HC Deb 09 June 1936 vol 313 cc51-75

3.49 p.m.

Mr. SANDYS

I beg to move, in page 2, line 4, to leave out "4d." and to insert "3¾d."

The basis for the Amendment is the principle of Imperial Preference. This principle has been seriously affected by the proposal to increase the duty on tea. The Chancellor of the Exchequer alleges that because the actual difference of duty between Empire and foreign tea has been maintained at the figure of 2d., therefore, the principle of Empire preference has been thoroughly safeguarded. I would like to urge, as has been urged in earlier stages of the consideration of the Budget proposals, that that principle, or at any rate the practice of it, has been very seriously affected. The measure of preference has been reduced from 50 to 33⅓ per cent., and, as my right hon. Friend the Chancellor of the Exchequer recognised during the earlier stages of the consideration of the Budget proposals, the effect of this may very well be to induce the public to transfer its purchases from dearer Empire teas to the less expensive Dutch East Indian teas. If that be the case—as the Chancellor admits it may very well prove to be—the Empire tea-growers and the whole principle of Empire Preference will be materially affected.

I know that my right hon. Friend would not be able at this stage to accept a reduction of the duty which would restore the full 50 per cent. of the preference owing to the heavy loss which would have to be incurred by the Treasury, but I ask him to give serious and sympathetic attention to this Amendment which would involve a reduction in the Empire Tea Duty of one farthing and would increase the preference from 33⅓ per cent. to something in the nature of 37 per cent. I am told this would give a considerably increased margin of preference and advantage to the Empire tea-grower. Finally, let me make it clear to my right hon. Friend that in moving this Amendment we accept fully the principle that large increases in our Defences are absolutely necessary, and that responsibility for Empire and National Defence must be borne equitably by all sections of the community according to their ability to contribute.

3.53 p.m.

Mr. GRAHAM WHITE

I do not know what may be the view of the Chancellor of the Exchequer in regard to this. Amendment, but it seems to me that it would have little or no effect either one way or the other. As a matter of fact, these preference duties have not aided the planters in Ceylon or India at all. Their result has been to accentuate the competition of Dutch East Indian teas in the neutral markets to the detriment of the Ceylon planters, who have been spending money to open up those markets. Consequently, the effect has been to limit the re-export trade in tea from this country to South America and other parts of the world. The re-export trade in tea is a growing one. The Dutch teas formed the basis of the blends which were sent to the neutral markets, and the fact that they were available in this country for blending with Ceylon and Indian teas meant that they were able to carry the latter into oversea markets where otherwise they would not have gone. There are more varieties of tea than there are of almost any other product. In dealing with tea in connection with a Financial Resolution, one is apt to think of it as a single product, but it varies from plantation to plantation, and from district to district. The best thing that could possibly happen from the point of view of the planting industries in Ceylon and India would be to put their teas on an equal basis with all other teas, so that the experts who make up the blends could attempt to satisfy the public, who would have an opportunity of getting the best of all the teas available. That would be in the interests of the planting industry as a whole.

3.55 p.m.

Mr. CARTLAND

I would like to say a word or two in support of the Amendment moved by the hon. Member for Norwood (Mr. Sandys). It seems to me that the arguments advanced by the hon. Member for East Birkenhead (Mr. White), if carried into effect, would practically do away with all preference, and naturally hon. Members on this side could not agree with that point of view. The Amendment is a very small one, but it would have the effect of giving a slight advantage to the Empire producers of tea. The proposal put forward by my right hon. Friend the Chancellor of the Exchequer seems to go rather against the previous assistance which has been given to the Empire producers of tea. The preference rate on coffee is 66 per cent., but many more people, particularly in the poorer homes, drink tea rather than coffee, and I feel that for that reason, if for no other, the preference rate on tea should be brought nearer to that on coffee, since coffee is more of a luxury drink than tea, which is almost a necessity in the poorer homes. I hope my right hon. Friend will consider this small Amendment in a sympathetic manner. We feel that it would make a little difference to the Empire producers of tea and not very much difference to the Chancellor's Budget. Therefore, on the grounds that the Amendment would assist the buyer of cheap tea and the Empire producer, and not make very much difference to the Chancellor's Budget, we hope he will accept it.

3.59 p.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

The views of hon. Members who have spoken are very different and they are actuated by very different motives. My hon. Friends who are responsible for the Amendment have put it forward, as I understand, in the interests of Empire production and with a view to increasing the preference to Empire producers to a higher percentage than that which is provided in my proposals. That attitude is very different from the one taken up by the hon. Member for East Birkenhead (Mr. White), who evidently knows better what is good for the Empire producers than do the Empire producers themselves, and who thinks the best plan would be to put everybody on the same level. The hon. Member will not expect me to express any great sympathy with that point of view. With regard to the views of my hon. Friend who moved the Amendment, my attitude is quite different. I am in sympathy with the general view of giving such preference to Empire producers as will enable them to have their good share in the expansion of trade that may take place.

But I am not sure that my hon. Friends have gone deeply enough into this matter to have arrived at what is really a sound conclusion. They may or may not be aware of the circumstances, but I may say to the Committee generally that Indian and Ceylon teas are particularly in competition with Dutch tea from the Dutch East Indies, and that although these three sources of production are no doubt in sharp competition with one another they nevertheless have this common interest, that none of them wants to see such cut-throat competition as will reduce the price of tea to an unprofitable level, and they have for some time had amicable arrangements among themselves for the regulation of production, with the view of maintaining the price at a reasonable level. I am officially informed that it would be entirely contrary to their desires to see the margin of preference widened beyond that which is embodied in my proposals, because the effect of it would be to injure the good relations which now exist between them and their Dutch competitors.

Therefore, although I am sure that my hon. Friend's Amendment is put forward with the best intention of helping Empire producers, I do not think it would help them if I accepted these proposals. The cost of it, although Small, would still be substantial. It would amount to nearly £500,000 a year. It is not on that ground particularly that I find myself unable to accept the Amendment, but on the ground that I have claimed, namely, that it would not really be in accordance with the desire of the Empire producers themselves, and that I do not think it would tend to improve their position in the long run.

Mr. SANDYS

In view of what the Chancellor of the Exchequer has said, while I regret that he is unable to accept the Amendment, I beg to ask leave to withdraw it.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

4.5 p.m.

Mr. BARNES

I regret that a technicality prevented myself and my fellow-Members from moving an Amendment which is on the Paper in our names. Therefore, I desire to oppose the whole Clause in lieu of the discussion of that Amendment. The opportunity that the Motion provides for voting against the whole of the Tea Duty is a much more desirable condition, from my point of view. I do not suppose that any duty, apart from Income Tax, has had the attention of this House more than the Tea Duty. In 1929 the House heaved a sigh of relief when it was felt that we had disposed altogether of discussion of the Tea Duty. It becomes increasingly difficult, as Budgets pass by, to find anything fresh to say on this particular subject, but because this is a matter which very vitally affects the whole of the population, it is impossible to allow to pass unchallenged a proposal by the Chancellor not only to continue this rather undesirable duty but to add to the burden of it.

I remember the occasion in 1929 when the right hon. Member for Epping (Mr. Churchill), in congratulating himself on the removal of this duty stated: 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 RETORT, 15th April, 1929; col. 63, Vol. 227.] That was the right hon. Gentleman's justification for removing the duty altogether. I would call the Chancellor's attention particularly to another statement of the right hon. Member for Epping on that occasion. He explained to the House that the duty had been imposed in the time of Queen Elizabeth and he was rather gratified to feel that in the reign of King George the Fifth the duty would be permanently removed. I do not consider that any sentimental or social appeals of mine will in any way influence the Chancellor, and I do not doubt for one moment that he would describe the language of the right hon. Member for Epping as sob stuff, in stating that tea represented the luxury of the old and the weak and the poor. Apparently the Chancellor now is determined that although the reign of King George the Fifth marked the abolition of this duty, the reign of King Edward the Eighth will see it imposed in a more onerous form.

With regard to the question of Imperial Preference, I fail to see how the operation of the Imperial Preference Duty has substantially improved the importation of Empire teas on to the British market. It has varied from 84 per cent. to 92 per cent., and even with the imposition of this preference over a period there has been a decline in the importations of Empire teas into the British market. One cannot see that the Empire preference represents any substantial improvement in the market position of Empire teas. The Chancellor told us that those in the tea trade have an arrangement between themselves and are anxious that that arrangment should not be jeopardised. That rather suggests that the intention is not so much to improve the position of the Empire importer on the British market, as to give the Empire importer a higher rate of profit on the tea that he puts on the British market. Figures were submitted during the Debates on the Budget Resolutions to prove that the imposition of a duty on tea works out at a higher percentage of increased burden on the poorer grade teas than on the higher grade teas. Therefore, in so far as tea is a universal beverage, that emphasises the point that to the extent to which the Chancellor increases the duty, it falls disproportionately on people with lower incomes who buy the cheaper grades of tea.

The Colwyn Committee 10 years ago emphasised the fact that the normal family with an income of £2 a week consumed on the average 39 lbs. of tea in a year. There is no indication that those figures of consumption have changed to any substantial degree since. It means that the Chancellor is imposing an additional tax of 6s. 6d. a year on the type of family referred to. Another aspect of the problem that we are entitled to emphasise is that the duty now is higher than at any period since 1923. The duty was re-imposed in 1932 as part of the emergency Budget impositions of that period, in order to deal with a special state of financial affairs. Since 1932 the majority of what may be described as the special hardship taxes then imposed under those abnormal conditions, have been removed. When the Tea Duty was introduced on that occasion, the excuse was that the special circumstances remained. The Chancellor has a responsibility not only to this House but to the country to explain how it is that, having imposed this duty again in 1932 after it had been removed from our system of taxation, he can justify the fact that while in the interim period the financial position has eased and other hardship taxes have been removed or cuts eased, on this occasion he not only maintains the Tea Duty but extends it. I notice that the "Economist" in dealing with this particular matter said: The burden of indirect taxation has already been disproportionate increased since 1931. This latest proposal is a grave infraction of the principle of equity, although the absolute burden of the tax is not very large. I trust that if hon. Members will look the facts straight in the face, without any political prejudice, they will recognise that neither the financial condition of this country nor the type of tax we are considering justifies the Chancellor even in maintaining this Tea Duty, and certainly does not justify its increase.

4.13 p.m.

Mr. TINKER

I wish to support my hon. Friend in opposing the Clause. I am not as sanguine as he is in hoping that the House will support us in the Lobby, for I do not believe that hon. Members opposite will vote with us. The Chancellor will not give way. He has made up his mind to continue this tax, and it almost appears to most of us that it is hardly worth while making any protest whatever. In these Budget discussions I find that when the Chancellor has decided on a certain line of policy all the talking in the world has no effect upon him. The right hon. Gentleman has balanced his Budget. He wants to produce a certain amount of money and he is determined to have it. However on this occasion, seeing that this is a tax on one of the chief articles of food of the people, we would be unwise to allow the opportunity to pass without protest, even if our protest has no effect at all.

The Chancellor of the Exchequer, in his first speech on the Budget, passed over this matter very lightly, and in his second speech on the subject he said he wanted every householder to be aware of the cost of the increased armaments. He wanted to see everyone paying a little bit towards that cost, and he took a sort of pride in that attitude. I can assure him that the people will bear in mind what he has done. Wherever I have been during the Recess, I have been challenged in every household about the Tea Duty. The people look upon a Member of Parliament, even though he may only be one of a small Opposition, as a person who has a voice in the control of affairs, and he has to take his share of responsibility. It is no use for a Member to say to these people, "I have spoken about the matter but I have not altered the Chancellor's view." The people hold a Member of Parliament responsible in part for this taxation and when asked what defence I can make of this proposal, I have been compelled to say that I can offer no defence for it at all.

Even though I may agree that certain armaments are necessary, and that it is requisite that there should be taxation, yet I cannot defend the imposition of additional Tea Duty for that purpose. That is why I say that we ought to protest in every way we can against this Clause which places a burden on the very poor. We have recently put questions on the subject of increased pensions. This question of the Tea Duty has a bearing on that matter, because the parishioners for whom we have been pleading must have their tea just like rich people but the cost of the tea will be out of all proportion to their income if this addition is made to the duty. It means they will have to pay an additional ½d. on every quarter lb. of tea and on smaller quantities the addition will be even greater proportionately. This affects the poorest class of people most severely and I think the Chancellor ought to have regard to that fact. When he was seeking for means of finding increased revenue he ought to have had regard to direct taxation more than to indirect taxation. He could have got the £3,500,000 which he hopes to get by the imposition of this additional duty, much more easily and from a more appropriate source.

I take this opportunity, therefore, of protesting against Clause 1. I have been here long enough to know that a small Opposition can never expect to get anything from one whom I would describe as a hard-hearted Chancellor. I look upon the right hon. Gentleman as a very hard-hearted man. Indeed, he seems to take a pride in it. He seems to think that the Government require a strong man who will not play with the Opposition, but will tell them plainly what is to be done and the right hon. Gentleman certainly fills that role well, because when he says a thing we know that he is going to stand by it and that there will be no temporising. Therefore, I make this protest with no hope of success but I hope that at the Election which I expect to happen before long—because the Government cannot continue to change Cabinet Ministers every day of the week without something of the kind happening—the people will bear in mind this increased Tea Duty and treat the Government as they ought to be treated, by sweeping them out of office.

4.20 p.m.

Mr. LEWIS

The argument used by the hon. Member for East Ham South (Mr. Barnes) really amounted to this, that if a demand for a luxury were sufficiently widespread, that luxury was not a suitable object of taxation. The argument has only to be stated in those simple terms to make its absurdity apparent. The hon. Member for Leigh (Mr. Tinker) went even further and spoke about "the food of the people." That phrase may perhaps read better in the local paper than "stimulant of the people" but the latter would be a much more accurate description. For my own part, I cannot see that either hon. Member has put before the Committee any serious reason why tea should not be regarded as a suitable object to bear a share of the heavy burden of taxation which has to be borne in one form or another. Further than that, I think, having regard to the present costs of production and the supplies available, the present rate of taxation on tea is not unreasonable. This afternoon we are asked to agree to an increase in that rate of taxation. I think before we do that we ought to have placed before us clearly the necessity for such an increase. I am not prepared to say, if the Chancellor can show us that the money has to be found, that this is not a reasonable way of finding a portion of it but some of us who have considered very carefully the Chancellor's statement in introducing the Budget are driven to the conclusion that he is under-estimating the yield of some sources of revenue and that, in the event, at the end of the year, we shall find that to balance the Budget, as set out by him, the increase in the Tea Duty is not necessary.

The Committee will agree that if there is any substance in that suggestion it is a serious point, and one that ought to be met. I appeal to the right hon. Gentleman now to assure us that in estimating the various sources of revenue for the current year he has not deliberately provided for a surplus higher than that shown in the Budget statement. If he has done so, the argument for the increased taxation of tea or, for that matter, for increased Income Tax, falls to the ground. There may be this further consideration. The Chancellor may say, "I am, perhaps, a little excessive in caution, because next year we shall have very heavy burdens in respect of our armament programme, and it would be helpful to have a larger surplus than that indicated in the Budget statement, at the beginning of the year." If he proposed next year to meet all the costs of armaments out of revenue, I should have sympathy with that view, but he has already told us that he proposes to borrow for that purpose. I do not labour that point now because it is rather wide of the Clause which we are discussing, but I would ask the Chancellor, if he can, to give us a clear assurance that the estimates of yield which he put before us were no more than reasonably cautious, that he does not anticipate a greater surplus than that originally indicated and that, therefore, in order to balance the Budget the increased Tea Duty is necessary.

4.25 p.m.

Mr. WHITE

I find myself in complete agreement with the hon. Member for East Ham, South (Mr. Barnes), who said that it was exceedingly difficult at this stage to find anything new to say on the subject of the Tea Duty. It may not be devoid of interest at the moment, however, to recall statements made by myself and others in the earlier Debates, and see to what extent those statements have been borne out by the experience of the tea trade and the tea market since the Budget Resolutions came into effect. The hon. Member for Colchester (Mr. Lewis) suggested that the increased Tea Duty might not be necessary because the Chancellor would, possibly, receive a larger income from various sources than that for which he has budgeted. I have grave doubts as to whether the Chancellor will receive the full amount of income which he has budgeted to receive from the Tea Duty. It is true that since the Budget Resolutions came into force the effect on the wholesale market has been that the demand has fallen and that prices have given way somewhat. That may be explained by the fact that when the Budget Resolutions were brought in the blenders and retailers did not immediately put up the price. Therefore, those who had in their pockets the money which would buy 2 lbs. or 3 lbs. of tea probably did so before the price went up. Those people are not now in the market and the effect of that may be finding its way over to the wholesale market.

I maintain, however, that the rise in the price consequent upon the imposition of the extra duty itself must inevitably have some effect upon demand, and that it is unlikely that the whole increase budgeted for by the Chancellor of the Exchequer will be received by him. The statement has been made that the object of the increased duty is to spread the burden over every household. Whatever else it may do, that is what it will not do. Owing to the mechanics of the tea market and the habits of the people that is one thing which is certain. Those who buy the cheapest quality of tea, say 1s. 8d., will inevitably pay every penny of the increased duty. There is no escape for them, because there is no margin to enable any concession to be made by the seller and the purchaser will pay the lot. When it comes to the case of the higher-rated tea, we have the ingrained and rather unfortunate habit of our people of buying tea, in the main, not by quality but by price. If a housewife has been in the habit of buying tea at a certain price whether 1s. 8d. or 2s. 4d. or whatever it may be, she continues to buy at that price.

What, has happened in this respect since the Budget Resolution came into effect? For the first week or two, there was no increase in the price at all. Then the blenders knowing that a demand would come for tea at a certain price, say 2s. 8d., did not take off the market the tea which had originally been 2s. 8d., add on the duty and call it 2s. 10d. tea. No, what they did was to keep a 2s. 8d. blend on the market and to have another blend at 2s. 10d. The housewife who is accustomed to buy tea at 2s. 8d. will continue to do so and will pay no more, but she will get a rather inferior blend and a rather less satisfactory quality of tea. What is actually happening across the counters of this country is that that habit or custom is being maintained. It is not, perhaps, being entirely maintained because some people are paying the extra 2d. but the majority are not and therefore the contention which I made at the opening of these discussions is correct up to the present, that everybody will not in fact pay the increased burden of this tax.

The effect of it is to concentrate the demand for tea on the lower qualities and it is therefore a great disadvantage to these planters in Ceylon, India, and Assam who have been endeavouring by superior cultivation, by increased manuring of their estates, by better methods of picking and plucking the tea, to improve the quality of their product. The effect of this increased duty is very unfortunate on these people. It has already been to reduce the wholesale price of the better quality tea and to maintain the price of the cheaper qualities. Therefore, from the point of view of the consumer, the increase in the duty is unfortunate, and from the point of view of the Chancellor it is even more unfortunate. Later in this week we shall have to consider the finance of the Provincial Governments of India, which is based largely on agriculture, and anything which affects the general prosperity of the agricultural districts of India will be unfortunate. Whether the Chancellor will obtain the full amount of his revenue is a matter for speculation, but the prospects are, in my opinion, that his anticipation will not be realised.

4.31 p.m.

Mr. SANDYS

I think the argument put forward by the hon. Member for Birkenhead East (Mr. White) is somewhat inconsistent with his opposition to the Amendment which I moved. He now puts forward the claims of the planter in India, which surely it was the endeavour of a previous Amendment to protect.

Mr. WHITE

I did not oppose your Amendment.

Mr. SANDYS

I cannot go into that at the moment, but the hon. Member certainly appeared to be opposed to the principle of Empire Preference which underlay it. As regards the principle of taxing tea, which we are now discussing, I entirely support the Chancellor of the Exchequer in his choice of tea for taxation. The hon. Member who has just sat down alleged that the taxation of tea would hit the consumer of the cheapest kinds of tea first and foremost, and that therefore it would be the poorest section of the community who would be the hardest hit. I think that is to some extent a fair and just argument, but surely the whole reason for introducing this increased Tea Duty is in order to reach the poorest section of the community, which is not always an easy thing to do. If they are affected to some extent more than certain other sections of the community, I ask hon. Members opposite to remember that those other sections of the community are bearing very considerable burdens for the purposes of defence, which is the main reason for the increase in taxation, and I think that any responsible citizen of this country would wish to feel that he had made his small contribution towards supplying the necessities for his own security. I will not follow the hon. Member for Colchester (Mr. Lewis) into the question whether tea is a stimulant or whether it is a luxury, but I think the Chancellor of the Exchequer is fully justified in fixing on this particular commodity in order to place the burden of responsibility, in a just and equitable measure, upon all sections of the community in accordance with their ability to pay.

4.35 p.m.

Mr. BENSON

The hon. Member for Norwood (Mr. Sandys) has followed the line of argument advanced by the Chancellor in his Budget speech, suggesting that he has chosen this particular duty in order that the very poor of the community might bear their share of the burden of increased armaments. He suggested that it is equitable that the very poor should bear their share. Quite frankly, we on this side are not prepared to accept that principle. I am prepared to admit as a general principle that everyone should bear taxation, but I will put this proviso, that taxation shall not be borne where the standard of living falls below what it ought to be and what it could be in a decently organised state of society. With all the wealth of this country, we have a population 50 per cent. of whom are living on a standard which does not give them adequate food. Such was the result of the investigations of Sir John Orr. There is no excuse for that grinding poverty. If it exists, then the people who have to exist in that state of poverty ought not to be called upon to pay the taxation of the country, and it is for that reason that we shall oppose this Tea Duty now and whenever we get the opportunity, though we are quite prepared to admit that everybody should bear taxation if and when they are in a condition to bear it.

4.37 p.m.

Mr. BANFIELD

I daresay the Chancellor of the Exchequer is aware, though many hon. Members of the House are not, that in the course of the last year or two there has been a steady rise in the price of tea. The Chancellor alluded to an agreement between certain sections of the community, the effect of which has been a rise which altogether has amounted to round about 5d. per pound. There are great sections of the workers, such as old age pensioners and millions of wage earners, who do not get more than £2 a week, and I want the Committee to realise that these people buy cheap tea. It is impossible for them to buy tea any cheaper. The cheapest tea on the market is always the tea that they buy. Then the Chancellor comes along with another 2d. per pound on tea. It does not sound very much, but to poor people, to the man with a wife and four or five children and £2 a week, with 8s. or 9s. a week rent, it becomes a great burden. I do not agree with the hon. Member for Norwood (Mr. Sandys) when he said that this tax is equitable and just. As a matter of fact, that is precisely the point on which we differ. People who can afford to pay 3s. or more per pound for their tea are not hit to any degree whatsoever by the mere fact that another 2d. is put on the pound of tea.

Mr. SANDYS

Surely what the hon. Member should be arguing is not against the principle of this taxation, which he admits is equitable in principle, but he should, on another occasion, urge measures to raise the standard of living of the nation, in which many hon. Members here would support him.

Mr. BANFIELD

That, of course, is one of those very nice expressions of opinion which we hear from time to time from young Members on the Government benches, but I have yet to learn that they carry these opinions with them into the Division Lobby. In any case the hon. Member will have his chance when the new unemployment regulations come before this House in due course. The hon. Member for Colchester (Mr. Lewis) said he thought tea was a luxury. Well, I am not sure. What is he going to put in its place? What is he going to give people to drink? Pure cold water? Are they to have nothing but the water from the tap? People in poor circumstances particularly must have a stimulant of some kind, and to call it a luxury in these days seems to me to be a perfect misnomer.

Mr. LEWIS

How did these people manage before tea was introduced into this country?

Mr. BANFIELD

I understand they used to drink beer, but I am sure the hon. Member for Colchester would not care to go into his constituency, among low-wage earners and say, "All you can afford to drink, after all, is a cup of tea, but I think that is a luxury, and you ought to do without it." Whether we like it or not, and whichever way we look at it, tea has become practically a necessity for our people. [HON. MEMBERS: "No!"] Hon. Members may disagree, but the facts are rather against them. I want to impress upon this Committee that this idea of spreading the burden, that the poor old-age pensioner must do a little towards the payment of the new battleships, that the responsibilities of Empire must fall upon her shoulders, is not applicable at all. The fact is that this particular tax on tea hits the poorest of the community, and hits them rather harder than any other form of taxation. It is useless for hon. Members to say that it is difficult to reach the poorest of the people by way of taxation. Indirect taxation falls upon them in all sorts of ways. As a matter of fact, I think it could be demonstrated that, according to income, the poorest people pay more in taxation than those who talk so glibly about the responsibilities of defence being placed upon their shoulders.

I feel on this matter very strongly, because I know something about the conditions of the ordinary people, and by that I am not alluding to the better paid artisans, to the men with £4 a week, but I am alluding to those millions of people with an income of less than £2 a week when they are in full work, with the responsibilities of a family on their shoulders, men who are unable to afford holidays, decent people who struggle to keep themselves out of debt and to get their children enough to eat. Those are the people who suffer when the Chancellor puts 2d. extra on tea. While it may be said that taxation has got to be fair, and that it is all very well to put up a plea for these people, but it is merely sentiment, it is not sentiment; it is bitter reality to millions of these people up and down the country. I am pleased to think we shall vote against this duty. I am satisfied that the Chancellor of the Exchequer has no need whatever to put this 2d. on tea. I believe he could have balanced his Budget without doing anything of the kind, and that it is simply being put on so that he can get up and say, "I have seen to it that everybody in the nation, the poorest of the poor and those who are better off, are contributing towards the new armaments policy." That may be all right from the Chancellor's point of view, but it is a bit hard that millions of children, who, we now know, do not receive sufficient food, should have to contribute their mite through their parents and through this 2d. towards that burden. We should be better without a Tea Duty at all, but, if it is necessary, there is no need to increase it.

4.45 p.m.

Mr. DAVID ADAMS

It is the duty of Members on this side of the Committee to speak and vote on every opportunity against the Tea Duty. I look upon the increase of this tax as the crowning defect of the Budget, and I was greatly astonished when I found it embodied in the Budget of this Chancellor. The right hon. Gentleman is an old municipal representative and he must possess a municipal representative's conscience. We have heard a good deal to-day about the Chancellor being hard-hearted, but I question that, for no Chancellor who has had the wide experience of municipal life that the present Chancellor has can be hard-hearted to the extent of ignoring the conditions of the people with whom the municipalities particularly deal. This duty is a tax upon the necessity of a large section of the community. To say that it is a luxury tax is an absurdity. Tea cannot be described as a luxury, and it has never been so properly described. It is for the working-classes, and particularly the poorest section, a prime necessity, and if you add a tax to it, even to the extent of 7s. to 10s. per annum, you make conditions more difficult for that section of the community, which is to-day admittedly submerged, and living below the poverty line.

This increased duty is a violation of the spirit of the age. Recently, through the public Press and from the pulpit, economists and thinking people generally have revealed a state of affairs lamentable in the extreme, showing that large sections of the community are living in low conditions of life. A universal protest has been heard during the last year or two. The Chancellor and the Government must know that they have still further depressed that considerable mass in the population and have made it more difficult and more costly for them to live. Insufficient food is now admittedly common, and medical officers of health throughout the kingdom are prepared almost universally to agree that from 30 to 50 per cent. of the sickness in their areas is due to malnutrition. That is the case particularly in the great cities, and the Tea Duty has added to the difficulties of the municipalities and increased their burdens, for the maintenance of public health has to be carried out through various remedial agencies in which local authority expenditure is extremely heavy. Nothing could be more startling, now that we are considering questions of defence, than to know how Army standards have been reduced, in order to meet the pigmy race growing up in the industrial areas. The Army now take men 5 feet 2 inches in height, 8 stone 3 lbs. in weight, with defective teeth and eyesight. That is a poor record for the great British people of a great Empire, yet the Chancellor, with a callousness which is surprising, and in spite of his municipal experience, has turned to this duty in order to raise but a relatively small amount.

Mr. LEWIS

Do I understand the hon. Member is arguing that the drinking of tea is calculated to increase a man's height and his weight?

Mr. ADAMS

I should have imagined that the hon. Member would have made a better deduction than that. What I am stating is that a large proportion of our population is under-nourished. The tax upon tea diminishes the amount of those people's income by the amount of the tax. They are, therefore, less able to nourish themselves and it is a step towards producing an even more defective race than exists at the present time. There is an almost universal protest against this increase; I have heard it in the railway train, in trade union meetings and among miners' associations that this is a most reactionary tax in face of the new standard of life which is being demanded on all hands. If the Chancellor could, even at this eleventh hour, see his way to extinguish the tax or to reduce it by half, I am certain that he would have the thanks of the nation.

4.52 p.m.

The FINANCIAL SECRETARY to the TREASURY (Mr. W. S. Morrison)

Many hon. Members have been confronted in this discussion with the difficulty of finding something new to say about this duty, which has already been thoroughly discussed in the earlier stages of our proceedings. I find myself in sympathy with their position, because the defence of the duty has been so adequately covered in the past that I feel there is very little new that I can add to what has been said.

Mr. TINKER

The Financial Secretary can do something new by giving way.

Mr. MORRISON

I am not prepared to purchase novelty at such a great cost. The case against this tax is always put by hon. Members opposite on the ground that it affects the poorer sections of the community. One would think from some of the expressions used in advancing that argument that it was a tax which affected only that section of the community. The fact is that it is a revenue duty placed on everyone who uses tea. There must be some 35,000,000 of those people in the country and it is idle for hon. Members opposite to pretend that the great bulk of those people are what have been described as the poorest of the poor. I would ask hon. Members, when they inveigh against the duty, to remember the difficulties that are inherent in any overstatement of the position. It is true that the Chancellor has endeavoured by imposing a Customs Duty to find a source of revenue which would be spread over the whole of the population. The hon. Member for Wednesbury (Mr. Banfield) attempted to win our sympathy by drawing a picture of the old age pensioner paying for a battleship. Let him remember the figures that are involved. The total yield of this additional tax in the whole year is about £3,500,000, and that is being paid for not by old age pensioners exclusively, but by the 35,000,000 tea drinkers in the country. Therefore, to talk about this as a device for making the old age pensioner pay for a battleship is putting the case higher than it will stand.

The hon. Member for East Ham, South (Mr. Barnes), who opened the discussion, referred to the revival of this duty in 1932. He based the revival of the tax on the financial conditions of the time, but I would ask him to remember that when it was reintroduced in 1932 there was another motive in addition to the revenue one, and that was that it was a piece of the Government's policy for giving preferences to the Empire. Without such a duty that would have been impossible.

Mr. BARNES

If that were the major purpose, there was no need to add 2d.

Mr. MORRISON

It was not the major purpose. There was another purpose beside the revenue purpose, important as that was; there was the preference motive at work also, and if this duty were entirely destroyed, not only would the revenue be lost, but the means for giving assistance to the producers in the Empire would also be lost. When the hon. Member for Leigh (Mr. Tinker) menaced us with the electoral results of this duty, he was surely forgetting the electoral consequences which followed in 1929. Those of us who remember that contest will recall that the action of the right hon. Member for Epping (Mr. Churchill) in removing the duty in that year did not produce the electoral consequences which, according to the hon. Member, should have been the converse of those he mentioned. So far as that aspect of the situation is concerned, we have received the hon. Member's menaces with some fortitude and composure.

The hon. Member for Colchester (Mr. Lewis) drew attention to a, matter which inspired some of the Amendments earlier on the Paper which were not called. He asked my right hon. Friend for an assurance that, in estimating this year, he has not deliberately provided for a surplus greater than that stated in the Budget. I give my hon. Friend that assurance most definitely. When hon. Members are inclined to criticise what they call the unduly conservative nature of the estimations of my right hon. Friend, let them remember that there is bound to be in this matter a certain element of speculation. No can can foresee the future. There are two sides to the account. There is not only bound to be some uncertainty in regard to the yield of tax, but there is bound to be some uncertainty as to the expenditure side of the account. My right hon. Friend, in budgeting as he has done, has had to make the closest estimate of both sides of the account that he can, and it is bearing these considerations in mind that I can assure my hon. Friend that there is no deliberate provision for a higher surplus than that declared in the Budget.

The hon. Member for East Birkenhead (Mr. White) drew attention to certain consequences of the Tea Duty which he declared would follow, one being the reverse consequence to that anticipated by the hon. Member for Colchester. In other words, the hon. Member was of the opinion that this additional taxation would not yield the amount that was expected of it. He drew attention to what he described as certain sluggish conditions in demand in the tea markets. The only thing I can say to reassure him is that the effect of any rise in price upon the consumption of a commodity is always one of the factors taken into consideration in arriving at the final settlement of a duty, and in this case it has been done; but I would also ask him to recollect that as my right hon. Friend told the Committee, speaking on, an earlier Amendment, tea production is to some extent a managed market. There are in existence arrangements between the producers in India arid Ceylon and in the Dutch East Indies for their mutual advantage and designed to secure a remunerative price, or a reasonable price, for tea. If the hon. Member bears that in mind, and remembers that to that extent it is not a mere question of supply and demand working unchecked upon the market, I think he will see that the results which he anticipates probably will not arise, and that the other consequences which might be feared cannot be anticipated with such certainty as he suggested.

In conclusion, I can only again ask the Committee to take the view, which my right hon. Friend has already indicated, namely, that my right hon. Friend is quite right, when facing this additional expenditure, not to put on one section of the taxpayers an obligation which is a national one and is not confined either in its responsibilities or its benefits to any particular section of the population. When hon. Members opposite refer to the burden of taxation upon the poor I would ask them to view the tax position as a whole, and I think it will then be agreed that the Chancellor, in asking those, in all circumstances of life, who consume tea, to contribute £3,500,000 is not asking an undue proportion from any section of the population. When it is remembered that the Income Tax payers, of whom there are approximately 3,500,000, are being asked to contribute an extra £12,000,000 and that the 35,000,000 tea consumers are being asked to contribute only £3,500,000, I think it will be agreed by the Committee as a whole that this is not an unjust burden.

As to the effect of this increase in the Tea Duty upon the family budget, I would point out that the average consumption of tea per head of the population is something like 9¼ lbs. a year, and

that if the whole of this additional duty is passed on it will mean a contribution of something like 1s. 6d. a year per person throughout the whole population. The hon. Member for Consett (Mr. David Adams) cannot seriously pretend that the nutrition of our people will be worsened in the dreadful manner he suggested because an average contribution of 1s. 6d. a year more is being imposed. I should be very sorry to think that the had teeth, the small stature and other things to which he referred could be affected by an expenditure of 1s. 6d. a year. When one tries to get really close to the effect that this will have on the cost of living of the average family it works out at something like 44 of a, point in the cost-of-living index figures. The right hon. Member for Hillsborough (Mr. Alexander) has admitted in earlier Debates that we have seasonal variations in the cost-of-living index of two to three points a month for no fiscal or budgetary reasons at all, and when this small rise of half a point is compared with the normal movements of the cost-of-living index figures, I think it will he seen that its effect is—I do not want to describe it as entirely negligible—an effect which is not of such great importance as has been represented. For these reasons I would ask the Committee to agree with my right hon. Friend that he is right in seeking to place the burden of taxation for a national purpose on the nation as equitably as possible, and that when the whole burden of taxation on our people is being increased it is not unreasonable to ask them to pay this additional impost on tea.

Question put, "That the Clause stand part of the Bill."

The Committee divided: Ayes, 241; Noes, 120.