Motion made, and Question proposed,
That the period for which the following duties of customs are chargeable (which expires on the fifteenth day of August, nineteen hundred and thirty-seven) shall be extended by four years, namely—
§ 5.20 p.m.
§ Mr. Attlee
I rise to congratulate the Chancellor of the Exchequer on the very clear and lucid way in which he has explained to us this, his sixth, Budget. We are given to understand that this is his last Budget. Six years is a very long time in which to be in control of the national finances. The right hon. Gentleman during those six years has set a new fashion in Budget statements. We have now departed from the exuberant rhetoric that we got from the right hon. Member for Epping (Mr. Churchill) and we are far away now from what must have been those interminable orations of Mr. Gladstone. We are now accustomed to businesslike statements, with very few high lights. The right hon. Gentleman spoke with a general air of gloom. We had, it is true, a bright interval when we had suggestions about amateur Chancellors, and we had a display of what I believe is now known as "strip-tease," in which we were kept in tantalising expectation of what was to come.
In the course of those six years the Chancellor of the Exchequer has gone round the full circle. He has moved back again to Bleak House and come back again to a full unbalanced Budget. When the National Government came in the charge against the Labour Government was that they had failed to balance their Budget and had raised loans to meet expenditure which ought to have been met out of revenue. We now have a Budget more completely unbalanced than any of its predecessors. £80,000,000 is to be met from loan. This is no temporary business. We are to have a series of unbalanced Budgets and a series of expenditures met from loans. In fact this is the first of a new series of war Budgets. 1624 It was quite obvious from the Chancellor of the Exchequer's speech that the whole of his financial statement was concerned in the main with providing armaments and conducting the process in a war atmosphere. We are to have a sequence of war Budgets.
We have already profiteering on a very large scale. We are to have a new device to try and tax the profiteer. I shall make no attempt to judge how likely the Chancellor of the Exchequer's proposals are to be successful. I wish him luck in the endeavour to put salt on the tails of the profiteers. But I would draw this comparison, that when we last entered on a series of war Budgets the National Debt stood at £650,000,000. We are entering upon this new series of war Budgets with a National Debt approaching £8,000,000,000, and with the prospect of adding to that debt every year. At the time when we started the war Budgets the Income Tax was 1s. 2d. in the £,and to-day it is already 5s. In this new Budget of over £800,000,000 something like £540,000,00o are to pay for past wars or preparation for future wars.
It is said that this is to be the Chancellor of the Exchequer's last Budget. He is providing for an enormous increase in armaments, which, as he has explained, means a very large increase in upkeep every year. He is leaving a pretty nasty inheritance for his successor. It is rumoured that he is to be succeeded by the present Home Secretary. If that be true there is a kind of poetic justice in it, because he is very largely responsible for the conditions which give the excuse for this armaments Budget, and it is only fair that he should find the money to foot the Bill. He will probably be the most unpopular Chancellor of the Exchequer we have had for years, just as he was the most unpopular Foreign Secretary. This Budget marks the complete failure of the Government's policy. The right hon. Gentleman talked at the end of his speech of the kind of conditions that might prevail. I was reading to-day the report of Mr. Butler, of the Internaional Labour Office, in which he says:All the financial commercial and social measures by which the crises of the past five years are being overcome are nothing but vanity if the whole political and economic fabric of our present system is under the constant menace of destruction by another international conflagration.1625 We have that in the policy that is being pursued which is marching straight on to another international conflagration. It is a policy which, to quote again the words of Mr. Butler, "involves an increasing sacrifice of the standard of life to the standard of arms." That is what this Budget marks. We are having rising prices, increasing the pressure on the poorest of the poor. They will be the people who will pay for armaments. We shall oppose this Budget because it is an expression of a foreign policy which is helping to ruin the world with results utterly fatal and hopeless to pursue at home and abroad.
§ 5.27 p.m.
§ Sir Archibald Sinclair
I should like to associate myself with the eloquent and obviously sincere tribute which the Leader of the Opposition paid to the present Chancellor of the Exchequer, but I do not think that at this stage I could also associate myself with the welcome which he offered to the new Chancellor of the Exchequer, on the assumption that he will be the present Home Secretary. I think it will be better for us to wait and see. For the form and manner of the Chancellor of the Exchequer's statement we owe him an unqualified debt of gratitude and admiration. If the newspaper forecasts that this is his last Budget statement should prove to be true, it will no doubt be sincerely regretted by hon. and right hon. Members in every part of the House. The regret, at any rate on these benches, will be not in regard to the policy of the Chancellor of the Exchequer—because I have no doubt his successor will have to follow out a similar policy—but rather that we shall no longer have the advantage of listening to these masterly series of Budget statements, a regret which may be to some extent tempered, as far as those who have to follow him are concerned, by the fact that we have almost exhausted the stock of our superlatives in congratulating him on the lucidity and dexterity of his statements.
It is not of the form but of the substance of the Budget that very different emotions must be expressed. We have had a Budget of Great Expectations and a Budget of frustrated hopes. Now we have boxed the compass and come back to where we started, Bleak House again. If this is what is to be done in the green, 1626 in the first year of the Government's rearmament programme, when trade is still in a favourable cycle, when the effect of rising prices is only just beginning to be felt, if we have to reconcile ourselves to a series of unbalanced Budgets, with Income Tax at 5s. in the £ and increased taxation of other kinds, what shall we do in the dry, when prices are soaring, when trade slackens, as it will unless the Government reverse their economic policy and take a lead in restoring overseas trade; when our borrowing comes to an end and the Budget has to be balanced, when an increased number of unemployed have to be provided for and a sinking fund has to be reconstituted for the protection of our credit? The increased expenditure on existing social services, without any addition to them, is progressive and automatic. The Chancellor of the Exchequer has explained clearly why in his opinion we cannot pay our way this year and why we must have an unbalanced Budget. He has not attempted to explain how and why we shall be in a better position in five years time to balance our Budget at the substantially higher level which we shall then have attained.
As regards the details of the statement, we shall have further opportunities of discussion. No doubt the most interesting feature of the statement was the proposal the Chancellor of the Exchequer made for meeting an expanding expenditure on measures of rearmament by a new and, as the right hon. Gentleman hopes, an expanding tax. He said he hoped that it would be a temporary tax. The same thing was said about Income Tax when it was first introduced. If indeed this tax, the provisions of which are necessarily complicated, is successful in dealing with the evils of profiteering, if it is successful in placing the unescapable burden of Defence expenditure on the backs of those best able to bear it, and we are satisfied that the tax is likely to have these results, we shall of course give it a most careful consideration. But, after all, it is an increment tax on productive industry, and surely the Chancellor of the Exchequer must feel that he would be in a much stronger position now if he had not in 2933 repealed the tax upon land, which would now be yielding invaluable revenue for his purposes without imposing a direct burden on productive industry. All these matters will be exhaustively debated during the 1627 coming weeks. Meanwhile, let me follow the course which the Chancellor of the Exchequer has himself pursued in his series of Budget statements and come back to the point from which I started. Let me offer him my most respectful congratulations on a Budget statement which is worthy to rank as the last of a great series of statements.
§ 5.35 p.m.
§ Mr. Maxton
I do not know whether it is a tribute to the success of the Chancellor of the Exchequer, but the House seems to be more empty and less anxious to listen to Opposition leaders than I have ever known it on a Budget night. Probably they are discussing in other places the new and ingenious devices which the Chancellor of the Exchequer has announced for dealing with the deficits he has to meet. I only want to add my word to what has gone before. I gather that this is something in the nature of a valedictory address. The Chancellor of the Exchequer says that he has had six years at his job. He has certainly had a great variety of situations to face in those years. I remember on one occasion, when a colleague of the Chancellor of the Exchequer was addressing the House, I asked the hon. Member next to me what were the qualities which the hon. Member who was addressing the House possessed which justified us in having him in an important position. My colleague said that he had one very great quality, the quality of being able to get away with it. The Chancellor of the Exchequer has shown that quality during the six years. He has always been able to get away with it, and as far as one can judge from newspaper rumours he is going to get away with it more successfully than many of his predecessors. The Back Benches of the House are strewn with ex-Chancellors, and in another place there are one or two odd lots. I understand that the Chancellor of the Exchequer is going to get away at the psychological moment; he is going to get away, to use a slang phrase, while the going is still good.
There is one thing upon which I have been pondering much during the last year or two. Not only do we seem to get away with financial operations which 20 years ago would have been regarded as completely impossible, but other 1628 nations also get away with it too. Nations which have been actually bankrupt two or three times in the post-War period are still going on. I do not know how the books are manipulated, but they always seem to be able to keep their head above water and to be able to launch armaments schemes big enough to make this nation go ahead with armaments schemes. The only conclusion I can draw from it is that there is a tremendous power of wealth production which is so unlimited that a nation is prepared to take on anything in the way of expenditure, provided it can manipulate books and figures with sufficient skill. In these circumstances the only further thought I want to put before the Committee is this. If it be that our productive power is so tremendously great to-day, there seems to be no justification whatever for the fact that the overwhelming mass of the population of this country is living either in poverty or in circumstances which do not lead to freedom in life. I should have thought that in his Budget arrangements the Chancellor of the Exchequer would have made some provision for a definite uplifting of the conditions of life of the poorest sections of the population. Perhaps he feels that as Chancellor of the Exchequer it is not necessary to do that, and that in the more important position which may come to him in the future he will be able to do greater and bigger things in the direction of social amelioration.
Does not the hon. Member agree that all the reforms and the wonderful things which have been done by the Chancellor of the Exchequer have meant a great uplifting of the poorer classes?
§ Mr. Maxton
If all the things that have been done by anybody during the last 20 years are added together they do not do more than scratch the surface of the poverty problem. However, I am not going to refer to that; I am simply going to congratulate the Chancellor of the Exchequer on his Budget statement.
§ 5.41 p.m.
§ Sir John Wardlaw-Milne
There is no doubt that hon. Members in all parts of the House will desire to join in the congratulations which have been offered to the Chancellor of the Exchequer not only on the delivery of his sixth Budget speech but upon the long series of successful 1629 Budget speeches in this House. Apart from these congratulations, however, I thought that the right hon. Gentlemen who lead the two main Oppositions found themselves in a position of some difficulty. It was extremely difficult for them to criticise the Budget at all, and I am not surprised. Their brightest hopes must surely have been realised when they heard the Chancellor of the Exchequer turn to that portion of the Budget to which he gave a new and attractive name but which most people will describe as a reimposition of the Excess Profits Duty. This is not the occasion to go fully into details regarding the Budget proposals, and I am not qualified to do so at the moment. They will require very careful study indeed, but when I heard the Chancellor of the Exchequer put forward that particular proposal I wondered whether he appreciates—although it is ridiculous to suppose that he does not—the amount of trouble and worry that is going to be brought upon trade and industry by this tax. When he came to the Budget figures which make it necessary to impose this tax, I noticed that the cause of the deficit of £14,000,000 was the falling off in the estimated receipts from miscellaneous taxes from £24,000,000 to £11,000,000 in the coming year.
The Chancellor of the Exchequer did not tell us, except in connection with one item of £5,000,000, why he expected this tremendous deficit of £13,000,000, which is practically equal to the amount he has to make up by new taxation. I am not suggesting, and indeed it would be absurd to do so, that it is not necessary to make up the figure of £13,000,000, but when you get £15,000,000 in a full year from an increase of 3d. in the Income Tax it seems a little hard on the top of that to put on the traders of this country an Excess Profits Duty which in the immediate future will bring in a very small return. We do not know what the conditions may be a year hence. Perhaps then it may be necessary to raise a further £20,000,000 but if so we are really adding 4d. to the Income Tax.
The Chancellor of the Exchequer's speech dealt largely with the improved conditions in the country and I think he was perfectly entitled to take a great deal of the credit to the Government for the increasing prosperity which we are enjoying. I do not want to minimise the ad- 1630 vance which industry has made, the very much better conditions which the country is enjoying at the present moment, the higher wages and the shorter hours as compared with a few years ago, and I say at once that this Government has a great deal to its credit in that connection. It is the confidence which the right hon. Gentleman's policy has brought to trade and industry that has made this increased prosperity possible. At the same time I sometimes wonder whether our prosperity is quite as widespread and well founded as people think. Anybody who reads the League of Nations Committee's returns on world production and exports will see that in all countries there has been a great increase in production, but that there has not always been a corresponding increase in exports. Although I have the greatest admiration for the work which the Treasury has done in connection with the Exchange Equalisation Account and other measures, particularly the agreement with the United States and France which was come to last September, and which has done so much to equalise exchange rates, the plain fact remains that we cannot get back our export trade until and unless we can get stable money values based on an international price level. That we have not yet got.
The reason why I make that reference is that until we get that, to my mind we shall not get that expansion of exports which is essential to real prosperity. We are, by the Chancellor's proposals, putting upon a certain section of the population a further tax which it may not be able to meet if the prosperity of which we speak so much does not reach the heights for which we all hope. Moreover, this taxation will fall mainly upon a certain class of people; it will fall upon the holders of the equity of the business; the same class who mainly pay the extra threepence in the Income Tax will pay this extra taxation on profits. This taxation will fall very largely upon the ordinary shareholders in these companies. To some extent, at any rate, they are the people who have already during the past two years lost about £100,000,000 owing to the conversions of War Loan to a lower rate of interest, and they have probably benefited very little from the extra £180,000,000 per annum by which our Social Services have 1631 increased in the past 10 years. They will pay this taxation, with almost the highest rate of Income Tax known, at a time of increased, and not reduced, prices which hit them as well as everybody else.
The main point that I wanted to make this afternoon is simply this: I am as anxious as everybody in the House that taxation should be spread evenly, but I think this proposal of the Chancellor is very hard upon a certain section of the people. It is true, as he says, that it follows only upon rising profits, and if we could be sure that prosperity was certain to continue, possibly we should be able to face this proposal with more equanimity. Is it possible that the proposal is put forward as a means of preventing expansion going too fast? We read of what happened in America, and it may be that my right hon. Friend thinks this is a very good way of suggesting that the advance in prices should not go too fast, and of putting a damper on the rate at which prosperity is growing. That may be good or bad—I am not dealing with that point to-day—but I was interested to note the attitude of the Opposition when the proposal was being put forward by my right hon. Friend. There was great satisfaction, I thought, that again something like the capital levy—I heard that whispered across the House—was being introduced.
I wonder whether hon. Members opposite realise that this may not only be a tax on profits, but may also be an unfortunate damper on the movement towards increased wages. That would be one of the worst things that could happen in this country. I have always held the view that labour was entitled to receive a larger share of the profit of industry, but it may well be that this tax proposal may be against progress in that direction rather than a measure which will help it to go forward. In conclusion, I congratulate my right hon. Friend very much on having introduced his sixth Budget, but I am bound to say that he would have received from me, at any rate, even greater admiration and respect than I already have for him for his wonderful work in that position—especially in connection with the Exchange Equalisation Account and with other measures to bring about prosperity and to give confidence in the country—if he had not found it necessary to introduce 1632 this special form of tax upon profits which may, I fear, be a drag upon industry and possibly slow down that expansion, both in profits and wages, which we all want to see.
§ 5.52 p.m.
§ Mr. Tinker
Probably this is the last time the Chancellor will introduce a Budget. Considering the vast expenditure caused by the Defence programme, we had all expected that he would have to look for some new sources of revenue, and I was not disappointed in my expectation because I had anticipated that the first source to which he would go would be the Income Tax. If the Defence programme is necessary, those who have the greatest amount of wealth should be called upon to pay towards it. I think no one can argue against that. I had expected also that the right hon. Gentleman would have gone to the Super-tax, and I think he might have reduced the limit from £2,000 to £1,500. I hope that at some future time that will be done.
Another matter of satisfaction to me was that the right hon. Gentleman did not increase the Medicine Stamp Duty. I have received several deputations who wondered whether he would not put something on the Medicine Stamp Duty, and I am glad that he has considered the matter and decided against doing so. One thing which strikes me is that every time the Chancellor makes a Budget statement, he has to refer to some loopholes by which wealthy people find ways and means of avoiding the payment of tax. It is deplorable that he should have to speak of that year after year, and try to find means of closing the loopholes by which these people, who ought to be more public-spirited, evade the tax, instead of paying it, as it is their duty to do. I was not quite clear as to the meaning of his remarks in this respect, but I shall watch with interest to see what is the full extent of the measures.
As to profits, I had prepared a speech on that subject, but the Chancellor has anticipated me, and I am very glad that he has done something in this matter. Hon. Members know what happened during the War period. I have figures drawn up by the committee set up by the Inland Revenue authorities which show that during the War period 360,000 people increased their fortunes by 1633 £3,000,000,000, which means that, taking an average, each person increased his fortune by about £9,000 as compared with the pre-war figure. To me it seems to be out of all reason that that sort of thing should have gone on at a time when thousands of our people gave their all to save their country. They went out with no thought of profit, but solely to save their country; and even now many hon. Members have to deal with cases of men who are still suffering from that.
The hon. Member for Kidderminster (Sir J. Wardlaw-Milne) said that this tax might react on the working classes, but can tell him of a way to avoid that. The Chancellor has given a figure of profits, and all profits above that limit will be taxed. I would say to the leaders of industry that when they reach that figure they should see that their work-people get some of the increased profits by increasing their wages. That could easily be done. Moreover, there is now agitation for holidays with pay. The people making these increased profits will have the opportunity either of giving something to the Chancellor or of handing something back to the workpeople, and that is why I am glad the Chancellor has made the proposals.
I would like now to refer to the Chancellor's remarks about general prosperity, because I am not quite satisfied on that point. I have here a resolution passed by the Miners' Conference in Lancashire requesting us to ask for an increase in unemployment benefit on account of the increased cost of living. When the Chancellor speaks of increased prosperity, I want him to bear in mind that prices are soaring and that the cost of living has gone up. Last week, in the Debate on malnutrition, various figures were given, and it was said that the cost of living had increased by 12 per cent. during the last 12 months. I have been looking at the figures, and I find that it has increased by about 8 per cent. in that period. The people with a fixed income feel that increase more than anybody else. The captains of industry who make increased profits do not feel it, and the wage-earning class try to get higher wages, so that they will not feel the burden as much as those with fixed incomes.
For instance, an unemployed man receiving a fixed rate of benefit, either 1634 standard benefit or unemployment assistance, of £1 finds that that is worth only 18s., if one takes the increased cost of living as being 10 per cent. The general prosperity cannot be said to help him. The people getting an old age pension of 10s. a week do not feel the benefit of this increased prosperity. If there is general prosperity, one would have expected the Chancellor to have done something in that respect. I think he might have done something for those having fixed rates of income, and not have left them alone. In a speech which he made on 5th March, he dealt with this point, and said that with all the new expenditure it was difficult to contemplate any new scheme in social services which would cost a great deal of money in the course of the next few years, although of course the Government were not going to abandon any principle of the social programme laid down.
There are one or two points which I think the Chancellor, or whoever follows him, ought to keep in mind. In a country such as ours, after all, we must have regard to all classes of the community, and when there is general prosperity not leave one section much better off than another. There are one or two cases I wish to bring to the notice of the House, and although perhaps they cannot be dealt with at this time, they should be borne in mind. I wish to refer, in the first place, to those old age pensioners who have arrived at the age of 65 and whose wives have also reached that age. The general prosperity cannot come to them when they are off unemployment and are reduced to l0s. In answer to a question last week it was stated that there were approximately 140,000 wives of this class whose husbands have reached 65 and where the wife is not 65. To pay 10s. a week to the wife would cost. £70,000 a week, or £3,600,000 in a full year—not a very big item in a Budget of the dimensions of the present one. It would, however, be a tremendous thing for these old people, many of whom are driven to the Poor Law in order to get a little more. These old people have done so much to help the country forward, and they should have some recognition when we are reviewing the financial state of the people who have to meet the increased cost of living on a fixed rate of income.
1635 During the last few weeks I have had brought to my notice rather vividly a case concerning widows' pensions. It may not be generally known that the pre-Act widows, as I term them, that is, women who became widows before 1926, are given 10s. a week if they have a child under 16. When the child turns 16, the widow's pension stops. In 1929 that was altered so that the pension was given to the widow when she became 55, I have had several cases brought to my notice where the youngest child has reached 16 and, because the widow has not reached 55, the pension has stopped. We talk about giving the children, a chance, but in such cases the children are driven to blind alley occupations in order to get what they can to help the homes. There are 40,000 widows in this position, and to continue their pensions would cost £20,000 a week, or just over £1,000,000 a year. If the Chancellor believes in general prosperity, he ought to pay attention to the lower strata of society and not always have his eye on the richer classes. The lower strata have not the ability or the education to make themselves heard, whereas the higher grades are able to bring to the notice of the Chancellor the things that they want to have redressed.
I recognise that these matters cannot be dealt with in the present Budget, but when we have a grievance we want to take the opportunity of bringing it before the Chancellor so that it may be noted by the Government for the future. I hope that whoever occupies the position of Chancellor in future will deal with general prosperity in a much wider aspect than the Chancellor has done in his Budget this year. We cannot expect that, when the financial statement is read to-morrow, the classes I have mentioned will take much joy in being told that, after all, they have not to bear any extra burden and that the burden has gone on to the people who pay Income Tax. I hope that when the Chancellor gets into his new position, when he is in the highest place in the land, he will pay some regard to the points I have brought before him. If he does, he will earn much gratitude from the people I have mentioned.
§ 6.5 p.m.
§ Mr. Boothby
When my right hon. Friend the Member for Epping (Mr. 1636 Churchill) was Chancellor of the Exchequer, he said to me at the time I was his Parliamentary Private Secretary, "I can never understand why more backbenchers do not take the God-given opportunity that is presented to them for airing their financial views immediately after the Budget statement, It would be a great bore for me, but it would be a great opportunity for them." At the risk of boring my right hon. Friend the Chancellor of the Exchequer for a few moments, I rise while the going is good from the point of view of a back-bencher to put one major point with regard to the Budget statement which he has just so brilliantly made for the sixth time. My right hon. Friend has presented to us what can only be described as a war Budget; and I think he was justified in doing that because at the moment we are engaged in armament construction almost upon a war scale, and also in economic warfare of one kind and another. My right hon. Friend is proposing to impose serious burdens upon the taxpayers, and it is no good the Committee trying to blink that fact. When his proposals are read by the business community of the country to-morrow, they will come as something of a shock. I do not suggest that that in itself is necessarily a bad thing, or that it may not in the long run prove to be salutary rather than otherwise.
But I do want to point out that this Budget is based on two assumptions, and can only work if those two assumptions are in fact borne out. The first assumption is that we shall have a continuance of the upward trend of commodity prices, and the second is that we are to engage for two or three years in a programme of continuous and heavy rearmament. As long as those assumptions are correct and are borne out, we can borrow on reasonable terms for capital expenditure, we can impose these terrific burdens without undue cost to the business community or the taxpayer, and we can insulate our national economy by a system of high protection such as we have at present. So far as rearmament is concerned I was glad to hear my right hon. Friend say that this is a suitable moment for discouraging all unnecessary constructive expenditure, so that if and when the rearmament programme slackens down, we shall be able to take up other work. Also, I think it will be necessary at that 1637 time to apply our minds very seriously indeed to the development of overseas trade.
The main point I want to put to my right hon. Friend to-night is that we are operating to-day in this country, and indeed throughout the world, a new and untried economic system. We have large gold reserves, and so have certain other countries, and the leading currencies of the world are not too firmly attached to them. We have to proceed by a process of trial and error, and that is what my right hon. Friend has done so successfully in the past. But great care is necessary. It is also necessary to look ahead. I firmly believe that it would not take as much as many people think to bring to an end the whole upward trend, to cut short the whole process of revival, and to put us instead into what I may describe as a deflationary spiral. If, for example, any serious proposals were made in this country, in the United States, or in France to lower the currency price of gold with a view to lowering commodity prices, that would immediately precipitate an economic crisis of the first order, and a world disturbance of the kind referred to in the Budget statement of my right hon. Friend. If that disturbance came about it would not only wreck this Budget, but might even precipitate a world war.
While it is necessary to check undue speculation, it is still more necessary to avoid a fall in prices and the risk of turning the whole of our economic machinery into the opposite spiral. A mere rumour the other day was sufficeint to cause a flurry in the markets of the world which must have caused serious anxiety to the people who have to operate this very delicate modern monetary machinery. For this Budget to succeed and to do no harm, and, indeed, for the capitalist system to succeed, there must be a slow but continuous rise in commodity prices, accompanied by a proportionate rise in wages. I would point out to those who are frightened about the rise in commodity prices that they are still comparatively low, being only approximately 52 per cent. of the 1927 level. If you take into account the depreciation of currencies, they have only quite recently regained the low level of 1931. Falling commodity prices and their consequence, trade contraction and restriction, paralysed the whole economic system of the world in 1638 1930 and 1931, and brought about the greatest economic crisis the world has ever seen. If this Budget is to succeed we must not even contemplate a repetition of the deflation to which we were subjected in 1929, 1930 and 1931, because deflation is economic death in the long run. Meanwhile, rising prices and expanding trade have already lowered the tension—even the tension in political and foreign affairs—and, in spite of Spain, we have seen some mitigation of the stresses and strains of contemporary political life, and has also helped to make this Budget possible.
At the same time, I would say to my right hon. Friend that the world economic structure is getting dangerously lopsided. The gold production of the world goes on at an enormous rate in South Africa, Russia and all the gold-producing countries. It has almost doubled between 1929 and 1936. That gold, however, is no better distributed in the world than it was five or six years ago. The bulk of it is held by the United States, France and ourselves; and comparatively small amounts by Belgium, Switzerland and Holland; and, relatively speaking, none by the rest of the countries. We cannot expect a revival of international trade, or of world confidence, until we get a better distribution of gold throughout the world. We do not want to press those countries that have no gold to desperate courses; and the only way to get a better distribution of gold is to bring about a real well-founded revival of international trade. It is essential both on economic and political grounds, if we are to get through in the long run. It is necessary if our civilisation is to survive; and I am sure that hon. Members in the Liberal party will agree when I say that.
We want first a redistribution of gold, we want at the same time the removal, so far as possible, of present exchange restrictions, a restoration of the credit of those nations and countries which at present possess no gold and little credit, and a reduction of trade barriers all over the world. The alternative is an increase of the pressure, and of the intolerable burden of armaments; and one of the reasons why I am glad that the Chancellor has not let us off this afternoon is that it will bring home to this country what an intolerable burden armaments are. It will impress everybody in all parts of the country, and, I think, in other countries 1639 as well, with the necessity, for the sake of the world, for the sake of the masses, of another effort to try to stop this wretched race in rearmament.
But I do not believe that we shall get disarmament until we get first of all a measure of economic disarmament, some revival of international trade, a measure of international economic co-operation: that must surely precede political and military co-operation. My right hon. Friend is relying very largely at the moment on a committee called the Foreign Transactions Advisory Committee to advise him in these matters. That committee has in my submission neither adequate powers nor adequate terms of reference for the times. A far wider conception is now wanted. The Chancellor of the Exchequer has, in my opinion, now got to take into consideration himself the question whether we should not revise our foreign lending policy, whether it would not pay us in the long run seriously to consider giving even gold loans to certain countries abroad with whom we wish to re-establish trade, to take the place of rearmament when rearmament, as we all must hope and pray, comes to an end. If New York will not do it, why should not London do it, and become once again a magnet for the world's capital? In the long run that is, I believe, the great function not only of this town but of this nation. Do not let us ever forget that our greatness was founded on international trade, and in the long run can be retained only through international trade.
One or two encouraging indications of the trend of events have appeared lately. There was Dr. Schacht's visit to Brussels the other day, and his observations to M. Van Zeeland which contained some remarkable things such as I do not think he would have said six months or a year ago. There is M. Van Zeeland's mission itself, to which I believe my right hon. Friend has given his approval. My hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) in his interesting speech urged the necessity for getting back to stable money values. We cannot do that without international cooperation, and I would say to my right hon. Friend that I hope he will, during these Debates, make some brief reference to it. I would beg him to lose no opportunity of bringing about another inter- 1640 national economic conference, not perhaps so large or so ambitious as the last one, which failed; but there should be an effort to get at least certain essentials, such as currency and exchange restrictions, settled in order to open up the way for that revival of international trade which is so necessary, as I think, for our survival.
§ 6.19 p.m.
§ Mr. Loftus
I only intervene because of the speech of my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) and because of his condemnation of the proposed National Defence contribution tax. I welcome that tax. I am greatly relieved to hear the proposal, because for some time past I have felt anxious about the financial position of this country, in this way. One thing which I fear is a wild speculative boom followed, as my right hon. Friend said, by a slump. I remember coming home on leave during the War in 1917 and 1918 and finding a cynical atmosphere of grab, the idea that there was unlimited Government money about and with almost everybody trying to get the utmost share of that money. It was almost a hysterical atmosphere of profiteering in 1917 and 1918. I do not suggest that there is a similar atmosphere at present, but there are certain symptoms and tendencies which cause disquiet, and I felt that what was wanted to steady the nation was to make it realise by taxation that the great National Defence loan is not a bonus for distribution but is a burden, that it is the duty of the whole nation to realise that this is not a time of unlimited spending but a time when we have to concentrate on building up our defences and, therefore, to sacrifice other things. I feel that 3d. on the Income Tax will make the nation as a whole realise it, but still more will this proposed new tax, this new form of Excess Profits Duty. For myself, I believe that it is probably the least objectionable type of tax. It will only operate where greatly increased profits are made, and those profits will probably have been made, either directly or indirectly, as a result of the Government's expenditure on National Defence.
I disagree with my hon. Friend the Member for East Aberdeen (Mr. Boothby) when he says that the only hope lies in continuously rising prices and a proportionate rise in wages. I 1641 suggest that we want a rise in prices, but not a continuous rise, and that when we get a satisfactory price level we ought to endeavour to stabilise it.
§ Mr. Boothby
I said that what we wanted now was a slow continuous rise. Ultimately, stability is the goal.
§ Mr. Boothby
If my hon. Friend had owned any commodities during the last week he would not be saying that.
§ Mr. Loftus
The last week I except. But I will not pursue that point. We have to recognise that not only is the burden of rearmament very heavy on the nation but that our social services automatically increase, getting heavier year by year, and that there is only one way to make the burden easier, and that is to increase national production so as to spread the charge, to make the percentage of national wealth taken in taxes a lesser amount and a smaller percentage. If we steadily increase national production I think we should also keep our price level stable. If the price level were to fall, obviously the burden of taxation expressed in terms of money would increase heavily. I apologise for intervening in a Budget Debate on the first day, but I repeat the great fear which I had that the country is getting into a state of speculation, of dangerous speculation, and I felt that some steadying steps were needed. I desire above all to see a stable price level maintained, and one of my greatest desires in political life would be somehow or other to see the achievement of conditions which would obviate the misery and the danger caused by depression and by slump to all classes of our people.
§ 6.26 p.m.
§ Mr. Radford
I can assure the Chancellor of the Exchequer that my remarks will be of such a simple and elementary nature that they will occasion him no added strain after the ordeal he has gone through, and so successfully, this afternoon. There is one omission from my 1642 right hon. Friend's proposals which has been a big disappointment to me. I had hoped there would be a tax on cosmetics. Seriously, I was looking forward to it. Such an indirect tax would have been free from the difficulties which attach to many indirect taxes through the law of diminishing returns. If the Chancellor had thought fit to impose such a tax he could have ignored the possibility of diminishing returns, because the tax would have operated either as a revenue producer or as a deterrent, and for my part I should prefer that it had operated as a deterrent. I welcome very sincerely the Chancellor's further references to stopping tax evasion. At the risk of being egotistical I may that that 10 years ago I was, I think, instrumental in getting my right hon. Friend the Member for Epping (Mr. Churchill), who was then Chancellor of the Exchequer, to tighten up the Surtax law, and anything in that direction I welcome very sincerely, because any evasion means that an additional load is thrown on to the backs of those who do not evade.
The National Defence contribution is too big a subject to touch upon this afternoon. It has much to commend it, and it has, of course, some of the objections which attached to the old Excess Profits Duty. The hon. Member for Leigh (Mr. Tinker) seemed to suggest that employers might treat their work-people very generously, because it would cut down the amount of profit on which they would have to pay the excess profits contribution. That is just scratching the surface of some of the old evils of the Excess Profits Duty of 17 years ago. I am sure there is no man who likes to hear compliments less than my right hon. Friend, though he has heard many this afternoon, and they have been well deserved, but I cannot help feeling that it must be a big disappointment to him that after six years as Chancellor he is unable, through no fault of his own, to give the nation reduced taxation. I could not help carrying my mind back to the similar position in which my right hon. Friend the Member for Epping found himself in his last Budget when, owing to the coal stoppage and the general strike of the preceding year, all his carefully laid plans were brought to nought. I am sure that it would have been a great joy to my right hon. Friend if he had 1643 been able to terminate his long and honourable career as Chancellor of the Exchequer by submitting proposals for reduced taxation, and I am very sorry that through no fault of his own he has not been able to do it.
§ 6.30 p.m.
§ Mr. Annesley Somerville
Nothing was more remarkable than the warmth with which Opposition Members greeted the two main proposals in the Chancellor's Budget. They cheered the proposal to add 3d. to the Income Tax and they cheered still more warmly the National Defence contribution. The attitude of their Leader was in striking contrast. Listening to those cheers, he must have said to himself: "This will never do. Something must be done about it." So, after a brief tribute to the Chancellor, he made some bitter and rather personal remarks about the occupants of our Front Bench. The other Opposition Leader was a little more generous in his tribute, but he could not help saying that nothing would be right until we had reverted to his own Free Trade doctrine. He did not remember that because of the agreements that have been made by this Government with other countries, the trade of this nation has been made more free than it was.
Our trouble is that we have to rearm. There is no question about it. Hon. Members opposite may say that we need not have rearmed if we had upheld the doctrines of collective security, but that is a will-o'-the-wisp. It is very easy to talk about it but very difficult to attain it. It is not attainable. Therefore we have to rearm. We have to spend a great deal of money, and some people in this country will make profits out of that spending. The new National Defence contribution will be a safeguard. It will be a guarantee that people who make the most profits out of the expenditure on armaments will pay the most of this new tax. It will be a guarantee to the workers that undue profits are not being made out of their efforts. I congratulate the Chancellor on his courage. It may well be that when the story of these six years is written, this Budget will be regarded as the most courageous of all.
§ 6.33 p.m.
§ Mr. Marcus Samuel
I would take the opportunity of saying a few words while 1644 the Chancellor of the Exchequer is still in the Committee. I would congratulate him once more upon producing a sound and satisfactory Budget. His record shows that, even at this time, balanced Budgets can be produced by relatively orthodox methods. There can be no question that the return of confidence, with the attendant improvement in industrial and commercial conditions is, in no small measure, due to the manner in which the Chancellor has done his job year after year, and it is a triumph that he should find himself able to finance a staggering rearmament programme without impairing our credit.
The purpose of my rising is not merely to give a well-deserved general eulogy, but to make what I hope are concrete suggestions for the solution of a very tragic problem. The swelling tide of industrial revival has barely touched the shores of this distressed area. There are still hundreds of thousands of unemployed, for many of whom the prospect of getting a job has improved but little during the last 10 years. In some districts the improvement is nil. When faced with such a problem, the canons of orthodoxy are of less importance than practical results, although long experience has proved orthodoxy to be, in the main, the most satisfactory and effective manner of approaching the problem; but if, after treading the path of orthodoxy, we have but arrived at the distressed areas, some departure is clearly called for. I have just returned from a visit to South Wales which I made for the express purpose of visiting Merthyr Tydvil and other stricken towns. I did not go further than Merthyr Tydvil. I went for the sake of impressions, and I got them, and I returned to the same ideas, strengthened and reinforced. It seems to me that this is a problem in which concrete ideas are of more importance than emotion. I propose to analyse as shortly as I can what appear to be the more important elements involved.
The first point is that it is now beyond dispute that the prime characteristics of the depression in these areas are quite apart from the ordinary trade cycle. There is the bringing about of dereliction which, in most of those benighted towns, has been unvarying for a decade or more. If the marked improvement throughout 1645 the rest of the country is in no way reflected in those areas, some measure beyond the measures already in force, is clamant. The first element is that of permanence; the second is of different application. It is obvious that the procuring of new industries in those areas must be the major part of the solution. Mere palliative measures are of secondary importance and utility. In the proposal for bringing new industries to those localities, two things stand out most prominently. The first is the adequacy of the labour. There are men whose hearts and souls have been clamouring for employment, and who are prepared to welcome with outstretched arms every opportunity offered to regain their moral self-respect. The second thing in favour of those areas as locations for industry is that the cost of living is very much lower than in London or Birmingham. It is said that the cost of living is from 10s. to 15s. a week less in those areas than in London, by reason of cheaper rents and similar matters. It was stated recently that the standard of living of unskilled workers in London was often lower than that of similar unemployed workers in the Special Areas.
In the past, many suggestions have been made that the Government should offer inducements to industry to commence operations in the depressed areas. Those suggestions have taken many forms, the most popular of which is for the relief of rates, rent and taxation, with special grants. The Chancellor has accepted some of those suggestions in principle. It will be noticed that all of them partake of the nature of a subsidy. There are, ordinarily, overwhelming objections to subsidising one part of industry as against another. If, for instance, there was a possibility of establishing a subsidised boot manufacturer in South Wales, it is clear that he would be obliged to engage in unfair price cutting against Northampton, to the great detriment of the latter. This has always been an insuperable problem, and it has been the principal stumbling-block of the Government.
Attention has been directed in recent months to certain other things which may be a means of surmounting the obstacles to a subsidy such as that which I have mentioned. The Prime Minister and the President of the Board of Trade have 1646 shown concern at the greater concentration of our manufacturers upon our protected home market and their increasing neglect of the export market, which, in the long run, is of equal importance. The protected home market has combined with the armaments programme to such an extent as to absorb all that certain manufacturers can produce, and they have no necessity to endeavour to hold a highly competitive or a more competitive foreign market; but we must not trust to luck. It would be exceedingly unwise if we were to lose the export trade. The problem of retaining our export trade may be related to the problem of the depressed areas. If an inducement were offered to manufacturers to make goods for export only, the establishment of their subsidised factories in the depressed areas could be a cause of complaint to none except their foreign competitors, with whose sorrows we are not very concerned.
For years, unsubsidised, we have been competing against subsidised industries whose wage scales were lower than ours, whose hours of work were longer and whose social services were in no case comparable with ours. I earnestly commend this suggestion to the Government, because it is imperative that something should be done to hold our export trade. If the Government must intervene in these matters, they can kill two birds with one stone. I am not in favour of intervention in Spain, but I am in favour of intervention in the depressed areas, for the sake of the workers and because of our endangered commercial position in the world. As to the manner in which trades producing for export could be attracted to the depressed areas, alternatives are numerous, but the main thing is that those methods should be simple, workable, and beneficial alike to labour, employers and the community.
One other point appeals to me. The permanency of the unemployment in some of the depressed areas is such that no reduction can be anticipated in the charges on the Unemployment Insurance Fund in respect of them. Assuming that the Government were prepared to subsidise in the way that I have suggested, why should it not be done by payment to employers out of the fund of a sum equivalent to at least half what the wage-earner would get had he not been employed? That subsidy could operate 1647 solely in the depressed areas and only in respect of export trade. This scheme would answer the usual objection that the Government would be making permanent payments in respect of men who might not remain permanently out of work. The men who get back to employment are those who have been permanently out of work. There is no glimmering of hope for people such as those in Merthyr Tydvil.
In addition, the subsidy itself, if applied in the way I have explained, would not be open to the usual objection that it would unfairly assist one part of an industry against another in the home market. Another fact to which I would draw the attention of the Committee is that married men with families would be the first to get beneficial occupation, and the relief to the country thereby would be very great. Moreover, such a scheme could be put into operation for the assistance of new industries such as the manufacture of calcium carbide and other products which are not made in this country and which are required by other industries, thus absorbing a large number of men for whom at the moment there is no hope of any employment for years to come. I hope that the Chancellor of the Exchequer will consider whether some such scheme could not be adopted. The idea is not, I believe, original, but hitherto it has been considered to be impossible on the ground that home industries would be competing with one another; but, if my suggestion were adopted, it would not involve the financing of some home industries at the expense of others, and it would benefit our export trade.
§ Question put, and agreed to.