, which everyone must carry, for the defences of the country and the cause of peace. The Chancellor of the Exchequer in raising taxation has always an unpleasant duty, but it is a duty which has to be done and in the discharge of it he is entitled to the support of all those who have the national interests at heart. At any rate, he has distributed the burden over all classes as equitably as possible. He has loaded the burden more heavily on those who can best afford to pay and has lightened it on those who are poor but who, nevertheless, have to take their share in this national responsibility. And he has ended the privileges of those who have adopted plans to avoid the severity of taxation. Let me say just a few words as to the national situation during the last five years of the present Government. Year after year we have seen a record figure of the number of people in work, but that is not enough. However much the employment figures may rise or unemployment figures decline, no one can be complacent with unemployment standing at nearly 2,000,000.

A good deal has been said about tariffs. They have been described as one of the pillars by which confidence has been built. I want to know whether it is not possible to extend the principle upon which the duties are imposed on manufactured goods which we can just as well manufacture ourselves by our own working people. I can speak for a good many industries in the city of Leicester, and I want to tell the Chancellor of the Exchequer that in every case where an industry has had the benefit of protec- tion against foreign competition there has been an increase in the number employed, a bigger output, more secure employment, and at no time has there been any increase in the cost of the article. Notwithstanding the £34,000,000 which has just been derived from the duties on manufactured foreign goods there has been no increase in the price of similar goods made in this country. I want to make it perfectly clear that there is no industry to which a tariff has been applied which has not benefited from the tariff. I visited an industry in my own constituency the other day and I saw there not merely extended works and increased employment, but also a training shop opened for the introduction of a number of men who had come from South Wales in order to learn an entirely different trade. They were to be taken on the establishment because of the greater production necessary since a tariff has been imposed, and which is giving the consumer a better article at a less price than before.

Having regard to the evidence which now exists in industrial promotion and expansion since the introduction of tariffs it must be remembered that they are now long past the experimental stage, and I hope the Chancellor of the Exchequer will give his serious consideration to expanding, where it is reasonably necessary, the level upon which ordinary taxation on foreign manufactured goods begins. Hon. Members opposite who failed to consider this question as a matter of economic expediency and always tried to use it as an argument for political principles, used to say that prices would go up, that there would be monopolies and log-rolling. The experiment has been watched with scrupulous care by its opponents during the last four or five years and this country can look back with great satisfaction to the fact that the experiment has succeeded, and that not one of the fears expressed by its opponents has been well founded. I hope the Chancellor of the Exchequer will consider whether it is possible to bring in a system which will raise the level, and act immediately in order to give British industry still further protection against goods made in foreign countries.

Our social services—the greatest ever known—have continued unimpaired. It has been observed that this is an occasion when something might have been said about the means test. The House has been promised, and it accepts the statement of the Minister of Labour, that whatever alterations are going to be made in the regulations providing for unemployment assistance they are coming as a separate issue before the House this spring. Nobody likes a means test, but some means test is essential. The leaders of the party opposite have repeatedly said the same thing. But while we believe that some sort of means test is essential in order to preserve the rights of the employed men, we, nevertheless, consider that it should be administered fairly and justly without creating undue hardship or interfering with the unity of family life. We shall wait and see when the Regulations are introduced and we shall not hesitate to criticise if we think our criticism is well founded.

Something has been said about the omission of the Budget to deal with maternal mortality. The House will consider next Thursday a Bill which has been introduced providing, for the first time in this country, for a national system of paid nursing services to expectant mothers. It is no good saying that maternal mortality, deplorable as the figure is, is one of those things which can be related only to unemployment. In the last discussion on this question I gave figures relating to Bournemouth and Hastings, where there is no unemployment, which were far higher than the figures for the north of England. Nobody will deny that unemployment, malnutrition, and bad nursing are factors which have to be provided for, and which I hope will be provided for when a full account is taken. But, they are not all. Whatever may be our duty to our people and our country, and to collective security, whatever may be necessary to fill the gaps in our defences, there is to be no reduction in the social services which we intend to give to the country, and no halting in our progress. The whole country is willing to stand by the pledge given by the Prime Minister at the last election.

The point has been made against the Government that no provision is being made for the payment of the American Debt, and that the American debt seems to be passed over as a matter of academic and almost historic interest. I am sure hon. Members who made that point do not wish to be deliberately unfair. Let it be remembered that when in the past prior Governments were paying the debt to America they were receiving far more from European countries who owed this country money than they were paying to America on our own debt. Some years ago when we put an end to the payments of foreign nations to ourselves, we put an end to receipts larger than the expenditure of the Government in paying the American debt—a debt which America probably really could not afford to receive.

I was interested yesterday in the speech made by the right hon. and gallant Gentleman the Member for Ripon (Major Hills), who spoke of increased spending power and the mobilisation of distribution and production. I believe all of us desire to see a better and fuller life for the people of this country. That could not be obtained by inflation, by budgeting for great deficiencies next year, and by destroying the confidence upon which financial solvency has been based. I will yield to none in the desire that I have to give better conditions of work, better conditions of organised leisure, a better working day and a better playing time, better distribution, bigger spending power and shorter hours of labour; but I believe those things are absolutely dependent upon the stability of the financial structure and the safety and confidence of the country.

I believe that the Chancellor of the Exchequer did a good thing when he removed the anomaly of the Road Fund. I hope he will consider, however, the introduction of safeguards which will ensure that adequate amounts are made available for road purposes. I hope he will see that there is a proper distribution according to the needs of the various parts of the Kingdom, although the Road Fund no longer exists as a separate entity. I suggest that these safeguards should take one of two forms, either regular consultation with those who represent in the main the road users; or the settlement of some formula for measuring road requirements, or the setting up of some advisory body, or some other method whereby the needs of road users could be considered. I do think that when hon. Members seek to make a point of the fact that the social services and the expansion of public ser- vices in the Budget are not as great as they ought to be, they should remember that last year £100,000,000 went to road planning and that there was a guarantee of over £26,000,000 for railway development.

For the first time the Chancellor of the Exchequer is taking a step to aid in the establishment of a reconstruction association in the nature of trading estates in the distressed areas. I am sure this will not be considered in any way as a semi-philanthropic institution, but will be a real endeavour to create business on businesslike lines. Many have taken the view, which I have never hesitated to express myself, that in dealing with the distressed areas one must look at the subject as a national problem. I am happy to say that I do not represent a distressed area, but it is nevertheless my business as much as it is the business of everybody else to see what can be done for any one part of the country which is suffering, no matter for what reason, from a calamity at its door. I do not think it is fair to say that the distressed areas have only arisen in the last few years. They have been with us for a long time. It does not matter how long they have been there or whose fault it is; this is no time for recriminations.

This is a national topic and I think it has to be considered by everybody as a national charge, and not left merely to those who represent the distressed areas to ventilate the facts concerning those particular districts. I hope that, whatever amount is necessary in order to give some attraction to new industries to enter those areas, where idle hands are waiting for work which has so long been done well and favourably in their industrial life, the Government will not hesitate to expend some energy and capital on it.

I would, however, like to know at some time in this Debate who will select the applications that are to be made to this new company in order to grant capital to assist new industries to go there. It must be remembered that if the industrial trek has not been to the south, the trend of the establishment of new industries has gone in that direction, and if now new industries are to be induced to start in the distressed areas there must be some attraction to those who seek to go there given from this fund which is to be established by the Government. I do not think the Government should ever try to dictate to industry where it shall establish itself and where it shall open branches, but I hope there will be some proper examination of every application that is made. I would like to know, if it is not too early to ask it, what sort of invitation or inducement it is proposed shall be given by this company to those who are considering the erection of plant or factories in the distressed areas. The only other thing I wish to say on that subject is that I hope the final word will not rest with a Minister in considering the applications that are to be made to the company until all considerations have been fully examined.

The criticism has been made that this remedy is only a partial one; a similar criticism was made when the Commissioner was first entrusted to make certain studies and authorise certain expenditure. I hope the Government will tell us that it is not their intention simply as a palliative to try to ease the position for the moment. I hope this is another attempt made since the establishment of the Commissioners for the distressed areas really to do something to open up the places which are distressed and which, so far as can be seen, may remain distressed for a long time. I hope we shall be told more of the details and of the manner in which this company will work. This afternoon I asked a supplementary question as to when it would start work, and the Chancellor told me that it would start as soon as possible. I realise that it is difficult now to give a precise date, but I am certain that this matter has been considered before now. It must have been considered before it was included in the financial statement, and I am certain that the machinery which the right hon. Gentleman and his Department have in mind is ready. I want to see it translated at once to the distressed areas.

I believe as fit a race of craftsmen can be found in the distressed areas as anywhere else. I believe it would be to the benefit of the whole community to get those areas back to work. The products of my constituency are products which are needed by the people who live in the distressed areas. They need only the means to buy those products and then they will buy them.I want them to have a re-establishment of trade whereby they can buy the things which other towns make. I believe that if the spending power of the whole people is increased it will go a long way to make still greater the national credit. Low wages and depression are no good to anybody. Economies must be made and crises have to be faced, but when those crises have been faced and when there is stability and confidence, let us get a measure of high spending power. Let us increase the power and capacity and the desire and will to spend, and then there will be the desire and will to make and the need to make, and the creation of secure employment. I do feel that this is a further budget of stability and confidence. While it is not wholly liked by everybody in that it increases taxation, it is one of the series on which the country in years to come will gladly look back and say it was another resolute effort by a wise director of the national finances to help to save the situation at a time of extreme gravity.

8.55 p.m.

Mr. HOPKIN

I understand that several Members on this side of the Committee desire to take part in the Debate and I do not therefore propose to speak at length. I intervene with great diffidence because the Budget presents a problem of enormous size and importance, involving complicated questions of all kinds upon which a Chancellor of the Exchequer has to conic to a decision. The back bencher would be a bold man who would pit his knowledge of such matters against that of the Chancellor of the Exchequer but I venture to think that any back bencher may offer criticisms of the general principles upon which the Budget is founded.

It seems fatuous for any one in this Committee to say that the expenditure side of the present Budget should be cut down, unless, at the same time, he indicates where that cut can be made. Examining the expenditure side of the Budget, I find that tine expenditure on the Consolidated Fund Services amount to £235,000,000. Hon. Members opposite have been demanding economy. Is there any one of them who will say that a single pound could be saved on those services? I am sure the Committee would be glad to hear from any hon. Member who is willing to point out where a saving can be made under this head. The internal debt at present amounts to £6,880,000,000 and, of that, £1,912,000,000 is in 3½ per cent. War Loan. Will any Member opposite say that there is a single item composing that internal debt which could be touched?

In the Supply Services, Army, Navy and Air Force Votes account for £137,000,000. No one in any part of the Committee will say that that sum can be appreciably reduced. I then take the Civil Vote which amounts to £369,000,000. This is an item upon which several hon. Members opposite have said some saving should be made. How is it made up? Exchequer contributions to local authorities represent £45,000,000. There can be no saving there. Education represents £54,000,000. There can be no saving there. So one could go through the items in Table "A" of the Financial Statement showing the amounts to be spent on agriculture, health services, housing, rural water supplies, police and so forth and I am at a complete loss to know where any saving can be effected. Under Table "B" we find that Old Age Pensions account for about £44,000,000 and War Pensions for £41,000,000. Will any Member of the Committee say that savings could be made on either of those items? Then we have widows, orphans and old age contributory pensions, £15,000,000 and unemployment insurance and assistance £68,000,000. Throughout the Debate I have not heard a single speech pointing out specifically where a pound could be saved on the present expenditure of the country.

We come to the means by which the Chancellor of the Exchequer obtains the money to be spent. The two biggest items are Income Tax £238,000,000 and Customs and Excise about £303,000,000. I respectfully put this question to my hon. and learned Friend the Financial Secretary to the Treasury: How long are these items to continue before they reach the point of diminishing returns? We have seen Customs and Excise rise from £238,000,000 in 1925 to a point at which the estimate for next year is £317,000,000. In 10 years we have seen an increase of £79,000,000 under this head. How long is this process to continue and how long can these already almost intolerable burdens be borne by the people of this country of all classes?

The Government must, sooner or later, look for new sources of revenue. There is one such source at their hand. The hon. Member for Chislehurst (Sir W. Smithers) hinted at where the Government could get an additional £3,000,000 in what I venture to describe as a rather mean way. But the Government have at hand a means of obtaining money easily and fairly, and that is by taxing land values. Around our cities, and particularly around London, land values are rising every day, and the money is going into the pockets of people who render no service to the State. If it be true that we cannot damage our credit by touching the Consolidated Fund Services, if we cannot take steps to reduce this £235,000,000, the people concerned in that are the very people who would for the greater part pay any taxation imposed upon increased and values. The gratest disservice done to this country in the last quarter of a century was when the measures commenced by Lord Snowden to deal with this matter were stopped. Here is a means ready at hand of raising taxation, one that would certainly be fruitful and which could be used, at least, as an alternative method to the methods of Income Tax and Customs Duties.

My hon. Friend the Member for Caerphilly (Mr. Morgan Jones) touched on the question of direct and indirect taxation. Of the total obtained by taxation, 54.1 per cent. is obtained by direct taxation and 45.9 per cent. is obtaintd by indirect taxation. I see on the Front Bench opposite two Ministers who must have spoken upon this point hundreds of times in their old Liberal days. In days of long ago it was a great point on Liberal platforms that taxation should be greater on the direct side than on the indirect side, because indirect taxation is paid by people without knowing it. It is inequitable also because it tends to raise the poor man's cost of living. With regard to the Road Fund, there can be only one possible reason for its absorption, and that must be for the Treasury to make it more difficult for money to be spent on roads. There is a wonderful piece of work which could be started if the money, were available. I refer to the Severn Bridge. Seventy-five per cent. of the cost has been offered, and surely, if there is any money in the fund that cannot be used this year, no better use could be made of it than to put forward this magnificent scheme, which would mean employment for so many men.

May I make a further point which has been made in a brilliant maiden speech by my hon. Friend the Member for Llanelly (Mr. J. Griffiths) with regard to the £1,000,000 which has been set aside for the Special Areas? I appeal to the Chancellor not to limit it to the Special Areas only. Is it possible for some other sum—if the Chancellor cannot afford £1,000,000, £500,000 would be well spent —to be granted to the areas which are immediately surrounding the Special Areas. May I give an example to show what I mean We have in the outskirts of the industrial parts of Carmarthen shire little villages where there are factories, not worked and controlled by families only, but employing in some cases 50 and 60 men and women. They are at present derelict and producing nothing. They have everything in the way of first-class machinery, but they have no money. These mills produce the finest flannel in the country, and they used to sell it to the miners when the miners had work. The miners have no work now, and these factories cannot sell the flannel. If some capital were forthcoming they would not, of course, of necessity, go on producing flannel which they could not sell, but they could be employed on other things which they could sell. I ask the Chancellor not to close his mind to the areas that are round the Special Areas; his assistance would not only employ people from those villages, but would absorb some of the people who are unemployed in the Special Areas.

9.9 p.m.

Lieut.-Colonel Sir ARNOLD WILSON

I cannot follow the hon. Member who has just spoken without criticising his advocacy of the Severn Bridge. I hope that the Chancellor of the Exchequer will not be led by admiration for grandiose plans to devote a yet larger sum of public money to make another racing track on which more motorists can risk their lives.

Mr. HOPKIN

It will save 100 miles.

Sir A. WILSON

I find it difficult to believe that it will be of permanent bene- fit to South Wales. There is a Committee sitting upstairs on the subject, and there are persons far better qualified than we are to consider the pros and cons of the scheme. We do not wish to indulge in works programmes simply for the sake of finding work. Work ought to be undertaken and considered from the national point of view. I spent an unprofitable week-end studying the finances of the principal countries of the world, and when I listened to the Chancellor of the Exchequer on Tuesday, I felt a proper national pride and a glow of growing confidence. That speech could have been delivered in no other great foreign country. I doubt whether it could have been delivered in any other country. It will do more to establish and strengthen confidence in the world than many speeches made at Geneva by well-meaning statesmen, whether representing this country or any other.

The defence of this country depends upon four things—men, arms, food and money. We have a financial system which remains sound and will make it comparatively easy at short notice to provide the other three. The Budget is on sound lines. So far from feeling chills as I listened to it, I was proud that we are not raising a large sum, however cheaply, by means of a loan, but prefer to carry the burden on our own shoulders instead of placing it on the younger generation now at school. We have raised quite enough by loan.

The Chancellor might have drawn the attention of the Committee to the fact that this year is a landmark in our history, for between now and the beginning of the next financial year, if the Registrar-General's anticipations are correct, the population of the country will begin to drop. The total was 45,401,000 in 1934, and it is anticipated that it will be 45,149,000 in 1936. Once the fall begins, it will continue, not rapidly at first in the total population, but there will be an immediate reduction in the number of the able-bodied wage-earning population.

That brings me to my second point in regard to the Income Tax. I therefore welcome the allowances for married men and in respect of children, and hope that there will be in future Budgets further allowances in this direction. It is true that we are not likely greatly to affect the birth rate by such devices. They have not done so in Germany. They have not been successful in Italy, where the birth rate has fallen year after year for 15 years and is now no higher than it was in England in 1913. They will, however, make it possible for children to be brought up healthy and strong, and will reduce still further not merely infantile mortality, but infantile ill-health, which is just as bad.

Mr. GALLACHER

They will not affect the derelict areas.

Sir A. WILSON

In the derelict areas, I am proud to say after some considerable examination of the statistics, infantile mortality is as low as in any other part of industrial England.

Mr. GALLACHER

Income Tax allowances do not affect them.

Sir A. WILSON

I am speaking of the probable effect of the increase of the allowances to the Income Tax paying classes who are affected. The Income Tax limit is now low, and I hope it may some day be raised. There are 500,000 children in receipt of domiciliary relief out of the total of 10,000,000 children in the land. It is true that we have not yet devised any system of family allowances for those below the present Income Tax limit, but in my judgment we shall soon have seriously to consider something like a system of family allowances for the non-Income Tax paying class, but on lines adopted with some success in three or four foreign countries, from whom we may learn something.

I hope the Chancellor will not be unduly moved by the allegations made in the papers that Budget secrets have leaked out. We all know how proudly tipsters announce it when they have struck a winner and how hard it is to discover 48 hours later the names of the losers they tipped a few days before. Rumour is a lying jade. As Virgil has it, fama malum quod non velocius ullum mobilitate viget viresque acquirit eundo. Ill news flies fast and gains speed as it goes, and I can well understand people in the City who live cheek by jowl with Lloyd's, rushing to take action on a rumour. I hope, also, that the right hon. Gentleman will not be moved by the allegation that bachelor girls and bachelor men are resentful of the increase in the allowance to married Income Tax payers. That sort of thing is unworthy of the Press and of the people whom they falsely claim to represent. The young men and women of this country are perfectly well aware of the need for these marriage allowances, and I have no reason to believe that the suggestion that they are squealing because their fathers and mothers are getting some advantage which they themselves do not receive has any foundation.

The fact that the population of this country is shortly going to fall must make us realise that we cannot expect to raise much more money by taxation. As my hon. Friend who has just sat down said, we cannot expect to spend much less. What we have to do, therefore, is to seek for possible means of avoiding waste and try to get better value for the money we do spend. In the case of the social services, and in a much wider sphere, it is within the power of the Government to get better value for what we are spending. We are not getting anything like full value at present in many directions. I took up by accident in the Library this afternoon the report of the Charity Commissioners for 1934, and I find that there are 244 charities for blind persons. I turn to the annual report of the Ministry of Health to find out how many blind persons there are in England. There are only 63,000. That means there is one society for every 250 persons. That is a, waste of money, though not necessarily the money of the State. I seriously suggest that as there are many charities which are entitled to obtain a. rebate of Income Tax in certain circumstances, the Chancellor might reasonably require from the Charity Commissioners—legislation will be necessary to do it—a certificate that those charities are efficiently organised, that they are necessary and that there is no overlapping.

There are 600 war charities. The charities of every sort in the country are innumerable and are still growing in numbers. Their overhead expenses are often enormous. Surely the time has come for the sphere of the Charity Commissioners to be considerably enlarged. I think we shall have to get back before long to the Minority Report of the Royal Commission on National Health Insurance, which advocated the breaking-up of the 6,000 independent units of friendly societies and the reorganising of them on a basis of per county and per county borough, making the cost of administration far less than it is now. At present £4,000,000 or £5,000,000 a year is spent on National Health administration. We have to spend the next few years seeking to avoid waste rather than discovering fresh means of raising money.

We have heard much condemnation, particularly from the Labour benches, of those who seek to avoid Income Tax. Avoidance is a very different thing from evasion. Avoidance is not only legal but it is proper. Those very able gentlemen who advise us, as trustees of others, make it their business to see that not one penny more is paid into the Exchequer than the Exchequer is entitled to. Where did they learn their tricks? Not from the Act, but from the ruthless way in which the screw is put on by the Inland Revenue Commissioners themselves, who may say with Macbeth that in these cases we but teach bloody instructions, Which, being taught, return to plague the inventor. or with Simon de Montfort: By the arm of Saint George they fight right shrewdly, But 'twas I that taught them. All those little tricks have been taught to experts by the Inland Revenue in their ruthless endeavour to strain the law and stretch the net to the utmost limit in order to include therein the unfortunate taxpayer. I am sorry to say that that has had a certain effect on the morals of taxpayers, who say "Tit for tat. You have plundered us, as we think unfairly, and we will get back on you as best we can." I do not like that attitude, and I do not practice it myself, but it is common, and I suggest that a department of mercy might be attached to the Inland Revenue. I suspect that, in proportion to the amount of revenue, far fewer small men escape than larger taxpayers, and I am credibly informed that if all the Income Tax that is really due could have been extracted—with no avoidance or evasion—we should be paying something like 1s. less in the pound—so vast is the extent to which avoidance can be practised perfectly legitimately and perfectly legally, but to an extent beyond, perhaps, what even the Inland Revenue suspect, with all their expert knowledge.

I regret for several reasons—and it is my sole note of criticism—the addition of 2d. to the duty on tea. It is an unscientific tax. It falls heaviest on the cheapest Indian teas, and lightest upon the more expensive China teas. It falls heavily on those who have the very minimum incomes and lightly on those who have the maximum. It is a tax which we deliberately abandoned not so many years ago, on good grounds, and this increase will realise only £3,500,0000. There is an alternative beverage which neither cheers nor inebriates, which is in not less universal use than tea, which has been taxed continuously in this country since 1783. That is the stuff the people buy in bottles and flasks from chemists—patent medicines, drugs and medicaments of every sort and kind which, by a system of insidious advertisement, are being forced more and more upon the people of this country as an alternative to a healthy diet. The medicine stamp duty used, only as lately as 1020, to bring in £250,000 a year. For the last 12 months it has brought in only £750,000 a year. Why has it dropped to that extent? It is not that we are consuming less drugs. We are consuming at least twice as much per head in 1936 as in 1920. It is because avoidance, if not evasion, is being practised by firms whose medical products infest every grocer's shop and which are exported to the uttermost ends of the earth, adding to the trials of those people who are being civilised with our assistance.

If this tax could be effectively administered and extended by amendment and consolidation of the existing Acts, dating from 1785, I have no doubt it would be easy to raise £3,000,000; and if cosmetics and aids to beauty, which spoil many a pretty face, were added to the list, I would place no limit on the sums which the Chancellor could raise and raise cheerfully, with a smile on every face. Even at present the law is not being fully administered. I have obtained copies of circulars from the Board of Excise, and I notice that certain taxes, in their own language, are "not pressed for." Owing to some process of hair splitting, duty is levied on aperient pills although it is leviable on lung balsam. It is levied on cough mixture, but if it is prescription 323, equivalent to Ellimans' Embrocation no duty is paid. Effervescent salts are not regarded as taxable and pay no duty, as it was decided by the courts in 1834 in Rex versus Lamplough that they had no medicinal value. But they are advertised on every hoarding as having a great medicinal value. They should not have it both ways. There is anything from £100,000 to £200,000 there. Here we have a source of taxation 150 years old, ready to hand, and existing machinery, practically the only great tax which is dropping year by year. It deserves the publicity of this House, which I hope I have given it, and the careful consideration of the Chancellor, which I hope he will give it.

When the Chancellor comes to deal with the question of this reconstruction company he should be most unwilling to assent to the suggestions that have been made from all parts of the House that the proposals of that company, which is a limited liability company, should receive the widest publicity. Wide publicity at this stage on what is going to be done, and how, and the extent of the discretion allowed to the managers and the managing directors, would be fatal to its success. Give them time to look round, and let us have a cautious approach otherwise money will be wasted quickly. I do not sympathise with those who regard £1,000,000 as being a drop in the bucket. It is not intended, I understand, to finance a whole industry. It is intended to assist in financing small industries, and I can see no reason why there should not be great and beneficent growth through trading by this and other means, but it depends almost entirely on the company being dealt with, on commercial lines, by business men, and not permitted to touch carbonisation of coal or other things of which far more is known by the Government, I fancy, than the Government care to say.

9.31 p.m.

Mr. PRICE

With much of what the hon. Member has said I find myself in agreement, particularly on what he said about the Severn Bridge, but I will not dilate on that; also when he talked about the waste in the organisation of charities, but I would warn him of the dangers of some of his recommendations. Charity organisations to which the hon. Member referred are very numerous and over-lapping but provide employment for young society ladies who will find themselves unemployed if there is to be rationalisation of that industry. When he suggests the taxation of cosmetics as well I tremble to think what will happen to him when he comes to seek election again. The hon. Member seemed to suggest that speeches at Geneva are less important than speeches by the Chancellor of the Exchequer. Here I do not find myself in agreement with him. It is clear that he has little respect for those who in these difficult times are still trying to uphold the principle of collective security and the League of Nations, and it looks to me as if he is making the task of the Foreign Secretary more difficult. We are in the remarkable position on this side of the House of having to defend his own Foreign Secretary against him if that was really the gist of his remarks.

The Budget which we are considering has one important feature. There is foreshadowed expenditure which in the coming year is to be met by taxation and in future years in some other way. We cannot allow this opportunity to pass without calling the attention of the Committee and the country to the fact that these deficits are, to a large extent, due to the foreign policy that the Government have carried on over the last five years. I listened last night to the Financial Secretary, and he said that this expenditure is due to other Governments willing other means to ours. Did that mean that he was putting the responsibility for the international situation, and the financial results with which this Committee has to deal, upon other Governments, instead of upon the foreign policy of the Government, which was all that could be desired? He tried also to make a. few jokes and to raise some artificial hilarity by suggesting that my hon. Friends and myself were advocating a foreign policy for which we were not prepared to vote the necessary means when the time came.

I would call his attention to the fact that during the last General Election a manifesto was issued by the party to which I belong and that one part of it read as follows: Labour will efficiently maintain such defence forces as are necessary and consistent with our membership of the League. My right hon. Friend the Member for Limehouse (Mr. Attlee), when he spoke upon the Amendment to the White Paper about three weeks ago, also called atten- tion to that statement and elaborated it. We do not stand for unilateral disarmament, and we are prepared to vote whatever is necessary, provided that we are sure that the money is being properly spent and that we get full value for it; moreover that the Defence policy of the country is based upon a foreign policy which involves support of the League of Nations and of collective security. In other words, our foreign policy must aim at collective security and our Defence policy at pooling our defences. We do not feel that we are getting that assurance. The Committee is entitled to ask whether it is really true that there are such large gaps in our defences that this very large sum of money must be raised if we are following a foreign policy based upon the League of Nations. If we are building against the whole world, that is another matter. If we regard all foreign Powers, whether they are members of the League of Nations or not, as potential enemies, the £200,000,000 which is foreshadowed in the next few years as having to be spent on the three defence forces will not be enough, and national and international bankruptcy will face the world.

Is it altogether true that we have allowed our defences to get to such a low level that we must regard ourselves as virtually disarmed? I have heard speeches during the last two days from hon. Members opposite suggesting that kind of thing. I have taken the trouble to look up the figures, and I find in actual fact that there has been a steady increase in expenditure on the three defence forces over the last five years. In 1931 on the Navy Vote we spent £51,000,000. This year it is foreshadowed that in the coming Estimates we shall be asked for £69,000,000. On the Army, £38,000,000 was spent in 1931, and in the coming year it will be £49,000,000. On the Air Force we spent £17,000,000, and in the coming financial year the expenditure will be £39,000,000. That amounts to an increase of £22,000,000 in the last five years. The increases spent over the 1931 level are,£41,000,000 for the Navy, £13,000,000 for the Army and £32,000,000 for the Air Force, a total of £86,000,000. If those figures are correct, where has all that money gone? I understand that considerable sums have been spent upon reconditioning battleships, and that nearly £2,000,000 has been spent in the last 18 months upon four big capital ships. If those figures are true, where is the basis for the statement that there are enormous gaps in the defence forces? They suggest that there is waste somewhere, and that money has gone into places where it should not have gone.

If the Defence policy of this country is based upon collective security under the League of Nations, we do not need to take into consideration the building programmes of those nations who are loyal to the League: France, Russia, and, indeed, the United States of America who, though she is not a member of the League, is not a country whose armament programme we need to take into consideration. The Committee must not let this opportunity go by without demanding from the Government a more precise statement of how the money is to be spent which is being asked for in respect of Defence. We are told in the White Paper about the necessity of laying down two new capital ships and £20,000,000 is foreshadowed, by the Chancellor as supplementary Votes for the three Services which lie will ask for in this House during the next 12 months. I should like him to tell the Committee if any portion of that money is to be for the laying down of the big capital ships. In view of the fact that there is much uncertainty in modern warfare whether those ships are of any use in face of the modern development of aircraft, will not that money be thrown away? Experts and admirals are not united on this matter A good many retired Admirals hold differing views about it. It is high time that a Committee of this House looked into the matter and asked for a more authoritative statement from the Government.

A point which affects my constituency to some extent is that the Chancellor has allowed £1,000,000 for financing new industries in the depressed areas. Although we are not classed as a depressed area, I still regard the area as one which should be treated as depressed. It is dependent upon coal mining and consequently suffers in the same way as South Wales and the North-East Coast. There is another way in which steps could be taken to deal with the depressed areas. We cannot complacently continue to look upon in- dustries slowly going away from the depressed areas to areas in South-East England and the East Coast, spoiling our countryside, creating social problems of housing and leaving large areas derelict in the form of depressed areas. I am informed that in some districts of South Wales industrial property represents one-third of the total rateable value, and that social capital in the form of schools, housing, and public institutions represents two-thirds. If one-third of the total rateable value moves away, as it may quite well do at the bidding of a small body of men, the remaining two-thirds is rendered valueless, and a very serious social problem arises.

We must face that problem. It is absolutely necessary, where so much social disturbance is liable to be caused, that there should be some control over the movement of industry. This is not a new idea. A few years ago a Departmental Committee, presided over by a Member of the other House, was appointed to inquire into the problem. That Committee recommended the zoning of areas, and made other far-reaching recommendations, such as the licensing of industry, tire prevention of industries from moving out of districts into other districts, and the prevention of industries from coming into new districts where the social effect would in the long run be harmful. Indeed, I understand that in the Irish Free State there is now a form of licensing of industries, and I venture to think that something of that kind ought to be adopted here also. If the Chancellor of the Exchequer would handle the problem from that end, rather than by providing this £1,000,000, which will be a mere drop in the ocean, I think he would do the country a great service.

There is only one thing, I think, upon which the Government can congratulate themselves in the last five years in regard to their financial policy. Their economies and cuts at the beginning of the financial slump caused great social mischief, which even now has not been put right. There is no provision in this Budget for doing away with the means test, which has hit so hard the depressed areas, including that which I represent. But the Government did one thing right—by accident; they left the Gold Standard, and I am bound to say that they have, in my humble opinion, followed a sound monetary policy by taking this country off the Gold Standard and getting on to a monetary exchange system which has really made sterling an area to itself. The sterling area now is an important factor in world economics. Nevertheless, the National Government was formed in 1931 for the express purpose of preventing that from happening, but there were forces which were too great for it. That only shows that the great financial blizzard which in 1930–31 swept across the world forced even the National Government into doing what it was formed for the express purpose of preventing.

There are still countries on the Continent of Europe that adhere to the Gold Standard, particularly France and Germany. I believe that attempts are being made from those quarters to tie sterling to the Gold Standard once more, but I hope that the Chancellor of the Exchequer, with the influence that he has in the City—which in my opinion ought to be greater than it is—will not listen to any of these sirens who are singing to attract us on to the rocks once more. There is no reason why we should tie sterling to the water-logged Gold Standard, which will have to sink once more into the abyss even in these countries. I hope, therefore, that, in this one particular at any rate, the Government will continue on the lines which they have been following. We cannot hope to get what we would like to see put right by this Budget—the abolition of the Tea Duty and other matters—but at least in that respect I hope the Government will follow the right path and make this Budget, which we say is due largely to the foreign policy of the Government and its failure to support the Covenant of the League of Nations, not so bad as it otherwise would be.

9.51 p.m.

Mr. ARTHUR GREENWOOD

We have heard on more occasions than one about a lull in foreign affairs. We have had a lull in financial affairs during the discussion on this Budget, which I think has been one of the dullest Budget discussions that I ever remember. That may be part of the craftiness of the right hon. Gentleman, or it may be that he had no goods to put in his shop-window; but, however it may be, the Budget discussions have not been signalised by that buoyancy, to use the word of the right hon. Gentleman, which we usually asso- ciate with Budget discussions. I think we can all sympathise with him in his difficulties. A Chancellor of the Exchequer is in a very unfortunate position, especially in a Conservative or National Government. It is easy for him to be parsimonious in the sphere of social services, but he is bound to respond to the call when the matter is one of rearmament, and I honestly feel sorry for the right hon. Gentleman, because, although he must take his fair share, as of course he would under the principle of collective responsibility, for the general policy of the Government, he is in the unfortunate position of having to provide the ways and means of carrying that policy into effect.

Last night the Financial Secretary to the Treasury tried to reply—I hope I am not being discourteous to him when I say that he tried to reply—to the criticism which had been made of the right hon. Gentleman that, after all, this policy is the outcome of the Government's own foreign policy. I am sorry that I should have to repeat this story again, but truth repeated loses nothing, and the truth is that this nation to-day is facing a very serious situation financially, and the Government have committed the country to an expenditure arising out of the futility of their foreign policy. There is not the slightest doubt, and I am sure that history will record this, that had the last National Government been a little more enthusiastic in the cause of the League of Nations and in the cause of disarmament, we should not have been facing an increase of expenditure—an undisclosed increase of expenditure—on armaments. The people of this country have now to reap the results of the follies of the last four and a-half years, they have to face the results of the weaknesses of the last four and a-half years, and the right hon. Gentleman has had to produce this Budget, for, after all, even Chancellors of the Exchequer have to carry out the will of the Government, especially in matters of defence.

Like all wise Chancellors the right hon. Gentleman has tried to put some sugar coating on the pill, and I do not blame him for that. Indeed, his sugar coating is on the whole palatable to the masses of our people. I think it is right that he should have done something to ease the burden of the Income Tax on people with low incomes. I think we all welcome that. We all welcome the decision to deal with those who evade Income Tax. But, after all is said and done, I think the House will agree that when he sat down after his speech on Tuesday his supporters were dismayed. There was no brightness about their appearance. They were not merely disappointed; they were hit in the pocket. They never expected 3d. on the Income Tax. My hon. Friend who opened the Debate from this side to-day referred to the Chancellor's speech two years ago when he said how they were, after "Bleak House," going on to "Great Expectations." The Chancellor on Tuesday presented the figure of a person wearily trailing himself back from "Great Expectations" to "Bleak House," and now his position is a kind of amalgam, one that we might call "Bleak Expectations.," for truly there is a grim prospect before the country to-day.

The right hon. Gentleman revels in turning the knife. He loves to tell the people that sacrifice is good for them. But what is his own record? This is his fifth Budget. Few Chancellors have enjoyed, if that is the right term, the opportunity of introducing five Budgets. The right hon. Gentleman has never balanced a Budget in his life. He assumed office with a grim determination to balance his Budget, and it looked all right on paper, but all his Budgets have been balanced either by defaulting in payment or by robbing someone's hen-roost. We never hear anything about the American Debt nowadays. Alter all, a gentleman's understanding is a gentleman's understanding. If you borrow money, you ought to pay it back, and every Government did until the right hon. Gentleman forgot to buy the postal order and send it off to the United States. I think he sent a penny stamp, or something equivalent to it—what was called at the time a token payment. That saved him about £30,000,000 a year. He did not mention that on Tuesday, but there it is, a debt which in honour is still owing from this country to the United States. That saved him about 7d. on the Income Tax.

There is something called a Sinking Fund. We never hear about that now. The Chancellor of the Exchequer, who boasts of financial probity, knows that it is the rule to put something into the national money box every year, and he has not done it. That has saved him a good deal. Then, of course, he has been guilty of the crime of taking something out of the child's money box—another raiding of the Road Fund. That is not new. He has done that before, too. Now he proposes to appropriate the whole of it. That, no doubt, has helped him very considerably in his financial difficulty, but that does not mean that he has ever balanced a Budget, and this Budget is as bad as the worst of them. Indeed, this narrow margin that he expects to get during the year will, no doubt, prove to be a deficit. I am no prophet, but I shall be surprised if he finds that he can, in view of this rapidly developing rearmament programme, realise the slight surplus for which he has budgeted. Even with forgetting the United States, even with ignoring the Sinking Fund, even with the raid on the Road Fund, the right hon. Gentleman has found himself compelled to impose new taxation. I should imagine that honest finance would have required at least 1s. 3d. on the Income Tax. He thinks, of course, that if hon. and right hon. Gentlemen opposite will go in for rearmament they must pay for it, and I am wasting no tears over those of us who have to find another 3d. in the £.

The tax on tea stands on an entirely different plane. It is totally indefensible, and I was very gravely perturbed to-day when the hon. Member for East Lewisham (Sir A. Pownall) spoke about some leakage. Leakages are not new, but some leakages are more serious than others. I have looked up the Press, because it was referred to by the hon. Gentleman.