FINANCE BILL.

HC Deb 26 May 1938 vol 336 cc1489-547

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.

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 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 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 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."

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. 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 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 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 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 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 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 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 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 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 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.

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 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 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 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 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 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 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 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 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 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. 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 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 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 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 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 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 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 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- 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 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 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 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 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- 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 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, 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 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 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 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 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 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 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 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 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 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 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 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 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. 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.]—