Commons Sitting of 26 May 1938

Preamble
The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.
Newcastle and Gateshead Waterworks Bill,
Ossett Corporation Bill,
Southern Railway Bill,
Read the Third time, and passed.
West Surrey Water Bill [Lords],
Read the Third time, and passed, with Amendments.
Royal Sheffield Infirmary and Hospital Bill [Lords],
As amended, considered; to be read the Third time.
Blackburn Corporation Bill [Lords] (by Order),
Read a Second time, and committed.
Gateshead and District Tramways and Trolley Vehicles Bill [Lords] (by Order),
Second Reading deferred till Monday next.
East Lothian Water Order Confirmation Bill,
Read the Third time, and passed.

ORAL ANSWERS TO QUESTIONS.

  INTERNATIONAL LABOUR CONFERENCE.
  Mr. Leslieasked the Minister of Labour whether he can give any information on the forthcoming International Labour Conference; and whether His Majesty's Government have formulated a policy on the questions on the agenda concerning hours of labour?
  The Minister of Labour (Mr. Ernest Brown): The 24th Session of the Inter-
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  national Labour Conference will open at Geneva on 2nd June. There are six items on the agenda, all of which are for first discussion. No conventions accordingly will be adopted except, possibly, on one item, concerning the collection of statistics of hours and wages, in regard to which it will be open to the Conference to proceed by single discussion and adopt a convention this year. Two Government delegates with advisers will attend the Conference, and I am appointing an employers' delegate and a workers' delegate, each of whom will be accompanied by 10 advisers. The answer to the last part of the question is in the affirmative. I may add, as I have already stated, that I hope that my hon. Friend the Parliamentary Secretary and I will attend.
  Mr. Leslie: Is the Minister aware of the number of countries that have already adopted shorter hours of labour, and does he not consider that a reduction of working hours might absorb some portion of the 1,250,000 unemployed workers?
  Mr. Brown: I am also aware that some countries which have adopted it have had to go back on it.
  Mr. J. J. Davidson: Does the policy which the right hon. Gentleman has formulated with regard to hours of labour involve support of the principle of a 40-hour week?
  Mr. Brown: That will be made clear at Geneva by the delegates concerned.
  Mr. Mander: Does my right hon. Friend and the Under-Secretary hope to remain for some considerable period during the Conference.
  Mr. Brown: When I come back the Parliamentary Secretary will go, and we hope to be there several days, as last year.
  Mr. Leach: Does the right hon. Gentleman promise to amend his very bad record there?
  Mr. Brown: The record is very good.

  UNEMPLOYMENT.

    ASSISTANCE.
    Mr. Ellis Smithasked the Minister of Labour whether he has considered the

    1357
    resolutions passed by the Distressed Areas Conference sub-committee; and what action does he propose to take?
    Mr. E. Brown: I would refer the hon. Member to the reply I gave the hon. Member for Everton (Mr. Kirby) on 28th April last, of which I am sending him a copy.
    Mr. Smith: I understand that the Minister met a deputation; has he given further consideration to the issues raised, and will he, in view of them, consider recommending amending legislation to deal with the grievances of the local authorities?
    Mr. Brown: If the hon. Gentleman will look at the answer, which is a long one, and the supplementary questions to it, he will see that I have dealt with that point and given the reasons.
    Mr. Buchananasked the Minister of Labour (1) whether he is aware that applicants for allowances under the Unemployment Assistance Board regulations are subject to investigation not only on their own and their family income but also as to their private lives, and the views held by them on political and other subjects, which are reported on by the investigator; whether he will state the full nature of the inquiries which are made; and take steps to see that this form is submitted to the applicant for his comments;
    (2) whether he will state the instructions which are issued to investigators under the Unemployment Assistance Board for their guidance when inquiry is made as to the means of applicants?
    Mr. Gallacherasked the Minister of Labour whether he is aware that the report of a means test investigating officer on the case of John Gellatty, of 182, Hospital Street, Glasgow, contains remarks about his alleged political opinions, and the fact that in his room was to be found a copy of the Unemployment Insurance Act, with the remark that he seemed to be well up in matters relative to that Act; why such information is considered as having any bearing on the man's claims; whether inquiries of this nature are sanctioned by the Ministry; and, if not, whether he will issue instructions that they be discontinued?
    Mr. Edeasked the Minister of Labour (1) whether he will make available for Members of the House blank copies of the form on which recently an applicant to the Unemployment Assistance Board in South Shields was described as a man holding extremist views and not a type to be encouraged;
    (2) whether he has given instructions that no regard is to be paid to the political and religious views of applicants for unemployment benefit or for allowances from the Unemployment Assistance Board; and whether he will make it clear that inquiries of this kind are not to be made, and that appropriate disciplinary action will be taken against officials who make such inquiries or record such information?
    Mr. Brown: The Board's officers are instructed to investigate and report upon such of the circumstances of applicants for allowances and their households as are relevant to the Act and Regulations relating to the assessment of needs. In view of certain recent cases in which irrelevant matters were introduced into these reports, the Board has issued express instructions in the following terms:
    " Reports by investigating officers must be strictly confined to the recording of matters which are relevant to the determination of allowances or to other decisions, e.g., in regard to eligibility for training which it is competent for officers of the Board to take. The religious or political views of applicants are wholly irrelevant to such decisions, and the greatest care must be taken by officers of all ranks to exclude any comments on such matters from their reports on the circumstances of the applicants and their households."
    As regards the last part of Question No. 6, the particulars recorded with regard to the membership and resources of the household are shown to the applicant and ordinarily signed by him. Any comments which the investigating officer may record in regard to the general circumstances of the case, as, for example, those relating to special needs or discretionary treatment, are not shown to the applicant, nor do I think it would be to his interest, or in the general interests of the administration of the scheme, that there should be a rule requiring them to be so shown. I should add that all information put before the tribunal in case of appeal is given also to the applicant or his representative. I am placing in

    1359
    the Library copies of forms B 6 and B 11 for the convenience of Members.
    Mr. Buchanan: Should not a document that has a bearing on a man's case be shown to him in order that he may have access to the information that is before the board?
    Mr. Brown: If need arises that is done.
    Mr. Gallacher: Can the Minister explain how in this investigation report we get information that the man expatiates on the cost of living and that he is a seditious type? Is the Minister aware that sedition is a crime, and is he prepared to protect the unemployed from what can only be considered a criminal libel by the investigation officer?
    Mr. Brown: The board and I are much obliged to the hon. Member for South Shields (Mr. Ede), who first called attention to a case of this kind, because it has enabled the board to issue this express instruction.
    Mr. Ede: With regard to the last part of Question 27, is it made clear to these officers that it is a serious breach of discipline to enter any of these comments on the forms supplied to them, and will steps be taken to enforce disciplinary action if there should be further breaches?
    Mr. Brown: There is no doubt about that. That is why the board have issued an express instruction to every one of their staff.
    Mr. Gallacher: Is the Minister aware that this photograph of the investigation reveals methods of investigation that are more in keeping with the methods of the Criminal Investigation Department than of the Unemployment Assistance Board, and will he take steps to see that the man responsible for this investigation is dealt with?
    Mr. Brown: I have already made the position perfectly plain.
    Mr. Stephen: Arising out of Question 12, will the Ministry refuse to accept responsibility in the case of an action by Mr. Gellatty against the board for libel?
    Mr. Brown: I should want notice of a question of that kind.
    Mr. Buchanan: I am not entirely satisfied with the answers to Questions 5 and 6, and I give notice that, as soon as possible, I will raise the subjects on the Adjournment.
    Sir William Jenkinsasked the Minister of Labour what number of persons in the county of Glamorgan received winter allowance from the Unemployment Assistance Board; and what number have received special allowance for the year 1937 and the latest date in this year?
    Mr. Brown: Information relating specifically to the county of Glamorgan is not available, but in the board's administrative districts of Cardiff and Swansea, which include almost the whole of the county area as well as the three county boroughs, there were on the 17th January last 25,436 applicants in receipt of winter additions. In reply to the second part of the question, perhaps the hon. Member will be so good as to inform me as to the type of allowance referred to as special allowance and the area in respect of which he desires information.
    Captain Arthur Evans: Will my right hon. Friend give separate figures for Cardiff?
    Mr. Brown: I am not sure that I can do so, but I will make inquiries to see.
    Mr. Thorneasked the Minister of Labour how many able-bodied unemployed persons were transferred to the care of the Unemployment Assistance Board on 1st April, 1937, in West Ham, Leeds, Sheffield, Liverpool, Manchester, Birmingham and Glasgow; how many were rejected on the grounds of their being unfit for work; and how many of those unfit for work have found employment between April, 1937, and 1938?
    Mr. Brown: As the reply contains a table of figures, I will, if I may, circulate it in the OFFICIAL REPORT.
    Mr. Kirkwood: With reference to Glasgow, which is one of the towns mentioned, and the last part of the question, can the Minister give us any idea of those unfit for work who have found employment in 1937 and 1938?
    Mr. Brown: If the hon. Member will look at the answer he will find two columns of figures, the first recording the number taken over from public assistance,

    1361
    which in the case of Glasgow was 18,931, and the other those who were not, numbering 529. I cannot say how many of the 529 found employment.
    Following is the reply:
    The table below shows in column (1) the localities in respect of which information is desired; in column (2) the administrative areas of the Board to which the figures in the table are related (these areas are not co-terminous with local authority areas of the same name); in

    Column (1)

    Column (2)

    Column (3)

    (a)

    (b)

    West Ham

    …

    …

    Canning Town

    …

    …

    705

    55

    Stepney

    Stratford

    Leeds

    …

    …

    Leeds (1), (2) and (3)

    …

    …

    1,779

    141

    Sheffield

    …

    …

    Sheffield (1) and (2)

    …

    …

    2,588

    178

    Attercliffe

    Walkley

    Liverpool

    …

    …

    Liverpool, Central (1), (2) and (3)

    …

    …

    11,317

    450

    Liverpool, South East (1) and (2)

    Riverside.

    Walton (1) and (2)

    Old Swan.

    Garston.

    Manchester

    …

    …

    Manchester Central

    …

    …

    2,934

    172

    Ardwick

    Newton Heath.

    Openshaw.

    Rusholme.

    Trafford Bar.

    Birmingham

    …

    …

    Birmingham (1) and (2)

    …

    …

    209

    27

    Glasgow

    …

    …

    Glasgow Central

    …

    …

    18,931

    529

    Glasgow South Side (1) and (2).

    Bridgeton (1) (2) and (3).

    Finnieston.

    Goven.

    Kinning Park.

    Partick

    Parkhead (1) and (2).

    Maryhill.

    Springburn.

    Information as to how many of the persons recorded in Column (3) (b) found employment between April, 1937, and April, 1938, is not available

    Mr. Davidsonasked the Minister of Labour whether he will recommend a special summer allowance to the unemployed during the summer months?
    Mr, Brown: No, Sir.
    Mr. Davidson: Will the Minister give consideration to the fact that during the summer the foodstuffs in working-class houses are apt to waste to a greater extent than in the winter and that that creates more hardship among the unemployed?
    column (3) the numbers of persons (exclusive of their dependants) in receipt of public assistance prior to 1st April, 1937, who on that day were (a) taken over from the public assistance authorities and (b) held to be outside the scope of the Unemployment Assistance Act on the ground that they were not capable of or were not available for work. It is not possible to give separate figures for these two grounds, which may of course be concurrent.
    Mr. Brown: I am more concerned with the fact that certain local authorities, about 19 in number, made an addition to the assistance given to the poor in the winter.
    Mr. Bateyasked the Minister of Labour the number of persons in Great Britain who were receiving payments in Great Britain in March, 1935, from the Unemployment Assistance Board, and the number on the latest available date; and the numbers for the same dates in the administrative district of Durham?
    Mr. Brown: The average weekly number of payments of unemployment assistance allowances in Great Britain in March, 1935, was 729,812; the number of payments in the week ended 8th April, 1938 (exclusive of payments in supplementation of insurance benefit), was 556,566. The corresponding figures for the Unemployment Assistance Board's administrative district of Durham were 40,594 and 24,096, respectively. Comparison of the figures for these dates is affected by the extension of the scope of the Unemployment Assistance Scheme as from 1st April, 1937, the Second Appointed Day.
    Mr. Graham Whiteasked the Minister of Labour whether the reductions in allowances by the Unemployment Assistance Board in respect of winter allowances will be limited to those applicants who have received such allowances?
    Mr. Brown: Yes, Sir.
    Mr. Whiteasked the Minister of Labour whether any estimate has been made of the saving to the Exchequer from the application of the needs test, having regard to the rise in the cost of administration of the Board?
    Mr. Brown: No, Sir, I have nothing to add on this question to the reply to the hon. Member for Stoke (Mr. E. Smith) on 19th May, 1938, of which I am sending the hon. Member a copy.
    Mr. White: Is the Minister in a position to state that the continuation of these means test inquiries does not cost more than they save?
    Mr. Brown: They undoubtedly save a great deal more than the extra cost—a great deal more.
    Mr. Thorne: Does the Minister think that the abolition of the means test will be brought about during the lifetime of this Parliament?
    Mr. Brown: No, I do not think so, nor under any Labour Government that comes in.

    TRADING ESTATES.
    Mr. W. Joseph Stewartasked the Minister of Labour what progress has been made on the Team Valley Trading Estate and the Pallion and South-West Durham Trading Estates; the number of factories
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    now completed; the number under construction; and the number of persons employed on each estate up to the most recent date?
    Mr. E. Brown: On 30th April, 1938, 44 factories had been completed on the Team Valley Trading Estate. Of these 42 were occupied by tenants, 35 of whom had begun production. On the same date 35 factories were in course of construction and agreements had been made with 18 further tenants for whom the building of factories had not begun. It is understood that approximately 1,000 persons were employed in the factories, and 1,450 persons were employed on the development work of the trading estate. The erection of two factories had just been begun and 13 workpeople were employed on the site acquired at St. Helen's, Auckland. Two factories were in course of erection, and 48 workpeople were employed at Pallion.
    Mr. Batey: Can the right hon. Gentleman say how many of the 1,000 persons employed on the Team Valley Estate are men over 21?
    Mr. Brown: If the hon. Gentleman will put that question down I will answer it.

    EMPIRE EXHIBITION (JOINERS AND BRICKLAYERS).
    Mr. Robert Gibsonasked the Minister of Labour how many joiners and bricklayers, respectively, were employed at the Empire Exhibition on Friday, l0th May, 1938, or the last convenient date; what were the corresponding numbers on the corresponding date in April, 1938; how many of these have been absorbed into house-building and other industrial enterprises, respectively; how many workmen formerly engaged on the erection and completion of the Empire Exhibition are at present unemployed; and whether he has any statement to make on the subject?
    Mr. E. Brown: According to my information, 73 joiners with 10 apprentices, and three bricklayers with two apprentices, were employed at the exhibition on 23rd May. Particulars of the numbers employed on 23rd April were stated in the answer given to the hon. Member by my right hon. Friend the Secretary of State for Scotland on 26th April. I regret that information is not available as to the number of these men, some of whom will

    1365
    have returned to other parts of the country, who have secured alternative employment or who are now unemployed; as regards the latter, if they register at their Employment Exchanges, they can be informed of any vacancies notified to the exchanges for which they are qualified.
    Mr. Gibson: May we take it that most of the men employed on the erection of the Empire Exhibition have been absorbed?
    Mr. Brown: If the hon. and learned Member will compare the figures, he will see that on the date to which my right hon. Friend referred there were 1,375 joiners, 27 apprentices and 42 bricklayers.
    Mr. Kirkwood: Does the Minister make any provision when a great work like this finishes to see that the men displaced are found employment instead of their having to go in a haphazard way to the Employment Exchange?
    Mr. Brown: There was an exchange at the exhibition and the men took advantage of it.

    BENEFIT
    Mr. Buchananasked the Minister of Labour whether he is aware that recently Mr. Peter Gibson, 18, Camden Street, Glasgow, was notified by express letter from the South Side exchange about 7 p.m. to go to a job the following morning; that he started work and received in payment for part of the day worked 2s. 8d.; that he would have received in benefit the sum of 5s.; and what action he proposes to take to see that the man is paid at least an amount equal to his benefit, and also to see that men in future are not penalised in this way?
    Mr. E. Brown: The facts are as stated in the question. It is the duty of the Employment Exchanges to inform unemployed workers of opportunities of employment. Mr. Gibson accepted this offer under the impression that he would be employed for a full day, and there is no action which I can take.
    Mr. Buchanan: Cannot the right hon. Gentleman see that a man is not penalised for working, and take steps to see that while he is working he at least gets equivalent to what he gets when unemployed?
    Mr. Brown: It depends on the arrangement between the employer and the employed when they meet. We act as agents to bring them in touch and it is for the man to decide whether to accept the offer. I understand that in this case he thought it was a full day, but it was not.
    Mr. Buchanan: Is not the right hon. Gentleman aware that the exchange allowed him to believe it was a full day, and will he take steps to see that a man who goes to a job at short notice is not penalised because of his desire to get employment?
    Mr. Brown: The point is that we offer the job and it is for the man to decide whether to take it or not. Hon. Members opposite would be the first to complain if any interference by the exchanges took place.
    Mr. T. Smith: What would happen if the man refused?
    Mr. Brown: A man is within his rights to refuse and he has his right to appeal. There have been cases where the umpire has often decided in favour of the man.
    Mr. David Grenfellasked the Minister of Labour the number of girls who have been recently denied benefit on account of their refusal to take up work at Reading and how many of them are resident in the Swansea Employment Exchange area; the number of vacancies reported by Messrs. Huntley and Palmer; and whether the Ministry of Labour has any difficulty in providing a sufficient number of girls to fill all bona fide vacancies reported by this firm?
    Mr. Brown: since 1st January, 1938, the claims of 120 women and girls in the Wales Division have been disallowed by the courts of referees on account of refusal to take up employment with Messrs. Huntley and Palmer, Limited, in Reading, and of these 27 women (all over 18 years of age) were resident in the Swansea Employment Exchange area. Figures for other divisions are not at the moment available. In the same period Messrs. Huntley and Palmer notified to the Department a demand for 200 girls and young women between the ages of 16 and 23 years and, as it was not possible fully to meet this demand from local labour, a representative of the firm arranged to visit suitable areas in Wales and the

    1367
    North-West in order to interview suitable applicants for transfer to Reading. Eleven girls (under 18 years of age) from Wales, and 61 women from Wales and the North-West have been placed with Messrs. Huntley and Palmer as a result of these interviews. In spite of the shortage of local labour the Department has so far been able partly by transferring people from other districts to meet the demands for labour made by Messrs. Huntley and Palmer.
    Mr. Tomlinsonasked the Minister of Labour whether he is aware that the court of referees disallowed benefit for two weeks for alleged industrial misconduct in the case of Joseph Speakman, of Farnworth; and, in view of the fact that this misconduct consisted of absenting himself from work in order to apply personally for another job, which would enable him to earn a better wage than the one he was receiving, namely, 28s. per week, and which, as a married man, he found he could not live upon, he will consider amending the regulation defining industrial misconduct?
    Mr. Brown: I have considered the circumstances of this case, but I do not think that any amendment of Section 27 of the Unemployment Insurance Act, 1935, is called for. That Section does not define the term "misconduct," and it is for the statutory authorities to decide whether disqualification has been incurred under this Section and to fix the period, within a maximum of six weeks, for which any such disqualification shall operate.
    Mr. Tomlinson: Is the Minister aware that as long as the present definition of "industrial misconduct" under which the statutory authority works remains, no person in the unfortunate position of this man can escape from an occupation without being penalised for so doing? If that is the case, will be not inquire whether some alteration can be made in the definition?
    Mr. Brown: As hon. Members know, this point has been the subject of discussion in connection with insurance for many years, and the House has always decided not to attempt precisely to define the phrase, and I think, looking at the matter all the way round, that is still the right decision.
    Mr. Tomlinson: May I ask the Minister to look into the matter again, in view of the fact that in Lancashire at the present time this particular case has been multiplied by the thousand? Will he consider whether in the altered circumstances a new definition is not required?
    Mr. Brown: I am, of course, aware of the difficulties in Lancashire, but I am not sure that this particular case will be multiplied by the thousand. However, I am willing to look into the matter again.

    STATISTICS.
    Mr. Davidsonasked the Minister of Labour the total number of registered unemployed in Great Britain for the years ended March, 1930, and 1938, respectively?
    Mr. E. Brown: The average numbers of unemployed persons on the registers of Employment Exchanges in Great Britain in the years ended March, 1930, and March, 1938, were 1,275,441 and 1,523,460 respectively.
    Mr. Davidson: Will the Minister take into consideration the tremendous increase in public relief during the same period, and is he satisfied with the unemployment figures to-day?
    Mr. Brown: That is an entirely different issue.
    Mr. Liddall: Will the right hon. Gentleman give the figures of unemployment in 1931?
    Mr. Brown: The total number of unemployed on 16th March, 1931, was 2,639,640.
    Mr. Davidson: Will the Minister keep in mind that in the eight years since 1930 we have had for seven years a National Government with an overwhelming majority?

    VILLAGES (FACTORY SITES).
    Mr. Leslieasked the Minister of Labour whether consideration is being given to the creation of factories and new industries at Port Clarence and Stillington, villages now derelict, where suitable sites are available and excellent transport facilities by road, rail, and sea?
    Mr. E. Brown: I am not aware of any proposals of the kind referred to by the hon. Member.
    Mr. Leslie: Does the right hon. Gentleman not think that it would be wiser to encourage firms to erect factories in these derelict villages where housing accommodation still exists rather than to send young people elsewhere or ask them to travel to the Team Valley Estate, 20 or 40 miles away?
    Mr. Brown: I would agree with the hon. Member, except that there is only a limited number of new industries, and that some can be attracted by the provision of facilities who would not be attracted in any other way.

    MERTHYR TYDFIL.
    Mr. S. O. Daviesasked the Minister of Labour what was the number of persons unemployed in the borough of Merthyr Tydfil on the last day for which information is available; the number in receipt of unemployment assistance allowances; and the number in receipt of statutory benefit?
    Mr. E. Brown: At 4th April, 1938, there were 8,298 persons aged 14 years and over, registered as unemployed at Employment Exchanges in Merthyr Tydfil. Of the 8,097 persons aged 16 years and over included in this total, 1,402 had claims admitted for insurance benefit, and 6,270 had applications authorised for unemployment allowances (excluding applications for allowances in supplementation of benefit).
    Mr. Daviesasked the Minister of Labour what percentage of the registered unemployed in the borough of Merthyr Tydfil have not been engaged in regular employment for one, two, three, four, five, and over five years?
    Mr. Brown: As the reply includes a table of figures, I will, if I may, circulate a statement in the OFFICIAL REPORT.
    Following is the statement:
    The only statistics available relate to the length of the last spell of registered unemployment of persons, aged 16 to 64 years, applying for insurance benefit or unemployment allowances, irrespective of the nature and duration of their previous employment.
    The following table gives the figures on this basis in respect of persons registered at exchanges in Merthyr Tydfil at 4th April, 1938.
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    Length of period on register.*

    Per cent. of total. applicants.

    Less than 1 year

    49

    1 year but less than 2 years

    10

    2 years but less than 3 years

    9

    3 years but less than 4 years

    5

    4 years but less than 5 years

    4

    5 years or more

    23

    100

    * Among persons who had been on the register for extended periods a proportion, which will increase as the period on the register increases, will have had one or more short spells of employment lasting not more than three days each during such periods.

    Mr. Daviesasked the Minister of Labour the number of unemployed persons signing at the Employment Exchanges of Merthyr Tydfil and Dowlais who received the winter and cost-of-living increases in allowances; and what was the average amount of such increase paid to such persons?
    Mr. Brown: Information relating to Employment Exchange areas is not available but in the Unemployment Assistance Board's administrative areas of Merthyr Tydfil and Dowlais which are served by the Merthyr Tydfil, Treharris and Dowlais Employment Exchanges the number of assessments current on 17th January last, which included winter? additions, were 2,149 and 1,245 respectively. The average addition was slightly over 23. per week in each case.

    JUVENILE ADVISORY COMMITTEES.
    Mr. Dayasked the Minister of Labour the number of advisory committees that are at present operating for juvenile employment in connection with the Employment Exchanges; and at what intervals a report of their work is presented?
    Mr. E. Brown: There are at present 197 juvenile advisory committees established by the Ministry in connection with the juvenile work of Employment Exchanges. A general account of their work is given in the annual reports of the Ministry.
    Mr. Day: Does the advisory committee still serve a useful purpose?
    Mr. Brown: It serves a very splendid purpose.
    Mr. Roland Robinsonasked the Minister of Labour why his Department refused to circulate to all employment committees the resolution of the Blackpool and Fylde District Employment Committee regarding the abolition of the Anomalies Regulations (Seasonal Workers) Order?
    Mr. E. Brown: The resolution in question was in general terms and demanded the reversal of a policy recently approved by Parliament. In these circumstances I felt that no useful purpose would be served by circulating the resolution to other committees.
    Mr. Robinson: Is it not to the general benefit that those who administer these regulations should be allowed to exchange views with other committees; and would the right hon. Gentleman say why, when resolutions from other committees are circulated, inevitably the resolution with regard to seasonal workers is refused circulation?
    Mr. Brown: My hon. Friend must not assume that the same view is taken in other unemployment committees as is taken in Blackpool, on this and other questions, or, that other committees are not equally competent with Blackpool to make up their own minds.
    Mr. Robinson: Why does the right hon. Gentleman not give Blackpool committee the opportunity of finding out what other people think?
    Mr. Brown: They are not seeking to do that at all; they are seeking to tell other people.

    SPECIAL AREAS (NEW INDUSTRIES).
    Mr. Manderasked the Minister of Labour whether he is aware of the fact that facilities granted to the Special Areas for attracting industries are likely to have an adverse effect on other industrial areas, and that already there have been cases of established concerns being drawn away from their home town to a Special Area, notably at Wolverhampton; and whether he will take steps to discourage this from occurring?
    Mr. E. Brown: In carrying out the duty placed upon him by Parliament in the Special Areas Acts of encouraging the development of new industrial enterprises
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    in the Special Areas, the Commissioner and his industrial advisers pay due regard to the position in other parts of the country. I am not aware of any cases in which established industries have been transferred.
    Mr. Mander: Is it the policy of the Government to encourage old-established businesses in the Midlands to go to other areas, and is the right hon. Gentleman aware that this has actually occurred at Wolverhampton?
    Mr. Brown: I am not aware that it has happened, and I should be very interested to have the facts. I have tried to make clear by my answer what has been made clear many times, that that is not the policy of the Special Areas Commissioner.

  COAL PRICES (DEPARTMENTAL COMMITTEE).
  Mr. Liddallasked the Minister of Labour whether, in view of the fact that the price of coal is now nearly double what it was in July, 1914, he will state some or all of the percentage increases in pit-head prices, in transport costs, dock costs, the costs of delivery from railway and / or dock to consumers' premises and in the profits of merchants and / or factors included in the 90 per cent. increase in coal prices for the year 1937 over July, 1914, as far as they operate in the cost-of-living index for 1937?
  Mr. E. Brown: The information in the possession of my Department does not enable me to give these particulars. I would, however, refer my hon. Friend to the reply given by the Prime Minister on 16th March last to the hon. Member for Wallsend (Miss Ward), in which he announced;that a Departmental Committee would be set up, the terms of reference of which would include the investigation of the various items which make up the differences between the prices received by the producers and those paid by the consumers of coal, coke and manufactured fuel.
  Mr. Grenfell: Can the right hon. Gentleman say whether the committee has yet been appointed or whether there is any information about prospective appointments?
  Mr. Brown: I am not sure. Perhaps the hon. Member will put the question down.
  Mr. Davidson: Will the Minister make it clear that it is of no use to complain of the price of coal and at the same time support Bills put forward by this Government which do not ease the situation at all?
  Mr. Brown: Hon. Members opposite will be very sorry if the Coal Bill is not passed, and so will the miners.

  ARMAMENTS MANUFACTURE (LABOUR TRANSFER).
  Mr. Liddallasked the Minister of Labour whether he has been advised of the fact that the establishment of aeroplane and similar factories for the purpose of rearmament is attracting by reason of higher wages labour which is ordinarily available to established manufacturing concerns; whether he is aware that embarrassment is being caused to those concerns which are unable to pay the high rate of wages necessary to retain their workpeople; and whether he will take steps to ascertain what can be done in the matter?
  Mr. E. Brown: While individual cases of men leaving their previous employment to take work with firms engaged in the manufacture of armaments have been brought to my notice from time to time, no satisfactory evidence has been forthcoming that the transfer was due to the offer of more than the recognised rate of wages. The question of securing sufficient labour for achieving the priority for defence requirements which the Government has already declared to be necessary, is at the moment the subject of discussion between the employers' organisations and the trade unions in the engineering industry. I have no doubt that it will be the desire of all parties to see that the necessary arrangements to this end are made with the least possible dislocation of the industry.

  KING'S NATIONAL ROLL.
  Mr. Radfordasked the Minister of Labour whether all the survivors of the 1,280,000 ex-service men who have received a disability pension at any time since the beginning of the Great War are
  1374
  eligible for employment under the King's National Roll scheme in common with the 400,000 men in the United Kingdom who now receive pensions for permanent war disablement; and does the total of 316,776 employed under the scheme include past and present pensioners in unknown proportions?
  Mr. E. Brown: The King's Roll scheme is intended to encourage the employment of ex-service men who are still in receipt of disability pensions or have commuted permanent disability pensions. An employer may, however, continue to count towards his Kings' Roll quota, a man whose disability pension has been withdrawn since the employer engaged him; such a man would not count towards another employer's quota if he left his present employment. The answer to the last part of the question is, therefore, in the affirmative. I will let my hon. Friend have a copy of the leaflet explaining the King's Roll scheme.

  EUROPEAN PRESS AGENCY, LIMITED, AND BRITISH GLY CERINE MANUFACTURERS, LIMITED.
  Mr. G. Straussasked the Secretary of State for the Home Department whether he has now completed his inquiries into the European Press Agency, Limited, and the British Glycerine Company; and whether he can make a statement?
  The Secretary of State for the Home Department (Sir Samuel Hoare): It appears as a result of inquiries that the European Press Agency, Limited, was incorporated in October last to finance a paper in Belgium, but no evidence has been found to support the allegation that German funds were offered or would be available to this company. Only a small fraction of the nominal capital of the company, which was £10,000, appears to have been subscribed and the company is now dormant. One of the original directors, a British subject, is now the subject of a warrant for fraudulent conversion in connection with quite a separate transaction. The objects of the British Glycerine Manufacturers, Limited, appear to have no connection with the European Press Agency, Limited. It was incorporated in October, 1Q36, for mak-

  1375
  ing glycerine, and has not started production. The managing director of this company, a Belgian subject, and two other aliens who stated that they had business to discuss with this company, have been refused leave to land because the immigration officer was not satisfied with the nature of the business which they wished to transact. No other aliens in this country appear to be connected with the management of this company.
  Mr. Strauss: Is the Home Secretary quite satisfied with the bona fides of both these firms?
  Sir S. Hoare: That is a very wide question.

  MURDER CHARGE, LEEDS.
  Sir C. Granville Gibsonasked the Home Secretary whether he is aware that during the recent trial, at the Leeds Assizes, of Jesse Peel on a charge of murder serious allegations were made that the police had used third degree methods of extorting evidence whilst the accused was merely under suspicion; whether the police are instructed or permitted to use such methods; and will he cause an inquiry to be made into this matter?
  Sir S. Hoare: I beg to apologise for the length of the answer. I am aware that such allegations were made and were denied and I have caused inquiries to be made about the matter, and am informed that the facts are as follows: The police who were making inquiries about the death of Mrs. Peel, told Peel that there were certain questions which they wished to ask him and he replied that he would answer any questions they wished. As he admitted in evidence, he voluntarily accompanied the police to Otley police station. He was cautioned and was invited to give an explanation of traces of human blood which had been found on his clothing. At the trial Peel alleged that the statement which was taken from him was obtained by improper methods, though he said he did not know which of the officers concerned was guilty of the alleged misconduct, but he admitted that he read the statement over several times and was given every opportunity to alter it and that he signed the statement. The statement contained a sentence in Peel's own handwriting in the following terms:
  1376
  " I have read the above, which is quite true."
  The allegations made by Peel against the conduct of the police were denied on oath by the police officers concerned, who were subjected to severe cross-examination but persisted in their denials. The Chief Constable of the West Riding informs me that in view of the allegations made against the police he made further inquiries into the matter, as a result of which he is satisfied that these allegations were quite unfounded. The Judges' rules were formulated for the purpose of explaining to police officers engaged in the investigation of crime the conditions under which courts would be likely to admit in evidence statements made by persons suspected of, or charged with, crime. The effect of these rules has been fully explained in a circular issued to the police by the Home Office. The police officers in question were fully acquainted with these rules, and I can find no ground for thinking that they failed to observe them.
  Sir C. Granville Gibson: Is the right hon. Gentleman aware that the public mind is greatly exercised in the West Riding over these serious allegations, and will he not cause a special inquiry to be made from the Home Office again into this matter, in order to clear the police of the suspicion that these allegations are true; or, on the other hand, if they are true, give instructions that these methods of extorting evidence should cease at once?
  Sir S. Hoare: I have made very careful inquiries from the Chief Constable in the West Riding, and I have also made a personal investigation into the case, and I am satisfied that there is no ground for the allegations made against the police.

  SILICOSIS.
  Mr. E. Smithasked the Home Secretary whether he has given consideration to the correspondence dealing with silicosis sent to him by the hon. Member for Stoke; and is it proposed to take any action?
  The Under-Secretary of State for the Home Department (Mr. Geoffrey Lloyd): The hon. Member has forwarded to my right hon. Friend two letters. One relates to the case of a workman who has been

  1377
  twice examined by the medical board. The board were satisfied on both occasions that he was not suffering from silicosis. The board is composed of experts with unique experience in the diagnosis of silicosis, and their decision is final. The other letter relates to alumina dust, which is being increasingly used as a substitute for flint dust, with a view to reducing the risk of silicosis. I am sending to the hon. Member a report by a committee of the Medical Research Council on this question.
  Mr. Smithasked the Home Secretary whether he is satisfied with the statistics in Command Paper 5722, pages 12, 13, and 26, with particular reference to silicosis; whether he is satisfied with the medical boards; if not, what changes are contemplated; and whether it is his intention to reconsider the question of liability and appeal?
  Mr. Lloyd: The number of cases is necessarily a matter of serious concern, and emphasises the necessity for taking all possible preventive measures. Much has been and is being done in this direction, and I am glad to note that, in several industries where stringent precautions have been adopted over a long period of years, there is now a marked reduction in the number of new cases. It is also to be borne in mind that the disease usually develops very slowly, and that many of the cases now occurring are the result of conditions existing before the necessary precautions were introduced. The medical board system appears to be working satisfactorily, and no material change is in contemplation.
  Mr. Smith: Does the Under-Secretary remember that he and the present Chancellor of the Exchequer were responsible for building up the hopes of many of us in the Debates on the Factory Bill; and may I ask what steps are being taken to implement the promises given in those Debates?
  Mr. Lloyd: I think the hon. Gentleman is thinking of an undertaking that we gave to consider any suggestions with regard to particular processes in the pottery industry. I understand that certain information is being considered, with a view to possible extension of the scheme to some additional processes.
  Mr. Hopkinasked the Home Secretary whether he is aware that, up to the
  1378
  end of 1937, 66 per cent. of the deaths due to silicosis in the South Wales coalfield, 65½ per cent. of the totally disabled, and 70 per cent. of the partially disabled cases, occurred in the anthracite coal districts; and, in view of this, what is the reason for the delay in issuing Mark IV respirators; and what immediate steps he proposes to take to deal with this problem?
  Mr. Lloyd: My right hon. Friend is fully alive to the importance of having supplies of such respirators available at an early date, and he is glad to learn that various difficulties which arose as to materials and otherwise have been overcome, and that the arrangements for supplying the manufacturers with requirements for production are now well advanced.
  Mr. James Griffiths: Will the hon. Gentleman consider trying these respirators experimentally in one colliery first; and will he bear in mind the fact that various medical men in this country are of opinion that the use of these respirators ought to be carefully checked?
  Mr. Lloyd: I am aware that the question is a very important one. For years it was impossible to make a respirator which was capable of resisting silica dust, but the matter was taken up by the Department of Scientific and Industrial Research and the respirator authorities, and they are now fully satisfied that a solution has been achieved.
  Mr. Grenfell: Does not all the information available point to the fact that the real remedy lies, not in respirators, but in the suppression of dust?
  Mr. Lloyd: The prevention of silicosis is a matter for the Mines Department.

  PRESERVATION OF AMENITIES (ADVERTISEMENTS).
  Mr. Rhys Daviesasked the Home Secretary whether he is aware that the Lancashire branch of the council for the Preservation of Rural England has recently passed a resolution in favour of effective legislation to enable local authorities to protect their districts from offence to local amenities caused by disfiguring advertisements; and whether he can hold out any hope for the introduction of such legislation?
  Sir S. Hoare: Yes, Sir. This matter is now before a Committee, set up in accordance with the proposal made during the debate on 8th December last, and I think it will be best to await their report.
  Mr. Davies: Has the right hon. Gentleman any idea when the Committee will report?
  Sir S. Hoare: No, Sir, but I think it will be in the comparatively near future.

  METROPOLITAN POLICE (EXPENDITURE).
  Mr. Thurtleasked the Home Secretary what items of expenditure of the Metropolitan Police service were omitted from the total expenditure of £9,400,000 recorded on page 107 of the Civil Appropriation Accounts, 1936, which led him to calculate the total expenditure for the period in question as being £8,700,000; and whether similar items were omitted in arriving at the figure of £2,700,000 as the total expenditure of the Metropolitan Police service for the year ended 31st March, 1913?
  Sir S. Hoare: No items of expenditure on the police service were omitted, but only those relating to the Metropolitan Police Courts, the probation service and costs in criminal cases. The figure of £8,700,000 is arrived at by excluding these and deducting the receipts shown under subheads "C" and "M" of the account and some £3,800 of the receipts shown under "N." The answer to the last part of the question is in the affirmative.

  DEPUTATION, LIMEHOUSE.
  Mr. James Hallasked the Home Secretary whether he is aware that unnecessary violence was exercised by the police when called upon by the officials of the Unemployment Assistance Board in Limehouse to expel an orderly deputation from their offices in West India Dock Road on 12th May; and will he inquire into the circumstances of this case?
  Sir S. Hoare: I have made inquiry and have been informed by the Commissioner of Police that the deputation left the building without incident on being requested to do so by the police. No
  1380
  person was removed from the building by force, and there was no disorder of any kind.

  AIR-RAID PRECAUTIONS.
  Mr. C. Wilsonasked the Home Secretary whether children at elementary schools will be supplied with one gas-mask for home and another for school, or whether it will be necessary for the mask to be carried from one place to the other; and if so, whether receptacles will be provided?
  Mr. Lloyd: All school children will be provided, in emergency, by the Government with respirators which they will carry with them to and from school. Containers will be provided.
  Mr. Sandysasked the Home Secretary whether he can make a statement as to the progress of plans for the evacuation of the civil population from areas which might be exposed to continuous air attack?
  Sir S. Hoare: Various aspects of the problem of transferring persons from areas which are likely to be exposed to continuous air attack, including the plans said to be in contemplation in other countries, have been examined by the Home Office. With the purpose of bringing the subject under full review, I have invited the right hon. Member for the Scottish Universities (Sir J. Anderson) and the hon. Members for South-West Bethnal Green (Sir P. Harris), Balham (Mr. Doland), and North Islington (Dr. Guest) to serve on a committee which will assist me in the preparation of plans. While this committee will, no doubt, begin its work on the problem of London, it will have in mind the application of its plans to other big centres of population.
  Mr. Sandys: Is my right hon. Friend aware that the knowledge that the Home Office are proceeding actively with their plans for evacuation has caused very widespread satisfaction?
  Mr. J. Griffiths: Will the right hon. Gentleman consult with those areas to which he is likely to evacuate the population?
  Sir S. Hoare: Certainly a question of that kind would come within the scope of the committee's investigation.
  Mr. H. G. Williams: Will they also consider whether, as ordinary human beings, people want their families broken up?
  Mr. Gallacher: Would it not be desirable that the Home Office should set up similar committees in other big centres which are likely to be attacked, rather than wait until everything has been prepared in London?
  Sir S. Hoare: I think it is best to begin with the most difficult part of the problem—the problem of London. If we find a satisfactory solution of the London problem, we shall be able to apply it to other big cities.
  Mr. R. C. Morrisonasked the Home Secretary whether he has been able to arrange a class of instruction upon air-raid precautions for Members of Parliament?
  Mr. Lloyd: My right hon. Friend will be happy to arrange for a course of instructional lectures and is inquiring through the usual channels as to the arrangements that will be most convenient to hon. Members.
  Mr. Mabaneasked the Home Secretary whether he is aware that many of those who offer themselves for training as air-raid precautions volunteers are required to undertake considerable outlay of cash quite apart from necessary personal expenses, in order to secure training, and that this outlay is demanded for books, training fees, equipment, and examination fees; and whether, as this is totally contrary to the spirit of the air-raid precautions service, he will take immediate steps to stop. this?
  Mr. Lloyd: It is intended that all training should be provided free for persons who are enrolled as members of public air-raid precautions services. Where they have individually incurred expenses, after enrolment, of the kind mentioned, it would be proper for the local authority concerned to repay them. My right hon. Friend is making arrangements which, I hope, will obviate the continuance of any such difficulties with the type of training in which it is most likely to have arisen, namely, training for first-aid services.
  Mr. Mabane: Will my hon. Friend take the initiative in suggesting to local
  1382
  authorities that they should make repayment of these sums that have been already paid?
  Mr. Lloyd: I think my answer is sufficient.
  Mr. Davidson: Will the Under-Secretary bear in mind also, that the burden on local authorities is excessive?
  Mr. R. C. Morrison: Will the hon. Gentleman also impress on them that they should not charge for instruction books for these classes?
  Mr. Lloyd: We have done that.
  Mr. Mabaneasked the Home Secretary whether the figures of 400,000 which he gave in his broadcast on 23rd May as the present total of air-raid precautions volunteers is based on returns from local authorities; to what date does the figure refer; and whether he will now state the exact official figure of the numbers of air-raid precautions volunteers who have been enrolled throughout the country?
  Mr. Lloyd: The number quoted by my right hon. Friend is an approximate estimate, based on figures collected from a number of representative authorities, of the present position. As the House has been informed, arrangements have been made for returns from local authorities of the full position, and the first of these returns will be available about the middle of next month.
  Mr. Cartlandasked the Home Secretary what are the additional powers with which it is proposed to invest air-raid wardens by special regulations in time of emergency?
  Mr. Lloyd: A.R.P. Memorandum No. 4, issued early last year, on the subject of air-raid wardens, stated that it was proposed to invest them with certain simple powers in time of emergency, but further examination of the position suggests that they will probably be able to carry out their functions without being invested with any special powers.
  Mr. Cartland: Does that mean that any suggestion that legislation will be introduced in the event of war breaking out to invest these persons with powers will not be implemented?
  Mr. Cartlandasked the Home Secretary by what method and under what authority air-raid warden officers are appointed?
  Mr. Lloyd: Air-raid wardens and head wardens are appointed by local authorities, as a part of the measures they take in preparing general precaution schemes under the Air Raid Precautions Act, 1937.
  Mr. Cartland: Is there, in point of fact, any uniformity? Has my hon. Friend seen the letter in the "Times" this morning?
  Mr. Lloyd: Yes, Sir. Certain suggested schemes of organisation were forwarded to local authorities, but the responsibility is theirs. If they wish to adopt a different form of organisation which they think is better suited to their local needs, they can do so.
  Mr. Mabane: Have air-raid wardens any security of tenure in their offices?
  Mr. Lloyd: They are volunteers under the local authorities.
  Mr. Cartlandasked the Home Secretary why gas masks for training are not issued to local authorities in sufficient quantities to provide one gas mask for every volunteer who undertakes training?
  Mr. Lloyd: Respirators are issued to local authorities in sufficient numbers to enable every qualified instructor to have a respirator for each member of his class.
  Mr. Cartland: How many have been issued for this purpose?
  Mr. Lloyd: About 350,000.
  Mr. Cartland: Can my hon. Friend say what the local authorities have done?

  CLUBS.
  Mr. Dayasked the Home Secretary whether, in view of the present position of clubs in the United Kingdom, he will consider introducing legislation for the purpose of restoring their pre-war privileges?
  Sir S. Hoare: No, Sir. I am not disposed to entertain this suggestion.
  Mr. Day: Can the right hon. Gentleman say whether he makes a regular report
  1384
  to the Cabinet on this subject; and, if so, when the last report was made?
  Sir S. Hoare: No, Sir; it would certainly be improper for me to say what I do or do not do in the case of the Cabinet.
  Mr. Day: Did not the right hon. Gentleman's predecessor in office state that written reports were made to the Cabinet?
  Mr. E. Smith: Will the right hon. Gentleman bear in mind that workmen's clubs are well conducted, and that they do not desire any change?
  Major Procterasked the Home Secretary whether he intends to deal with the control of bottle parties in connection with the legislation shortly to be introduced referring, in particular, to bogus clubs; and, if not, whether he will consider the desirability of consulting with the customs and excise authorities, with a view to ascertaining whether the problem of the bottle party can be dealt with by an alteration of the law which will result in the organisers of these parties making the same contribution towards the excise as is made by hotels, restaurants, and other licensed premises which provide alcoholic refreshment and entertainment?
  Sir S. Hoare: My hon. and gallant Friend's suggestion has been noted, but I am not in a position at present to make any statement.
  Major Procter: Is not the position a very bad one when, while other licensees have to pay very heavy contributions to the Exchequer, these institutions get off scot free?
  Captain A. Evans:Will my right hon. Friend bear in mind the large amount of revenue that is lost to the Treasury from this cause in the present state of legislation; and will not the Chancellor of the Exchequer see whether it is possible to include a Clause to deal with it in the Finance Bill which is at present before the House?
  Sir S. Hoare: The second supplementary question shows that the first supplementary question should be addressed to the Chancellor of the Exchequer.
  Mr. Thorne: Will the Home Secretary say what is really meant by bottle parties?

  ACCIDENT, PIMLICO STEPS.
  Sir Alfred Beitasked the Home Secretary whether his attention has been drawn to an accident which occurred at 4.10 p.m. on 30th April, 1938, off the Pimlico Steps, Grosvenor Road, Westminster, whereby a boy aged four years fell into the river and lost his life; whether he is aware that the steps are in a bad condition; who is responsible for seeing that these steps are protected so as to prevent children from gaining access to the river at this point; and what is being done to prevent a repetition of this accident?
  Sir S. Hoare: My attention has been drawn to this regrettable accident. I understand that the London County Council is responsible for the upkeep of the steps, and is looking into the matter, but my information does not suggest that the condition of the steps contributed to the accident.

  ADVERTISEMENTS.
  Mr. Manderasked the Home Secretary whether he is aware of the inconvenience and loss caused to purchasers of greenhouses and similar articles on the strength of advertisements which fail in many respects to comply with the expectations held out; and whether he will consider the advisability of introducing legislation dealing with the subject of such advertisements?
  Sir S. Hoare: I could not express any opinion as to the need for further legislation in this direction without knowing more of the circumstances to which the hon. Member refers. If he cares to send me particulars, I will consider the matter.
  Mr. Mander: I will send the right hon. Gentleman particulars of cases which have occurred in Wolverhampton and elsewhere.

  CUSTOMS CONVICTION, CROYDON AIRPORT.
  The following Question stood upon the Order Paper:
  Mr. Fleming: To ask the Secretary of State for the Home Department whether he is aware that Mrs. Elsie Hesse, a German Jewess, was convicted of attempting to avoid payment of Customs
  1386
  duties at Croydon airport; and if he has made a deportation order in this case?
  Mr. Arthur Henderson: On a point of Order. May I draw your attention, Mr. Speaker, to the fact that the lady referred to in the question is described as a German Jewess. Is it not undesirable to refer to the religion of an individual when it may have the effect of creating racial prejudice?
  Mr. Speaker: The hon. Member is quite right. I think it is undesirable.

  EDUCATION.

    NATIONAL FITNESS COUNCIL (GRANTS TO UNIVERSITIES).
    Mr. Rostron Duckworthasked the Parliamentary Secretary to the Board of Education what are the conditions under which the sum of £200,000 has recently been granted to the universities by the National Fitness Council?
    The Parliamentary Secretary to the Board of Education (Mr. Kenneth Lindsay): The grants offered to university institutions by the University Grants Committee, on behalf of the National Fitness Council, are grants in aid, the institution meeting the remainder of the capital charges as well as the charges of future maintenance involved by each scheme. Three considerations throughout have been the provision of skilled instruction by properly qualified staff; the provision of such arrangements for medical inspection as may be appropriate; and the desirability of the appointment at each institution of a University committee (with student representation) composed of those particularly interested.

    ELEMENTARY EDUCATION (COST).
    Mr. H. G. Williamsasked the Parliamentary Secretary to the Board of Education whether he is aware that the average number of children in attendance at the public elementary schools this year is expected to be 608,000 less than in 1932–33, and that the estimated expenditure of the local education authorities is expected to be £11,374,000 higher, though the salaries of teachers have risen only by £5,074,000; and whether he can furnish any explanation for the increase of £6,300,000 in the other costs of elementary education?
    Mr. Lindsay: The increase to which my hon. Friend refers is primarily due to the programme of educational reorganisation and development consequent upon the adoption by the Government of the policy contained in the Hadow Report, and to the necessary preparations for the raising of the school-leaving age in 1939. Other contributory factors are the increased cost of special services which provide for the health of the school child, the expenditure necessary to replace black list schools, and the provision of new accommodation necessitated by the shifting of population in recent years. I must also remind my hon. Friend that in 1932–33 the economy measures necessitated by the crisis of 1931 were in full operation, and the expenditure of local education authorities was in most cases cut down to the minimum compatible with efficiency..
    Mr. Williams: How long can we go on increasing the burden of local and national expenditure in this way, providing for an ever-diminishing number of children?
    Mr. Lindsay: My hon. Friend does not seem to appreciate that there is a very big change going on in the schools, to meet a public demand, and our concern is to meet this as economically as possible. Let me give an example. The average height of school children in Sheffield has increased since 1920 by 3¼ inches, and the average weight by 13¼ lbs.
    Mr. Williams: Does my hon. Friend suggest that the general change in the average height and weight of the population, which is found in all classes, irrespective of the type of school to which they go, is due to the present extravagance of his Department?
    Mr. Lindsay: I was simply concerned to show that one of the bigger items of our expenditure is the increased cost of special services; and I gave a practical example.
    Mr. J. Griffiths: Can the Parliamentary Secretary give the comparable increase in the cost of education, for the same period, of rich children in public schools?
    Sir Gifford Fox: Is my hon. Friend aware that some of these children, when they come to enlist, are found to be actually illiterate?
    Mr. Lindsay: I think I know the single case to which my hon. Friend is referring. I am trying to trace it back to the school.

    LIVERPOOL.
    Mr. Loganasked the Parliamentary Secretary to the Board of Education whether he will send a copy of the letter E. 91, G (6), page 7, dated 6th May, from the Board of Education on Liverpool's schools problem, to the Town Clerk of Liverpool, so as to make known at once to members of the Liverpool City Council the contents of that letter?
    Mr. Lindsay: The letter to which the hon. Member refers was addressed to the Town Clerk, as being the chief executive officer of the local education authority.
    Mr. Logan: In view of the importance of that letter will the hon. Gentleman ask the Town Clerk to disseminate that news to the council? I understand that it has gone to the education committee; I want it to go to the council.
    Mr. Lindsay: I think that is a separate question; but I understand that it has been done.

    ELEMENTARY SCHOOLS (ACCOMMODATION).
    Lieut.-Colonel Wickhamasked the Parliamentary Secretary to the Board of Education what is the total accommodation in public elementary schools, council and voluntary, administered by the Somerset County Education Committee; and what was the average attendance for the year ended 31st March, 1937?
    Mr. Lindsay: As the answer contains a number of figures, I will, with my hon. Friend's permission, circulate it in the OFFICIAL REPORT.
    Following is the answer:
    The accommodation of many public elementary schools has not been reassessed for many years, and does not represent their effective accommodation on modern standards. Subject to that important qualification, the present recognised accommodation of the public elementary schools in the administrative county of Somerset is as follow:

    Council Schools

    27,207

    Voluntary Schools

    39,344

    Total

    66,551

    The average attendance for the year ended 31st March, 1937, was:

    Council Schools

    14,699

    Voluntary Schools

    19,944

    Total

    34,643

    Mr. Morganasked the Parliamentary Secretary to the Board of Education whether his attention has been drawn to the shortage of public elementary school accommodation in Harrow; and what steps are being taken to make good the shortage?
    Mr. Lindsay: My Noble Friend is aware that, owing to the rapid housing development in Harrow, the local education authority have found it difficult to keep pace with the increase in the numbers of children, an increase of about 1,500 per annum over the last seven years, requiring elementary school accommodation. I will, with my hon. Friend's permission, circulate in the OFFICIAL REPORT a statement setting out the present position.
    Following is the statement:
    From September, 1930, to April, 1938, the numbers on the rolls of the elementary schools in Harrow increased from 6,6o6 to 18,713, the average annual increase being about 1,500. During the seven years preceding November last, additional school accommodation in permanent buildings amounting to 7,326 places has been provided, and during the last seven months eight new departments with accommodation for 3,198 children have been opened. At the present time there are in the district 16,794 school places in permanent buildings, 2,222 places in huts specially erected for the purpose, and 800 places under temporary arrangements in church halls and similar buildings, a total of 19,816 places for a roll of 18,713 children. A new school for 850 children will be opened after the summer holidays; two others for 1,460 children will be opened within a year. Plans for a further 1,642 places are under consideration and an additional five sites have been acquired for which building plans have not yet been drawn.

    PHYSICAL TRAINING (TEACHERS).
    Sir Ernest Graham-Littleasked the Parliamentary Secretary to the Board of Education whether, in view of the greater importance which is now being attached
    1390
    to physical education in schools and the widely-experienced difficulty of securing adequately-trained instructors, partly because of the inadequate remuneration offered, he will press the Burnham Committee to review, at the earliest opportunity, the low-salary scales which are now paid to teachers of physical training, notwithstanding the fact that the course for the diploma of qualification in that subject is at least equivalent to the course for a degree?
    Mr. Lindsay: I assume that my hon. Friend refers to women teachers of physical education in secondary schools or technical institutions. It is open to those acting on behalf of the teachers affected to approach the Burnham Committee through the proper channels, but my hon. Friend will know that it would be inconsistent with present arrangements for my Noble Friend to bring pressure to bear, either directly or by implication, upon this body.
    Sir E. Graham-Little: Is my hon. Friend aware that diplomas in similar courses have been accepted, and does he not accept the diploma for physical training?
    Mr. Lindsay: I think the Question and Answer will show the position.

    VOLUNTARY SENIOR SCHOOLS, SURREY.
    Sir Percy Harrisasked the Parliamentary Secretary to the Board of Education whether his attention has been called to the report of the Surrey local education authority of 7th December, 1937, that, where proposals to erect new voluntary central schools were made, time was the essence of every scheme in order to have schools ready for the appointed day; whether he is aware that early in January, 1938, the Surrey diocesan officials announced that they would put forward schemes in 12 areas which they found possible and desirable, but that at present no agreement has been made for any one of these and no building in these 12 areas has been begun; and whether he will now take suitable action to assist the local education authority in their efforts to provide the necessary school accommodation?
    Mr. Lindsay: My Noble Friend is not aware of any projects for the provision of new voluntary senior schools in Surrey except those which have reached his De-

    1391
    partment. These have been, and will continue to be, dealt with as quickly as the procedure prescribed by Section 18 of the Education Act, 1921, permits. If and when it becomes clear that any of them will not materialise, the hon. Member may be assured that the Board will do their best to facilitate the provision of any necessary school accommodation by the local education authority. He will not, of course, overlook the provisions of Subsection (2) of Section 8 of the Act of 1936.

    HOUSING (STATISTICS).
    Mr. Barrasked the Minister of Health the total number of houses, as for England and Wales, completed with State assistance from 1919 up to 31st March, 1938, or the last available date, and the total amount of State subsidy paid in respect thereof?
    The Minister of Health (Mr. Elliot): The aggregate number of houses is 1,404,576. The total amount of State subsidy paid in respect of the houses from 1919 up to 31st March, 1938, was £193,304,622. As the answer to the remainder of the question includes a number of figure, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.
    Following is the answer:
    The total number of houses completed by private enterprise in England and Wales with State assistance from 1919 up to 31st March, 1938, was 426,276. From 1919 up to 31st March, 1936, local housing authorities in England and Wales completed 829,851 houses with State assistance, and during the two years ended 31st March, 1938, they completed a further 148,449 houses. A small proportion of these houses did not specifically attract subsidy, but owing to the pooling arrangements brought about by the Housing Act, 1935, all houses now provided by a local housing authority share in any State assistance given to that authority in respect of their houses.

    LOCAL AUTHORITES' EMPLOYES (SUPERANNUATION CONTRIBUTIONS).
    Mr. Leachasked the Minister of Health whether he will consider introduce-
    1392
    ing legislation to abolish the power of local authorities to confiscate the superannuation contributions of employes who are dismissed for alleged misdemeanours, even though no charges are brought in court against them?
    Mr. Elliot: As the matter has so recently been decided by Parliament I am afraid it is not possible to comply with the hon. Member's suggestion.
    Mr. Leach: Can the right hon. Gentleman say how confiscation of superannuation contributions in circumstances as set forth in my question can possibly be defended?
    Mr. Elliot: This matter was reviewed by Parliament when the Local Government Superannuation Act was passed in 1937.

  PUBLIC HEALTH.

    BURNING PIT-HEAPS.
    Mr. Tinkerasked the Minister of Health whether he is aware that the health committee of the Manchester City Council have decided to get powers to experiment with a smokeless zone in one part of the city, as they are of opinion it will be beneficial to the health of the people; and will he consider giving powers to local authorities to control burning pit-heaps by establishing smokeless zones in the same way?
    Mr. Elliot: I am aware that the Manchester Public Health Committee have had this matter under review, but I have not been informed of the specific proposals in contemplation or the powers which they may think it necessary to seek. As regards the second part of the question, arrangements have been made for my alkali inspectors, in conjunction with the inspectors of the Mines Department, to visit the burning pit-heaps and to explore the practicability of abatement and prevention. It is doubtful whether legislation would facilitate the solution of this problem.
    Mr. Tinker: Should the local authorities desire this legislation, would the right hon. Gentleman give consideration to it?
    Mr. Elliot: I am afraid that that is a hypothetical question.

    WATER SUPPLY.
    Mr. Chorltonasked the Minister of Health the progress made by the special committee appointed to investigate the water position in this country as to the amount, relative quantity in each area, and facilities of supply; and whether he will give a table of districts in which no public supply is available?
    Mr. Elliot: I would refer my hon. Friend to the Year Book of the Inland Water Survey Committee published on the 11th of this month. As regards the second part of the question, no public water supply is available in one borough, and 11 rural districts. With permission, I will circulate the list in the OFFICIAL REPORT.
    Mr. Henderson Stewart: Will my right hon. Friend bear in mind that in many districts in Scotland there is almost a complete shortage of water with disastrous results to the prospects of housing?
    Mr. De la Bére: Is my right hon. Friend aware that in Evesham water is turned off at 10.30 at night?
    Following is the list:

    *The Borough of Eye.

    The Rural Districts of

    Broadwoodwidger.

    Holsworthy.

    Knighton.

    Launceston.

    Lodden.

    *Mitford and Launditch.

    Newton and Llandiloes.

    Painscastle.

    *Smallburgh.

    Swaffham.

    *Twrcelyn.

    * The local authorities for these areas have submitted applications for loan sanction for schemes of public supply.

    MILK (PASTEURISATION).
    Mr. Rostron Duckworthasked the Minister of Health whether any conversations have yet taken place with representatives of local authorities with regard to the suggested legislation under which they are to have power to decide whether or not there shall be compulsory pasteurisation of milk sold in the area under their control; and, if not, whether he proposes to have such consultations?
    Mr. Elliot: Yes, Sir. My Department and that of my right hon. Friend the
    1394
    Minister of Agriculture and Fisheries are in consultation with representatives of the associations of local authorities concerned.

    SMALL-POX.
    Mr. Leachasked the Minister of Health how many cases of small-pox, and how many deaths from that disease were registered in England and Wales in 1937?
    Mr. Elliot: Four cases of small-pox were notified in England and Wales in 1937. No deaths from this disease were registered during that year.
    Mr. Leach: Now that the work of the right hon. Gentleman's Department, in partnership with that of the local authorities, has abolished the dangers of smallpox practically, will he not also consider abolishing the vaccination laws?

    MENTAL DISEASE (INSULIN TREATMENT).
    Mr. Richardsasked the Minister of Health to what extent is insulin treatment of certain types of mental disease on the lines so successfully pursued by Dr. Manfred Sakel, of Vienna, employed in the public mental hospitals of this country?
    Mr. Elliot: As stated in reply to a recent question on this subject, insulin treatment is being applied in some 12 public mental hospitals in this country.
    Mr. Richards: Can the Minister say what is the cost of this treatment, and whether it is prohibitive at the moment in this country?
    Mr. Elliot: I cannot say without notice, but if the hon. Gentleman will put down a question, I will try to get the information.

  RATES AND DEBT CHARGES,CARDIFF.
  Mr. Hopkinasked the Minister of Health what were the total rates levied in the city of Cardiff in the years 1914 and 1937, respectively, and the debt charges for each of those years?
  Mr. Elliot: As the answer contains a number of figures, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.
  Mr. Hopkin: Is it possible for the Minister to say how much the debt charges were in 1937, and whether it is proposed to ask Lord Bute to pay these charges?
  Mr. Elliot: In 1937 they were £714,218, and that figure includes £507,948 in respect of trading undertakings and housing which are to a large extent productive services.
  Mr. James Griffiths: In view of what has recently happened in Cardiff, where a portion of land which years ago was a swamp has now been sold for untold millions, will the right hon. Gentleman consider this method of raising funds for local purposes?
  Following is the answer:
  In the City of Cardiff the total rates in the £ levied in the years ended 31st March, 1914, and 31st March, 1937, were 7s. 10d. and 12S. 1d. respectively, and the debt charges payable by the city council were for the former year £286,888 and for the latter year £714,218. The first mentioned figure included £137,023 and the last mentioned figure £507,948 in respect of trading undertakings and housing which are to a large extent productive services.

  PUBLIC ASSISTANCE (OUT-RELIEF STATISTICS).
  Mr. Davidsonasked the Minister of Health the total amount expended in out-relief in money and kind in Great Britain for the years ended January, 1930, and 1938, respectively?
  Mr. Elliot: The total amount expended during the year ended January, 1930, was £12,778,042. The corresponding figure for the year ended January, 1938, was £17,198,276. As regards Scotland, I would refer the hon. Member to my right hon. Friend the Secretary of State.
  Mr. Davidson: In view of the fact that the right hon. Gentleman is now established as Minister of Health, can he indicate what special steps he is taking to clear up this £7,000,000 of increase in Poor Law relief in this country in that period, while, at the same time, we have had an increase in unemployment?
  Mr. Elliot: That does not arise out of the question. It is too difficult to discuss the matter by question and answer, and the hon. Member's arithmetic is nearly £2,000,000 out.
  Mr. Davidson: Can the Minister indicate what steps —
  Mr. Speakerrose —

  HERRING INDUSTRY (ZETLAND).
  Major Neven Spence (by Private Notice)asked the Secretary of State for Scotland why the Herring Industry Board has fixed 14th June instead of 7th June as the starting date for herring fishing in Zetland in opposition to the wishes of the fishermen, curers and the German importers.
  The Secretary of State for Scotland (Mr. Colville): I am informed that the Herring Industry Board have fixed 14th June as the starting date for curing herring in Zetland. They have not, however, I understand, placed any restriction on fishing. I understand that an earlier date, for starting curing is desired by the local fishermen and curers, but that that desire is not shared by the industry in general in this country, or by the majority of the importers concerned. The fixing or curing dates is a matter within the jurisdiction of the Herring Industry Board, who reached the decision as to a commencing date after consideration of all the interests affected, and I am unable to interfere with their discretion.

  CZECHOSLOVAKIA.
  Mr. Noel-Baker (by Private Notice)asked the Prime Minister whether His Majesty's Government will propose the immediate despatch of an imparital international commission to the frontier between Germany and Czechoslovakia to investigate the alleged violations of the frontier and other incidents which may arise.
  The Under-Secretary of State for Foreign Affairs (Mr. Butler): The hon. Member's suggestion is one which His Majesty's Government will bear in mind should it appear likely to be helpful.
  Mr. Noel-Baker: Will His Majesty's Government bear in mind that in previous similar cases, when there was a danger of war, experience has shown that the presence of such an impartial commission has been a guarantee of peace for all concerned?
  Mr. Davidson: Is it possible for the Prime Minister to appoint an impartial commission?

BUSINESS OF THE HOUSE.
Mr. Attlee: May I ask the Prime Minister to state the business for next week?
The Prime Minister (Mr. Chamberlain): Monday.—Second Reading of the Imperial Telegraphs Bill, and Committee stage of the necessary Money Resolution; Second Reading of the Mental Deficiency Bill; consideration of Lords' Amendments to the Sea Fish Industry Bill.
Tuesday.—Conclusion of the Committee stage and Third Reading of the Air Navigation Bill; Committee stage of the Herring Industry Bill.
Wednesday.—Supply; Committee (8th Allotted Day). The Air-Raid Precautionary Services Vote will be considered.
Thursday.—Second Reading of the Essential Commodities Reserves Bill, and Committee stage of the necessary Money Resolution.
Friday.—The House will adjourn for the Whitsuntide Recess and meet again on Tuesday, 14th June.
It is hoped that there will be an opportunity to take the outstanding Import Duties Orders, including those relating to Pig Iron, either on Monday or on Tuesday.
On any day. if time permits other Orders may be taken.
After the Second Reading of the Finance Bill to-day, we propose to take the Report stage of the Herring Industry Money Resolution.
Mr. Attlee: Can the right hon. Gentleman say when the Essential Commodities Reserves Bill will be available?
The Prime Minister: To-day.
Mr. H. G. Williams: Can my right hon. Friend say whether it is anticipated that the Road Haulage Wages Bill will be concluded on Friday, and, if not, whether it is intended to carry it over until after Whitsuntide?
The Prime Minister: I cannot definitely say, but we hope to get it To-morrow.
Sir Irving Albery: When is it hoped to take the Committee stage of the Finance Bill?
The Prime Minister: We shall give notice in good time, but at the moment I cannot say.

BILL PRESENTED.
  ESSENTIAL COMMODITIES RESERVES BILL,
  " to enable the Board of Trade to obtain information as to commodities which in the opinion of the Board would be essential for the vital needs of the community in the event of war and to make provision for the maintenance of reserves of such commodities; and for purposes connected with the matters aforesaid," presented by Mr. Stanley; supported by the Chancellor of the Exchequer, Sir Thomas Inskip, Mr. Colville, Mr. W. S. Morrison, and Mr. Cross; to be read a Second time upon Monday next, and to be printed. [Bill 163.]

  MESSAGE FROM THE LORDS.
  That they have agreed>to:
  Aldridge Urban District Council Bill,
  London Midland and Scottish Railway Bill, with Amendments.
  Amendments to—
  Patents, & c. (International Conventions) Bill [Lords], without Amendment.
  That they have passed a Bill, intituled, "An Act to empower the Mayor Aldermen and Burgesses of the borough of Warrington to construct waterworks; to make further provision with regard to their water undertaking; and for other purposes." [Warrington Corporation Water Bill [Lords.]

  WARRINGTON CORPORATION WATER BILL [Lords].
  Read the First time; and referred to the Examiners of Petitions for Private Bills.
BILLS REPORTED.

  MANCHESTER CORPORATION BILL [Lords].
  Reported, with Amendments, from the Committee on Unopposed Bills (with Report on the Bill).
  Bill, as amended, and Report to lie upon the Table; Report to be printed.
  LONDON COUNTY COUNCIL (GENERAL POWERS) BILL [Lords].
  Reported, with Amendments, from the Committee on Unopposed Bills (with Report on the Bill).
  Bill, as amended, and Report to lie upon the Table; Report to be printed.

  MANCHESTER CORPORATION BILL [Lords].

    COWES URBAN DISTRICT COUNCIL BILL.
    Reported, with Amendments, from the Committee on Unopposed Bills (with Report on the Bill).
    Bill, as amended, and Report to lie upon the Table; Report to be printed.

    SEA FISH INDUSTRY BILL.
    Lords Amendments to be considered upon Monday next, and to be printed. [Bill 165.]

    KITCHEN AND REFRESHMENT ROOMS (HOUSE OF COMMONS).
    Special Report from the Select Committee brought up, and read.
    Special Report to lie upon the Table, and to be printed.

ORDERS OF THE DAY.

  FINANCE BILL.
  Order for Second Reading read.
  Motion made, and Question proposed, "That the Bill be now read a Second time."
  3.50 p.m.
  Mr. A. V. Alexander: I beg to move, to leave out from the word "That," to the end of the Question, and to add instead thereof:
  " this House regards with concern the continuing policy of unbalanced Budgets, and cannot assent to the Second Reading of a Bill which, while permitting excessive profits on rearmament and subsidies to private industry to make increasing inroads on the public purse, penalises road transport and adds to the already heavy burdens of people of small means, instead of raising the necessary revenue from the taxation of great wealth."
  We, as a House of Commons, have had a few weeks since the introduction of the Budget by the Chancellor of the Exchequer to consider in somewhat more detail the financial position with which the nation is faced, and I am bound to say that the more time one has for reflection upon that position, the more serious the outlook appears to us to be. We are faced in Europe to-day with a very serious position. We speak almost daily of international crises, and one cannot possibly separate the difficult international position from the problem of finance which the country has to face. It is hardly more than rough justice that the present Chancellor of the Exchequer should find himself compelled to bear the burden in the House of Commons of responsibility for the Government's proposals for the finance requisite at the present time, because he had so much responsibility for the foreign policy in the last six years which has contributed to the difficult situation which we have to meet.
  The financial crisis on which I desire to speak to-day-it is certainly a financial crisis that the nation is called upon to face-is in' large degree subject to two main causes. It is very largely due to the special contribution which His Majesty's Government call upon the country to make for armaments and, secondly, it is due in no small degree to the fact that ever since the National Government have been in office-even during
  1426
  the years when the present Prime Minister was Chancellor of the Exchequer—they have failed, in spite of the original purpose of their election in 1931, to deal with the finances of the nation on the basis of balanced Budgets. We make the first and the primary point in our Amendment the serious position which is created by this continuing series of un balanced Budgets, and at the outset this afternoon I wish to examine briefly the situation which has been created in that respect.
  In 1931, when the Labour Government went out of office, there was a total dead weight of National Debt of rather more than £7,400,000,000. To-day, before we begin to speak of the borrowing which will come in the present financial year, if I read the figures aright, the national dead weight debt stands at over £8,000,000,000 —£8,026,000,000. We have, therefore, over £600,000,000 increase in the dead weight debt. One of the answers that is made from the Government Bench is that we must not overlook the fact that the figures in the dead weight debt include the extent to which public credit has been used for financing the Exchange Equalisation Fund. I do not think the House as a whole is very happy about the position of the Exchange Equalisation Fund. It is true that we are indebted to the Chancellor of the Exchequer for having met a promise to submit certain information, which I gather is rather old, to the Public Accounts Committee, but the House itself has no real information as to what the ultimate position is likely to be in respect of the £550,000,000 which has been met from public credit in order to manipulate our position in relation to the pressure which arises from time to time from different international sources in regard to our exchange. The fact that we have to face is that we have not been able to provide for that work out of revenue. We have had to add to the National Debt the figures required for that purpose. We are, therefore, faced to-day with an increase in the National Debt already of over £600,000,000.
  The Chancellor of the Exchequer has been quite frank and honest about the present Budget, and that is one of the few things on which I can be complimentary to him. He admits that the Budget is not balanced, that even before the special steps were forshadowed by the

  1427
  Prime Minister, arising out of the annexation of Austria by Germany, we had projected borrowing £90,000,000 in the current financial year for armaments, which we could not meet out of revenue, and we have to face, in addition, the cost of Supplementary Estimates for the increased effort, the provision of funds for air-raid precautions and to meet any necessary charge which may arise during the financial year in regard to food storage. It seems clear to me, therefore, that the sum to be borrowed will not be £90,000,000, but is much more likely to be £115,000,000, and may reach £120,000,000. Therefore, at the end of the current financial year, on 31st March, 1939, it seems to me that the total dead weight debt will already have reached a figure of round about £8,150,000,000.
  The total cost of the armament programme was originally estimated at £1,500,000,000, but almost every authority who has examined the proposals of the Government admits that the cost will be much nearer £2,000,000,000. We have to contemplate borrowing another £300,000,000 or £400,000,000 in the course of that programme. That means that, even as we hope may be the case, if the international situation may become so auspicious that we can rest upon our armaments provision, we shall have a total dead weight debt of something like £8,500,000,000 to £8,600,000,000. That is an extraordinary position for the country to have to face at the end of eight or nine years of a National Government, which claims to be national because it is said to represent all parties—a Government which was brought in for the specific purpose of restoring financial confidence and financial stability and the return, as was said in 1931, to ways of orthodox finance. When I consider the relationship of the picture we have to face today with what were the circumstances in 1931, then I say that the financial crisis we have to face to-day is far worse in proportion and far more difficult and serious in its nature, because of the way in which revenue resources have already been tapped by the Government, than was the position in 1931. It is to that situation that we want the House of Commons to address its mind to-day.
  Let me examine the position for a moment. I have said that in 1931 our total deadweight debt on national account
  1428
  was just over £7,400,000, but in regard to revenue resources to be tapped to meet the demands at that time let us consider the situation in relation to what it is today. The Government come before us with a Budget which has raised Income Tax from 4s. 6d. to 5s. 6d. in the £. In addition, it has added to the burden of Income Tax the National Defence Contribution of Is. in the £ on practically all industrial and commercial profits. It is therefore, over a wide field of the ordinary Income Tax revenue producing resources, a tax of 6s. 6d. in the £. But in addition, following the fiscal policy for which it had no real mandate in 1931 but which it has steadfastly pursued, it is raising from the general taxpayer, from the consuming public, something like £110,000,000 a year more in taxation of commodities than was raised from that source in 1931. It is doing that in spite of the fact that in the interim it has had the good fortune to convert £2,000,000,000 of War Loan stock at an annual saving of £30,000,000, every penny of which apparently for the last five and a-half years has been liquidated in current expenditure.
  Let me add something else. I come back to a point which was the subject of a little exchange of views between the Chancellor and myself at the end of his wind-up speech on the Budget Resolutions. When the Labour Cabinet met in the time of the so-called crisis of 1931 it was presented by the Treasury with a Bill which the Treasury said the nation had to meet.
  The Chancellor of the Exchequer (Sir John Simon): I suppose it was presented by the Chancellor of the Exchequer.
  Mr. Alexander: I said the Treasury, but I suppose that the Chancellor spoke for them. I do not suppose that the present Chancellor, after his long association and intimate connection with the Treasury, finds it unnecessary to be advised by the very able staff of Treasury officials. In 1931 the Cabinet were presented with a Bill of £170,000,000, and included in that Bill of extra money to be raised in the following financial year were two items, £56,000,000 for the continuance of what we had always met, the annual contribution to the sinking fund for reduction of debt, and £39,000,000 for payment to the United States of America as a proper annual provision.

  1429
  So, of the £170,000,000, £95,000,000 was for the reduction either of the internal or external debt. Apart from meeting the contribution in the first following financial year, 1932–1933, to the United States of America, not one penny piece of those two commitments presented to the Labour Government in 1931 has ever been met by the present Government; and every year there has been this continuance of heavy expenditure. The Government have made no provision for the reduction of debt, and to-day, within a few months of the time when Ministers were talking about prosperity and boom, they are adding day by day, indeed hour by hour, to the deadweight debt that the country has to shoulder.
  I am making the statement as undeniable, that behind the facade of complacent, pharisaical humbug on the part of the Government, the real financial figures in relation to the British Exchequer to-day reveal a state of financial crisis beyond all doubt much more serious and much more devastating in the burdens that the country is being asked to meet, than was the case in 1931. [Interruption.] I heard a word or two, a noise or two from the benches opposite, as though that statement did not meet with unanimity. I make the statement not only with regard to the vast amount of expenditure the Government are asking the country to meet, not only with regard to the increasing burden of debt and unbalanced Budgets, but I state the fact that that is not all, for it is in spite of the Government having enormously increased existing taxation both upon the direct and indirect taxpayers; and I challenge the Chancellor to deny either of those main propositions.
  Apart from a purely verbal statement that they alone are the people who ought to have confidence placed in them, there they stand holding the reins of office, a dying Cabinet. [Laughter.] I notice that there is a little hilarity about that statement, too. When I look at the arrangements made in the last week or two for a reshuffle of the gentlemen who occupy the Government positions, and I find that the two latest additions of added strength, of new life and blood to this super-Cabinet, are the Noble Lord who sits for the Fylde Division of Lancaster (Lord Stanley) and the right hon. Gentleman who is now the Secretary of State for
  1430
  Scotland, both representatives in this House of the most popular and pleasant type of parliamentary colleague, but neither of them calculated to be, either in the mind of the House or in the opinion of the country, added bulwarks of strength to British statesmanship, and when I consider the manner in which this Cabinet has been deteriorating year after year and now month after month, and how they appear to be completely bankrupt of any real live reinforcement from their back benchers, I do not think it calls for dispute when I suggest that the Cabinet is a dying Cabinet, old, weak, feeble, but holding on to office when it ought to get out and let the country begin to deal on a new and rational basis with the greatest financial problem that it has ever yet been faced with in peacetime, far greater and more serious than was the position in 1931.
  I want to add one or two further comments about the present position in relation to the Chancellor's general proposals. In our Amendment we refer to the policy of the Government permitting excessive profits on rearmament and subsidies to private industry. We have had numerous debates in which in some form or other this question of armament profits has come up, but in dealing with the proposals of the Chancellor to meet the financial position it is essential that we should show that before the country is called upon to bear this increasingly heavy burden and at the same time to increase its national indebtedness, the country has a right to demand of the Government that even if every part of the rearmament programme should be found to be necessary, at least it should be provided in the most efficient and economical manner possible. We have warned the Government in the last two years that unless they have some really effective and rational system for dealing with the control of armament supplies, excessive profits at the expense of the nation would be certain to arise. We have already arrived at a situation which enables us not only to check the statement but to give the facts. I hope the House will pardon me if I give the names of a few firms' individual rises in profits. Take the well-known firm of Messrs. Baldwin's, Limited. I see that their net profit in 1933 was £142,000; in 1937 it was £521,000. The Consett Iron Company

  1431
  made a profit in 1934 of £91,000; in 1937 the figure was £636,000.
  Mr. Boothby: Under the National Government.
  Mr. Alexander: My answer at once is that I am glad the hon. Member reinforces my argument. I am charging the Government with the responsibility for such an utter lack of efficient control over armament expenditure that profits are rising to undue heights.
  Mr. Peat: Let us make the position clearer. Will the right hon. Gentleman tell us the capital investments of the companies to which he is assigning these profits?
  Mr. Alexander: I am giving quite clearly the figures of the net profits. I am not arguing about the remuneration upon the capital employed. If you take, as an example, a rise from £142,000 of net profits to £521,000 in the course of two or three years, it is an extraordinary rise.
  Mr. Peatrose —
  Mr. Alexander: I really cannot keep on giving way. I want to give the information that I have at my disposal.
  Mr. Boothby: Does the right hon. Gentleman say that all these profits have come out of rearmament?
  Mr. Alexander: They are very largely influenced by rearmament. I come next to Messrs. Dorman Long, whose net profit in 1934 was £38,000, and in 1937 had risen to £1,013,000. Here are some more figures: Lancashire Steel Corporation, 1933 profits, £96,000; 1937, £628,000. Tube Investments, 1933, £224,000; 1937, £825,000. Vickers-Armstrong, 1933, £188,000; 1937, £867,000. Vickers, Limited, 1933, £543,000; 1937, £1,351,000. I could go on and quote a large number of other typical steel firms dealing particularly with the raw material of armaments.
  I want to come to another aspect of the armament industry. I come to the air side, and I am all the more insistent in pressing home the responsibilities of the Government in this matter—if no other Minister will do it, then the Chancellor of the Exchequer should do it in the interests of national economy—because of the
  1432
  almost insulting way in which the Secretary of State for Air treated the House last night in his complacent reply to the Debate, in which he practically disdained to answer many of the questions put to him. I take the Bristol Aeroplanes, Limited. In 1935–36 they paid a net ordinary dividend, not of 5 per cent., but of 22½ per cent. I am not going to admit for a moment that in a time of national emergency, when the country is called upon to pay as it is now, there is any justification for the payment of dividends at the rate of 22½ per cent. on capital in respect of armament provisions, and I do not believe that the Chancellor of the Exchequer himself will justify it. I take the accounts of the de Havilland Aircraft, Limited. In 1933 the profits were £63,000; in 1937, £213,000. I take Fairey Aviation, Limited. In 1934, the profits were £47,000; in 1937, £248,000. In the case of Handley Page, the net profits in 1933 were £20,000; in 1936, £100,000—an ordinary dividend of 50 per cent. Is there any justification for the payment of dividends at the rate of 50 per cent. owing to the boom in the armaments industry?
  When the Chancellor of the Exchequer says that every worker in the country, or a large number of workers are proud to bear their share in the payment of the Tea Duty towards the armaments programme, we are entitled to draw attention to these cases and to urge that if the Government have not the good sense to see what they are doing and get out now, they should reform their ways and exercise some more effective financial control over this post-war repetition of profiteering at the expense of the nation, which was so rife and so disastrous during almost the whole period of the Great War from 1914 to 1918. It is a pretty comment upon the patriotism of the people who support this kind of thing to remember the answer which was made to me by the present Prime Minister some 15 months ago in debate, in which he asked me how I thought armaments were ever going to be provided for the country in its emergency unless profits were allowed. If that is the case, let me tell the Government that if they will get out and give us a Labour majority we will show how to get armaments without this kind of profit.
  Colonel Sandeman Allen: There has been an increase in wages.
  Mr. Alexander: I went to a by-election in Stafford the other day and the first meeting I addressed was in a small mining village. Some of the men employed in the pit talked to me about their wages. I asked one man what his conditions were, and he said "A six-day week with five days of nine hours each, and my pay docket is 39s. 3d." That is the marvellous effect of a National Government. These are the people who, the Chancellor of the Exchequer says, are proud to pay 2d. on every four ounces of tea which they consume in order to back up the lack of control of profiteering by the Government. [Interruption.] Hon. Members opposite, and also the Chancellor of the Exchequer, do not seem to understand the increase which is proposed on the Tea Duty. As a matter of fact the Chancellor of the Exchequer knows as well as anyone that the tax on foreign tea is 8d., and he also knows that although a substantial proportion of the tea comes from the Empire and is taxed at a rate of 6d. yet, in the long run, the consumer pays nearer 8d. than 6d. I have heard him argue that case many times when he was in a situation different from that which he occupies now, when he was a strong opponent of Imperial Preference and argued that a preference given to Dominions and Colonies was always reflected in the price of the foreign article to the consumer. I am not asking anything unreasonable in urging an increase of effective control of this armament expenditure when you consider its nature.
  The actual armament programme this year will cost 343,000,000, but that is not the end of the story. If you take the £343,000,000 in the fighting Services Estimates, you have to add to that a sum which is not less than £15,000,000 for Supplementary Estimates, and, in addition, the cost of air-raid precautions, food storage, and oil reserves, costing approximately £12,000,000. Therefore, our war preparation for the present year is L370,000,000. Does the House realise that £370,000,000 on war preparation is more than the total yield not only of Income Tax at 5s. 6d. in the £ but also of the National Defence Contribution as well? To raise £370,000,000, Income Tax would have to be 7s. in the £ that is the extent of the provision we have to make in this one Budget for war prepara-
  1434
  tions. Is it unreasonable in such circumstances to ask for greater and more effective control on armament expenditure? We have asked and pressed for a ministry of supply. I go further and say that, instead of having the whole range of shadow factories which are partly vested in private profit-making firms, I would undertake to provide whatever is required of an emergency character on behalf of the nation with no profits except the service of the Government capital employed. It can, and it should be done in the interests of the nation.
  I come to another matter to which the Chancellor of the Exchequer as Minister in a new office should give his attention. He is bound to face the problem of Budgets for some time to come of nearly £1,000,000,000, and I want him, therefore, to give his attention to the subsidy policy of the Government and to go into the question of the actual amount of the subsidies which are now a charge on the public purse. There is one subsidy which is of such long standing that people have begun to forget all about it. I refer to the derating subsidy. It is true that in the case of some of the heavy major industries, especially those of an exporting type, they would be in a difficult position if they had to meet to-day the full burden of local rates, but, as I pointed out during the course of the financial discussions in 1931, there are large numbers of very heavy profit-making firms in the country who are receiving part of this public bounty to-day, the only result of which is to increase the distribution on shares. I have referred previously to the fact that one large firm issued a balance sheet showing a dividend of 85 per cent., and that it was also distributing Li for every four 5s. shares held, and that it was getting this subsidy from public funds under derating.
  The Chancellor of the Exchequer and his successors who will have to grapple with this awful burden of financial responsibility are bound to look at these things unless the whole standard of life of the mass of the nation is, in the words of the Prime Minister, to be steadily lowered for a generation to come. It is not that we are arguing that necessarily every single subsidy which the State has been called upon to bear can be removed, but that now there is such a heavy drain on the public purse

  1435
  they should be reviewed, and that where subsidies are continued two conditions of great importance should be attached—first, that where you give a subsidy there should be guaranteed proper remuneration to the workers, and, secondly, that you should acquire a national interest in the industry which is subsidised. Both these points should be taken into the earnest and serious consideration of the Chancellor of the Exchequer.
  Now I come to the question of the inequitable distribution of the burdens which previous Budgets and the present Budget make in meeting the financial position. In the present Budget there are two outstanding proposals. One is the increase in the Petrol Duty and the other the increase in the tax upon tea. Both of them are symptomatic of the way in which the National Government have been moving the burden from the shoulders of the wealthy to the backs of the poor.
  Mr. Boothby: There has been an increase in Income Tax.
  Mr. Alexander: If the hon. Member had been listening carefully he will know that I have already referred to the increase in the Income Tax, and he need not be anxious, because I propose to refer to the wealth which can yet be taken from the wealthy before I sit down. But the burden to-day upon the poor is altogether out of proportion to that which they are able to bear. Take, for example, the kind of weekly wage to which I have already referred. Let hon. Members consider the family of a miner in that position. At the present time, there is not an article of their food, except bacon, which is not taxed directly, and even bacon is kept at an artificial price by other extra-fiscal methods. The right hon. Gentleman the Chancellor of the Exchequer was once a member of a party which always resisted to the last taxation on food, and now he is Chancellor in an administration which raises taxation on food. In the last financial year, the Government obtained roughly £40,000,000 from taxes on food, and with the addition of the Tea Duty —and we consider tea as a food, for it is a food to the working classes—an amount of £42,750,000 will be obtained from taxes on food alone. In the case of the Petrol Duty, do not for one moment
  1436
  think that that will be felt only be certain captains of industry and wealthy people who use motor cars. When one considers the extent to which the road transport industry enters into the national life nowadays in transporting essential goods, including food commodities, the additional burden that is placed upon that industry by the Petrol Duty is bound ultimately to have its influence on the poorer consumers. We say that these inequalities are not justifiable as long as there remain avenues of wealth in this country which can be taxed for the purpose of meeting the burdens which the country has to face.
  Moreover, there are certain proposals in the Bill which effect slight amendments to the tax which caused so much controversy last year, the National Defence Contribution; but I fail to notice in any of those proposals any relief from the burden in the case of societies which do not make profits, but are engaged in mutual trading, nearly all of which are owned and controlled by the heavily-taxed workers themselves. I do not find any indication in the Chancellor's Budget speech or in this Bill that he has done what he told me last year he would do, namely, look into the question of the profits of certain companies which provide public services, which may or may not be public utility companies, but the profits of which, as I quoted last year, are exceedingly heavy, and many of which are exempted altogether from the burden of the National Defence Contribution. As long as companies providing for public services, having public utility conditions and making large profits, are relieved, then it is completely unreasonable to ask the working classes to pay taxation upon their own mutual efforts or to pay increased taxation upon their food. Therefore, I draw attention particularly to the iniquity of these proposals.
  I could say a great deal about the Tea Duty, but as we had a Debate on it in Committee on the Budget Resolutions, and as no doubt we shall have other opportunities, I do not propose to enter into the details to-day, apart from saying that evidence has already accumulated in my own organisation, which is the largest distributor of tea in the world, that the whole tendency since the return to the tax on tea and its gradual increase during the last three or four years has been to

  1437
  concentrate demand in a larger degree upon the cheaper qualities, with a consequent rise in the price in those common qualities, and a stabilisation—and not an upward trend—in the case of the more expensive qualities of tea which are not used by the working classes. If at any time the Chancellor has any doubt about that, and wants to see the figures, I shall be pleased to show them to him. That is all I propose to say on the Tea Duty now.
  I suggest to the House that, with this nation in face of a growing financial crisis in the National Exchequer, the position is still as the party to which I belong has so often said, namely, that wealth is allowed to increase in limited sections of the community while poverty increases among other sections, and that when one comes to the national burden, it is inequitably distributed among those sections. We say that the Chancellor, in dealing with the very complex financial situation which he had to face, had the opportunity of going to other sources to meet the needs of the moment. Much was said in the course of the Debates on the Budget Resolutions about the fact that, for some reason or other, no recourse has been had to new revenue either from Surtax or from Estate Duties. I know it may be argued that any drastic revision of the rate of imposition on the Surtax payer might lead to the operation of the law of diminishing returns, but after reading carefully the various annual reports of the Board of Inland Revenue, I am satisfied that we have by no means exhausted the extent to which the national burden could be met from the Surtax.
  When I look at the record in regard to Estate Duties, I consider that the case of hon. Members on this side is absolutely proved, and that wealth continually increases in face of the continued deepening of the poverty of large sections of the community. I will quote to the House the figures of the yield from Estate Duties. In 1930–31, it was £82,000,000; in 1931–32, £65,000,000 (the fall was largely accounted for by the low market price of shares); in 5932–33, £77,000,000; in 1933–34, £85,000,000; in 1934–35, £81,000,000; in 1935–36, £87,000,000; in 1936–37, £87,000,000; and in 1937–38, a pound or two short of £89.000,000. During the last few years, there has been practically no change in the rates. In
  1438
  other words, the fortunes of a limited section of the community are increasing year by year. As far as I can see, there is no reason why, in dealing with the national financial burden, the Chancellor should not have refrained from overtaxing that section of the community which is so near, and in some cases below, the poverty line, and turned to those sources of wealth, and distributed the burden in a manner which was more equitable and just than has actually been the case.
  Moreover, that is not the only resource to which the Government can turn. As has been mentioned before by some of my hon. Friends, there is perhaps no more able and well-informed student than the Chancellor of the general principles and law relating to the tax on the unearned increment of land values. When one considers what has happened during the last few months in regard to land values, when one considers the extent to which in incident after incident there has been abuse of land values at a time of national necessity, when land is wanted for national emergency purposes, I should have thought that, considering all the years during which the Chancellor ardently advocated the obtaining of wealth from that source, no one would have been as bold as him in making proposals to the House in that respect. I feel that, however inadequately I have painted the picture this afternoon, we are at any rate justified in moving our Amendment. I repeat that the financial crisis which has arisen so largely from the failure of the Government's policy is far greater than the financial crisis in 1931. [Interruption.] I hear something more like a snort than anything else from the other side of the House. I will give a quotation from someone who is not a Labour Member of Parliament and not a Socialist. A book has just been issued entitled "Can 1931 come again?" This is how the situation is summed up in that book by Collin Brooks —
  "Behind the false facade of prosperity made by rearmament activity, Britain's true economic position is desperate. The remedies must be drastic. What is the disease we have to cure? These are its symptoms: (1) A lack of economic and commercial confidence in Britain itself …. (2) A lack of political confidence … (3) A general lack of confidence, felt abroad, in Britain's stability."
  [Interruption.] I am glad that causes amusement to hon. Members opposite.

  1439
  I shall not be upset if their amusement continues, because it will mean that they will continue to lose by-elections. If they remain in that position of complacency when we put such facts before them, they will go on losing by-elections; but, in the interests of the nation, we would rather that the House as a whole would give its attention to the problem that we have to face. We ask the Government to tackle these problems on the basis which we have outlined, or to make way for those who are willing to tackle them on a sound and rational basis. We ask them in the first place to apply to themselves, and in a more marked degree, the same medicine which they applied in a far lesser financial crisis to the Labour Government in 1931. As a matter of fact, with the grave problem of high Budgets which will come during the next few years, I do not believe that the Government will ever be able, with its political beliefs, to tackle the situation. Until there is a Government that will tackle the international situation on the basis of Labour's foreign policy and get rid of the drift from collective security, and relieve the problem of rearmament by getting a solution of the problem of collective security, it will not be possible to get any remedy. I do not believe we shall be able fully to meet the burden of these national Budgets until we get in office a Government which is prepared, not from the objective of private profit, but in the public interest, to plan and organise the whole of the resources of the nation in the public interest.
  4.44 P.m.
  Mr. Radford: I hope the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) will acquit me of any discourtesy if I do not follow his lengthy arguments, which I venture to predict will be dealt with at a later stage by one who is far more competent to deal with them than I am. I wish to confine my remarks to the matters contained in Clauses 2 and 3 of the Finance Bill, taking Clause 3 first. Clause 3 deals with the Excise duty which is proposed of 9d. per gallon on power methylated spirits. During the Debate on the Budget Resolutions some hon. Friends of mine put down an Amendment to reduce the proposed tax of 9d. to 4½d. I, myself, took part in the Debate and I told the House that
  1440
  I was not a disinterested party, because I was a director of one of the companies distributing this alcohol blend. For the information of any Members who were not present on that occasion, may I say this power methylated spirit, or power alcohol, as it is commonly known, is made in this country, and, to a great extent, from imported molasses. At the same time, there is a certain amount of home-produced molasses used in its manufacture, and it is capable of being made entirely out of indigenous vegetable matter. The Potato Marketing Board at present have a proposal in Section 74 of their proposed marketing scheme that they should be allowed to buy and use surplus potatoes and erect the necessary plant for manufacturing alcohol from those potatoes.
  The only argument that has ever been advanced in favour of the proposed Excise duty of 9d. per gallon on power methylated spirits, is that a certain percentage, somewhere about 15 per cent., of this alcohol has been blended with petrol and not being liable to duty, has caused a certain loss of revenue. This loss of revenue, even on my right hon. Friend's estimates, is on a maximum figure of I0,000,000 gallons, and that is far in excess of last year's consumption, which was 5,600,000 gallons. This loss of revenue from the expected figure of 10,000,000 gallons has occasioned these proposals, but the loss of revenue on between 50,000,000 and 60,000,000 gallons of benzol does not appear to have caused any distress or uneasiness to the Treasury. In fact the committee set up by the Government to report on the possibility of producing more of our motor spirit requirements at home specifically referred to this benzol. I will give their own words:
  " A production in 1936 of 51,000,000 gallons of motor fuel was a helpful contribution to the needs of the country."
  The Committee then point out how it would be possible for additional supplies to be produced here, and they were only sorry that no more than 20,000,000 gallons could be obtained. They were anxious, however, that that much should be obtained. There is a definite difference between this home-produced benzol and the oil made by the hydrogenisation process. In that process the making of oil from coal is the definite goal aimed at, and the coal is destroyed, whereas

  1441
  benzol is only a casual by-product. But in view of the fact that the alcohol, although made mostly from imported molasses, could be made entirely from home-grown vegetable matter, I regret that my right hon. Friend proposes to subject this power alcohol to an Excise duty equal to the duty on imported petrol.
  The only argument, as I have said, that has been advanced in defence of it, is that there is at present a certain loss of revenue. But there are other factors to be taken into consideration, primarily that of the national interest. There are innumerable cases where people buy home-manufactured articles and thereby occasion the Treasury a loss of revenue. Under the Import Duties Act, 1932, cotton and woollen goods for household use, brought from abroad, are subjected to a 20 per cent. import duty. But would anyone suggest for a moment that, because patriotic people were buying Lancashire cotton goods or Yorkshire woollen goods, which were not subject to Excise duty and using them in preference to imported articles, that was not in the national interest, because the revenue was losing money because people were using home-produced and not foreign-produced goods?
  Mr. McGhee: Very unpatriotic.
  Mr. Radford: I think the hon. Member must have been engaged in conversation with his neighbour, for he has got it the wrong way round. I was pointing out that, if they were patriotic and using home-manufactured goods, instead of imported goods, no one would say that, on account of the loss of revenue incurred, you should put an Excise duty on those home-produced goods. What is the attitude of other countries to this manufacture of power methylated spirits from vegetable matter and the blending of it with petrol? The attitude of other countries is more advanced than that of Great Britain. In Italy, about 15 per cent. of the total motor spirit requirements is provided by home-macle alcohol. In the case of our neighbours, Eire, they have a Measure before their Parliament, the Industrial Alcohol Bill of 1938, which will enact compulsory powers for alcohol to be blended with straight petrol in all cases. Japan, in 1937, passed a compulsory measure for the blending of this alcohol with all petrol brought into that country, and at the present time there
  1442
  are no less than 80 plants being constructed or projected for the making of this alcohol out of indigenous vegetable materials. Germany is much the same as Italy. She is making power methylated spirits out of potatoes and the like, in order to obviate her importing more motor spirit than she can help. That shows the view taken by go-ahead countries. Our own Potato Marketing Board is asking for these powers and intends to go in for wider planting of potatoes. Yet the Government have brought in a proposal to treat the product, some of which is even now made out of indigenous vegetable matter, and the whole of which could be made that way in a crisis, on the same terms as petrol imported from abroad. I am hoping, in view of what was said on the occasion of the Budget Resolutions Debate, when the Chancellor of the Exchequer and the right hon. Gentleman the Secretary of State for Scotland, the then Financial Secretary, promised they would look into the matter in the light of that Debate, that we shall hear that their proposals will be amended.
  To go a little further, the Chancellor of the Exchequer announced some eight days ago in answer to a question as to whether he was in a position to announce the decisions of the Government on the report of the Falmouth Committee:
  " His Majesty's Government have decided to accept the recommendations contained in the published report of the Falmouth Committee. Provision is accordingly being made in the Finance Bill to give effect to the recommendation for the extension for a period of 12 years of a guaranteed preference of 8d. per gallon on home-produced motor spirit and Diesel oil for use in road vehicles, subject to the adjustments recommended by the committee."
  My hon. Friend the Member for South Croydon (Mr. H. G. Williams) then asked:
  " Will the Resolution cover motor fuels made in this country from materials other than coal? "
  To which the Chancellor replied:
  " No, Sir. That was not what the Falmouth Committee recommended.''—[OFFICIAL REPORT, 18th May, 1938; col. 406, Vol. 336.]
  I would draw my right hon. Friend's attention to page 54, paragraph 274, of the Falmouth Committee's report, where they say, dealing with the question of future preferences:
  " The present guaranteed preference is available to all processes for producing motor spirit

  1443
  from indigenous materials, and the committee are of opinion that there is considerable advantage in preserving that basis in any extension of the preference."
  Am I not right in assuming that potatoes grown in this country are indigenous materials? Surely "indigenous materials" does not refer only to coal which certainly is a "most favoured commodity" in this country? Surely agriculture is entitled to as much consideration as the coal industry? I would ask my right hon. Friend whether the words I have read out of the Falmouth Committee's Report, namely, that they recommend a guaranteed preference, provided the motor spirit is made from indigenous materials, refers not only to coal but equally to home-grown vegetables? In his reply my right hon. Friend stated that the Government were following the advice of the Falmouth Committee. The Falmouth Committee recommended that there should be no differentiation between petrols made by an process, from indigenous materials. Are not homegrown potatoes indigenous materials? [Laughter.] Hon. Members opposite may treat this as a joke but there are industries which require all possible encouragement and they include not only coal but agriculture. Other enterprising and scientific countries find it possible to make this fuel out of home-grown vegetable matter. Surely it ought to be possible for Great Britain to do so. The Potato Marketing Board show by their proposal that they consider it possible. I ask the right hon. Gentleman, between now and the Committee stage, to make sure whether he is right in restricting this preference. In Clause 2 of the Bill there is a definition of "indigenous materials." The expression is said to mean:
  "coal shale or peat indigenous to the United Kingdom or products produced from those substances."
  Why should our country not be able to do what every other enterprising and scientific country is doing, namely, producing such things as potatoes or artichokes, in order to make this power' methylated spirit? Yet the wording of that definition appears to close the door on any possibility of developing the manufacture of power alcohol in this country from home-grown vegetable matter. I ask my right hon. Friend apart from the question of the proposed duty in Clause 3, to
  1444
  go carefully into that definition. The use of power methylated spirits as a blend with petrol is, as I have said, limited to a certain percentage which, it has been calculated, is about 15 per cent. In other words, if anyone were to have this power methylated spirit given to him to blend with petrol in the proportion of 50–50, he would not take it, because it would ruin the blend. There is, therefore, a limit to the extent to which it can be used. This is not a matter merely of ekeing out petrol. The blending of a suitable proportion of alcohol with petrol raises its anti-knock value or what is called in the trade its octane rating.
  If there is one problem which the country will have to face in time of war more serious than another, it is that of the provision of aviation spirit. By a suitable blend of power methylated spirits and benzol with petrol which would otherwise be unfit for aviation spirit, it can be raised to the level of aviation spirit. Let the House remember that we buy our aviation spirit mostly from the United States or South America, or the Dutch East Indies. Supplies from the Dutch East Indies would have to run the gauntlet of the Mediterranean and, as to the supplies from the United States, under the Neutrality Act of 1937, the export from the United States of what can be clearly defined as munitions, is prohibited in case of war, to either of the combatants, whether the combatant is a victim or an aggressor. The President has also power to prohibit the export of things which are in his judgment ancillary to the conduct of war. It is clear that under these conditions the export of aviation spirit to this country from the United States might well be prohibited, if we were involved in a war, even though we were the victims and not the aggressors.
  We do appeal to the right hon. Gentleman to consider the matter seriously before he decides finally on the imposition of this duty. This is a young industry and we feel that the right hon. Gentleman is in danger of discouraging it fatally. We also ask him seriously to consider the provisions of Clause 2 so that the guaranteed preference shall be available not only in accordance with the definition of indigenous materials contained in Clause 2 but shall also be available for the products of vegetable matter grown in this country.
  5.7 P.m.
  Mr. Graham White: I propose to make some observations later on the subject of power alcohol to which the hon. Member for Rusholme (Mr. Radford) has referred, and I say nothing more about it at the moment except to congratulate the industry upon having such an able advocate in this House. Without any interest in, or prior knowledge of, the industry, I look upon this new form of tax from an impartial point of view and I am bound to say that such evidence as has come before me, has led me to a conclusion which differs somewhat from that placed before the House by the hon. Member. To return, however, to the general and somewhat sombre aspect of our financial affairs, may I say that no one who has given much attention to the course of our finances would quarrel with the statement of the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) that we are in a condition of crisis and, furthermore, that the crisis is bound to continue as long as the international tension remains and we are obliged to make such tremendous efforts as we are making in the cause of Defence. Not only is this year's Budget conditioned, but future Budgets as far ahead as we can see, will be conditioned and controlled by the interests of Defence. We shall make a profound mistake if we think that there is any easy escape from these liabilities or if we underestimate the importance of maintaining, cost what it may, our financial structure on a sound basis.
  It is with a sense of gratitude that we see that the Chancellor of the Exchequer has avoided the devices which were suggested to him in various quarters. If we wish to see the consequences of unsound finance, we have merely to look at what has happened in other countries. If we are to avoid the dangers and difficulties which always follow the adoption of some form of closed economy, with all its restraints upon liberty and upon the remuneration of the worker, we need to steer our course very carefully at the present time, and we must be prepared to shoulder even heavier burdens than those which we are considering to-day. It is something that, in the present situation, we have turned away resolutely from devices which, though they might have served the purpose for the moment, would not have solved or even ameliorated our long-term problem.
  1446
  Other countries have found it necessary to curtail liberty and to submit to an extraordinary degree of control in all aspects of industrial life. They have adopted the expedient of "buffer Budgets" and even in this country, it is suggested that we might have something of that kind in order to help us to meet the expenditure upon armaments. But the "buffer Budget" is nothing more than a shock absorber. It is a series of dodges and devices for deferring default.
  If mankind is so mad or so foolish, as to continue to allow his efforts to be frustrated, by devoting the whole of the surplus available from those efforts to purposes of destruction, let us, at any rate, make up our minds that, as long as it is open to us, we will avoid any departure from the path of sound finance. It is true that the last War used up the resources which had been accumulated in this country on the foundation of sound finance laid by Mr. Gladstone. It is extraordinary to think that one of the most beneficient results of the labours of that great man was to enable the last War to be won on behalf of freedom. At the moment the actual position is that rearmament has just had the effect of cancelling out from an Exchequer point of view, the whole of the gain from the expansion of national revenue, since the National Government took office. That, in a sentence, is the net result of the Budget before us, and it is the arithmetical measure of the long series of lamentable events which has brought the foreign policy of the Government to such a lamentable conclusion.
  I have no doubt that if it should be necessary for us to shoulder even heavier burdens than those here proposed, we can do so. I believe the country would be willing to do so on certain conditions, and those conditions are fairly simple. The first is that the taxation which we are asked to pay should be fair as between one taxpayer and another. Adam Smith, who is little quoted in this House in these days, said that a tax must be "clear, definite and equal," and that is a useful test to apply to any taxation proposals even in these times. The second condition is that not only must there be no waste in expenditure, but that the people must be satisfied that there is no waste, and the last part of that condition is, in

  1447
  my judgment, even more important than the first. People are far from satisfied at the present time that there is no waste. We do not need the great array of figures and statistics quoted by the right hon. Gentleman who opened the Debate, to arouse the feeling in people's minds that there is waste. The third condition on which the country would be willing to undertake these added burdens is that the armaments which are being provided at such enormous cost will be used only for purposes of which the nation approves, and behind which the nation can rally in unity. There is one other condition. People must be satisfied that no undue profits are being made out of the necessities or misfortunes of the nation.
  The right hon. Gentleman the Member for Hillsborough made a passing reference to the Income Tax, and I would like briefly to draw attention to the change which is taking place, or appears to have taken place in policy as regards the Income Tax and the nature of our direct taxation. The Chancellor of the Exchequer, by increasing the standard rate of Income Tax, has altered the progressive character of our direct taxation. From the point at which the standard rate comes into operation up to the Surtax level of £2,000 the increase is equivalent, roughly, to 10 per cent., but from £2,000 upwards the proportionate increase falls away. That appears to be a change in the character of direct taxation, and significance is to be derived at the present time from the fact that while this year Income Tax is higher than in the crisis year 1931, Death Duties and Super-tax remain at the same level. It would not have been impossible by means of some combination of an increase in the standard rate of Imcome Tax with increases in other forms of direct taxation to bring before us an instrument which would have achieved the same, and possibly an even greater, revenue, with more efficacy and less disturbance to business as a whole.
  Bearing in mind the condition that taxes must be fair between one taxpayer and another I would say in passing that there is a feeling among some of the bigger insurance companies that they are not being treated quite fairly in relation to the National Defence Contribution. They do not in any way wish to contract out of the general liability for the National De
  1448
  fence Contribution, but they fail to see why, in respect of the income from those funds which they accumulate for the benefit of insurers against fire, burglary, accidents and one or two other forms of insurance, they should be called upon to pay anything to the National Defence Contribution as though it were an ordinary part of their trading profits. The result is that in comparison with other industrial corporations they are called upon to pay a higher and, as they say, an unjust proportion of the tax. In the later discussions we shall have an opportunity of dealing with this matter in more detail.
  I will now say a word or two with regard to the question of power alcohol which was raised by the hon. Member for Rusholme. It seems to me, on an examination of this matter, that it is a subject of taxation which seems to answer most of the qualities that ought to justify a tax. The growth of the manufacture of this material has been very rapid and almost phenomenal. The amount of power alcohol blended with petrol has risen from 18,000 gallons in 1931 to 6,369,000 now. The hon. Member said that the Chancellor's proposal would close this business down. I notice, however, that the Chancellor, in his estimates, budgets not for a decrease in the use of power alcohol, but for an increase of something like 3,000,000 gallons in the current year. That seems to me a most desirable thing, and I shall have something to say about it later. Here is an expanding production and the increase in taxation will not have the effect of choking down what the hon. Member says is a desirable development.
  Mr. Radford: By taking thought you cannot add a cubit to your stature, and because the Chancellor has said that during the coming year the gallonage will be so-and-so, that does not mean that it will actually be so.
  Mr. White: But I presume that the Chancellor, in making his estimates, has relied on the best advice which is available to him.
  Mr. Macquisten: The advice that he gets from his experts is not advice but prophecy.
  Mr. White: In a matter of opinion prophets must either agree or disagree, but when the Chancellor of the Exchequer, supported by the best advice

  1449
  available, comes to the House and gives us that advice, we should be well advised to accept it. The hon. Member for Rusholme went on to develop the matter further, and suggested it was a great pity that the distillation of this product from potatoes should not be encouraged. since this matter was first projected and brought before the House, considerable argument and controversy have developed in regard to it. In the "Manchester Guardian" there was an article which took a different view from the one which the hon. Member has put forward. The "Times" was on this matter in complete agreement with the "Manchester Guardian" and dealt with the arguments which the hon. Member has placed before the House, and dealt with them faithfully. I have here another paper, a less decorous but more popular paper. The matter seems to have become news, for in the "Daily Express" of 2nd May the whole matter is set out with captions of the kind which are usually reserved for the activities and antics of celestial bodies in the film world.
  Reference is made therein to the enormous profits which are being made by those who have demanded that this product should be free of tax and who are, in addition, receiving an Excise subsidy of something over 8d. a gallon. The right hon. Gentleman who spoke above the Gangway referred to the profits of armament firms, but some of the profits which are indicated as having been made in this commodity put anything which the right lion. Gentleman mentioned in the shade. There is one company—the Petroleum Storage and Finance Corporation—which between 1929 and 1931 seems to have doubled its capital and to have paid dividends of an amount that might be regarded as beyond the dreams of avarice. In 1929–30 the dividend was 8 per cent., and a year later 20 per cent. Then there seems to have been a setback when there is no dividend on the ordinary capital. But in 1935–36 it was 72 per cent. on the deferred capital, and in 1936–37 it was 344 per cent. on the deferred capital.
  Mr. Radford: I told the House I was a director of one of the companies that blended and distributed this motor spirit. That is the company in question. It would be only fair if the hon. Member mentioned that the deferred shares were Is. each and had been without dividend
  1450
  for many years previously. About three-quarters of that company's business did not touch alcohol at all. It did not, therefore, make its money out of what the hon. Member described as an article free from duty; and what about the people who distributed over 50,000,000 gallons of Benzol free of duty? Are they making nothing out of it?
  Mr. White: Those who know me in the House know that I am the last to wish to be un fair to anybody, and if I have exaggerated in any way I am sorry. These are not figures taken from the "Daily Express." I took them for greater accuracy from the Stock Exchange Year Book. In spite of the hon. Gentleman's intervention, I still cannot help thinking that on this occasion the Chancellor has found a subject of taxation which will commend itself to the House. I hope that he will not be prevented from carrying the Clause which he has inserted in this Bill.
  With reference to the Tea Duty, the Chancellor in the discussions on the Budget said that there was no such thing as a good tax. I do not know that I agree with him altogether, but perhaps I may have his acceptance of the proposition that in the category of necessary evils there may be variations in the degree of merit. The tea tax, I think, is a very bad tax, and there is really nothing to be said for it. I hope that anybody who may be tempted to defend it will not allow himself to say it is a tax that falls equally upon the consumers, because that is not the case. It was not the case when the tax was raised by 2d. before, nor is it the case on this occasion. The tax falls on the poorest members of the community because tea is their main beverage. The poorest consume far more than the average of 9 lbs., which is the average of the country as a whole. The poorest people are the only people who pay the full tax because there are no cheaper qualities which can be bought. Upon them falls the consequences which flow from the imposition of the tax, for it concentrates all the buying power of the market on the cheaper qualities and thus forces up the prices of the cheaper qualities.
  When the tax was put up 2d. two years ago, that process went on steadily, with the result that a further 2d. had to be

  1451
  added to the price of the cheapest blends. I do not know whether that will follow now, but the process has already started. since the Budget was introduced there has been an addition of one halfpenny to the price of tea in the auctions. It is inevitable that the imposition of the tax will attract to this country some undesirable and cheap qualities of tea from Japan and China. An effort will be made to try to produce a blend of tea which will be within the reach of the poorest people. If the Chancellor wishes to introduce a tax upon tea which will fall equally upon all consumers, he must arrange that all tea shall be of the same quality and sold for the same price. That is the only condition on which it can be done. This tax is placed on a product which is finding it hard to maintain its consumption, for it is competing with a large number of other beverages which are heavily advertised. The consumption is, in fact, declining. It is unfortunate that at a time when planters have devised a plan for popularising tea, and are spending about £50,000 upon advertising it, a step should have been taken which will neutralise the effect of what they are trying to do.
  I notice that some growers in Ceylon and India are petitioning the Governments of Ceylon and India to protest to the Home Government against the imposition of this increased duty. We do not wish to have any extension of the discord between India and ourselves. In the world to-day conditions are not very happy as regards trade, and we do not wish to have any further trouble over a thing of this kind. I would also remind the House of the great disadvantage which growers of tea in India and Ceylon suffer owing to the continuation of the preference of 2d. per lb. in the duty upon Empire tea. The result is to divert the natural flow of the exports of tea from India and Ceylon. As one illustration of what I mean, before the preferential duty the Australian market used to import about 75 per cent. of its tea from Imperial sources, India and Ceylon, but the quantity has now fallen to 25 per cent. I do not ask the House to rely upon my word in this matter. Here is the statement of the chairman of one of our biggest planting concerns, who said on 17th May:
  1452
  " He again emphasised the harmful effect on British Empire teas of the preferential duty applicable to them in this country. Teas displaced from the London market had in turn displaced Indian and Ceylon teas in outside markets, and he was convinced that it would be in the best interests of Empire producers if the preference were removed. The recent additional duty of 2d. per lb. would tend to accentuate the demand for commoner teas and diminish the demand for medium and better qualities."
  If the right hon. Gentleman wishes to help consumers in this country, to help planters, and to help the development of the tea trade, the simple course would be to do away with the differential duty. That is a proposal which has the support of the planters and of the practical experience of the trade.
  My right hon. Friend the Member for Caithness (Sir A. Sinclair), in his speech upon the Budget Resolutions, commended a series of proposals to the Chancellor of the Exchequer as a means of fortifying his Budget. Among them was a proposal for an investigation—on lines such as we have had experience of in our administration, or on some other appropriate lines—into the vast expenditure in our own country to-day. In his reply the Chancellor made rather light of that suggestion. He went over various items of expenditure in which he said, very truly, the House would not wish to see any economy made, and in that way, by a series of subtractions, he reduced the field of investigation to very small proportions. But I would point out that we are not dealing with a level of taxation which is going to decrease; indeed, we have increases in prospect, and I suggest in all seriousness that the sooner the right hon. Gentleman does institute some process of investigation into and control of expenditure the greater chance there will be of the people being willing to shoulder the vast burdens which he is calling upon them to undertake.
  Even as things are I am not by any means sure that waste is being avoided, and I will ask the right hon. Gentleman to give attention to one specific matter in connection with the social services. Nobody wants to curtail any benefit which comes to any individual who is a beneficiary under the great system of social services which we have built up in this country, but I would draw attention to the tremendous growth of the purely administrative expenditure of the Unem-

  1453
  ployment Assistance Board. In the year 1932–33 there was a weekly average of 988,000 payments to applicants for allowances, and the administrative cost was £3,385,000, or something like £3 4s. per head. The work at that time was being done by the Ministry of Labour in conjunction with the local authorities. In 1933–34 the number had fallen to 957,000 cases per week on the average, but the expenditure had risen to £3,740,000. The Unemployment Assistance Board took over the work in 1936, and for the year 1936–37 the average number of payments weekly was 600,000, something like one-third less, while the expenditure of the Board in making those payments had risen to £4,430,000, or something over £7 per head.
  There is no beneficiary under that scheme of public assistance who has derived any money benefit at all from that increased expenditure. I ask the right hon. Gentleman to direct his searchlight in that direction, and there are no doubt other directions in which he could look because this is an important matter. The stability of our finances, and the willingness of the country to bear the burdens which are placed upon it and which are grievous enough, demand that we shall have the knowledge that no waste is being incurred. I have already spoken longer than I had intended, but in conclusion I would ask the Government to realise that the only hope of any substantial amelioration of our financial position lies in the prosecution of a policy of appeasement.
  5.37 P.m.
  Brigadier-General Sir Henry Croft: The speech with which the right hon. Member for Hillsborough (Mr. Alexander) opened the Debate was forceful and wide in its compass, and interested everyone, I am sure. He had a few flings at His Majesty's Government, and among other things brought in a reference to the by-elections. He will forgive me, I hope, if I recall in passing a series of by-elections many long years ago when I was a young man seeking to enter the portals of this august assembly. There were no telephones in those days—perhaps that will not be believed—and I used to get a young man to cycle out to me in the middle of the night to tell me the latest triumphs in those by-elections. It was during a period when the
  1454
  fortunes of our party were very low, and I was delighted to think that the future for us was most rosy, because we won every one of those by-elections—I think there were six in all. I see one of Inc culprits in those night adventures sitting on the Government side of the House now, and I am sure he will remember that series of great by-elections which made us imagine that the country had changed its mind. The fact is that it is rather good for a Government to lose one or two by-elections, because they arc always won back in the General Election, and it stimulates interest in politics when it might otherwise be at a low ebb.
  Although later I may have to say a word or two of warning to my right hon. Friend the Chancellor of the Exchequer, which I hope he will not take amiss, I should like to say now, with regard to the general principles underlying the Finance Bill, that in my opinion the people of this country ought to be grateful to the Chancellor for the sanity of his policy and for the fact that he is not gambling at a time when things are so uncertain in the world. Gambling may be wise if there are definite indications of a movement towards prosperity, but it cannot be justified when conditions are static, or when there is the amount of disturbance in the world which we see at the present time. I, for one, feel that he has chosen wisely. As an income-tax paper I very much dislike this increased imposition, but who have been more guilty of asking for the insurance of the safety of this country by adequate defence measures than I and those who think with me? I am glad to find that hon. Members of the Labour party are also now demanding increased measures of defence. What right have we to demand that our country shall be made safe if we are not prepared to face the fact that it must inevitably mean a greater burden upon all classes? Therefore, I think we should realise that the addition to the Income Tax was an equitable form of increasing taxation. As to the Tea Duty, everybody dislikes a tea duty, but it must be admitted that if we want to tax a commodity which is consumed generally by everybody in the country there could not be a fairer choice.
  Mr. Silverman: Does the hon. and gallant Gentleman really say that the drinking of tea by people with incomes

  1455
  of his standard is so great in proportion, or is so important, as it is among people at the other end of the scale?
  Sir H. Croft: Not for one moment. What I was trying to convey was that probably everybody drinks tea, and that if, after the extra tax placed upon the rich, a still further contribution to revenue has to be found, you probably cannot find fairer taxation than the Tea Duty. It is quite understandable that the Opposition should make a great deal of the increase of 2d. in the Tea Duty; I should have done the same thing myself if I had been sitting on their benches; but I must remind them that when my right hon. Friend the Member for Epping (Mr. Churchill) was Chancellor of the Exchequer and took 4d. off the Tea Duty he got no blessing from them, and, indeed, was almost cursed. One of the most vigorous leaders of left wing thought in this country said, "What does this mean to a working-class family in the course of a year? Only 7s. 4d. Thank you for nothing." In the General Election people all over the country were told that this remission of 4d. was no advantage to them. If that were so, then an increase of 2d. in the Tea Duty cannot mean such an appalling burden as the hon. Member who has endeavoured to assist the fortunes of the Liberal party by his eloquent speech would have us imagine.
  In reference to the increases in both the Income Tax and the Tea Duty I would say to the people of this country that it is far more important that they should be able to live free from the fear of death than enjoy a little temporary ease or comfort. We have to face the fact that the money for Defence must be found, but I entirely agree with the hon. Member for East Birkenhead (Mr. G. White) that in view of the vastly increased expenditure upon armaments it is vital that we should look afresh at our general expenditure. We cannot carry both burdens. In one of our country districts not long ago I was talking to a distinguished man who remarked, "In the near future we are going to spend £400,000 upon educational establishments in this area." That is very good in good times, but when we know that the children of school age are decreasing in numbers, are we wise in going ahead, at this time,
  1456
  with great expenditure upon educational establishments? It is to satisfy a need which, though desirable, is not imperative.
  I should like to refer to the speech of my hon. Friend in relation to power alcohol. It was an eloquent speech. I look at this matter from a rather different standpoint from the hon. Gentleman who spoke before me. I submit that we have come to a decision that we should never discriminate, if possible, against home industries. Having, after due consideration, decided that we should give an advantage to certain power liquids, we should not go back upon it in the case of power alcohol. We should treat it in the same way as we treat benzine. The hon. Gentleman said: "Look at the profits," but the Chancellor of the Exchequer knows as well as any of us that he likes success from which he can recover the finances of this country in the days to come. Let us not hear criticisms, especially from the Liberal benches, suggesting that an industry must be taxed because it is a success. Successful industries are necessary in order that we may be able to wring taxation from them as a result of their high profits.
  One or two emphatic remarks were made by the right hon. Gentleman the Member for Hillsborough. He instanced four or five industries in this country, saying "Look at the increase in profits." If he really went into the history of those industries I wonder what he would find. I have not been able to check the facts, but the right hon. Gentleman cited Dorman Long. I am not in the City, and so I do not know. He cited the Consett Iron Company, and other companies, and called attention to their subscription lists. Does the right hon. Gentleman) realise that from the days of the blight when he and his colleagues were in control of the government of this country several of those companies have paid no dividend or only a very small one? Is it not a fact that some of the industries which he mentioned have issued great blocks of new capital and are expanding greatly; but is it a crime that the National Government are succeeding in bringing about expansions in industry which have given immediate employment to large numbers of people in all these industries?
  Mr. Alexander: And bonus shares to the shareholders.
  Sir H. Croft: Certainly. It must be of advantage if you are making an industry so successful that you are able to extend the advantage to the shareholders, as the right hon. Gentleman and those who take that line of argument are inclined to forget. I think I am right in saying—and were the hon. Member for Oxford University (Sir A. Salter) here at present he would probably bear me out because he, like myself is an economist. [Laughter.] Yes, I have been an economist all my life. I spend three hours every morning studying world returns. I may not be able to put my case well, but at any rate I study these matters as much as hon. Gentlemen. Until recovery came about four years ago, during the preceding eight years the average rate of interest on capital in this country did not exceed something between 4 per cent. and 4½ per cent. Even if you had a Socialist Government in this country British credit would hardly be able to borrow from the rest of the world at a rate much better than 4½ per cent. I am talking of capital invested as a whole.
  Hon. Gentlemen say: "Look at these vast ordinary profits," but I reply: "Look at the number of companies who paid no ordinary dividends at all until the recovery four years ago." We see increased profits to-day from firms who made no profit at all before. I mention this aspect of the matter because we ought to get a fair outlook upon the whole subject and not pick out two or three industries for castigation. I will give an instance of what I mean. Here I think the right hon. Gentleman will probably agree with me. We want to stop profiteering, but none of us will deny a reasonable profit on every article of armament which is required. You may say that the industry which is producing Zoo aeroplanes ought not to be allowed to make great profits, but if it is producing 2,000 aeroplanes we are always ready to see a reasonable profit on everything they turn out. Surely that is right. [HON. MEMBERS: "No !"] That is efficiency.
  Hon. Members: No!
  Mr. Alexander: If the hon. and gallant Gentleman were engaged in business would he not want a reduction upon a quantity?
  Sir H. Croft: Certainly, I would, but I would say that I was going to get speed
  1458
  in my production. If the profit upon the single article is not excessive I do not mind how much profit the industry makes. I might give the homely example of Messrs. Coats. I have not followed the fortunes of that firm lately, but I think they have made very great profits and that they have been rather an asset to this country. [Interruption.] I hope hon. Members will bear with me. I do not want to delay my speech on these points, but this is an example of what I am trying to point out. I think that the actual profit they made upon a reel of cotton was ½d. Who else would have been content with a profit like that? The cheap cotton thread that they gave to the housewife in this country was the result of their enormous production. If we got that production in aeroplanes, or in other munitions, it must be to the advantage of the State.
  Mr. Benson: Are we not getting that enormous production in aeroplanes?
  Sir H. Croft: I do not want to make a speech on that subject. Pressure came from various parts of the House that we must have greater expansion in air production. It would be folly to try to reduce the legitimate profits upon the article turned out. What we want to see is a speedy production. I am sorry to have been taken off my main theme.
  The adverse balance of trade of this country is a serious matter. Last year it was £443,000,000. I think the President of the Board of Trade gave a slightly different figure by eliminating silver at about £11,000,000 from the figure. Following upon the adverse balance of trade last year, taking all invisible exports into consideration the adverse balance was £52,000,000, and that of the year before at £18,000,000, and it appears that for the first four months of this year the adverse balance of trade has increased, taking the world over with ourselves, by £17,000,000. If that rate were continued for the whole year—although no one can prophesy on that subject—it would mean an increase of something like £68,000,000. If you add that to the adverse balance last year and to the increase in last year's balance, the total increase is over £100,000,000.
  Mr. White: £118,000,000.
  Sir H. Croft: I was going to say £120,000,000. Heaven forbid that we should make alarmist speeches, but it

  1459
  seems a good thing that we should take action early when we see tendencies approaching. I had the audacity in 1928, speaking in this House, to point out that the adverse balance of trade was going against us and that before 1932 we should have a very difficult situation unless steps were taken to rectify that adverse balance. I ask the Chancellor of the Exchequer whether, in view of the present tendency of world trade, we can hope that invisible exports will be much better than last year. I do not want an answer now, but I doubt whether they will be better, or that our interest on world investments will be much better than it was last year. If that is so, ought we not to take steps now to rectify that position? It may surprise hon. Members who have not followed these matters to be informed that we are importing practically as much into this country to-day as we were importing before the tariff was introduced. It is very surprising. We are importing at an increasing rate large quantities of manufactured goods which we are definitely capable of producing.
  When Lord Runciman was President of the Board of Trade in this country, he saw dangerous times, which were rather similar in a way, and he even went so far as to impose an abnormal Import Duty. If we see people losing their jobs in this country owing to greatly increased importations of foreign manufactured goods, would it not be wise once more for the Government to take a hand, apart from the Import Duties Advisory Committee, and put a check on the flood which is now coming in? In reply to questions, Ministers say that Opel cars are no longer coming in. If that is so, the probable reason is that Southampton Docks are so congested that it is no good sending any more. I travel by Southampton Docks every week. The place was black with them. It was like a swarm of bees, all coming in so suddenly. It has had a very serious effect upon the producers of cheap cars in this country. Think of all the men employed in these industries. Has not the time come for exceptional treatment in this matter?
  Did time permit I could give a long list of Class 3 manufactured goods, showing a surprising rise of imports in the last two or three years, not only in the bulk, but in the percentages; truly re-
  1460
  markable, but I shall not weary the House with the figures. Hon. Members are probably aware that out of the Class 3 list of goods—goods like textiles, silks, wrapping paper, typewriters, motor cars and other goods, which we have certainly proved able to produce ourselves—there is an enormous increase in imports in the last two or three years. If that is so, and if people are no longer being absorbed in larger quantities into employment, let us be frank. As the result of the policy of His Majesty's Government, we have 300,000 more people at work to-day than a year ago, and in April more people employed than ever before in our history.
  Mr. Quibell: Who is buying these cars?
  Sir H. Croft: I do not know, but I say, do not let them. I ask His Majesty's Government to consider these facts. Not only is there the rising tide of the adverse balance of trade, but even in the countries with which we have made trade agreements in recent years, the adverse balance is increasing against us. Perhaps I may just give, briefly, to show what I mean, the names of countries with whom we are on very good terms and with whom we have made trade agreements. In the case of Sweden, our adverse balance of trade has increased from £1,500,000 to over £3,000,000; in the case of Norway, from less than £500,000 to nearly £1,500,000; in the case of Denmark, from £3,750,000 to over £4,500,000; in the case of Germany, from over £1,000,000 to £1,500,000; in the case of the Netherlands, from £1,500,000 to £2,000,000, and in the case of Belgium the same. In the case of France, a favourable balance of £2,000,000 has become an adverse balance of £300,000. In the case of Japan, the adverse balance has increased from £1,250,000 to £2,000,000, and in the case of the United States of America from £11,000,000 to nearly £31,000,000.
  Surely our trade agreements, if they had been wisely drawn, would not have permitted of a progressive adverse balance of trade against us in all these cases. Everyone knows, of course, that the Government were really out to create a bigger flow of trade between these countries and ourselves. They are friendly countries, and I do not want to say anything unfriendly to them, but we

  1461
  do not want continually to see the balance of trade going against us, and surely that question must be considered when these treaties fall for reconsideration. In the case of the United States, the adverse balance has increased at a truly alarming rate during the last four months. We have had an adverse balance for the last three years of over £180,000,000, and during the last four months it has become greater than it was before. Surely this indicates that when we are discussing, as we want to do, the promotion of a trade agreement with the United States, we must insist that at least the main result of that agreement will be that the adverse balance will be greatly lowered, and that we shall be trading more on equal terms than has been the case in the past.
  The one hopeful picture,' looking round the world, has been the fact that the British Empire has been buying more from us than all the rest of the world put together during the last four months. That is a wonderful result of our longterm policy, and I believe that in these difficult days we should do everything we can still further promote trade between the various parts of the Empire and this country. With all the dangers of the world before us, can we not get together as a nation with the fraternity of British peoples overseas, and say that, if all the rest of the world is insane, we at least will be brethren and get together to extend our flow of trade and improve the lot of the workers in all our countries, for our mutual strength and unity. If His Majesty's Government can concentrate in the future on making the flow of trade between the various parts of the Empire still more liberal and still more rich, will not that be one way of ensuring the strength of this country, and, by ensuring our commercial strength, ensuring the defence of the British Empire as a whole?
  6.5 p.m.
  Mr. Poole: I claim the indulgence of the House, as this is the first occasion on which I have spoken in this Chamber. I was delighted to hear the previous speaker say that it was good for the Government to lose by-elections. I am very glad to have had the opportunity of bringing some goodness to this Government, who are badly in need of it. I have dared to intervene in this Debate only because of the circumstances following that most important by-election at
  1462
  Lichfield. My opponent gave, as the prime reason why he was not successful and I was, the fact that the Chancellor of the Exchequer had introduced a Budget which was very much in my favour and was certainly not in his favour. Therefore, I feel that my first act of worship in this House should be at the shrine of one who has made it possible for me to sit here, and for that reason I have ventured to intervene in this very important Debate.
  The whole House, I feel sure, is impressed with the magnitude of the burden which we as a nation are now called upon to face. The Chancellor of the Exchequer, in his Budget statement, made it abundantly clear that he would expect all sections of the community to bear their fair share of that burden. Whilst we on this side of the House may be prepared to accept that statement if the burden be equitably distributed, we place the responsibility, first of all, for the need for that burden, as the right hon. Gentleman the Member for Hillsborough (Mr. A. V. Alexander) has done, on the shoulders of the people to whom we think it rightly belongs, namely, the present Government, for their failure in foreign policy. That is the primary cause of the necessity for this burden. More than that, we feel that there is no equity in the distribution of the burden under the present Finance Bill.
  I have been endeavouring to imagine just exactly what it was that inspired the Chancellor of the Exchequer in fixing his taxation in the manner that he has. I visualised him, with the idea of equity of distribution of the burden, thinking that various classes of the community should pay their contribution towards this expenditure. I visualised him looking at the ordinary working-class man and woman and saying, "These are people who ought to pay, and they can only pay by taxation upon their basic commodity of food. Therefore, I will impose an extra 2d. on tea." Then visualised him coming to the middle class and saying, "What is there different in this class that I can tax, so that I may call upon them to bear their share of the burden?" and suggesting to himself that this class of the community were people who perhaps were fortunate enough to have motor cars, and that they might pay in the form of additional taxation upon motor spirit.

  1463
  Then I visualised him as coming to a higher stratum of society—I must confess I am not an authority on class distinctions—where the people were fortunate enough to pay Income Tax. I state openly in this House that I have never been fortunate enough to have to pay Income Tax. [Interruption.] It is not even coming to me. I have additional responsibilities, and I also have some knowledge of how to fill up an Income Tax return. I think I shall be fully exempted, even though I have achieved the status of an hon. Member of this House. The right hon. Gentleman arranged that that section of society should share the burden by paying another 6d. in the in Income Tax. There is still another stratum of society—and this is why we feel that the burden has not been equitably distributed—there is another section of the community who ought really to have borne a larger share of the burden, namely, the Super-tax payers, the armament manufacturers, the financiers in the City, who apparently are not going to be called upon to shoulder any additional burden.
  The injustice of the taxation as regards the poorest section of the community lies in the fact that it hits the homes of the workers of this country. What is 2d.? I can imagine hon. Members on the other side of the House saying that 2d. is such a small thing—that in the average working-class home, where they consume a pound of tea a week, they are only called upon to pay 2d. extra. I can quite sympathise with the inability of hon. Members to understand just exactly what an additional 2d. means in the budgets of some working-class homes. One can only appreciate the effect of a 2d. increase on a basic commodity in household use if one has felt the need of 2d. at some time in one's own experience. It is only when you have felt, perhaps through the grievous sickness of a child of yours, the necessity for providing for that child something that it needs, and have lacked even the elementary 2d. to pay for it, that you can understand the effect of a small tax of 2d. on a pound of tea. That is the difference, and that is why I am afraid the Chancellor himself and hon. Members opposite have failed to appreciate the tremendous significance of the additional 2d. on tea.
  1464
  The petrol tax, too, is a tax which of necessity must also hit the poorest homes in this country. What is that tax going to mean to the municipal transport undertakings? It is going to be reflected, of course, in increased transport costs and increased fares for the working-class housewife every time she requires to go from the new estate into the centre of the town to do a bit of shopping. Miners, factory workers and others who are called upon to travel long distances by bus will have to pay increased fares, which they can ill afford. Foodstuffs which are brought into our great industrial centres by road motor transport will of necessity have to be increased in price, because motor transport undertakings to-day cannot afford to bear any additional burden of taxation without its being reflected in the price they charge for the services they render, since price-cutting in road transport has now been reduced to such a fine art that 'there is no margin for taking on additional taxation such as this without passing it on in the price of the services rendered.
  In the division which I have the honour to represent, there is a large body of people who work in the city of Birmingham and in Coventry, many of them engaged in carrying out the rearmament programme of the Government. They are compelled to live some 15 or 20 miles away from their employment, having been driven right out of the industrial centres and into the arms of the building societies. Because of the restricted housing legislation of the Government, they have been compelled to engage, through building societies, in the purchase of their houses, and then, in an endeavour to eke out their income and make their position better, they have undertaken the purchase of a motor car in order to reduce the cost of transport to their employment. Here they are taxed again a second time. Their tea having been taxed, their motor transport to their work is also taxed. Therefore, I say that the burden is not by any means equitably distributed. Moreover, through the National Defence Contribution, these same people who are members of co-operative societies are taxed yet again to the extent of 3s. 6d. a year. Therefore, practically every aspect of the additional taxation except that of the Income Tax is hitting the same class of workers over and over again.

  1465
  I want to give expression, if I may. to some fears that arise in my mind with regard to the enormity of this burden and the proposals for shouldering it. I find that the Chancellor of the Exchequer, in the Debate on the Second Reading of the corresponding Bill in 1937, said:
  " Our prosperity does not depend upon rearmament. The recovery of the country was thoroughly well advanced before rearmament began, and the pace of recovery, though it goes on, has not noticeably quickened 4s the result of rearmament"— [OFFICIAL REPORT, 31st May, 1937; col. 712, Vol. 324.]
  I am wondering whether the right hon. Gentleman still holds that opinion, whether he believes that the recovery in the trade of this country is still advancing so well, even apart from rearmament, and whether the financial provisions during die present financial year are going to be based on that assumption. If so, I feel that the yield is going to be a disappointing one. Prior to coming to this House I can claim to have been in touch, not with any specific trade in the City of Birmingham, but to have touched all the staple trades of that city, and whereas, in the business in which I was employed, we came in the early part of the year to talk about a temporary lull in trade, and then about a recession of trade, before I was elevated to this House we were talking of it as an absolute slump. I believe we are facing a veritable slump in industry to-clay. I believe the danger is that if the yield the Chancellor is expecting, based on the assumption of improved trade, is not forthcoming, we shall have a repetition of the experiences we have had before, and an attack on our social services and the standard of life of the people of this country.
  Apart from the burden of this Bill, there are ever-increasing burdens on ratepayers and local authorities due to the war psychology. Air-raid precautions are causing the local authorities grave concern. The Fire Brigades Bill, in its local aspects, is causing local authorities grave concern. Public Assistance also is causing them grave concern. They are being compelled to cancel schemes of local expenditure because they cannot face the intolerable burden; so unemployment is growing and public works contractors are without work. In the circumstances which I have detailed, my fear is that this country is facing a slump. Should this arise, I have a very grave fear, knowing the past his-
  1466
  tory of this Government, that there will be an attack on our social services and the standard of living. I trust that my fears are unfounded; but, should they be borne out, we on this side will very definitely resist any encroachment on our social services or on the general standard of living. We are not going to tolerate any repetition of 1931. [HON. MEMBERS: "Hear, hear!"] Yes, "hear, hear," comes from the other side. The encroachments of 1931 also came from the other side; and, should there be any repetition, the resistance from this side will be much greater than it was in 1931.
  I want to thank you, Mr. Speaker, and the House for their indulgence to me this afternoon. I trust I shall be able, in the days to come, to make an effective contribution to the Debates, often criticising perhaps, but, I hope, making an effective contribution to the welfare of the people we represent. I trust that I shall always receive the toleration I have had this afternoon; but, knowing the temperament of hon. Members opposite and also my own temperament so much better, I very much doubt it.
  6.19 p.m.
  Sir J. Simon: We have reached a point in this discussion when, I think, it would be suitable for me to intervene. I am glad to do so at this stage, because it makes me the mouthpiece of the whole House; and I tender very sincerely our congratulations to the hon. Member for Lichfield (Mr. Poole) for his contribution. We shall always be glad to hear contributions from him as good tempered and as forceful as that which he has delivered this afternoon. Indeed, I owe him a special debt, because he has been good enough to pay me a compliment. I understood him to say that I am the sole cause, or almost the sole cause, of his coming here. He is new to the House, but I am sure that he will understand me when I say that any incense that is burned on the altar of the Treasury at this time of the year will be very gratefully received. The fact that the hon. Member's was a maiden speech after a by-election indicated, I think, the general character of the arguments which he presented, very forcefully and very effectively, I am sure, to his constituents.
  If I remark upon one aspect of what he said, it is not for the purpose of having

  1467
  a quarrel with him, but in order to correct what, I think, is a mistaken point of view. He said, and I was very glad to hear him say it, that he would accept the proposition that, in the circumstances in which we stood, contributions ought to be got from the community as a whole; of course, he objected to the proportion, but really it is a most profound error to speak as though the proposals embodied in this Finance Bill did not fall with very great severity on the rich. I think it is perfectly right that heavy contributions should be got from those who can contribute most. I have never differed from that view. It is a perfectly sound principle. But it is not correct to represent the main proposals of this Finance Bill as being a departure from that very necessary rule. I have raised the Income Tax to 5s. 6d. Quite true. But does everybody in this House and outside realise that no single soul in this country except a Surtax payer ever pays 5s. 6d. in the £ on the whole of his income? The scheme of our taxation is one which makes, as we all understand, a graduated scale, and the only people who can ever pay 5s. 6d., rather than a lower figure, on the whole of their income are people who, in fact, are within the Surtax limits. That is the result of the abatements which the hon. Gentleman so happily referred to by saying that he has only recently joined the chosen band of those who might have to pay.
  Let me illustrate the effect of this Bill on the richer members of our community. You can find out what is the total of the Income Tax, Surtax and Death Duties which are gathered in a year from the group of people who are within the Surtax limits; and these are the figures: in the case of Income Tax, something like £134,000,000; in the case of Surtax, another £62,000,000; and in the case of Death Duties, £69,000,000. That makes a total of £265,000,000 in the coming year, as far as can be estimated, which will be provided from those three taxes by those who are Surtax payers—only 100,000 people. Without discussing whether that is enough or too much, it really is presenting the matter without any sense of proportion, as it seems to me, if one does not realise that, taking those three taxes together, 100,000 Surtax payers are, in fact, contributing enough in this year to pay the cost of Defence
  1468
  charged to revenue in the year or, to look at it in another way, the cost of the social services.
  If you take those 100,000 Surtax payers, and select out of them those who are the richest of all, those with incomes exceeding £10,000—and there are about 10,000 of them—you will find that of that £265,000,000 which I have just spoken of as being produced by direct taxation within the Surtax limits, no less than £133,000,000 is contributed by the 10,000. I can understand the argument that there ought to be other ways of collecting wealth; but what I have said does show that it is not a fair description of the Budget to say that it is failing to get a very big contribution from the very rich people.
  Mr. Benson: Is the amount of Death Duties that the right hon. Gentleman has said could be got from Surtax payers an estimate, or can the Treasury actually link up the two taxes?
  Sir J. Simon: I had the same reflection when I saw the figure as the hon. Member has. It is a natural question to ask. I am informed that the estimate can be made, and I have given it as it is given to me. But it is a significant figure, because it shows that the £69,000,000 which comes from the Surtax paying class is £69,000,000 out of a total this year of, I think, £88,000,000. I am not seeking to make any controversial point; I am asking the whole House to consider whether it is not fair to say that the provisions in this Finance Bill are made with a view to getting substantial contributions from all quarters in a fair proportion.
  Mr. E. J. Williams: If the right hon. Gentleman will allow me —
  Sir J. Simon: I cannot give way too often. But no doubt the hon. Member has some original idea.
  Mr. Williams: I just wondered whether the right hon. Gentleman would take the other side of the balance sheet, and say how much the Surtax payer is receiving by way of interest on War stock out of the Budget.
  Sir J. Simon: I cannot do that; it would not be relevant. The real point is to see how the tax burden is distributed between different sections of the population. When I hear this argument about the increase in the tea tax, which is expected to produce this year £2,750,000,

  1469
  my answer is that I would never for a moment deny that that is by itself a more severe burden on a small income than it could be on a big income, but I think that I am justified in saying that, taking a fair view of the Budget as a whole, it is a perfectly honest attempt to spread the burdens as they ought to be spread through the whole community. I believe that outside this House that opinion is so widely held that a proposal which was expected to produce a great storm has been recognised as being, on the whole, tolerable, and I hope, as far as any tax can be, acceptable.
  I now turn to the speech of the right hon. Gentleman the Member for Hillsborough (Mr. Alexander). I will take, first, his statement that one of his objections to the Finance Bill was that it represented a continued policy of unbalanced budgets. Here again—he was good enough to say that I have been perfectly frank—I have made it clear from the beginning that if we were to rely on taxation alone, without resource to loan, there would be £120,000,000 to find—there would be at least that. There is a sense, no doubt, in which any Budget can be regarded as not balanced if tax provision for any service is supplemented by borrowing. At the same time I think that we are entitled to claim, as the hon. Member for East Birkenhead (Mr. White) said in his speech just now, that through these difficult times we in this country as a whole are struggling to keep on the straight road when we have many bad examples set us in various parts of the world. In the present case this borrowing of £90,000,000 for Defence purposes which we are meeting this year, is, it is fair to say, compared with the total defence expenditure of 340,000,000, a small proportion.
  The justification for the Defence loans have been discussed in this House again and again. While there is no hard-and-fast rule by which you can decide whether, in a given instance, the policy of borrowing is justified or not, I think that the argument for dealing with the matter as we have dealt with it is a strong one. There are some simple cases in which most people would have no difficulty in coming to a conclusion as to whether borrowing should be resorted to. If you have a project of a non-recurrent nature, if it involves expenditure of
  1470
  abnormally large sums within a short period, and if the expenditure is going to produce assets which will provide a constant revenue, if all these conditions are satisfied, the case for borrowing on the most classic principles would, I think, be met. We would be perfectly justified in borrowing, say, for telephone development. But we are not dealing with a case as simple as all that, but with a much more difficult and complex case. Some of these tests would be satisfied, and others of these tests would not. It is true that the outlay which we arc now facing is a terrific outlay, and it is also true that it is not being incurred simply for the benefit of the present year. There are large items of expenditure this year, such as the erection of these shadow factories, which certainly could not recur year after year. They represent the spending of money on something which will have a remaining value. It is true that our plans include a large element of what might be fairly called exceptional expenditure and that that expenditure is designed to be of advantage for years to come and not only for to-day. The figures are abnormally large. But it is very important, from the point of view of all who look seriously at our finances, to realise that, though this is vital and indispensable expenditure, which we must find and we must meet whatever happens, still it is not the sort of expenditure which produces revenue in future years. Rather it adds to our liabilities. Therefore, I willingly admit, and every serious student of the subject must admit, that this is a far more difficult case than a simple case of borrowing.
  I have asked myself, and I ask the House for a few minutes to reflect on what sort of considerations should guide our action about it. I have laid down for myself one or two warning propositions. I make this observation: Borrowing may mean paying later on rather than paying now, but it means paying all the same, and, after all, that is a very serious consideration for a Chancellor of the Exchequer to determine in a given year that he can resort to borrowing for meeting some portion of the burdens of the country. It is so easy—we all have it in our own sphere; it is a human failing—to see our immediate burden and our difficulty very clearly indeed, and we recoil and say, "I cannot do that. How can I get through next week?" It is much

  1471
  more difficult to look ahead, but by postponement there may none the less be a more difficult situation later on. That was the reason why I ventured to say in my Budget speech, that I knew perfectly well that, if I met all this extra expenditure by borrowing, I should be taking the easy course. But I warned the Committee then that it would be the easy course for the moment, but it did not follow that it would be an easy course when we looked at it later on.
  There is a second warning proposition which I would venture to make. We talk about abnormally high expenditure. We say, "These things should be postponed or put upon other shoulders because the expenditure is abnormal," when what we really mean is, that it is a great deal higher than it used to be. Expenditure on national defence not so very long ago was of the order of f £110,000,000, and certainly, as compared with that, we are facing very abnormal figures. There was much force in the observation made by more than one speaker this afternoon, that we must judge the abnormality of the expenditure by reference to the future rather than to the past. It is my duty to warn the House and all of us to look at this circumstance. We must not assume that we shall get back to lower figures as easily as we would wish. The expenditure we are incurring, absolutely necessary as it is, in its turn is going to mean that we shall have a larger outfit to keep in condition, and the maintenance of it, apart from everything else, will not be a small but may be a large figure.
  I am making these observations, I think the House will see, in an effort to serve the House, and not in the least with a desire to defend myself or anything of the kind. The responsibilities I have just now are pretty big, and I feel it my duty to take this opportunity to point out these considerations, somewhat gloomy and serious as they may seem. I think that our expenditure, as things have turned out, was abnormally low when we were trying to bring about unilateral disarmament, and we are now under an obligation to improve our defences. At the same time we must consider what is likely to be the development in the future, and not lightly assume that we shall get back to easier times.
  1472
  I think that in those circumstances we were justified in taking the middle course. As I expected, the middle course is criticised by two sets of people from opposite points of view. We get people, the purists, who tell you that you should not borrow at all. Let them sit down and imagine exactly what their proposals would have been on Budget day in respect of that additional £120,000,000 which was required? You get other people who have been inclined to suggest that the whole of the money should have been borrowed. It is now clear that the general good sense of the country, without partisanship—we have plenty of things to quarrel about—on these essential and fundamental financial arrangements, does take this middle view and recognises that it was right to make a modified use of both resources—of borrowing and of taxation. I would call attention to the fact that observers abroad, our critics over the world—and we have many—are not reproaching us for failing to pay our way or because we have used these two resources, taxation and borrowing. They are very much more impressed by the fact that the country as a whole is resolutely facing and bearing its burdens. It is that in which they are interested. Their interest is in the fact that Great Britain is not insisting upon having recourse to an easier method which would have avoided additional taxation, but that the people are willing to recognise that, in the times through which we are passing, it is right that a certain burden by way of additional taxation should be put upon the country as a whole. That, I think, is the broad defence to the criticism that has been made.
  The right hon. Gentleman opposite early in his speech gave point to his general criticism of the Budget by some reference to the deadweight debt. I do not think that the right hon. Gentleman's account of this matter is quite complete. It seemed to me that he gave a view of it which was extremely partial and, indeed, one-sided. It certainly is, as he said, a very sobering thought that the deadweight debt is over £8,000,000,000. I should be the last person with responsibility to minimise that fact, but really I do not think that such a deep point can be made of this contrast between to-day and 1931 in that respect. He said that if we took this £8,000,000,000—it was

  1473
  £7,400,000,000, or a little more, in 1931–32—there was an increase of nearly £600,000,000, and he asked everybody to observe how much that bore out his criticism. In the first place, as the right hon. Gentleman indicated, nearly the whole of that difference—£550,000,000—is due to the Exchange Equalisation Account. It is perfectly correct to speak of the deadweight debt as having increased, but it is somewhat satisfactory that practically the whole of that increase is represented by assets. That makes an enormous difference.
  The Exchange Equalisation Account, it is true, has been put into being by guar-teeing public credit to the tune of £550,000,000, but it is an asset, and is making a profit, which is not the same thing as an addition to our borrowing without anything to show for it. The small balance such as it is—and I have only been able to have the figures looked at a little hastily—I think I am right in saying, represents in part the expenses of the conversion of the 5 per cent. War Loan. If we are going to look at the matter as a whole we had better realise that the important thing is not the size of the deadweight debt, but the annual burden which rests upon the people to-day in respect of that deadweight debt. If you have to pay a higher rate of interest it is increased, but if something has happened to reduce the rate of interest, the burden is reduced. The position is that in 1931, the first of the two years taken, interest and management of the then debt cost the country the annual sum of £298,000,000. Interest and management in 1937 was £216,000,000. The right hon. Gentleman was good enough to say that the present Government had the good fortune to find that they could borrow money more cheaply. Good fortune comes to people who direct their policy in the right way. What has really happened is that the burden of the debt has been most materially reduced as compared with 1931. Those facts ought to be borne in mind when we are having a serious and powerful argument put forward in comparing the deadweight debt of 1931 with that of 1937.
  Mr. Alexander: We recognise that there has been that reduction, but we remember that you were not meeting the interest charges on the American debt, which we were doing in 1931.
  Sir J. Simon: That is a fair point to make. The interest and management cost in 1931–32 was £298,000,000, of which, so far as I can make out, the interest on the United States debt was £13,500,000. That is a correction that should be made. If I subtract that £13,500,000, I have a balance of £284,500,000. That is the right figure.
  Mr. Macquisten: We were collecting money from other countries at that time.
  Sir J. Simon: The two comparable figures are that the annual burden was £284,500,000 in 1931, and £216,000,000 in 1937.
  I should like now to take the opportunity of making a short statement, as was promised from this Bench to-day, on another subject, with one aspect of which I propose to deal by an amendment in the Finance Bill. It has to do with the very difficult question of whether anything can be done to ease the burden of expenditure for air-raid shelters by a modification in the instrument of taxation. It is a very difficult and complicated subject, as I am sure everyone who has studied it closely will admit. The suggestion has been made from many quarters, and I have been considering it very closely, whether or not it would be possible to secure under Schedule A that the annual values of property shall not be increased for the purpose of Income Tax by reason of expenditure incurred in structural alterations, or additions, or improvements made solely for the purpose of protection in the event of air raids.
  I have felt for some time that there was a good deal of force in that argument, and that when the community is pressing on everyone to take a hand in providing shelters and protection it seemed odd, perhaps anomalous, if the expenditure which they incurred in answer to that pressure should actually increase the amount of tax which they have to pay under Schedule A. One of the difficulties that had to be overcome is this: it is not, I suppose, absolutely necessary but, to say the least of it, it is traditional and very convenient, that Schedule A assessment and assessments for the purpose of local rates should be dealt with, broadly, on similar lines. Therefore, a rating question as well as a taxation question arises, and I have done my best to devise a plan which will cover both. It appears

  1475
  that it is not possible to introduce in the Finance Bill, within the Rules of Order, any amendment in the law relating to the assessment for local rates. That will have to be done by another Bill, and that shall be done and as a result of consultation with my right hon. Friend the Minister of Health and my right hon. Friend the Secretary of State for Scotland I am able now to make this statement:
  The Government have decided to introduce legislation to secure that the annual values of property shall not be increased for the purposes either of Income Tax under Schedule A or of rating by reason of expenditure incurred in structural alterations, additions or improvements made solely for the purpose of protection in the event of air raids. So far as Income Tax under Schedule A is concerned, however, the exemption will, in the case of rented properties, be subject to the condition that the additions, etc., are not reflected in the rents thereafter payable in respect of the properties. If a bigger rent is charged there is no reason why we should make an allowance in respect of Schedule A. The House will not expect to hear the details of the necessary legislation which will, broadly speaking, be on similar lines for both purposes. But it may be for the general convenience if I give the following outline of the proposals:

  (1) No assessment, whether for Income Tax or rating purposes, of any property shall be increased by reason of structural alterations, additions or improvements made solely for the purposes of protection in the event of air raids. This provision will apply both to properties which are already in existence and to those which are hereafter built, but will be subject in regard to Income Tax to the condition that no increased rent is payable in respect of the alterations, etc., in the case of leased properties.

  (2) Where a shelter, which is occupied and used solely for the purposes of shelter in the event of air raids, has been provided as part of new property, no regard shall be had, whether for Income Tax or rating purposes, to any additional letting value arising from the provision of the shelter. But where such property is let, regard will be had in determining the assessment to Schedule A, to any rent payable.

  1476

  (3) There shall be exemption from both Income Tax and rates for separately assessed properties which are occupied and used solely for the purpose of shelter in the event of air raids.

  There are many cases where air-raid shelters are being constructed independent of the main house. If that is done it is a new property, and if the shelter is occupied simply and solely for the purpose of shelter in the event of air raids there will be no rate payable and no Schedule A applied. A Clause will be introduced for inclusion in the Finance Bill, and in order to give effect to the corresponding proposals in respect of rates, my right hon. Friend the Minister of Health will introduce legislation in the course of this Session.
  Now I return to a subject which is dealt with in the Amendment and was referred to by the right hon. Gentleman. He returned very forcefully to the charge that in connection with the expenditure for which this Finance Bill provides we are permitting excessive profits on rearmament. If there is anybody who is really interested in preventing that, it is the Chancellor of the Exchequer. He has more to gain than anybody from anything that can be done in that direction. Therefore, I am not in the least disposed to cavil because the point is made a very important one as a subject of inquiry in the Amendment. But I hope the right hon. Gentleman will allow me to make this general comment on what he said. I think it is pretty clear that so far as the references are references to dividends paid on ordinary shares, such references are very likely to be illusory when it is attempted to argue from that, that excessive profits are being made on armament contracts.
  The truth of the matter is that in the structure of many companies the ordinary shares fluctuate very much in their productivity. It constantly happens that the ordinary shareholder or the deferred shareholder gets no return. None the less he regards his holding as of value and is prepared to keep it because the time may come when he will get a considerable yield on his ordinary shares. If you have money invested in an average range of ordinary shares you find that over a period of years you will not get more than a very moderate return. Some companies will cease paying dividends altogether, some will in certain

  1477
  years pay a high rate, but on the whole the return will be only an average one. That fact must be looked at if we are to judge fairly what is the remuneration that is being produced.
  I should have thought that the real test, the proper test, is the relation between the total profits and the total capital employed, and I must add that it would be a very serious mistake to assume that you can get at the total capital employed merely by looking at the share capital. That does not in the least follow. You may have a company with a comparatively modest amount of share capital which, none the less, is able to provide itself with capital for its business, for its plant, its materials and its buildings not because it is spending the capital which has been subscribed by the shareholders but because its credit is good and, through borrowing from the bank, it has acquired greatly additional resources, and it is earning a return not on the subscribed shares but on the whole totality of the capital that is involved in the business. These are perfectly manifest considerations which anyone who looks at the matter seriously must allow as legitimate.
  Moreover, if we are to get a fair view one has to remember that share capital may have been severely written down in recent times. Everybody knows that that has happened to a great many companies in the iron and steel trades, to which the right hon Member referred.
  Mr. Alexander: In many of the cases that I quoted the share capital has been written back since.
  Sir J. Simon: I am not putting this in any captious way, but these are elements to be properly explored if we are to pronounce a judgment. A further point. It is surely quite an unfounded assumption if we assume that all these companies are engaged wholly on armament work or in some cases mainly on armament work. I happen to have looked at a passage available to me from a certain publication and I find that in the case of the English Steel Corporation even in 1937 60 per cent. of the company's work was ordinary commercial work. I think it is true that the iron and steel trade is more prosperous than it was some years ago, and I am glad of it. I believe that that is partly because of the policy of the
  1478
  Government. At any rate it seems to me to be wrong to say that because you can show a great increase in the return on certain classes of shares that therefore that is proof that there has been vast profiteering in armaments contracts.
  What has really happened is this. As soon as our rearmament programme began we sought and obtained the very best expert advice we could find for the purpose of trying to devise an effective machinery to ensure that profits should be reasonable and not excessive, and I think that anybody who examines the elaborate system that we have will not treat the Government or the Government Departments as though they were indifferent on this subject.
  I am not at all saying that everything is perfect and nothing more needs to be done. I am not in the least complacent about it, but I ask the House to take a fair view about this, because it seems to me that it is a jaundiced and untrue view that Government contractors are left to their own devices to accumulate wholly unreasonable profits. I believe that the methods that are being adopted, which have been discussed in great detail both by the Public Accounts Committee and the Estimates Committee, and have been examined by many impartial persons, are very thoroughly and ingeniously devised to secure what must be secured, that the State when it places these contracts is not exploited.
  Mr. Alexander: What we are anxious about is that the Chancellor should consider two things. In the first place, the basis of his policy of check should not be that of allowing a fixed margin upon every single commodity produced, that is to say for an aeroplane £300, or a certain amount for a particular type of ammunition, gun or rifle. In the second place, we have had no answer yet to the case put by the hon. Member for Ipswich (Mr. Stokes) on the Budget Resolutions. I should like to know that those things are being inquired into.
  Sir J. Simon: I have not omitted to observe what was suggested, and that very suggestion is in course of being investigated. The Amendment mentions subsidies to private industries. I am always a little surprised when a Socialist raises this question. I myself, being a believer on the whole in private enterprise, think, other things being equal,

  1479
  that it is better to let private enterprise fight its battles, win them if it can, and sink if it cannot. I regard cases of helping particular industries by subsidies as essentially exceptional and as cases which must be justified, either because of special need or of special difficulties. But I am not a Socialist. I cannot understand a Socialist who wishes to see a vast variety of enterprises carried on, whether they make profits or losses —
  Mr. Montague: You cannot make a profit under Socialism. You ought to have studied the subject better than that.
  Sir J. Simon: The hon. Gentleman makes a most illuminating observation which throws a flood of light. He says that in a Socialist State you cannot make a profit.
  Mr. Montague: Or a loss. May I explain.
  Sir J. Simon: I really think I understand.
  Mr. Montague: You do not understand Socialism.
  Sir J. Simon: The system, I understand, is one in which there are to be no rich men and the whole of the revenue is to be got by taxing the rich. If any particular enterprise—railways, waterways or anything else—does not make a profit it does not matter a row of pins, because in the Socialist view there is no such thing as profit and no such thing as loss.
  Mr. Montague: Produce what you want and enjoy it.
  Sir J. Simon: It is a system under which you produce what you want and enjoy it. How you pay for it no one knows. [Interruption.] I shall have to apply to the hon. Gentleman for private instruction.
  I shall not speak on the duty on power alcohol, the subject of the speech of the hon. Member for Rusholme (Mr. Radford), except to say I hope very much that a tax of a little over rd. on each gallon of the particular mixture that he is interested in will not entirely destroy the fortunes of a company, which I understand last year made a larger amount of profit than the whole of its paid-up capital.
  Mr. Radford: Can the right hon. Gentleman tell me of any other commodity where a tax is applied with the intention of taking the profit, if it is available, as it cannot be passed on to the consumer?
  Sir J. Simon: On another point in the Amendment I do not think that the additional tax on oil that we are proposing is going to do the injury to road transport that is supposed. The capacity of the road transport industry to meet the demands of this taxation is very easily illustrated. The number of commercial passenger vehicles in use has increased from 45,700 in 1934 to approximately 51,000 in 1937. If you take commercial goods vehicles, as between the same dates they have increased from 403,000 to to 463,000, and the number of cars taxed according to horse power has risen in the same period from 1,308,000 to 1,798,000. I really think the motoring community is prepared to accept this additional contribution and recognises that it is not an unfair demand to make.
  I come lastly to more general considerations. For practical purposes we are facing a £1,000,000,000 Budget. When I look back to the days when I was a young Member the contrast is perfectly staggering. It is true, no doubt, that the State now undertakes a far widen range of duties than it used to undertake in the old days, and I think the change is all for the better. It is right that we should regard the instrument of taxation as a method by which we attempt to do something to adjust inequality and I believe that has become the general opinion of the country. There has been one Chancellor of the Exchequer in the last generation or two who never produced a Budget. That was Lord Randolph Churchill. In the autumn of 1886 he was preparing his estimates, but he resigned in December. What was the staggering prospect which caused him to break his career and resign? It was that the Defence Services were demanding no less than £31,000,000. Here we are facing a total of £300,000,000. We are unquestionably facing a very serious position. I am not at all disposed to minimise its seriousness, but, though we have to face it, and will face it, it is my firm belief that, if we do our utmost to maintain sound principles of finance we shall get through it. We are doing it most of all for the sake

  1481
  of the defence of our native land and the security of beliefs and convictions which we all share.
  When I first went to the Treasury and began to study the complicated and technical questions which every Chancellor of the Exchequer has to do his best to understand and pronounce upon, to one who has not been all his life a trained economist the task appears very serious and difficult indeed, but in this, as in so many other things, there are sometimes simple principles running through very complciated technical and difficult questions. This immense provision that we are calling upon our fellow-countrymen to make for Defence illustrates a very simple economic principle. We are spending this large sum for the sake of liberty. The law of supply and demand teaches that when things are abundant they can be got cheaply and when they become very rare they cost more. Liberty is not so abundant as it ought to be. This country has to preserve that precious thing and, in preserving it, it must pay the price.
  7.15 p.m.
  Mr. Bellenger: The right hon. Gentleman the Chancellor of the Exchequer in the course of his speech attempted to define Socialism. I am not going to attempt to explain what it really is, but if the right hon. Gentleman does want to know something about the subject and is thinking of using the knowledge he gets for political purposes, ha cannot do better than go to the hon. Member for West Islington (Mr. Montague). I was sorry to hear the hon. and gallant Member for Bournemouth (Sir H. Croft) refer to the cost of primary and secondary education in the manner he did. I do not think it is unfair to suggest that the education of his own children would be one of the last things upon which he would attempt to economise, and I suggest that it is false economy to cut down the expenditure on our educational services.
  Sir H. Croft: I hope the hon. Member will not imagine that I said any such thing. What I said was that the number of children approaching school age was decreasing and, therefore, in view of our armament expenditure we should be wise in not increasing our expenditure on school buildings in the immediate future.
  Mr. Bellenger: I understood the hon. and gallant Member to say that we should
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  decrease our total expenditure on education. In answer to a question as to the component parts of this expenditure the Parliamentary Secretary gave the figures which go to the cost of educating a child and also the figures for building costs. Many of the buildings in this country, particularly in rural areas, are totally unfit for the education which is to be given, and I suggest that it is false economy to reduce our building costs, just as much as it is false economy to leave slums standing. That is why hon. Members in all parts of the House are agreed that slums should be pulled down and rebuilding take place.
  Many of the things which the Chancellor of the Exchequer has said are fundamental and worthy of the consideration of hon. Members, wherever they may sit. Many of them are truisms, but there are certain aspects of his speech with which I cannot quite agree. The right hon. Gentleman referred to the burden of debt, and attempted to show that between 1931 and the present year it has been considerably reduced. As far as the figures go that is true, but the same would be true in the case of a person who purchases a house, borrows the money from the bank or from a building society, pays the interest on the money year after year, but makes no provision for the redemption of debt. That is what is happening in the case of the National Debt. The figures the right hon. Gentleman gave only showed the cost year by year of the maintenance of that debt, and no provision is made for redemption. Any provident individual, whether he has a hank loan or is buying his house through a building society, generally puts aside a certain sum of money for the reduction of the debt for what is generally a depreciating asset, and it would be well in the management of the country's affairs if some provision for amortisation of the burden of debt was made. A quarter of the National Debt consists of War Loan, provided during the years of the War for destructive purposes, and if we are unfortunately engaged in another war in the future it would necessitate more loans. I ask hon. Members to reflect on what the position is likely to be. Previous wars have caused the piling up of debt, and then the debt has been repudiated. I suggest to the right hon. Gentleman that we cannot continue piling up debt in the manner

  1483
  we are in non-productive enterprises, without at some future date envisaging the possibility of repudiating the capital sum we have borrowed.
  I want to deal with the Clauses of the Finance Bill which relate to tax evasion, but before doing so I want to make one or two observations on the Exchange Equalisation Fund. The right hon. Member for Hillsborough (Mr. Alexander) paid a tribute to the right hon. Gentleman for giving the House information as to the gold holdings of the fund, but the Chancellor of the Exchequer knows that the gold holdings are not the only asset of the fund. I think that we ought to get a balanced view of this fund. After all, there is £550,000,000 of credit in the hands of the Government about which the House knows very little indeed, and if the House of Commons is to be the guardian of the national finances, we should know as much as possible of all the transactions which take place. Would it be possible to disclose, in the same way as the right hon. Gentleman has disclosed the gold holdings of the Exchange Equalisation Fund, something about the other assets? Would it be possible for the Government to say something about the profits? I think the fund is an additional weapon in our economic armoury. I regret the necessity for this huge fund in different countries. It is hidden in mystery, but it can be a potent weapon in the economic warfare going on between countries, and I suppose that leaving the Gold Standard made it inevitable that a fund of this nature should be set up.
  On the Finance Bill, I regret that it has not been possible for the Chancellor of the Exchequer to make a better allowance to married men in the way of wife's allowance and children's allowance. I should like to have seen the right hon. Gentleman do something for a class of individuals who are most deserving and who in times like these ought to be encouraged. The burden of children on parents is extremely onerous especially in the early years of the children's lives, and I had hoped that the right hon. Gentleman would have reverted to the allowances which operated at the time of the economic blizzard.
  There are seven Clauses in the Bill dealing with tax evasion, and they occupy
  1484
  something like nine pages. So far, very little has been said about these Clauses, and the right hon. Gentleman did not find it necessary to refer to them. I think the Chancellor of the Exchequer has made considerable efforts to put a stop to this unworthy evasion of taxes by people who ought never to attempt it. Tax evasion is largely among Super-tax payers, and I think the House viewed with considerable alarm the fact which came out in a notorious law case recently that certain individuals in high places in this land, with more than adequate incomes, are attempting to evade their liabilities and obligations. As we say in our Amendment, if money is to be found it is obvious that it must be found in the taxation of those who are best able to bear the burden. I pay a tribute to the right hon. Gentleman's efforts to see that those who are able should pay their taxes.
  I should like to ask one or two questions on these Clauses. Clause 32 says:
  " where any such power as is referred to in paragraph (a) of this Sub-section cannot be exercised within the period of six years from the time when the first of the annual payments so referred to becomes payable."
  I should like to ask why the period of six years has been put in, and also what provision is made to insure that payments duly reach the trust or the objects of the settlement? I think it is possible that trusts may be set up and settlements made under the provisions of which money which is supposed to go to the beneficiaries actually never leaves the settlor, and remains in his pocket as his income. Is there any provision in the Bill to prevent that happening? A similar question arises later on in the same Clause. The Chancellor of the Exchequer has made provision in the Finance Bill, as his predecessor did, to stop tax evasion. It is a well-known principle of our tax law that the subject is only liable to pay taxes which have been provided for in the Finance Act or other Acts of Parliament, and if there is no provision in the law whereby he should pay taxes, then he need not pay taxation. Under that principle it has been possible for taxpayers to avoid liability, and in doing so they have provided a very nice income for lawyers.
  Would it not be more simple to do as I understand they do abroad, and that is to throw the whole onus on the owner of the income, and to say that where an indi-

  1485
  vidual has an income, of whatever sort and from wherever derived, it should be regarded prima facie as his own income and, therefore, liable to taxation, and that the onus should be upon the individual to show that it was not his own income? If some such method as that were adopted, instead of trying to stop leaks as they occur, and as they are likely to occur in the future, I think we should have a much simpler method of getting taxes in. We should not require the courts to adjudicate on all these intricate questions, with the cost to those engaged in trying to avoid taxation or even to the Commissioners of the Crown in trying to enforce taxation. It would be possible perhaps for the Special Commissioners to settle these things with a jury of the taxpayers themselves in a far simpler manner than is provided for in this Bill.
  I generally set myself about a quarter of an hour or 20 minutes when I rise to speak in this House, and I do not like exceeding that limit, particularly when there are others who want to speak, but may I say, in conclusion, that we on this side realise the difficulties of every Chancellor of the Exchequer, whatever his political views may be. We know that when the time comes for us to occupy the seats occupied at present by the Government supporters, our difficulties will be just as large as, and perhaps larger than, those of to-day's Government, but we suggest to the right hon. Gentleman that an attempt must be made, and not necessarily in the orthodox fashion which has been adopted by the right hon. Gentleman himself in this Bill, to put the finances of the country on a much more stable basis. It must be obvious to hon. Members opposite, many of them business men themselves and some of them financiers, that you cannot go on increasing the enormous debt of this country, and thereby piling up the current expenses of management and interest from year to year without sooner or later something terrible happening. We have seen this Government transfer £2,000,000,000 of War Loan from a 5 per cent. to a 3½ per cent. basis, and that was all to the good. It reduced the management part of the debt. But there is this tremendous capital debt piling up, which is likely to increase probably at a much heavier rate if our rearmament programme increases as we are led to believe that it will increase. What steps are the Government taking
  1486
  to deal with this very serious problem? It is because we believe that they are not taking the right steps to-day, that we have put down our Amendment.
  7.34 P.m.
  Mr. Hely-Hutchinson: I thank you, Sir, for this opportunity of speaking in support of the Finance Bill. As I listened to the hon. Member for Bassetlaw (Mr. Bellenger), I derived both refreshment and support from what he said—support because of the very strongly orthodox tendency of his remarks on the growth of the National Debt, refreshment from the more personal note when he made reference to the burden which all parents bear and suggested that the Chancellor might give us some additional relief. But when he went on to ask the Chancellor for an alteration of the whole basis of our Income Tax law, and to put the onus of determination of income on the taxpayer, I think he had not really thought out his problem. He said that everybody who receives income should have the onus on him of establishing that it was not his own income.
  Mr. Bellenger: What I said was that prima facie it should be accepted as the income of the taxpayer and, therefore, as liable to taxation, unless he could prove that it was not his own income, by the instruments that he is using to-day, by which, incidentally, in one of the Finance Acts, if he transfers money abroad, he can avoid payment of taxation, if he can prove that it was not transferred for the purpose of evading taxation.
  Mr. Hely-Hutchinson: Perhaps I misunderstood the hon. Member, but surely a definition of income is necessary before a taxpayer can be taxed upon it. There can be no such thing, for taxing purposes, as a definition of income other than a statutory definition. Any receipt of money is not necessarily income. It is not sensible that every receipt of money by a private individual or company is to be presumed to be income until the taxpayer has established that it is not.
  I find myself so heartily in support of the general outlines of the Finance Bill that I do not wish at this time to say very much in reference to them. There may be some minor points with which it may be more suitable to deal at a later stage, but I would like to refer to the speech of my hon. Friend the Member for Rusholme (Mr. Radford) on the sub-

  1487
  ject of the 9d. duty on alcohol, and to say that I am entirely in sympathy with the suggestion of the hon. Member for East Birkenhead (Mr. White) that the tax which is now proposed should be retained. The hon. Member for Rusholme very frankly admitted that he had a personal interest in the matter. For my part, I have no interest, so that the House need not regard this as a sort of internecine struggle between two deep-sea monsters. I feel that this tax, which is now proposed, falls on an article which is manufactured from a raw material 92 per cent. of which is imported from abroad, and on its way to us across the seas that article takes up two-and-a-half times as much tonnage space as the finished article would take if imported. When we are doing, as we must now be doing, everything with an eye to the necessity of economy of ocean tonnage in war time, I think this is an article to which we need not show any special favour.
  I would like also to associate myself with the remarks of the hon. Member for East Birkenhead on the subject of the incidence of the National Defence Contribution on the income from investments which constitute the reserves of insurance companies engaged in forms of insurance other than life insurance. I think those companies have made out a very strong case that the holding of investments is not a regular part of their business. The part of their profits which is properly the subject of taxation, and which, therefore, properly falls under the scope of the National Defence Contribution, is the excess of their premium income over their expenses and claims. I hope that my right hon. Friend will entertain the suggestion that the incidence of this tax should be confined, as it is in the case of other companies to whose operations investment is merely incidental, solely to the operating profits of those companies.
  Believing as I do in the general structure of the Finance Bill, I feel that there is very little that I need say in direct support of it, because I think it carries with it its own commendation. I propose, therefore, to confine myself much more to knocking down some of the ninepins which hon. Members opposite have kindly set up for us in the form of the Amendment which stands on the Paper in the name of the Leader of the Opposition. In the
  1488
  first place, may I say how cordially I welcome the opening phrase of that Amendment:
  " That this House regards with concern the continuing policy of unbalanced Budgets."
  I think that is a sentiment which finds an echo in every corner of the House. We none of us like to see unbalanced Budgets, but coming from hon. Members opposite, it is particularly interesting to me, because of an impression which I received in the first few weeks of my membership of this House, when I heard hon. Members opposite offering a direct challenge in words to the proposition that good finance and good government are merely different aspects of the same thing. I paid great attention to that challenge, because I feel that any views sincerely maintained by a considerable body of men must necessarily rest upon, or be presumed to rest upon, a rational process of thinking. The only explanation that I could find of that challenge to the proposition that good finance and good government are practically the same thing was the suggestion that perhaps hon. Members opposite looked at finance solely as a matter of money, and felt that there should be higher values than mere money considerations which should be taken into account in matters of government.
  I do not know whether I have correctly interpreted their views by that statement, but I would like to offer to hon. Members opposite a slightly different conception of finance. Finance is concerned primarily, as I understand it, with the making and fulfilment of promises. I believe the word itself in its derivation has nothing whatever to do with money. Money is merely incidental to it, because we happen to live in a money economy. Promises are capable of expression in terms of money, measurement in terms of money, and fulfilment in terms of money, and as government is little else than the making of a series of promises —

  ROYAL ASSENT.
  Message to attend the Lords Commissioners.
  The House went; and, having returned —
  Mr. SPEAKER reported the Royal Assent to—

  1. Increase of Rent and Mortgage Interest (Restrictions) Act, 1938

  1489

  2. Workmen's Compensation (Amendment) Act, 1938.

  3. Evidence Act, 1938.

  4. Patents, etc. (International Conventions) Act, 1938.

  5. Poor's Allotment in Hanwell Charity Scheme Confirmation Act, 1938.

  6. Forfar Corporation Water Order Confirmation Act, 1938.

  7. Irvine and District Water Board Order Confirmation Act, 1938.

  8. Bournemouth Corporation (Trolley Vehicles) Order Confirmation Act, 1938.

  9. Blackpool Improvement Act, 1938.

  FINANCE BILL.
  Question again proposed, "That the words proposed to be left out stand part of the Question."
  Mr. Hely-Hutchinson: I was venturing to suggest that finance provided the means for the expression, the measurement and the fulfilment of the promises of government in money, and that therefore, the proposition that good finance and good government constitute the obverse and reverse of the same coin may perhaps prove acceptable to hon. Members opposite. But there are special reasons why we may regard with concern the continuation of unbalanced Budgets, all the more because it is not a policy, but an inescapable sequence of events. The most depressing realisation which a newcomer to politics experiences is that when the Budget comes before Parliament, the item of expenditure has already been decided long ago, not merely when we pass the Estimates, not merely when Bills are passed previously in the Session, but we are dealing with the commitments of British Governments made over a very long series of years in the past, and the function of the Finance Bill is not to cut down expenditure, but to find what means there can be of raising the necessary money. I think that what I may say on this will be accepted possibly as the reflections of a tenderfoot in politics; but another aspect of the matter which causes a newcomer great concern is to realise that the competition between the great political parties in the State nowadays is not to show how economical they have been, but to prove how much they are spending.
  1490
  Hon. Members opposite go to their supporters in the country and say, "Vote for us, and we will give you a piece of pie." Hon. Members on this side have to devote their entire time to showing the country how much pie they are already handing out. As expenditure grows, it becomes increasingly difficult to resist each new item of expenditure. We are spending £I,000,000,000—why should we boggle at an extra £10,000,000, £20,000,000, or £30,000,000 for old age pensions? One realises that it has become well nigh impossible for the House to resist demands made on the public purse on compassionate grounds. While I realise that what I am now saying is not practical politics, it is nevertheless a matter for regret that no great political party dares to tell Englishmen, as a cardinal point of its policy, to rely on themselves. So it comes about that, in words which I read the other day, Parliament has come to be a place where A and B put their heads together and decide what C shall give to D. As far as D is concerned, that is a process which goes down very easily, but every now and then C, the taxpayer, makes a protest, and the art of politics has refined itself down to the scientific anaesthetisation of C so that the extraction may be as painless as possible.
  But the growing volume of taxation has an important bearing on certain features of the present Budget. One of the problems with which the Chancellor is faced is that of the evasion of taxes, and as we know that income can only be, for purposes of taxation, statutory income, as the level of taxation grows so do we find an increasing tendency on the part of taxpayers to avail themselves of all statutory provisions for avoiding liability to tax. Indeed, we had an example of it to-day. I should like incidentally to associate myself with others in congratulating the hon. Member for Lichfield (Mr. Poole) on the most attractive, forcible and sincere maiden speech which he made. It was interesting to note that the hon. Member referred to the fact that he had never been in the class of the Income Taxpayer, and that on arriving in the House he very quickly acquainted himself with those statutory provisions whereby he could avoid liability to unnecessary taxation. In so doing he was following the precept of a gentleman, no longer a Member of the House, Sir

  1491
  William Jowett, who was at one time Attorney-General in the Labour Government, whom I heard lay down in court the principle that every man was entitled so to arrange his affairs as not to attract the maximum amount of tax. That is a principle which becomes more and more acceptable to taxpayers the higher the rate of tax imposed.
  Passing from the central part of the Amendment moved by hon. Members opposite, we come to the really important part which is the sting in the tail. The right hon. Gentleman opposite castigated my right hon. Friend for not raising the necessary wealth from "the taxation of great wealth." I hope we shall hear a few more speeches from hon. Members opposite in order to define exactly what is meant by that phrase "the taxation of great wealth." I presume it does not mean great aggregations of wealth as such, because the largest aggregation of wealth in this country is that which is represented in this House by the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) himself. We are not, therefore, concerned with the taxation of great aggregations of wealth merely because of size. From what has been said by hon. Members opposite, I can only think that they have one body of people in mind when they talk of "the taxation of great wealth," and that is the Super-tax payers. My right hon. Friend has given figures showing the burden of taxation already borne by the Super-tax payer, but I happen to have been looking at the figures myself from a slightly different angle, and it is possible that the House might find another presentation of the case interesting.
  There are, in very round figures, 100,000 Super-tax payers in the country, or, roughly, one in every 450 of the population. Their income upon which tax falls is, again in very round figures, about £500,000,000, which is about one-eighth of the total national income. These 100,000 Super-tax payers are already paying nearly one-half of the total Income Tax collected from all taxpayers. It is very simple to show that 5s. in the £ on £500,000,000 is £125,000,000. On top of that, they are paying Super-tax which takes, on an average, the equivalent of a further 2s. 6d., or £62,500,000, so that already 7s. 6d. in the £ has gone
  1492
  from their income and they are left, on the average, with 12s. 6d. in the £. When we raise the Income Tax from 5s. to 5s. 6d. in the f, nearly half the total additional sum raised from the taxpayers comes from that class. Out of the £25,000,000 to £27,000,000 which is being raised this year out of the additional 6d. on the Income Tax, something like £12,500,000 comes from the Super-tax paying class. It is important to realise that the more we have already taken from the Super-tax payer the bigger proportion will the increase in tax bear to what he has left.
  Another consideration which is worth bearing in mind is that the average Super-tax payer has from 15 to 25 people dependent upon him in his household, taking into consideration his own family, his servants, and the wives and children of those of his servants who happen to be married. Thus the remainder of the 12S. 6d., which is now whittled down to some such figure as £312,000,000, is not the income of roo,000 people. It is the income of about 2,000,000 people. Regarded from that point of view, it does not look like the concentration of wealth in the hands of too small a number. With the growing amount of taxation it is an undoubted fact that the majority of Super-tax payers are living up to the level of their income; when they are faced with additional taxation, the only way they can meet it is by cutting down their expenses in some direction, and how can they do that without buying less from someone or else discharging one of their unfortunate servants towards whom they feel a sense of responsibility?
  I think this general proposition of trying to put every additional burden that arises on the shoulders of the Super-tax payers is advanced without fully thinking out the problem. I can hardly expect hon. Members opposite to take such a suggestion from me. [HoN. MEMBERS: "Hear, hear!"] Well, about seven or eight years ago, before I was a Member of this House, I happened to be in the Gallery listening to somebody to whom I think hon. Members opposite would pay attention. I refer to the late Lord Snowden, then Mr. Philip Snowden, who was Chancellor of the Exchequer in October, 1931. He was speaking on the Third Reading of the Emergency Finance Act which was found necessary that year to

  1493
  deal with the crisis—that crisis which the right hon. Gentleman the Member for Hillsborough has compared with what he describes as the present crisis. I dare say the arguments which obtained at that time carry force to-day. What Lord Snowden said on that occasion stuck in my memory. I have looked it up in the OFFICIAL REPORT and I think it might interest hon. Members to hear these words, spoken by him in October, 1931:
  " I put before the House of Commons and the country last February a statement of the financial position…. I addressed a special meeting of the Labour party…. What support did I get there? I got none. The only thing they did was to talk the usual clap trap about going to the Super-tax payer."—[OFFICIAL REPORT, 2nd October, 1931; col. 772, Vol. 257.;
  8.9 p.m.
  Mr. Stokes: I do not propose to follow the hon. Member for Hastings (Mr. Hely-Hutchinson) into an examination of unbalanced Budgets, but I cannot allow his remarks to pass unchallenged. I would remind him that the state of trade in the world in 1931 was very different from the state of trade to-day. Here we are at the height of a boom and the Government still find themselves unable to balance their Budget. The hon. Gentleman went on to talk about what he called, I think, "handing out cake." He said that we on this side went to the people and promised them the moon, whereas hon. Gentlemen on his side had to go and explain to the people why they could not have the moon. Be that as it may, it is strange to many of us, possibly on both sides of the House, that when war looms ahead there appears to be any amount of that curious thing called credit available for war purposes, but the moment there is any sign of peace the greatest restrictions are found necessary, and it is impossible to carry out the kind of social measures which we on this side desire. The hon. Gentleman expressed doubt about what we meant by "the taxation of great wealth" and he supposed that it meant going for the Super-tax payer again. I do not propose to go at length into the various methods of bringing about a better distribution of wealth, but I would remind the hon. Member that one of the biggest values in this country is the value of land, and one of the best ways of raising revenue is that described in the well-known phrase, "taxation of land values."
  1494
  I desire this evening to confine myself largely to two proposals, which, I think, might assist the Government in reducing the cost of rearmament and in maintaining our export trade and, therefore, helping generally to keep down the amount for which it is necessary to budget. I am glad to hear from the Chancellor of the Exchequer that he is examining proposals for the more direct control of profits, and I hope we shall hear in due course that his investigations have met with success. I want to refer once more to what I call the "racket" in raw materials which is having disastrous effects on our heavy industries in their export trade. I can see the time coming when rearmament will have come to an end and when, owing to raw material prices having risen out of all bounds, our heavy export trade will be reduced to a minimum, and what we have lost will be irrecoverable. I wish to give the House some figures on this point. In the heavy industries, pig iron is the material which matters most, and that has gone up by 55 per cent. since 1936. I am unaware that it costs more to produce iron ore. As far as my mechanical experience goes, I am certain it costs a great deal less. The fly in the ointment—and I am assured of this by one of the biggest pig iron manufacturers in the country—is that the price of coking slack has increased by too per cent., from 8s. to 16s. a ton. The inevitable result is that the cost of pig iron has increased. On top of that, the cost of manufactured steel has increased by 33 per cent. With regard to the coal side of the question, I would like to read an extract from a letter written by the gentleman to whom I have just referred, following a speech which I made in this House in March. He complained that I had not been fair to the pig iron producer and stated that the coal-owner was the responsible person, and, with regard to central selling schemes he wrote:
  " They were introduced in the belief that they were going to reduce the cost of selling and get better prices for the benefit of labour. They have resulted in better prices being obtained, but this has been the beginning and end of their achievement and, as far as selling costs are concerned, these have not been reduced, but substantially increased. In other words, the machinery set up for controlling sales has acted merely as a controller for purposes of increasing prices."

  1495
  I suggest to the Chancellor that he might turn his examination glass on to the cost of this raw material. In connection with the price of pig iron I would tell the House of an occurrence which took place last week. The same friend of mine was concerned with the rising cost of manufactured goods, and wished to bring down the cost of pig by 10s. a ton. At the association meeting it met with opposition, and it turned out after discussion that the reason why agreement could not be reached with regard to a reduction in price was that the Import Duties Advisory Committee had made representations that it would be extremely inconvenient for them if the cost of pig iron were brought down at this moment because they had fixed until 31st December, 1938. I have already agreed to keep the price of steel no reason to doubt that that is true, and it would be a good thing if we could have an assurance that that matter will be looked into.
  I have a second proposal which concerns the vexed and difficult question which was discussed yesterday. I have been informed, and have read it in the Press, that not more than a few days ago a certain offer was made by Continental manufacturers of bombing airframes which, I am told, are in every way comparable with the machines which we produce; and they suggested that they should be given an order for a certain number. I think they went further and suggested that the chief engineer or proprietor of this concern should come here to show us how to set about the mass production of aeroplanes. To engineers in this country that proposal is fantastic, but it has the germ of a good idea in two ways. Politically, on the international front, the mere fact that our new entente with Italy—because this proposal came from Italy —
  Mr. Deputy-Speaker (Captain Bourne): I do not see what this has to do with the Finance Bill, or how the Treasury can answer the point which the hon. Member is raising.
  Mr. Stokes: I was pointing out that if that offer were accepted it would save the Treasury a great deal of money in dealing with the peak load of aeroplane rearmament which was so much discussed yesterday, and that if the Government
  1496
  could purchase a few machines from this foreign country, for which I hold no brief, it might assist them in their expenditure. It would also assist the unemployment situation here, because these particular airframes are so constructed that the Rolls Royce Merlin engine and the Bristol Perseus engine which are built here can be fitted to them. It is within my knowledge that both these factories are not working to capacity. By avoiding the unnecessary expenditure of laying down huge aircraft factories in order to meet this peak load, we should be saving a considerable amount of money to the taxpayers.
  The Chancellor in his peroration said that we were all being asked to meet these burdens in order to defend our land. We on this side of the House, while recognising what he means, are sorry that he does not do something to deal with the land racket. Wherever the Government move now in order to complete the rearmament programme they are being held up to ransom by the private ownership of land. I hope that when the Financial Secretary replies to-night he will give some answer to the reference which was made to this matter by my right hon. Friend who opened the Debate. I hope, also, that we may soon have some kind of intelligible indications from the Government, now that they have decided that peace in the world is possible with all but a very few, of some constructive proposal which will indicate that peace with those remaining few Nations may be achieved in a short time.
  8.20 p.m.
  Mr. Assheton: We always enjoy a speech from the hon. Member for Ipswich (Mr. Stokes), and I wish he could have developed more fully his argument with regard to the taxation of land values. It would have given me great pleasure to have the opportunity of debating that issue with him. I do not propose to follow him in the question of the purchase of aeroplanes from abroad, for I am doubtful whether it would be in order. I felt obliged on a similar occasion last year to make some criticisms of the proposals in the Budget, and it is therefore with all the more pleasure that I take the opportunity of congratulating the Chancellor this year on a Budget, which seems to me to be both courageous and wise. If the Budget proposals met with

  1497
  any criticism in the first instance it was due to the fact that the country had not been expecting a severe increase of taxation, although I cannot understand how the public could have been free from anxiety on this score if they had followed the debates in this House as closely as some of us do. Perhaps it might be wiser when increases of taxation have to be made in future if the Chancellor prepared the House and the country for the shock by a series of gloomy prognostications on the subject throughout the winter. One often wonders whether the tremendous secrecy which surrounds these matters is as necessary as the Treasury thinks.
  If the enormous expenditure for which the Chancellor has budgeted is really necessary, I have little quarrel with the way in which he has decided to raise the additional taxation. He has appreciated the important fact that increased expenditure is best met by increased revenue. He has, therefore, adjusted his taxation as far as possible so to avoid crippling trade and industry. I welcome the additional allowance for depreciation which he has made. I can only hope that my right hon. Friend may take the valuable advice which my hon. Friend the Member for the City of London (Sir A. Anderson) offered in his speech on the Budget Resolutions to consider whether some allowance could be made for obsolescence in the case of buildings. If that had been done a generation ago we should not now have those dreary collections of offices and buildings which we have to look at, and the slum clearance problem would not have existed in anything like the degree in which it exists to-day.
  When I spoke on one of the Budget Resolutions I pointed out the grave anxiety with which the present rate of expenditure is viewed by many people. I refer not only to Government expenditure but to local government expenditure. The increased burden of taxation bears heavily upon all classes of the community, but the increasing burden of rates bears especially hardly on householders, and there is great unrest and anxiety in many parts of the country on this account. My hon. Friend the Member for Hastings (Mr. Hely-Hutchinson)—whose election to this House those of us who know him were very glad to sec—in an interesting speech which he
  1498
  made a little while ago inferred that it would not be possible to reduce the very high level of expenditure in which we are at present indulging, and I think he was supported in that suggestion by my hon. Friend the Member for East Aberdeen (Mr. Boothby). He went on to ask himself—or the House, I forget which—three questions. I think the Chancellor at one point in this Debate asked three questions, and I propose to do the same: In what direction can we spend less? 2. Can we spend our money better? 3. In what way can the money best be raised?
  How to spend less money is a question which everyone must be asking himself in these days of increased taxation and rising prices of so many things which we all want to buy, and I do not believe it is unreasonable to ask the Government to see whether there are not some directions in which they also can reduce expenditure. All of us in this House are convinced of the present need for a very large expenditure upon armaments, but perhaps we are not all convinced that the money is being spent as wisely as it might be, and though I am not one to suggest that there should be any undue delay in these matters I am certain that the cost must be carefully examined. There is one direction in which economy might perhaps be practised, and that is if the spending Departments got it into their heads that more might be done on the Ford principle rather than on the Rolls-Royce principle.
  It is always a very popular thing to appeal for economy in general, but never popular to appeal for economy in any particular case, and I might well be asked in what direction economies might be introduced. My answer to that is that I observe in the Civil and Revenue Estimates for this year an estimated expenditure of £519,000,000, against an audited expenditure of £317,000,000 only Jo years ago. I am sure that the country does not realise that apart from the gigantic expenditure upon armaments these Estimates are £200,000,000 higher than they were so short a time as 10 years ago; and that increase takes no account of the enormous increase in the expenditure which is borne by the local rates. I was very much interested by the speech made by my hon. Friend the Member for Huddersfield (Mr. Mabane) at an earlier stage. He asked whether

  1499
  we used our Supply Days well. I am not sure that we do. It seems to me that the control of the finances of this country is slipping out of the hands of this House, whose first duty it is to control them, and we ought to try to devise some method by which we can more adequately watch the interests of our constituents in that respect. In the Civil Estimates alone this year there is an increase of more than £20,000,000 over last year, whereas one would have hoped that in a year when there is such an enormous expansion in the expenditure upon armaments there might have been a reduction in some other direction.
  Page 4 of the admirable Memorandum which the Financial Secretary to the Treasury presents every year shows all the increases in the Votes, and the first item which I notice is an increase of £6,500,000 in the expenditure upon roads. I beg the House to consider, for example, whether that particular increase is really necessary. I think there is hardly an hon. Member who could not point to some unnecessary expenditure upon roads in his own constituency—I refer more particularly to the expenditure upon the secondary roads. Many unnecessary alterations are made, and amenities suffer all over the countryside, in order to satisfy what in my view is an unnecessarily high standard of technical efficiency.
  Mr. Macquisten: You must be a railway director.
  Mr. Assheton: I have nothing to do with railway companies, and I am not very sorry that I have not. We must think carefully of how we are going to spend our money. We all know instances of new roads which are being built almost parallel to old ones, and of improvements being carried out now which, apart from not being vitally necessary, would constitute a splendid reserve of work against that time of declining trade which I think we all realise must inevitably come to us. In these same Estimates in which there are these great increases of expenditure upon roads there is a decrease in expenditure upon water supplies in rural areas, one of the things which we neglect in this country more than anything else.
  As to the question, "Can we spend our money better?" I have not any doubt
  1500
  that we can. It is a very strange thing that we should spend so much upon some things, and none at all on other things. Our outlook in this matter is altogether too material. Let me give an example of what I mean. Anyone who is familiar with the expenditure upon education knows of the enormous amount of money which goes in new schools built upon an elaborate scale. I suggest that the most important factor in education is the teacher. Looking back at my own school days, I have most clearly in mind such advantages as I obtained from a brilliant teacher, and at this distance of time I cannot recollect whether the school room in which that brilliant teacher taught was a good one or a bad one. I am not suggesting that we should put up with second-rate schools, but if we have to save money let us save it upon the buildings rather than upon the teachers. I believe that a few hundred thousand pounds spent in giving teachers an extra year at a training college would be money perhaps better spent than millions spent upon bricks and mortar.
  There is another direction in which, I think, money might wisely be spent in the same sphere. It has always been an ambition of mine that there might one day be established in this country a Ministry of Arts. The Minister would not try to dictate to artists what they should create, but it should be his duty to see that a certain sum of money was wisely used in trying to encourage music, architecture, the theatre, and so on. It seems quite extraordinary that we in this country should impose heavy taxation upon the theatre—which is just as bad as proposing heavy taxation upon books.
  Mr. Tomlinson: Will the hon. Member explain how he reconciles this suggestion with saving money upon school buildings?
  Mr. Assheton: I was pointing out that I think we devote rather too much attention to the buildings and too little attention to the less material but perhaps more valuable side of education. There may be a case for spending more money in one direction and not so much in another.
  On the question of how we are to raise the money that we are to spend, it is clear from the Debate, and from the Amendment which the Opposition put down, that in their view the increased revenue should come from the taxation of great wealth. No one here would deny

  1501
  that great wealth already pays a very heavy contribution. The highest incomes are paying now 13s. 9d. in the £, and in addition heavy Death Duties have to be met. If the man who has the very highest of incomes sets aside sufficient to pay his Death Duties he will, of course, be paying very much more than 20s in the in taxation. I am not suggesting for one moment that taxation of the rich is wrong, but we want to make sure that we are not killing the goose that laid the golden eggs. I have often wondered whether heavy taxation of the rich is not very much better for the rich than for the community in general.
  If hon. Members would look at the report of the Commissioners of Inland Revenue they will observe that the last set of figures for Surtax shows that the income of all Surtax payers for the financial year was £424,000,000. That certainly appears to be a stupendous income for 85,000 citizens to have, but we must not forget, as has already been pointed out, that out of that comes £160,000,000 for Income Tax and Surtax, reducing the figure to £264,000,000. If you were further to reduce this income so that no Surtax payer received an income in excess of £2,000 a year, you would obtain only a further revenue of £96,000,000, less whatever was spent each year by that class of taxpayer in paying for Death Duties out of income. That, too, is only on the assumption that the enormously increased taxation would not discourage those who earned large incomes from continuing to do so. [Laughter.] That idea may not be quite so silly as it sounds. Let us take the example of a rich professional man. He might not be tempted to work himself to the bone—[HON. MEMBERS: Shame! "] —as much as he does, if he were not going to get a reward over and above a certain level.
  An Hon. Member: What about unearned income?
  Mr. Assheton: I was here referring to earned income. Suppose, however, I am wrong, and that everybody worked just as hard and just as much as they could to increase their incomes in the new circumstances; I ask hon. Members opposite to bear in mind that there is apparent from these figures a very clear limit to the amount available to the Chancellor. The idea that there is an
  1502
  inexhaustible surplus of wealth which is to be tapped by taxation is a proposition which the figures do not justify.
  There are, of course, other methods of raising taxation, but on the whole I always prefer direct taxation. I cannot help wondering why the Chancellor of the Exchequer has not considered the possibilities of the tax on betting which many of us on all sides of the House think should be imposed. It has been tried, and it has failed, but there is no reason why it should not be tried again. I am confident that success could be achieved if the right method were pursued. It has often occurred to me that a most valuable tax would be upon advertisements publicly displayed in rural areas. It might benefit the Exchequer and a great many others also. I am glad that the Chancellor of the Exchequer has done something to tackle the question of tax avoidance, but he has still further to go. Some cases of accumulated trusts exist to which he might very well direct his attention.
  The last resort of an embarrassed Chancellor of the Exchequer is borrowing, which inevitably brings inflation in its trail. At the present time, the fall in world commodity prices has to some extent obscured the inflation. Those who take an unorthodox view, as my hon. Friend the Member for East Aberdeen sometimes does, approve of inflation because they feel that it reduces the weight of taxation. Apart from such a view being inherently immoral, it cannot be justified as a policy except in the most exceptional circumstances, because it is discriminatory taxation against the holders of fixed incomes and Government securities. It means that the man who lends the Government one pound will receive back less than he lent. I urge my hon. Friend to take that fact into consideration.
  It may be highly impolitic for advocates of a policy of borrowing to talk too freely about the relief that will hereafter be obtained from a rise in money prices. Some news of it might come to the ears of possible lenders and might conceivably embarrass the gentlemen who had to undertake the problem of borrowing, and they might meet with unexpected difficulties.
  Mr. Macquisten: Like the London County Council.
  Mr. Assheton: One must realise that a rise in prices of 20 per cent. would not reduce the relative burden of taxation by anything like as much, because the debt charges amount only to some 25 per cent. of the total expenditure. Therefore, if other charges, such as pensions and salaries, rose in proportion to the inflation, which in due course they would do, the relief of a 20 per cent. inflation would be a relief of only 5 per cent. to the Budget, and much more than 20 per cent. inflation would therefore be necessary. The effects of such an inflation upon the whole structure of the country would be so serious that I hope no one in this House would suggest it unless it is necessary.
  It seems essential that we should try to follow a sound financial policy. Poverty and ignorance are two of the chief sources of our trouble and social discontent, and we desperately need money to spend on social services of all kinds. I suggest that we must be most careful not to squander our resources on the wrong things and in the wrong direction. We must spend them where best the money can do service to the community. Let us maintain our financial integrity so that we shall be able to do these things.
  On this subject of retaining our financial integrity, I would ask the Chancellor of the Exchequer one last thing: Will he see whether it is possible to come to some settlement of the American Debt? The present position certainly is a stain upon our reputation, and it may imperil our ability to borrow again in that market. It is already having the most disastrous effect on our debtors in different parts of the world. It cannot be denied that it is a most serious thing and I beg the right hon. Gentleman to give the matter once again his most serious consideration. My right hon. Friend the Member for the City of London told us in a speech the other day that to make ends meet is the acid test of democracy. Let us on both sides of this House co-operate to make it possible for this country to pass that test and to show the world that democracy really can display a true sense of its responsibility.
  8.44 P.m.
  Mr. Benson: I very greatly enjoyed the speech of the hon. Member for Hastings (Mr. Hely-Hutchinson) when he spoke on the Budget, but I was rather disappointed
  1504
  with what he had to say this evening. He said that he was a tenderfoot in the House of Commons; if I may say so without offence his speech failed this evening because he is rather inexperienced in the House. He dealt with the immense burdens of the Surtax payers and explained how, in his opinion, they were spending up to the hilt. When he has been here a little time he will find that my hon. Friends on this side are an extraordinarily callous lot when it comes to considering the sufferings of the Surtax payer.
  I happen to have a copy of the report of the Commissioners of Inland Revenue, and I have checked up what this expenditure-up-to-the-hilt meant. I took the 85 people in the maximum-income group of over £100,000. Their average income is £175,000 and they pay a fairly heavy tax. They pay, I agree, £100,000 per annum in taxation, but that leaves them £70,000 a year, or £1,400 a week, and any man who has an income of £1,400 a week and spends it all deserves to be taxed more heavily. But as a matter of fact, despite the very high rate of taxation in Surtax and in Death Duties, we are not likely as the hon. Member seems to anticipate, to kill the goose that lays the golden eggs. One of the most extraordinary things that one finds in studying the report of the Commissioners of Inland Revenue is the stability of the various strata of society, and the way in which, over any reasonably long period, both the wealth coming under review for Death Duties and the income coming under review for Surtax steadily increases.
  Mr. Assheton: The total amount assessed to Surtax in 1931 was £545,000,000, and the total on the latest date for which the figures are available was £424,000,000. There has, therefore, been a substantial decline.
  Mr. Benson: Yes, very largely due to evasion.
  Mr. Assheton: I hope the Chancellor of the Exchequer will stamp that out.
  Mr. Benson: The only explanation of that extraordinary decrease is evasion. As a matter of fact, the amount of capital held by these people has steadily increased over the same period. If you take £25,000 of capital as representing the level at which Surtax-paying income starts, and compare the increase in the

  1505
  growth of the estates coming under review for Death Duties in the last 10 years, you will find that there is an identical increase in growth below the £25,000 level and above the £25,000 level. That level more or less cuts in half the amount of the estates coming under review for Death Duties. Ten years ago, when Surtax-paying income stood at £595,000,000, again it was about half, while last year also the £25,000 level almost divided in half the estates coming under review for Death Duties. It will be found that, so far as capital is concerned, there is quite definitely an appreciation of equal amount both below and above the Surtax level. I am not prepared to admit that a decrease in income can happen at the some time as a considerable growth in capital.
  Mr. Assheton: Perhaps I may illustrate what I mean by reference to War Loan. Some years ago, the holder of £1,000 War Loan was drawing £50 a year in income. War Loan then stood at 8o, so that £800 of capital was producing £50 a year. To-day, War Loan stands at 101, so that £800 of capital brings in £35 a year. It is, therefore, quite clear that the reason why these capital values have increased so much is that money is cheaper, and capital values are therefore higher. Similarly, in the case of Surtax, the capital has increased but the revenue of Surtax payers has diminished.
  Mr. Benson: Then you get the very curious result that the incomes below £2,000 have not been affected in the same way, and that only those people who have incomes above £2,000 have been affected, by this drop in returns.
  Mr. Boothby: A large proportion of the incomes below £2,000 is entitled to the earned income allowance.
  Mr. Benson: Even making that very generous assumption, if you deduct the earned income calculated from the earned income allowance from the incomes below £2,000, leaving a selected income group which is unearned, you get exactly the same result, namely, that the unearned incomes below £2,000 have increased considerably, as well as the earned incomes. I am not prepared to agree that unearned incomes below £2,000 have not suffered and unearned incomes above £2,000 have suffered.
  1506
  I wanted to refer to some remarks of the Chancellor of the Exchequer, who has returned to the House at a most appropriate time. He said he was struggling to keep a straight course. I do not know much about navigation, but I think that to be 10 per cent. off one's course in navigation means that one is 36 degrees out, and I understand that that is rather a serious matter. The Chancellor said one thing with which I heartily agree, namely, that if you are to judge the present position, you must judge it by the future and not by the past. I think it is true that, as was said by the hon. Member for Hastings in the Budget Debate, and as a large number of Members agreed, we have to look forward in the future to Budgets of £1,000,000,000. That means that the figure of our present Budget is a normal figure. I know it is possible that there will be a decrease in our enormous expenditure on rearmament, but it will not be a decrease to the level which obtained before we started it; our expenditure on armaments will be very much higher than we were accustomed to before then.
  And then there is something as well which every Chancellor must take into consideration, and which must haunt Chancellors. That is the natural growth not of the revenue, but of expenditure. It is all very well saying, "We must economise; we cannot continue to spend all this; there is no possibility of economy." Your social services, unless you are prepared to cut them, will steadily cost more. Old age pensions are bound to increase, and increase rapidly, if the present tendency in age distribution is continued. I do not see any possibility of economy unless we are prepared to slash our social services. That means that we have got to treat our present Budget level as practically the normal. We cannot go on borrowing £90,000,000 a year indefinitely. If our £1,000,000,000 Budget is a normal Budget, it will have to be met by taxation, and not by borrowing. The Chancellor asked, what would anyone else who was Chancellor have done in his place, having to meet the problem that he had to meet? He suggested they would have met it in the same way: by taking a middle course. But future Chancellors will all have to meet this problem, of raising approximately £1,000,000,000, and they cannot always

  1507
  take the middle course, that is, borrow £90,000,000. Sooner or later, £1,000,000,000 will have to be regarded as the sum that this country has to meet by taxation. I admit that it is not a particularly happy outlook; but it is one that we shall have to meet.
  The Chancellor referred to the Exchange Equalisation Fund as an asset. He said we had £550,000,000 in gold in that as an asset. He said also that it is making a profit. It may be making a profit, but whether it is an asset I am not at all sure. With the present normal gold production in the world, and with the gold production continually increasing, the Exchange Equalisation Fund is only an asset as long as we continue purchasing gold. We keep our gold worth what we pay for it by continually buying more and more every year. We are steadily piling up an enormous asset, which we can only keep as an asset by increasing and increasing it. Where are we going to have an opportunity of unloading all this gold? France, the United States and other countries are steadily buying gold, which cannot possibly earn a dividend. Where is it going to end? I am not at all sure that the various Chancellors of the Exchequer will not have to get together and, in self-protection, buy up the gold mines and close them down.
  Mr. Assheton: A marketing board.
  Mr. Benson: I suggest that our present Chancellor should ask his advisers how long it is going to continue, and what we are going to do with the gold that is piling up. It may be a theoretical asset: it is worth what we have paid for it, as long as we do not let it go; but as soon as we try to realise it, it turns to ashes.
  Mr. Boothby: If the hon. Gentleman has any gold, he will find it quite easy to sell it.
  Mr. Benson: Yes, but I do not happen to have £550,000,000 worth. You can sell a little, but the hon. Gentleman knows perfectly well that the value of gold is a theoretical value. It is based on convention, and also it is based on scarcity.
  Mr. Macquisten: Is the hon. Gentleman aware that gold has kept its value for thousands of years, and that it was the
  1508
  basis for the wealth of the Queen of Sheba?
  Mr. Benson: I am perfectly willing to admit that this convention of gold is a very ancient one. I have not the advantage of the hon. and learned Gentleman in knowing the Queen of Sheba. All I said was that the value was a conventional one, and the convention depends on the value given it as a medium of exchange.
  Mr. Macquisten: It always has been.
  Mr. Benson: That is the attitude I have noticed in the hon. and learned Gentleman. It always has been; therefore, it always has to be. The fact remains that gold has a conventional value. Supplies are getting so enormous, and the burden of keeping up those supplies by steady purchase is so enormous, that sooner or later we shall break down.
  Mr. Macquisten: Is the hon. Gentleman aware that the demand for gold is increasing, and that part of the suffering in the world is due to the fact that gold supplies do not keep up?
  Mr. Benson: That may be perfectly true as long as you tie your currency to gold; but as soon as you remove your currency from gold and control it, a shortage of gold cannot cause the trouble to which the hon. and learned Member refers. If you tie your currency to gold, if you have £550,000,000 worth, and you issue currency to cover it, you get inflation. I repeat that gold has conventional value, and we only keep it at that value by buying more and more and burdening ourselves with a bigger and bigger debt to absorb the gold; and that, sooner or later, that policy must come to an end.
  9.4 p.m.
  Mr. Boothby: I am sure the whole House listened with great interest to the observations of the hon. Gentleman on the subject of gold. I have taken an interest in the same theme, but I do not intend to go into it in detail now. I want to ask the hon. Member a question. What does he mean by, "saddling ourselves with this burden"? It is no burden at all. If the hon. Member has £100,000,000 in the bank, would he call it saddling himself with a burden?
  Mr. Benson: I said that this gold was a burden, because we have already borrowed £550,000,000 in order to pur

  1509
  chase that gold. It is doing nothing, or very little. We have continued to buy more and more of it in order to maintain its value, and that is why I say that it is a burden.
  Mr. Boothby: Gold represents wealth and is generally recognised as such throughout the whole world, civilised and uncivilised, at the present time. As my hon. and learned Friend the Member for Argyll (Mr. Ma cquisten) said, gold has always been recognised, and it is the only thing to have been recognised at its intrinsic worth ever since the dawn of history and indeed of civilisation. [HON. MEMBERS: "Oh!" I Anyway its worth was recognised from the first moment that gold was discovered, and it was discovered at a very early stage. It is not so many years ago that all the nations of the world were assembled at Geneva for the purpose of discussing the alarming shortage of supplies of gold available for monetary purposes. That was not more than 15 years ago. All the experts were out there asking how they could possibly make the world's gold supplies go round in order to satisfy the credit demands of modem civilisation.
  If the hon. Gentleman wants to tamper with gold and fiddle about with the value of gold, he can do two things. He can reduce its value in terms of currency. If he does that, he increases in exact proportion the deadweight burden of all debts in every country all over the world. But he may go further than that and want not only to reduce the value of gold in terms of currencies but to destroy its value altogether. If he did that he would destroy the accumulated wealth of the United States of America and the British Empire, not to mention the economic system as we know it. All commodity values would crash. He might be able to build up a new form of Socialist economics on the ashes of the old system, but it is not a reform that I would like to see take place or could contemplate with any equanimity.
  Mr. Benson: I have never suggested that I wanted to do anything of the kind. I said that the main trouble was the automatic value of gold, which might break itself.
  Mr. Boothby: Gold is not in circulation either in America or in this country, and the more gold we have the easier it will
  1510
  be to finance that great expansion of credit, which is inevitable if we are to keep on with £1,000,000,000 Budgets, and keep human beings in all the civilised countries at the standard of living which the present day demands. We had one gold scare, as the right hon. Gentleman the Chancellor of the Exchequer well remembers, last Summer; and it caused a lot of trouble. Some people did not think that it would do any harm at the time, but in fact it threatened the whole world commodity price level, and it now turns out, and nobody would deny it, that it contributed largely to the industrial recession in which we find ourselves to-day. There are plenty of scares in the modem world without manufacturing artificial gold ones to add to all the evils. We have enough to go on with, without the hon. Gentleman trying to manufacture a new one to-night.
  I see on the Front Opposition Bench the right hon. Gentleman who opened this Debate, and I must join issue with him upon the subject of the hook which he had the audacity to quote with approval. It was "Can 1931 come Again?" by Mr. Collin Brooks. He gave us the analysis of Mr. Brooks on the situation:
  "The British Empire, and particularly the Government, was on the brink of disaster, and it was largely our own fault."
  He quoted with approval, and apparent agreement this analysis of the situation. He did not go on to mention the remarkable remedies put forward in this volume by Mr. Collin Brooks, who says that the first and most essential cure is a wholesale cut in wages right through the whole field; secondly, the standard of living of the middle classes has to be cut in half; and lastly most of the social services should be done away with altogether. If the right hon. Gentleman agrees with that diagnosis, presumably he agrees with the remedy.
  Mr. Alexander: I only quoted what were regarded as the symptoms. I agree with the symptoms, but I do not agree with his remedy at all. It has more interest for hon. Members opposite, for he has published to the world what, in a few years, will be their position.
  Mr. Boothby: My views in a few years or a few weeks will never be his views. His diagnosis is quite as foolish as is

  1511
  his remedy, and we should do well to steer clear of this book.
  Mr. Alexander: If the hon. Member will also refer to the remarkable catalogue of symptoms in the Treasury evidence before the Royal Commission on Unemployment Insurance in 1931 he will find exactly the same sort of thing.
  Mr. Boothby: We all know what the symptoms were in 1931. They were much less difficult than those which confront the present Chancellor of the Exchequer. But nobody had any confidence in the right hon. Gentleman, whilst everybody has confidence in the present Chancellor of the Exchequer.
  Mr. George Griffiths: They have had confidence in us at the last few by-elections.
  Mr. Boothby: Everybody seems to have confidence in the Chancellor of the Exchequer, except me on occasions. But on the whole the fact remains that the business, trading industrial and financial communities of this country and of the whole world have confidence in the present administration, and particularly in my right hon. Friend, whereas nobody had any confidence in the late Labour Government. The present Chancellor of the Exchequer is faced with a far more critical situation in several respects, but he is weathering the storm, and he is able to do it because he has confidence. There is no panic, and the Government are able to maintain cheap money. The whole struggle of the right hon. Gentleman was to try and prevent panic developing, and he struggled in vain.
  I would like to deal with one other part of the speech of the right hon. Gentleman, where he referred to the profits of the steel companies. This is a very important matter. The Chancellor of the Exchequer dealt with it, but I have some figures of interest in the light of what the right hon. Gentleman said. His figures showed a considerable rise in prosperity in the year 1937, and also a considerable rise in revenue, which ought not to be lost sight of. But he took no account of the capital structure of these companies. I would like to re-emphasise what the Chancellor of the Exchequer said, that iron and steel companies in particular are
  1512
  companies which are apt to have no profits of any kind and declare no dividends during periods of depression or semi-depression, and then, when they come into the upgrade, they make very big profits over a brief period. If you average out the dividends received by the ordinary shareholder who sticks to his holding in the ordinary iron and steel company, you will find that the average over a period of five and certainly ten years is not very high.
  I would like to give one or two figures with which I have been supplied from an authoritative source. These figures represent about 86 per cent. of the independent iron and steel companies in this country, the shares of which total in value just over £126,000,000. The financial results of these companies, as shown by the accounts published in the first quarter of 1938, after providing the charge for depreciation and debenture interest but without charging Income Tax, to be deducted from dividends, and before making any transfer to reserves, yielded an average profit of 12.8 per cent. on the total share capital, which compares with 11 per cent. in 1937 and 8.7 per cent. in 1936. In those years the dividends paid were 7.8 for 1937 and 6.4 for 1936. If you take the average over the 10 years from 1927 to 1937 you find that the profit is not more than 4 per cent., and the dividend of 3.29 per cent. Can any hon. Member say that that is wholly unreasonable? Of course, many shareholders will sell their shares if they see bad times coming; but no one can say that that is an unduly high rate on the capital over a period.
  Mr. Alexander: Those figures do not hold water when we find cases like this, of Vickers, Limited, giving a 5o per cent. bonus in 1935 and John Brown giving a capital bonus of 66⅔ per cent. in 1937. You must take all those capital movements into account.
  Mr. Boothby: The right hon. Gentleman is right when he speaks of all these capital movements, up and down, but you have to bear in mind that the nominal capital in the iron and steel trade has been written down during the past decade to the extent approximately of one-third of the total capital originally subscribed; that is to say by over £40,000,000. No one pretends that there has been a slump in the iron and steel trade during

  1513
  the last two years, but we must be fair in these matters. It is estimated, as far as the heavy steel makers are concerned, that until quite recently rearmament accounted for only about 10 per cent. of their total activity. The right hon. Gentleman tried to make out that the whole of this boom that took place in 1936–37 was due to rearmament. That is not true. If it were true it would be a very great argument in favour of public works. But we are only now coming to the peak of this gigantic rearmament programme, arid this is the moment when, according to all authorities, trade is slowing down. We are in a recession, and the great anxiety of everybody is to avoid a slump. During one period we were going right ahead and having a time of great prosperity, almost a boom period, when rearmament was very much less than it is at the present time. That goes to prove what some of us have always maintained, that the efficacy of Government spending on public works to cure a depression has been very much exaggerated. That argument can be greatly overdone. It may be possible to mitigate certain hardships by spending public money in times of depression and strictly regulating such expenditure in times of boom, but to say that public expenditure can stop a slump is not true. Hon. Members on both sides of the House, whether Socialists or capitalists, would do well to learn by experience and not to put too much faith in public expenditure as a method of controlling a trade cycle.
  Nevertheless, I should like to say that I share the views of the right hon. Gentleman in regard to the rearmament business, up to a point. I believe that, in the long run, a ministry of supply in this country will be found to be absolutely inevitable. The Government will be obliged, sooner or later, to set up such a ministry, and to arm it with the necessary powers by legislation, if the present pressure is kept up. If the pressure is relieved, if some agreement can be come to with Germany, it will of course be different, but if the present pressure is continued, and we have to go on expanding, particularly in the Air Force, to the extent which seems probable, I believe a ministry of supply, armed with great powers, and involving a great deal of industrial dislocation and interference with labour, is absolutely inevitable. I believe
  1514
  that the House as a whole is gradually reaching that conclusion.
  I should like to say a few words on the subject of the very heavy taxation that is being imposed in this Finance Bill. Hon. Members on both sides agree on this point. An Income Tax of 5s. 6d. in the £, plus National Defence Contribution, is an extremely heavy burden of direct taxation. And I think hon. Members on both sides will admit that the limits of indirect taxation have very nearly been reached. When we see the Supplementary Estimates which the Government have to produce for rearmament, I think we shall come to the conclusion that our expenditure is bound to run for many years at something in the neighborhood of £1,000,000,000, as the hon. Member for Hastings (Mr. Hely-Hutchinson) has said. Therefore, we are up against the absolute necessity of keeping up the national revenue, if we are to avoid a very serious financial crisis at some time or other. How are we to do that?
  We cannot cut down expenditure on armaments and we cannot cut expenditure down substantially on the social services. Everybody admits that. The only way that we can hope, in the long run, to meet our obligations and pay our way, is to maintain the national income and, if possible, to increase it. Otherwise some form of crisis is inevitable. At the present time the situation gives cause for a certain amount of anxiety, and I am sure the Chancellor of the Exchequer will admit that. For a long time we tried to pretend that there was no recession. Now we know that there has been a recession, and that at this moment there is still a considerable recession. This applies to all sections of industry, even to the iron and steel industry, and particularly to the textile industry. It applies pretty well over the whole field of export industry. Even the motor car industry is feeling it. It is not yet very serious or grave, but it is there, and we have to face it.
  An even more disquieting symptom of the present economic situation is the fall in world commodity prices. They have always been a barometer. I am not talking now of retail prices or the cost of living, but basic commodity prices for wheat, metals, and so on. If commodity prices fall below a certain point, primary

  1515
  producers can no longer make a living; therefore we lose our markets. [An HON. MEMBER: "Why are they falling?"] Because of the general world depression and the deflation which is in operation at the present time. I hope that very soon we shall be able to check this fall; everybody is trying to do so. During recent weeks the fall has unfortunately not been checked, but on the whole it has continued, and has caused considerable anxiety to those of us who study economic trends. At the same time our adverse balance of trade is increasing.
  All these things give cause for anxiety, and one asks oneself why they are happening. The day before yesterday the President of the Board of Trade gave an absolutely brilliant and most lucid survey of the economic situation in this country and in the world. It was fearless and clear, and fair, as the right hon. Gentleman always is on these economic subjects, and hon. Members on all sides would do well to study that statement, which is based on the very good information that we get from our trade officers throughout the world.
  Mr. Shinwell: Was not the statement made by the President of the Board of Trade a complete change from the statement he made only a few months ago?
  Mr. Boothby: That may be, but it was not only the Government but many other people as well who were trying to persuade themselves a few months ago that there was no serious recession. They were whistling to keep their courage up. And indeed there were good grounds for hoping that the adverse movement would be checked. Now it has gone too far, and we have to face up to the fact that there has already been a considerable recession. The President of the Board of Trade faced up to it, and gave an interesting analysis of the causes, in which he pointed first of all to the deliberate deflation in the United States, secondly to the adverse effects, which were for a long time. not wholly appreciated, of the Sino-Japanese conflict, which for the time being knocked out a gigantic market to which many people were looking forward 18 months ago as one of the greatest markets available for trade expansion, and thirdly to the European tension. I would add, for the benefit of the hon.
  1516
  Member opposite, the gold scare of last year, which he has tried to revive unsuccessfully to-night.
  The trouble about all these things is that they are interdependent. One affects the other. You get the fall in commodity prices, deflation in the United States, European tension and the Sino-Japanese war, and they all have an adverse effect on each other. Low commodity prices bring about the impoverishment of the Empire, weaken the whole economic system, and enable the dictator States, particular Germany, to buy raw material for rearmament purposes cheaper and in larger quantities, thus increasing the tension in Europe. A German friend of mine said the other day, "What we cannot understand in my country is the spectacle of the great United States of America and the British Empire, with all the gold, all the raw material, all the commodities, all the wealth of the world in their hands, going into something like a depression while we, with nothing, or very little, are able to maintain our people in full employment." [Interruption.] I am not arguing in favour of the totalitarian system. I am only saying that that is the sort of argument that they are putting over in Germany to-day.
  It is a very tragic thing that at this of all moments the United States and the British Empire should be definitely weakened by economic recession. I appeal to my right hon. Friend to see whether we cannot consult with the United States as to methods that we can take together to get out of the present difficult situation, and to stop the decline in wealth values and commodity values. We have a trade delegation arguing about tariffs. That is all very well and useful but, if we go on in the present way, there will be very little trade to negotiate about. I support the hon. Member who preceded me on this side and say that, if necessary, I should be delighted to see a debt settlement negotiated with the United States, provided we could really get together. We have at our service some of the great economists of the world. I need only mention Sir Frederick Leith Ross, who has performed so many valuable services for this country all over the world.
  I should like to see an authoritative mission, headed by the right hon. Gentleman or by a responsible Cabinet Minister, consulting with the Federal

  1517
  Government in Washington as to ways and means by which the democracies of the world can use their great wealth to restore their economic strength at a critical time. That, and a real effort to revive trade in Central and Eastern Europe, are the most hopeful lines of advance for the country at present. This economic recession is in the minds of many of us largely unnecessary. It need never have taken place. I believe it is largely artificial. It could be cured by effective co-operation between the great democracies of the world. So long as it continues, so long will the democracies be unnecessarily weakened, at a time when it is essential that they should be strong; and everyone knows that their economic strength is the fundamental strength of democracies, as against totalitarian States.
  9.31 p.m.
  Mr. Price: The hon. Member is always interesting and instructive on matters concerning finance, but I hardly think he did himself justice by trying to make capital out of the crisis in 1931 and hinting that this party failed to meet the situation because there was no confidence in them among the captains of industry and finance. I think the real truth is that the rank-and-file of this party refused to allow Lord Snowden to organise scarcity on the basis of the Gold Standard, and consequently refused to agree to the cuts. After all, the cuts having taken place for the purpose of keeping us on the Gold Standard, the Gold Standard was very soon abandoned. A good deal of sympathy has been expressed by certain Members opposite with the Super-tax payer. Certainly those who are Super-tax payers have to pay more under this Budget than before, but I think one has to compare the source of taxation to-day with the purpose for which that taxation is spent. If that is done, we shall see that the social services are being, to a large extent, financed out of indirect taxation.
  If you compare the increase of indirect taxation before the War with the increase in the cost of the social services, the two figures very nearly equal each other. In other words, there has been very little shift in the burden of taxation which goes towards the financing of the social services. It is true that direct taxation has increased considerably since
  1518
  1913, but a very great deal of that goes to cover the interest on the National Debt, which has increased enormously since the War. The whole tendency has been to increase indebtedness and then for that indebtedness to be paid for to a large extent by the increase of direct taxation, thereby leaving the indirect taxpayers to finance the social services, so that one cannot shed these tears in reason for the burdens of the Super-tax payer. Of course Super-tax payers do not like paying. I am a Super-tax payer and I do not like paying. I have told my children that they will probably inherit nothing from me except debts, and they must earn their own living. On an occasion like this, when the national accounts are before the House, I feel inclined to appear before the Chancellor of the Exchequer like the gladiators appeared before Caesar in the amphitheatre and say:
  " Ave Caesar morituri to salutant."
  " Hail Caesar, those about to die salute thee." This increase in direct taxation continues and is bound to continue, whether it is by the way of this Budget, in stopping leaks, quite rightly, or whether it is by a greater taxation on the higher accumulations of income. Let me say one word in reply to the hon. Member for East Aberdeen (Mr. Boothby) on the national income as a whole. He emphasised the necessity of keeping up the national revenue, but prior to that he seemed to contradict himself as he scouted the idea that very much could be done by Government expenditure on public works. That is where I join issue with the hon. Member. When the Budget Resolutions were before the House there were one or two speeches which seemed to me to strike the right note. The hon. Member for Stockton (Mr. H. Macmillan) said, quite rightly, that the national income was not to be regarded as something static. I agree. It is something dynamic, and Government policy can do a great deal towards increasing national income.
  I do not agree with the hon. Member for East Aberdeen that Government expenditure on public works is not likely to be of great value in assisting the national revenue. I have some figures from the United States of America as to the amount of money which has been spent on all forms of public works in recent years. If you take the Treasury

  1519
  receipts in the United States and deduct from them the sales of Government bonds, you get the net Government spending, and if you compare that with the index of industrial production—this is for the year 1936–37—you will see a very interesting and rather remarkable connection between the two. In the last half of 1936 the net Government expenditure of the United States amounted to 1,946,000,000 dollars, and the index of industrial production was 109. Twelve months later, in the last half of 1937, there was not only no Government expenditure but the Government receipts were in excess of Government expenditure, so that the expenditure was a minus quantity of 115,000,000 dollars. During that same period the index of industrial production began to go down; it was just over 100, indicating that in the United States, at least, Government expenditure had been playing a very big role in the boom of the year or two before. Of course, the President of the United States is following a policy of pump-priming by which he hopes to reverse the process.
  I am not arguing that Government expenditure alone will put this matter right. On the contrary, we say that where Government expenditure is made in the form of a subsidy to private industry State control must follow. It is an indication that a private capitalist system cannot be kept going without continual pump-priming by the State. It also indicates that capitalism is going rapidly into a decline. It is a natural process. Public expenditure is always taking a larger share of the national budget, and our argument is that public control must follow. If private enterprise cannot keep this machinery working, then public expenditure and public control must follow. I do not think the public realise how much greater is the power which now exists with the Treasury even under the present Government, which does not pretend to favour State enterprise as against private enterprise. The mere existence of the Exchange Equalisation Fund with its £550,000,000 for the purpose of equalising the exchanges is a usurpation by the Treasury of functions formerly exercised by the Bank of England. The Foreign Loans Advisory Committee controls to some extent foreign investments, and
  1520
  quite rightly, and the Exchange Credits Department brings the State directly in as a banker to assist the export trade.
  All this is in line with general world developments. The Fascist States have done it long ago. Private enterprise is there very much under control. Prices are fixed for industrial goods and profits are fixed, and there is a far greater control in the Fascist States than there is in democratic industrial States like this country, France and the United States. In Russia it has been carried to a far greater degree, and it seems to me that the problem which democratic States will have to face and solve fairly soon is how to increase public control over industry, but to do it in a different way from that of the Fascist States and Russia. I am not worried by the prospect of a £1, 000, 000, 000 Budget which is apparently to become something normal to this country. I see nothing unusual in it, having regard to the way in which the world is working. Hon. Members opposite cannot help themselves. They have had in the last few years to bring in measures of control over foreign investments, exchanges, and the process has to go on. You can call it what you like, it is Socialism all the same. We are merely concerned with an extension of the principle.
  It may be argued that public expenditure in the form of loans should be carried out for the purpose of financing our armaments. There, I agree with the Chancellor of the Exchequer. I think he is quite right in not listening to those who argue that the whole of the £30,000,000 deficit should be found by way of loan. I think it is unwise to finance the expenditure of what, after all, is a wasting asset, by way of a loan. I would much sooner see the national credit used for the purpose of creating a national asset, such as electricity supply, roads, industrial development of all kinds, bridges, and so on. We cannot say that the expenditure to which the nation is committed for defence is something which will bring in a revenue. It is necessary, of course, as an insurance, but I would not like to insure my life by borrowing, if I could help it. I would sooner pay for it out of income, if possible, particularly in view of the fact that, according to my information it is held in Germany to-day that warplanes, on the declaration of war, are not likely to be in existence for more than six

  1521
  months, the rate of destruction in modern warfare is so terrific, indicating that the wastage will be tremendous. This again shows that we must pass along this narrow, thorny way of financing ourselves as much as we can out of income rather than by loans, and leave loans, and public works financed by loans, for something which may be necessary when industrial depression comes. Industrial depression is beginning with us now, as everyone more or less admits. We do not want to waste our credit, therefore, by spending it on wasting assets, but we want to spend rather on something which will make the nation rich and able to withstand the difficult times which are ahead.
  9.47 P.m.
  Mr. Amery: I am sure the hon. Member for the Forest of Dean (Mr. Price) will forgive me if, at this late hour, I do not follow him in some of the rather abstract arguments which he has used, but address myself directly to the main subject of the Budget which underlies the present Finance Bill. It is, of course, a notable Budget and destined to be a milestone in our financial history, not because it is an abnormally large Budget, but because it is the first Budget, though certainly not the last Budget, of over £1,000,000,000 in times of peace. My hon. Friend the hon. Member for Hastings (Mr. Hely-Hutchinson), in an admirable maiden speech the other day, showed very clearly why it is out of the question for us to expect any substantial reduction below the £1,000,000,000 figure in the next few years. I would say, going even further, that we are bound to face a continuous process of increase. The tendency which, in the last 10 years, has added some £360,000,000 to our expenditure on comparable objects is bound to go on. As the hon. Member for the Forest of Dean very truly said, it is in line with the whole of that world development which undoubtedly has continually increased and is continually increasing the functions of the State, both in relation to our social and domestic life and no less in international competition.
  From that point of view we have to face the fact that our expenditure is still, and will inevitably continue to be, on the up grade. Our social services have been brought from £45,000,000 before the War, to, £345,000,000 to-day, not counting contributions from local taxation, by a process which is bound to con
  1522
  tinue. I say nothing about automatic increases of pensions and of the various forms of insurance, but there are new services which we have to face, which are necessary to create a really healthy nation. To do for some of the wasting diseases of the country what other countries are doing to-day, to give to our youth all that opportunity for healthy training and development, is going to cost a great deal more money than we are spending at present. Then there is another problem of vital consequence, not only from the point of view of immediate justice to the growing children in this generation, but from the point of view of the future existence of the nation, and that is the problem which the hon. Member for Bassetlaw (Mr. Bellenger) mentioned, the problem of the family and the unfair burden upon parents. That is going to involve expenditure. If it is to act effectively against the tendency to a diminishing population, it may involve a very large expenditure. Certainly we, on this side of the House, are pledged t0 a policy of continuing social reform, and I could hardly imagine that hon. Members opposite, if they came into office, would start by retrenching on social services. So we can definitely assume that those services will increase, though there is at any rate one thing about them, and that is that we have ourselves some measure of control on the pace that we set. We can postpone desirable reforms for the time if we believe at any particular moment that we cannot afford them.
  That is not the situation when we come to that aspect of our expenditure which is created by the policy of other countries. We had a Debate yesterday, and there was not a single speech on either side of the House, least of all from the Opposition Front Bench, which for one moment suggested that our efforts in rearmament should be measured by any financial standard of what we could afford. The whole standard which the House set itself unanimously yesterday was the standard of what we must afford in face of the dangers that may confront us. We may hope that those dangers will gradually diminish, we may hope that the kind of crisis through which we passed in the last few days will not recur too often. All the same, so long as you are dealing, as I fear you will have to deal for years to come, with unresolved conflicts of ideals and ambitions, right

  1523
  against right, or conflicts in which right is not wholly on one side, so long will great nations undergo sacrifices to secure their ends, and the measure of those sacrifices imposes upon us a corresponding measure.
  There is another form of expenditure in prospect which we have hardly begun to face, and that is the expenditure destined to arise through economic competition. As was very truly said by the hon. Member for the Forest of Dean there are other nations which control their economy very drastically. They do so not only to secure self-sufficiency as far as possible within their own territory, but also to compete effectively in the outside world against others. They do so by subsidies of every kind, direct and indirect. They subsidise their shipping on a large scale, they subsidise their exports by all kinds of measures, difficult for us even to grasp, because they are so interwoven with their whole control of exchange, finance, and internal markets. All the same, they create a danger to us, to our exports, which we are not going to meet by mere unaided individual competition. In one way or another, I venture to predict that year by year we shall find ourselves compelled, if our industries are to exist at all in the outside world, to give, directly or indirectly, State aid in forms that will affect our expenditure.
  How are we to meet that problem? The hon. Member for the Forest of Dean said that it did not worry him. I confess that, although it is an inevitable problem, it does worry me, and I think it ought to worry the House. We cannot meet it to any serious extent by economy. I entirely agree with my hon. Friend the Member for Hastings (Mr. HelyHutchinson) that no major economy involving many tens of millions is possible as long as our national policy at home and abroad is what it is to-day. I do not think we can meet it by steepening still further the rate of incidence of our taxation. We have reached a point in our direct taxation where evasion is becoming more and more difficult to cope with. We may soon reach a point where there is real discouragement to production and enterprise in this country. I do not believe that we can go much further in the direction of increased direct taxation, or increased indirect taxation for that matter. How are we to meet the diffi-
  1524
  culty? I venture to suggest that there is only one way, and that is by increasing the volume of national production out of which the expenditure of the State must necessarily come. That is the vital, and I fear the increasingly urgent, problem before us.
  Are we facing that problem to-day? I confess—and I agree with my hon. Friend the Member for East Aberdeen (Mr Boothby)—that the situation from that point of view is far from reassuring. The very able speech which the President of the Board of Trade delivered last Tuesday showed in detail the many factors, both temporary and permanent, which are tending to restrict our external trade. We are faced with the fact that to-day, when the recession has not yet gone very far, we have 1,750,000 men unemployed, nearly 350,000 more than in April of last year. We are faced, as the President of the Board of Trade admitted, with a very disquieting growth in the adverse balance of trade. That means, in simple language, that this country is not supporting itself year by year on what it produces; it is drawing from capital invested abroad or beginning to borrow, and putting itself into a position which is dangerous in time of peace, but infinitely more dangerous in time of war. After all, in 1914 we had a net balance on our transactions of over £180,000,000, and £3,000,000,000 of good, safe securities abroad.
  Mr. MacLaren: Free trade.
  Mr. Amery: Our relative position in regard to other countries might have been even stronger if we had adopted the right policy earlier. [Laughter.] The laughter is interesting, but, after all, we have been strengthening the position of this country very substantially during the last six years by following what the Government and their supporters believe to be the right policy, a policy which hon. Gentlemen opposite will be bound to pursue if they come into office. That is the question I wish to raise with regard to the Budget itself. To what extent does the Budget contribute effectively or not to the increase of national production? There is one item in the Budget from that point of view which I can at once applaud unreservedly, and that is the increase in the concession in regard to wear and tear given to industry. It is a concession

  1525
  which, I think, fully offsets anything that industry may conceivably suffer by the increase of Income Tax. I am not so sure that there are other features that I can applaud equally. I regret the decision, for it seems to be that, of the Chancellor of the Exchequer with regard to power alcohol. I was indeed surprised that he should use against my hon. Friend the Member for Rusholme (Mr. Radford) the very argument used by hon. Members opposite, which he so much deprecated, namely, judging taxable capacity by the profits of a single year. Has he inquired for how many years the particular company in which my hon. Friend is interested made losses? In any case, is it the right principle of taxation to base taxation not upon income generally, but to select a single industry on which to impose a special Surtax?
  My hon. Friend the Member for Hastings argued, in support of the Chancellor of the Exchequer, that this industry employs a great deal of shipping to bring those raw materials here. The employment of a great deal of British shipping in peace time is an admirable thing, and if that shipping can be released in time of war and domestic production substituted for the imported raw material—which I am afraid the present Finance Act is going to prevent—then that shipping is released for more important purposes. In any case, I regret any item of taxation which discourages, or neglects an opportunity of encouraging, a hopeful British industry.
  Neither in his Budget speech nor in his speech this afternoon did the Chancellor of the Exchequer make any reference to the protective duties in the present financial scheme, except to mention incidentally the total revenue from Customs and Excise; and yet, regarding them not merely from the point of view of their direct contribution but of their indirect contribution, they are not the least important part of the whole financial scheme. They have contributed, as the Chancellor of the Exchequer and all his colleagues never fail to assert, enormously to the recovery of strength of British industry, and by that, to the contribution of that industry to every tax in the Budget. Surely, at a time such as this, one of the first duties of the Chancellor of the Exchequer in presenting his Budget, I should have thought, would have been to make
  1526
  an examination of those particular taxes in order to ask himself whether they are contributing the maximum that they can contribute to British production and therefore, in the long run, to revenue.
  I venture to say that any such examination, conducted from the point of view of the present Government and not necessarily from a Free Trade point of view, would be bound to show that our present tariff, weakened as it has been by the gradual readjustment of monetary relationships and, therefore, losing the advantage which we first enjoyed when we went off the Gold Standard, is letting in far too large a volume, and an ever-increasing volume, of competitive foreign manufactures. The figure was over £170,000,000 last year, excluding semi-raw materials and things such as oils, resins and base metals. I venture to say that of that £170,000,000, at least £100,000,000 could, with advantage, be produced in this country, giving direct employment to some 400,000 workers and giving a great deal of valuable revenue to the Chancellor of the Exchequer.
  Mr. MacLaren: I am sorry to interrupt the right hon. Gentleman, but I wish to put a question to him. We have been talking about threats of war and the possibility of a great war. I want to ask him in all sincerity whether, if we kept out foreign trade to the extent that he desires, that would be conducive to bringing about peace in the world to-day?
  Mr. Amery: I have not noticed that similar action on the part of every other country except this country has led to the hostility of its neighbours. It is a policy which is pursued by all countries, and considered as natural by them. Similarly, I think the Chancellor of the Exchequer ought to have studied the extent to which that part of our tariff which is preferential in its effect has made its contribution to the export trade and the productive strength of this country. My hon. and gallant Friend the Member for Bournemouth (Sir H. Croft) gave some very interesting figures from that point of view. I am not sure that I do not regret the imposition of the additional duty on tea, not on the grounds on which hon. Members opposite have criticised it, but because I think the right hon. Gentleman might have got the same revenue by imposing a duty on foreign sugar. That

  1527
  would have involved no greater hardship, if there be hardship, and it might have done a great deal to strengthen the production and improve the standard of living of our fellow citizens in the West Indies, while at the same time increasing the export trade of this country. All the same, I am not going to suggest that that particular aspect of our policy is sufficient, by itself, to meet the kind of problem with which we have to deal. We may have to take far bolder measures than we have ever taken yet, such as subsidies to shipping, cotton and other export industries and direct financial subvention of new industries and research, in order to put ourselves on a level with our competitors. We shall have to take heroic measures, and I venture to say that the closing sentence of the Chancellor of the Exchequer, in which he suggested that we could get through our difficulties by what is called sound finance, seemed to me to embody a very dangerous doctrine. Sound finance, by itself, is not going to avert a disastrous breakdown.
  There is just one other serious aspect of the matter to which I will devote a sentence. That is the fact that our population is declining. By 1975 there will be £10,000,000 fewer taxpayers in England and Wales alone than there are to-day. A reduction of 25 per cent. in the number of taxpayers means an increase of 33 per cent. in the burdens, which they will individually have to bear, if our Budgets then are only on the same level as the Budget of to-day. All these things cost money and effort, and only wise expenditure and a bold policy can meet the situation with which we are confronted. I venture to say that the economic danger is just as grave as the military danger and that we need a policy of economic rearmament just as effective and far-reaching as that which we are carrying through on the defensive side. But I would make this appeal. Do not, as in the case of Defence, allow the years to slide by and to be "eaten by the locust." Let us take the problem in hand now, and set to work without delay, by every means that will meet the case, to build up that national economic strength and production, from which, alone, future Budgets can be fed.
  10.8 p.m.
  Mr. Pethick-Lawrence: Many large issues arise on the Second Reading of this Finance Bill. They centre round the fundamental fact that this is a Budget unprecedented in peace time, when for the first time the total amount to be spent exceeds the vast sum of £1,000,000,000. We have had a very interesting Debate which has ranged over a large number of questions. Some of these have been minor matters of detail; others have dealt with larger issues of fundamental importance. I propose to devote a considerable part of what I have to say to the larger issues, but before I come to them there are one or two smaller matters to which I ought to direct the attention of the House.
  I am glad that on the first matter which I propose to mention, I hope to be able to give my hearty support to the proposal of the Chancellor of the Exchequer. He told us that he had been giving very careful consideration to the matter of air-raid shelters, and he outlined a proposal which will, I think, command the general approval of this House. Certainly prima facie the agreement of the House may be assured to the Chancellor of the Exchequer on this matter. We shall, of course, and I am sure the right hon. Gentleman will take no objection to it, examine the proposals in detail to see, in the first place, whether they go far enough to meet the needs of the case, and, in the second place, to assure ourselves that they are fair as between the public and the private individual. One question occurs to me which I do not attempt to decide one way or the other at the moment. How far will the provisions which individuals are expected to make be solely for themselves and their own immediate entourage? Are they in any way to be available for the general public? When the proposals come before us in specific form we shall have to consider this and other questions.
  There is a second part of this Finance Bill to which I think my hon. Friends and I can give, in the main, our broad agreement on principle. That is the attempt which the Chancellor is making to deal with tax evasion. I believe that in all parts of the House those who honestly endeavour to pay their own taxes, must welcome every attempt that is made to

  1529
  prevent others who are less honourable from evading the obligations which the State has put upon them. There again I do not think we can discuss the proposals in detail to-night. They are far too technical and complicated and it would be unfair to put any specific questions on these matters to the right hon. and gallant Gentleman who is to reply. He is new to the task to which he has been promoted, with, may I say, the general good will of the House. But I shall have something to say with regard to the taxation of the larger forms of wealth. I and those who sit with me on these benches consider that a far larger quota of the requirements of the present Finance Bill might have been secured by the Chancellor of the Exchequer from that source. In fact we maintain that that would be far more just than placing on some of the poorest of the population the burdens which the right hon. Gentleman proposes by the Tea Duty and other methods. It may well be that the Chancellor of the Exchequer, if he still holds that office next year, will find it necessary to raise substantially the rates of taxation along those lines. Therefore the proposal which he is making to-day to meet evasion must be welcomed in all parts of the House.
  There is another matter which has been raised in the course of this Debate, and that is the question of tariffs. It has been raised by the hon. and gallant Gentleman the Member for Bournemouth (Sir H. Croft), who I regret to see is not in his place, and the right hon. Gentleman the Member for Sparkbrook (Mr. Amery)—what we may call the long and the short of it. It seems to me to be this. The right hon. Gentleman and the hon. and gallant Gentleman who have throughout been passionate advocates of tariffs, have come to the conclusion to which tariff advocates generally come after tariffs have been in operation for a short time. They say, "This remedy which we have proposed is excellent, but the time has come when we find it totally inadequate to meet the difficulties of the situation, and that being so, we want an additional dose of it." The right hon. Gentleman the Member for Sparkbrook was careful to underline it and to say that we wanted not only an additional dose of tariffs, but additional subsidies, additional indirect subsidies, and so on. The experience of all tariff countries is being repeated here. The first round appears to achieve a cer-
  1530
  tain success, but that apparent success soon wears off, and the time comes when it is necessary to have a second round. That more speedily works to its conclusion, and so the tariff wall and the subsidies and counter-subsidies go on increasing and increasing until there is very little left of the free enterprise which used to be the boast of this country and of hon. Gentlemen opposite.
  I propose to say a word on the question of the National Defence Contribution. If I am not mistaken, the Chancellor does not propose to make any substantial alteration in the incidence of the contribution. I am inclined to think that he would have done well to have considered this matter from several points of view. I think with my right hon. Friend who opened the Debate that there are fields where the Chancellor might have been right in imposing its burden where hitherto he has refrained from doing so. On the other hand some of the societies which my right hon. Friend mentioned are entitled in my view to claim relief; and the same applies to another section, that is, the housing societies. They are subject to this tax and yet they are in effect public utility companies which are serving a very useful purpose. They are limited to a small rate of dividend and therefore cannot make indefinite profits. When the time comes I shall submit an Amendment to the Bill with a view to suggesting to the Chancellor that there should be some measure of relief for these housing societies.
  A good many points have been raised in regard to the Tea Duty. I do not think that at this stage of the Debate there is any need to add to the very thorough and careful remarks that have been made, not only by my hon. Friends on these benches, but in the informative speech that was made from the Liberal benches. I have dealt somewhat summarily with these important, though comparatively minor, points, because we shall have plenty of other opportunities of going into them in further detail.
  I now proceed to the larger perspective in which this year's Budget must be viewed. I said just now that it was unprecedented because it had passed for the first time in peace time the figure of £1,000,000,000. We are all wondering whether ever again we shall get down to a Budget the extent of the millions of

  1531
  which can be expressed in three figures. But it is not only that which makes it so peculiarly noteworthy. Another great fact is that it is for the first time a frank departure from classical finance. In a speech a little while ago I spoke of it as the end of Gladstonian finance, but I use the word "classical" finance this time because I think it is more appropriate. It is true that we have borrowed before to reach a balance in our Budget in war time, and we have for some years in peace time borrowed comparatively small amounts, and, of course, last year there was a Budget deliberately unbalanced by the right hon. Gentleman's predecessor the present Prime Minister; but there is this great difference, that last year the Prime Minister, when introducing his Budget, paid lip-service to classical finance. All that he was borrowing was going to be repaid when the peak expenditure upon armaments was passed and things came back to normal. There was going to be full payment of interest and of Sinking Fund at some future time, and in a period of something like 20 or 3o years everything would be as it should be and we should have normal Budgets again.
  We all listened to that patter, and though we on these benches disbelieved it, the Prime Minister himself pretended to believe it. I do not wish to cast any reflection upon him, but he appeared to believe that what he was saying was not patter but fact, and the House of Commons, broadly speaking, accepted that explanation. Now we know definitely—at least it ought to be known, though it may still be denied on the Treasury Bench—that there is going to be no peak in Government expenditure. It is a road winding uphill all the way. There is going to be no paying off by a Sinking Fund of the amounts we are borrowing at the present time, unless there is some change of attitude on the part of the Government or their successors. Therefore, I maintain that this Budget, whatever may be true of the last Budget, marks a frank admission that the Government deliberately propose to bring financial orthodoxy and classical finance to an end.
  Not only are we bringing to an end classical finance but we are bringing to an end classical economics. That is not a sudden action in this particular year,
  1532
  but it is the gradual process which the Governments of the last six or seven years are carrying into effect. We find, in the first place, a growth of tariffs. The conversion of the Chancellor of the Exchequer to a tariff system does not, of course, date from this year. Those who were in the House a few years ago will remember the famous speech of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George)—I am sure the Chancellor himself has not forgotten it—in which he eloquently likened the conversion of the Chancellor of the Exchequer to tariffs to a teetotaller finding his last resting place in an inebriates' home. It is not merely a question of overthrowing Free Trade, and not merely that we are entering upon the second round of the tariff-and-subsidy system which the hon. and gallant Member for Bournemouth and the right hon. Gentleman the Member for Sparkbrook are so anxious to see initiated; it is the disappearance of all the ordinary ideas which lie behind classical economics. On that aspect of the matter I shall have a word further to say a little later.
  Classical finance has gone, and classical economics has gone. That may be right. I am not expressing an opinion on that. But I am asking and I want to draw the attention of the House most carefully to this—what is the new system which the Chancellor of the Exchequer and the Government are putting in their place? As far as I can see, they have no new principles to take the place of those which are gone. They are to go on and on with borrowing, they are to go up and up with the National Debt and higher and higher with tariffs and subsidies. When we say that they are doing on a larger scale what they blamed us for doing in 1931, their answer is: "Ah, but we have the confidence of the country. You lost the confidence of the country and we have got it." [HON. MEMBERS: "Hear, hear."] I am glad to notice that I am expressing the views of hon. Gentlemen opposite. They say: "It does not matter whether we break all the laws of classical finance and economics. It does not matter that we have no special policy. We are doing it with the connivance and the confidence of the people and the industrialists of the country. As long as we have that, we are quite satisfied." That attitude separates them not only from the Labour Government of 1931 but from a very great

  1533
  man on the other side of the Atlantic, who also appears to have lost the confidence of the great industrialists. I am told that there are at the present time about 12,000,000 unemployed in the United States.
  I wish to take the House into a slight digression. I want to examine in what respect the economy of this present day differs from the economy and industrialism of the nineteenth century. In the nineteenth century we had a multiplicity of small industrialists, and therefore you had something like the perfect economy of Adam Smith. There was complete competition, and the laws which belong to a complete system of competition prevailed. All that is gone and instead of that multiplicity of small industrialists we have a few big industrialists. Just as the mechanism of a sand-heap differs from that of a pile of rocks, so the economy of the nineteenth century differed from that of the twentieth century, and this confidence upon which the Government rely really means that the few men who are the big industrialists of the country can count upon the Government toeing the line that they draw and coming to their heel and giving them whatever benefits they require.
  Mr. Assheton: Does the right hon. Gentleman think that that explains the confidence which other countries have in this Government?
  Mr. Pethick-Lawrence: I do not think that the Government have the confidence of other countries which the hon. Gentleman thinks they have. I do not see it.
  Mr. Assheton: They send their money here.
  Mr. Pethick-Lawrence: I do not think that that is altogether true. There has always been in days gone by a certain amount of money coming into this country, but that does not mean much confidence in the Government of this country. I am told that, whenever internationalists meet, the one thing they say is, "No one knows what the British Government will do in any of the emergencies that may happen."
  The fact is that we have come to a time when, instead of the small industrialists and real competition, we have a few industrialists and practical monopoly. The point about monopoly is
  1534
  that, while it may pay monopolists to get on with production, and while at certain times it does pay, it may pay the monopoly not to get on with production, but to stifle down production, to put up the shutters and retire. During the last few years it has paid the monopolists to produce, but a time may be coming when it may pay them not to produce. There are signs of that in some directions, though I hope it is not going to be so. What are the Government going to do if that state of affairs arises? They cannot wheedle industrialists into production; mere words will not do. They are accustomed to come down to this House and very smilingly and courteously deal with those who sit on this side. In Parliament the blandishments of the right hon. and gallant Gentleman and of his right hon. Friend may disarm criticism. But the industrialists are not going to be disarmed by mere words; they will want hard cash; I do not think it is too harsh to say that they will have to be bribed into action if they think it does not pay them to produce. That has come about in the United States, and it looks as though it might come about here, if not soon, at any rate after a while. Then the economic conditions on which the Government base their policy will break down.
  I have raised before the question of the higher taxation of great wealth. I believe that that could be applied to-day, and there may well come a time when the Government will find it necessary to put on a greater amount of additional taxation. But they cannot do that indefinitely, and, if there comes a time when the great monopolists think that it does not pay them to produce, then they will not go on manufacturing capital goods, and when unemployment rises to figures which may be startling to those who have been accustomed to the conditions of the last few years, this policy of indefinite subsidies may be quite impossible of realisation. What plans have the Government to meet that situation? They say it is a matter for the future, but I think it is a matter for very early decision.
  This brings me right back to the finances of the Bill and of the current year. It is not merely the fact that we are reaching a £1,000,000,000 Budget, but it is the proportion that that bears—and this has been expressed in all parts of the House to the total revenue of the

  1535
  nation as a whole. In 1914, the total expenditure of the State was slightly under £200,000,000, and at that time the total income of the nation was about £2,000,000,000, so that the expenditure of the State was roughly one-tenth of the national income. To-day, when the expenditure of the State runs to £1,000,000,000, the national income has increased to something in the neighborhood of £4,000,000,000; so that to-day, instead of one-tenth, we are taking one-quarter for the expenditure of the State. There may be something to put on the other side. It may be true that of the large expenditure of the State part goes directly back to the individual, and it may be that that is putting it a little high, but no one will disagree with the contention that the proportion which the expenditure of the State bears to the total expenditure is very much larger than in days gone by.
  What is the only way in which we are going to meet this bill? We are not going to meet it by cutting down the social services. We are not going to meet it by reducing the Defence forces, as long as they are required. I hope that the time will come when they will not be required, but that will not be in the early future. The only way is by a vast increase in the national income as a whole; and there is really no reason economically, potentially, why that should not come about. Industry is not prevented from producing to-day by the difficulties of production. Any engineer, any producer, any great organiser will tell you that the output of industry at the present time could be, I will not say indefinitely, but enormously, greater than at the present time. The problem of industry to-day is not production, but sale, and I have heard it said—and no one, I think, will disagree with this—of an expensive motor car that it costs more to sell it than to produce it. I expect that that applies to other industries as well.
  The fact is that industry is being held up, production is being curtailed at the present time, not because of the difficulties of production but because of the difficulties of distribution and sale. Production could perfectly satisfy all the legitimate needs of this country, provided the apparatus of industry was sufficient for the purpose. The trouble is
  1536
  that our present economic system is based on scarcity and cannot work on a basis of plenty. What the Government have to do is to find some means of making this national income adequate to bear the burden of the requirements of the State. The dictator countries, whether we go to Germany or to Italy or, under a somewhat different system, to Soviet Russia, depend on compulsion, and, certainly in Germany, to some extent at any rate, the motive on which they attempt to work is the motive of fear. We in this country can never subscribe to a doctrine of that kind. It is utterly repugnant to all British ideas that industry and the work of the people should be controlled by motives of fear.
  What we have to do—and this is what Members in all parts of the House have to think out—is how free institutions can secure the benefit of the effective production of industry, and what action is necessary to secure that national effort is pooled, not by motives of compulsion and fear but by the free development which the institutions of this country have always required. We have to enlist the services of the nation in this great effort. What are you going to offer the great organisers in place of the fabulous profit which falls to them under the present system? You have to create the idea of service. Hon. Gentlemen may say that that is not realism, that it is working in the realm of ideals. There are beyond that three things in the gift of a free democracy determined to pool the national effort on behalf of the public welfare of the world—honour, prestige and power. Honour, prestige and power are what men all down the ages have cared for more than they care for anything else. There is no reason why, under the system which we on these benches adumbrate, the men who contribute that splendid effort to the nation should not have these things conferred upon them.
  The Government have no such outlook, They still think that they can maintain private profit and that they can cajole the great industrialists and drive them, by tariffs and subsidies, to continue the hybrid system which they are trying to work at the present time. That system I do not believe can continue much longer to deliver the goods even in peace time. But surely even those who support

  1537
  it in peace time must realise that, if the catastrophe of war overtakes us, this hybrid system of private profit will fail. I trust that it will not be through any such calamity that the necessity of substituting a national system for it comes to be recognised.
  The existing system is crumbling, and all the clever people and the wiseacres think that what we are saying on these benches on this matter is foolishness and the babbling of children. No doubt we appear to be fools to the Chancellor of the Exchequer and his closer colleagues in the Government, but I would remind them of what was the last saying of that clever, wise and cunning statesman M. Clemenceau. He was asked what was the great lesson he had learnt from life, and he said:
  " The fools are always right."
  No doubt we may appear as children to some of the wise men on the opposite benches. But there was a greater than M. Clemenceau, who, confronted with the wiseacres in his time, gave thanks that the most important things in life were hidden from the wise and prudent and were revealed unto babes.
  10.45 p.m.
  The Financial Secretary to the Treasury (Captain Euan Wallace): During the very interesting Debate that we had yesterday my right hon. Friend the Member for Epping (Mr. Churchill) designated the new Air Minister as a round peg in a square hole. I understand that the Air Minister replied by designating the right hon. Gentleman as a square peg in a round hole. In spite of the kind words of welcome which have been addressed to me in this arduous situation by the right hon. Gentleman opposite, I must say that I feel like a very small peg in an absolutely enormous hole. I have, however, the satisfaction of knowing that before my maiden speech in the realms of high finance I have listened for practically the whole day to a Debate which has been a real Debate. We on the Government side know only too well that on many occasions the Government speakers from this bench are practically the only defenders in Debate of what we are proposing, and we have to listen to a good deal of criticism from the other side without any counterbalancing arguments from our own back benches. But to-night every one of the
  1538
  thoughtful speeches that have been delivered from the other side, either from the Front Bench or from the back benches, has been very effectively replied to from this side and I must say that I have been deprived of a good deal of material by the way in which one hon. Member has cancelled another out.
  To end this Debate, we have had an extremely thoughtful speech from the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence). While I cannot agree with everything that he said, yet there is always something in the way he puts his points which makes one want to agree with him as much as one can. There was one point which he made which I could not swallow, and that was when he spoke of last year as being the time when Gladstonian finance was first abandoned. I felt compelled to wonder what that eminent statesman would have said or thought about the first Budget of 1931. One further thing on which I might join issue with the right hon. Gentleman was his rather sinister reference to the power which was to be given to the industrialists who would come in to help. It seemed to me that it was rather against the conception of democracy which we have always understood was held on those benches, that power should be held out to a ny section of the community in such a blatant way.
  The task to which I have to address myself in the first place is the Amendment on the Order Paper, which was moved by the right hon. Member for Hillsborough (Mr. Alexander), with all his usual vigour. That Amendment makes six definite points, five of which are critical of the policy embodied in the Finance Bill, while the sixth may be taken as a constructive suggestion. His Majesty's Government is blamed for a Budget which is said to be unbalanced, for permitting excessive profits to be made in connection with the rearmaments programme, for giving subsidies to private industry, for penalising road transport and, finally, for greatly adding to the burdens of people of small means. The Amendment goes on to suggest that every one of these difficulties would be obviated by additional taxation on that small section of the community which possesses great wealth.
  My right hon. Friend the Chancellor of the Exchequer dealt very fully and

  1539
  faithfully with the Amendment, as I think anyone who heard him will agree, and in proposing to say something on each of its points I shall be only attempting to fill in the few gaps which my right hon. Friend, through pressure of time, was obliged to leave.
  The first accusation is that we have a series of unbalanced Budgets. But I must point out that last year we had a surplus of £28,750,000. Moreover the borrowing of £65,000,000 for Defence was part of a definite plan providing for the borrowing of a limited sum and for repayment within a limited period. For five years, until 1942, interest only is to be paid. After that the whole sum is to be repaid with sinking fund in 30 years, and I see no reason, and I think the world sees no reason, to suppose that that undertaking will not be complied with. The borrowing for Defence this year, £90,000,000 plus Supplementry Estimates, is part of the same plan. The same conditions apply, and it is not the uncontrolled and ill-defined borrowing to which reference has been made on previous occasions. I think we can claim that we are this year providing a very large proportion indeed of our defence expenditure out of taxation. Many hon. Members on all sides have said that we have a formidable problem to face, and this is true. Expenditure from revenue on Defence has grown from £124,000,000 in 1936 and £198,000,000 last year to no less, with air raid precautions, than £264,000,000 this year.
  To balance the Budget, apparently, to the satisfaction of the Movers of this Amendment, we should have to add at least another £90,000,000 to taxation this year. I do not think it is necessary to do more than ask the House in all seriousness the simple question, what effect an additional impost upon the people of the country of £90,000,000 in the current Budget would be likely to have on our trade prospects. One method of balancing the Budget was suggested by my hon. and gallant Friend the Member for Bournemouth (Sir H. Croft), backed up by my right hon. Friend the Member for Sparkbrook (Mr. Amery). I hate to say anything to contradict him, for I learnt politics, so to speak, at his knee. But we must take the long and not the short view. The trade of the country
  1540
  will only grow to the volume to which we wish it to grow if we bring the whole world into our orbit.
  The right hon. Gentleman went on to talk about the trade balance. I should like to draw attention to the speech of my right hon. Friend the President of the Board of Trade only two days ago when, in a very carefully considered review of the economic position of the country, he said that the increase in the adverse balance of trade in 1937 was not in itself very frightening. It was not due to a decline in exports, which actually increased by 9½ per cent. in volume, but to an increase in the price of imports. That situation was not unexpected in view of the increased prosperity last year. As the House knows, the economic structure of this country has depended for years, and will continue to depend, upon the import of raw material and the export of the finished product, and in that case, when the country has been upon the up-grade, there must always be some lag and we must always expect an increase of imports at such a time. As the President of the Board of Trade said, this situation must be carefully watched, and I have no doubt that my right hon. Friend will continue to watch it.
  Sir H. Croft: Will the right hon. and gallant Member say what the Government are going to do about the increase in the imports of manufactures which have come in during the last few years?
  Captain Wallace: That may be due to some extent to the increased prosperity of this country. It is not for me to say what my right hon. Friend the President of the Board of Trade is going to do, but he made it perfectly clear that he intended to keep the situation in all its tendencies under the most careful observation.
  Let me come back to the point made by the right hon. Member who opened the Debate in regard to the year 1931. There is no doubt that he and his friends find it extremely hard to forget 1931, and find it difficult to realise that the situation today is in no way comparable with that of 1931. It may be very unlucky, but it is perfectly true that the credit worthiness of A is not the same as the credit worthiness of B, and, quite apart from the fact that the right hon. Gentleman and his friends were then borrowing in 1931, without limit and without provisions to repay, and

  1541
  were borrowing for immediate and current needs, what really matters is what the world thought about it. The right hon. Gentleman referred to our attitude in a striking phrase, "complacent and Pharisaical humbug," but the fact remains that in 1931 there was a panic and in 1938 the world is undisturbed by the modest measure of controlled borrowing which the Government propose.
  The second point in the indictment was the alleged laxity of Vie Government in allowing the hon. Member for Ipswich (Mr. Stokes) and his friends to get away with an undue degree of profit. There is no doubt that it is to the interests of everyone to see that excess profits are not made out of the necessity for providing armaments for the defence of all. But there is one person to whom this is of paramount interest, and that is the Chancellor of the Exchequer. My right hon. Friend has explained some of the precautions he has adopted, and has given an assurance that he is ready to consider any practicable plans to achieve the end we all desire; the only criterion is that they must be practicable.
  The right hon. Gentleman opposite went on to deal with the question of subsidies to private industries. The total of these subsidies this year is about £10,000,000, which will be increased, not I believe substantially, by new legislation in regard to milk and herring. Of that £10,000,000, civil aviation and transport in the Highlands and Islands will take about £I,000,000, which I do not suppose anybody will grudge. Then £2,500,000 goes to beet sugar, about which I do not think I need say any more, and i'6,500,000 out of the £10,000,000 goes to agriculture. Agriculture undoubtedly gets the lion's share of the subsidies, but agriculture, after all, is our greatest industry, and it provides the most employment in this country. The difficulties of agriculture are due principally to world conditions, and whatever may be the theoretical arguments for or against assisting agriculture in this country, there is not the slightest doubt that for practical reasons some form of extraneous assistance is essential. The Government are not giving these subsidies, to which objection is taken by implication, as mere doles or as premiums on inefficiency. Many of them, for instance, those for tramp shipping, North Atlantic shipping, bacon and milk, have been coupled
  1542
  with conditions as to reorganisation, and it has been made a rule that where assistance is offered to an industry we shall endeavour to see that, as in the case of tramp shipping, when the time for assistance expires the reorganisation remains. I think it must be pointed out in this connection that every nationalised industry would be subsidised if it made a loss.
  The next count in the indictment is the Oil Duty. This is a revenue tax. It has not got for its object either to assist or to penalise any form of transport. Heavy oil used as fuel on the roads bears the same tax as petrol. Actually it has a certain advantage because Diesel oil gives a greater mileage per gallon than does petrol, and if you work it out on the basis of mileage per gallon, I believe the fair tax on Diesel oil would be about 1s. 2d. If it bore less than the tax which my right hon. Friend intends to impose on it, there is no doubt that its increasing use on the roads would eat into the petrol duty revenue, deprive the Chancellor of a valuable source of supply, and eventually oblige him to look somewhere else. I do not think it can be considered that this tax has either stifled road transport development or is an intolerable burden on road users. The Chancellor himself gave some very striking figures as to the recent road transport development, and, of course, it is a fact, as the House knows, that the price of petrol fluctuates for commercial reasons quite independent of the rate of duty. It went up by id. after the Budget, but it has since come down by ½d., and to-day it is 1s. 7d., or actually less than a year ago. Therefore, I do not think it can be contended that this is an intolerable or unjustifiable tax on road-users.
  The right hon. Gentleman's Amendment goes on to refer to burdens placed upon the poor. He knows as well as I do that this is a subject on which it is difficult to talk without appearing to be smug, but I assume he was referring to the £2,750,000 to be raised by the increase of the duty on tea, part of which will fall on the very poor. I must point out to the House that the Chancellor, for reasons which are generally appreciated, has to find a large additional revenue this year, and of this estimated additional revenue, that is, the additional taxation which he is imposing, plus the increased

  1543
  yield of existing taxation, he is getting no less than £66,500,000 from direct taxation and only £11,000,000 from indirect taxation, of which £7,000,000 is from the Oil Duty and only £2,750,000 from the Tea Duty. I ask the House whether that is an excessive proportion. On the other side of the picture, increased expenditure on social services is more than four times as much as the whole of the increase in the Tea Duty. The estimates for the social services are actually £12,000,000 more than was spent last year.
  Those are the indictments against the Government. As to the remedy of obtaining all the additional taxation from the rich, I do not think it is necessary for me at this hour to add anything to the very clear statement of my right hon. Friend, first as to how we are at present soaking the rich, and then super-soaking the very rich. Probably the best answer to hon. Gentlemen opposite who asked whether it would not be possible to turn the screw a little tighter at the present moment was given by my hon. Friend the Member for Hastings (Mr. Hely-Hutchinson), who once more has made a notable contribution to our Debates on financial affairs, when he reminded the House of what the late Lord Snowden said in 1931 about the trouble he had with his hon. Friends who talked the usual claptrap about going to the Surtax payers. It is also worth remembering, as has been pointed out by my hon. Friend the Member for Hastings and my hon. Friend the Member for Rushcliffe (Mr. Assheton), that if you soak the rich, you soak those who serve them. I do not think there is much hoarding among people with big incomes, and I believe it is substantially true to say that if you take more than 13s. in the £ from certain people, the economies which they will be forced to make in the first instance will be personal economies which will bring unhappiness and trouble to other people. A great many points were made in other speeches with which I would like to deal, but I appreciate that in many cases this is not the best moment to do so. I would only say to those hon. Members, particularly the hon. Member for Bassetlaw (Mr. Bellenger), who raised the question of tax evasion, that we believe we are doing a great deal. We have definite provisions in the Bill, and we shall do our best to see that they effectively carry out their purpose. If defects in them can be
  1544
  pointed out, we shall be glad to have any suggestions, because everybody, irrespective of party, must agree that if a tax is imposed it is obviously fair that two people within the same range and scale of taxation should pay the same tax.
  The Second Reading of the Finance Bill does not lend itself to a peroration. At the best of times it is a reminder that all policies have to be paid for, and it is no more welcome either to hon. Members or to the country than that crop of bills with a little B which we are accustomed to receive quarterly, monthly or even more frequently. The Chancellor of the Exchequer has presented a bill, which, of necessity, calls for increased sacrifices. No one, as has been testified to-day, doubts the necessity for National Defence. No one doubts the desirability of maintaining our social services, nor if they were responsible for conduct of financial affairs, would hon. Members doubt the wisdom of meeting the charge for the service of our debt. The field of possible administrative economies, as my right hon. Friend pointed out in the Debate on the Budget Resolutions, is extremely small, and we might as well face the fact that if we wish to achieve a reduction of expenditure on a scale which would bring substantial relief to the taxpayer, we shall have to make fundamental alterations in our national policy of a kind which, I think, no party in the House is proposing at the present time.
  There is an old proverb which comes from my part of the world to the effect that "the man who pays the piper can call the tune." The converse is equally true and in this case, we have called the tune and the piper has to be paid. As to the exact division of that bill among those who are collectively responsible for meeting it, there may be legitimate divergences of view. It was only necessary to sit here to-day and hear the speeches from all sides of the House—none of them, I think prejudiced and all of them thoughtful and sincere—to realise the existence of those differences. Those which have been expressed in the shape of constructive criticism—to which I fear it would be impossible at this stage to reply in detail—will, I assure hon. Members receive the careful consideration of my right hon. Friend in the furfher stages of the Bill to which, I hope, the House will now give a Second Reading.

  1545
  Question put, "That the words proposed to be left out stand part of the Question."
  The House divided: Ayes, 250; Noes, 122.

  Division No. 220.]

  AYES.

  [11.14 p.m.

  Acland-Troyte, Lt.-Col. G. J.

  Eastwood, J. F.

  Markham, S. F.

  Adams, S. V. T. (Leeds, W.)

  Eckersley, P. T.

  Mayhew, Lt.-Col. J.

  Albery, Sir Irving

  Edmondson, Major Sir J.

  Mellor, Sir J. S. P. (Tamworth)

  Alexander, Brig.-Gen. Sir W.

  Elliot, Rt. Hon. W. E.

  Mills, Major J. D. (New Forest)

  Allen, Col. J. Sandeman (B'knhead)

  Ellis, Sir G.

  Mitcheson. Sir G. G.

  Amery, Rt. Hon. L. C. M. S.

  Elliston, Capt. G. S.

  Moore, Lieut.-Colonel Sir T. C. R.

  Anderson, Sir A. Garrett (C. of Ldn.)

  Elmley, Viscount

  Moreing, A. C.

  Anstruther-Gray, W. J.

  Emery, J. F

  Morris-Jones, Sir Henry

  Apsley, Lord

  Emrys-Evans, P. V.

  Morrison, G. A. (Scottish Univ's.)

  Aske, Sir R. W.

  Errington, E.

  Morrison, Rt. Hon. W. S. (Cirencester)

  Assheton, R.

  Everard, W. L.

  Muirhead, Lt.-Col. A. J.

  Astor, Hon. W. W. (Fulham, E.)

  Findlay, Sir E.

  Munro, P.

  Baillie, Sir A. W. M.

  Fleming, E. L.

  Nicholson, G. (Farnham)

  Baldwin-Webb, Col. J.

  Fox, Sir G. W. G.

  Nicolson, Hon. H. G.

  Balfour, Capt. H. H. (Isle of Thanet)

  Fremantle, Sir F. E.

  O'Connor, Sir Terence J.

  Balniel, Lord

  Furness, S. N.

  O'Neill, Rt. Hon. Sir Hugh

  Barclay-Harvey, Sir C. M.

  Fyfe, D. P. M.

  Palmer, G. E. H.

  Barrie, Sir C. C.

  Gledhill, G.

  Patrick, C. M.

  Beauchamp, Sir B. C.

  Gluckstein, L. H.

  Peake, O.

  Beaumont, Hon. R. E. B. (Portsm'h)

  Goldie, N. B.

  Peat, C. U.

  Beit, Sir A. L.

  Gower, Sir R. V.

  Perkins, W. R. D.

  Bernays, R. H.

  Graham, Captain A. C. (Wirral)

  Petherick, M.

  Blair, Sir R.

  Greene, W. P. C. (Worcester)

  Pickthorn, K. W. M.

  Boothby, R. J. G.

  Gridley, Sir A. B.

  Pilkington, R.

  Bossom, A. C.

  Grigg, Sir E. W. M

  Plugge, Capt. L. F.

  Boulton, W. W.

  Guest, Lieut.-Colonel H. (Drake)

  Ponsonby, Col, C. E.

  Bower, Comdr. R. T.

  Guest, Hon. I. (Brecon and Radnor)

  Porritt, R. W.

  Boyce, H. Leslie

  Guinness, T. L. E. B.

  Pownall, Lt.-Col. Sir Assheton

  Brass, Sir W.

  Hacking, Rt. Hon. D. H.

  Procter, Major H. A.

  Briscoe, Capt. R. G.

  Hambro, A. V.

  Radford, E. A.

  Broadbridge, Sir G. T.

  Harbord, A.

  Raikes, H. V. A. M.

  Brown, Col. D. C. (Hexham)

  Haslam, Henry (Horncastle)

  Ramsay, Captain A. H. M.

  Brown, Rt. Hon. E. (Leith)

  Haslam, Sir J. (Bolton)

  Ramsbotham, H.

  Brown, Brig.-Gen. H. C. (Newbury)

  Heilgers, Captain F. F. A.

  Rathbone, J. R. (Bodmin)

  Browne, A. C. (Belfast, W.)

  Hely-Hutchinson, M. R.

  Reed, A. C. (Exeter)

  Bull, B. B.

  Heneage, Lieut.-Colonel A. P.

  Reed, Sir H. S. (Aylesbury)

  Bullock, Capt. M.

  Hepburn, P. G. T. Buchan.

  Reid, W. Allan (Derby)

  Burghley, Lord

  Hepworth, J.

  Remer, J. R.

  Burton, Col. H. W.

  Herbert, A. P. (Oxford U.)

  Rickards, G. W. (Skipton)

  Butler, R. A.

  Herbert, Capt. Sir S. (Abbey)

  Ropner, Colonel L.

  Caine, G. R. Hall.

  Higgs, W. F.

  Ross, Major Sir R. D. (Londonderry)

  Campbell, Sir E. T.

  Hope, Captain Hon. A. O. J.

  Ross Taylor, W. (Woodbridge)

  Cartland, J. R. H.

  Hopkinson, A.

  Royds, Admiral Sir P. M. R.

  Carver, Major W. H.

  Horsbrugh, Florence

  Russell, Sir Alexander

  Cayzer, Sir C. W. (City of Chester)

  Howitt, Dr. A. B.

  Russell, S. H. M. (Darwen)

  Cazalet, Thelma (Islington, E.)

  Hudson, Capt. A. U. M. (Hack., N.)

  Salmon, Sir I.

  Chamberlain, Rt. Hn. N. (Edgb'l'n)

  Hudson, Rt. Hon. R. S. (Southport)

  Salt, E. W

  Clarke, Colonel R. S. (E. Grinstead)

  Hulbert, N. J.

  Samuel, M. R. A.

  Clarry, Sir Reginald

  Hunter, T.

  Sanderson, Sir F. B.

  Cobb, Captain E. C. (Preston)

  Hutchinson, G. C.

  Sassoon, Rt. Hon. Sir P.

  Colfox, Major W. P.

  Inskip, Rt. Hon. Sir T. W. H.

  Scott, Lord William

  Colman, N. C. D

  Keeling, E. H.

  Selley, H. R.

  Colville, Rt. Hon. John

  Kerr, H. W. (Oldham)

  Shakespeare, G. H.

  Conant, Captain R. J. E

  Kimball, L.

  Shaw, Captain W. T. (Forfar)

  Cooke, J. D. (Hammersmith, S.)

  Lamb, Sir J. Q.

  Shepperson, Sir E. W.

  Courthope, Col. Rt. Hon. Sir G. L.

  Latham, Sir P.

  Simon, Rt. Hon. Sir J. A.

  Croft, Brig.-Gen. Sir H. Page

  Law, R. K. (Hull, S.W.)

  Sinclair, Col. T. (Queen's U. B'lf'st)

  Crooke, Sir J. S.

  Leech, Sir J. W.

  Smith, Bracewell (Dulwich)

  Crookshank, Capt. H. F. C.

  Lees-Jones, J.

  Smith, Sir R. W. (Aberdeen)

  Croom-Johnson, R. P.

  Leighton, Major B. E. P.

  Somerville, Sir D. B. (Crewe)

  Cross, R. H.

  Lennox-Boyd, A. T. L.

  Somerville, A. A. (Windsor)

  Crossley, A. C.

  Liddall, W. S.

  Spens. W. P.

  Crowder, J. F. E.

  Lloyd, G. W.

  Stanley, Rt. Hon. Lord (Fylde)

  Cruddas, Col. B.

  Locker-Lampson, Comdr. O. S.

  Stanley, Rt. Hon. Oliver (W'm'ld)

  Culverwell, C. T.

  Loftus, P. C.

  Stewart, J. Henderson (Fife, E.)

  Davies, C. (Montgomery)

  Lyons, A. M.

  Storey, S.

  Davies, Major Sir G. F. (Yeovil)

  Mabane, W. (Huddersfield)

  Stourton, Major Hon. J. J.

  Dawson, Sir P.

  M'Connell, Sir J.

  Strauss, E. A. (Southwark, N.)

  De la Bére, R.

  McCorquodale, M. S.

  Strauss, H. G. (Norwich)

  Denville, Alfred

  MacDanald, Rt. Hon. M. (Ross)

  Stuart, Lord C. Crichton- (N'thw'h)

  Dodd, J. S.

  MacDonald, Sir Murdoch (Inverness)

  Stuart, Hon. J. (Moray and Nairn)

  Dower, Major A. V. G.

  McEwen, Capt. J. H. F.

  Sueter, Rear-Admiral Sir M F.

  Duckworth, W. R. (Moss Side)

  McKie, J. H.

  Tasker, Sir R. I.

  Dugdale, Captain T. L.

  Maclay, Hon. J. P.

  Tate, Mavis C.

  Duggan, H. J.

  Macmillan, H. (Stockton-on-Tees)

  Thomas, J. P. L.

  Duncan, J. A. L.

  Makins, Brig.-Gen. E.

  Thomson, Sir J. Q. W.

  Dunglass, Lord

  Margesson, Capt. Rt. Hon. H. D. R.

  Touche, Q. O.

  Tufnell, Lieut.-Commander R. L.

  Wayland, Sir W. A

  Wood, Hon. C. I. C.

  Wakefield, W. W.

  Wells, S. R.

  Wright, Wing-Commander J. A. C.

  Walker-Smith, Sir J.

  Whiteley, Major J. P. (Buckingham)

  Young, A. S. L. (Partick)

  Wallace, Capt. Rt. Hon. Euan

  Wickham, Lt.-Col. E. T. R.

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Williams, H. G. (Croydon, S.)

  TELLERS FOR THE AYES.—

  Ward, Irene M. B. (Wallsend)

  Windsor-Clive, Lieut.-Colonel G.

  Lieut.- Colonel Kerr and Mr. Grimston.

  Wardlaw-Milne, Sir J. S.

  Winterton, Rt. Hon. Earl

  Walt, Major G. S. Harvie

  Womersley, Sir W. J.

  NOES.

  Acland, R. T. D. (Barnstaple)

  Griffiths, G. A. (Hemsworth)

  Pethick-Lawrence, Rt. Hon. F. W.

  Adams, D. M. (Poplar, S.)

  Griffiths, J. (Llanelly)

  Poole, C. C.

  Alexander, Rt. Hon. A. V. (H'lsbr.)

  Groves. T. E.

  Price, M. P.

  Ammon, C. G

  Hall, G. H. (Aberdare)

  Pritt, D. N.

  Attlee, Rt. Hon. C. R.

  Hall, J. H. (Whitechapel)

  Quibell, D. J. K.

  Banfield, J. W.

  Hardie, Agnes

  Richards, R. (Wrexham)

  Barnes, A. J.

  Harris, Sir P. A.

  Riley, B.

  Barr, J.

  Hayday, A.

  Robinson, W. A. (St. Helens)

  Batey, J.

  Henderson, J. (Ardwick)

  Rothschild, J. A. de

  Bellenger, F. J.

  Henderson, T. (Tradeston)

  Salter, Dr. A. (Bermondsey)

  Benn, Rt. Hon. W. W.

  Hicks, E. G.

  Sexton. T. M.

  Benson, G.

  Hills, A. (Pontefract)

  Shinwell, E.

  Bevan, A.

  Hopkin, D.

  Silkin, L.

  Broad, F. A.

  Jagger, J.

  Silverman, S. S.

  Buchanan, G.

  Jenkins, Sir W. (Neath)

  Smith, Ben (Rotherhithe)

  Burke, W. A.

  John, W.

  Smith, E. (Stoke)

  Charleton, H. C

  Jones, A. C. (Shipley)

  Smith, T. (Normanton)

  Chater, D.

  Jones, Morgan (Caerphilly)

  Sorensen, R. W.

  Cluse, W. S.

  Kelly, W. T.

  Stephen, C.

  Cocks, F. S.

  Kennedy, Rt. Hon. T.

  Stewart, W. J. (H'ght'n-le-Sp'ng)

  Cove, W. G.

  Kirby, B. V.

  Stokes, R. R.

  Cripps, Hon. Sir Stafford

  Lansbury, Rt. Hon, G.

  Strauss, G. R. (Lambeth. N.)

  Daggar, G.

  Leach, W.

  Summerskiil, Edith

  Dalton, H.

  Leslie, J. R.

  Taylor, R. J. (Morpeth)

  Davidson, J. J. (Maryhill)

  Logan, D. G.

  Thurtle, E.

  Davies, R. J. (Westhoughton)

  Lunn, W.

  Tinker, J. J.

  Day, H.

  McEntee, V. La T.

  Tomlinson, G.

  Dobbie, W.

  McGhee, H. G.

  Viant, S. P.

  Ede, J. C.

  MacLaren, A.

  Walkden, A. G.

  Edwards, Sir C. (Bedwellty)

  Marshall, F.

  Walker, J.

  Foot, D. M.

  Mathers, G.

  Watson, W. McL.

  Frankel, D.

  Maxton, J.

  Welsh, J. C.

  Gallacher, W.

  Messer, F.

  White, H. Graham

  Gardner, B. W.

  Milner, Major J.

  Whiteley, W. (Blaydon)

  Gibbins, J.

  Montague. F.

  Williams, D. (Swansea, E.)

  Gibson, R. (Greenock)

  Morrison, R. C. (Tottenham, N.)

  Williams, E. J. (Ogmore)

  Graham, D. M. (Hamilton)

  Naylor, T. E.

  Windsor, W. (Hull, C.)

  Green, W. H. (Deptford)

  Noel-Baker, P. J.

  Woods, G. S. (Finsbury)

  Greenwood, Rt. Hon. A

  Oliver, G. H.

  Young, Sir R. (Newton)

  Grenfell, D. R.

  Paling, W.

  Griffith, F. Kingsley (M'ddl'sbro, W.)

  Parker, J.

  TELLERS FOR THE NOES.—

  Parkinson, J. A.

  Mr. Adamson and Mr. Anderson.

  Bill read a Second time.

  Bill committed to a Committee of the Whole House, for Monday next.—[Captain Margesson.]—

  HERRING INDUSTRY [Money].
  Resolution reported,
  " That, for the purposes of any Act of the present Session to amend the Herring Industry Act, 1935, to authorise the giving of further financial assistance to the Herring Industry Board and to herring fishermen, and for purposes connected with the matters aforesaid, it is expedient—
  (a) to authorise the payment out of moneys provided by Parliament—

  (i) in respect of the general administrative expenses of the Herring Industry Board (including the expenses of the Herring Industry Advisory Council constituted by the said Act and of any committee appointed by the Board), of sums not exceeding sixty thousand pounds;

  1548

  (ii) in respect of such other expenses of the said Board as may be specified in the said Act, of sums not exceeding the amount which with the sums paid in respect of the general administrative expenses of the Board will amount to one hundred and twenty-five thousand pounds;

  (iii) of grants to herring fishermen, for the purpose of assisting in the provision of new motor boats which could not be provided without such assistance, so, however, that no grant in respect of any boat shall exceed one-third of the total cost thereof and the aggregate of the grants shall not exceed two hundred and fifty thousand pounds;

  (iv) into the Herring Fund Advances Account of such sums not exceeding in the aggregate one hundred and fifty thousand pounds, as may he required for the purpose of making advances to the Herring Industry Board towards their expenses in the exercise of their powers for the purposes mentioned in subsection (3) of section nine of the Herring Industry- Act, 1935, as amended by the said Act of the present Session;

  1549

  (v) of remuneration to the members, officers, and servants of the consumers' committee and of the committee of investigation appointed under section four of the Herring Industry Act, 1935, and of such sums as may be necessary to defray the expenses of the said committees;

  (b) to authorise the payment into the Exchequer of all sums received by way of interest on, or repayment of the principal of, any advance made to the said Board."
  Resolution read a Second time.
  Mr. Speaker: The Amendment standing in the name of the hon. Member for Lowestoft (Mr. Loftus)—In line i5, leave out "motor"—is not in Order.
  Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
  11.24 p.m.
  Mr. Boothby: I do not want to detain the House, but there are one or two aspects of this Measure which have to be dealt with, because we are not getting it in Committee upstairs, as we had at one time expected, and that means that it will not receive the same exhaustive treatment. While the general terms of the Bill and its financial provisions have been improved, I think it can be said, from the point of view of the bulk of the Scottish herring fishery, as the Minister is no doubt aware, that widespread disappointment has been caused by the fact that it fails to make any financial provision for the fishermen in the immediate future, in the interim period. What they asked and what they hoped to receive by this Bill was something to help them with their running expenses in the coming season when things are so difficult. This financial provision is for certain grants to fishermen under conditions which we examined in the Committee stage of the Bill and which will not come into operation till an appointed day, which I believe is not to be until December. The grants themselves are not unsatisfactory, but in the meantime the fishermen have to get through the forthcoming summer and autumn fishings as well as they can. Nothing in this proposal will help them to meet one of their greatest problems, that of running costs. I put down a Question the day before yesterday, asking the Government when they would consider the possibility of doing something to secure that bonâ fide fishermen should be able to purchase the coal which is essential for their steam drifters at some
  1550
  thing below the market price of 37s. per ton. The Bill contains no proposal enabling them to purchase coal more cheaply or in other ways to reduce their running expenses, and that is the cause of a considerable amount of disappointment. I would like my right hon. Friend to state whether, even at this late hour, it would not be possible to insert some form of financial provision into the Bill to assist fishermen to reduce their running costs in the immediate future, and that the Bill should not be confined entirely to giving, in respect to motor boats, grants which will not come into operation until December.
  I should like to raise another point in respect of these grants, if it is in order. I believe it is, and there is no other way of raising it. I would ask the right hon. Gentleman whether it is possible to insert into the Bill provisions to make the grants for motor boats retrospective, even for a short period. The position is that a number of fishermen of enterprise and standing who have the credit facilities have actually built, or are having built to their order now, a certain number of motor boats of exactly the type covered by the Bill. I am sure I shall have him with me when I ask whether he thinks it is fair that these men, who have had the courage to go ahead on their own, having the credit at the bank, should be deprived of the benefits of the Bill. There are only five or six drifters concerned, and the concession for which I ask would cost but a negligible amount of money.
  Mr. Speaker: The hon. Member cannot suggest anything which would increase the amount laid down in the Money Resolution.
  Mr. Boothby: I was not aware of that. I bow to your ruling, Sir, that I am out of Order in asking that this grant be made retrospective. I think I shall be in Order in my last point. There is provision in the Bill which enables these grants to be made, provided that no other financial accommodation is available, or words to that effect. It looks at first sight something like a means test for these fishermen. The danger that some of us fear is an investigation into the means and standing of each fisherman who asks for a grant under the Bill. A good man who might be able to raise the necessary cash from his bank would not be able to get a grant, while the less good fisherman who

  1551
  had no credit facilities would be able to get a grant. I am sure my right hon. Friend will agree that that would not be fair, and I hope he may be able to give us some assurance.
  11.30 p.m.
  Mr. Loftus: I intervene bacause the Financial Resolution is so drawn as to strangle discussion in the Committee stage and prevent any reasonable Amendment to the Bill. I support the appeal of my hon. Friend the Member for East Aberdeen (Mr. Boothby) for some consideration of the question of the running costs of the fishermen. I understand that my Amendment to delete the word "motor" will not be called, but I would like to mention the question of the grant for motor vessels. I have looked up in the dictionary the definition of the word "motor," and I find that the Oxford Dictionary says it means:
  "Machine supplying motive power for carriage or vessel."
  In view of that definition I would ask the Secretary of State whether the grant should not include vessels propelled by steam, which would come under the definition in the Oxford Dictionary. This is my last chance of making this appeal. I would point out to my right hon. Friend that the cost of vessels of the same size is approximately the same. In 1937 a Diesel-engined vessel 80 feet long cost £7,800, and a steam vessel 85 feet long cost £7,700. As regards running costs, I know that the present steam drifters are extremely expensive to run, and, therefore, a case can be made out on their account. But the present steam drifters are old boats. Recently an experiment at the National Physical Laboratory showed that one thing only, an alteration in the shape of the hull, reduced the cost of fuel by 25 per cent. That is one indication of what steam under modern conditions can do. Then, in Germany, producer gas from coke is being used for running some 25 ships up to 1,000 tons, and one of these ships showed a saving on fuel of £120 a year. That shows that there are economical modern methods which may produce a cheaper-running vessel than the Diesel.
  It seems to me astonishing, in view of the fact that our fishing vessels are part of the national food production plant, that the Government should subsidise and encourage the running of part of our
  1552
  national food production plant on imported fuel rather than on fuel produced from coal. In wartime we might, owing to scarcity, find this important part of our food production partly immobilised for want of fuel. I submit that the mining interests in this House should carefully consider the fact that the drifter fleet uses approximately 150,000 tons of coal a year, and that in the national interest it is unwise to destroy that market and become more and more dependent on imported fuel.
  I regret this Resolution. In the first place, I understand from my right hon. Friend that the subsidy will only go to small boats. That means that the whole of the East Anglian fishing is ruled out; it means that probably not 5 per cent. of the subsidy will come to England. In the second place, the English boats are more heavily in debt than the Scottish. The Duncan Report gave the indebtedness of the whole fleet as £580 per boat; in one port it was £1,800 per boat, and that was an English port. Therefore, the fleet that is most heavily in debt will not receive any financial help. I believe that unemployment is being caused at the ports by knocking out coal and using petrol instead. My final point is again to say how astonished I am that in this House of Commons, where we are making every possible preparation for war, we should be faced with this proposal tonight to increase our dependence, without any necessity, on imported fuel.
  11.36 p.m.
  Mr. Dingle Foot: I have just a few words to say about the form which this Money Resolution takes. In the last year or two we have had a great many animated debates on the form of Money Resolutions. On the Special Areas Bill, the Tithes Bill and other Measures there were protests from all parts of the House at the unnecessary particularity with which many Resolutions are drawn, because it is felt, and rightly so, that this method has the effect of gagging the House and preventing reasonable Amendments being moved. It will be within the recollection of the House that so strong were the protests that the Government were constrained to set up a Select Committee on the subject. That Committee reported, in effect, that the protests were justified, and they made certain recommendations. The Government did not carry out the recommendations, but in

  1553
  the debate we had on the subject earlier in the Session the Prime Minister gave an assurance that a circular had been sent round to the Government Departments responsible, and that it enjoined on those who draw up the Resolutions that they should be drawn as widely as possible, so as not to fetter the chances of Amendments being moved. It is quite clear that that instruction has been ignored in the case of the present Resolution, because in the Resolution there appear the words, "new motor boats". Why should that reference to motor boats be necessary in the Money Resolution?
  In any case, both in the Resolution and in the Bill, there is a limitation of the amount to £250,000; so there can be no question of any increase in the charge. What is being done here, quite apart from the charge, is to put in this qualification, so that on the Committee stage it will be out of order for hon. Members representing herring ports to move that steam boats should be eligible for the subsidy in the same way as the other boats. That is entirely contrary to the instruction given a few months ago. It shows how useless these instructions are. Once again a deliberate attempt is being made to tie the hands of the House. It must be deliberate, because this matter about steam boats was raised in the debate on the Bill by several hon. Members —I know the hon. Member for Lowestoft (Mr. Loftus) expressed the hope that they were not to be ineligible. This Resolution is being brought forward after the Bill, and our hands are being tied by it. We ought to have some explanation from the Government as to the form the Money Resolution takes.
  11.40 p.m.
  Mr. Henderson Stewart: I think that most of us will join with the hon. Member for Dundee (Mr. Foot) in his protest against the close drafting of the Money Resolution. It is an old complaint in this House, and I imagine it will go on as long as our present methods continue. I join issue with the hon. Gentleman on the question of motor boats. I could with great pleasure enter into a debate with the hon. Member for Lowestoft (Mr. Loftus), but I do not want to do so at this late hour. I cannot imagine from what source he obtained his figures. In East Fife last year we built a 65 ft. motor diesel vessel for just over £3,000. It has been to Yarmouth, has taken part in the East
  1554
  Anglian fishing and has been very successful. A steam drifter of the same size, built to do the same kind of fishing, would cost about three times as much. There fore, as the expense of the diesel boat is only one-third of the steam boat, I am satisfied that it is proper to give this subsidy to motor boats at this time.
  I rise merely to support my hon. Friend the Member for East Aberdeen (Mr. Boothy) in making a protest to the Government on account of their failure to appreciate the real and the immediate needs of the herring trade. I have pleaded for grants for motor boats for many years in this House. Although I would be the last to be ungrateful for what is being done now—" For what we are about to receive, may the Lord make us truly thankful," and I hope that we may be—none of the provisions in the Bill is likely to be of the slightest immediate advantage to the herring trade this year or, I think, next year. I beg of the Government to reconsider the whole Bill with a view to recognising facts and producing satisfactory remedies. Is the House aware that we are losing men at such a rate in the herring trade that in ten years time, if the present rate is continued, there will not be any men left at all for the herring drifters. We are losing boats at such a rate that, if it is continued, in five years' time, there will not be one steam drifter left in Scotland. These facts must be faced by the Government if we are to maintain this essential trade.
  I thank the Government for this Measure as far as it goes, but I would be failing in my duty to my constituency if I did not make it abundantly clear, that it does not scratch the problem with which we are faced in the herring ports. That problem is one of making the herrings that we catch cheaper to sell. The only possible way that we can see of reducing their cost price is some grant towards expenses. My hon. Friend has suggested a loan to meet the increased cost of coal. I would like the basis chosen to be broader. I agree with the Herring Producers' Association and the deputation representing all sections of the trade which met the Government last year in asking for a grant of 25 per cent. covering all the many branches of expenses. The Minister refused that request and I now beg of him to reconsider the proposal most earnestly.
  11.45 p.m.
  Mr. Petherick: We have been listening to hon. Members representing Scottish constituencies. The trouble with them is that they are too greedy. Scotland is already getting the lion's share, under the Bill, of the £376,000 and on the top of that probably also £150,000 out of the Herring Fund Advances Account. I rise to make a plea on behalf of English Fishermen. It is a point which I raised on the Second Reading, and it is one of considerable importance. I am confirmed in that opinion by the fact that what I said has aroused a great deal of interest in Cornwall, and I understand also in Devon. The point was whether the advances to be made to herring fishermen are available for fishermen who catch herrings for part of the year, but not mainly for the whole year. In parts of Devon and certainly in Cornwall, there are men who go out during the winter months from November to, say, January, and catch herrings, and at other times they use their boats for catching pilchards, mackerel and, maybe, for fishing with long lines. It is important that it should be possible for them to obtain grants as part of their share of the money which is to be allocated for the building of boats. I have approached my right hon. Friend the Minister of Agriculture and Fisheries on this matter, and he has promised to look into it. I hope that he will be able to assure the herring fishermen that in this financial Resolution, and also in the Bill, they are covered, because they are certainly not less deserving than the Scottish herring fishermen, although they fish for herring for only part of the year.
  11.48 p.m.
  Mr. Gallacher: The hon. Member for Penryn and Falmouth (Mr. Petherick) is very supercilious about Scottish Members. If he thinks that my intervention is undesirable, the door is there, and there is no reason why he should stay here and suffer in listening to me. I discovered that it was too late for me to put down Amendments on the Financial Resolution, and I decided to draft Amendments for the Committee stage because, although I have miners and agricultural workers in my constituency, I have also a certain number of herring fishermen. Therefore, I have tried to give some consideration to the herring industry. I drafted Amendments for the Committee stage, and then I learned that they are out of
  1556
  Order. One Amendment, to provide that "motor" should be deleted, was out of Order, so I was told. I also discovered that an Amendment to provide that the sum total of the grants should be increased to £500,000, would be extremely out of Order. I also had an Amendment that in addition to the grants for boats there should be grants made to meet the current needs of the fishermen. I was told that that was out of Order. Therefore, my activities to get in my Amendments in good time, have not been of much avail.
  I take the opportunity of protesting against the Financial Resolution. It is obvious that the provision made in the Financial Resolution is not sufficient. Although the Government have been constrained to do something to help the herring fishing industry, the something they are doing is the absolute minimum. I am positive that a representative body of Government Members could not work out a plan of any kind that would give less to the herring fishermen. The method of allocation is simply tying the House of Commons hand and foot. We can think out the most effective way of distributing any money that there is to be distributed so as to be of the greatest advantage to the fishermen and, no matter how much thinking we may do, it is of no avail. Suppose we got meetings of fishermen at Lowestoft, on the Forth and at Aberdeen and discussed with them ways and means how the best possible use could be made of the money in order to meet their current needs, we come here and are told we are out of Order. It does not matter how bad and how dangerous is a proposal brought forward by the Government the Members behind them go into the Lobby as they are told. Here and there someone may get up and say a word or two to give the impression that he is free, but not a man dare stay out. With an automatic majority how is it possible to carry on the business of the country? [An HON. MEMBER: "What about Russia?"] I should like to divert a little.
  Mr. Deputy-Speaker (Sir Dennis Herbert): If the hon. Member means divert from what he was talking about back to the Resolution, I should have no objection.
  Mr. Gallacher: That is very subtle. I dearly like subtle things, so I will accept your advice, Sir Dennis. I ask the House

  1557
  not to pass the Resolution. It is not only the Lowestoft fishermen. National interests are involved. The hon. Member for East Fife (Mr. Henderson Stewart) tells us the Government are only scratching at the problem. Stop this scratching at the problem and deal with it in an effective manner. Hon. Members cannot support this Money Resolution if they are genuine towards their constituents. I want a Financial Resolution which will give fishermen assistance now for running costs and for other necessities. Neither the hon. Member for East Fife, the hon. Member for East Aberdeen (Mr. Boothby), the hon. Member for Lowestoft (Mr. Loftus) nor the hon. Member for Dundee (Mr. Foot) can support the Resolution. There cannot be any neutrality in this matter. Let us have a Division. Why not? It is an offence against the fishermen to let the Government get away with this Resolution. They are a thousand times more important than the collection of oddities who occupy the Government's Front Bench. If I can get any assistance I am prepared to go to a Division. The hon. Member has referred to greedy Scotsmen. Englishmen have been robbing Scotsmen for several centuries; they have been flourishing at the expense of Scotsmen.
  Mr. Loftus: The proper time to oppose was on the Second Reading. I did so, but perhaps the hon. Member was not present.
  Mr. Gallacher: I opposed the Second Reading, and I want to oppose the Resolution now. The proper time to oppose is when the subject comes before us, whether it is on Second Reading or on Financial Resolution. If we defeat it the Government will have to bring in another. I ask the hon. Members not to encourage any scratching with this serious problem, but to force the Government to face it in a manner which the great services that the fishermen have given to the country deserve. I hope the Resolution will be withdrawn.
  11.59 p.m.
  Mr. J. J. Davidson: I think that the Government should make no exception at all and in dealing with this industry should deal with it as a whole and not with particular sections of it. There must be no selection. It cannot be proved that a particular part of the industry is
  1558
  suffering more than any other. The herring industry has been sadly neglected for many years, and hon. Members on all sides are doing their utmost to see that assistance is given to it. The hon. Member for Lowestoft (Mr. Loftus) cannot deny that if it was right to support this proposal on the Second Reading it is right that he should support it to its logical conclusion. Have the hon. Members who put this proposal forward done it merely with a view to making speeches that will impress their constituents, but not with a view to taking action that will help their constituents? If so, they do not truly represent their constituents; they are shadow boxers. They are not carrying out their Parliamentary duties as they should do.
  Mr. Boothby: Both my hon. friend the Member for East Fife (Mr. Henderson Stewart) and I made it plain that we approved the Bill as far as it went, but regretted that it did not go further.
  Mr. Davidson: If the hon. Members desire to impress the Government with the necessity of going further and go to the extent of placing their view in an Amendment on the Order Paper, and the Government refuse to accept that view, it is their duty to press the Government by voting against them. The hon. Members have agreed that the Government have not gone far enough; that means that in their opinion the Government are not doing sufficient in their view for the herring industry. All they do is to make rebel speeches, and then, when the Chief Whip shows his face, they run away with their tails between their legs. Is that carrying out their duty to their constituents? Are they merely playing with the problem as politicians, or are they prepared as representatives interested in the herring industry to carry their views to their logical conclusion? We want to let their constituents know that we are watching their members who are such rebels in words, but such quitters in action. In view of the great volume of criticism on this point and the brilliant speeches which have been made by these fighting members on the Government side on behalf of the herring industry, I suggest that the right hon. Gentleman should delay this question and give the House a bigger opportunity of discussing it. I ask that as one who desires to assist the herring industry.
  12.5 a.m.
  Mr. Harbord: I wish briefly to register a strong protest against the action of the Government in not conceding to the request of those who represent the herring fishing ports of Great Britain. It seems that the appeals that have been made have fallen on deaf ears. I shall feel it my duty to vote against the Financial Resolution. Having made a strong protest, I feel that it is logical that I should vote against proposals which will result in a number of boats in the port which I have the honour to represent going out of operation and a number of men losing their livelihood. The Government will not grant the necessary financial assistance for the working of these boats, although, in all, the assistance for which we have asked would not involve an expenditure of more than £160,000 by the Government. Is this great national fishing industry to go to the wall because the Government will not grant the necessary financial assistance? I must express my disappointment and disgust that the Government have not accepted the case which has been put so strongly. I welcome the action which has been taken by my hon. Friend the Member for Lowestoft (Mr. Loftus), who has done his best for the fishermen of the port of Lowestoft. I make a last appeal to the Government to be more fair. This Bill is entirely a Scots Measure, and the English side of the industry has been neglected, apart from the provision for new boats.
  12.8 a.m.
  The Secretary of State for Scotland (Mr. Colville): The points that have been raised on the Report stage of the Money Resolution are substantially the points that were raised on the Second Reading of the Bill. On that occasion, I tried to demonstrate to the House why the Government had chosen to assist the industry in the way laid down in the Bill and the way provided for in the Money Resolution. At this time of night, I do not think the House would wish me to make my Second Reading speech over again, but perhaps I might underline that what I said on that occasion was that we recognised the difficulties from which the herring industry is suffering, difficulties mainly occasioned by the contraction of overseas markets; that we would do our best to secure for the British herring industry a share in those overseas markets, contracted though they
  1560
  were; and that by reconstituting the Board on. the lines which I explained, we believed a greater degree of efficiency could be obtained: but that, when all that was said and done, we felt that the best contribution we could make to the industry was to assist it in future in providing itself with efficient boats for the purpose of catching fish at a reasonable cost.
  I also endeavoured to explain that we had deliberately selected the motor boat for this purpose. I know that my hon. Friend the Member for Great Yarmouth (Mr. Harbord) and my hon. Friend the Member for Lowestoft (Mr. Loftus) have strong views on that subject, and I do not think I shall convince them: but I must say again that there were strong and cogent reasons which induced the Government to concentrate on re-equipment by means of new motor boats. We have studied the question carefully and have had in mind clearly the paragraph which was quoted by the right hon. Gentleman the Member for Hillsborough (Mr. Alexander) from the Herring Industry Board's second report to the effect that the steam drifter is the most efficient machine for catching herrings at all seasons and in all regions, if used to full capacity. But we have also had to consider the claim of the advocates of the motor-boat, which is also dealt with in the report, that it is more economical in running and maintenance expenses, requires a smaller crew and could probably be used for fishing for white fish when no herring is available.
  The report went on to say that it was anticipated that a number of those craft could be built in time for the season of 1937 and that, if experience could be gained of their performance, it would be possible to form an opinion of their capability and suitability for the herring industry. Experience of the performance of such boats since that report was written, justifies the conclusion which the Government have reached, that it is the right type of boat to assist by Government grant. Such boats have shown themselves capable of pursuing herring fishing off the East Anglian coast not only in 1937 but in previous years. In the earlier Debate the hon. Member for Lowestoft quoted a passage from the Duncan Report to the effect that it was admitted that there was not enough experience of the suitability of the Diesel drifters of the larger size that would be necessary for the more arduous work of

  1561
  herring fishing in open waters and rough weather, the capital cost of which would be at least as great as that of the steam drifters. That, however, was written in 1934 and considerable experience has been gained since then showing that the motor boat is an efficient instrument for herring fishing. While it is true that their catching power is less than that of efficient steam drifters, they are an economical proposition. The present fleet of steam dritters is unable to find full-time occupation, and it seems essential for the steam drifter to keep in full-time occupation in order to make it a paying concern.
  This is an essential point in the Bill and, therefore, in the Money Resolution. Hon. Members have complained that the Money Resolution is drawn in such a way that, by using the word "motor," amendment and discussion on this point is precluded. As I have said, this is an essential part of the Bill and it was carefully explained in the discussion on the Bill, that we had chosen to concentrate our assistance on motor boats. The Committee stage of the Money Resolution passed without challenge and I think the majority of hon. Members at that time were convinced that the proposition which we made was based on a careful consideration of the advice given to us.
  Mr. Foot: Why should not this question of motor boats or steam drifters be threshed out on the Committee stage of the Bill? Why should you draft the Money Resolution so as to rule out of order any Amendment in favour of steam drifters?
  Mr. Colville: I cannot discuss that point now. This is the Report stage of a Resolution which received the King's Recommendation and passed its Committee stage and I have endeavoured to explain that the Government feel this to be an essential point in the Bill. I would remind hon. Members that, in this case, the Government are taking a new step and a great step by making grant available to the extent of £250,000. It is a step which was urged very strongly by the industry and, in taking that step, I think the Government were entitled to weigh up how they could best help the industry in the provision of efficient boats. Having weighed all the evidence, they came to the conclusion that they ought to devote the grant for this emergency period to the motor boat.
  1562
  Most of the other points which have been raised can be discussed on the Committee stage of the Bill. The hon. Member for East Aberdeen (Mr. Boothby) raised a point which, as Mr. Speaker pointed out, could not be pursued on this occasion. The hon. Member for Lowestoft said that the whole of the East Anglian fishing would be ruled out. I do not think that is a correct view. I believe there will be a very considerable share for the East Anglians. The hon. Member for East Fife (Mr. Henderson Stewart) said grace for what he had received but asked for more. I have tried to explain that the Government, in considering how best to help the industry, decided against a running grant and in favour of a new Board, the continuance of loans for certain purposes, and the considerable use of grants for the provision of boats of an efficient type.
  Mr. Boothby: Does my right hon. Friend rule out all hope of any consideration by the Government, of the possibility of reducing the price of coal to the fishing fleet?
  Mr. Colville: I do not think I can discuss that point on the Money Resolution. I hardly think it would he in Order. I will certainly consider what my hon. Friend has said. I know the importance of this matter to the fleet. The hon. Member for Penryn and Falmouth (Mr. Petherick) raised a point as regards the eligibility of Cornish fishermen for the grant and whether they would not have to be exclusively engaged in the herring fishing industry, to qualify for the grant under the scheme. Of course, the scheme is not yet made but the personal view I am expressing now is that they would not have to be exclusively engaged in herring fishing to qualify for such consideration. With those observations and having in mind the full explanation given on the Second Reading, I hope the House will now agree to the Resolution.
  Mr. E. J. Williams: Has the right hon. Gentleman considered the effect on the coal industry of permitting steam drifters to go out of commission?
  Mr. Davidson: Could the right hon. Gentleman not withdraw this Resolution now, and allow us at a later stage to discuss the whole issue as between motorboats and steam drifters?
  Mr. Colville: No, Sir. I could not hold out any hope of that being done. As for the point raised by the hon. Member for Ogmore (Mr. E. J. Williams), that is a consideration which, naturally, we have to bear in mind. I agree that anything which substitutes the burning of oil for the burning of coal is a matter to which we must pay great attention, but
  The remaining Orders were read, and postponed.
  It being after Half-past Eleven of the Clock upon Thursday evening, Mr.
  I assure the hon. Member that it was examined and taken into account when we were considering how best to help the herring fishing industry.
  Question put, "That this House doth agree with the Committee in the said Resolution."
  The House divided: Ayes, 76; Noes, 30.

  Division No. 221.]

  AYES.

  [12.19 a.m.

  Albary, Sir Irving

  Fremantle, Sir F. E.

  Munro, P.

  Allen, Col. J. Sandeman (B'knhead)

  Furness, S. N.

  O'Connor, Sir Terence J.

  Anderson, Sir A. Garrett (C. of Ldn.)

  Greene, W. P. C. (Worcester)

  Petherick, M.

  Anstruther-Gray, W. J.

  Grigg, Sir E. W. M.

  Ramsbotham, H.

  Aske, Sir R. W.

  Grimston, R. V.

  Rathbone, J. R. (Bodmin)

  Balniel, Lord

  Guinness, T. L. E. B.

  Reed, A. C. (Exeter)

  Beaumont, Hon. R. E. B. (Portsm'h)

  Hambro, A. V.

  Reed, Sir H. S. (Aylesbury)

  Boothby, R. J. G.

  Heilgers, Captain F. F. A.

  Reid, W. Allan (Derby)

  Boulton, W. W.

  Hely-Hutchinson, M. R.

  Royds, Admiral Sir P. M. R.

  Boyce, H. Leslie

  Higgs, W. F.

  Salt, E. W.

  Briscoe, Capt. R. G.

  Hopkinson, A.

  Smith, Bracewell (Dulwich)

  Brown, Col. D. C. (Hexham)

  Horsbrugh, Florence

  Stewart, J. Henderson (Fife, E.)

  Bull, B. B.

  Hutchinson, G. C.

  Strauss, H. G. (Norwich)

  Carver, Major W. H.

  Keeling, E. H.

  Stuart, Hon. J. (Moray and Nairn)

  Clarke, Colonel R. S. (E. Grinstead)

  Law, R. K. (Hull, S.W.)

  Thomas, J. P. L.

  Cobb, Captain E. C. (Preston)

  Locker-Lampson, Comdr. O. S.

  Tufnell, Lieut.-Commander R. L.

  Colfox, Major W. P.

  M'Connell, Sir J.

  Wakefield, W. W.

  Colville, Rt. Hon. John

  MacDonald, Rt. Hon. M. (Ross)

  Ward, Lieut.-Col. Sir A. L. (Hull)

  Courthope, Col. Rt. Hon. Sir G. L.

  McKie, J. H.

  Watt, Major G. S. Harvie

  Crookshank, Capt. H. F. C.

  Maclay, Hon. J. P.

  Wells, S. R.

  Crowder, J F. E.

  Margesson, Capt. Rt. Hon. H. D. R.

  Williams, H. G. (Croydon, S.)

  Dugdale, Captain T. L.

  Mayhew, Lt.-Col. J.

  Young, A. S. L. (Partick)

  Eastwood, J. F.

  Mellor, Sir J. S. P. (Tamworth)

  Edmondson, Major Sir J.

  Mills, Major J. D. (New Forest)

  TELLERS FOR THE AYES.—

  Errington, E.

  Moreing, A. C.

  Captain Arthur Hope and Lieut. Colonel Kerr.

  Findlay, Sir E.

  Morris-Jones, Sir Henry

  Fox, Sir G. W. G.

  Muirhead, Lt.-Col. A. J.

  NOES.

  Barr, J.

  Jenkins, Sir W. (Neath)

  Robinson, W. A. (St. Helens)

  Benn, Rt. Hon. W. W.

  John, W.

  Silverman, S. S.

  Bevan, A.

  Kelly, W. T.

  Smith, Ben (Rotherhithe)

  Burke, W. A.

  Kirby, B. V.

  Smith, E. (Stoke)

  Cocks, F. S.

  Loftus, P. C.

  Stephen, C.

  Dalton, H.

  Logan, O. G.

  Tinker, J. J.

  Davidson, J. J. (Maryhill)

  Mathers, G.

  Tomlinson, G.

  Edwards, Sir C. (Bedwellly)

  Maxton, J.

  Williams, E. J. (Ogmore)

  Griffiths, J. (Llanelly)

  Milner, Major J.

  Hall, G. H. (Aberdare)

  Noel-Baker, P. J.

  TELLERS FOR THE AYES.—

  Harbord, A.

  Pritt, D. N.

  Mr. Foot and Mr. Gallacher.

  DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.
  Adjourned at Twenty-eight Minutes after Twelve o'Clock.