REPORT [26TH APRIL].

HC Deb 03 May 1938 vol 335 cc705-842

Resolutions reported:

CUSTOMS AND EXCISE.

INCREASE OF CUSTOMS DUTY ON HYDROCARBON OILS.

1. "That as from six o'clock in the evening on the twenty-sixth day of April, nineteen hundred and thirty-eight, the Customs Duty on hydrocarbon oils shall be at the rate per gallon of ninepence instead of eightpence, and any rebate allowed on the delivery for home consumption of hydrocarbon oils, other than light oils, shall be at the rate per gallon of eight-pence instead of sevenpence: And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

EXCISE DUTY ON SPIRITS USED FOR MAKING POWER METHYLATED SPIRITS.

2. "That—

1. (1) on and after the second day of May, nineteen hundred and thirty-eight, there shall be charged on all spirits used for making power methylated spirits a duty of excise of ninepence for every gallon of the spirits so used;
2. (2) in this Resolution the expression ' power methylated spirits ' means spirits methylated in the manner prescribed for making power methylated spirits by regulations for the time being in force under section thirteen of the Finance Act, 1924."

INCREASE OF CUSTOMS DUTY ON TEA.

3. "That as from the twenty-seventh day of April, nineteen hundred and thirty-eight, the Customs Duty on tea not being an Empire product shall be at the rate per pound of eightpence instead of sixpence, and the Customs Duty on tea being an Empire product shall be at the rate per pound of sixpence instead of fourpence. And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.''

CUSTOMS DUTY ON REIMPORTED FILMS.

4. "That—

1. (1) no film printed, or produced by any other process, in the United Kingdom and exported therefrom shall be exempt from Customs Duty by virtue of any enactment relating to the exemption of reimported goods, unless the Commissioners of Customs and Excise are satisfied either that no imported film was used in the printing or production of the film as aforesaid, or that the duty chargeable on all imported films so used has been duly paid;
706
2. (2) in this Resolution the expression ' film ' means a positive or negative cinematograph film within the meaning of section three of the Finance Act, 1925, or a positive or negative sound track, whether developed or not."

INCOME TAX.

CHARGE OF TAX.

5. "That—

1. (1) Income Tax for the year 1938–39 shall be charged at the standard rate of five shillings and sixpence in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine;
2. (2) all such enactments as had effect with respect to the Income Tax charged for the year 1937–38 shall have effect with respect to the Income Tax charged for the year 1938–39.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

HIGHER RATES OF INCOME TAX FOR 1937–38

6. "That Income Tax for the year 1937–38 in respect of the excess of the total income of an individual over two thousand pounds shall he charged at rates in the pound which respectively exceed the standard rate by amounts equal to the amounts by which the rates at which Income Tax was charged in respect of the said excess for the year 1936–37 respectively exceeded the standard rate for that year. And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of 'faxes Act, 1913.

AMENDMENT AS TO RELIEF IN RESPECT OF LIFE INSURANCE PREMIUMS.

7. "That, in cases where the allowance to be given in respect of life insurance premiums and other payments under Section thirty-two of the Income Tax Act. 1918, is restricted by paragraph (f) of Subsection (3) of that Section as amended by Section twenty-three of the Finance Act, 1935, the rate of tax by reference to which the allowance is so restricted shall be ten thirty-thirds of the standard rate instead of one-third of the standard rate. And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

AMENDMENTS OF SCHEDULE C AND CONSEQUENTIAL AMENDMENTS OF SCHEDULE D.

8. "That—

1. (1) for all the purposes of Income Tax under Schedule C and Rule 1 of the rules applicable to Case III of Schedule D, the expression "public revenue" shall, except where the context otherwise requires, include 707 the public revenue of any Government whatsoever and the revenue of any public authority or institution in any country outside the United Kingdom;
2. (2) where a banker or any other person in the United Kingdom, by means of coupons received from any other person or otherwise on his behalf, obtains payment of any foreign dividends elsewhere than in the United Kingdom, the tax under Schedule C shall extend to the dividends and the person obtaining payment shall be treated for the purpose of the paying agents rules as if he were intrusted with the payment thereof;
3. (3) where a banker in the United Kingdom sells or otherwise realises coupons for any dividends, being foreign dividends, and pays over the proceeds to any person or carries them to his account, or where a dealer in coupons in the United Kingdom purchases any such coupons as aforesaid otherwise than from a banker or another dealer in coupons, the tax under Schedule C shall extend to the proceeds of the sale or other realisation, and the paying agents rules shall apply to those proceeds as if they were dividends, and shall apply to the banker or dealer as if he had been intrusted with the payment thereof;
4. (4) the provisions of the last two foregoing paragraphs shall apply for the purpose of Rule 7 of the miscellaneous rules applicable to Schedule D (which relates to interest, etc., from colonial and foreign companies) subject to any necessary modifications;
5. (5) for the purpose of this Resolution—
1. (a) the expression ' banker ' includes a person acting as a banker and, notwithstanding anything in the paying agents rules, includes the Bank of England and the Bank of Ireland;
2. (b) the expressions ' dividends,' ' coupons ' and ' coupons for any dividends ' have the same meanings as in the paying agents rules and the expression ' foreign dividends ' means dividends payable elsewhere than in the United Kingdom, whether they are also payable in the United Kingdom or not;
3. (c) the expression paying agents rules ' means the rules applicable to Schedule C as to interest, etc., with the payment of which persons other than the Bank of England, the Bank of Ireland and the National Debt Commissioners are intrusted;
6. (6) the provisions of Schedule C and Schedule D shall be deemed always to have had effect subject to the foregoing provisions of this Resolution:

Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven, and before the twenty-seventh day of April, nineteen hundred and thirty-eight, tax could have been charged on or deducted from any profits under Schedule C of the said Rule 7 if the provisions of this Resolution had been enacted at that time, but has not been so charged or deducted, those profits shall be chargeable under Case VI of Schedule D for the year of assessment in which the profits arose. And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

TRANSFERS OF INCOME ARISING FROM SECURITIES.

9. "That—

1. (1) where, in any year of assessment, the owner of any securities (in this Resolution referred to as ' the owner ') has sold or transferred or hereafter sells or transfers the right to receive any interest payable, whether before or after the sale or transfer, in respect of the securities without selling or transferring the securities, the following provisions shall have effect and shall be deemed always to have had effect:—
   1. (a) that interest, whether it would or would not be chargeable to tax apart from the provisions of this Resolution, shall, for all the purposes of the Income Tax Acts, be deemed to be the income of the owner or, where a beneficiary is entitiled to the income arising from the securities, the income of the beneficiary, and not the income of any other person, and be deemed to be income for that year;
   2. (b) in the case of a sale or other realisation the proceeds whereof are chargeable to tax under Schedule C or Rule 7 of the miscellaneous rules applicable to Schedule D, the amount of the interest deemed to be the income of the owner or beneficiary shall he an amount equal to those proceeds;
   3. (c) in any other case, tax at the standard rate in respect of the interest shall he chargeable on the owner or beneficiary under Schedule D;
2. (2) nothing in the foregoing provisions shall affect any provision of the Income Tax Acts authorising or requiring the deduction of tax from the interest, or from the proceeds of any subsequent sale or realisation of the right to receive the interest;
3. (3) for the purpose of this Resolution, the expression interest ' includes dividends, annuities and shares of annuities, and the expression ' securities ' includes stocks and shares."

FUNDING BONDS ISSUED IN RESPECT OF INTEREST ON CERTAIN DEBTS.

10. "That—

1. (1) where any funding bonds are issued to a creditor in respect of any liability to pay interest on any debt to which this Resolution applies, the issue of the bonds shall be treated for all the purposes of the Income Tax Acts as if it were the payment of an amount of that interest equal to the value of the bonds at the time of the issue thereof;
2. (2) where any person by or through whom any such bonds are issued in any year of assessment would be required under the said Acts to deduct tax from the said amount of interest if it had been actually paid by or through him, he shall retain bonds the value 709 Whereof at the time of issue is equal to tax at the standard rate for that year on the said amount of interest, and shall be acquitted in respect of the retention in like manner as if he had deducted such tax from the interest, and shall be chargeable with such tax accordingly: Provided that the Commissioners of Inland Revenue, if satisfied that it is impracticable to retain bonds as aforesaid, may relieve any such person from the foregoing provisions of this paragraph on such conditions as they think fit, and thereupon tax in respect of the amount of interest treated as having been paid by the issue of the bonds shall be chargeable for that year under Case VI of Schedule D on the persons receiving or entitled to the bonds;
3. (3) the debts to which this Resolution applies are any debts incurred, whether in respect of moneys borrowed or otherwise, by any Government, public authority or public institution whatsoever, or by any body corporate whatsoever, and for the purpose of this Resolution the expression ' funding bonds ' includes any bonds, stocks, shares, securities or certificates of indebtedness;
4. (4) the foregoing provisions of this Resolution shall he deemed always to have had effect:

Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven, and before the twenty-seventh day of April, nineteen hundred and thirty-eight, any bonds could have been retained under this Resolution if its provisions had been enacted at that time but have not been so retained, an amount equal to the value of the bonds at the time of the issue thereof shall be chargeable under Case VI of Schedule D for the year of assessment in which the bonds were issued. And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

PROVISIONS AS RESPECTS SETTLEMENTS.

11. "That

1. (1) there may be included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to—
1. (a) settlements which are wholly or partly revocable or otherwise determinable in any circumstances whatsoever (including settlements whereunder the settlor's liability might cease on payment of a penalty);
2. (b) settlements whereunder any income or property of any description is, or will or may become, payable to or applicable for the benefit of the settlor in any circumstances whatsoever;
3. (c) the disallowance, in computing total income for purposes of Surtax, of the deduction of sums paid by a settlor to the trustees of the settlement or persons connected with the settlement;
710
4. (d) sums paid directly or indirectly, whether by way of loan or repayment of loan or otherwise, by the trustees of a settlement or persons connected with a settlement to the settlor;
2. (2) subject to such qualifications and exceptions as Parliament may determine, the said provisions shall apply to any settlement wherever or whenever made or entered into, and shall apply for the purposes of assessment to Income Tax for the year 1937–38 and subsequent years;
3. (3) for the purpose of this Resolution the expression ' settlement ' includes any disposition, trust, covenant, agreement or arrangement, and the expression ' settlor ' includes any person by whom a settlement was made or entered into directly or indirectly and, in particular, includes any person who has provided or undertaken to provide funds directly or indirectly for the purpose of a settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into a settlement; and references to a settlor include references to the wife or husband of a senior."

AMENDMENTS AS TO AVOIDANCE OF INCOME TAX BY TRANSFER OF INCOME ABROAD.

12. "That there may be included in any Act of the present Session relating to finance such amendments of Section eighteen of the Finance Act, 1936 (which contains provisions for preventing avoidance of Income Tax by transactions resulting in the transfer of income to persons abroad), as Parliament may determine, and any such Act may provide that the said amendments shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years, and shall apply in relation to transfers of assets and associated operations whether carried out before or after the date of this Resolution.

ADMINISTRATION OF ESTATES.

13. "That—

1. (1) there may be included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to the estate of a deceased person and the income arising therefrom before the completion of the administration of the estate, in relation to persons having an interest in the residue of an estate before, on and after the ascertainment thereof and persons to whom legacies are bequeathed by a will, and otherwise in relation to the administration of estates;
2. (2) any such Act may provide that the said provisions shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years and shall apply in relation to the estate of a deceased person whether he died before or after the commencement of that year."

VALUATION OF TRADING STOCK ON DISCONTINUANCE OF TRADES.

14. "That—

1. (1) when any trade is discontinued al treated for the purposes of Income Tax as if it had been discontinued, any trading 711 stock then belonging to the trade shall be valued, in computing for the purposes of Income Tax the profits or gains of the trade, as follows:
1. (a) in the case of any such trading stock which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade in the United Kingdom and may deduct the cost of the trading stock as an expense in computing the profits or gains of that trade, the value thereof shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer;
2. (b) in the case of any other such trading stock, the value thereof shall be taken to be the price which it would have realised if sold in the open market at the discontinuance;
2. (2) provision shall be made for determining any questions arising under sub-paragraph (a) of the last foregoing paragraph for the purpose of computing the profits or gains of both the trades concerned;
3. (3) for the purpose of this Resolution, the expression ' trading stock ' includes property of any description, whether real or personal."

LOSSES OF CAPITAL REDEMPTION BUSINESS.

15. "That

1. (1) where any person carries on capital redemption business—
1. (a) the capital redemption business, if carried on in conjunction with business of any other class, shall be treated for the purposes of Income Tax as a separate business; and
2. (b) in ascertaining whether and to what extent he has sustained a loss in the carrying on of the capital redemption business for the purpose of setting off or giving relief in respect of the loss, any of his income derived from investments held in connection with the capital redemption business shall be treated as part of the profits arising from that business:
2. (2) in this Resolution the expression ' capital redemption business ' means the business (not being life assurance business or industrial assurance business) of effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or series of sums will become payable to the insured in the future."

ESTATE DUTY.

ESTATE DUTY IN RESPECT OF RESIDUARY ESTATES.

16. "That—

1. (1) there may be included in any Act of the present Session relating to finance such provisions as to Estate Duty as Parliament may determine in relation to the residue of the estate of a deceased person and to the inclusion of property representing such residue in the property that passes or is 712 deemed to pass on the death of a person dying before the completion of the administration of the estate;
2. (2) any such Act may provide that the said provisions shall have effect and be deemed always to have had effect in relation to a person so dying whether before or after the commencement of the said Act."

ESTATE DUTY IN RESPECT OF PROPERTY TRANSFERRED TO, AND SHARES IN, CERTAIN COMPANIES.

17. "That—

1. (1) for the purpose of determining the rate of Estate Duty, property which is deemed to pass on the death of any person by virtue of Section thirty-four or Section thirty-five of the Finance Act, 193o, shall not be an estate by itself but shall be aggregated with other property passing on the death;
2. (2) for the purpose of the definition of the value of the total assets of the company ' contained in Section thirty-eight of the said Act, the deduction to be made under paragraph (i) in respect of any debentures, debenture stock or preference shares of the company shall, instead of being the par or redemption value thereof, whichever is the greater, be the principal value thereof."

ESTATE DUTY IN RESPECT OF SETTLED PROPERTY.

18. "That the exemption conferred by Sub section (3) of Section five of the Finance Act, 1894, in the case of settled property where the interest of any person under the settlement fails or determines by reason of his death before it becomes an interest in possession and subsequent limitations under the settlement continue to subsist, shall cease in cases where the property would, if that Sub-section had not been enacted, have been deemed to pass on the death otherwise than by reason of the failure or determination of the interest.

MISCELLANEOUS.

NATIONAL DEFENCE CONTRIBUTION.

19. "That Part III of the Finance Act, 1937 (which relates to the National Defence Contribution), shall be amended—

1. (a) so as to re-define the circumstances in which a body corporate is to be deemed to be a subsidiary of another body corporate for the purpose of Section twenty-two of the said Act (which provides for the amalgamation of the profits and losses of subsidiary and principal companies) and of any provision made in pursuance of this Resolution;
2. (b) so as to alter the provisions of the said Section twenty-two relating to the giving of a notice thereunder by a principal company as respects a subsidiary;
3. (c) so as to disallow, in computing profits, any deduction in respect of any interest, annuity, or other annual payment, or any royalty or rent, paid by one body corporate to another, where one of them is a subsidiary of the other or both are subsidiaries of a third;
4. (d) so as to disallow the carrying forward of any loss under sub-paragraph (2) of paragraph 2 of the Fourth Schedule to the said 713 Act, if and to the extent that the loss has been deducted from or set off against the profits arising from a trade or business, whether under the said Section twenty-two or otherwise;

and that the said amendments shall be deemed to have had effect as from the date on which the said Part III came into operation.

RESTRICTION OF RELIEF FROM TRANSFER STAMP DUTY ON CERTAIN INSTRUMENTS.

20. "That any Act of the present Session relating to finance may restrict, in such manner as Parliament may determine, the relief from Stamp Duty given by Section forty-two of the Finance Act, 1930 (which relates to instruments the effect whereof is to convey or transfer a beneficial interest in property from one associated company to another).

First Resolution read a Second time.

3.35 p.m.

Mr. Kelly

I beg to move, in line 3, to leave out "ninepence," and to insert '` sevenpence.

There is also a second Amendment to reduce the rebate from 8d. to 6d., and I am wondering whether it will be for the convenience of the House for the two Amendments to be considered together?

Mr. Speaker

These two Amendments in the name of the hon. Member for South Shields (Mr. Ede) and the hon. Member for Rochdale (Mr. Kelly) are technically out of order. Hon. Members will realise that the existing duty is 8d. and it is suggested to reduce the duty from 9d. to 7d. in which case, if the Amendment were accepted by the House, no Money Resolution would be necessary as it would be a reduction of the duty. I do not propose to take that line and rule the Amendments out of order, but to allow the hon. Member to move his Amendments. I think it would be for the convenience of the House if they were discussed as one Amendment.

Mr. Kelly

The first Amendment is to reduce the 9d. per gallon on hydrocarbon oils to 7d. and the second is to reduce the rebate from 8d. to 6d. For many years when Chancellors of the Exchequer have been looking for means of raising money they have turned immediately to the road transport industry. This industry, which is already heavily burdened, finds something like £88,000,000 a year, about 9 per cent. of the national revenue, and is now once again to have a further impost of one penny on the raw material they need for their transport. One would have expected that the Chancellor of the Exchequer would have looked in other directions to find the money he requires. This burden is not confined to the people who are engaged in this particular industry but is passed on to most people in the country. It is passed on to those who travel as passengers on the roads and to those who purchase goods, most of which are now carried by road transport, and in placing this burden once again on family budgets in all parts of the country the Chancellor of the Exchequer has taken the easiest course to impose the extra taxation he requires.

I hope the right hon. Gentleman will give further consideration to the position and realise the heavy burden that these people already have to bear. This extra penny may not sound very much, but, added to that which they are already paying, it is a serious matter for the industry. I wonder why there is this discrimination against this particular section of the transport industry. This taxation was originally imposed in the year 1909. I am not going to weary the House with a history of the matter, but we know that they were induced to accept it with willingness because it was intended to be used for road purposes. Various Chancellors of the Exchequer have rushed to this fund and raided it time and again, not utilising the taxation for the purposes for which it was originally intended, and to-day we find that greater burdens are being placed upon these people until there is now a duty of 9d. per gallon on hydrocarbon oil. I realise that this motor spirit if used for stationary engines or railway engines does not bear a duty to the extent of 9d. per gallon.

In view of the serious position in which the road transport industry finds itself at the present time, and the fact that this impost will affect the cost of the things which many homes purchase for their maintenance, I ask the Chancellor of the Exchequer to give serious consideration to this Amendment, and to realise that the burden is too heavy for these people, and ought not to be imposed upon them in this way. The transport of food, and all forms of industrial and commercial transport will be affected. This is indeed a direction in which we did not expect the Chancellor would look even for the sum which he requires at this time. I urge the right hon. Gentleman to accept the Amendment, so that there shall be no discrimination against these people and so that they may be given the opportunity of carrying their industry forward to greater prosperity, to the advantage of the country. If he does that, he will earn the thanks of the community.

3.42 p.m.

Mr. Benjamin Smith

I beg to second the Amendment.

Ever since the Road Fund was initiated in 1909, there has been, with the exception of a few years, a continual impost for revenue purposes upon this industry. In instituting the tax, the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) gave a pledge on behalf of his Government—of course, I know that no future Government can be bound by such a pledge—and the House supported him, that the tax was to be for the purposes of putting the roads of the country in a proper state of repair and making them sufficient to bear the ever-growing traffic that would go upon them. The right hon. Gentleman said that in no circumstances was that revenue to be used for the ordinary purposes of taxation. The right hon. Gentleman the Member for Epping (Mr. Churchill) followed by imposing a duty on petrol, and he said much the same thing as the right hon. Gentleman the Member for Carnarvon Boroughs. The late Sir Austen Chamberlain again pledged the Government of which he was a Member that, whatever might be the revenue from this source, it was to be used for the roads of the country. Then a one-time colleague of mine, the late Viscount Snowden, apologised to the House in 1931, at a time when, presumably, there was a great slump and when an emergency Budget had to be brought before the House, for having to increase the tax on petrol, and he pledged himself that when any reduction of taxation came, this would be one of the first directions in which relief would be given. A year ago the present Prime Minister, when Chancellor of the Exchequer, decided to take away from the roads the whole of the revenue from this form of taxation and to place it at the disposal of the Exchequer. Let me observe, in passing, that it is said that the Government propose to give about £20,000,000 to the Fund this year, an increase of approximately £6,000,000 over what was spent last year; but obviously it is untrue to say that, because there was a surplus in the account last year of approximately £6,000,000, so that the actual increase in the amount going from the Exchequer to that Fund will be about £900,000.

There are one or two things which I wish to bring to the notice of the House. Let me take, first of all, the case of a taxicab driver, whose cab averages 18 miles to the gallon. Day in and day out, empty or full, a tax of ½d. a mile is levied on that taxicab. It is a formidable tax. On top of that, the man has to pay, as an owner driver, for two licences, and anything up to £16 a year for the registration of his vehicle, so that there is an imposition of something like £60 a year, if one takes an average mileage for the taxicab of from 35,000 or 45,000 miles per annum. Let it be remembered that such a man has to pay the rates and taxes which the ordinary citizen has to pay. This is an imposition upon his industry, and instead of being used to give better facilities on the road, it is now to be used by the Exchequer for the purposes of the ordinary revenue of the country. I have in my hand a letter which reads: Can you not, on our behalf, enter a strong protest against any increase in fuel costs in the transport industry. Our wages bill last year for 10 men amounted to £2,080; taxes paid to the Government to £1,200. That means that taxation to an amount of upwards of 50 per cent. of the wages bill is placed upon this industry. How can one expect the industry to thrive as it should when such a preference is given to another section of the transport industry which, if it has standing engines or uses heavy oil in its engines, is to be taxed at the rate of only 1d. per gallon. I suggest that that is unfair discrimination as between one industry and another. I wish to bring to the notice of the House another aspect of this matter to which, perhaps, the House has not given much attention. An industry which has, by its work, to find a revenue tax, is a badly-paid industry. There is before the House a Road Haulage Bill which, if carried by the House, will fix the wages, as three Acts of Parliament, under the Ministry of Transport, have already fixed the hours in the motor-transport industry. There are in that industry notoriously long hours and bad wages, the reason being that the industry cannot compete effectively with railway transport without making a drive into the working conditions of the people.

If hon. Members doubt this, let me refer to another section of that industry. If the Minister of Labour will look into the wages paid to people employed in garages and serving at petrol pumps, he will find that they receive from 17s. 6d. to 30s. a week for a week of about 60 or 70 hours. [An HON. MEMBER: They get tips. They expect tips, but that is a pretty pernicious way of getting a living, and one which I am sure no hon. Member would support. In the drink trade, for instance, it is notorious that they are the worst-worked and worst-paid people, again because of the incidence of taxation. In the grocery and provisions trade, sugar, tea and coffee, arid so on, it is already contemplated that there shall be a trade board because of the rotten conditions applying throughout the country in regard to what are called the small men employed in that industry. The Chancellor of the Exchequer was once a great Free Trader, and I remember that on one occasion he told his constituents that the Government were even going to tax the currant in a halfpenny bun. To-day, the Chancellor sits with his new friends, and imposes taxes willy-nilly upon all and sundry.

I drive a 14 horse-power car. As an ordinary citizen, I have to pay the increase of 6d. in the Income Tax; through my family I have to meet the impost of 2d. a lb. on tea; and there is a tax levied on me of a ½d. a mile for every mile I travel in my car, apart from buying petrol and maintaining that car in the proper condition in which it should be maintained. I say that it is unfair discrimination, not only against industry, but against individual citizens, to penalise one citizen who has to meet all the common obligations of revenue, imposed whether by his local authority or by the Exchequer and yet has this further impost placed upon him. The Chancellor of the Exchequer, when introducing his Budget, asked, could anything preferable to the present proposals be suggested? The right hon. Gentleman the Member for Caithness and Sutherland (Sir A. Sinclair) suggested various forms of taxation. I suggest one which, I think, would do a lot of good in the world, and in this country in particular, and that is an inheritance tax. A lot of lazy drawing-room loungers are spoiling Mayfair and spending in the casinos of foreign countries wealth that has been earned by their fathers. They are debauching themselves and bringing this country into disrepute and the Chancellor of the Exchequer could make decent citizens of them by the imposition of an inheritance tax which would force them to work honourably for a living. There, I suggest, is a means of finding revenue without imposing hardship upon anybody. The dead are dead and you cannot hurt them any longer, but certainly the gentleman who, having received his inheritance, goes about the country wasting wealth is a very good subject for taxation by the Chancellor. I hope that all Members who believe that this is an unfair burden upon a growing industry, which last year paid £88,000,000 to the revenue of the country, will join with me in asking the Chancellor of the Exchequer to withdraw this tax, or to reduce it as suggested in the Amendment.

3.53 p.m.

Colonel Sandeman Allen

I cannot join with the hon. Member for Rotherhithe (Mr. Benjamin Smith) in all he has said, and I presume that if the dead to whom he referred were alive, they would not necessarily be driving 14-horse power cars. I must point out that there is no necessity for the hon. Member to drive a car at all. There is no necessity for any of us to drive cars and if we choose to indulge in luxuries, we have to pay for them. But I agree with him most heartily in his dislike of the discrimination in this tax. The fact that stationary engines and railway motors should be allowed to go free while road users are penalised, seems to be most unfair. I do not think any member of the community objects to paying a tax which he knows to be required for the safety of the country. What we do object to is the discrimination shown in this tax and the lack of that fair spread which ought to obtain in a case of national emergency. We realise that this is a question of national emergency, and that rearmament has to be paid for, but we say that the necessary taxation ought to be spread evenly over the various sections of the community, and not levied particularly on one industry to that industry's disadvantage in competition with others. It is to that point that I hope the Chancellor of the Exchequer will address himself more particularly to see whether he cannot secure a little better levelling out of this necessary taxation.

3.55 p.m.

Mr. Holdsworth

I was astounded to hear the hon. and gallant Member for Birkenhead (Colonel Sandeman Allen) refer to the driving of a car in these days as a luxury.

Colonel Sandeman Allen

For private citizens it is.

Mr. Holdsworth

I do not care what qualification the hon. and gallant Member makes. Surely we have passed the time, in these days of speed and the necessity of getting quickly from one place to another, when the driving of a car could be defined as a luxury. I was very interested in the suggestion of the hon. Member for Rotherhithe (Mr. Benjamin Smith) as to a new tax, but I do not propose to follow him into that matter. I have, so far in my life, regretted that no one was ever good enough to leave me any money, either to live a good and sober life or to go in for debauchery. But I did want to refer to the history of this tax. The hon. Member for Rochdale (Mr. Kelly) said he would not weary the House by going into it. I do not want to weary the House either, but I think it is essential that something should be said on the subject.

I do not think we realise the tremendous increase that has taken place in this tax. In that famous Budget, probably the most famous of all Budgets, the Budget of 1909–10, the then Chancellor of the Exchequer put two kinds of duties on the motor industry. One was a vehicle tax, and the other was a tax of 3d. on petrol. I ought to mention here, because it is an interesting reference to the industry with which the hon. Member for Rotherhithe was connected, that motor cars, omnibuses and hackney carriages were exempted from the vehicle duty, and commercial goods vehicles at that time were allowed a rebate of half the Petrol Duty. We ought to bear in mind, too, that the whole proceeds of those duties were allotted, without any deduction, to road improvements. The Finance Act, 1920, gave statutory form to the bond between the motor taxpayer and the Government, whereby all the money raised was to be spent upon road improvement. Those arrangements held good until 1926, and then we saw the first raid on the Road Fund. The right hon. Gentleman the Member for Epping (Mr. Churchill) set a very bad example in the Budget of that year. From that year onwards there have been periodical raids on that fund, and in 1928 there was reimposed a duty on petrol of 4d. a gallon, and in 1931, in each of the two Budgets of that year, there were further increases of 2d. per gallon on petrol, making a total of 8d. a gallon at that time. Now there is to be a further increase of a rd. per gallon, making it 9d. per gallon.

There are one or two figures which I wish to give because they are very striking. In 1910 the first result of the Petrol Duty was to bring in £321,000. In 1938–39, as the White Paper issued last Tuesday shows, the taxation on hydrocarbon oils amounts to £57,500,000, not including the vehicle tax. I want to be quite fair and, making an allowance for the tax paid on oil used for purposes other than transport, we get a net sum estimated to be produced this year, in oil taxation, of £51,500,000, the whole of which is paid by road transport. Let me put it in another way. The total national expenditure in 1930–31 was £799,000,000. In 1937–38 it was £844,000,000. That is an increase of £45,000,000 in that period. And the yield from taxation of motor fuels during that period increased by £31,000,000. If you also add the motor vehicle taxes in 1930–31, including Import Duties of £29,000,000, they rose in 1937–38 to £37,000,000. Of the total increase in those years of £45,000,000 in national expenditure no less than £39,000,000, or 87 per cent. of the increase, was found by motor transport —an astounding sum.

Is that a fair proportion? I understand that the landed price of petrol is 4d. per gallon approximately, so that the real taxation on the absolute cost is 225 per cent. I should have thought that when seeking an article for taxation raw materials would not be selected. Oil for industrial purposes is used as a fuel for power and heat, and it is used for lubrication; and the cost of transport is a serious item in the cost of production of every manufactured article. It is interest- ing to study what is the percentage of cost caused by transport. I am not going to give any figures because they are very difficult to work out, but I do not think I shall exaggerate if I say that a minimum of 7½ per cent. represents the cost of transport in any article of production I believe that this cost has a serious effect on the export trade. At the present time in Bradford and in the textile areas generally we are going through not a recission but a terrific slump in trade. The Chancellor of the Exchequer knows that area almost as well as I know it myself, and he knows that we are having a terrific struggle to keep going. All sorts of difficulties are to be met with, currency restrictions, depreciation of currency, and so on. I suggest to the Chancellor that, however small a burden is added to the cost of production, it does hinder recovery so far as the export trade is concerned.

Let me give an illustration. The hon. Member for Rotherhithe has already given one or two interesting illustrations. Take the case of a small vehicle with an unladen weight under 2 tons. There is a tax paid of £25 a year. If we take an average running of 400 miles a week at 12 miles to the gallon we find that that vehicle pays £65 per year in Petrol Duty. It means a total, on a small vehicle of that description, of £90, or, to put it into weeks, a tax of 35s. a week. The hon. Member for Rotherhithe mentioned a 14 horse-power car. One pays for that a vehicle tax of 10 guineas a year. Running 25,000 in the year the tax paid is £46 17s., or a total of £57 7s., without the tax on the oil. Working it out we find it comes to 22s. a week for a small car.

One other matter to which I must refer is the tremendous added cost to public service vehicles. I read somewhere that the London Passenger Transport Board—I do not want to take an oath on these figures because I am speaking from memory—will have to meet something like £146,000 additional charge per year on their cost of running. I believe that in Bradford this extra penny means an added cost of some thousands a year. Who pays this? I believe it is absolutely impossible for most of these undertakings to pay this added tax without putting up the fares or reducing the distance that a passenger can travel, and it is true that this is another tax that will be largely paid by the workers. What have we done? For some years in this House one of the pleasing things has been the building of new houses and the encouragement given to people to get away from their work in the industrial areas and to live in pleasanter surroundings. I can best refer to Bradford because I represent one part of that city. We have in Bradford housing estates where the people in order to get into town have to pay a 3½d. bus fare. One of the great struggles of the workers nowadays is not merely payment of increased rent but the payment of increased fares in getting to and from their work. The transport charge is a terrific burden; in some cases it comes to 10s. or 15s. a week for a man and his wife and other members of the family who are working. They travel miles to their work. What is this extra charge going to mean to the ordinary worker and his family? It is certainly going to mean shillings a week in additional cost of transport to and from work. It seems to he of little use this House trying to encourage the worker to get away from an industrial area into healthier surroundings if we make the cost of transport a terrific charge on his weekly earnings.

Further, this tax discriminates between one form of transport and another. Traditionally taxation in this country is for the sole purpose of raising revenue. But that has not applied for some years; other motives have crept in. In 1928 the Petrol Duty was reimposed avowedly to finance the derating proposals. The right hon. Member for Epping stated in his Budget speech that £4,000,000 raised by the 4d. imposed upon petrol was to be allocated to replace rates hitherto paid by the railway companies. It is true that the railway companies in return were to lower freights on coal, iron, steel, and other heavy goods. It always struck me as ironical that the road hauliers should have to present the railway companies with money in order that the railway companies might lower freights as the Government asked them to do. It was an absolute present to their own competitors. It seems to me the strangest form of taxation to tax one man in order that he might encourage his competitor to defeat him in the same industry. How would the railway companies like a similar tax on their fuel? In 1937 the railways consumed 15,000,000 tons of coal, and I understand that the average pithead price for it was something like 15s. 2d. a ton. If there was a tax of 225 per cent. on their fuel there would be an increased operating cost of £25,500,000 a year placed on the railway companies. What a scream there would be in this House. I often think it is a pity that there are not in this House more people directly interested in road transport. The railway companies are very well represented.

Mrs. Tate

Too well.

Mr. Holdsworth

There is a great discrimination between the different forms of transport. I took the trouble to get out a note of what the Prime Minister said in his Budget speech of 1933. It confirms my statement as to discrimination. These were his words: I have received very strong representations from the coal industry, supported by the gas and electricity industry and by the railway companies that in the interests of the British coal and allied industries I should review what they regard as an anomalous position.''—[OFFICIAL REPORT, 25th April, 1933; col. 52, Vol. 277.] The whole trend of legislation during these past few years has been to discriminate between road and railway interests. Ever since 1926 successive Chancellors have imposed further burdens on road transport not merely for revenue purposes but by way of penalising one form of transport. Let me give an illustration to show the burden on the road transport industry. Only a week last Saturday morning a certain gentleman whom I have known for years, who had started a small haulage business with one lorry, came to see me. That business had developed until the man had seven lorries. In our particular area business is almost dead at the present time, with the consequence that he ran only four lorries out of the seven. But he is scared to death that if he does not keep the whole of the seven licences he will lose his licences when he makes further application. The licence of each one of those vehicles costs 30s. a week, for they are heavy vehicles. Here is a poor fellow going through a terrible trade depression, wondering how to make ends meet, and because of our legislation here he has to spend £4 10s. a week on three vehicles that he cannot run, and now he has this added burden proposed by the Chancellor.

The whole basis of legislation with regard to road transport is penal in its character. It simply hinders people from running cheap forms of transport and prevents their rendering to people the service which they desire. Of course, that is now a thing of the past; people are not allowed to do that kind of thing. It was only last week that we learned that it was a crime to give people what they wanted at a price that they could afford to pay. That is the whole basis of our legislation. I really cannot understand why this should be done. If the matter were considered only from the point of view of employment, it should be remembered that this industry gives employment to more than 1,000,000 people in this country I believe it gives direct and indirect employment to nearly 1,500,000 people. If we reckon the manufacture of motor cars and lorries, the drivers, the oil industry, road conctruction and steel production, transport gives a tremendous amount of employment. If it could work without all this penal legislation it would lower the cost of production tremendously. It also saves a tremendous amount of time in delivery. It is not possible to assess the monetary value of the saving of time that this industry has caused for all the other industries. It has revolutionised transport. Why seek to impede progress by penal taxation? I am certain that the Chancellor desires, as we all do, to see this country prosperous, but in order to achieve this desire we ought to do everything in our power to assist a progressive, cheap and efficient transport.

The Financial Secretary to the Treasury (Lieut.-Colonel Colville)

Perhaps it will be for the convenience of the House if I now indicate the Government's views—

Mr. James Griffiths

There are other aspects of this question which hon. Members wish to mention.

Lieut.-Colonel Colville

I will gladly give way to the hon. Gentleman if he desires to speak.

4.16 p.m.

Mr. J. Griffiths

We are developing in this country a crazy kind of economics. We set one industry against another and make one man's meat another man's poison. A tax like this, for example, which fills the genial taxi-man in London with a good deal of dread for the future sends a little ray of hope into the life of the miner that it will help on the use of coal for the production of oil. We ought to try to discover how these conflicting interests can be gathered together instead of having all sorts of vested interests which fight one another. One of the reasons given for the high taxation of petrol was that it would be an aid to the development of the industry of producing oil from coal at home. That is the only justification that I see for it. At the moment we are making the worst of both worlds. Our people are having to pay heavy transport costs because of this taxation, and the taxation is not coming to the aid, as it should, of the development of oil from coal at home. Originally this tax was the subject of negotiation, consultation and agreement between the Government and Imperial Chemical Industries when they set up their experimental plant at Billingham. From the beginning the nation has contributed towards that experiment and yet has not been allowed to know anything about it. Everyone who pays for a penny fare on the bus pays towards this tax which has contributed towards the Billingham experiment, and yet we know nothing about it. It is shrouded in mystery.

We are no further forward in this country to a solution of the problem of producing our own oil from coal than we were seven or eight years ago. If what is now said is true, they have largely given up trying to produce oil from coal at Billingham and are producing oil from all kinds of mixtures. We really do not know what they are doing. Since then we have had the Falmouth Committee's report, and so far there has been no opportunity for the House to discuss it. I am profoundly disappointed with it. The Committee have taken an extraordinarily narrow view of the whole position. They have been tied down far too much to the question whether it is possible at this moment to establish an industry that will stand on its own feet. A far longer view ought to be taken. This Budget is the first of the rearmament Budgets, perhaps the smallest of them. We are getting apprehensive as to what the taxation in the next Budget will be like. Therefore, if we are asked to accept this Budget on the ground that it is essential for rearmament, it is appropriate that we should discuss whether the best use has been made of the taxation from the standpoint of rearmament.

Let me contrast what has been done in Germany with what has been done here. In the last five years the oil from coal industry in Germany has been developed so rapidly and extensively that whereas five years ago they were producing only 10 per cent. of the oil they consumed, they are now producing 47 per cent. In the eastern part of Germany they are producing oil from lignite only, that is to say, from brown coal, from what we regard as scrap coal. Yet in this country we are doing nothing in the matter that is worth while. I join with my colleagues in the view that there ought not to be any taxation which puts one form of transport at a disadvantage as against another. The only justification that I know of for putting this taxation upon petrol is in order to assist the coal industry. We know that one of the permanent factors in the decline of the coal-mining industry in this and every other country is the coming of petrol. The first consideration of those of us who speak for the mining industry in the last ten years have been how we can get a bit more work for our people. Therefore, when we see oil displacing our men, closing pits and rendering valleys derelict, we have had to look round to see if there were any means by which this menace can be overcome.

It is a tragic thing how a new invention can become a new menace. The coming of this form of transport has been a menace in some respects. We, therefore, looked forward to the time when, by the aid of this tax and under its shelter, it would be possible for a new industry to be developed in the extraction of oil from coal. We are doing nothing effective about it, however. What is the good of having a tax of this kind if the only justification for it is not being carried out? We are spending enormous sums on aeroplanes and they will not be of any use unless there is petrol to fly them. We are dependent on imports for 95 per cent. of the petrol that we require, and we must have a network of far-flung communications from the oil wells to the storage places all over the country which are vulnerable to air and other kinds of attack. Yet we are doing nothing to encourage the home industry. Our Navy depends on oil, and the Army is becom- ing more and more mechanised. Yet no real tangible effort is being made to supply the need. The Falmouth Committee reported three months ago. Disappointing as their report is, they do suggest that something should be attempted now in the hydrogenation process, but nothing has been done. The House has not had an opportunity of discussing the report and no announcement has been made. I put it to the Financial Secretary that it is no use defending this tax, as ather Chancellors and Financial Secretaries have done, on the ground that it provides a shelter under which a home oil-from-coal industry can be created, unless some real efforts are made to carry out the implications, which are to assist in the development of a real oil-from-coal industry in this country.

4.27 p.m.

Sir John Wardlaw-Milne

I was much interested in what the hon. Member for Llanelly (Mr. J. Griffiths) said regarding progress in Germany in the extraction of oil from coal. On another occasion I shall be still more interested if he can give us details about the cost of that production. I am informed that the cost is extremely heavy.

Mr. J. Griffiths

It is impossible to discover any figures about anything in Germany in these days, but I have seen estimates of the cost. Probably for local internal reasons the Germans are extracting oil from lignite, and the cost of this should not be used as a basis for determining the cost of extracting oil from coal.

Sir J. Wardlaw-Milne

I was not criticising the statements of the hon. Member, but I should be interested to know what the cost of production in Germany is. I have been very struck with the criticisms of this tax, and I am in entire agreement with the expressions of opinion as to the burden which it will cause to fall upon certain people. I do not think it is unfair to call this tax unfortunate in the sense that it is discriminatory and that it falls more heavily upon one class of user than another. I have no doubt that the Chancellor's answer to these criticisms would be, not that he entirely disagreed with what has been said, but that some form of taxation is necessary to raise the money he requires. I have on another occasion said that some of us thought that it was not absolutely necessary to raise this extra £30,000,000 this year by taxation, but that is not a point into which I can go to-day. The Chancellor's main argument in his Budget statement was that he had to raise £30,000,000 and that he wished to spread the taxation over all the classes of the population. He will forgive me if I say that he then proceeded to raise about £25,000,000 of it from one small section of the population, about 3,500,000 people who pay Income Tax, and, if you allow for the extension of exemptions given to the small Income Tax payer, probably to far fewer than 3,500,000. But leaving that aside, it is probably true that this tax is one way of seeing that all sections of the population pay a share of the extra money required.

The point that I want to raise this afternoon is this: Although we must all agree that in recent years the taxation of petrol has become part of the ordinary Budget receipts and can no longer be looked upon as a tax specially connected with the construction of roads, that does not alter the fact that, as the hon. Member for South Bradford (Mr. Holdsworth) said, the tax was originally designed to assist in the production of good roads, and I am therefore anxious to take this opportunity of putting before the House this one aspect of that matter. I think a good deal of harm has been done—I say it without offence, I hope, to anybody —by the visit about a year ago of a large number of people from this country to Germany to look at roads. Some of them, I think, came back with the idea that this country should follow Germany in the production of great lengths of large motor roads, but the fact is, of course, that the conditions in this country are totally different from those in Germany, and the problem can never be the same. The distribution of the population is different, the situation in the country districts is different, and in almost every way conditions which apply in Germany do not apply here.

I do not suggest for a moment that I am opposed to the construction of good motor roads, more particularly if those roads are of value to the commercial transport and the trade of the country—in such a case we must all be in favour of such roads—but the point that I want to make is, Are we not really going too far in this matter? When I hear of a proposal quoted to me by an hon. Friend who usually sits behind me, but who unfortunately is not in his place at the moment, that in the North of Scotland—and I am sorry the right hon. Member for Caithness and Sutherland (Sir A. Sinclair) is not in his place either when I say this—there is to be an expenditure of £6,000,000 upon secondary roads, mostly provided by the taxpayers of England, I am a little appalled, and I wonder whether this country realises how far it is going in this provision of secondary roads. I do not know the exact figure —I do not know that it has ever been quoted, and if this were a suitable opportunity, I should like to ask the Minister of Transport what it is—but I am informed that it may be something just under £1,000,000 for the construction of roads in the county of Sutherland, where, to my knowledge, there are miles and miles of roads on which there is not a single house. I feel that, although this tax may be absolutely necessary for the purposes of ordinary revenue, to fill a gap in the Chancellor's Budget, and although we must now look upon it not as a tax for the purpose of roads, still, those of us who remember, as most of us do, the earlier days of the proposal for a petrol duty and the object of it when it was first introduced, must, I think, wonder whether the enormous expenditure on roads at the present moment in our present financial circumstances, and especially on secondary roads, is really justified.

I would only add this further word: I am not at all certain that the production of these great highways is necessarily the best way to put down the numbers of fatalities that take place on the roads. I think it is very questionable whether these wonderful roads do really reduce the death-rate. Although I agree with what has been said regarding the burden of this tax upon certain users of motor vehicles, I appreciate at the same time that it is part of the ordinary Budget taxation to-day, and on that account, if we are to have this enormous rearmament programme, I do not know that we can object to any more than we object to any form of taxation.

4.35 p.m.

Lieut.-Colonel Colville

I do not propose on this occasion to follow my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) on the question of expenditure on roads in the North of Scotland, except to observe that the improvement of the Highland roads is an important matter. I am glad that I gave way to the hon. Member for Llanelly (Mr. J. Griffiths), because he raised a point in which I am very much interested personally. I happen to represent a constituency in Scotland where shale oil is produced, and there the same point in which he was interested, in regard to encouraging the production of oil from indigenous sources, arises. I remember very clearly that the justification for the rise in the rate of taxation on oil was on Revenue grounds, but with the important sideline that by giving a preference at the same time to the oil produced from indigenous sources, we should encourage that industry. Therefore, while both the hon. Member and I would be glad to see the production of oil from coal encouraged, we cannot say that the whole purpose of this duty was to provide a large measure of protection for that industry. I would point out that if the Amendment were accepted, it would greatly worsen the position of the home industry, because it would considerably reduce the amount of preference which is given at present, and I assume, therefore, that the hon. Member's contribution was in the nature of a demonstration rather than a serious intention to support an Amendment which would only have the effect of lessening the preference given to the coal industry and the home shale-oil industry, which have considerably benefited from that preference.

The very cogent reason why my right hon. Friend cannot accept this Amendment is because of its financial effect. The effect of these two Amendments, taken together, would be to reduce the duty on light hydro-carbon oils and heavy oil used as road fuel, that is, Diesel oil, to 7d. a gallon instead of increasing it to 9d., the duty on other heavy oils remaining at 1d. The loss of revenue from such a proposal would be approximately £10,000,000. It has already been made plain that the Chancellor of the Exchequer expects to obtain £5,000,000 this year from the increase in the oil duty, and if instead of the increase it was reduced by the amount proposed in the Amendments, the loss would be £5,000,000, the other way. While this may not appeal to all hon. Members in the same way as it does to my right hon. Friend, I can assure them that it is a very cogent reason why the Amendments should not be accepted.

A word on history. We have had a good deal of history to-day, some good and some bad. The history of the origin of the oil tax has been a little mixed in its presentation. In point of fact, the Road Fund never really had anything to do with the present tax on petrol, but was fed by the Motor Licence Duty. The petrol tax, which was introduced in 1928 by the right hon. Gentleman the Member for Epping (Mr. Churchill), whose name has been on the lips of several hon. Members this afternoon, was introduced at a time when, as the hon. Member for South Bradford (Mr. Holdsworth) pointed out, we required further revenue for the de-rating scheme. The Road Fund was related only to the Motor Licence Duty. The Road Fund still exists, but, as the House knows, what has been changed there is the source of its revenue.

Mr. Benjamin Smith

And its destination.

Lieut.-Colonel Colville

There are different views upon its destination, which I will not enter into now. The question of the Road Fund was decided by Parliament in the Finance Act, 1936, and I do not think we can reopen that whole discussion now.

The reason for selecting this oil duty is one upon which I must spend a few moments. It relates to the history of the oil duty, and to the effect we have seen of the various additions which have been made to the oil duty. In 1928 there was the original duty of 4d; in 1931 there was an increase of 2d, and in the September Budget of that same year it was increased by a further 2d, bringing it up to the total of 8d. at which it has remained until the present time. Then again, in 1933, the then Chancellor of the Exchequer put a penny a gallon on the heavy oil, which includes kerosene or paraffin, lubricating oil, and fuel oil, and this was done by reducing the rebate from 8d. to 7d. Again, in 1935, the then Chancellor of the Exchequer, now the Prime Minister, taxed Diesel oil, which is the heavy oil used for motor vehicles, at 8d. a gallon, equally with petrol. So we have had various changes during that period of years, but over that period the consumption of oil has gone steadily up. I will give the House some figures to show that, and I will then come to the question of price.

In the year 1929–30, when a duty of 4d. was in force, the quantity of light oils, including Diesel oil, taxed was 903,000,000 gallons; in 1932–33, when the tax was up to 8d., the amount was just over 1,000,000,000 gallons; in 1936–37, with the tax still at 8d., it was 1,352,000,000 gallons; and in 1937–38 it was estimated at 1,416,000,000 gallons. The hon. Member for Llanelly said that we are seeking to put a prohibitive duty on heavy oils, but I think that was only a figure of speech, because there has been an immense increase in the quantity of imported oils during these years when the duty has been increased for Revenue reasons, and the increase has not checked the consumption of oil in this country. I should like to look at the price of petrol during the same period; that is really the kernel of our argument in demonstrating why we believe this tax can be borne without excessive hardship. We do not pretend there is not some burden attached to it—we admit that there is a burden attached to every fresh tax—but I do not think undue hardship will be inflicted by the burden which we are now imposing.

Here is the price position: In March, 1929, when a duty of 4d. was being applied, the retail price of grader petrol from the pump was 1s. 7d. per gallon. I will take, not each year, but years which fairly illustrate the price movement. In 1931, also in March, with the same rate of duty, the price was Is. 2½d.

Mr. Benjamin Smith

Do you say that was the average price for that year?

Lieut.-Colonel Colville

No, only at that date. As I had given the price on 1st March, 1929, I gave the price in March, 1931. There are seasonal fluctuations.

Mr. Smith

The average price was much above that.

Lieut.-Colonel Colville

I took the comparable month. On 1st March, 1929, the price was 1s. 7d.; on 3rd March, 1931, is. 2½d., the same rate of duty applying. On 14th September, 1932, the price was is. 7½d.; there was a higher rate of duty by then, the second Budget of 1931 having been passed. By May, 1933, the price had fallen to 1s. 5d., although the same rate of duty applied. In March, 1934, the price was 1s. 5d., while the rate of duty was still 8d. In April of last year the price was 1s. 7½d. and in February of this year it had fallen to 1s. 6½d. Since the duty now in operation was applied the price has again risen by a penny to 1s. 7½d., which is exactly the same as in April of last year.

Mr. Smith

Then the industry must never benefit by price fluctuations?

Lieut.-Colonel Colville

My point is that this does demonstrate that this taxation, which has been applied by stages during this period of years, has not had a crippling effect upon the industry, that the price of petrol has moved up and down for commercial and other reasons, and that to-day the price, with this additional taxation, is not greater than it was at this time a year ago. There have been much wider fluctuations than a penny at times when there was no variation at all in the duty. I therefore say again that while we do not claim that there is not some burden in this additional duty, the record of consumption and the record of price over a long period bear out my right hon. Friend's view that in the present circumstances, when he is looking for revenue, this duty on oil can be applied without producing an excessive hardship, and we believe that it will be accepted by the general public as a wise measure.

The last time that the right hon. Member for Caithness (Sir A. Sinclair) spoke on this subject he raised a specific point which I should like to answer. He said there was actual discrimination between the Diesel oil used by locomotives on railways and the Diesel oil used by road vehicles the one being taxed and the other not taxed. I would point out that at this stage, at any rate, it cannot be said that this difference can have any serious effect, because the employment of oil-driven locomotives upon railways is still in an experimental stage. Out of a total of 20,000 locomotives fewer than 100 are of the Diesel-engine type, and therefore the total consumption of Diesel oil by the railway companies is negligible.

Mr. Holdsworth

Would it not be as logical to say to the man who has only one lorry, "We will let you off the duty while the man who has 10 lorries shall pay it "?

Lieut.-Colonel Colville

The point is that the distinction has not operated to the disadvantage of one set of users as compared with the other, because so few locomotives are of the Diesel-engine type. The justification of our action rests on this, that my right hon. Friend has to find £30,000,000 by taxation; he is finding much the larger part of it by direct taxation; he is increasing only two indirect taxes, those upon oil and tea. In applying those taxes he has to review the whole field of taxation and consider how he can fairly get his revenue and yet not unduly damage industry or affect the interests of consumers. Having regard to the record of prices and consumption during the whole period in which the oil duties have been applied, we say that this is a burden which can reasonably be borne in the present circumstances.

4.51 p.m.

Mr. Pethick-Lawrence

I think those who have listened to the right hon. and gallant Gentleman defending this duty can scarcely be of opinion that he has made out a good case for the Government. We on these benches do not like this increase, because it is not merely an indirect tax but an indirect tax which is of a particularly injurious kind. Although it may be reasonable to put a certain amount of taxation upon oil, there does come a point beyond which we ought not to go. Perhaps the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) will do me the honour of waiting to hear what I have to say in reply to him.

Sir J. Wardlaw-Milne

I was leaving only because I had been called away.

Mr. Pethick-Lawrence

I will take the hon. Member's speech first. He said that we might go too far, and I thought he was going to put forward an argument with which I should have sympathy, that though there might be some case for putting on a certain amount of taxation, we must not go beyond a certain point, but, as far as I could make out, what he wished to convey was that we must not go too far in making roads. There, is not the smallest suggestion that the proceeds of this taxation are going to make roads. The Financial Secretary has pointed out that that was not the origin of the tax, and there has not been a single suggestion by the Chancellor of the Exchequer or the Financial Secretary that the purpose of imposing this duty is to enable more roads to be made. I think there is a very good case for extending the main roads of the country, extending them in districts which are now covered by second-class roads. The statement of the hon. Member that we ought not to go too far is thoroughly applicable in the case of the taxation of oil, because when it is at the figure to which the Chancellor of the Exchequer is proposing to raise it it really becomes penal taxation upon industry, and more harm is done to the income of the country as a whole than is gained in revenue by the State.

I should like to give an illustration from a somewhat analogous case. There was a time when Chancellors of the Exchequer took the whole surplus revenue from the Post Office and it was rising year by year, but eventually Lord Bridgeman and others were appointed as a committee to investigate the question, and they came to the conclusion that it was thoroughly unsound for the State to take the surplus revenue from what was an industry serving the purposes of the public. They said that the State, after taking a certain sum every year—I think in the neighbourhood of £10,000,000 or £11,000,000—ought to stop there, and that any additional revenue which the industry was able to make ought to go to the improvement of the industry, either in giving benefits to the public or in improving the conditions of those engaged in the service. They said that the amount the State took from an industry of that public character ought not to go on increasing every year. The transport industry renders a very similar service to the public to that given by the Post Office, and the argument which Lord Bridgeman and his colleagues found of strong avail in the case of the Post Office applies equally, in our opinion, to the road services.

It is no argument to say that the price of petrol has been coming down, apart from taxation, and that therefore the duty is only keeping it at about the old level. In the first place I do not know whether it is altogether true to say that the price has been coming down, but, if it be true, that fall in price ought to be of great value in enabling the services given to the public to be bettered. To say that any drop in the price of petrol should be immediately mopped up by the Exchequer, and that this taxation upon oil is to go on increasing as the price falls, seems to be an entirely fallacious argument. Not only is this a tax upon industry which is injurious to the public, but it is a discriminatory tax. The Financial Secretary tried to pretend that we need not pay any attention to that argument, because the discrimination, though a large one in rate, did not have very considerable effect owing to the fact that the railways use this oil only to a very small extent. I cannot see that that argument is at all sound. If of two competitive users of oil one is to get his oil at a very much lower rate than the other, it is a very unsatisfactory position. It is a well known canon of taxation that it ought to apply equally to competitive goods and competitive services and that one ought not to be favoured at the expense of the other.

Though I would not go so far as to say that the whole of the oil duty ought to be abolished, I do say that it would be very much better if some of the taxation at present levied upon oil were passed on to other things. I believe in the principle of the taxation of wealth rather than the taxation of industry. I believe it leads to the development of the country, and that it is what is required to enable us to utilise to the full the resources of potential wealth among our people. Therefore, I myself, and I think my hon. Friends behind me, will take this course, that we shall vote for this Amendment for the reduction of the duty from 8d. to 7d. The second Amendment concerning the deduction of the rebate is consequential, and if we are defeated on this first Amendment we shall not, therefore, vote on the second one, but vote against the main Resolution which imposes the increase.

5.0 p.m.

Mr. Assheton

I want to make only a very small point in relation to what the right hon. Gentleman opposite has just been saying and to the speech of my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne). This taxation is to increase the revenue by £5,300,000. Though it is true that the petrol tax has no relation to the expenditure on roads, nevertheless I call the attention of the House to the significant fact that we shall now have £5,300,000 additional taxation of petrol on the one side, and that on the other side we are budgeting for an additional expenditure this year of £6,500,000 on roads. That fact seems to have escaped the attention of most Members.

Mr. H. G. Williams

I would point out that last year a good deal of money was taken out of the old pool—about £5,500,000—and that this year they are taking a very much smaller sum, and although this year is appears as £6,500,000, it is really only an increase of about £1,000,000.

Mr. Assheton

Yes, the actual expenditure has gone up by about £2,000,000 or £3,000,000 and the estimates are up by £6,500,000. There is a great deal of anxiety throughout the country, particularly among local authorities, at the extravagant expenditure which is going on in connection with the roads. At a time like this when we are obliged to spend an enormous amount of money on our rearmament programme, we do not want to cut down our social services if we can possibly help it. We have to see where the money is going, and road expenditure seems to be a way in which we can reasonably economise. I do not think that the anxiety which people are feeling in the City and in business circles is sufficiently appreciated. We are working up to a position similar to that of 1931, judging by the way in which expenditure has gone up in the last few years. We are spending £200,000,000 more on Civil Estimates than we were 10 years ago. I do not propose to make any further remarks on this subject now but I hope to have the opportunity on the Second Reading of the Finance Bill of saying something on the subject of expenditure. We have to watch expenditure as well as taxation.

5.3 p.m.

Mr. H. G. Williams

I do not differ from my hon. Friends as to the vital necessity of economy but I would point out that the figures presented in the Estimates this year create a misleading impression of the total expenditure to be incurred this year by Treasury grants on roads. I am going to vote for this Resolution because we have to find the money in the existing circumstances, and I am riot in a position, as a private Member, to propose an alternative, but Chancellors of the Exchequer must realise that they cannot look upon the Petrol Duty as one which they can increase indefinitely. It was left at fourpence by my right hon. Friend the Member for Epping (Mr. Churchill) who introduced it in order to finance derating. Subsequent Chancellors have found it an easy way to raise revenue without at the same time arousing much protest.

It is true that the price of petrol has fallen very much in recent years, and that the burden of the tax has not been felt, but it is not certain by any means that crude petroleum will continue indefinitely at its present relatively low level. If there is increased prosperity in the United States, the price of crude petroleum will rise very sharply and we shall find the taxes that we have imposed being really reflected in the retail price. It is also true that the bulk of the Petrol Duty has been absorbed, in the main, through the fall in price, and that we have been left very much where we were, but it is an extraordinary thing to reflect, when you fill up your petrol tank, that half of what you are paying is tax. It is a punitive tax upon the means of locomotion and of pleasure, and upon an important industrial development. Although we have to be careful of our expenditure I should have thought that road development which would facilitate more traffic, and, therefore, more revenue, was a sound policy upon economic grounds. I think it is better to spend a little more on the roads and to cut the social services, if you are seeking to bring about the maximum benefit to the people in the long run —but I must not get into a Second Reading speech. I was merely following the hon. Gentleman, and I think we are entitled to follow previous remarks.

The Chancellor of the Exchequer ought to realise that there is very considerable discontent about the penny increase in the Petrol Duty. We, naturally, do not pay undue attention to the communications which we receive when we know that they have some common origin, but I notice on this occasion that communications are coming in the form of telegrams, and are a little more imperative than the normal communications we receive from our constituents. They have taken on a directness which is a little unusual; in fact, our constituents seem on this issue to be telling us, in modern parlance, where we ought to get off. It is some indication of the feeling which exists, and the Chancellor should warn his colleagues that the time has come to go a little slow, particularly the Minister of Health, who, following the Russian example, has now invented a five-year plan of extravagance. It might be as well for him to go slow so that we might get back to a fourpenny duty on petrol next year.

5.7 p.m.

Mr. David Adams

I join with those who have spoken in condemnation of the petrol tax, which is a tax on industry, a discriminatory tax and one which removes further from the people the possibilities of enjoying motoring as a natural entertainment and amusement. In this respect, it is a tax upon the health of the general community. Nothing is more apparent than the difference between the position of the working classes in America and in Great Britain in this regard. In the United States, almost without exception, excluding only the very poorest of the coloured people, every family has a motor car. Every industry, including mining, agriculture and iron and steel, makes provision at the works for the motor cars of the workmen. This development is due to the fact that petrol and the motor car are not taxed in America as they are in Great Britain. When I was there last year the price of petrol varied from 11 to 20 cents, the equivalent of 5½d. to a maximum of 10d. per gallon. There was a small petrol war in California. The tax upon petrol throughout the State was but four cents, or 2d. per gallon. The horse power tax in the States was a negligible amount. Workmen look upon the motor car as one of their normal adjuncts enabling them to take their family to the country at week-ends during the summer and to expand their entertainment and healthy enjoyment to a degree quite unknown in this country.

If we are to proceed upon a basis of taxing petrol and the industry in successive increases, we are removing further from the workers the great possibilities

which are realised in the United States under general social conditions comparable to what we have here. It is not that the American workman receives a relatively higher remuneration for his services than does his British counterpart but that there are the added facilities for travel which this tax on petrol has helped to destroy in this country. The tax is discriminatory and this fact is surprising, as it violates all sound canons of taxation that there should not be discrimination and that one industry should not suffer by the advantage accorded to another. It is a poor argument for the Financial Secretary to urge that the railways have not taken advantage of the cheaper price of petrol, there were so few Diesel engines on the road. The advantage should not have been placed at their disposal and in due time without doubt they will undoubtedly benefit from it.

This is a tax upon the workers' purses and upon the industry. Though there has been an increased consumption of petrol despite the rise in the rate of taxation, it can justly be concluded that if the tax had been reduced or had been left stationary there would have been a substantial rise in the amount of petrol consumption with the consequent expansion of all phases of the motor and motoring industry in this country. We admit the difficulties of the Chancellor of the Exchequer in the matter but I suggest there were numerous other directions in which he could have turned. Whatever his difficulties be next year, if he remains in his present office, we hope that the taxation of petrol and spirit and other taxes upon the amusement and entertainment and health of the people will be downward and not as threatened in an upward direction.

Question put, "That the word ' nine-pence ' stand part of the Resolution."

The House divided: Ayes, 228; Noes, 110.

Division No. 191.]	AYES.	[5.13 p.m.
Acland-Troyte, Lt.-Col. G. J.	Balfour, Capt. H. H. (Isle of Thanet)	Bower, Comdr. R. T.
Adams, S. V. T. (Leeds, W.)	Balniel, Lord	Broadbridge, Sir G. T.
Agnew, Lieut.-Comdr, P. G.	Barclay-Harvey, Sir C. M.	Brocklebank, Sir Edmund
Albery, Sir Irving	Barrie, Sir C. C.	Brown, Brig.-Gen. H. C. (Newbury)
Allen, Col. J. Sandeman (B'knhead)	Beamish, Rear-Admiral T. P. H.	Browne, A. C. (Belfast, W.)
Anstruther-Gray, W. J.	Beaumont, Hon. R. E. B. (Portsm'h)	Bullock, Capt. M.
Apsley, Lord	Bernays, R. H.	Burton, Col. H. W.
Aske, Sir R. W.	Bird, Sir R. B.	Butcher, H. W.
Asshaton, R.	Blair, Sir R.	Campbell, Sir E. T.
Astor, Hon. W. W. (Fulham, E.)	Bossom, A. C.	Cartland, J. R. H.
Baillie, Sir A. W. M.	Boulton, W. W.	Chamberlain, Rt. Hn. N. (Edgb't'n)
Channon, H.	Hope, Captain Hon. A. O. J.	Rawson, Sir Cooper
Chapman, Sir S. (Edinburgh, S.)	Hopkinson, A.	Rayner, Major R. H.
Chorlton, A. E. L.	Horsbrugh, Florence	Reed, A. C. (Exeter)
Clarke, Frank (Dartford)	Howitt, Dr. A. B.	Reid, Sir D. D. (Down)
Clarke, Colonel R. S. (E. Grinstead)	Hudson, Capt. A. U. M. (Hack., N.)	Reid, W. Allan (Derby)
Cobb, Captain E. C. (Preston)	Hurd, Sir P. A.	Ramer, J. R.
Colfox, Major W. P.	Hutchinson, G. C.	Rickards, G. W. (Skipton)
Colville, Lt.-Col. Rt. Hon. D. J.	James, Wing-Commander A. W. H.	Ropner, Colonel L.
Conant, Captain R. J. E.	Jones, L. (Swansea W.)	Ross, Major Sir R. D. (Londonderry)
Cook, Sir T. R. A. M. (Norfolk, N.)	Kerr, H. W. (Oldham)	Ross Taylor, W. (Woodbridge)
Cooke, J. D. (Hammersmith, S.)	Keyes, Admiral of the Fleet Sir R.	Rowlands, G.
Cooper, Rt. Hn. T. M. (E'nburgh, W.)	Knox, Major-General Sir A. W. F.	Royds, Admiral Sir P. M. R.
Courthope, Col. Rt. Hon. Sir G. L.	Lamb, Sir J. Q.	Ruggles-Brise, Colonel Sir E. A.
Cox, H. B. Trevor	Lambert, Rt. Hon. G.	Russell, Sir Alexander
Critchley, A.	Latham, Sir P.	Russell, S. H. M. (Darwen)
Croft, Brig.-Gen. Sir H. Page	Law, Sir A. J. (High Peak)	Salmon, Sir I.
Crooke, Sir J. S.	Leech, Sir J. W.	Salt, E. W.
Crookshank, Capt. H. F. C.	Leighton, Major B. E. P.	Samuel, M. R. A.
Cruddas, Col. B.	Levy, T.	Shaw, Major P. S. (Wavertree)
Culverwell, C. T.	Lewis, O.	Shaw, Captain W. T. (Forfar)
Davison, Sir W. H.	Liddall, W. S.	Shepperson, Sir E. W.
Dawson, Sir P.	Llewellin, Colonel J. J.	Simon, Rt. Hon. Sir J. A.
De la Bère, R.	Lloyd, G. W.	Sinclair, Col. T. (Queen's U. B'lf'lt)
Denman, Hon. R. D.	Loftus, P. C.	Smith, Bracewell (Dulwich)
Doland, G. F.	Lyons, A. M.	Smith, L. W. (Hallam)
Dugdale, Captain T. L.	Mabane, W. (Huddersfield)	Somerset, T.
Dunglass, Lord	M'Connell, Sir J.	Somervell. Sir D. B. (Crewe)
Ellis, Sir G.	MeCorquodale, M. S.	Somerville, A. A. (Windsor)
Elliston, Capt. G. S.	McKie, J. H.	Spears, Brigadier-General E. L.
Emery, J. F.	Macqulsten, F. A.	Spens, W. P.
Emrys-Evans, P. V.	Maitland, A.	Stanley, Rt. Hon. Lord (Fylde)
Entwistle, Sir C. F.	Makins, Brig.-Gen. E.	Strauss, E. A. (Southwark, N.)
Erskine-Hill, A. G.	Manningham-Buller, Sir M.	Strauss, H. G. (Norwich)
Evans, Capt. A. (Cardiff, S.)	Margesson, Capt. Rt. Hon. H. D. R.	Stuart, Hon. J. (Moray and Nairn)
Everard, W. L.	Maxwell, Hon. S. A.	Tasker, Sir R. I.
Fleming, E. L.	Mayhew, Lt.-Col. J.	Taylor, C. S. (Eastbourne)
Fox, Sir G. W. G.	Meller, Sir R. J. (Mitcham)	Taylor, Vice-Adm. E. A. (Padd., S.)
Fremantle, Sir F. E.	Mellor, Sir J. S. P. (Tamworth)	Thomas, J. P. L.
Furness, S. N.	Mills, Sir F. (Leyton, E.)	Titchneld, Marquess of
Fyfe, D. P. M.	Mills, Major J. D. (New Forest)	Tree, A. R. L. F.
Gledhill, G.	Mitcheson, Sir G. G.	Tryon, Major Rt. Hon. G. C.
Gluckstein, L. H.	Moore, Lieut.-Col. Sir T. C. R.	Tufnell, Lieut.-Commander R. L.
Glyn, Major Sir R. G. C.	Morgan, R. H.	Turton R H
Gower, Sir R. V.	Morris, O. T. (Cardiff, E.)	Wakefield, W. W.
Graham, Captain A. C. (Wirral)	Morris-Jones, Sir Henry	Walker-Smith Sir J.
Grant-Ferris, R.	Morrison, Rt. Hon. W. S. (Cirancester)	Wallace, Capt. Rt. Hon. Euan
Grattan-Doyle, Sir N.	Munro, P.	Ward, Lieut.-Col. Sir A. L. (Hull)
Gretton. Col. Rt. Hon. J.	Neven-Spence, Major B. H. H.	Wardlaw-Milne, Sir J. S.
Gridley, Sir A. B.	O'Connor, Sir Tersnce J.	Waterhouse, Captain [...].
Grimston, R. V.	O'Neill, Rt. Hon. Sir Hugh	Watt, Major G. S. Harvie
Gritten, W. G. Howard	Palmer, G. E. H.	Wells, S. R.
Guest, Han. I. (Brecon and Radnor)	Patrick, C. M.	Whiteley, Major J. P. (Buckingham)
Guinness, T. L. E. B.	Peake, O.	Wickham, Lt.-Col. E. T. R.
Hambro, A. V.	Peat, C. U.	Williams, H. G. (Croydon, S.)
Hannon, Sir P. J. H.	Perkins, W. R. D.	Willoughby de Eresby, Lord
Harbord, A.	Pilkington, R.	Wilson, Lt.-Col. Sir A. T. (Hitchin)
Harvey, Sir G.	Ponsonby, Col. C. E.	Windsor-Clive, Lieut.-Colonel G.
Haslam, Henry (Horncastle)	Porritt, R. W.	Wise, A. R.
Haslam, Sir J. (Bolton)	Power, Sir J. C.	Withers, Sir J. J.
Hely-Hutchimon, M. R.	Pownall, Lt.-Col. Sir Astheton	Womersley, Sir W. J.
Heneage, Lieut.-Colonel A. P.	Procter, Major H. A.	Wood, Hon. C. I. C.
Herbert, A. P. (Oxford U.)	Purbrick, R.	Wragg, H.
Herbert, Major J. A. (Monmouth)	Radford, E. A.	Wright, Wing-Commander J. A. C.
Higgs, W. F.	Ramsay, Captain A. H. M
Hoare, Rt. Hon. Sir S.	Ramsbotham, H.	TELLERS FOR THE AYES.—
Holmes, J. S.	Rathbone, J. R. (Bodmin)	Mr. Cross and Major Sir James
		Edmondson.
NOES.
Acland, R. T. D. (Barnstaple)	Cluse, W. S.	Garro Jones, G. M.
Adams, D. (Consett)	Cocks, F. S.	George, Major G. Lloyd (Pembroke)
Adamson, W. M.	Cove, W. G.	Green, W. H. (Deptford)
Alexander, Rt. Hon. A. V. (H'lsbr.)	Cripps, Hon. Sir Stafford	Greenwood, Rt. Hon. A.
Ammon, C. G.	Daggar, G.	Griffith, F. Kingsley (M'ddl'sbro, W.)
Anderson, F. (Whitehaven)	Dalton, H.	Griffiths, G. A. (Hemsworth)
Attlee, Rt. Hon. C. R.	Davidson, J. J. (Maryhill)	Griffiths, J. (Llanelly)
Banfield, J. W.	Davies, R. J. (Westhoughton)	Groves, T. E.
Barnes, A. J.	Davies, S. O. (Merthyr)	Guest, Dr. L. H. (Islington, N.)
Batey, J.	Day, H.	Hall, J. H. (Whitechapel)
Bellenger, F. J.	Dobbie, W.	Hardie, Agnes
Benson, G.	Edwards, A. (Middlesbrough E.)	Harris, Sir P. A.
Buchanan, G.	Edwards, Sir C. (Bedwellty)	Harvey, T. E. (Eng. Univ's.)
Cape, T.	Foot D. M.	Hayday, A.
Charleton, H, C.	Gallacher, W.	Henderson, J. (Ardwick)
Chater, D.	Gardner, B. W.	Hills, A. (Pontefract)

Holdsworth, H.	Marklew, E.	Smith, Ben (Rotherhilhe)
Hollins, A.	Marshall, F.	Smith, E. (Stoke)
Hopkin, D.	Maxton, J.	Smith, Rt. Hen. H. B. Lees-(K'ly)
Jones, A. C. (Shipley)	Messer, F.	Smith, T. (Normanton)
Jones, Sir H. Haydn (Merioneth)	Montague, F.	Sorensen, R. W.
Jones, J. J. (Silvertown)	Morrison, R. C. (Tottenkam, N.)	Stephen, C.
Jones, Morgan (Caerphilly)	Parker, J.	Stewart, W. J. (H'ght'n-le-Sp'ng)
Kelly, W. T.	Parkinson, J. A.	Summerskill, Edith
Kennedy, Rt. Hon. T.	Pearson, A.	Taylor. R. J. (Morpeth)
Kirby, B. V.	Pethick-Lawrance, Rt. Hon. P. W.	Thorne, W.
Lansbury, Rt. Hon. G.	Quibell, D. J. K.	Thurtle, E.
Lathan, G.	Richards, R. (Wrexham)	Tinker, J. J.
Leach, W.	Ritson, J.	Viant, S. P.
Lee, F.	Roberts, W. (Cumberland, N.)	Walkden, A. G.
Leslie, J. R.	Rothschild, J. A. de	Watkins, F. C.
Logan, D. G.	Salter, Dr. A. (Bermondsey)	Williams, T. (Don Valley)
Lunn, W.	Seely, Sir H. M.	Windsor, W. (Hull, C.)
Macdonald, G. (Ince)	Sexton. T. M.	Woods, G. S. (Finsbury)
MeEntee, V. La T.	Shinwell, E.	Young, Sir R. (Newton)
McGovern, J.	Silkin, L.
MacLaren, A.	Silverman, S. S.	TELLERS FOR THE NOES.—
		Mr. Whiteley and Mr. John.

Question put, "That this agree with the Committee in the said Resolution."

The House divided: Ayes, 233; Noes, 111.

Division No. 192.]	AYES.	[5.21 p.m.
Acland-Trayte, Lt.-Col. G. J.	Dawson, Sir P.	James, Wing-Commander A. W. H.
Adams, S. V. T. (Leeds, W.)	De la Bère, R.	Jones, L. (Swansea W.)
Agnew, Lieut.-Comdr. P. G.	Denman, Hon. R. D.	Kerr, H. W. (Oldham)
Albery, Sir Irving	Doland, G. F.	Keyes, Admiral of the Fleet Sir R.
Allen, Col. J. Sandeman (B'knhud)	Dugdale, Captain T. L.	Knox, Major-General Sir A. W. F.
Anstruther-Gray, W. J.	Dunglass, Lord	Lamb, Sir J. Q.
Apsley, Lord	Eastwood, J. F.	Lambert, Rt. Hon. G.
Aske, Sir R. W.	Ellis, Sir G.	Latham, Sir P.
Assheton, R.	Elliston, Capt. G. S.	Law, Sir A. J. (High Peak)
Astor, Han. W. W. (Fulham, E.)	Emery, J. F.	Leech, Sir J. W.
Baillie, Sir A. W. M.	Emrys-Evans, P. V.	Leighton, Major B. E. P.
Balfour, Capt. H. H. (Isle of Thanet)	Entwistle, Sir C. F.	Lennox-Boyd, A. T. L.
Balniel, Lord	Erskine-Hill, A. G.	Levy, T.
Barclay-Harvey, Sir G. M.	Evans, Capt. A. (Cardiff, S.)	Lewis, O.
Barrio, Sir C. C.	Everard, W. L.	Liddall, W. S.
Beamish, Rear-Admiral T. P. H.	Fildes, Sir H.	Llewellin, Colonel J. J.
Beaumont, Hon. R. E. B. (Portsm'h)	Fleming, E. L.	Lloyd, G. W.
Bernays, R. H.	Fox, Sir G. W. G.	Loftus, P. C.
Birchall, Sir J. D.	Fremantle, Sir F. E.	Lyons, A. M.
Bird, Sir R. B.	Furness, S. N.	Mabane, W. (Huddersfield)
Blair, Sir R.	Fyfe, D. P. M.	M'Connell, Sir J.
Bossom, A. C.	Gledhill, G.	McCorquodale, M. S.
Boulton, W. W.	Gluckstein, L. H.	McKie, J. H.
Bower, Comdr. R. T.	Glyn, Major Sir R. G. C.	Maitland, A.
Broadbridge, Sir G. T.	Gower, Sir R. V.	Makins, Brig.-Gen. E.
Brocklebank, Sir Edmund	Graham, Captain A. C. (Wirral)	Manningham-Buller, Sir M.
Brown, Brig.-Gen. H. C. (Newbury)	Grant-Ferris, R.	Margesson, Capt. Rt. Hon. H. D. R.
Browne, A. C. (Belfast, W.)	Grattan-Doyle, Sir N.	Maxwell, Hon. S. A.
Bullock Capt M	Gretton, Col. Rt. Hon. J.	Mayhew, Lt.-Col. J.
Burton. Col. H. W.	Gridley, Sir A. B.	Meller, Sir R. J. (Mitcham)
Butcher H. W.	Grimston, R. V.	Mellor, Sir J. S. P. (Tamworth)
Campbell Sir E T.	Gritten, W. G. Howard	Mills, Sir F. (Leyton, E.)
Cartland, J. R. H.	Guest, Hon. I. (Brecon and Radnor)	Mills, Major J. D, (New Forest)
Chamberlain, Rt. Hn. N. (Edgb't'n)	Guinness, T. L. E. B.	Mitcheson, Sir G. G.
Channon, H.	Hacking, Rt. Hon. D. H.	Moore, Lieut.-Col. Sir T. C. R.
Chapman, Sir S. (Edinburgh, S.)	Hambro, A. V.	Morgan, R. H.
Chorlton, A. E. L.	Hannon, Sir P. J. H.	Morris, O. T. (Cardiff, E.)
Clarke, Frank (Dartford)	Harbord, A.	Morris-Jones, Sir Henry
Clarke, Colonel R. S. (E. Grinstead)	Harvey, Sir G.	Morrison, Rt. Hon. W. S. (Cirencester)
Cobb, Captain E. C, (Preston)	Haslam, Henry (Horncastle)	Munro, P.
Colfox. Major W. P.	Haslam, Sir J. (Bolton)	Neven-Spence, Major B. H. H.
Colville, Lt.-Col. Rt. Hon. D. J.	Hely-Hutchinson, M. R.	O'Connor, Sir Terence J.
Conant, Captain R. J. E.	Heneage, Lieut.-Colonel A. P.	O'Neill, Rt. Hon. Sir Hugh
Cook, Sir T. R. A. M. (Norfolk, N.)	Hepburn, P. G. T. Buchan-	Palmer, G. E. H.
Cooks, J. D. (Hammersmith, S.)	Herbert, A. P. (Oxford U.)	Patrick, C. M.
Cooper, Rt. Hn. T. M. (E'nburgh, W.)	Higgs, W. F.	Peake, O.
Courthope, Col. Rt. Hon. Sir G. L,	Hoare, Rt. Hon. Sir S.	Peat, C. U.
Cox, H. B. Trevor	Holmes, J. S.	Perkins, W. R. D.
Critchley, A.	Hope, Captain Hon. A. O. J.	Peters, Dr. S. J.
Croft, Brig.-Gen. Sir H. Page	Hopkinson, A.	Pilkington, R.
Crookahank, Capt. H. F. C.	Horsbrugh, Florence	Ponsonby, Col. C. E.
Cross, R. H.	Howitt, Dr. A. B.	Porritt, R. W.
Cruddas, Col. B.	Hudson, Capt. A. U. M. (Hack., N.)	Power, Sir J. C.
Culverwell, C. T.	Hurd, Sir P. A.	Pownall, Lt.-Col. Sir Assheton
Davison, Sir W. H.	Hutchinson, G. C.	Procter, Major H. A.
Purbrick, R.	Shaw, Captain W. T. (Forfar)	Walker-Smith, Sir J.
Radford, E. A.	Shepperson, Sir E. W.	Wallace, Capt. Rt. Hon. Euan
Ramsay, Captain A. H. M.	Simon, Rt. Hon. Sir J. A.	Ward, Lieut.-Cot. Sir A. L. (Hull)
Ramsbotham, H.	Sinclair, Col. T. (Queen's U. B'lf'st)	Wardlaw-Milne, Sir J. S.
Rathbone, J. R. (Bodmin)	Smith, L. W. (Hallam)	Waterhouse, Captain C.
Rawson, Sir Cooper	Somerset, T.	Watt, Major G. S. Harvie
Rayner, Major R. H.	Somervell, Sir D. B. (Crewe)	Wayland, Sir W. A.
Reed, A. C. (Exetor)	Somerville, A. A. (Windsor)	Wells, S. R.
Reid, Sir O. D. (Down)	Spears, Brigadier-General E. L.	Whitelay, Major J. P. (Buckingham)
Reid, W. Allan (Darby)	Spans. W. P.	Wickham, Lt.-Col. E. T. R.
Renter, J. R.	Stanley, Rt. Hon. Lord (Fylde)	Williams, H. G. (Croydon, S.)
Rickarde, G. W. (Skipton)	Strauss, E. A. (Southwark, N.)	Willoughby de Eresby, Lord
Ropner, Colonel L.	Strauss, H. G. (Norwich)	Wilton, Lt.-Col. Sir A. T. (Hitchin)
Ross, Major Sir R. D. (Londonderry)	Stuart, Hon. J. (Moray and Nairn)	Windsor-Clive, Lieut.-Colonal G.
Ron Taylor, W. (Woodbridge)	Tasker, Sir R. I.	Wise, A. R.
Rowlands, G.	Taylor, C. S. (Eastbourne)	Withers, Sir J. J.
Royds, Admiral Sir P. M, R.	Taylor, Vice-Adm. E. A. (Padd., S.)	Womarsley, Sir W. J.
Ruggles-Brise, Colonel Sir E. A.	Thomas, J. P. L.	Wood, Hon. C. I. C.
Russell, Sir Alexander	Titchfield, Marquess of	Wragg, H.
Russell, S. H. M. (Darwen)	Tree, A. R. L. F.	Wright, Wing-Commander J. A. C.
Salmon, Sir I.	Tryon, Major Rt. Hon. G. C,
Salt, E. W.	Tufnell, Lieut.-Commander R. L.	TELLERS FOR THE AYES.—
Samuel, M. R. A.	Turton, R. H.	Major Sir James Edmondson
Shaw, Major P. S. (Wavertree)	Wakefield, W. W.	and Major Herbert.
NOES.
Acland, R. T. D. (Barnstapte)	Guest, Dr. L. H. (Islington, N.)	Parkinson, J. A.
Adams, D. (Consatt)	Hall, J. H. (Whitechapel)	Pearson, A.
Alexander, Rt. Hon. A. V. (H'lsbr.)	Hardie, Agnes	Pathick-Lawrence, Rt. Hon. F. W.
Ammon, C. G.	Harris, Sir P. A.	Pritt, D. N.
Anderson, F. (Whitehaven)	Harvey, T. E. (Eng. Univ's.)	Quibell, D. J. K.
Attlee, Rt. Hon. C. R.	Hayday, A.	Richards, R. (Wrexham)
Banfield, J. W.	Henderson, J. (Ardwick)	Riley, B.
Barnes, A. J.	Hills, A. (Pontefract)	Ritson, J
Batey, J.	Holdsworth, H.	Roberts, W. (Cumberland, N.)
Ballanger, F. J.	Hollins, A.	Sailer, Dr. A. (Bermondsey)
Benson, G.	Hopkin, D.	Seely,.Sir H. M.
Buchanan, G.	John, W.	Sexton, T. M.
Cape, T.	Jones, A. C. (Shipley)	Shinwell, E.
Charleton, H. C.	Jones, Sir H. Haydn (Merioneth)	Silkin, L.
Chater, D.	Jones, J. J. (Silvertown)	Silverman, S. S.
Cluse, W. S.	Jones, Morgan (Caerphilly)	Smith, Ben (Rotherhithe)
Cocks, F. S.	Kelly, W. T.	Smith, E. (Stoke)
Cove, W. G.	Kennedy, Rt. Hon. T.	Smith, Rt. Hon. H. B. Lees- (K'ly)
Cripps, Hon. Sir Stafford	Kirby, B. V.	Smith, T. (Normanton)
Daggar, G.	Lambury, Rt. Hon. G.	Sorensen, R. W.
Dalton, H.	Lathan, G.	Stephen, C.
Davidson, J. J. (Maryhill)	Leach, W.	Stewart, W. J. (H'ght'n-le-Sp'ng)
Davies, R. J. (Westhoughton)	Lea, F.	Summerskill, Edith
Davies, S. O. (Merthyr)	Leslie, J. R.	Taylor, R. J. (Morpath)
Day. H.	Logan, D. G.	Thorne, W.
Dobbie, W.	Lunn, W.	Thurtle, E.
Ede, J. C.	Macdonald, G. (Ince)	Tinker, J. J.
Edwards, A. (Middlesbrough E.)	McEntee, V. La T.	Viant, S. P.
Edwards, Sir C. (Bedwallty)	McGovarn, J.	Walkdan, A. G.
Foot, D. M.	MacLaren, A.	Watkins, F. C.
Gallacher, W.	Marklaw, E.	Whitaley, W. (Blaydon)
Gardner, B. W.	Marshall, F.	Williams, T. (Don Valley)
George, Major G. Lloyd (Pembroke)	Maxton, J.	Windsor, W. (Hull, C.)
Green, W. H. (Deptford)	Messer, F.	Woods, G. S. (Finsbury)
Greenwood, Rt. Hon. A.	Montague, F.	Young, Sir R. (Newton)
Griffith, F. Klngtley (M'ddl'sbro, W.)	Morrison, R. C. (Tottenham, N.)
Griffiths, G. A. (Homsworth)	Muff, G.	TELLERS FOR THE NOES.—
Griffiths, J. (Llanelly)	Parker, J.	Mr. Groves and Mr. Adamson.

Third Resolution read a Second time.

5.31 p.m.

Mr. H. G. Williams

I beg to move, in line 4, to leave out "ninepence," and to insert "fourpence halfpenny."

This Amendment raises a question of principle quite different from that which we were discussing on the last Resolution. We were then dealing primarily with a problem of revenue. Here we are dealing partly with a problem of revenue and partly with a problem of protecting home production against foreign competition. We are now a protectionist country, and, that being so, my hon. Friends and I see no reason why power alcohol produced in this country should not be accorded a measure of protection over the foreign article. It will be noticed that this duty is not accompanied by a customs duty. That is explainable by the fact that this spirit, unless made under special regulations, would be liable to a much heavier duty than would apply to potent alcohol. As that would apply to all imported alcohol, there is no necessity for it to be accompanied by a special duty. This power alcohol is an alternative to either benzol or petrol. Here is an article made in this country, partly from home-produced raw material and, as I understand, partly from imported raw material. Generally speaking, it is made from molasses, which may be imported or made from home-grown sugar beet. Alcohol is one of the easiest things in the world to produce. Nature has made the extraordinary provision that any kind of rotting rubbish will ultimately produce alcohol, but not always in the form desired.

Alcohol is one of the things that could be produced internally on competitive terms with one of the derivatives of petroleum. Since we accord a protectionist duty of 8d.—now increased to 9d.—a gallon to the products of Billingham, the products of shale oil of Scotland, and benzol produced in our gas works, it seems to me quite wrong that in respect of power alcohol there should be no protection at all. I do not understand that. I do not know what reply the Chancellor may have. I am not an expert on this particular commodity. It may be argued that, even at a 9d. duty, it is in a more favourable position than petrol or benzol. The Chancellor may tell us that those who produce this commodity get what is called a rebate, but that rebate does not represent any financial advantage to them. Anybody familiar with the production in this country of excisable commodities knows that they are subject to special restrictions, and that to compensate for that they have a lower Excise Duty. Everyone familiar with the production of matches knows that there is a difference of 2d. per gross of boxes between the Excise Duty and the Customs Duty in order to compensate the British manufacturers for their trouble in carrying out the very difficult excise regulations. There is a reference made in the Resolution to the regulations for the time being in force under Section thirteen of the Finance Act, 1924. If my information is accurate, the rebate is only sufficient to compensate for the expense to which they are put. I am told that this alcohol, in addition to being used for mixing with petrol, is also used extensively for the manufacture of chemicals, high explosives and artificial silk. This duty is a very heavy duty on the raw material of a variety of other manufacturing industries. For good reasons of revenue, we have decided to submit the raw material of the motor car industry to a tax of 9d. per gallon if imported, while retaining it entirely free of duty if produced in this country; and that with the assent of every party in this House. On the last Amendment, the hon. Member for Llanelly (Mr. J. Griffiths) pleaded for a more extensive oil-from-coal policy, which is only conceivable under a complete remission of the duty on petrol produced in this country. Here we have an alternative product, which also uses a substantial amount of coal in its production and which is one of the things this country can develop in order to make it less dependent on imports. We propose to deprive that industry of the whole of its protection.

The Treasury might say that the circumstances of this industry are such that they are able to produce a gallon of this commodity much more economically than Imperial Chemical Industries can produce a gallon of petrol at Billingham, and that, therefore, they do not think it desirable that this industry should have full remission. I am not asking for that. I am only asking that it should be subject to only half the duty of the imported commodity. I sought out information after we had decided to put this Amendment down, and it was represented to me that the industry is very much afraid that the plants which have been put down to produce this spirit will become idle if the duty goes on at the full rate. The advantage will be wiped out. It is only in recent years that the use of alcohol has been developed. There is a risk that if you wipe out the whole of its protection, production will cease, and that a great decrease of employment will result. It is true that this production is small as yet in relation to the vast importation.

I do not know whether hon. Members often look at the Trade and Navigation Returns. We are now buying more in imported fuel than we are getting by exporting our own fuel. That is a complete reversal of the previous position. In pre-war days we obtained 10 times as much for exporting fuel as we had to pay for importing petrol. Last year we spent 10 or 15 per cent. more in buying petroleum products than we gained in exporting coal, coke and manufactured fuels. That is the biggest change to our detriment in our economic situation that has occurred in the last 30 or 35 years. Here is a means of preventing that from becoming worse. We should not run the risk of completely destroying this, as yet, young industry. It may be urged that the industry is making good profits, and that the protection it enjoys is now too much. I do not know, but there should be some measure of protection, and it seems to me reasonable that the duty they have to bear should be half the duty on the imported product.

I ask hon. Members to support me in this. [HON. MEMBERS: "In the Lobby? "] It is suggested that we shall run away. If, as the result of the Debate, I find some Members are prepared to go in for the cheap martyrdom of being beaten, we shall not go into the Lobby. [Interruption.] Hon. Members on my side enjoy much more freedom in voting against our party than hon. Members opposite. They exist under a party tyranny which Members on my side would not tolerate. Having said that, I hope that I shall receive a substantial measure of support. I hope the arguments I have advanced will induce the Chancellor to examine this problem afresh. I am not asking him—I do not expect him—to make this concession this afternoon. We all know that the Debate on the Report stage of the Budget Resolutions is to draw attention to certain features of the taxation proposals which hon. Members think undesirable, in order that the Chancellor may examine them and make some concession on the Committee stage of the Finance Bill. That is the time to make concessions; not now. In these circumstances, I hope I shall enjoy a substantial measure of support.

5.45 p.m.

Brigadier-General Sir Henry Croft

Hon. Members will agree that the case has been put very forcibly and ably by my hon. Friend the Member for South Croydon (Mr. H. G. Williams), and I was a little surprised that anybody should suggest that he of all people has not the courage, if his conscience dictates, to go into the Lobby even against his own party. Quite definitely this House for many years past has laid down the principle that any fuel which might be produced at home should have an advantage over imported fuel. It is generally admitted that it is only by those means that production in this country, in its infant stage at any rate, can live. That has been accepted with regard to benzol and petrol from coal, and yet for some extraordinary reason, on the question of power alcohol, we find that for the first time the advantage which existed before is to be removed. My hon. Friend is pressing the Chancellor of the Exchequer not to alter that principle.

We hope that in the course of the various discussions on the Finance Bill he may be able to revise this decision, which seems to be going back upon the whole policy upon which this country has entered, namely, to give some reasonable advantage to home producers, which is not disputed either by hon. Members above the Gangway or hon. Gentlemen around me. The Financial Secretary to the Treasury, in speaking on the last Amendment, mentioned how valuable the preference was with regard to shale, and, surely, the same principle should apply here. I, therefore, urge the Chancellor of the Exchequer to consider this change, unless he can give some very vital reason why he should select one of the particular fuel-producing industries and say that it should not have the benefit which is now embraced within the general principal.

5.48 p.m.

Mr. Holdsworth

We have listened to a very able and clever speech from the Member for South Croydon (Mr. H. G. Williams), but its cleverness is not to be assessed by what he said so much as by what he left out. He has not given the House the whole of the information on the subject. It is not correct to say that there is not going to be a special privilege given to power alcohol, even now that the 9d. is put on. He brushed aside quite lightly the advantages gained from the excise allowance.

Mr. H. G. Williams

I did not brush it aside, but pointed out that there was no advantage to compensate manufacturers for expenses incurred in administration.

Mr. Holdsworth

What is the allowance?

Mr. Williams

Fivepence.

Mr. Holdsworth

They get 8¾d. as an excise allowance on the production of power alcohol.

Mr. Williams

It is 5d.

Mr. Holdsworth

We will see whether the Financial Secretary confirms my figure or not. The 5d. is per proof gallon, which works out at 8¾d. for an imperial gallon.

Mr. Williams

A proof gallon is not a measure of quantity but an imperial gallon is.

Mr. Holdsworth

They have a tremendous advantage from the excise allowance. The hon. Gentleman knows quite well that this particular allowance was not given to encourage the production of spirit, as far as petrol is concerned, but largely to encourage production for industrial purposes. The consequence has been that, in view of the excise allowance and of the fact that it was made duty free in order to compete with other producers of petrol, there has been a tremendous increase in power alcohol for fuel purposes. If there is to be fair competition, why should power alcohol, the greater part of which is produced from imported molasses, be exempt from tax and subsidised to the extent of 8¾d. per imperial gallon? Since the petrol tax was increased in 1931, when another 4d. was put on, the increase in the production of power alcohol has been tremendous. In 1931 it was 13,373 imperial gallons, and in 1937 it had risen to 5,646,000 gallons.

Take the protection which it gives to molasses produced from home-grown beet and see what it means. What are the facts as far as production is concerned. In the year ended 31st March, 1932–33, 3,677,000 cwt. were brought into the country from imported sources, and in 1935–36 the total had risen to 6,666,000 cwts. The people who are making power alcohol from molasses have a tremendous advantage not only from the excise allowance, but also from the increase in the Petrol Duty. The Government have been giving away revenue in order that these people could put the money into their own pockets, and that is the reason why the Chancellor has put on this particular tax. The hon. Gentleman based a great deal of argument on the advantage to be got from home-produced raw material. I have given the figures of imports.

Mr. Radford

Does the hon. Gentleman suggest that the imports of molasses are solely for the purpose of making power alcohol?

Mr. Holdsworth

I suggest that the Chancellor of the Exchequer has put on the duty because there has been a tremendous increase in petrol mixed with power alcohol which has escaped the duty. That is the reason why the tax is put on in this Budget. There is no other reason. The home production has increased from 397,000 cwts. in 1932 to 676,000 cwts. in 1935–36. You cannot even make out a case as far as the Empire is concerned. There is no challenge to the statement that it is a mere 17 per cent. of the imports which come from the Empire. The remainder comes from foreign sources. The hon. Gentleman the Member for South Croydon called attention to the advantages of preferences given to the home manufacturer in this country, and, under a protective system, I agree that it may be quite logical to do that.

Mr. H. C. Williams

Since the bulk of the wool used in the Yorkshire textile industry is imported, does the hon. Gentleman suggest that the Yorkshire textile industry should not be protected?

Mr. Holdsworth

Not a bit of it. I do not see that that argument is relevant at all. Practically the entire output of molasses from beet sugar grown in this country is devoted to the production of yeast. It is not produced for the purposes of which the hon. Gentleman spoke. I believe that there has been a tremendous abuse of the position because of the failure to put on this particular tax on petrol derived from power alcohol. An advantage has been taken such as was never intended when the excise allowance was made. It was never thought that it would come into competition with petrol imported in the ordinary way. The figures in the White Paper show that the Chancellor of the Exchequer expects to receive between £300,000 and £400,000 on this particular tax. If a Division is taken, I shall vote against the Amendment of the hon. Member, as it simply means giving to certain manufacturers an undue preference by allowing them to make exorbitant profits under the cloak of something which was given for another purpose. They are doing very well indeed out of the 8¾d. per gallon excise allowance, and it is not true that they will not be in a better competitive position, as regards the production of petrol, than the petrol producers who import it in the ordinary way. I hope that the Chancellor of the Exchequer will refuse to accept the Amendment.

5.57 p.m.

Mr. Amery

The speech to which we have just listened is a complete confirmation of the argument which we have put forward. The hon. Member for South Bradford (Mr. Holdsworth) has pointed out that a very small amount of protection in this matter has led to a great increase in production. He complained that that increased production has largely been in the shape of imported raw material. Would that be an objection to the woollen industry or to any industry of this country? It is one of the strongest arguments for protection that it leads to a much greater use of imported raw materials instead of imported foreign manufactured articles. It is one of the strongest refutations of the Free Trade theory that Protection diminishes imports, that it has constantly led to an increase in the importation of raw materials. Therefore all the figures which the hon. Member has given only strengthen the case for giving a further reasonable protection in order to enable the continued development of industry. It benefits British shipping, as he himself has shown, and provides employment for a substantial number of workers, scientists and others in this country.

Mr. Holdsworth

Is not the same amount of labour put into the manufactured article, that is, petrol, before it goes out on to the market, and does not the same argument apply in respect of the raw material, that is, crude oil?

Mr. Amery

Undoubtedly in so far as petrol is manufactured in this country and not imported, I am entirely in favour of giving it a measure of protection. We do protect the home fuel industry. In putting forward this Amendment my hon. Friend the Member for South Croydon (Mr. H. C. Williams) and I had the intention of drawing the attention of the House not merely to this particular instance, but to the broader issue that now that we have a system of protective taxation in this country, the main object of which is to encourage and stimulate production, we ought not to maintain survivals of the old theory that you must always tax imports and home production equally. To talk of a leakage in the revenue belongs to the old Free Trade conception of taxation for revenue only, a conception which is entirely inconsistent with the policy of protection which this country has adopted.

We have to face increasingly in the future the really big problem that underlies our whole revenue system, and that is how to maintain the national production from which our expenditure is derived. One criticism that I would have made of the speech of my right hon. Friend the Chancellor of the Exchequer in introducing the Budget was that he treated it so much as a revenue problem and devoted a great deal of attention to what I regard as the immaterial distinction as to whether you borrow or tax for the £30,000,000. The actual burden is on the present in either case. It is a mere matter of internal adjustment whether you tax or borrow. The really vital question, which my right hon. Friend did not touch upon, is how long are the productive industries of this country to be able to carry the immense and permanent burden of expenditure for social and Defence purposes? What is really vital is to concentrate on how national production can be increased, and the essential test is that every item in our budget should as far as possible make some contribution towards production or, at any rate, that it should not hinder production in any way.

6.2 p.m.

Mr. Radford

I rise to support the Amendment, and I think it only right to say that I am an interested party. I am a director of the company which blends and distributes at least 75 per cent. if not 90 per cent. of the petrol blended with alcohol, which is the subject-matter of the Amendment. The hon. Member for South Bradford (Mr. Holdsworth) referred to the tremendous development in this use of alcohol as being due to a rebate which distilleries enjoyed under the existing law. The development is not due to any supposed advantage of that kind but is accounted for by the fact that after years of weary expenditure on research, which the company I represent could not at that time afford, we ultimately struck the right blend, which has proved enormously popular and has resulted in the growth of the figures referred to. When I come to deal with some other figures I think the hon. Member will agree that his description of the alcohol gallonage as terrific was exaggerated. The alcohol so used in 1937, as the hon. Member correctly stated, was approximately 5,600,000 gallons, which is as the dust in the balance compared with some other figures which I will give to him.

My hon. Friend the Member for South Croydon (Mr. H. G. Williams) was correct when he said that the proposal of the Chancellor of the Exchequer appeared to be going entirely counter to the policy of successive Governments in encouraging as far as possible the production of oil or the derivatives of oil from home sources, and thereby putting us into a stronger and more independent position of supplies from abroad. Benzole, which is made from coal but does not come under the category of light hydro-carbon oil, has always been free from any duty. The British Hydrocarbon Oils Production Act of 1934 left home-produced petrol and oil free from the excise or customs duty of 8d. per gallon, which duty is now being put up to 9d. In their report, issued four or five months ago, the Sub-Committee on Oil produced from Coal reported in a disappointing way as to the home supplies capable of being produced from coal but recommended, as an encouragement to further research taking place, The continuance of a guaranteed preference for a period of is years from 1938, the rate being increased from 4d. to 8d. per gallon, and the guarantee extended to include diesel oil for the use in motor vehicles. I promised to give some figures which would interest the hon. Member for South Bradford. The hon. Member referred to what he described as fabulous figures relating to alcohol used for blending with petrol, which he said were due to the exceptional privileges that the producers of that alcohol had enjoyed. What about the benzole which has been free from duty all the time and is still to be free so far as home-produced benzole is concerned? The Sub-Committee to which I have referred say: while production in 1936 of 51,000,000 gallons of motor fuel was a helpful contribution to the needs of this country "— I would ask hon. Members to note those words, "a helpful contribution to the needs of this country "— it represented only 4 per cent. of the total requirements. As the information given above indicates, there is a further potential supply available which, if it were possible for all gas works to scrub their gas for benzole, and to be brought up to the present standard of recovery obtaining at coke ovens, would represent a further quantity of about 35 million gallons of crude benzole, producing 20 millions of motor benzole, in addition to smaller quantities of other refined products. On the basis of the present scale of activity of the two industries this would represent the practical limit of production. That would be an additional 20 million gallons of benzole for blending with petrol which would pay no duty and it is not proposed that it should pay duty. The amount of alcohol which in 1937 was blended with petrol, namely, 5,600,000 gallons, is absolutely dwarfed by these figures. This sub-committee had no idea that the Chancellor of the Exchequer either this year or in any year in the future was likely to put an excise duty on this motor fuel, which in the case of benzole they were urging, in the national interest, might be increased from 51,000,000 gallons to 71,000,000 gallons.

There is no difference between this power methylated spirit and the benzole, except that the raw materials from which the former is made is imported in the form of molasses. It would be perfectly possible in a national emergency however to make the whole of this fuel out of vegetable matter grown in this country. The hon. Member for South Bradford is a Free Trader and he would surely not say that we should now produce it from vegetable matter grown here, when it is more economical to import it from abroad. In these circumstances, I am sure that he would not wish to exclude the imports which are so dear to his heart.

What is the position of the Potato Marketing Board in regard to this matter? They are now seeking powers to enable them to make this fuel from surplus potatoes. They desire to make alcohols any synthetic organic chemicals prepared from ethyl alcohol. The Potato Marketing Board ought to have some knowledge of what potatoes are capable of producing, and it is significant that they are seeking permission to make this commercial alcohol out of surplus potatoes in this country. Therefore, I say to my right hon. Friend that, having regard to the fact that the raw material from which this power alcohol is made is capable of being made out of home-produced raw material in any emergency (although it is more economical in the meantime to buy the raw material from abroad) it is reasonable to view it as practically equivalent to being made from indigenous raw materials. I am unable to see where equity lies in singling out one particular product manufactured in this country, which is blended with petrol, and making it subject to what is really penal treatment, although it is not intended to be penal.

What view do other countries take in regard to making themselves self-sufficient in regard to motor spirit? In this country in 1936—I have not the figures for 1937—we produced—I will leave out the decimals—8 per cent. of our requirements out of such things as alcohol, or benzole, or oil made from coal, and oil shale. In Italy they produced just under 15 per cent. of their requirements, and in Germany over 39 per cent. out of substitutes. In Germany they produce it from such things as lignite and peat, but Italy's was almost entirely power alcohol made as to one-half out of imported materials and one-half from their own home-grown vegetable matter. That was in 1936, when they were in duress.

The Chancellor of the Exchequer (Sir John Simon)

What was the precise figure for Italy?

Mr. Radford

The precise figure was 14.9 of their total requirements, practically all alcohol made from molasses.

Sir J. Simon

The hon. Member gives the figure of 14 per cent. in the case of Italy, composed entirely of alcohol. Unless you mix alcohol with petrol in the proportion of something like 15 per cent. will you get a suitable fuel?

Mr. Radford

I have not all the details in regard to Italy, but if they were to blend the 14.9 of alcohol with 86 per cent. of petrol they would meet the whole of their motor spirit requirements, and would save the importation of 14.9 of such requirements. If the Chancellor of the Exchequer sticks to his proposal in the Budget it is about equivalent to putting beer and stout on a different basis of Excise Duty, and that would hardly conduce to the contentment of the brewers of beer or the makers of stout. I recognise that the only justification anyone connected with the industry has for taking part in the Debate is that he has knowledge which he can bring to the Debate, and which might be wanting if he did not take part. The only basis, of course, on which the House can proceed in this matter is that of the national interest, and there is not a shadow of doubt that the national interest lies in the encouragement of the making of this power methylated spirit. The blending of this spirit with petrol is not simply to eke out the petrol; it alters its whole character and gives it a high anti-knock value. It provides what is known as a high octane value which for aviation purposes is absolutely imperative.

Mr. Fleming

Can the hon. Member tell us how the price per gallon of this blended power alcohol compares with the price of pure petrol?

Mr. Radford

The retail price is 1s. 7½d. in each case. I submit that the national interest demands that all encouragement should be given to the production of this power methylated spirit, and that it should not be discouraged. In the Budget estimates it is calculated that the amount which will be realised in a full year is £375,000. That clearly postulates a sale for use on 'the roads of 10,000,000 gallons of this power methylated spirit during the coming year. I can tell the Chancellor of the Exchequer with some knowledge of the trade that if this impost had not been proposed there would not be 10,000,000 gallons sold during the coming year. The gallonage which his experts have advised him will be used is wrong, and I think I know how they came to be wrong. It came to my knowledge some weeks ago that a large oil company had put out an inquiry to producers of alcohol for a fantastic number of gallons of power methylated spirit, which presumably could only be for the purpose of going in largely for this alcoholic blend. The figures were so fantastic that it would have taken 10 years before the company could have taken the quantity for which they made inquiry. This inquiry was generally known in the motor spirit industry, and I am confident that our Customs and Excise officials, who are most efficient, heard of it; indeed I am certain that steps were taken that they should not fail to hear of it, and it seems to me that the proposals in 'the Budget have to some extent been based on that inquiry.

Sir J. Simon

That is rather an unpleasant suggestion. The hon. Member was good enough to inform me privately that he entertained certain suspicions, and I at once made an inquiry, and I will tell him that whether the Department is right or wrong in its estimate, it has been in no way influenced by the matter to which he has just referred. We none of us can be sure that an estimate is right, but the Excise Department in this matter dealt with it on the best calculations they could get, and were perfectly unaffected by anything to which the hon. Member has referred.

Mr. Radford

I, of course, accept the right hon. Gentleman's assurance that the estimate in the Budget has not been influenced at all by this inquiry, but if the figures are to remain somewhere around the present level, I doubt whether it would have been considered necessary to introduce these proposals in the Budget.

6.23 p.m.

Sir Arnold Wilson

I support the Amendment with particular reference to the announced intentions of the Potato Marketing Board. Power alcohol is a by-produce of some form of food, whether it is potatoes, or cane sugar or beet. If we do not take steps to maintain the production of power alcohol in this country we shall be wasting one by-product and running the risk of increasing the cost of other by-products of the raw material. If we cut out the production of power alcohol we make sugar slightly more expensive; if we do not give the Potato Marketing Board the powers and inducements it requires we shall discourage pro tanto the production of potatoes in this country. What we want to do is not to prohibit anybody growing more food in this country but to provide factories in which the potatoes which are not required for food can be converted into food in another form, whether as flour or whether as alcohol. It seems to me a most retrograde step to put suddenly, without any notice, a duty upon a locally-made fuel which is derived directly from the sun and the soil. So far as molasses are concerned, they are imported mostly from our own Colonial possessions; what will they think if a duty is suddenly imposed on a trade which has been running for so many years, the raw material of which is carried in British bottoms and the industry managed, owned and controlled by British capital and worked with British machinery? It is not possible to expect that trade to develop; it might be contracted.

I have had some experience in the daily work of the petroleum industry; I have visited power alcohol plant in a good many parts of the world. In almost every country in the world the production of power alcohol is being encouraged, and is going up and up. It is being stimulated in every part of South America; we hope to introduce it into our own Colonies. The researches and experiments which have gone on in this country are of vital importance to the British Empire and to all our Colonies, which are seeking means, particularly in West Africa, of producing fuel for motor spirit more economically than by relying on imports. It affects our balance of trade. I would urge upon the Chancellor of the Exchequer that this matter should have far more consideration than it has yet received at the hands of the Minister of Agriculture, the Colonial Office and the Board of Trade.

6.27 p.m.

Lieut.-Colonel Colville

I think it will be convenient if I put the Government point of view now, not in any way to stifle discussion but in' order that the House should have certain facts before it. The hon. Member for South Croydon (Mr. H. G. Williams) was right in saying that to some extent it is a problem of revenue. The position is that power alcohol, used in motor engines after it has been treated so as to render it unpotable, is to pay a duty at the rate of 9d. per gallon. This material is being increasingly used, not as a simple substitute for petrol, but as an addition to petrol in the proportion of some 12 to 15 per cent.; this power alcohol counteracts the knocking tendency in engines and the mixture has been found to make a very efficient motor petrol. The growth of its sale in this country has been due to the fact that this mixture has proved to be very valuable to motorists. We recognise that, and hope that this valuable property in power methylated spirit will enable it to retain its place after the duty has been applied. If we assume the consumption at 10,000,000 gallons in 1938–39, then the revenue in a full year from the duty will be about £375,000; this year it will be about £350,000. That is not a huge sum, but the consideration which my right hon. Friend had to bear in mind was the grave one of a potential loss of revenue. As regards the estimates which have been made as to the amount likely to be used, I can assure hon. Members that the Department do their best to provide absolutely fair and correct estimates, and in their view the estimates on which we have based our calculations are proper.

Mr. Radford

May I ask why a mere matter of 5,000,000 or 6,000,000 gallons is picked out for the production of this revenue and over a hundred millions of gallons of other products go free?

Lieut.-Colonel Colville

I hope my hon. Friend will allow me to develop my argument, and I shall be very glad to show why we thought it necessary to make this proposal. Although petrol has been taxed since 1928, power methylated spirits so far have been free from taxation. In common with all alcohol used for industrial and similar purposes, they are exempt by law from the Spirit Duty. In addition, they still receive the statutory allowance as a compensation for the increased cost of production due to the restrictions imposed upon distillers for the protection of the spirit revenue.

Mr. H. G. Williams

Is that of any advantage to the producer?

Lieut.-Colonel Colville

I think it is.

Mr. Williams

Since the Excise authorities designed this allowance for the precise purpose of compensating them exactly for the increased cost, why were the Excise authorities so incompetent that they gave them too much?

Lieut.-Colonel Colville

I do not think I can go into the whole history of this subject. That is a matter of the past. The point which was made was why we are making the suggestion to apply this tax. Here I will give some figures of the development of the production of power methylated spirits. Hon. Members have already given some figures on this subject, and they may differ from the figures which I give, but the reason is that I am giving the figures for the financial years, whereas in some cases the figures for the calendar years were given. In the financial year 1931–32, the figure was 18,000 gallons; in 1932–33, it was 85,000 gallons; in 1933–34, it was 361,000 gallons; in 1934–35 it was 1,036,000 gallons; in 1935–36 there was a slight recession and the figure went down to 914,000 gallons; in 1936–37 the figure went up considerably to just under 3,000,000 gallons; and for 1937–38, the figure for part of the year being an estimate—and I am told that it is a conservative estimate based on the year that has just closed—the figure is 8,000,000 gallons. These figures demonstrate a considerable growth in the manufacture and consumption of power alcohol. I do not complain, for hon. Members know that the National Government have in various other ways attempted to encourage home production. While it is not a matter for complaint, it is proper that my right hon. Friend the Chancellor should examine the effect which this may have on the revenue. I agree with my right hon. Friend the Member for Spark-brook (Mr. Amery) when he said that one must not use that argument too strongly, but that, in addition to looking at the revenue position, we must also look at the industrial position.

Mr. Amery

And its effect on the revenue.

Lieut.-Colonel Colville

They are bound up together. Nevertheless, it is proper that the Chancellor should have regard to a tendency which might grow to a considerable extent and lose him a good deal of revenue. What is the position? As a fuel, alcohol is inferior. I think that is not disputed. It is said truly that it gives only about 75 per cent. of the mileage obtainable from petrol, and there are certain other disadvantages. Only when it is mixed with petrol in fairly small proportions does it achieve the valuable results to which I have already referred, although I was not able to deal with them in technical language, as some hon. Members have done. If it were to reach 15 per cent. of the existing petrol consumption—I agree there is a considerable gap between the present figure and that figure, but this is a consideration which has to be taken into account—it would mean the displacement of some 200,000,000 gallons of petrol a year, and then one would be faced with a substantial loss of revenue which would amount to some £7,500,000 a year. I put it no higher than this, that in framing the estimates of revenue and expenditure, in which the Petrol Tax is an important element, my right hon. Friend could not ignore the growth—the perfectly healthy growth from an industrial point of view —in the use of this substance as a mixture with petrol, which was increasing by leaps and bounds, and which might, if the tendency continued, displace revenue to the extent of £7,500,000.

This is a very technical matter, and this is the first discussion of it. Other opportunities will occur. Hon. Members have made some very technical observations to which I am doing my best to reply, and I assure them that all their observations will be carefully considered. We had the best technical advice we could get before making this proposal, but what has been said by hon. Members to-day will be very carefully examined. It is a question which my right hon. Friend fully agrees should be examined in all its aspects. My hon. Friend the Member for South Croydon (Mr. H. G. Williams) wished to make out a case that this industry should, at any rate, be treated no worse that the industry which produces petrol in this country. I would point out that the petrol which is refined in this country from imported oil bears the full rate of taxation. The hon. Member agrees that that is so, and I mention it only in case any hon. Member should be under a misapprehension. But petrol which is produced from indigenous coal and shale is exempt. When the Petrol Tax was imposed for the purpose of raising revenue, that exemption was given at the same time in order to encourage the coal and shale industries, which were depressed.

Mr. J. Griffiths

I do not think the right hon. and gallant Gentleman is quite accurate. Is it not a fact that Imperial Chemical Industries were given a guarantee that the tax would remain at 4d. over a period of years? Was there not a definite guarantee to the industry?

Lieut.-Colonel Colville

I do not want any misunderstanding to exist. Certainly, there was a guarantee of its continuance for a period, but the original intention of the tax was a revenue-raising one, but with it there was an exemption to help the coal and shale industries. I come now to the position as regards homegrown molasses. Here we have an exact counterpart of the petrol produced from home coal and shale. The position is this. Alcohol which is made into power methylated spirits is obtained by distillation from molasses, either imported or home-grown, and the bulk is imported at the present time. The quantities of molasses derived from homegrown beet used in the production of power methylated spirits are not known, but the quantity used in the manufacture of spirits of all kinds—and obviously the figures I am about to give will be slightly larger than the figure which refers to power methylated spirits during the financial year 1935–36 was 145,000 cwts., and in the year 1936–37, 73,000 cwts. I am advised that, broadly speaking, 1 cwt. of molasses produces three bulk gallons of power methylated spirits, and on the basis of a duty of 9d. a gallon, the burden on the above quantities, even if they had all gone into the production of power methylated spirits, would have been only about £16,300, and £8,200 respectively. In other words, if one takes what is on a strict analogy with the shale and coal industry, that is to say, what is produced from the indigenous home product, the total amount of tax would have been less than £16,300 and £8,200. Those are not large amounts.

The purpose of the exemption in the case of coal and shale was to help those industries, which were depressed, but the industry affected here, which is largely the sugar-beet industry, is very largely assisted from public funds in other ways. There is a subsidy of over £2,000,000 to that industry. Therefore, it should be borne in mind that one cannot compare it strictly with those other two very hard-hit industries which are not assisted in the same way. I repeat that all that has been said in the Debate will be carefully considered, but my right hon. Friend must have regard to a tendency which might in certain circumstances lead to a loss of revenue of £7,500,000. [HON. MEMBERS: "No !"] I explained how it was.

Mr. Radford

Does my right hon. and gallant Friend think it is a reasonable argument to anticipate that the industry will develop to the extent of 40 times its present production, asd they say that he will lose that amount of revenue?

Lieut.-Colonel Colville

I gave the figures of increased production, which show that my argument is far from un- reasonable. I will give them again. In 1931, the total amount was 18,000 gallons, and to-day it is 8,000.000 gallons. If that rapid increase were to continue, my right hon. Friend would be in serious difficulties. It would not be prudent to disregard that tendency. Having said that everything that has been said to-day will be carefully considered, I cannot do more at this stage than repeat that we cannot accept the Amendment.

6.41 p.m.

Mr. Macquisten

I wish to add one or two points for the consideration of my right hon. Friend the Chancellor of the Exchequer. I am not so much moved by the question of the revenue that might be lost, although that would be serious. There could not be a greater benefit to this country than producing all our power within the borders of our own island. Some 15 or 16 years ago, the late Sir Edward Manville, then a Member for one of the Birmingham Divisions, and a half a dozen other hon. Members, tried to get up a scheme to get the beet sugar subsidy extended to power alcohol distilleries, for the benefit of agriculture, which was just as distressed an industry as the others which have been mentioned. One could put up a distillery for £40,000 or £50,000, whereas a beet-sugar factory costs from £250,000 to nearly £500,000. In addition, potatoes could have been planted without limit, and the surplus could have been used for the making of power alcohol as is done in America, France and Germany. The farmers realised that if they had too many potatoes, they could have sent the surpluses to power distilleries, which could have been scattered up and down the country, and thus would have helped to stimulate agriculture. That is the direction in which we should aim, and it would help us enormously if we could develop the power alcohol industry in our own country. Whatever you are doing, you are killing the gosling that will ultimately lay the golden eggs, and not merely the goose that did lay them.

Mr. J. Griffiths

The marketing boards are.

Mr. Macquisten

All these boards are unnecessary excrescences. They are enormously increasing the cost of food to the people. If there had been power alcohol distilleries scattered throughout the country, supplying all these products for cattle feeding and taking all the surplus products of agriculture, you would never have needed these huge bureaucracies, which are strangling everything. That would not happen if you had natural development. Agriculture is still a distressed industry and apparently will always be a distressed industry, and the more distressed it becomes, the more millstones we hang around its neck. Here is a simple method of using our system of taxation in a way which would do good to the people concerned. Put a duty on molasses coming from abroad if you want to, but try to secure that the raw material will be grown in this country and in that way you can strengthen the resources of the country and improve the incomes of the people and ultimately you will derive a far bigger revenue in that way, than you can get from any miserable tax of this kind.

6.47 p.m.

Mr. Levy

From a National Government point of view, the argument advanced by the Financial Secretary in justification of this tax was a most amazing one. If we were to carry the right hon. and gallant Gentleman's reasoning to its logical conclusion, there seems to be no reason whatever why a tax should not be placed upon steel which is manufactured in this country because we place a tax upon the importation of steel from abroad. If such a proposal were made, I am sure he would be the first to object to it as being detrimental to the commerce of this country and to say that, apart from questions of revenue, the principle was a bad one. We on this side have always argued that in protecting the industries of the country we are encouraging their extension, whether it applies to petrol or any other commodity or to agriculture or any other industry. We changed to a tariff system in order to protect home industries. Yet here is a case in which, apparently, home industries are to suffer for the sake of the revenue. It is impossible to believe that it is beyond the wit and ability of the Treasury to devise means of collecting revenue without acting detrimentally to industries which are endeavouring to develop themselves in this country. I ask the Chancellor of the Exchequer to give this question his serious consideration and to bear in mind the im- portance of doing nothing which would injuriously affect these young industries.

Mr. Amery

In view of the conciliatory reply of my right hon. and gallant Friend, I do not press this matter further. I only ask the Government to give it further and serious consideration, remembering that anything which checks production must, in the long run, injure revenue, whereas as long as they look after production, revenue whether in meal or in malt, will look after itself.

6.50 p.m.

Mr. Lewis

I am rather disappointed at the speech of the Financial Secretary, for this reason. Unlike some of my hon. Friends I am not a great enthusiast in the matter of protective duties. I have always regarded protective duties as, at the best, a necessary evil. Now that we have embarked on a policy of protection we ought to try as far as possible to be consistent in the duties which we impose. In this case we have put a duty on oil for revenue purposes, and in order that it may have a protective effect, we exempt oil produced in this country from coal and shale. If the Financial Secretary had said, "We have examined the cost of the production of this oil and as a result of that examination we can show that that product is capable of bearing a certain amount of this duty without harm," and if he had asked us to agree that some part of the duty should be borne by that oil, he might have been able to make out a case. But he does not offer any such explanation.

His argument is that he is not concerned with the taxation which the industry can bear, but with maintaining the imports of petroleum from oversea, so that he shall continue to get his revenue thereon. That view seems to be irreconcilable with what he said about aiming at an increase in the supply of duty-free petrol produced from coal or shale. The Chancellor of the Exchequer has promised to consider the matter further and therefore I do not wish to detain the House now, further than to say that I hope, if this proposal is included in the Finance Bill, we shall have an examination of the costs of production of this commodity so that we may be able to form some estimate for ourselves of the effect which the duty is likely to have in restricting that production.

Amendment negatived.

6.53 p.m.

Mr. Chater

I beg to move, in line 3, to leave out "eightpence," and to insert "fourpence."

The effect of this Amendment would be to reduce the duty on tea by exactly the same amount as that by which the Chancellor of the Exchequer in the Resolution proposes to increase it. I wish to preface my remarks on the Amendment by a reference to a statement by the Chancellor of the Exchequer in his Budget speech. Towards the end of that speech, having dealt prospectively with the revenue which he expected to derive from various sources to balance his Budget, he arrived at a deficiency of £3,000,000. I do not know exactly what process the right hon. Gentleman followed, or whether he cast his eye upon any other possible sources of income, but, at any rate, he came down on the side of an additional tax on tea. Evidently there were some slight misgivings in his mind as to whether such a tax would commend itself to the working classes or not and he sought to soften the blow to some extent by the following expression: I well understand that even an extra halfpenny per week is a material and appreciable addition to the expenses of those with the smallest incomes. Having thus given expression to his keen appreciation of the burden which people with small incomes would have to bear if he put a halfpenny per lb. on tea, the right hon. Gentleman promptly proceeded to tax those people four times that amount. I can well understand that some of my constituents in North-East Bethnal Green would feel more grateful to the right hon. Gentleman if he withheld his appreciation of their economic position, having regard to the form which it took in this instance. I would not be surprised to find deputations waiting upon him from the working-class women in my constituency asking him to withhold such appreciations of their economic difficulties on future occasions lest it should cost them still more. At this stage in the right hon. Gentleman's speech some hon. Members evidently felt rather puzzled as to why he was putting this tax on tea after the expression of his appreciation of the unfortunate economic position of those who would have to bear the larger part of it. Then, the right hon. Gentleman said: I believe there is a willingness and even a pride in the humblest homes to take a share in this rearmament outlay."—[OFFICIAL REPORT, 26th April, 1938; col. 66, Vol. 335.] I could not help noticing that it seemed to require an effort on the Chancellor's part to bring himself up to the point of making that heroic pronouncement. I would like to introduce him to a few meetings of working-class women in my constituency. I can assure him he would find that while they were perfectly polite in his presence their criticisms would, at least, be forcible. As I say, we propose by this Amendment a reduction and not an increase in the duty on tea. We would prefer to be in the position to-day of discussing not that the tax should be one-third less than the present rate, but that it should go altogether. It has always been a cardinal point in the policy of the party on these benches and one of the chief points in the policy of the great cooperative movement, of which I am proud to be a representative, to oppose all taxes on necessary items of working-class diet. We have a very sound reason for that policy. Taxes on these vital and necessary items of diet seem to us to be a vicious and unfair method of raising revenue.

These necessary articles of diet constitute, in the household budgets of the working class, apart from rent, the largest item of weekly expenditure. In the comparatively wealthier classes the burden of the cost of food does not make itself severly felt, but I can say with perfect honesty, from my knowledge of working-class families in my constituency, that there are hundreds and perhaps thousands of those families who are never able in any week to spend enough on food to provide that standard of nutrition which, according to the highest medical and scientific authorities, they ought to have. They have to economise upon food in order to be able to afford other necessities such as clothing. Therefore we say that this proposal to tax one of the vital necessities of working-class diet is not only vicious but unjust and unfair.

I wonder in what sense did the right hon. Gentleman use the word "income " when he referred to these people. We know that the classes represented by the right hon. Gentleman have what are called incomes derived very often from investments. The amount that comes into the wealthy household is more or less regular and of a substantial character, but the people who are to bear this tax have only scanty wages coming into their households, from week to week. Their "incomes" have not the characteristics of regularity or amount which apply in the case of better-off people and in many cases are not sufficient to sustain life at anything like a decent level. The incomes of the greater proportion of the working population in Bethnal Green vary between £2 and £3 a week. I doubt whether there are many, if any, Members opposite who have the slightest appreciation of what it means for the worker, and especially for his wife, who has to struggle along week after week, with the cost of living at its present level, and try to make ends meet. The Chancellor has such a keen appreciation of the economic disabilities of these unfortunate people that he promptly puts another 2d. a pound on their tea. I think they will ask to be preserved from the blessing of his appreciation.

Tea in working-class homes is far from being a luxury. It has become a vital necessity not only in working-class but in other homes. In working-class homes it performs another function. The womenfolk have to rise early in the morning and get ready the meals for the wage earners, then perform their household drudgery and, with the return of the workers in the evening, there is more drudgery in preparing meals, and then perhaps a fitful half-hour's rest before 10, 11 or 12 o'clock. What happens during all these long, weary hours? The woman, insufficiently nourished, can keep going only by recourse to constant stimulant, and that stimulant is tea. I do not see why the Chancellor should have put an additional tax on that while he lets the expensive luxuries in the way of stimulants of the wealthy classes go free.

This tax is being put equally upon foreign and Empire teas. The poorest people are compelled, because of the smallness of what the Chancellor calls their income, to purchase the cheapest qualities of tea. I am informed that frequently the cheapest qualities are those that come from foreign sources. The tax amounts to a percentage tax upon the value of the tea, before it is blended, of something like 50 per cent. It also means that this further taxation will cause these poorer sections of the community to go still more to the cheaper grades. That the tax bears more hardly upon the classes whom we represent than on those represented on the benches opposite is instanced by the fact that if the wealthy housekeeper of a Member opposite orders a pound of tea at 5s. she pays no more tax than a working-class woman who buys tea at only half-a-crown a pound. The incidence of the tax is, therefore, doubly severe on working-class women to what it is on women with ample means.

In the Co-operative and Labour movement we shall always oppose this tax arid we look forward to the day when we shall get rid of it altogether and relieve our consciences of a most unfair and unjust burden upon a vital article of consumption to the working classes. It is said that the Amendment, if carried, would increase the Chancellor's difficulty in balancing his Budget, but this microscopic amount of £3,000,000, compared with a revenue approaching £1,000,000,000, is but a drop in the ocean, and the Chancellor might easily have found other means. We do not regard it as any great difficulty for him to find the amount from other sources quite easily. To my mind the tax is a mean and contemptible one and I hope that, at any rate, some hon. Members opposite will support us in resisting it.

7.9 p.m.

Mrs. Hardie

I beg to second the Amendment.

We ask not only that the present tax shall not be imposed, but that something should be taken off it, and we are entitled to do so because it hits the very poorest class. The Chancellor congratulated himself on the fact that the women who paid it would be quite pleased to do so, because the very poor were quite delighted to pay for the defence of the country. The poorest people are always prepared to pay a fair share of the taxes, but we believe that they are paying much more than a fair share. There is already a very heavy tax on tea. If that were the only article of food taxed it would not be so bad, but the burden of taxation that the housewife has to meet is very heavy. We reckon that it works out at 5s. in the When a woman goes to a store and buys provisions—tea, sugar and imported meat—when she spends £1 she gets 15s. worth. The other 5s. is tax. In addition you have quotas, restrictions and marketing schemes. It is the housewife who is paying for all that. It comes out of her ultimately in the higher cost of the commodities that she buys. This method of levying indirect taxes is very unfair and wasteful. I was a shopkeeper, and I know exactly what happens. The consumer does not only pay the tax but a profit on the tax because, when the shopkeeper pays 2d. more for the article, he charges the consumer 3d. Food taxes are never justified. Food is the last thing in the world that we should tax. It does not do a great deal of harm to do without some other article but food is essential, especially at present when there is such a tremendous amount of poverty and malnutrition.

In a previous Debate a speaker opposite pointed to the small number of people who were being penalised because of the increase in Income Tax. It did not seem to occur to him that it was a tragedy that in a wealthy country such as this, with such an enormous national income, such a small proportion of people should earn enough to qualify to pay Income Tax. Income Tax is the only fair way to levy taxation. If it is necessary to make poorer people contribute, do not do it in this mean, underhand way so that they do not know exactly what they are paying. For years Governments have been shifting the burden from the direct to the indirect taxpayer. The amount of indirect taxation has increased by about £150,000,00o since 1918, while the direct taxpayer is paying that much less. That is why we resent this added burden on the poorer people and on the housewife. The housewife resents this extremely. She has already had a big increase in the cost of living. There has been a considerable increase in almost every commodity that she buys. We are told that wages have gone up to a certain extent, but in many cases it is the women who have to meet the increase. They have been protesting against the increase in the cost of living, and the Chancellor puts this extra tax on tea. That is a rebuff and an insult. I, there- fore, protest against this increase in the tea tax, and suggest that, instead of increasing it, the Chancellor should reduce the existing tax and thereby relieve the people who are entitled to relief.

7.16 p.m.

Mr. Kingsley Griffith

As the hon. Lady who seconded this Amendment made her extremely sensible and practical speech and suggested that all food taxes should at all costs be avoided, I could not help thinking that those words must have raised some echo in the heart of the Chancellor of the Exchequer. I am sure that is a sentiment to which he himself on many occasions has given, not merely adhesion, but the most brilliant advocacy. It have been left a little wondering why cm this occasion, with so many expedients present to his fertile mind, he has chosen to select this one. We must all realise the large, indeed the enormous sums, of money which have to be collected in the present national emergency, whatever we may think as to the responsibility for that emergency arising. We all realise that when those sums have to be collected all classes must join in that effort. I am prepared to judge this tax by both those tests. A large amount of money has to he raised, but this tax really represents an infinitesimal portion of the Chancellor's main task. There is no question that he could have avoided it. There is no question, I should imagine, that he could avoid it even now. The difference in the Budget would not upset its balance to such an extent that he could not put it straight.

When it is a question of all classes joining in the national effort, there is no question that they have already so joined, and the humblest classes no less than others. The changes in our fiscal system have seen to that. The immense amount of our indirect taxes, bearing without discrimination upon those from whom they are collected, already secures that there is no question of any humble people disregarding the importance of the national effort and thinking that this is something for which the rich have to pay. I do not believe anybody thinks that. That danger simply is not present. I must ask, therefore, what is the special merit of this tax? It is not a question of having a large yield. It does unquestionably cause a considerable amount of irritation at a time when, as the hon. Lady the Member for Springburn (Mrs. Hardie) has pointed out, there was already a widespread feeling with regard to the rising cost of living. This particular addition, greater in some families than in others according to their habits and tastes, but present in nearly all working-class homes to a very considerable extent, comes as a special irritation and a kind of challenge.

It is a tax which has a very bad and unequal incidence. My hon. Friend the Member for East Birkenhead (Mr. White), who has a considerable knowledge of this subject, said last week that the tendency is always to push the burden on those who buy the cheapest kinds of tea. I have myself some knowledge of selling in the tea trade. I know you cannot sell in indefinitely divisible fractions. If anybody is buying tea, he probably buys it at a certain penny rate, say, a 7d. rate for the quarter. If a tax arises which would make that 7½d., the buyer would still probably insist on getting the 7d. tea. Somebody, therefore, has to make up a tea of an inferior quality. The people who cannot escape are those who are buying the tea which is already the cheapest. As my hon. Friend pointed out last Thursday, the result of that is an increasing demand for the very cheapest kinds of tea. That in itself does not give me very much satisfaction. I do not like to see our people driven back to the cheapest, and probably the most unhealthy, article in any commodity. Apart from that, this special demand for the cheapest variety of tea, according to the operation of the laws of supply and demand, tends to put up the prices of those cheapest teas. Therefore, the calculations which are formed as to what the average cost per family of a tax like this will be are extremely difficult to work out. The burden upon those who can bear it least is liable to be very much greater than is worked out by the Treasury officials in just trying to arrive at a statistical result. The average may be only a comparatively small amount, but upon the people who can really bear the burden least the burden will fall with the greatest weight.

There were plenty of alternatives—a tax on tobacco, for instance, and taxes on other kinds of consumable articles which would have caused less irritation, which would have been less universally felt as an annoyance, and which would have been just as profitable. I will not go into different classes of taxes like the taxation of land values, which is obviously a large and additional source of revenue. I was endeavouring to confine myself to taxes of the same class and variety as that which the Chancellor has selected. I think that if he really appreciated the feelings which this tax aroused, he would not so easily imagine that the payers of this tax were going to do it with a kind of pride, feeling they were bearing part of the great national burden. It is a burden of the purpose of which, I cannot help feeling, a great many of them are still uncertain. They are not certain, either, whether the money is being wisely and properly expended. They are also uncertain whether there has been a real investigation by the financial authorities of the country as to where the burden could be put with the greatest equity and the least suffering. Thus, in spite of everything the Chancellor can say, I do not think there will be a feeling of pride in paying this tax, but a feeling of resentment and of irritation out of all proportion to any financial advantage which the Chancellor can expect to derive from the tax.

7.24 p.m.

Mr. Croom-Johnson

I listened with close attention to the speech made by the hon. Member for North-East Bethnal Green (Mr. Chater) in proposing this Amendment. I did so for a personal reason which arises out of matters which the House has probably long since forgotten. In April, 1929, in the last Budget produced by the Chancellor of the Exchequer in a Conservative Government, the right hon. Gentleman the Member for Epping (Mr. Churchill) removed in full the tea tax which, at that time, I think was 4d. a lb. A short time afterwards, I went to fight the first election at which I had submitted myself to the suffrages of my fellow-countrymen. I found that the repercussions of the removal of that tax were absolutely nil. I do not believe that a single vote was influenced as a result of it. We all thought that the Chancellor of that day was right, and I have no doubt that to-day the present Chancellor, if times were different, if our national problems were different, and if our national finances were in a different state, could agree with many of the moving observations which came from the hon. Member who proposed and the hon. Member who seconded this Amendment. I cannot help thinking that they over-estimate the feeling which will be excited in the country by housewives or shopkeepers or other persons as the result of what is, after all, a small impost from one point of view.

I hope the House will not think that I am unmindful of the fact that for many of our fellow-citizens the smallest compulsory readjustment of their pitiful budgets are things we should scrutinise with great care. I would say to the hon. Member who moved the Amendment, who talked of incomes from £2 to £3 a week, that there is no Member who sits, as I do, for a constituency which is overwhelmingly agricultural, who does not know that the vast bulk of the constituents are people who would regard a weekly wage of £3 a week as indeed a blessing. We are not unmindful of the smallness of the weekly budget of the agricultural labourer, whose family consumes perhaps as much of what has become the national beverage as the families of the hon. Gentleman's constituents in Bethnal Green. The results of the additional tax, as I understand it, in a family of four is likely to amount to 1½d. a week. I do not say for a moment that that will not mean to a great number of my constituents a definite pecuniary sacrifice. I think it will, but I have not found by correspondence or by any other means by which I keep in the closest contact with my constituents that they are objecting or raising any question about it at all. I hear somebody say that they cannot afford the stamp. I am there every week-end and they do not need one.

I do not believe it is right to say—at least so far as my constituency is concerned—that the humble housewife with her market basket is going with any feeling of resentment or grouse at the present moment in our national finances to do [...]shopping and to buy her little packets of perhaps very cheap tea after this tax has come into operation. I have found that a great many people in all parts of the country are always ready and willing to invite the Chancellor to substitute something else. I always think that Budget making is a very good round game. There is nobody that I have come across anywhere in each succeeding year when we have had to discuss varying Budgets —and I think this is the tenth or eleventh Budget to which I have listened in this House—who does not think that in one way or another he could improve on the effort of the Chancellor of the Exchequer, guided and assisted as he is, as we know, by the most expert assistants, by persons who have paid the very closest attention to the matter and who have no axe to grind themselves. In these circumstances is it likely that our fellow citizens, knowing the difficulties and the dangers of the times, although they might perhaps think the tax might have been put on to something else—and, after all, which of us likes any tax when it comes to affect ourselves and would not prefer something else?—will feel in the very least, in regard to this tax, that it is either a disgraceful Lax or that it is one which is unfair or unjust or about which any of the epithets which have been used from the other side have been justly used?

We are increasing a duty which, I say frankly, in other circumstances and at other times I should like to see abolished. We hoped in May, 1929, that the Tea Duty had gone for ever, and I am not at all sure that expressions to that effect were not used in this House—it was just before I came here for the first time—by Members in all parts of the House, but circumstances have unfortunately changed. Circumstances at the moment are in such a condition that I cannot believe, speaking on behalf of my own people, of whose budgets and affairs I can claim to have some intimate knowledge, that they will have the smallest possible objection to making this small contribution, although perhaps proportionately large to them, at a time when the national emergencies drive us to do a great many things that most of us, if we had the chance of remoulding this world and rebuilding it on a better design, would not seek, if we could, to put into a very different shape.

7.33 p.m.

Mr. W. H. Green

I find it very difficult, in a House constituted as this House is, to hope to make any effective impression on such a subject as the increase in the Tea Duty. It seems to me that in the Debates which will take place on the passage of this Budget through the House this, perhaps alone, will strike the human note. I feel that it is very difficult for many Members here, placed as they are, adequately to appreciate the feelings with which some of us who represent industrial and very poor divisions are constantly brought face to face. I can assure the hon. and learned Member for Bridgwater (Mr. Croom-Johnson) that we on this side are not animated by any suggestion that we might catch votes by the attitude which we take on this Tea Duty. The majority of the people whose grievances we are ventilating already place their votes in the right direction, and we cannot expect to gain many votes as a result of our protests against this tax. The hon. and learned Gentleman seemed to make a point of the fact that the poorer people in his constituency did not approach him on this question. I am not at all surprised. If my borough were represented by a Member on the other side, I should not expect the poor people to approach him. I should know that they would expect that he would support such a tax as this, and it does not occasion me any surprise that those agricultural workers have long ago despaired of getting any justice from the Conservative party.

Mr. Croom-Johnson

The hon. Member may think so, but they are never quiet on all other topics which affect either their industry or themselves.

Mr. Green

I cannot escape a suspicion that their present plight is largely due to the fact that so many constituencies are represented as that constituency is to-day. It seems to me that the fact that, in a Budget of these astronomical proportions, this House should stoop to inflict what in relation to the existing Budget is a microscopic tax is really demeaning to this House, and whatever pride the Chancellor of the Exchequer may feel as in future clays he remembers that he piloted a record Budget through this House, I am certain that this particular tax will yield him very little satisfaction indeed. We do know, of course, and we appreciate as much as do hon. Members in other parts of the House, that money has to be raised, and we also appreciate the hon. and learned Member's remark that everybody who is taxed feels that he more or less has a grievance and would much prefer the tax to fall on some other section of the community. We know that the Chancellor's job is not an easy one, but is it justifiable that at the present moment we should seek to impose what, after all—and the Chancellor's legal abilities and debating power will not cover this fact—when all is said and done, is a tax on poverty and a tax that falls the heaviest on the poorest section of the community?

Most of the discussions during the Budget season will really be carried on by the representatives of vested interests seeking to escape their fair share of the burden of taxation. With the other two increases in the Budget, on Income Tax and petrol, we on this side may have very little fault to find, but when it comes to this Tea Duty, I really wonder whether there is a Member in this House who honestly, sincerely, and in his own heart would feel, if it was not for the party Whip, that he ought to support it. It does not take any stretch of the imagination to recognise that this increase in the Tea Duty is not in the same category in any degree as the other increases which are proposed. We generally pride ourselves in this House that such taxes as are imposed shall, at least superficially, suggest that they are equitable, fair, and proportionate to the backs that have to bear them. But that cannot be said under any circumstances of this tax. It is inequitable, as has already been argued, in that the very poorest type of tea, purchased in the main by the poorest section of the community, will pay exactly the same tax as the higher priced teas, purchased, of course, by the well-to-do and better placed.

One cannot escape the thought that while Death Duties, Super-tax, and champagne escape the attentions of the Chancellor of the Exchequer when he seeks to find additional revenue, the Tea Duty of the poor should share that advantage. It almost leads one to ask the question, Has Britain really sunk so low, has it reached such a distressing state, that we have to go to the very poorest homes, to the old age pensioners, to the family trying to exist under the means test, to the hundreds of thousands of homes where the wages are under £2 a week, and ask them to pay the additional tax? I sometimes wish the housewives of this country were organised. If they were, I venture to say that the Chancellor would not dare to have suggested this further increase of the tax on tea. The only argument that the right hon. Gentleman has used—and I do not imagine he really believes it himself; I think we know him better than that—

Sir J. Simon

Do you believe in yours?

Mr. Green

Well, I am sure the Chancellor will agree, when he asks for an increase of this tax in order that every class shall bear its share, that that is not the sort of thing that one can justify to one's own conscience. If these poorest people were not contributing anything by way of taxation to the increased expenditure, necessary, it may be, to the country, there might be something in that contention, but we all know, and the Chancellor knows better than any of us, that these poorer sections of the community are bearing an out-of-proportion amount of taxation at the present time through indirect taxes on foodstuffs, and when one recognises that, it does not seem to me that there is too much in the argument that every class should share the burden.

I suggest that the man on the means test and the old age pensioner are bearing more than their burden of the national expenditure to-day, and some of us do not appreciate the other argument used by the Chancellor, that there will be a sense of pride, a feeling of happiness, in these poor homes, where life is a constant struggle from one week's end to another, in paying 1½d. or 2d. a week extra towards the national Defence. No one doubts their patriotism or their love of their country, although it has not treated them very well, but at any rate one does feel that you are hardly dealing fairly with these people when you suggest that the test of their patriotism will be their pride to starve themselves a little further than they are doing already on incomes which are totally inadequate to keep body and soul together. I know that what is meant by 1d., or 1½ 2d. a week cannot be appreciated by the bulk of hon. Members sitting opposite, but some of us fancy that we do know what it means, and because of that we say that this tax ought to be rejected. It is not as if there were not other sources available that could be tapped without any feeling of hardship or grievance being created. In the main, as many of our poorer people will resent this tax and feel that it is art injustice, and that their patriotism is being exploited, we urge the Chancellor of the Exchequer to reconsider even now the removal of this additional tax on tea.

7.45 p.m.

Mr. Lewis

This Amendment raises a very important matter of principle. The Chancellor of the Exchequer has explained in his Budget statement how the acceleration and the increase of the rearmament programme has necessitated the finding of a larger sum of money than was otherwise anticipated. As a consequence of that he is obliged to bring before us some proposals for increased taxation. He suggested in that statement that as this increased provision for armaments was something which directly affected us all, something that was of absolutely primary-importance to us all, therefore, as far as could be devised, all classes of the community should make some extra contribution to meet this extra charge. He suggested, in order to spread this burden widely, that there should be an increase in the Income Tax, the Petrol Duty and the Tea Duty. Hon. Members who support this Amendment seek to get that increase of the Tea Duty removed. If they had their way the result would be that the great bulk of the population would not make any extra contribution towards this extra burden of rearmament, because, broadly speaking, the result would be that the extra burden would be borne only by those whose incomes came within the limit of the full Income Tax charge or who would become liable to extra duty through the use of petrol, and, of course, those classes are a comparatively small number compared with the whole of the community.

The hon. Member for Deptford (Mr. Green) seemed to think there was something extraordinary, something almost improper, in the suggestion that at a time of national emergency like this the great bulk of the people should be not merely asked to make a contribution towards that extra expense but should be expected to make it gladly. He could not understand why. I can assure him that there are great numbers of people in this country, very poor people, who will make their contribution quite cheerfully, having regard to the purpose for which it is asked, and I venture to say that there will not anywhere be much murmuring, except among those who have so far absorbed the principles of Socialism that they expect somebody else to bear all their burdens. As to the actual duty proposed I would remind the Committee that the Tea Duty has in past years been much higher than it is to-day. That is often forgotten. At the time of the Great War it rose to 1s., and, if we go still further back, in the Crimean War it was as high as 1s. 9d. I would remind the House that during that interval of time, in which this tax has been either remitted or been so much smaller, direct taxation has increased enormously. Therefore, it cannot be suggested that any relatively severe burden of fresh taxation is being placed upon the consumers of tea.

Some Members, of course, raise the question whether tea is a proper subject for taxation at all. I have argued in this House before that tea is a particularly good subject for taxation, because it is a luxury of almost universal consumption. It is by far the most popular stimulant that we use. For my part I think tee-totallers, in particular, should be very glad of this opportunity of making some small further contribution to a revenue which for so long has taken a quite disproportionate share from those who use other stimulants in the form of beer or whisky. As to the burden of the tax, those hon. Members who took part in or listened to the Debate on this subject two years ago may remember that the then Financial Secretary to the Treasury gave us some interesting figures to show what the burden of this tax was. He estimated that there were at that time some 35,000,000 people in this country who drink tea, and that the average consumption per head was in the neighbourhood of 9¼ lbs. A simple calculation will show hon. Members that an addition of 2d. per lb. to the duty means an additional charge of somewhere about 1s. 6d. per head per annum. I would commend those figures to those hon. Members opposite who sincerely think that this extra charge will be grudged by the great majority of the men and women in this country, bearing in mind that it is asked for to meet the greatest of all national needs, the safety of our homes.

As to the ability to pay the tax, it is perfectly true, as the hon. Member for Deptford said, that if an income be sufficiently small any additional charge is a serious matter. That is obvious, but I would point out, as we are considering relative matters, that hon. Members opposite when they stress this argument, ought at the same time to remind their audiences that as a result of the same policy pursued by the present Government the position of the great mass of the wage-earning classes of this country has greatly improved during recent years. There was a very interesting article on that subject in the "Daily Herald" a week or two ago, in which their industrial correspondent pointed out that the total net gain through wage increases in 1937 was somewhere in the neighbourhood of £50,000,000. When we are considering the imposition of what is admittedly an additional burden, we ought also to have regard to an improvement in the capacity to pay. I do not think the one can be fairly considered without the other. As to the Amendment as a whole, I would say that I think hon. Members opposite are very slow to realise any new thing. They were very slow to realise the necessity for rearmament. They voted against the Service Estimates long after everyone else realised their imperative necessity, and just as they were very slow to recognise the necessity for rearmament so, tonight, they are very slow to realise that rearmament has to be paid for.

7.55 p.m.

Mr. George Griffiths

I have listened with interest to the hon. Member for Colchester (Mr. Lewis) and the hon. and learned Member for Bridgwater (Mr. Croom-Johnson). Both of them represent working-class constituencies. I should like to follow the hon. Member for Colchester for two or three minutes, and then I shall come back to the Chancellor for about five minutes. The hon. Member for Colchester said that tea is a luxury. It may be a luxury to him, who was practically born with a silver spoon in his mouth, but it is not a luxury to the old age pensioner, to the widow and to the unemployed. It is not a luxury to persons on relief, of whom there are now 230,000 more than when the Labour party went out of office. It is not a luxury to the men who have been maimed in industry. In the industry which I represent 178,000 men were maimed last year-25 per cent. of the number working in the industry, one in every four. When a man gets maimed he gets his wages cut in two, and when this taxation is put on he does not regard it as a luxury. Last Sunday afternoon I was in Oldham speaking about the Budget, and I said that the Stock Exchange had christened the Chancellor "Simon the Tanner," and a lady who stood just in front of me said, "He is not Simon the Tanner to us; he is Simon the Starver, because he put the tax on tea." That was the name they gave him in Lancashire. What they will give him in Spen Valley I do not know.

I have heard four Budgets since I came into this House, and I have never heard a Chancellor put it across so nicely and smoothly as the present Chancellor did. He practically hypnotised the House for a time, until he came to mention this extra "tanner," and then I saw one of his followers get up. He had to go out to get a drink because he was fainting. When he came back he looked as though he had been revived. There is one passage in the Chancellor's speech which I have marked in the OFFICIAL REPORT in both black and red, because I intend to use it in the by-election at Barnsley. The Chancellor knows something about elections in Barnsley, because at the last election he had a pretty warm time there. This was the astounding thing which was said by the Chancellor: I well understand that even an extra halfpenny per week is a material and an appreciable addition to the expenses of those with the smallest incomes. [HON. MEMBERS: ' Why do you do it? '] Why do I do it? He pulled himself up to his full height, taller than I am—I was sitting there looking at him—and he said: I believe that there is a willingness and even a pride in the humblest homes to take a share in this rearmament outlay, for defending those homes from peril. They have not been defended from poverty—never mind peril. I want to come back to the hon. Member for Colchester in a few minutes. I have a few figures not from Colchester but from Yorkshire. I was reading: defending those homes from peril, just as much as in the homes of more comfortable and wealthy people."—[OFFICIAL REPORT, 26th April, 1938; col. 66, Vol. 335.] I have some figures from Yorkshire showing the numbers of people who are on poor relief at the present time, and who are pensioners. They have had to apply to the West Riding authorities for additional help. They are people who do not look upon tea as a luxury; they look upon it as a necessity. I would tell the hon. Member for Colchester that a lot of those people buy their tea two ounces at a time. I do not suppose that he ever heard of that in his life. When I was a lad at home I was sent to get the tea two ounces at a time. My father was earning about 21 bob a week for the eight of us. My mother would fetch it in a piece of white paper. It used to be taken out of the caddy with a spoon and weighed. The shopkeepr will have to charge on those two ounces for the extra 2d. per pound. He charges on the two ounces and there are eight times two ounces in the pound. Those people have to buy their tea like that. In the West Riding at the present time the number of married couples who are both contributory pensioners on relief is 1,055 and the relief paid out to them during the last 12 months was £28,756. The number of couples on relief containing one pensioner, that is to say with only 10s. a week between the two of them, is 1,239, and the amount paid out in relief is £5,500.

In such a case, the man draws his contributory pension. When he gets to 65, generally speaking, the boss sends for him to the office and says: "You have been a jolly good worker, Jack; you have worked for this firm for the last 40 years, but, you know, you are not so good as you used to be. We can't expect it. We have got to reduce the staff next week. We are sorry to lose you, but you know you get a pension now." The man gets his pension of 10s. a week for the next three or four years, and nothing else. I could go down the list and give the total figures relating to relief in the West Riding. Leaving out the cities, the full total is £197,370. That is where the additional spending goes about which the hon. Member for South Croydon (Mr. H. G. Williams) cannot sleep at nights. The rates are going up all over the country. Rates are the hon. Member's bogy. We are paying £197,354 in contributory pensions. When it comes to non-contributory pensions we are paying £61,000 in the West Riding to poor people who look upon tea not as a luxury but as a necessity. They cannot sit with their feet across the fender singing: Rescue the perishing, care for the dying. It is not easy for those people, because the 2d. in the lb. is a burden to them.

We appeal to the Chancellor of the Exchequer to take that burden away from them, and from that lady in Oldham who said he was not Simon the Tanner but Simon the Starver. I cannot very well forget that description. Why? Because these poor persons feel that the 2d. tax is an addition which is taking something away from them. I appeal to the Chancellor and to the Financial Secretary to take this matter into their consideration and to find the additional £3,000,000 from some other source.

8.5 p.m.

Colonel Nathan

A few moments ago the hon. Member for Colchester (Mr. Lewis) said that he did not think it was in the least likely that the housewives of the country would grudge the payment of the extra 2d. per lb. on tea. This afternoon I was addressing a meeting of women not very far from here. I did not go to speak about the Budget and I said very little about it, but on the mere mention of this 2d. tax on tea there was a shout throughout that gathering of housewives. It is not asserted that if this additional tax stood alone and if the level of the cost of living were lower, the extra 2d. per lb. would make all the difference in the world, but hon. Members sometimes fail to realise that the extra 2d. comes on the top of so many other increases, some of which are due to the immediate action of the Government in imposing taxes and some to the indirect effect of Government policy. The increase is also on the top of a gradually rising curve of expenditure, which has been rising now for six or seven years. It is that fact which makes the burden so heavy.

On the other side of the House hon. Members may feel that the extra 2d. in the lb. does not make much difference to them. I say at once that it does not make much difference to me. I shall not go without anything because of it. Probably most of us will not notice it, but will take it unobserved in our stride. The real complaint against hon. Members opposite, and against the Chancellor of the Exchequer, is that they do not understand what happens in the ordinary homes of the ordinary people in the byways and side-streets of our great cities and our countryside. The extra ½d. on the 4-oz. packet of tea makes a real difference to the householders of the kind whom I have in mind. My hon. Friend has just referred to tea being bought in screws of 2 ozs. and he was, of course, quite right, but the price will be put up for those 2 ozs. not one farthing but one halfpenny, and, in spite of the increase of tax being 2d. in the lb., for the people who buy tea in those small quantities the additional tax will be 4d. in the lb. That is the sort of thing which is happening in the everyday life of the ordinary people whom hon. Members on the other side seem so often to overlook or not to understand—not of ill-will, but because they do not realise the position. Well-inclined though they may be, they just do not know what difference small items make to people who have to live on the narrowest margins and often —too often—without any margins at all.

It was sad to listen to the Chancellor of the Exchequer a few days ago bringing forward this tax in his very first Budget as Chancellor of the Exchequer, because one remembers how for a generation, at least from 1906 onwards, he was one of the protagonists of a reduction of the tax on tea. He was spokesman on every platform in the country of the policy of the free breakfast-table. How lamentable it is that this Chancellor of the Exchequers of all politicians, with that record behind him, should take a hand in making the breakfast-table less free than it was when he took office. When we remember the scanty budget of the ordinary working-class housewife, how meat is up in price, the price of bread is up fantastically, the price of milk is so high that it is becoming almost prohibitive, bacon has almost disappeared from the breakfast-table of the poor and the price of potatoes, flour and a vast range of every-day commodities which are the very staple of life in working-class households, one realises what an enormous difference and what a tremendous burden this extra tax is for those people.

I sometimes wonder whether hon. Members on the other side ever make it their business to work out exactly how the working-class budget is expended. I refer to hon. Members on the back benches upon the Government side of the House. Even the Government cannot tell us what the burden of indirect taxes is upon the private citizen. In answer to a question some days ago on this very question of the burden of indirect taxes, the Chancellor of the Exchequer blandly answered that he really did not know, and that the Government did not possess statistics which would enable him to give to the House the information. What a shocking thing it is that any Chancellor of the Exchequer should put forward proposals for an increase, whether of direct or indirect taxation, without knowing what the burden of that taxation would be upon the private citizens who had to pay it. The Chancellor of the Exchequer openly admitted on the Floor of this House that he really did not know; I suggest that it is about time that the Government informed themselves upon this subject, as others have endeavoured to do, in order to be in a position to give necessary information to the House of Commons. If they did so they would find that the burden of indirect taxation—

Mr. Deputy-Speaker (Captain Bourne)

The hon. Member is discussing the tea tax as though it were still an annual duty. There will be a further opportunity for considering the question of indirect taxation, but I would remind him that nowadays the tea tax is not an annual duty, and, therefore, the same opportunity for debating it does not arise.

Colonel Nathan

I bow to your Ruling. I will put my argument in a different way. If such an inquiry were made I believe that the Chancellor of the Exchequer and the Financial Secretary would be surprised to find what a difference is made in the burden of taxation upon the smallest income by this extra 2d. in the pound on tea. An hon. Member opposite asked why every class in the community should not bear some proportion of additional taxation. I wonder whether he has looked at the White Paper presented by the Chancellor of the Exchequer; or, if he will read the Chancellor's speech, he will realise it. He will find that special steps have been taken, and it is made a boast by the Chancellor, so that certain taxpayers shall escape a part of the additional burden. I refer to the lower ranges of the earned Income Tax payer, who suffers no additional burden—

Mr. Lewis

He shares the burden of the petrol tax and the tea tax.

Colonel Nathan

I shall not allow myself to be drawn into an argument as to the merits or defects of the addition to the petrol tax. I will only say that the petrol tax does not directly affect the Income Tax payer any more than it affects the payer of indirect taxes. It affects all of us indirectly, through the whole machinery of movement and the occasions for the use of petrol. I wish, however, to press upon the Government the undoubted burden that this additional taxation involves for the poorest households in the community, and I want to ask the Government whether they will not even now, at long last, take some steps to inform themselves and to enable them to inform the House and the country as to the burdens which this taxation involves upon every class of taxpayers.

8.18 p.m.

Mr. Tinker

There is one thing to be said for those hon. Members opposite who have supported this tax, and that is that they have shown courage in backing up the Government in what they are attempting to do. As a rule we get silence from the benches opposite; there is no effort to defend the Government. Therefore, I somewhat admire the attitude of hon. Members opposite who put forward reasons for the vote they are going to give. I would recommend them to make inquiries of their constituents as to whether this tax is really acceptable in the form in which it has been imposed. I think that, if they put the case before their people, they will find that there is a great deal of opposition from those upon whom the tax has been imposed. Apart from that, even if there were no outcry from the people of this country, it would be our duty here, as Members of Parliament, to draw the attention of the Chancellor of the Exchequer and the Government to the fact that we shall always oppose indirect taxation, whatever form it may take. I think it is a wrong method of attempting to get money, because many people do not realise where they are being called upon to pay, and I claim that all taxes ought to be so prominent that everyone knows what he is being called upon to give to the Treasury. Then we should know exactly what had to be done.

I claim that this money could have been found from other sources. To-day I had a reply from the Financial Secretary giving me the information I desired. I suggested, in the Debate on the Budget statement, that, if the present limit of £2,000 for Super-tax were reduced to £1,500, the money could be found in that way. To-day the Financial Secretary tells me that that would bring in an additional £8,000,000 per annum to the Treasury. It might be said that that would be too big a burden for Super-tax payers, but I have never held that view. When once men and women have a certain standard of life, which gives them all that they desire, I claim that above that standard all the money ought to go to the relief of taxation. I claim that this would be a more sensible method than attempting to put the burden on a commodity that is used in every household. I do not argue that there will be any reduction in the drinking of tea. There will not. Because it is such a necessity in the household, people will go on drinking the same amount as they did before; they will not try to save on that. But when a commodity like this, which is used in every household, is being deliberately taxed by the Chancellor on the plea that the people of the country are all anxious to give something to the national credit to meet this armament boom, or whatever it may be, I think he is entirely wrong in his conception of what working-class people think. It would have been far more honourable if he had simply said, "I want the money, and I am going to have it."

The poor are suffering in many ways owing to the burden of armaments, apart from this taxation on tea. At the present time the Income Tax is giving a greater yield than it has ever given for many years, judging from the figures I have examined to-day. A penny on the Income Tax now brings in £5,000,000, and it has never been at such a high figure since 1927. In 1925 it was slightly more. That goes to prove that the fairly well-to-do are doing exceedingly well out of the present position of the country—that is to say, the middle class, and I put most of those who pay Income Tax into the middle class or the better class. They are doing far better now than they have done for many years. Therefore, I claim that this additional money could have been got by much fairer methods from the people who are well able to pay, rather than resorting to the class of people mentioned by my hon. Friend the Member for Hemsworth (Mr. G. Griffiths). The old age pensioner whose pension still remains at 10s. a week, when he has his cup of tea has to pay more for it out of his 10s. a week. The same applies to the widow on pension, to the unemployed man, and to the man on what is called public assistance. All those people with a meagre allowance have to meet this additional burden, and, even though it is only a slight amount, it assumes, in the case of very small incomes, rather large proportions, much more than the extra 6d. on the Income Tax will mean; because again I argue that, when you have enough to live upon, the additional money that is taken from you does not affect you as it does these poor people.

Many of us who will be called upon to pay additional Income Tax will not be any worse off. We shall not have to give up any suits of clothes, or any pairs of boots; we shall not have to miss a meal; we already have enough. But to the poor people this extra cost will represent a large amount. It would be far better for the Government not to have done what they have done. However, I suppose it is no use arguing in the hope of getting them to alter what they have set out to do. The only effective remedy that we can use is to voice our protest and make it known to the country, and, then at the first opportunity we get, to urge the people to turn out a Government that resorts to such mean methods as those of this Budget.

8.25 p.m.

Colonel Clifton Brown

I want to say a word or two from this side of the House in defence of this tax, because I realise, like everyone else, that it is not exactly a popular tax—no taxes are ever popular. I anticipate fairly well that, when the next election comes, there will be a little leaflet and the names of all of us who vote for the tax will be on it, and I thought I would not give a silent vote. I am prepared to have those leaflets issued in my constituency—as they have been before, with very little effect—and say a word in defence of the Chancellor and this tax. I am aware that this tax produces hard cases. Every tax does. When Income Tax, for instance, is increased, and a business man's employés get discharged in consequence, the employés are the hard cases. The old age pensioners are the hard cases in connection with this tax. But they are not the only people affected. This tax will touch millions.

Those who are earning or £3or£4 a week would pay no extra taxation at all unless there were some tax of this kind, which I, like others, am prepared to believe they are only too proud to pay. I do not think the other side help their case by exaggerating the hard cases or the hard times during which this tax is imposed. An hon. Member has told us that there are more people on Poor Law relief even than there were five years ago. That is not so.

Mr. G. Griffiths

Will the hon. and gallant Member look up the returns published last July, which show that there are 230,000 more persons on relief? They are the Government's figures, not mine.

Colonel Brown

I may be wrong; but I made inquiries, and that is the answer I was given. I will look into it, and if I am wrong I will withdraw the statement. The hon. Member for North-East Bethnal Green (Mr. Chater) told us that prices were rising and people were hard up. But there is a definite gain, as a result of the rise of wages, over the cost of living. While one must deplore the fact that there must be an increase in taxation, I do not think one can reasonably complain of a tax which is distributed over such a wide field, and which is not too hard for a large number of our people.

Mr. G. Griffiths

Is it not a fact that the rise in the cost of living since 1933 has been 18 per cent., and the rise in wages 7½ per cent.?

Colonel Brown

The Chancellor has been accused of having no imagination and of having only accepted the view of the Treasury officials. One knows that the great idea of the Budget was that all classes should pay a fair proportion. If the Treasury were the authors of this Budget, who were in a fairer position really to distribute the burden than those officials, who are able to survey the whole field? On the whole, when you consider the increase of other taxes—the increase of direct taxation, coming on top of the increase of direct taxation last year, when there was no increase of indirect taxation —it does seem to the ordinary person that this is a very fair tax to impose, and it has the advantage that as a rule, with a tax on tea, it is direct, and there is not much wastage in middlemen's costs.

I have one recollection of a Budget when the other party was in power, when the tax on tea was reduced by a penny. On that occasion, the moment was chosen so badly that, owing to the state of the tea market, the price never fell anything like that. I have sufficient confidence in the Chancellor to make me believe that he will have studied the tea market, and that the price of tea probably will not rise by anything like the amount of the tax, and probably will not rise at all.

It seems to be suggested by the party opposite that if a tax affects millions of our fellow subjects, it should not be put on. This tax is, of course, unpopular. The Chancellor cannot have wished to impose a tax which would be unpopular, but if the great mass of our citizens never have any tax put on them we shall be killing the goose which lays the golden eggs. True leadership will face the fact that our working people are just as willing as anybody else to pay their fair share of taxation. I have had some experience, having fought an election when people were far poorer than now—at my first election, 28 years ago, there was indirect taxation far higher than there is to-day—and I used to be amazed at the patriotism of the people. Nothing would ever persuade me that their patriotism consisted only in shouting songs and waving flags; it goes far deeper.

8.34 p.m.

Mr. Gallacher

We have had a demonstration this evening of what representation means to the Members on the other side. I hope that those who are interested in the by-election which is taking place at Lichfield will take due note of what has happened here. It is necessary to draw attention to the fact that in discussing the Resolution before this, where there was a tax which affected profit, the hon. Member for Rusholme (Mr. Radford), who was interested in profits in that particular industry, made a real fighting speech, which staggered the Treasury Bench. The Financial Secretary to the Treasury got up at that Box and said the whole matter would be reconsidered. Member after Member on the other side got up. There was a regular barrage directed against the Treasury Bench on the question of a tax that was going to affect profits, but, when it comes to a tax which is going to affect constituents, where are the Christian gentlemen? There is the hon. and learned Gentleman the Member for Bridgwater (Mr. Croom-Johnson). He represents an area in which there are very poor agricultural workers, who would consider a wage of£3 real affluence, they are so poor. Do you find hon. Gentlemen opposite fighting for their constituents in a manner in which they are prepared to fight for profits? No, Christianity is forgotten, and all the gentlemanly qualities disappear, and their constituents are thrown to the wolves on the Treasury Bench. They have no opportunity of expressing any dissent. The Chancellor of the Exchequer is very sensitive.

Mr. J. J. Davidson

Did the hon. Member say "sensible "?

Mr. Gallacher

No, not sensible, but very sensitive. Why is he so sensitive? Because he is conscious of his own guilt. When the hon. Member for Deptford (Mr. Green) said that the Chancellor of the Exchequer did not believe in his own argument, the right hon. Gentleman responded quickly; he was so affected and upset. I have heard the Chancellor of the Exchequer using all the great brilliance that has been so often talked about, to try to prove without the shadow of a doubt that the one great and desirable thing in this country was a free breakfast table, and say that anything that interfered with a free breakfast table was an evil and something not to be supported and encouraged by him. Did he mean it? Do hon. Gentlemen who believed his arguments then reject his arguments now?

But the right hon. Gentleman has gone a long way since then. What a company he is in. He recognises the parlous condition of the poorest of the poor. As the Mover and Seconder of the Amendment said, he is very concerned about their plight, but he puts an extra tax upon them. He says that they have a right to pay and will take a pride in helping to pay for rearmament. Are they not already paying for armaments? What are all these increased prices but payment for armaments? [An HON. MEMBER: "Wages."] The Unemployment Statutory Committee say that they cannot increase relief to meet the actual needs of the unemployed because wages are so low. They are cutting down unemployment relief, but prices are soaring. Did the Chancellor of the Exchequer ever hear of rent, and how the payment for armaments is affecting rent? There has been an extra cost of £126 in the provision of a workman's house during the past two years. Is that not paying for armaments? There has been £30 for increased cost of material, as the Secretary of State for Scotland told us, £20 increased cost of superficial area, and £6, increased cost of wages, making £56 as the actual increased cost. What of the other £70? The Secretary of State groped around and then told us that "floating factors accounted for this. "Floating factors "? It is robbery for armaments.

The poorest of the poor are the most hardly hit in every direction. It is monstrous to say that they would take a pride in paying for armaments. An hon. Member opposite who has spoken and has now left the Chamber is so melancholy-looking that one would naturally think that he had been brought up on a starvation diet. I do not know what is the matter with his internal organs, but he does not seem to enjoy the wealth that somebody has provided for him. He says 'that tea is a luxury. I have spent most of my life doing pretty hard work, and year after year my principal diet, knocking off at nine o'clock for breakfast, and at one o'clock for the midday meal, consisted of two slices of bread and butter, with maybe a piece of cold ham or bacon between, and tea, not champagne and all the different kinds of wines and cognac. The poorest miners go to work in many of the villages with a tin of bread and butter and a flask of tea in their pockets.

The very necessaries of life are being affected. The Amendment proposes that the 2d. should be taken off and the tax reduced by 2d.; that instead of £3,000,000 extra from tea there should be £3,000,000 taken off. That is the proposal. Cannot Surtax stand another £6,000,000? Of course it can. We should make the rich pay. Some hon. Members have said that the poor people should pay for rearmament; it is for the protection of their homes. Is there any hon. Member prepared to say that there is any protection for the homes of the poor people of this country? We have all this babble about air-raid precautions, and all this mess, muddle and nonsense about gas attack.

What has that to do with the protection of the homes of the people? Explosive bombs will destroy homes everywhere. There is no protection for the homes of the people against bombs. One of my comrades, the leader of my party, Harry Pollit, was in Spain and he stood looking at Tortosa where there was not a building left and the population had been scattered. What protection is the Home Office giving for the people? I have raised the question of evacuation.

Mr. Deputy-Speaker

I must ask the hon. Member to keep to the subject of the Amendment.

Mr. Gallacher

There is no protection for the homes of the people of this country. The armaments are not for the protection of the people but for the protection of the privileged people and their property. The whole policy of the National Government makes that clear. The people who will get protection from rearmaments are the rich. The Chancellor of the Exchquer spoke about the Surtax payer, the fellow who has married a woman who has Surtax qualifications and who sends some of his capital to America. That man said that he was doing it because he was afraid of what would happen if a Labour Government came into office. Hon. Members heard in the court recently the case of a Member of this House. Why should such people be left with money which is so valuable and could be used for the people instead of being wasted and squandered?

Mr. Deputy-Speaker

The hon. Member must keep to the Amendment.

Mr. Gallacher

I was about to suggest that the £6,000,000 we are asking for in this Amendment is modest, and that it can be obtained without putting an extra penny of tax upon anybody. I would ask the Financial Secretary to the Treasury to give special consideration to this point. He said that he would give great consideration to the point raised by the hon. Member for Rusholme (Mr. Radford). If the Financial Secretary would recommend the Chancellor of the Exchequer to accept this Amendment and if the Government would deal thoroughly with the question of tax evasion they could get the £6,000,000 without putting another extra penny of tax upon anybody. The tax evasion amounts to about £10,000,000, and they are proposing to get only £1,000,000 from that source in the Budget.

Lieut.-Colonel Colville

Will the hon. Member say who estimated the amount of tax evasion?

Mr. Gallacher

It was an estimate made during the Budget discussion, and I should have to look it up. The estimate was not seriously disputed. There is a possibility that the figure may have been slightly exaggerated, but the fact remains that there is a big field over and above the £1,000,000 which is proposed to be obtained by the Budget from that source. I am certain that if effective means were applied to prevent tax evasion by the higher range of taxpayers the Government could accept this Amendment and get the necessary £6,000,000. It is a shame and a scandal that the old age pensioner and the very poorest people should have any further burden put upon them.

This increased Tea Duty is bad for the working class as a whole. The Chancellor of the Exchequer says that they have a right to pay, as if they were not paying already in other directions. What about the N.D.C. contribution? We were told that that was to be a tax on armament profits. Then it was changed and it was made into a Co-operative tax. The old age pensioner who has a few shares in a co-operative society, and all the other working people who have cooperative shares, have to contribute towards N.D.C. Therefore, this extra duty on tea is an addition to the heavy burdens already being borne by the masses of the people, who are getting no protection for the money they are paying. In view of the fact that the working people are already more than sufficiently taxed I would ask hon. Members opposite to forget profits for a moment and for once to put the interests of their constituents foremost and to fight for their constituents as they would fight for profit. If they would do that the Amendment would be carried and the Chancellor of the Exchequer would have to find the £6,000,000 in some other way.

8.52 p.m.

Sir H. Croft

I have an Amendment on the Order Paper which, I understand, will not be called, and I should like briefly to make the point which I should other wise have made had I been allowed to move the Amendment. It is 28 years ago this month since I had the honour of making my maiden speech, and it happened to be on the subject of tea. On that occasion I urged that we should lower the amount of the duty on tea coming from India and Ceylon, which was consumed in large proportions by the working classes, and raise the duty on foreign tea. I have been consistent to that principle, and it is to that subject that I should like to call the attention of the House.

On the broad question I do not want to follow the arguments of the last speaker, but I would point out that this instrument of the Tea Duty has generally been recognised, I think for 300 years, as the normal duty by which a greater number of people can contribute in case of emergency. That duty was not removed entirely during all the period when Liberal, Socialist, Conservative, Coalition or National Governments were in office, except when the right hon. Member for Epping (Mr. Churchill) was Chancellor of the Exchequer. It was during his Budget in, I think, 1928, that he removed the Tea Duty. It was always a favourable subject of election speeches. When my right hon. Friend removed the duty I remember that one of the most brilliant debaters among the left wing supporters of the Opposition at that time declared: "Thank you for nothing." I think I am right in saying that, taking the average working class family, throughout the year the value represented by the duty was something like 7s. 4d. It is true that when we went to the electors and told them the great advantages we had given them in taking off the Tea Duty the only response we got from the housewives was, "What about bacon? "—and there was no duty on bacon at that time. It will be agreed that if the masses are to be asked to contribute to any form of taxation probably this is the lightest of the various duties which could be proposed, and that is the reason why ever since tea has been imported into this country it has been regarded as a legitimate fiscal instrument.

I want to deal with one particular point. The Chancellor of the Exchequer is raising the Tea Duty by 2d. in the lb. —6d. to 8d.—and 4d. to 6d. on Empire tea. The point I want the House to appreciate is this, that the preference under the old scale of duties was a prefer- ence of 50 per cent. over foreign tea, and that by the present proposals this preference is being reduced to 33½ per cent. To that extent the advantage to tea producers in the Empire is narrowed. I feel most strongly that we should be careful whenever we make alterations in our taxes not to narrow the advantages which this country has declared should be given to producers in the British Empire. I feel this all the more strongly because it is really vital that we should do everything to maintain the proportion of tea from India. There is such an enormous number of workers employed in the industry in India that it is of supreme importance we should maintain the industry in full work, and it is all the more important at the present moment, when we are by negotiation trying to get better facilities for the products of Lancashire in India, that there should be no appearance of narrowing the preference.

I do not think the Chancellor of the Exchequer did it deliberately but I believe he would have been much wiser if he had left the Empire duty at 5d., which would have given an advantage to Empire tea which is consumed by the working classes of this country, even if he had increased the duty on foreign tea. I cannot propose that, but I hope we shall have an assurance that if it is possible the Chancellor of the Exchequer will see if he cannot modify his proposal so as to maintain the preference as it was. It may interest the Committee to know that when the Tea Duy was abolished by the Budget of the right hon. Member for Epping, Empire tea was 85 per cent. of our consumption. Last year it had sunk to 82 per cent.—not a great decline—and at the present moment it is something like 90 per cent. When the preference is restored you immediately see an increase in the amount of Empire tea coming into this country. Although there may be a difference of opinion on all kinds of fiscal measures I believe there is one principle which is now accepted by all parties, and that is that wherever we can, without injury to our own people, we should prefer the products of the people of the British Empire. I do not think hon. Members above the Gangway would ever take away a preference which has been granted.

Mr. Lansbury

You do not know of what they would be capable.

Sir H. Croft

I have every respect for the sincerity of the right hon. Gentleman, but I cannot think that there is any hon. Member on the Front Opposition Bench who would be prepared, when no injury is being done to the people of this country, to have any part or lot in injuring the preferential duties in the Empire. For these reasons I urge the Financial Secretary to give consideration to this matter. If we on this and other occasions continue to narrow the advantages of Imperial Preference without the House realising that there is an alteration of the principle which the House has adopted, we shall be taking a course contrary to the will of the country as a whole.

9.1 p.m.

Mr. T. Smith

The hon. and gallant Member for Bournemouth (Sir H. Croft), as we all know, takes a keen interest in Empire affairs, and particularly in financial matters relating to preferential taxation. I was privileged less than 12 months ago, in one of our Colonies, to spend a very interesting day on a tea plantation, and would say to the hon. and gallant Member that I want to see the position of the natives improved. I asked the proprietor of this tea plantation the wages that were being paid to the natives, and he told me that it was from 8d. to 10d. and is. a day. One person who was present said that they had a handful of rice per day, and I remarked that it was because they could not afford anything else. A lady member who was present said, "Perhaps you are right." When we talk about the Empire and all it stands for we must have some regard for the welfare of the people who produce the products. When you get 8d. as the price of a pound of tea f.o.b. and you notice the prices being paid in the shops there is a gap which should be investigated.

I suppose there is no Member of this House more open to the charge of inconsistency than the present Chancellor of the Exchequer. I took the precaution at the week-end to look up some of his past speeches. I do not intend to weary the House by giving quotations from the right hon. Gentleman's speeches, but there is one quotation which is worth giving. Referring to the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), the present Chancellor of the Exchequer said: I know well that what that remarkable man says at one time is no sure indication that he will do it at another. That was said when the right hon. Gentleman was in opposition. He is now Chancellor of the Exchequer and he can justify anything. He attempted to justify this 2d. on tea by saying that tea drinkers in the United Kingdom will willingly raise the cup which cheers and does not inebriate because it is all for the national good. The sooner we clear our minds of that sort of cant the better. I want to oppose this duty first because it is a burden which falls heaviest on the poorest of the community. The hon. Member for Colchester (Mr. Lewis) divided the taxpayers of this country into watertight compartments. He said that teetotallers will willingly pay this 2d. as if teetotallers are the only people who drink tea. I represent a constituency where most people drink tea, but where a lot of other people drink things other than tea. The hon. Member for Hemsworth (Mr. G. Griffiths) graphically described the poorest classes in the community who will feel this burden, which other members of the community will not. I have been a big tea drinker, as most miners are. For 16 years I was working underground, and my favourite beverage was tea. I had two quart bottles full of cold tea every day, and after being several hours in the pit, it tasted as good as when it was first brewed.

Another point I wish to make is that this is a flat rate tax, and not a tax according to value. People with low wages usually buy the poorest kind of tea. If a woman buys a pound of tea at half-crown, which is the average price which a housewife in a working-class district pays, 6d. out of that half-crown goes as taxation, but with the better blends of tea which cost, say, 4s. 6d. a lb., the same taxation of 6d. is paid. The poorer people are, the greater the amount of tax they pay. It is no good arguing that there is any equality in this. In my opinion, if we have to tax tea and other commodities, it would be far better if we graded the tax in accordance with the value rather than levied the taxation at a flat rate. Hon. Members opposite are great advocates of teaching the electors of this country what there is to know not merely about the science of government, but about what is paid in taxation. I suggest that if they are anxious that people should know what they are paying in indirect taxation, they ought to apply the same argument towards tea as they use with regard to foreign produce. For many years I have heard hon. Members opposite arguing that everything that comes into the country should be marked with its country of origin. I would like to see packets of tea not only stamped with the price of the tea, but containing a statement of how much taxation is paid on it. I do not believe that the Chancellor of the Exchequer, if he were a free agent, would be opposed to that. It would be one of the best ways of teaching people what they are paying in indirect taxation. If that were done, I will not say what adjectives would be thrown at the right hon. Gentleman by women who, on paying their money over the counter, saw stamped on the packets the amount of taxation they were paying. With regard to the question of the ability to pay these taxes, the hon. Member for Colchester said that, according to the "Daily Herald," wages have risen in this country during the past 12 months by something like £50,000,000, and that because wages are higher to-day than they were 12 months ago, poor people will willingly pay this taxation. I want to ask the hon. Member why and how wages are higher to-day than they were 12 months ago. Is it not a fact that under our system, the only time that the workers can get an increase in wages is when they threaten to strike?

Mr. Lewis

No, Sir.

Mr. Smith

Can the hon. Member tell me when the mine-workers of this country got their wages increased without agitation? Surely, the hon. Gentleman remembers the way in which the public, or some of them, willingly agreed to pay is. a ton more for coal because wages were so low. Although wages are slightly higher in some industries, that increase has been more than countered by the increase in the cost of living. If the hon. Member cares to investigate that statement, he will find that it is true. The Ministry of Labour are collecting information from different classes in order to test whether the cost of living index is right or not. I assert that there has been a definite increase in the cost of living, which has fallen very heavily on the backs of those with fixed incomes, such as un- employed persons and old age pensioners, and on wage earners, and that because of that increase in the cost of living, the workers have had to agitate for more wages. This tea tax is an additional burden which cannot be justified, and I hope that my hon. Friends will not hesitate to go into the Lobby in favour of this Amendment.

Mr. Levy

Is it not true to say that wages to-day are 4 per cent. higher than they were in 1929, and that the cost of living is 4 per cent. lower than it was then?

Mr. Smith

The hon. Member may make a statement about 4 per cent., but is it of any use going to a housewife in London who has a fixed amount of money, say,£2, coming in each week and saying to her, "Now, my dear, wages are up by 4 per cent."? What would she tell the hon. Member? It is no good discussing decimal points in connection with the cost of living with a housewife. She has so much money coming in, she will have to pay 2d. a pound extra on tea, and she will have so much less for other things.

9.11 p.m.

Sir Alfred Law

The hon. Member for Leigh (Mr. Tinker) said that he was not in favour of there being any indirect taxation. Does he, therefore, advocate that there should be some direct taxation paid by those who are now paying indirect taxation? Would he advocate a universal Income Tax? I have often heard that suggested, but if these were a universal Income Tax—

Mr. Deputy-Speaker

I would point out to the hon. Member that under the old custom, when this tax was re-voted annually, it was legitimate to raise the question of the balance between direct and indirect taxation. Now that it is a permanent tax, that no longer applies, and the hon. Member may not go into the general question of taxation on this tax.

Mr. A. V. Alexander

Further to your Ruling, Mr. Deputy-Speaker, we are debating to-night a proposal to increase the tax in this year. Surely we are entitled to make proper comments to the Chancellor about the effect which that has upon direct and indirect taxation. Indeed, we are moving in our Amendment to reduce the tax below the level of last year. Therefore, we ought to be entitled to say to the Chancellor how we would propose to raise the revenue.

Mr. Deputy-Speaker

I do not think anything I have said is contrary to the point which is put forward by the right hon. Gentleman. What I pointed out is that under the old custom, when the tax was re-voted annually, it gave an opportunity to raise the entire question of the balance between direct and indirect taxation. That was an understood custom on the Budget. The tax is no longer an annual tax, but a permanent one, and although it is in order to point out, as hon. Members in many parts of the House have done to-night, that the increase in this taxation could have been avoided if taxation had been levied in other directions, they may not now use this tax as an opportunity to go into the general question, not on the specific proposals before the House, but on the general question of indirect taxation.

Sir A. Law

I will abide by your Ruling, Mr. Deputy-Speaker. Having pointed out to the hon. Member the alternative, J will leave that point. As regards that part of the Budget which deals with indirect taxation, and especially the Tea Duty, I must confess that I am rather sorry that resort has been made to an increase in the Tea Duty, because there are other means of indirect taxation which would not affect the poor as this will. I suggest that there should be a tax on football pools, a tax on luxuries, such as wines and spirits, and also a tax on bicycles. Motor bicycles are already taxed, and I do not see why some tax should not be put on "push" bicycles. When we come to consider the question of Income Tax—

Mr. Deputy-Speaker

I would remind the hon. Gentleman that this is not an occasion for a general discussion on the Budget. On Report, we are limited strictly to the actual Resolution before the House.

Sir A. Law

I was about to say that if we come to the question of the Income Tax—

Mr. Deputy-Speaker

We cannot discuss the Income Tax on the Resolution which is now before the House.

Mr. Lansbury

On a point of Order. I heard an hon. Member a short time ago suggesting that instead of increasing the taxation on tea we ought to increase Estate Duty or Excess Profit Duty or some other duty. Are we not entitled to say to the Chancellor of the Exchequer, "You can raise your money from taxation on land values or on something else," without necessarily going into the whole merits of such a proposal?

Mr. Deputy-Speaker

The right hon. Gentleman has been long enough in the House to realise that on the Report stage of the Budget Resolutions we are limited to the Resolution before the House at the time. It would be in order, of course, to suggest that if the particular tax proposed were not agreeable to the House, there were certain alternative taxes, but, as I understood the hon. Member for High Peak (Sir A. Law), he was not dealing with that question. He was going into the general proposals of the Budget which is not allowable on this occasion.

Mr. Lansbury

I do not want to be misunderstood and I agree that we cannot, on this occasion, discuss general taxation. All I am asking is whether we have not the right to reply to the Chancellor of the Exchequer when he asks, "How am I to find this money? "We ought to be in a position to tell him that he can find it elsewhere.

Mr. Deputy-Speaker

The right hon. Gentleman would be in order if he put forward the suggestion that the money could be found, not in the way proposed, but by increasing Income Tax or Surtax or some other tax, but, as I have pointed out, the hon. Member for High Peak was not dealing with that question, but with the general proposals of the Budget.

Sir A. Law

I submit to your Ruling, Mr. Deputy-Speaker, and I only wish to say a little more about the Tea Duty. I said just now that I was rather sorry that the Chancellor had put this 2d. on tea, because there are numerous other methods of putting on indirect taxation. The hon. Member for Leigh pointed out that there were unemployed people and old age pensioners and people in receipt of widows' pensions who would feel the proposed increase very keenly. Those who enjoy good wages or salaries will not feel the extra 2d. per lb. very much. It has been computed that it would cost only about 1s. 6d. per annum. As I say, I agree that there should be some increase of taxation, but I regret that it should have been found necessary to impose it on tea.

9.20 p.m.

Mr. Graham White

The hon. Member for Normanton (Mr. T. Smith) made a, rather attractive suggestion when he proposed that each packet of tea sold, in addition to being marked with the price, should bear an indication of the amount of tax comprised in that price. I think that is an idea which might appeal to the Chancellor of the Exchequer and it would certainly enable the consumer of tea to realise at once the extent of the impost which he had to pay. The right hon. Gentleman said the other day that there would be pride in the homes of the most humble people, derived from the fact that by paying an enhanced price for their tea, they were sharing in the national burden. I certainly do not understand why patriotic sentiment should be stimulated more by paying a higher price for tea than by paying a higher price for any other article of common consumption. The hon. Member for Normanton went on to suggest that the tax should be graded according to the kind of the tea, but when he made that suggestion he was approaching a territory in which effective action would be very difficult.

One of the difficulties in regard to the Tea Duty and in regard to this Amendment is that tea varies enormously in quality. There are many different grades and varieties of tea. It varies not only according to the country of origin, but also to the plantation where it is grown—the altitude of the plantation, the climate and the degree of cultivation to which it is subjected. Therefore, I think there would be great difficulty in carrying out that suggestion. The Amendment would, I think, add further to the existing complications. Everybody is wondering what will be the effect of the tax. This Amendment deals with tea from Ceylon and other places within the Empire and I notice that in auctions yesterday the price of Indian tea rose about a halfpenny per lb. We are all concerned to know whether the result of this increase is going to be the same as the result of raising the tax two years ago. The result then was—and to some extent it will be the same this time—to concentrate buying upon the cheaper grades of tea.

The right hon. and gallant Gentleman the Financial Sesretary the other day suggested that the consumption of tea was about 9¼ lbs. to 9½ lbs. per head of the population and he based upon that, an estimate that the extra tax would amount only to about is. 6d. per head of the population or that in the case of a family of four or five persons it would mean an increase from 6s. 8d. to 8s. 4d. per year. As a result of the concentration of demand upon the cheaper qualities of tea, in order that the people of this country may continue their long-established practice of buying tea according to price rather than according to quality, the dealers will be compelled to buy the cheaper qualities so as to enable the prices of their standard grades to be maintained at 2s. 6d. or 3s. or whatever they may have been. By steady gradations the prices of tea, following the imposition of the duty, rose steadily until it was necessary to put it up by 2d. a pound, so that the true result of the imposition of the tax was not an imposition of is. 6d. per head of the population but at least 3s., and we are wondering to-day whether the result of this tax, whether modified by this Amendment or some other, is not going to have exactly the same result as before.

I have always been led to suppose that it is one of the canons of sound taxation that the Chancellor of the Exchequer should look for some tax that is expanding and giving an increased yield, and one in which there is some elasticity and buoyancy. That cannot be said in regard to tea. Anyone coming to London and arriving at any railway terminus is confronted by advertisements inciting him to drink, on the most lavish scale that has ever been seen. It merely indicates the extraordinary severity of the competition in beverages, which has made the consumption of tea a steady if not a declining quantity for some time past. Looking at the matter I may remind the House that from the point of view of the producer, a committee has been set on foot by agreement amongst Imperial producers to advertise in order to compete with other beverages and to try to bring back the consumption of tea to its former volume. The committee has been working for some years and has spent some £50,000 in advertising, and now this duty comes along to knock their efforts on the head. The producer and the consumer, including the poorest members of the population, have to bear the incidence of the tax. I can think of nothing that can be said in its favour.

There is an element of uncertainty in the situation. The price at the moment appears to be rising as a consequence of the imposition of the duty. Last year the committee liberated an extra 40,000,000 lbs. for the quota of production and from 1st April a further 40,000,000 lbs. will be liberated. That may do something to prevent the rise in price which would inevitably follow from the imposition of this ill-conceived tax. I suggest that the Chancellor should consult with the committee and ask them to liberate such quantities at such times as will prevent a rise in the market price.

9.30 p.m.

Mr. Silverman

It is a little difficult at this stage to make any point that is new, but I hope the House will forgive me, especially those who have listened to the greater part of the Debate, if I make my contribution, however unoriginal at this stage it is bound to be. As I understand it, the onus of proving that a new tax is fair, just and right, lies inevitably upon those who propose to inflict it. It is not for those who do not like a tax to prove that it is wrong. It is for those who seek to impose it to prove that they are right. Two arguments have been used, if they can be called arguments, to justify the tax. One is that the contribution that people will be called upon to make is very small, and the other is that, however small or large it may be, they will be proud to make it. The Chancellor of the Exchequer will find it extremely difficult to satisfy the House or the public that the tax will not impose very great hardship upon the very large numbers of extremely poor people who in the main will have to make the payment. It is not very much use saying they will be making a legitimate sacrifice. They have nothing to sacrifice. It is not that they will tell themselves, "We must do without a little tea," and that that is the end of the story.

The means of the greater part of the people upon whom the burden of the tax will ultimately fall are so small that they cannot satisfy the needs of a normal, dignified, human existence, and what you compel them to give up in tea, or what they have to give up in other things because of the extra cost of the tea, does not amount to the giving up of a luxury, which might perhaps legitimately be demanded, but simply alters the balance of the things that they buy to their further disadvantage, and the ultimate effect of this tax upon these people is not merely to depress still further the standard of living but to affect their health in an extremely serious degree. When you say that the burden is only a small one, what you mean is that their life is so miserable and poor and desolate a thing already that the small degree by which you increase its misery and desolation is something that it is not worth while to take into account. That is not a thing that this Chancellor of the Exchequer, of all people in the House, can be expected to defend. All he can say is, "I want the money and I am going to get it from these people because they are least able to resist it. I am following the path of least resistance. My business is purely the business of an accountant. I need the money. I can get it from these people and other things do not matter."

I should be among the last to deny that the poorest of our people have a legitimate pride, and I suppose it is true that they have been the victims of that pride throughout the greater part of their lives. When you taken into consideration the points that have been repeatedly made as to the conditions under which these people are living, even if the right hon. Gentleman is right—and there is much doubt about it—that these people will make that contribution with pride, that will not justify the tax. The right hon. Gentleman will still have to answer the question, though they make the payment with pride ought he not to be ashamed to take the money? It is not sufficient to say that destitute people will render themselves a little more desolate by reason of their pride, of which the Chancellor is prepared to take advantage. He ought to be able to go further and say that it is right and proper that they should be allowed to depress their standard of living so much further so that advantage could legitimately be taken of their pride by the Chancellor of the Exchequer of the greatest and richest Empire the world has ever known. If, indeed, it be his purpose to raise the dignity of the poorest people, Members on this side of the House could suggest many ways in which it could be done much more simply and far more effectively than by taking money out of their pockets. One might consider the operation of the means test, the houses in which they live, the standard of life which is imposed upon them, and how far in our system of society dignified human existence is possible to a great number of these people. If the Chancellor is concerned with raising and improving that dignity, it is significant and a little curious that the very first effort he makes in that direction is to pick their pockets.

The hon. and gallant Member for Bournemouth (Sir H. Croft) wanted to alter this tax in such a way as to preserve to the Empire producers of tea the advantages which they would enjoy but for the tax now proposed. Are they not proud to make their contribution? Is there no pride in the Empire producers of tea? If the poorest people in this country can be called upon to pay more for their tea in order to satisfy their pride, may not the same demand be made with much greater justification throughout the Empire? I would like to remind the Chancellor that the Tea Duty has not merely a recent history. The duty is imposed now in order to assist in a preservation of the Empire. There was once a Tea Duty which lost an Empire. Unless I have misread history, I understand that the American Empire was lost on a Tea Duty, and that the principle behind it was the principle of no taxation without representation. I remind the Chancellor of that because it is now said that this tax is necessary in order to pay for rearmament. Who made that rearmament necessary? It has been said that the policy of the Government is one for which they have no mandate. They had a mandate for a policy in 1935, from which they say circumstances have compelled them to withdraw. It is said that they must now apply a policy vastly different from the mandate which they had in 1935 and that it is the very need of that policy which now requires this further contribution.

May I remind the Chancellor of that principle of no taxation without representation, and suggest to him that he has no right to go to the poorest people in order to get further finances to back a policy which is not the policy the Gov- ernment were elected to pursue, unless he is prepared first to go back to the people of the country and obtain a new mandate? Otherwise he may find that the additional Tea Duty, like the Tea Duty a century ago, far from preserving the things he holds dear, may result, as the other duty resulted, in the downfall of just those things he wants to preserve. It is a poor kind of civilisation and a poor kind of State which finds it necessary at this time, when we are spending £2,000,000,000 in five years upon rearmament, to go to the weakest, the oldest and the poorest, those who have had least out of life, and to take from them a contribution towards a defence in which, it is almost common ground, they will not share.

9.42 p.m.

Mr. Levy

This is not the first time we have heard a contribution from the hon. Member for Nelson and Colne (Mr. Silverman), who invariably makes his appeal to passion and emotion instead of to logic and reason. I have had opportunities of testing feeling in my constituency with regard to the Tea Duty. The people all realise that the money is required for national rearmament, and they are quite prepared to make that small contribution towards the safety and security which we hope the rearmament policy will bring about. They look upon it as an insurance premium, and they consider that the small contribution they make through the Tea Duty is cheap at the price. I have had no comments from any of my constituents that they are hardly done by in being called upon to make this small contribution, which is widely spread throughout the country. There is no duty more widely spread than the Tea Duty. They also realise that the revenue not only provides the security for which it is intended, but helps to maintain that large volume of social services from which the poor receive the most benefit. I intervene only to assure the Chancellor that the increased duty has not met with the disapproval which hon. Members opposite have been expressing for political propaganda purposes. He can rest assured that he has the whole of the country behind him in the collection of the duty, the prime purpose of which is national rearmament and the security of the country.

Mr. Lansbury

I should like to say, in answer to the hon. Member for Elland (Mr. Levy), that his experience differs entirely from mine as to what people are thinking of this tax. Most of the people in my constituency, which is not much worse off on the average than his, think that this is the most iniquitous tax placed upon the very poorest people. I agree with the hon. Member opposite who just now chided us that those of us who were speaking or might speak would be saying very little that was fresh on this subject, but that is true of all discussion in this House, and every Member has the right, I think, to put the case that he desires to put in whatever way he pleases. There is no one, I think, who in the past has attacked this sort of tax more than has the right hon. Gentleman the Chancellor of the Exchequer. But I have risen to point out that people are speaking about the effects of this tax on the very poorest of the poor. Few of us realise that the poor people of this country pay relatively more than anyone else for everything they get. If you take house rent, furniture, food, clothes, they are really plundered in every sort of way. Take the rent that I pay for my house in proportion to the accommodation that I get for it, and compare it with the small room for which a person will be paying 5s. or 6s. a week, and it will be found that, for the size of the rooms in my house, there is no comparison in rent except to the detriment of the very poor person.

I challenge anyone to contradict the fact that when it comes to housing, the very poorest people pay, in proportion to what they get in cubic space and accommodation, infinitely more than any of us in this House pay. That is true of everything that they buy and that they need, because they cannot buy in the quantities in which we can buy, they cannot go to the sort of stores at which we can buy, and they cannot in any way use their very small incomes in the sort of spacious manner—I use that word also relatively —that we are able to use our incomes. I think the Chancellor of the Exchequer has done a very bad thing indeed in bringing this proposal forward at this time of day, because whatever quibble you may make about the cost of living, you have only to go into the shops in the place where I live to find that the cost of things has gone up very considerably. But the old age pensioner's pension has not gone up, the widow's pension has not gone up, and many another small fixed income has not gone up, because it is fixed. Then it is said that it is only a penny or twopence, and that that does not matter very much. I think that those who use that argument do not realise what pence: dean to the very poor people. I have not much hope that the right hon. Gentleman will give us any hope that this increase is not to be levied, but I wish it were possible for the House to have a free vote on it, so that we could really register our opinions.

Now I want to say a word or two about the patriotism of this sacrifice. The sacrifice for patriotism must be measured, not by what you pay, but by what you have left after you have paid, and all through this talk about sacrifice, it must be remembered that very rich persons will not sacrifice anything of any real worth through the taxation that is put upon them, because if they deny themselves some big luxury or other, that is not a real denial at all. It is not the same as the denial that these poor people will be called upon to make. I was very much tempted, until we were reminded by Mr. Deputy-Speaker as to the limits of this discussion, to put to the Chancellor various proposals, and to elaborate them, for replacing this tax, but I only need mention one or two matters. One is the taxation of land values, about which I have heard the right hon. Gentleman speak most eloquently, and have agreed with him. There are many things on which I have agreed with him in the past, and that is one of them. He could quite easily have found all the money that he needs, for this purpose anyhow, and more, from the taxation of land values. I would also like to say that I have heard other hon. and right hon. Members in this House discussing the benefits of direct as against indirect taxation. I do not propose to argue the matter now, except to say that I am an unrepentant believer in direct taxation and no other taxation. I believe that once we got that, we should have got the real test of whether people like or did not like taxation. [Interruption.] I do not think any hon. Members really enjoy paying it; they may tell me that they do, but I shall not believe them.

It has been said—it is a very old saying of William Pitt's, and I remember hearing the late Philip Snowden recalling it in this House—" You can tax the shirt off a person's back by indirect taxation without his knowing you are doing it." People buy your goods and do not realise what they are paying in taxation, and that brings me to the point that I support the idea put forward by the hon. Member for East Birkenhead (Mr. White), that the Chancellor of the Exchequer should consider compelling the people who print the packets in which tea is packed to put on them how much tax is paid, because I do not think people, when they are buying food in these days, know how much they are paying in taxation. That brings me back to the first point that I made, that the poor, relatively to their income, pay much more than anybody else. Speaking for myself, if I drew only my income from this House of £600 a year, I should relatively pay less than the very poor person pays. Therefore, I repeat that I think that this is an iniquitous argument. I shall not attempt to talk about why the Government are raising this money. I am hoping to catch your eye, Mr. Speaker, when the Finance Bill comes up for discussion. I will only say, "For heaven's sake, don't go home and tell the world you have got to tax the very poorest of the poor in order to help you to get ready for the next catastrophic war."

9.54 p.m.

Sir John Haslam

I do not rise to argue the matter with the right hon. Member for Bow and Bromley (Mr. Lansbury), because, as he always does, he has put his case so reasonably and amicably that there are very few people who would quarrel with him. He said that the poor pay proportionately higher taxation, when it is put on food, than do the richer people. As one who has had some experience in these matters, I cannot deny that allegation, because anything that is bought in small quantities inevitably pays a higher proportion of tax. You cannot divide the tax up to the same extent when it is only a penny or twopence on a commodity that is sold in ounces. I was rather surprised at the right hon. Gentleman, as an ex-Cabinet Minister, suggesting that there should be a free vote on this matter in the House. I do not know whether the Socialist Government, when they were in office, allowed a free vote on such matters, or whether, if ever they come back to office, they will be prepared to carry out the suggestion now made.

I really rose to protest against the strong language used by the hon. Member for Nelson and Colne (Mr. Silverman). If we are to believe him the heavens will come down and all our civilisation will go by the board because an extra 2d. per lb. duty has been put upon tea. Overstating a case does it more harm than making no statement at all, and I would ask the hon. Member, when he rises again to talk about these subjects, to be more reasonable and moderate in his assertions, and I am sure he will then carry far more weight. He said also that it was not right that the people should pay a proportion of the cost of rearmament. I thought the party to which he belongs was in favour of rearmament, and if the working classes are not going to pay their proportion who is going to pay for rearmament?

If the Government had not increased the Income Tax and the duty on petrol and other things I should have been one of the first to say that this increase in Tea Duty would press unduly on the wrong shoulders, but when 6d. has been added to the Income Tax and there has been an increase in the taxation upon petrol and other things surely it is not asking a great deal, or putting too onerous a burden upon the working classes, to put this 2d. upon tea. Everybody jumps to the conclusion that this addition to the Tea Duty will cost 1s. 6d. per head of the population. They get that figure by dividing the consumption of tea in this country by the population. Nobody knows better than the right hon. Member for the Hillsborough division (Mr. Alexander) that the huge cafes, the hotel people, the railway people will all pay a very heavy proportion of this tax. They will not increase the price of the cup of tea in consequence of the tax.

Mr. Holdsworth

They have increased the price in the Lobby bar.

Sir J. Haslam

I did not think they had increased it and if they have somebody is profiteering, because I do not believe they have paid an increased price for their tea, and really the grievance of the hon. Member lies against the Catering Committee of this House and not against the Chancellor of the Exchequer.

Mr. K. Griffiths

Is the hon. Member aware that the figure of is. 6d. per year per person does not come from anybody on this side of the House but from the Financial Secretary to the Treasury?

Sir J. Haslam

It is the Financial Secretary whom I am trying to correct on this point. I never make a statement without giving a reason and I have given my reason, and from a long experience in the trade I should say that the average consumption of tea per member of a family—I challenge anyone to dispute it, and no one knows more about it that the right hon. Member for the Hillsborough division—is 2 oz. per week. If there is a family of four they use half-a-pound. I know that the quantity used varies, some use enormous quantities and others less, but on the average where there are two in the family they use a quarter of a pound per week, where there are four in the family half a pound and with eight in the family one pound.

Mr. Alexander

The hon. Member is about 50 per cent. out. We find it is about three quarters of a pound for an average family of four.

Sir J. Haslam

The right hon. Member's experience is different from mine and, as he knows, I have had a little experience in the matter. He may differ from me but I stick to my figures, and I think I can get confirmation of them. If it is as the right hon. Gentleman says, where does the proportion of tea which is used in hotels, restaurants, railway trains and other places come in? The general consumption only works out at three-quarters of a pound for a family of four or 1s. 6d. per person per year, and surely the right hon. Gentleman will admit that some tea is used by places such as I have mentioned; in fact, a very large proportion is used. I know there is one hon. Member of this House who will pay very heavily in consequence of this extra duty upon tea, I do not want to belittle the increase, but I do want it to be put in its right proportions, and I stick to it that the cost to a family of four will be about a penny a week, which is 4s. a year.

I was very much struck by what the previous occupant of the Chair said when he told us that we could not discuss this duty because it was a permanent duty. I always thought the Chancellor of the Exchequer was the person who decided whether a duty was permanent or changeable, and I should be sorry to hear that the Tea Duty was to be regarded as a permanent duty and not one to be put on year by year. The hon. and gallant Member for Bournemouth (Sir H. Croft) spoke about Empire Preference. I am not against an increased preference for Empire tea, which would come mainly from Ceylon and India, but I would impress upon Ceylon and India that Empire Preference cuts both ways, and that if we give a preference to them on their tea it would not do them any harm to give us in Lancashire a higher preference on our cotton goods. I have been a supporter of Empire Preference all my public life, but I have always thought that it should cut both ways, and it is not Empire Preference when it is only a one way preference.

Two or three hon. Members said they would like to see the amount of the duty upon tea marked upon the packets of tea which are sold. I am not against that, but would they agree to the same thing being done in the case of beer and whiskey? It would be a little difficult, but I personally should not object. They would realise, however, the difficulties of carrying out that suggestion, and nobody knows it better than the right hon. Member for Bow and Bromley. Those who know anything of the tea trade know how difficult it is to sort out values. Values change according to the auctions and according to the imports and—

Mr. Lansbury

The Tea Duty does not change in that way.

Sir J. Haslam

I know that it does not change, but the right hon. Gentleman insinuated that the poorer qualities of tea pay a higher proportion of duty than the better qualities of tea. Some hon. Member spoke as though the average price of tea to the poor was 2s. 6d. per lb. I dispute that. I should think it does not average more than 2s. or 2S. 2d. per lb. When statements go out from this House they ought to be founded on something like the facts and not up the fancy or imagination of hon. Members.

Mr. Silverman

This increase of Tea Duty is a flat rate of 2d. per lb., and does it not therefore follow that the lower the price of tea the higher the proportion of tax it bears?

Sir J. Haslam

Certainly. I was pointing out the difficulty of deciding upon an ad valorem duty when you are dealing with a commodity such as tea. It is a blended article. It is not something which is gathered from the tea plantation and sold direct to the consumer. There are a dozen or twenty different blends in a pound of tea. There might be some tea as low as 8d. per lb., some at 2S. per lb. and some at 4s. or 5s. per lb. How can one work that out? The House will realise that it is almost impossible. I am not disputing the assertion that the lower price bears a higher proportion, because that is a fact recognised by everybody, but I am pointing out how impossible is the realisation of the ideal advocated by the hon. Member for Nelson and Colne. Much as we hate taxation—none of us like to pay it—we realise that it is inevitable. I want to congratulate the Chancellor of the Exchequer on producing a Budget which is very fair in its operation. If he had to raise so much money I do not know how he could have raised it in a fairer manner. For hon. and right hon. Members opposite to insinuate that the poor are paying a higher proportion is entirely beside the mark and absolutely untrue.

10.7 p.m.

Mr. Davidson

I regret having to intervene in the Debate at this late hour, but I want to make it clear to hon. Members that the lure of the Exhibition in Glasgow has not attracted all the Scottish Members of this House, and, secondly, that I welcome this opportunity of pointing out to the Chancellor of the Exchequer and to the two last speakers from the other side that I am redeeming a pledge made to my constituents at the last General Election that I would oppose all taxation on the foodstuffs of the working class while so much surplus wealth existed in the country. I want to make one or two points to the Chancellor of the Exchequer in the way which was so successful when speakers on the other side were dealing with a previous Amendment. They appealed to him for reconsideration of taxation which he intended to impose, and I appeal to him, in view of the many speeches made on this subject to-day and the expressions of opinion as to the hurtful influence of this taxation upon a certain section of the community, that he should promise to reconsider the question fully.

I do not wish to be accused by the previous speaker of making exaggerated statements. I thought it strange that when he addressed himself to my hon. Friend the Member for Nelson and Collie (Mr. Silverman) he gave him a lecture on over-statement and indicated that the heavens would burst and wrath fall upon the Chancellor of the Exchequer and other Members on the other side with regard to over-statements or exaggerations. I suggest that the hon. Member should try to avoid those things himself. Another hon. Member stated that no great feeling existed in his constituency with regard to this taxation. I would point out that last Sunday, which was the May Day of the working-class people of this country, we had the strongest, greatest and most enthusiastic May Day gathering that this country has ever seen, and that from thousands of platforms and thousands of audiences objections were made by the common people to the imposition of this tax. If the Chancellor really believes, with his supporters, that the people are not interested and perturbed about this increased taxation on tea, I suggest that he should stay in Spen Valley until the next General Election and test the people of the constituency from which he is now so anxious to disappear.

Not only do I ask for consideration for the people of this country, but, as a Scottish representative, I ask the right hon. Gentleman to consider the exclusion of Scotland from this tax. I am not expressing that wish from a Scottish nationalist point of view. It has been proved in this House by facts and figures, and in statements from the Government Ministerial Bench, that Scotland is suffering to-day from an increasing poverty which is the worst that she has suffered for many years. Who are the working-class people in Scotland who are to pay—

Mr. Speaker

I would remind the hon. Member that this is an Amendment to reduce the tax, and not to apply it only to the Scottish people.

Mr. Davidson

I accept your Ruling reluctantly. I wanted to ask the Chancellor to recognise that the people who have to pay this increased tax and for whom I am appealing are those who are in receipt of public assistance, old age and widows' pensions and whose numbers have materially increased during the last seven years. In 1931, we in Glasgow were paying £36,000-odd in public assistance relief; to-day we are paying £2,360,000-odd. A great number of the population are upon a fixed, poverty income. In Glasgow, and in every industrial town in this country to-day, as the Financial Secretary to the Treasury knows well, local authorities are paying to the people who are on the poorest and the lowest minimum allowance, more than the Government are giving them in pensions. The people who are on public assistance relief, the old age pensioners, the widow pensioners—these are people upon whom even one extra farthing in the week ought not to be placed while there are other obvious avenues for this taxation. I think I am perfectly logical in asserting that surely a man of such great experience as the Chancellor of the Exchequer, who has had such a varied political career, who has had the benefit of so many different political platforms and who has served in so many various offices in the Government, from Foreign Secretary and Home Secretary to Chancellor of the Exchequer, ought to be able to submit to the House a scheme whereby this further £3,000,000 could be raised without touching the poorest section of the community, and I ask the Chancellor of the Exchequer to use his powers to shift this burden on to shoulders more able to bear it. I do not want to stress overmuch the question of Scotland, but, if the Chancellor really believes in his tea tax, if he honestly and sincerely believes that the people of this section of the community will welcome the tax as an insurance for their defence, I would ask him to come to any industrial constituency in Scotland and try to prove that to the people there. They will not have it.

As to the £3,000,000 for Defence, they are paying for that already. Those old age pensioners who have been refused an increase, every local authority that has had to impose extra rating burdens on its people because the Government's rearmament programme has made them refuse grants that ought to have been made to those local authorities—those people already, by their low housing conditions, by the lack of building of houses, by their low subsistence levels of relief, are already paying more towards the rearmament programme of this Government than any other section of the com- munity. Hon. Members from all quarters of the House spend carelessly in the dining rooms of this House more money on one meal than those people who are being asked to bear another burden can spend on their children in one week.

Such taxation is unfair. I believe that. if we are to have social services, if we have to have community services, the community ought to bear the cost of them fairly and squarely. They are not being asked to do that to-day. A burden is being placed upon people—and I ask the Chancellor to consider the matter from this point of view—who are unable o bear one extra farthing of reduction in their income to-day. I would also point out to him that there are many avenues—if he cares to speak to me at any time privately I will expatiate on those avenues—whereby other people who are living in luxury, who have never wanted, who have never lacked the best things of life, can be made to pay this extra £3,000,000 towards the defence of the nation, which involves their good more than it involves the good of the people for whom I speak.

10.19 p.m.

Mr. Alexander

I am sure that the Chancellor must have been a little surprised that the Debate on this Amendment has occupied so much of the time of the House. A good many people would not have imagined, in the early part of the Debate, that it was going to last, as it has done already, three hours and a half. But I think that on reflection the right hon. Gentleman will see that, whatever else may be said about his Budget, there is a very strong feeling of resentment at the attempt which he has made further to mulct the common people of the country—the poorer sections—in this additional burden. A great deal has been said to-day about what else the Chancellor could do. He had a Budget deficit of £120,000,000, of which he had already arranged to borrow £90,000,000. He had decided on an increase of 6d. in the Income Tax, which would bring in£20,000,000. What else was he to do?

To start with, I feel that it is quite unnecessary for the House to be asked tonight to approve this additional burden upon the necessities of the poor when the Chancellor is making in the same Budget important Income Tax concessions to profit makers. In the evening paper tonight I have seen another example of a company announcing its final distribution of dividend, which makes a total dividend of nearly 90 per cent. for the year, and there is also the promise of an issue of a 5 per cent. preference share of £1 for every four deferred shares of 5s. now held. That company, under the Chancellor's Budget, will he given double the allowance for wear and tear of its machinery in the coming year.

Sir J. Simon

The last increase was 10 per cent. and the addition will now be 20 per cent. of the allowance. That does not make the allowance double.

Mr. Alexander

I ought to have said he has doubled the increase. I am quite prepared to say "double the increase," because the Chancellor is also doubling the increase in the Tea Duty put on two years ago, and, as an exact set-off, he is doubling the increase for wear and tear to large companies. It was quite unnecessary for that extra allowance to be made, and especially if he would require in those circumstances to put this extra tax on tea. Much has been said by hon. Members like the hon. Member for Bolton (Sir J. Haslam), who has experience of trade, as to what the effect would be. It is only fair to say that long experience of the use of a Tea Duty as a means of raising revenue proves quite conclusively that the movement in the market prices follows exactly the average amount of duty imposed, and that, in fact the average dealer in the trade does not profiteer over the duty. I have all the figures for the last 16 years. But when the hon. Member for Bolton said that the cost to the average consumer is only 4s. per year—say for the average household—

Sir J. Haslam

Of four.

Mr. Alexander

—of four—he is very much out of touch with the situation. I am convinced, from inquiries up and down the country, that an average of ¾lb. of the commodity for a family of four is not only general but is often exceeded. When he takes into account supplies for hotels, restaurants and the like, it only emphasises that the rich section of the population drink far less tea per head than the working class. I was brought up among the working class, and I know that, day after day, week after week, the only beverage in the household is tea. They do not have the variety of beverages that the rich have, they do not have Ovaltine at night, and they do not have liqueurs as the rich have. It is tea, tea, tea.

Sir J. Haslam

I do not know whether the right hon. Gentleman is insinuating that I belong to the richer class. The home in which I was brought up was far humbler than his could possibly be, because my mother was left with six children under ten years of age, and I was only three months old, and there was no such thing as a widow's pension. Therefore I know what a humble home really means.

Mr. Alexander

My mother was widowed at 28. I was not making any insinuation at all concerning the hon. Member. What I was saying to the hon. Member was that our experience showed that it was the richest section of the population who drank less tea per head and that that accounted for the difference. I come to the actual burden of the Tea Duty. If you take ¾lb. of tea for the ordinary household, with the tax on foreign tea at 8d., the average of the home cannot be taken at less than 7d. You have therefore to pay three-quarters of 7d. in the lb. of this new duty every week. Instead of the burden being about 4s. as an increase, there will be a burden of 22S. or 23s. per annum for every household of a family of four. What is more to the point—and the hon. Gentleman the Member for Bolton knows as well as anybody who has experience of the food trade—this is a superimposition upon the imposts made by the present Chancellor of the Exchequer and previous Chancellors upon the people.

I have gone into the position of food taxation under the National Government during the last five years. When the right hon. Gentleman the present Chancellor of the Exchequer in company with his colleague who is now in the other House, Lord Runciman, made an appeal to the nation in 1931 as a section of the old Liberal party supporting the National Government, they pledged themselves specifically against the taxation of food, but to-day the food taxation per annum under the National Government is already over £40,000,000, and, with the addition of the Tea Duty, it will be £42,500,000. There is not a working-class family of four who will not be paying by the end of this year £10 per annum at least in taxation. When you consider that, in many cases, that £10 will come from a working-class family with a total income of from £80 to £85 a year, it is not something special, as was said this afternoon, but it is an outrage. I say that especially, because the Chancellor could have avoided this particular increase by simply not giving an unnecessary additional allowance in respect of wear and tear. We were told in the Budget speech that the Chancellor of the Exchequer expects to get from this addition of 2d. in the lb. on the Tea Duty about £2,750,000, and in a full year £3,250,000. The Chancellor of the Exchequer expects to give out of his Income Tax yield just that sum in respect of additional allowance for wear and tear, and to give it to industry whether they need it or not.

Therefore, I think we have a particularly strong case in respect of the Tea Duty. With regard to the price of the commodity and how the Tea Duty affects the consumer, I have taken out a list of prices of the common tea which could find a good sale. I have taken the figures from the year 1922, when the Tea Duty stood at 10d. on Empire and 1s. on foreign tea. The retail price was then 2s. 2d. for that common tea. There was a gradual reduction in the retail price according to the fall in the duty, until it was abolished in the year 1929. When the duty was abolished in 1929 the price was 1s. 2d.

Lieut.-Colonel Colville

In 1922 the full duty was 8d. and the preferential duty was five-sixths of that sum.

Mr. Alexander

I do not know where the Financial Secretary has got his figures, but mine are taken from pretty good book-keeping entries. I do not think that the interruption was relevant. These figures are taken from our books, and we are the largest sellers of teas in the world and the largest payers of duty out of bond to the Exchequer. Therefore, we know something about the subject. My point is that from 1922 until 1929 the retail price steadily went down. If we take the year after there was no payment of duty, we could get good common tea in 1931 at 1s. and 10d. and later in that year it was even down to 8d. I am told that in that year there was a reasonable but not a high quality of common tea on sale at Woolworths at 6d. per lb. It may have been that that particular parcel sold at that price was an attractive parcel put up for the purpose of attracting other custom, but it is true to say that throughout the tea trade in the year when there was an absence of duty one could get drinkable tea at 8d. per lb. We shall not he able to get this year, with the rise in duty, tea of that quality at less than 2S. 2d.

That is the measure of the difference in the burden that the housewife has to pay. It is not a question of whether it is 1d. or 2d. more now, but it is a question of the policy of the Government in gradually raising the price to the consumer from 8d. in the lb. in 1931 to 25. 2d. now. That is the case that we have to put to our consumers in the country as to the effect of the Government's policy upon prices. We are always told that there is no guarantee that these increased duties are going to be paid by the consumer. I remember that a few months ago, when the question of the cattle subsidy was before us and the basis of finance was changed and it was put on a receivable duty basis, it was said that the duty of ¾d. in the £ would not be paid by the consumer but by the cattle producer in Argentina. We all know that since that duty was put on instead of the ¾d. being paid by the Argentine producer it has been paid by the consumer, and that we have been paying 1½d. or 2d. per lb. more for meat, because of the duty, plus the extra rise alongside of it.

It is quite certain that the consumer pays. In view of the astronomical figures of the Budget I am certain that £1,049,000,000 at least will have to be raised by the Chancellor of the Exchequer before the end of the financial year. To take £3,000,000 out of the working classes when there are so many other opportunities of raising the money in a manner in which people would pay according to their ability to pay, is unreasonable, and I hope we shall not be confined to Labour and Liberal support of this Amendment, but that hon. Members in all parts of the House, who have a real sympathy with the position of the workers, will have the courage to come into our Lobby and see that the people who voted for them in the belief that they would stand for League policy and disarmament are not mulcted in these unfair charges.

10.36 p.m.

Sir J. Simon

The Debate has gone on for four hours, and I am sure there is no hon. Member who has attended it who at all grudges the time. The matter we have been discussing is certainly very important, and I think it is right that it should receive the very full treatment it has, though, of course, there will, I presume, be further opportunities after the Finance Bill is introduced of debating the general subject. Most of the points have been presented fully and fairly— do not doubt their importance—and I hope the House will now think it right if I say a few words in conclusion. First of all as to the Amendment itself. The hon. Member for Maryhill (Mr. Davidson) in his speech told us that he felt bound to intervene because he was pledged to his constituents never to vote in favour of any tax upon food. In that case I am afraid he will not be able to vote for the Amendment, because the Amendment is not that the tax should be abolished, but that it should be reduced to 4d.

Mr. Davidson

May I point out to the right hon. Gentleman that my constituents can always appreciate my choosing the lesser of two evils?

Sir J. Simon

I was for the moment reminding the hon. Member of the actual issue which is raised—raised, of course, for the purposes of a general challenge. The real issue is this. I have felt it my duty to present in the Budget a proposal under this head which will increase the revenue of the country this year by something under £3,000,000. The proposal now before the House is that, instead of there being an increase under this head, there should be a reduction, and I must point out, quite bluntly, that if the proposal is accepted, it means that the Budget which I have been at some pains to balance—

Mr. Dalton

Misleading.

Sir J. Simon

I hope not—the figures I have endeavoured to bring together would, in fact, be reduced by something like £5,500,000. I must ask the House and those who support the Government to see that I do not suffer that loss. The hon. Member for Bolton (Sir J. Haslam) made a forcible speech, because he spoke with the full authority of an hon. Mem- ber who is speaking about things of which he really knows. He made an observation, in passing, about this Tea Tax being described as a permanent tax. In a sense no tax is permanent, but there is this distinction between the two kinds of taxes in this country. There are some taxes which last for the year, and at the end of the year would automatically cease unless, annually, by the action of Parliament, they were renewed. There are other taxes which, having once been enacted, continue on automatically year after year unless and until Parliament intervenes to do something to alter the position.

In the old days there used to be two taxes which were called temporary taxes, one direct and one indirect. Income Tax has always, or nearly always, been regarded as a temporary tax, ever since it was introduced. When Mr. Gladstone was Chancellor in 1854, he produced a scheme by which Income Tax, which then stood at 7d. should be reduced in the course of the next seven years—he was looking far ahead—and at the end of seven years should disappear for ever. Unfortunately, the Crimean War intervened, and I am afraid that Income Tax did not disappear quite as Mr. Gladstone had planned. But Income Tax has always been, subject to that, a temporary tax, and that is why we renew it by vote every year. In the old days tea was also a temporary tax voted every year. One indirect and one direct tax—those were the two taps which it was regarded as right to turn in order to get the right quantity of liquid into the receptacle. Since 1932, I think, tea has not been provided for in that way, and the Tea Tax now is a continuing tax, subject, of course, to the right of Parliament every year to increase, decrease or abolish it. That, I think, is how the matter actually stands.

Perhaps I may mention one other matter outside what I may call the broad merits of our present discussion which was raised by my hon. and gallant Friend the Member for Bournemouth (Sir H. Croft). He was anxious to know—and I think he had an Amendment down for the purpose—whether, if the rate of the tax was raised, the extent of the Preference should not be altered so as still to bear the same proportion to the higher tax as it now bears to the lower tax. That is not the proposal I have made. I have made the proposal that we should retain the Preference of 2d., moving up the level so that there is exactly the same difference of 2d. as existed before. I think that is the right view. At an earlier stage, the method that was adopted was that the Imperial Preference was not a fixed figure, but was a certain fraction—one sixth—of the duty. Therefore, when the duty was small, the Preference was, in fact, less than 2d. Subsequently, a change was made and the Preference was fixed at 2d. I do not think it would be a good reason for increasing the Preference merely because the fractional relationship between the Preference and the tax itself is now altered.

Having disposed of those things, may I now come to the main subject of our controversy in this matter? I quite agree with hon. Members in different parts of the House that we should deal with the question before us now as a matter of principle. It is a matter of principle, no doubt. My hon. Friend the Member for Colchester (Mr. Lewis) made a speech earlier in the afternoon, and I think he was quite right when he said that there was a question of principle involved. I would like to state to the House what is my view of the principle. I have to decide what is the right action, and this is what I think is the question of principle. It seems to me that we must proceed on the basis that we need more money, and that we need more money for rearmament. There are other occasions when we may discuss that, but that is the basis on which we are proceeding to-night. We need £30,000,000. If that is so, should the contribution towards that extra sum, needed for the defence of the whole country, in principle be got by spreading it among the community as well as we can, or should we adopt the principle—which some hon. Gentlemen quite openly advocate, and which I can understand may be held—that even though the service for which it is required is essential to the country as a whole, and upon it depends the safety of the homes of the people, that none the less this additional money should be got from a portion of the community and that the rest of the community—I assume for this purpose the poorest—should make no contribution at all?

Mr. Gallacher

They are making a big contribution.

Sir J. Simon

I agree they are making a contribution now, but there is no point at issue about that. The point is that at this time practically the whole country is clear that it is necessary to find this extra money and it is being found for the defence of every home, for the defence of every roof in the country. That is the object and the question then is, which is right in principle—to get this money from a section of the population, which I will assume is the wealthier section, or to endeavour to get it from the population as a whole? That, I think, has been correctly described as a matter of principle. I well understand that there are hon. Members who take another view and are prepared to stand up for that view, but I wish to declare my own view that in the circumstances the right thing to do is to try to get the contribution from the community as a whole. Hon. Members opposite and I may differ upon that point. I have no quarrel with any hon. Gentleman opposite because he takes a different view from me upon it, but, none the less, I most definitely do hold the view that when we consider that this money is needed for air-raid precautions; when we consider that if an attack came upon us from the skies, there is no method by which one roof will escape because it covers poor people while another will be hit because it covers rich people; that there is no method of marking the doorposts so that the Angel of Death may not strike at a particular home—I say, in those circumstances the right principle to apply is that of having the contribution fairly distributed among the whole population.

In the second place, if you are going to do that, I think you will find as a practical matter that under our system it is necessary to have resort to indirect taxation. I understand the ideal of which one or two hon. Members have spoken to-day, of having all taxation direct, and having the direct taxation applied to everybody. As an ideal, I understand that, but it is not a very practical proposal. We have proceeded on the opposite view. We do not exact Death Duties from the very smallest estates. We do not exact Income Tax until after a certain limit of income has been passed and you will find that for practical purposes it is not possible by way of direct taxation to secure a contribution from the whole population and that it has never been done.

Mr. Tinker

Does the right hon. Gentleman say that if you excluded the smaller incomes, direct taxation could not be applied to the whole?

Sir J. Simon

I can assure the hon. Member and I always listen with great respect to what he says, that if he will think the matter out and perhaps have some conversation about it with others, he will find that that is not a very practical proposition. It is always necessary to have some recourse to indirect taxation for this purpose. I think I understand the objection to indirect taxation as well as anybody in this House. I have not changed my understanding of the difficulties of that taxation because I have changed my office or my position—not in the least. I perfectly understand that indirect taxation has this effect, that it does, in the circumstances, as hon. Members have said, press proportionately with greater severity on persons with small incomes than on persons with big incomes. Therefore, unless you are to have at the very least a proper combination of direct and indirect taxation very great injustice will be done and I conceive that one of the principles of our fiscal and financial system is to secure that our direct taxation is so applied and so administered that you get great contributions from those who have great possessions.

At the same time, I must say that it is natural and right when we are facing a common responsibility like this, which is vital to every home in the land, that we should, at the same time, get some supplementary contribution from those lower in the scale. The hon. Member for Springburn (Mrs. Hardie) was wrong when she said that what was happening was that indirect taxation was being increased and direct reduced as a matter of proportion. The actual facts are exactly the other way. They were stated clearly by the Financial Secretary last week, who pointed out that the proportion as it would exist with the Budget proposals adopted was something like 63 per cent. from direct and 37 from indirect, whereas if you go back a year or two the proportions were 60 and 40, and if you go back to 1936 they were 59 and 41. I concede that in- direct taxation has undoubtedly thrown a big burden upon poor people, and must do from the very nature of the case, but at the same time it is true that indirect taxation is taxation upon everyone. It is direct taxation that is not taxation upon everyone. Direct taxation is limited to those in the more comfortable strata.

Having stated my general feeling about it, I come to the immediate question. If my principle is right and we are going to try to do this, what is to be selected as the article to tax? I must select an article, as far as may be, of universal consumption. The principle that everyone should contribute is fulfilled in choosing an article of very general consumption. The Noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor), if she were here, would have contributed an interjection suggesting another liquid which would be a better subject than tea. I think however for this particular purpose that, there is no particular reason why teetotallers, whatever the merits of their practice and the extent of their virtues, should escape contribution because they are teetotallers. Suggestions have been made about tobacco. I am not saying that tobacco may not in some circumstances be a proper subject for additional taxation, but if you try to get a very minute contribution from that source, instead of getting your additional revenue, you are very likely to get smaller cigarettes, or a smaller amount of tobacco in the cigarettes. I am bound to find a method which will really produce a contribution though it is, I agree, a small one.

The right hon. Gentleman who spoke last painted a picture which I thought was very much exaggerated. I have never denied that even a halfpenny a week on those with very small resources is a matter of importance. I am not treating a halfpenny as if it were a matter of indifference at all. At the same time, I really cannot accept these estimates of the burden that is being thrown even on small homes, and I call a witness who seems to be very much in point. When the right hon. Gentleman the Member for Epping (Mr. Churchill) was Chancellor of the Exchequer and he repealed the Tea Duty altogether, comments were made by hon. Members opposite as to the value of this boon. I suppose it will be admitted that, if putting on this duty inflicts this intoler- able hardship, as it has been described, taking it off must have produced a very substantial measure of relief.

The right hon. Gentleman the Member for Hillsborough had as a colleague at that time on the Front Bench a Member of Parliament whom we all remember and whose death we all lamented, Mr. Willie Adamson. He was entrusted with the task of stating the case for the Opposition when the Tea Duty was withdrawn by the right hon. Gentleman the Member for Epping. He made the last speech of the day on 16th April, and I should like to read one sentence from what he said on behalf of the Labour Opposition. No doubt he had the advantage of having the right hon. Gentleman at his side with all the information he is able to collect from the Co-operative Society and with all the figures worked out to the nicest possible degree. Let us see what was the result only a few years ago when the Tea Duty was repealed. It was then 4d. This is the language that was used by Mr. Adamson: On the calculation of the average amount of tea consumed, it "— that is to say, this relief— may amount to something like 1d. to 1½d per head of the population per week in relief. I only make the observation, which is merely arithmetic, that if the plea of hon. Gentlemen opposite is that when you have a tax taken off tea to the extent of 4d. per lb. it merely means a relief of 1d. or 1½d. per head of the population, how much extra burden does it mean if you put on 2d.?

Mr. Alexander

May I say how glad I am that the Chancellor has confirmed my figure? I put the case that a family household of four would use three-quarters of a pound a week, and that the charge would be 1d. to 1½d. per person. My figure was 6d. a week. That is just the figure the right hon. Gentleman mentioned.

Sir J. Simon

Then we reach the end of this period of the Debate in a most happy state of agreement. I was also about right last Tuesday in the Budget speech when I said that I recognised that even an extra half-penny a week per person was not to be disregarded; but we should not put this thing higher than it deserves.

I do not think that some hon. Gentlemen altogether correctly reflect the view which I am sure prevails among a very large number of humble people in this country. They are proud of this country, they have had a great deal to do with building it up, and they know perfectly well that the work of Parliament in the last generation has been largely directed to doing the things for which I have honestly stood all my life, that is to direct the power of Parliament through the system of taxation towards wide measures of social reform so that those who have most to spare should contribute most and that the State should come to the help of those who need it most. That is not a party plea. It has become the general policy of the whole country The only difference is that we do not always agree how it should be done, but that is, in fact, the common purpose of all decent and honest people in all parts of the House. It is not true that even the very humblest of our fellow citizens are forgetful of the fact that we have by this means brought immense relief to those who need it most. It is not an insignificant circumstance that in this very Budget the estimate for social services has increased this year by £12,000,000 over the expenditure last year—by four times the amount of the produce of this duty. It is not a small fact that last year we were getting from revenue £50,000,000 a year more than we got in 1931 for the social services.

That is one side of the picture. The other side of the picture is that indeed it is true that the poorest in our land none the less have a hard and difficult time. I am not for a moment suggesting that what I am proposing here to add to which they have to pay does not affect them. It does. But I believe it is true that if you tell the people of this country the truth as to the purpose and the need, you are not doing justice by them if you treat them as though they wanted to resist and avoid a small contribution. If we are putting some unfair burden on them, challenge it and improve it, but I have done my very best to make the contribution small, and I believe I have made it just. I have never supposed that this particular proposal would be popular. If you are seeking popularity, do not be Chancellor of the Exchequer and introduce a Budget like mine, but if you will tell the people, as I have tried to tell them, in all honesty and straightforwardness, what the actual situation is, I do not believe it is true of our country that it is not prepared to see it through provided that the burden is fairly and properly distributed and shared. Therefore, I ask that the House should support my proposal. In ordinary times, and if there were plenty of other resources, I would never be a party to increasing the Tea Duty, but I think that in the circumstances I have no other course, and I invite the House to support me in taking it.

11.3 p.m.

Mr. MacLaren

I am impelled to intervene because of the argument put forward by the Chancellor of the Exchequer that there are certain sections of the community which pay certain contributions to the taxation of the State and that you can clearly define what those sections are. There are the very wealthy section, the intermediate section, and the lower or working-class section. The present Chancellor of the Exchequer, and the Prime Minister when he was Chancellor, both addressed their minds to this Tea Duty from the same plane, as it were, that is, that the lower strata of society might be called upon, owing to the obligations of the State, to make a contribution. That is the appeal. When will Chancellors of the Exchequer face the fact that the entire Budget is paid for by the working class? If any hon. Member opposite wishes to challenge that, I shall be delighted if he will get up and do so. All taxation as at present levied is extracted from the common pool of wealth produced by those who work in the production of that wealth, and when we are told that the working classes, owing to their small incomes, are therefore paying very little in taxation, I say that that is a travesty of the facts, and that it is a falsehood that should be challenged and demolished on the Floor of this House. If there is anything that is selfevident, surely it is the proposition that I have put forward. Only from those who produce the wealth can taxation be derived.

Mr. Speaker

I am afraid the hon. Member is going a long way beyond this Amendment.

Mr. MacLaren

I am leading up to the Tea Duty, but I wanted to clear this fallacy, which is constantly trotted out when these taxes are proposed. The Chancellor of the Exchequer has told us that, owing to the fact that there is a probability of the country being subjected to indiscriminate bombing, we must therefore have indiscriminate taxation. That is what it means. "Let us scatter the taxes throughout the whole community." Once or twice he said so. I noticed that he gave us a little recitation, and I noticed that the Speaker did not rule him out of order. That is a liberty that a Chancellor has.

Mr. Speaker

The right hon. Gentleman's argument was directed to quite a different point.

Mr. MacLaren

The Chancellor told us that the process of indirect taxation was necessary, that there was no escape from it, that it had to be resorted to as an inevitable consequence. He knows as well as I do that indirect taxation is resorted to because you can always get more from people if they do not realise the extent to which they are being made to pay. If the Chancellor was looking for some common basis for his taxation, something from which he could get the money which was in common use by all, I can assure him that there is something else that he could tax besides tea. I will not mention it; the House knows what I mean. The Chancellor has emphasised to-night the peroration which he made in his Budget speech, that the people of this country will be proud to pay this con-

tribution. Perhaps they will be, or perhaps they will not be. I think that if the Chancellor went round to the poorer sections of the community and told them that it was inevitable that they must be heavily taxed and should feel proud of it, because it was to defend their country, it might become dangerous propaganda, because the people might ask, "Is this to defend something which we own? "

That would be a dangerous question, and I suggest when the next Chancellor comes to the same impasse as the present one, has a deficit and is looking around for a new tax, that if he is under the threat of a war there is no more appropriate basis from which to get the money than that element which we are all called upon in common to defend if war takes place. Having hinted what that is as clearly as I can I suggest that we should stop these subterfuges and sentimentality and emotional appeal and he frank. This is an indirect tax added to the other indirect taxes, and indirect taxation is resorted to not only by the Chancellor of the Exchequer of this country but of every country so that there may be extracted from the workers more than they are conscious of contributing to the enormous burdens of the State.

Question put, "That the word ' eight-pence ' stand part of the Resolution."

The House divided: Ayes, 229; Noes, 129.

Division No. 193.]	AYES.	[11.9 p.m.
Acland-Troyte, Lt.-Col. G. J.	Butler, R. A.	Eastwood, J. F.
Adams, S. V. T. (Leeds, W.)	Campbell, Sir E. T.	Edmondton, Major Sir J.
Agnew, Lieut.-Comdr, P. G.	Cartland, J. R H.	Ellis, Sir G.
Albery, Sir Irving	Carver, Major W. H.	Elliston, Capt. G. S
Allen, Col. J. Sandeman (B'knhead)	Cary, R. A.	Elmley, Viscount
Amery, Rt. Hon. L. C. M. S.	Cayzer, Sir H. R. (Portsmouth, S.)	Emrys-Evans, P. V.
Anderson, Rt. Hn. Sir J. (Sc'h Univ's)	Channon, H.	Entwistle, Sir C. F.
Anstruther-Gray, W. J.	Clarke, Colonel R. S. (E. Grinstead)	Erskine-Hill, A. G.
Apsley, Lord	Cobb, Captain E. C. (Preston)	Everard, W. L.
Astor, Viscountess (Plymouth, Sutton)	Collox, Major W. P.	Fildes, Sir H
Astor, Hon. W. W. (Fulham, E.)	Colman, N. C. D.	Fremantle, Sir F. E.
Balfour, G. (Hampstead)	Colville, Lt.-Col. Rt. Hon. D. J.	Fyfe, D. P. M.
Balfour, Capt. H. H. (Isle of Thanet)	Conant, Captain R. J. E.	Gledhill, G.
Barolay-Harvey, Sir C. M.	Cook, Sir T. R. A. M. (Norfolk, N.)	Gluckstein, L. H.
Beamish, Rear-Admiral T P. H.	Cooke, J. D. (Hammersmith, S.)	Goldie, N. B.
Beaumont, Hon. R. E. B. (Portsm'h)	Courtauld, Major J. S.	Gower, Sir R. V.
Beechman, N. A.	Cox, H. B. Trevor	Graham, Captain A. C. (Wirral)
Bernays, R. H.	Critchley, A.	Grant-Ferris, R.
Birchall, Sir J. D.	Croft, Brig.-Gen. Sir H. Page	Gretton, Col. Rt. Hon. J.
Bossom, A. C.	Crookshank, Capt. H. F. C.	Gridley, Sir A. B.
Boulton, W. W.	Croom-Johnson, R. P.	Grimston, R. V.
Bower, Comdr. R. T.	Cross, R. H.	Gritten, W. G. Howard
Boyce, H. Leslie	Crossley, A. C.	Guest, Lieut.-Colonel H. (Drake)
Broadbridge, Sir G. T.	Cruddas, Col. B.	Guest, Maj.Hon.O. (C'mb'rw'll, N.W.)
Brooklebank, Sir Edmund	Culverwell, C. T.	Guinness, T. L. E. B.
Brawn, Col. D. C. (Hexham)	Davidson, Viscountess	Hacking, Rt. Hon. D. H.
Brown, Brig.-Gen. H. C. (Newbury)	Denman, Hon. R. D.	Hambro, A. V.
Browne, A. C. (Belfast, W.)	Dugdale, Captain T. L.	Hannah, I. C.
Bullock, Capt M.	Duggan, H. J.	Hannon, Sir P. J. H.
Butcher, H. W.	Duncan, J. A. L.	Harbord, A.
Haslam, Henry (Horncastle)	Mellor, Sir J. S. P. (Tamworth)	Shaw, Major P. S. (Wavertree)
Haslam, Sir J. (Bolton)	Mills, Major J. D. (New Forest)	Shaw, Captain W. T. (Forfar)
Heilgers, Captain F. F. A.	Mitchell, H. (Brentford and Chiswick)	Shepperson, Sir E. W.
Hely-Hutchinson, M. R.	Moore, Lieut.-Col. Sir T. C. R.	Shute, Colonel Sir J. J.
Heneage, Lieut.-Colonel A. P.	Moreing, A. C.	Simmonds, O. E.
Hepburn, P. G. T. Buchan-	Morgan, R. H.	Simon, Rt. Hon. Sir J. A.
Herbert, Major J. A. (Monmouth)	Morrison. Rt. Hon. W. S. (Cirencester)	Sinclair, Col. T. (Queen's U. B'lf'st)
Herbert, Capt. Sir S. (Abbey)	Muirhead, Lt.-Col. A. J.	Smith, L. W. (Hallam)
Higgs, W. F.	Munro, P.	Somerset, T.
Holmes, J S.	Nall, Sir J.	Somervell. Sir D. B. (Crewe)
Hopkinson, A.	Neven-Spence, Major B. H. H.	Spens. W. P.
Horsbrugh, Florence	Nicholson, G. (Farnham)	Storey, S.
Hudson, Capt. A. U. M. (Hack., N.)	O'Connor, Sir Terence J	Strauss, E. A. (Southwark, N.)
Hume, Sir G. H.	O'Neill, Rt. Hon. Sir Hugh	Strauss, H. G. (Norwich)
Hutchinson, G. C.	Ormsby-Gore, Rt. Hon. W. G A.	Stuart, Hon. J. (Moray and Nairn)
Inskip, Rt. Hon. Sir T. W. H.	Palmer, G. E. H.	Sueter, Rear-Admiral Sir M. F.
James, Wing-Cammander A. W. H.	Patrick, C. M.	Tasker, Sir R. I.
Keeling, E. H.	Peake, O.	Tate, Mavis C.
Kerr, H. W. (Oldham)	Peal, C. U.	Taylor, C. S. (Eastbourne)
Keyes, Admiral of the Fleet Sir R.	Perkins, W. R. D.	Thomas, J. P. L.
Knox, Major-General Sir A. W. F.	Plugge, Capt, L. F.	Titchfield, Marquess of
Lamb, Sir J. Q.	Ponsonby, Col. C. E.	Tryon, Major Rt. Hon. G. C.
Latham, Sir P.	Procter, Major H. A.	Tufnell, Lieut.-Commander R. L.
Leech, Sir J. W.	Radford, E. A.	Turton, R. H.
Leighton, Major B. E. P.	Ramsay, Captain A. H. M.	Wakefield, W. W.
Lennox-Boyd, A. T. L.	Ramsbotham, H.	Walker-Smith, Sir J.
Levy, T.	Rankin, Sir R.	Wallace, Capt. Rt. Hon. Euan
Lewis, O.	Rathbone, J. R. (Bodmin)	Ward, Lieut.-Col. Sir A. L. (Hull)
Lindsay, K. M	Rayner, Major R. H.	Ward, Irene M. B. (Wallsend)
Llewellin, Colonel J. J.	Reed, A. C. (Exeter)	Warrender, Sir V.
Lloyd, G. W.	Reid, W. Allan (Derby)	Waterhouse, Captain C.
Locker-Lampion, Comdr. O. S.	Remer, J. R.	Watt, Major G. S. Harvie
Loftus, P. C.	Rickards, G. W. (Skipton)	Wayland, Sir W. A.
Lyons, A. M.	Ropner, Colonel L.	Wells, S. R.
Mabane, W. (Huddersfield)	Ross, Major Sir R. D. (Londonderry)	Whiteley, Major J. P. (Buckingham)
M'Connell, Sir J.	Ross Taylor, W. (Woodbridge)	Wickham, Lt.-Col. E. T. R.
McCorquodale, M. S.	Rowlands, G.	Williams, H. G. (Croydon, S.)
Macdonald, Capt. P. (Isle of Wight)	Royds, Admiral Sir P. M. R.	Willoughby de Eresby, Lord
McEwen, Capt. J. H. F	Russell, Sir Alexander	Windsor-Clive, Lieut.-Colonel G.
McKie, J. H.	Russell, R. J. (Eddisbury)	Winterton, Rt. Hon. Earl
Maitland, A.	Salmon, Sir I.	Wise, A. R.
Makins, Brig.-Gen. E.	Salt, E. W.	Womersley, Sir W. J.
Manningham-Buller, Sir M.	Samuel, M. R. A.	Wood, Hon. C. I. C.
Margesson, Capt. Rt. Hon. H. D. R.	Sanderson, Sir F. B.	Wragg, H.
Maxwell, Hon. S. A.	Scott, Lord William	Wright, Wing-Commander J. A. C.
Mayhew, Lt.-Col. J.	Selley, H. R.
Meller, Sir R. J. (Mitcham)	Shakespeare, G. H	TELLERS FOR THE AYES.—
		Captain Hope and Mr. Furness.
NOES.
Acland, R. T. D. (Barnstaple)	Garro Jones, G. M.	Lunn, W.
Adams, D. (Consett)	Green, W. H. (Deptford)	Macdonald, G. (Ince)
Alexander, Rt. Hon. A. V. (H'lsbr.)	Greenwood, Rt. Hon. A.	McEntee, V. La T.
Ammon, C. G.	Grenfell, D. R.	McGhee, H. G.
Attlee, Rt. Hon. C. R.	Griffith, F. Kingsley (M'ddl'sbro, W.)	McGovern, J.
Banfield, J. W.	Griffiths, G. A. (Hemswerth)	MacLaren, A
Barnes, A. J.	Griffiths, J. (Llanelly)	Marklew, E.
Batey, J.	Groves, T. E.	Marshall, F.
Bellenger, F. J.	Guest, Dr. L. H. (Islington, N.)	Maxton, J.
Benson, G.	Hall, G. H. (Aberdare)	Messer, F.
Brawn, C. (Mansfield)	Hall, J. H. (Whitechapel)	Milner, Major J.
Buchanan, G.	Hardie, Agnes	Montague, F.
Charleton, H. C.	Harris, Sir P. A.	Morrison, Rt. Hon. H. (Hackney, S.)
Chater, D.	Harvey, T. E. (Eng. Univ'e.)	Morrison, R. C. (Tottenham, N.)
Cluse, W. S.	Hayday, A.	Muff, G.
Cocks, F. S.	Henderson, J. (Ardwick)	Nathan, Colonel H. L.
Cove, W. G.	Hills, A. (Pontefract)	Naylor, T. E.
Cripps, Hon. Sir Stafford	Holdsworth, H.	Oliver, G. H.
Daggar, G.	Hollins, A.	Owen, Major G.
Dalton, H.	Hopkin, D.	Parker, J.
Davidson, J. J. (Maryhill)	Jenkins, Sir W. (Neath)	Parkinson, J. A.
Davies, R. J. (Wasthoughton)	John, W.	Pearson, A.
Davies, S. O. (Merthyr)	Jones, A. C. (Shipley)	Pethick-Lawrence, Rt. Hon. F. W.
Day, H.	Jones, Sir H. Haydn (Merioneth)	Price, M. P.
Debbie, W.	Kelly, W. T.	Pritt, D. N.
Dunn, E. (Rother Valley)	Kennedy, Rt. Hon. T.	Quibell, D. J. K.
Ede, J. C.	Kirby, B. V.	Richards, R. (Wrexham)
Edwards, A. (Middlesbrough E.)	Lantbury, Rt. Hon. G.	Riley, B.
Edwards, Sir C. (Bedwellty)	Lathan, G.	Ritson, J.
Evans, D. O. (Cardigan)	Lawson, J. J.	Roberts, W. (Cumberland, N.)
Foot, D. M.	Leach, W.	Robinson, W. A. (St. Helens)
Frankel, D.	Lee, F.	Rothschild, J. A. de
Gallacher, W.	Leslie, J. R.	Salter, Dr. A. (Bermondsey)
Gardner, B. W	Logan, D. G.	Seely, Sir H. M.

Sexton, T. M.	Stephen, C.	White, H. Graham
Shinwell, E.	Stewart, W. J. (H'gh'n-le-Sp'ng)	Whiteley, W. (Blaydon)
Silkin, L.	Stokes, R. R.	Wilkinson, Ellon
Silverman, S. S.	Strauss, G. R. (Lambeth, N.)	Williams, T. (Don Valley)
Simpson, F. D.	Summerskill, Edith	Windsor, W. (Hull, C.)
Sinclair, Rt. Hon. Sir A. (C'thn's)	Taylor, R. J. (Morpeth)	Woods, G. S. (Finsbury)
Smith, Ben (Rotherhithe)	Thurtle, E.	Young, Sir R. (Newton)
Smith, E. (Stoke)	Tinker, J. J.
Smith, T. (Normanton)	Viant, S. P.	TELLERS FOR THE NOES.—
Sorensen, R. W.	Walkden, A. G.	Mr. Adamson and Mr. Anderson.

Question put, "That this House doth agree with the Committee in the said Resolution."

The House divided: Ayes, 227; Noes, 129.

Division No. 194.]	AYES.	[11.18 p.m.
Acland-Troyte, Lt.-Col. G. J.	Erskine-Hill, A. G.	Manningham-Buller, Sir M.
Adams, S. V. T. (Leeds, W.)	Everard, W. L.	Margesson, Capt. Rt. Hon. H. D. R.
Agnew, Lieut.-Comdr. P. G.	Fremantle, Sir F. E.	Maxwell, Hon. S. A.
Albery, Sir Irving	Furness, S. N.	Mayhew, Lt.-Col. J.
Allen, Col. J. Sandeman (B'knhead)	Fyfe, D. P. M.	Meller, Sir R. J. (Mitcham)
Amery, Rt. Hon. L. C. M. S.	Gledhiil, G.	Mellor, Sir J. S. P. (Tamworth)
Anderson, Rt. Hn. Sir J. (Sc'h Univ's)	Gluckstein, L. H.	Mills, Major J. D. (New Forest)
Anstruther-Gray, W. J.	Goldie, N. B.	Mitchell, H. (Brentford and Chiswick)
Astor, Viscountess (Plymouth, Sutton)	Gower, Sir R. V.	Moore, Lieut.-Col. Sir T. C. R.
Astor, Hon. W. W. (Fulham, E.)	Graham, Captain A. C. (Wirral)	Moreing, A. C.
Balfour, G. (Hampstead)	Grant-Ferris, R.	Morgan, R. H.
Balfour, Capt. H. H. (Isle of Thanet)	Grettan, Col. Rt. Hon. J.	Morrison, Rt. Hon. W. S. (Cirencester)
Barclay-Harvey, Sir C. M.	Gridley, Sir A. B.	Muirhead, Lt.-Col. A. J.
Beamish, Rear-Admiral T. P. H.	Grimston, R. V.	Nail, Sir J.
Beaumont, Hon. R. E. B. (Portsm'h)	Gritten, W. G. Howard	Neven-Spence, Major B. H. H.
Beechman, N. A.	Guest, Lieut.-Colonel H. (Drake)	Nicholson, G. (Farnham)
Bernays, R. H.	Guest, Maj, Hon. O. (C'mb'rw'll, N.W.)	O'Connor, Sir Terence J.
Birchall, Sir J. D.	Guinness, T. L. E. B.	O'Neill, Rt. Hon. Sir Hugh
Bossom, A. C.	Hacking, Rt. Hon. D. H.	Palmer, G. E. H.
Boulton, W. W.	Hambro, A. V.	Patrick, C. M.
Bower, Comdr. R. T.	Hannan, I. C.	Peake, O.
Boyce, H. Leslie	Hannon, Sir P. J. H.	Peat, C. U.
Broadbridge, Sir G. T.	Harbord, A.	Perkins, W. R. D.
Brocklebank, Sir Edmund	Haslam, Henry (Horncastle)	Plugge, Capt. L. F.
Brown, Col. D. C. (Hexham)	Haslam, Sir J. (Bolton)	Ponsonby, Col. C. E.
Brown, Brig.-Gen. H. C. (Newbury)	Heilgers, Captain F. F. A.	Procter, Major H. A.
Browne, A. C. (Belfast, W.)	Hely-Hutchinson, M. R.	Radford, E. A.
Bullock, Capt. M.	Heneage, Lieut.-Colonel A. P.	Raikes, H. V. A. M.
Butcher, H. W.	Hepburn, P. G. T. Buchan-	Ramsay, Captain A. H. M.
Butler, R. A.	Herbert, Major J. A. (Monmouth)	Ramsbotham, H.
Campbell, Sir E. T.	Herbert, Capt. Sir S. (Abbey)	Rankin, Sir R.
C[...]tland, J. R. H.	Higgs, W. F.	Rathbone, J. R. (Bodmin)
Carver, Major W. H.	Holmes, J. S.	Rayner, Major R. H.
Cary, R. A.	Hopkinson, A.	Reed, A. C. (Exeter)
Cayzer, Sir H. R. (Portsmouth, S.)	Horsbrugh, Florence	Reid, W. Allan (Derby)
Channon, H.	Hudson, Capt. A. U. M. (Hack., N.)	Renter, J. R.
Clarke, Colonel R. S. (E. Grinstoad)	Hume, Sir G. H.	Rickards, G. W. (Skipton)
Cobb, Captain E. C. (Preston)	Hutchinson, G. C.	Ropner, Colonel L.
Colfox, Major W. P.	Inskip, Rt. Hon. Sir T. W. H.	Ross, Major Sir R. D. (Londonderry)
Colman, N. C. D.	James, Wing-Commander A. W. H.	Ross Taylor, W. (Woodbridge)
Colville, Lt.-Col. Rt. Hon. D. J.	Keeling, E. H.	Rowlands, G.
Conant, Captain R. J. E.	Kerr, H. W. (Oldham)	Royds, Admiral Sir P. M. R.
Cooke, J. D. (Hammersmith, S.)	Keyes, Admiral of the Reel Sir R.	Russell, Sir Alexander
Courtauld, Major J. S.	Knox, Major-General Sir A. W. F.	Russell, R. J. (Eddisbury)
Cox, H. B. Trevor	Lamb, Sir J. Q.	Salmon, Sir I.
Critchley, A.	Latham, Sir P.	Salt, E. W.
Croft, Brig.-Gen. Sir H. Page	Leech, Sir J. W.	Samuel, M. R. A.
Crookshank, Capt. H. F. C.	Leighton, Major B. E. P.	Sanderson, Sir F. B.
Croom-Johnson, R. P.	Lennox-Boyd, A. T. L.	Scott, Lord William
Cross, R. H.	Levy, T.	Selley, H. R.
Crossley, A. C.	Lewis, O.	Shakespeare, G H
Cruddas, Col. B.	Liddall, W. S.	Shaw, Major P. S. (Wavertree)
Culverwell, C. T.	Lindsay, K. M.	Shaw, Captain W. T. (Forfar)
Davidson, Viscountess	Llewellin, Colonel J. J.	Shepperson, Sir E. W-
Denman, Hon. R. D.	Lloyd, G. W.	Shute, Colonel Sir J. J.
Dugdale, Captain T. L	Locker-Lampson, Comdr. 0. S.	Simon, Rt. Hon. Sir J, A.
Duggan, H. J.	Loftus, P. C.	Sinclair, Col. T. (Queen's U. B'if'st)
Duncan, J. A. L.	Lyons, A. M.	Smith, L. W. (Hatlam)
Eastwood, J. F.	Mabane, W. (Huddersfiald)	Somerset, T.
Edmondson, Major Sir J.	M'Connell, Sir J.	Somervell, Sir D. B. (Crewe)
Ellis, Sir G.	McCorquodale, M. S.	Spens. W. P.
Elliston, Capt. G. S.	Macdonald. Cant. P. (Isle of Wight)	Storey, S.
Elmley, Viscount	McEwen, Capt. J. H. F.	Strauss, E. A. (Southwark, N.)
Emery, J. F.	McKie, J. H.	Strauss, H. G. (Norwich)
Emrys-Evans, P. V.	Maitland, A.	Stuart, Hon. J. (Moray and Nairn)
Entwistle, Sir C. F.	Makins, Brig.-Gen. E.	Sueter, Rear-Admiral Sir M. F
Tasker, Sir R. I.	Ward, Lieut.-Col. Sir A. L. (Hull)	Windsor-Clive, Lieut.-Colonel G.
Tate, Mavis C.	Ward, Irene M. B. (Wallsend)	Winterton, Rt. Hon. Earl
Taylor, C. S. (Eastbourne)	Warrender, Sir V.	Wise, A. R.
Thomas, J. P. L.	Waterhouse, Captain C.	Womersley, Sir W. J.
Titchfield, Marquess of	Watt, Major G. S. Harvie	Wood, Hon. C. I. C.
Tryon, Major Rt. Hon. G. C.	Wayland, Sir W. A	Wragg, H.
Tufnell, Lieut.-Commander R, L.	Wells, S. R.	Wright, Wing-Commander J. A. C.
Turton, R. H.	Whiteley, Major J. P. (Buckingham)
Wakefield, W. W.	Wickham, Lt.-Col. E. T. R.	TELLERS FOR THE AYES.—
Walker-Smith, Sir J.	Williams, H. G. (Croydon, S.)	Captain Hope and Mr. Munro.
Wallace, Capt. Rt. Hon. Euan	Willoughby de Eresby, Lord
NOES.
Acland, R. T. D. (Barnstaple)	Hardie, Agnes	Parkinson, J. A.
Adams, D. (Consett)	Harris, Sir P. A.	Pearson, A.
Alexander, Rt. Hon. A. V. (H'lsbr.)	Harvey, T. E. (Eng. Univ's.)	Pethisk-Lawrence, Rt. Hon. F. W.
Ammon, C. G.	Hayday, A.	Price, M. P.
Attlee, Rt. Hon. C. R.	Henderson, J. (Ardwick)	Pritt, D. N.
Banfield, J. W.	Hills, A. (Pontefract)	Quibell, D. J. K.
Barnes, A. J.	Holdsworth, H.	Richards, R. (Wrexham)
Batey, J.	Hollins, A.	Riley, B.
Bellenger, F. J.	Hopkin, O.	Ritson, J.
Benson, G.	Jenkins, Sir W. (Neath)	Roberts, W. (Cumberland, N.)
Brown, C. (Mansfield)	John, W.	Robinson, W. A. (St. Helens)
Buchanan, G.	Jones, A. C. (Shipley)	Rothschild, J. A. de
Charleton, H. C.	Jones, Sir H. Haydn (Merioneth)	Salter, Dr. A. (Bermondsay)
Chater, D.	Kelly, W. T.	Seely, Sir H. M.
Cluse, W. S.	Kennedy, Rt. Hon. T.	Sexton, T. M.
Cocks, F. S.	Kirby, B. V.	Shinwell, E.
Cripps, Hon. Sir Stafford	Lansbury, Rt. Hon. G	Silkin, L.
Daggar, G.	Lathan, G.	Silverman, S. S.
Dalton, H.	Lawson, J. J.	Simpson, F. B.
Davidson, J. J. (Maryhill)	Leach, W.	Sinclair, Rt. Hon. Sir A. (C'thn's)
Davies, R. J. (Westhoughton)	Lee, F.	Smith, Ben (Rotherhithe)
Davies, S. O. (Merthyr)	Leslie, J. R.	Smith, E. (Stoke)
Day, H.	Lipson, D. L.	Smith, T. (Normanton)
Dobbie, W.	Logan, D. G.	Sorensen, R. W.
Dunn, E. (Rother Valley)	Lunn, W.	Stephen, C.
Ede, J. C.	Macdonald, G. (Ince)	Stewart, W. J. (H'ght'n-te-Sp'ng)
Edwards, A. (Middlesbrough E.)	McEntee, V. La T.	Stokes, R. R.
Edwards, Sir C. (Bedwellty)	McGhee, H. G.	Strauss, G. R. (Lambeth, N.)
Evans, D. O. (Cardigan)	McGovern, J.	Summerskill, Edith
Foot, D. M.	MacLaren, A.	Taylor, R. J. (Morpeth)
Frankel, D.	Marklew, E.	Thurtle, E.
Gallacher, W.	Marshall, F.	Tinker, J. J.
Gardner, B. W.	Maxton, J.	Viant, S. P.
Garro Jones, G. M.	Messer, F.	Walkden, A. G.
Green, W. H. (Deptford)	Milner, Major J.	White, H. Graham
Greenwood, Rt. Hon. A.	Montague, F.	Whiteley, W. (Blaydon)
Grenfell, D. R.	Morrison, Rt. Hon. H. (Hackney, S.)	Wilkinson, Ellen
Griffith, F. Kingsley (M'ddl'sbro, W.)	Morrison, R. C. (Tottenham, N.)	Williams, T. (Don Valley)
Griffiths, G. A. (Hemsworth)	Muff, G.	Windsor, W. (Hull, C.)
Griffiths, J. (Llanelly)	Nathan, Colonel H. L.	Woods, G. S. (Finsbury)
Groves, T. E.	Naylor, T. E.	Young, Sir R. (Newton)
Guest, Dr. L. H. (Islington, N.)	Oliver, G. H.
Hall, G. H. (Aberdare)	Owen, Major G.	TELLERS FOR THE NOES.—
Hall, J. H. (Whitechapel)	Parker, J	Mr. Adamson and Mr. Anderson.

Fourth Resolution agreed to.

Ordered, "That the Consideration of the remaining Resolutions be now adjourned."—[Captain Margesson.]

Fifth and subsequent Resolutions to be considered To-morrow.