HC Deb 25 April 1939 vol 346 cc997-1089

Motion made, and Question proposed, That in lieu of the full duties of customs now chargeable on tobacco imported into the United Kingdom there shall, on and after the twenty-sixth day of April, nineteen hundred and thirty-nine, be charged the following duties, that is to say:

s. d.
Upon tobacco unmanufactured, viz.,
containing 10 lbs. or more of moisture in every 100 lbs. weight thereof—
unstripped the lb. 11 6
stripped the lb. 11
containing less than 10 lbs. of moisture in every 100 lbs. weight thereof— the lb.
unstripped the lb. 12 6
stripped the lb. 12
Upon tobacco manufactured, v.,
Cigars the lb. 20 1
Cigarettes the lb. 16 7
Cavendish or Negrohead the lb. 15 9
Cavendish or Negrohead manufactured in bond the lb. 14 0
Other manufactured tobacco the lb. 14 0
Upon snuff—
containing more than 13 lbs.
of moisture in every 100 lbs.
weight thereof the lb. 13 4
containing not more than 13 lbs.
of moisture in every 100 lbs.
weight thereof the lb. 15 9
and so in proportion for any less quantity.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."—[Sir J. Simon.]

5.8 p.m.

Mr. Attlee

The Chancellor of the Exchequer began his speech by referring to one of his predecessors who was introducing a Budget just prior to a war. Let us hope that that remark is not an ill-omen. He went on to point out that that little Budget let loose a flood of eloquence. I am sure that we are all very glad that the present holder of the office did not indulge in the lengthy explanations and oratory of his great predecessor. The explanations of the right hon. Gentleman have been, of course, lucid, as always from him, and have been commendably brief, but I am bound to say that Mr. Gladstone, if he had got over the shock of contemplating these figures, would have indulged in a good deal of philosophic reflection and would have given us rather more background to his financial statement. Probably he would have indulged in rather more looking ahead than we have had from the right hon. Gentleman.

We are contemplating a colossal expenditure, the highest this country has ever had to face in time of peace, as well as the enormous expenditure upon armaments. The question we should all like to ask is, Have we reached the peak yet? The Chancellor of the Exchequer hinted last year that we had not reached the peak, and it was quite clear that we had not reached it then, but the right hon. Gentleman has said nothing at all as to whether these figures go in any order of progression, whether we have reached a peak and have to come down again, or whether this is only one step in a steeper climb. We have to recognise that this enormous expenditure brings with it very great commitments for the future. I remember the Prime Minister's speech last year with regard to those commitments. All this expenditure on the armed Forces means a tremendous added annual expenditure for upkeep, and all this borrowing means a tremendous sum in the future, a constantly increasing sum, for interest and for sinking fund.

In fact, from the point of view of a broad outlook, the Chancellor of the Exchequer is not facing the problem at all. He is passing it on. Much of the interest in the Budget has passed away since we left aside all question of trying to balance revenue and expenditure. I can imagine that the House listened in the time of Mr. Gladstone with intense excitement to items that are now passed over, and little sums of a few hundred thousand pounds or even less were considered of most momentous importance. The Chancellor of the Exchequer has brought us up today to the comparatively small sum of £24,000,000 that he had to raise by extra taxation. The sum is small compared to his huge total, and there was nothing like the interest shown that I have known in former Budgets because the Chancellor of the Exchequer had really selected an arbitrary token amount to be provided by taxation. If he had not wanted to make some particular sum he might easily have put this all on to borrowing, but it seemed to me that he tried to wrap himself in a rather scanty rag of financial virtue.

Before discussing these particular matters we have to consider the general effect of the process which is going on of enormous borrowing. One effect will undoubtedly be inflation, and that is where the mass of the people will pay the price. It is unnecessary for the Chancellor of the Exchequer to think that we must increase the tax on sugar in order to bring it home to the mass of the people; this process of borrowing and inflation will sooner or later bring it home to the poorest of the poor. The second point is that this enormous borrowing is going to lead to dislocation of industry which will be felt very severely, if we can avoid the major horror of another war. At the back of the Chancellor's Budget there is no real national planning. It struck me throughout his speech that, despite all the talk about everyone making sacrifices, the Chancellor in fact is trying to carry on in an abnormal situation the normality of the class structure of society. He said that nothing could be done with regard to pensions, that nothing could be done with regard to social services, because he accepted as absolutely necessary the maintenance of the standard of life of the different classes in this society.

That is really the dangerous thing at the back of the Chancellor's whole statement. There is no conception that what we really need to do in these days is to think of the actualities behind the figures. The Chancellor gets a balance for the moment, but he is not really dealing with the problem of utilising the resources of this country. He has introduced certain taxes. I was glad to see that to a certain extent he was concentrating on luxuries, but I think it is necessary to go a great deal further than that—not just from the point of view of what is called "soaking the rich," but from the point of view of bringing pressure to bear in order that we may concentrate in this country on the provision of necessities and not of luxuries. I would have liked to have seen a heavy tax on the very expensive motor car; I would have liked to have seen the tax on horse-power graded so as to fall more steeply, and with ever increasing steepness, on the highest-powered cars than on the ordinary working car which is used for business or for the purposes of the simple pleasures of very humble people. It would have had a far better economic effect.

I was glad to hear the Chancellor's proposals with regard to Surtax and Estate Duties. There, again, it is right to put the taxation on the higher incomes, because, after all, it is not what is taken from them, but what is left behind, that matters. I was glad to hear him speak of evasion. It is a kind of task in which, it seems to me, the greyhound never really catches the hare, but I hope he will get near enough to have another bite. New methods of evasion occur, and, just as you are nearing the hare, it escapes again. I am given to understand by those who know that there are very large sums—I am told in the neighbourhood of £12,000,000 in Surtax alone—which escape even now. The effect does not rest so much in those actual sums as in the minds of other people who know that these people are evading taxation. I hope the right hon. Gentleman will look into this matter, not only as regards the people who have tricky arrangements devised for them by lawyers, but as regards people who arrange their residence so as to evade taxation. To my mind we have to look ahead and consider how far we can continue to bear this ever-mounting burden of debt. Sooner or later, and I think the sooner the better, we shall have to come down to the taxation of wealth—I mean accumulated wealth. You are creating, by this method of borrowing, just as you did in the War, an enormous mass of indebtedness, on which interest has to be paid, and you are creating an enormous rentier class. This will render it necessary to adopt different methods.

It is not my intention to deal in any detail with the Budget; my friends will have an opportunity of doing so; but, before I close, I would like to say one thing, and that is that we are meeting to-day having just lost a Member of the House who took a very prominent part in these Debates for many years. He was a Member who was very dear to us on this side, who was respected by all, who showed a devotion to duty which I think wore him out prematurely, and who served the House for many years on a most important Committee, the Public Accounts Committee. I felt that I could not let this occasion pass wihout paying a brief tribute to his memory.

5.20 p.m.

Sir Archibald Sinclair

I am sure that it is not only Members of his own party who will be grateful to the Leader of the Opposition for the graceful tribute which he paid to the memory of the late hon. Member for Caerphilly, who was not only beloved by all his fellow Members and played a prominent, important and distinguished part in our Debates, but gave devoted service to the House as Chairman of the Public Accounts Committee.

The Chancellor of the Exchequer gave us this afternoon the kind of speech that we expected from him—a clear, terse and revealing statement of the national finances. The Committee will be grateful to him for his searching analysis of the financial situation, and for a lucid and graceful presentation of what struck me as being a pedestrian and unimaginative Budget. The right hon. Gentleman referred to the crushing burdens which would be borne with the good will and patriotism of the taxpayer. As I said last year, I am convinced that the Chancellor, the Government and Parliament will not look in vain to the taxpayer to show cheerfulness and resolution under the heavy burdens which the national necessities are throwing upon him at the present time, but I believe that that cheerfulness and resolution would be greatly fortified if the taxpayers were assured that the Government were seriously tackling the problem of expenditure, and doing their utmost to ensure that, while we know that expenditure on an immense scale is necessary, we are getting full value for every pound that is spent, and that all unnecessary expenditure is being cut down.

It is true, and I do not in the least want to pass over the fact, that the Chancellor said that most strenuous efforts must be made to effect savings of money now voted, but he did not give us any indication of what those efforts were going to be. If I am asked as I was in the Debate on the subject last year, where these economies are to be made, I would say, first of all, let us look where most expenditure is being incurred, and let us be absolutely certain that our great expenditure on armaments is being economically administered. There is published to-day the Report of the Public Accounts Committee, which shows that, as regards certain Departments, there is undoubtedly very great need for more effective control of expenditure, and that is one reason, though not by any means the only reason, why my hon. Friends and I have urged the establishment of a Ministry of Supply. It is true that we have been offered a truncated Ministry; it is true that we have been offered a Ministry with powers limited to the supplies of one Department; but we shall certainly scrutinise very anxiously the Bill for the establishment of that Ministry when it comes before the House, and we shall urge that ample powers should be given to ensure that the expenditure on defence is fully productive and that waste is as far as possible eliminated.

I have ventured to describe the Budget as unimaginative, mainly because it does not indicate, as far as I can make out, any solution for the two main problems of the Budget at the present time. The first is a financial problem. The Chancellor said in solemn language that the use of borrowed money only postpones the burden. It is abundantly true. That was the reason why we moved Amendments to the first Defence Loans Bill which came before the House of Commons. We felt then, and I cannot help thinking that the Committee must now agree with us, that it would have been better if, in the earlier stages of this great effort in rearmament, Parliament had decided that the greater portion of the burden should have been shouldered by taxation rather than by loans. The Chancellor told us that the use of borrowed money only postpones the burden, but he did not give us any indication of how that burden is eventually going to be shouldered; he did not give us any indication ofthe long-term financial policy of the Government; and I am sure that the minds of the public will be greatly preoccupied with the thought of how these great burdens are to be carried in the future, and with the immense problem that will face the Chancellor of the Exchequer when he comes to compile his Budget next year.

The second problem with which, it seemed to me, the Chancellor failed to deal, was the question of the concentration of the economic and financial strength of the country upon the problem of rearmament. He did, indeed, warn us of what is sufficiently obvious from a study of the figures, namely, that the Supplementary Estimates for defence are the pith and kernel of the matter—as he said, the cardinal issue of the Budget; and he went on to say that the shape and content of our financial burden is determined by our defence needs. But it is just there that his proposals for taxation seem to me to fall short of requirements. Surely, in the circumstances with which we are faced, the main need is to prevent private expenditure, and especially expenditure on luxuries, from competing with the national effort at rearmament in its demand upon skilled labour and upon capital. Therefore I join with the Leader of the Opposition in suggesting that there ought to have been much heavier taxation, for example, upon motor cars, and especially upon higher-powered motor cars, with the effect of putting at the disposal of the national effort in rearmament the capital and skilled labour which are now engaged in the motor car industry. I should have hoped that the Chancellor would have seen his way to carry that further, and indicate how he proposes to grapple with the fundamental problem of liberating our productive capacity for the needs of rearmament.

Mr. H. G. Williams

Is the right hon. Gentleman seriously proposing that the sale of motor cars in this country should be reduced?

Sir A. Sinclair

Yes, I am proposing that, and that the capital and skilled labour employed on their manufacture should be liberated for other productive purposes for which it is so badly needed. Unless we do that, we shall be faced with the problem of inflation in its worst form at a very early date. Then the Chancellor dealt with the problem of tax dodgers. I may be wrong, but I believe that the Chancellor has his heart in this business, and I am very glad that a man of his power and experience in these matters is in charge of what the right hon. Gentleman the Leader of the Opposition has described as a "hunt." I wish him good fortune in his hunt, and if there is anything we can do I can assure him that he will have the assistance of my hon. Friends and myself. As regards his minor proposals, I could not help wondering whether this penny will be of any help to the living theatre. I suppose it is a gesture, and perhaps it has more in it than some gestures that are made; but I doubt whether it will be very valuable to the theatre. As for patent medicines, I do not myself use patent medicines, but I am in a small way an amateur cinematographer, and, therefore, I cannot help wondering whether this letting off patent medicines at the expense of cinematographers is going to do the country much good.

The Chancellor, in the early part of his speech, pointed out that the revenue estimate had proved to be £17,500,000 too high. Any of his predecessors would have felt bound to come before the House in a white sheet and apologise for so egregious an over-estimate, but, of course, the Chancellor is in a position to say that this is due to circumstances far outside his control, to international events. The error of the Government was obviously less of a financial error than a political error. It was an error in estimating the value of the appeasement policy which they had been following in recent months. Last year the Chancellor of the Exchequer asked us to trust to that policy of appeasement, but we can see that it has not led either to success in the field of foreign affairs or to any diminution of our financial burdens. On the contrary, we are faced with further demands. We shall have many opportunities of discussing the details of the Budget in the Debates that lie ahead. Broadly speaking, it seems to me that the chief criticism is that when so many supporters of the Government are demanding conscription of the man-power of the country, there is too little evidence in this Budget of an intention on the part of the Government to mobilise our economic and financial resources for the national effort which lies before us.

5.35 p.m.

Mr. Boothby

I would like to take the opportunity of congratulating my right hon. Friend the Chancellor upon what I think hon. Members on all sides must agree is a most admirable Budget in every respect. It seems to me that my right hon. Friend has struck the right balance, in circumstances of very great difficulty, first of all between revenue and loan expenditure, and secondly between direct and indirect taxation. If I may humbly be allowed to say so, it is a very remarkable achievement. With regard to some of the detailed proposals, I think the Committee as a whole will welcome the Chancellor's gesture to the living theatre. I quite agree with my right hon. Friend the Member for Caithness and Sutherland (Sir A. Sinclair) that it may not be all that is required, but it is at least a gesture of sympathy with the living theatre in a time of difficulty, and it shows what the opinon of the House is. Equally, the House will welcome the repeal of the Medicine Stamp Duty.

With regard to the increase in the Horse Power Duty, I have no doubt that we shall hear very severe criticisms from hon. Members on this side, but I would like to say two things. First, I think the conditions on the roads of this country are rapidly becoming intolerable, and some reduction in the number of luxury motor cars on these roads is desirable until the time comes when we can do a great deal more in regard to the upkeep of existing roads and the construction of new trunk roads. Secondly, I agree with my right hon. Friend the Member for Caithness and Sutherland that, although it is not yet apparent, one cannot see how the enormous expenditure on armaments now contemplated can fail to produce a shortage of skilled labour over the next 12 months if the expenditure is actually carried out; and I think it is desirable that there should be a transfer of this type of skilled labour from the manufacture of what is after all a luxury, the private motor car, to the manufacture, not only of aeroplanes but of all the other forms of mechanical transport which are a vital part of national defence. Therefore, stiff though it may appear, I think my right hon. Friend is perfectly right to have greatly increased the duty on horse power. I think the events and experience of the next 12 months will fully justify his action.

With regard to loan expenditure, I would like to point out that £380,000,000 represents very nearly 8 per cent. of our national income. Actually £400,000,000 represents 8 per cent. of our national income, so you can say that the loan expenditure contemplated represents very nearly 8 per cent. This is a very large sum, much larger, as Mr. Keynes pointed out the other day, than President Roosevelt has even contemplated spending in the United States. The question arises whether the money can, in fact, be raised. I think there is no doubt that it can be raised—and raised without difficulty. A certain part of it, as I am sure my right hon. Friend will realise, should be raised in the form of floating debt; and, in so far as possible, I would ask him to raise the money after the expenditure has taken place, otherwise it may have unfortunate effects on the general economy of the country. But that we can raise the money without serious difficulty, and at reasonably low rates of interest, I have no doubt. I do not think that anybody in the City of London doubts it either.

I would, however, like to make one appeal to the Chancellor. I still feel that it is very desirable that everything possible should be done to keep down the rate of interest; in other words, to keep money cheap. There has been a tendency in recent weeks for the market rate for bills to rise. That is due to the fact that during recent weeks the banks have not been supplied with sufficient cash. They require a good deal to make them feel secure under existing conditions. This is an old theme of mine, and I do not wish to bore the Committee by going into it again at length this evening, but I believe it is absolutely necessary that the joint stock banks should be adequately supplied with cash reserves at the present time—and if my right hon. Friend likes to do it, in conjunction with the Bank of England, he can. And do not, under any circumstances, allow the impression even to be formed that until we reach the concluding stages of the next war, the bank rate will be raised. I believe it to be absolutely essential, if the financial policy outlined in this Budget is to succeed, that money should be kept cheap; and that the Government should be able to borrow on short, medium or even long term at low rates of interest. If that is done, we shall be able to surmount the admittedly enormous tasks that lie ahead with no difficulty whatever, and set an example to the world, and even to the totalitarian States.

Mr. Tinker

Has the hon. Member any idea in his mind as to what rates of interest he would pay?

Mr. Boothby

That must depend on the conditions prevailing at the moment; but I cannot see why His Majesty's Government should be required to pay more at any time than 2½ per cent. Hon. Members on both sides will, no doubt, ask themselves whether this enormous loan expenditure may not give rise to what is sometimes called inflation. I do not think that that will necessarily follow. There is still a considerable surplus of productive power, of labour and resources, in this country unused; and as long as that is the case no dangerous inflation is possible. A certain rise in wholesale prices is still justifiable.

Mr. Silverman

I wish the hon. Member would explain what he means by saying that because we have this reserve no inflation is possible. Does he not mean that no inflation would be possible if, at the same time as you borrowed, you increased your use of that labour. If you borrow and leave that reserve of labour unused, then, indeed, you have inflation, and inflation of the worst kind.

Mr. Boothby

No. Unless the Government go into the labour market and compete strongly with private industry until the reserves are exhausted, I do not see how retail prices or wages can be forced higher. I was endeavouring to point out that there is still room without any suffering on the part of the community as a whole, for a considerable rise in wholesale prices. The wholesale world price level has not risen during recent months. On the contrary the tendency has been for it to go down, with somewhat disastrous effects. If we get a moderate rise in the wholesale price level it will do no harm, and it will reduce the burden of debt. A rise of 1 per cent. per annum would reduce the real burden of debt by no less than £80,000,000. From this point of view it would do no damage to the general economy of the country; and, I am sure, would inflict no suffering whatever on the working class.

There is another point, and that is the balance of trade. Here we are up against a very serious problem indeed; and I do not think that we can get through with this enormous loan expenditure without doing everything possible to rectify our adverse balance of trade, which otherwise looks like extending very considerably in the immediate future. In this connection, I am sure that my right hon. and gallant Friend the Financial Secretary, who we are all delighted to see in his new office, will forgive me if I quote one paragraph from an article of Mr. Keynes in the "Times" the other day bearing on this particular subject. I do not think that the outlook is so alarming in certain respects as Mr. Keynes seems to think with regard to the absorption of all unemployed and skilled labour over a very short period; but on the subject of the balance of trade I think that he is perfectly right. He says: At a time of rapid increase in domestic expenditure there are two physical obstacles to overcome; and in such circumstances only these physical obstacles are fundamental. The first is the shortage of labour; the second is the shortage of foreign resources. Apart, therefore, from the labour problem, the balance of foreign trade must be our chief preoccupation. Our demand for imports will surely increase, and this may facilitate, at the same time that it makes more necessary, Mr. Hudson's excellent efforts to adapt our export methods to the times But, in addition to our demand for import, it is clear that we shall need large resources for political loans, while it is important not to impair our ultimate gold reserves more than is unavoidable. The handling of foreign trade cannot safely be left to individual enterprise unaided. For individuals have no machinery for the linking of imports to exports is now essential for our financial strength. This is an urgent problem of immense difficulty—not less so because the solution is so contrary to our traditions and our preferences. I would point out that under existing conditions we have not the machinery in this country greatly to expand our export trade; and that the ordinary private merchants and bankers cannot afford, without some form of assistance from the State, really to push ahead and run the risks which are now inseparable from the conduct of foreign trade. I suggest to my right hon. Friend that the Bill which was passed recently by this House to extend export credits may in the long run prove inadequate for our requirements. We must not, we cannot, allow the adverse balance of trade to grow; and it may well be that still further assistance to our merchants and traders for the purpose of expanding our export trade in these very difficult times, when the political risks cannot be shouldered by private enterprise, will have to be forthcoming from His Majesty's Government. It is a subject which deserves, and should receive, the most serious consideration. Mere expressions of opinion on the part of Ministers that we will beat the foreigners at their own game, and all that kind of thing, however admirable in themselves, do not necessarily mean that we are going to beat them. We shall have to devise a technique of expanding our export trade which alone can enable us to avoid a serious adverse balance.

Those who are very depressed by this enormous and growing expenditure on rearmament would do well to remember that our recovery between the years 1933 and 1937 was based upon great capital expenditure on housing, upon cheap money, and upon confidence. I see no reason why the recovery of 1939–43 should not be based upon great expenditure on rearmament, on cheap money, and, again, on confidence. That confidence will actually arise out of the expenditure on rearmament, if it is done on a big enough scale, and with sufficient resolution.

The only way to finance this very heavy expenditure in the long run, whether you do it by loan or by revenue, is by increasing the national income; and the only way to increase the national income is for us to do everything in our power to increase production and productivity in this country. For this reason one of the things which I welcome most warmly in the Budget of my right hon. Friend is his refusal to be lured into raising the Income Tax, because that is one of the things that might very easily have damped down enthusiasm in the business community, for psychological reasons apart from anything else, and helped to hold up the increase in productivity which is essential if we are to get through. I would much rather the Surtax payers, especially those in the higher ranges, and the payers of Estate Duty in the higher ranges had to bear the extra burden at the present time, as I think their shoulders are perhaps better able to bear it than any others.

As far as indirect taxation is concerned, I think that hon. Members opposite will not find any great complaint to make about the Chancellor's proposals. If they result in the smoking of a little less tobacco, I do not think that anyone can say that it will have a deleterious effect either on the health or the habits of the population as a whole. My right hon. Friend is to be congratulated wholeheartedly upon producing, in circumstances of almost inconceivable difficulty, an excellent and well balanced Budget.

5.52 p.m.

Mr. Ellis Smith

The Chancellor of the Exchequer this afternoon made the clearest statement when introducing his Budget that I have ever heard in this House. The most striking features of that statement, as far as I am concerned, were the following points. He had to budget for an expenditure of £942,000,000, and £8,163,250,000 is now the National Debt, an appalling figure. I also notice in the Blue Paper that we have to find £230,000,000 to meet the interest and administration of the National Debt. What struck me more than anything else perhaps was the way ex-generals and ex-colonels on those benches reacted to the statement about social services. Another point was that £500,000 less was spent on unemployment assistance in a year when the numbers applying for unemployment assistance considerably increased, and, according to the Blue Paper, calculation is made on the basis of the reduction of another £265,000 during the current year in unemployment assistance.

Mr. H. G. Williams

I think that the hon. Member is under an honest misapprehension. The total in respect of unemployment insurance rose heavily, and it is in respect of unemployment assistance that the total fell.

Mr. Smith

I will check up those figures afterwards. I have adopted at least one principle in life, and that is never to quote a figure or make a statement unless I am sure that it is the fact. On this occasion I have armed myself with the facts, and I am able to produce documentary evidence, if need be, in order that the hon. Member for South Croydon (Mr. H. G. Williams)can check up the facts after these statements have been made. The Chancellor of the Exchequer made a clear statement from the Cabinet point of view as representing the rich people of this country. I have noticed during past years that when annual meetings of big businesses have been held, the chairmen of those meetings have, time after time, made veiled attacks upon the social services in this country and in particular upon the people to whom we belong. Chairmen speaking at these annual meetings represent the views of their own people, and on this occasion I want to speak from the point of view of our own people. The hon. Member for East Aberdeen (Mr. Boothby), for whom I shall have a sneaking regard provided he maintains the policy and principles that he has supported during the past few years, said that this was an admirable Budget. It is an admirable Budget for those who desire to maintain the status quo, but we are not satisfied with the maintenance of the status quo. I would call the attention of the House to the position with which we are confronted. I find the following people are the chief directors of the Midland Bank. Lord Ashfield, with six directorships; Sir Percy Bates, with nine directorships; Lord Davies, with 16 directorships; Mr. B. D. Docker, with 15 directorships, Sir Francis Joseph, with 16 directorships, and Lord McGowan with 15 directorships. One could show that these people hold between them from six to 16 directorships, receiving an average director's fee from the Midland Bank alone of approximately £26 per week, plus 16 per cent. on the shares they hold in the Midland Bank. There is the case of Barclays Bank, where Lord Essendon has 33 directorships, and the Westminster Bank, where Lord Hunsdon holds directorships of five other companies, and Lord Inchcape 27 directorships. One could go on giving an analysis of the financial directorships in this country, showing that on an average these persons receive as directors of banks alone £30 a week, which is paid, work or play, with no piece work and no loss of time, for 52 weeks in the year. That is the basis upon which I want to proceed to analyse the position of this country.

The insecurity of our people throughout a period of development is economically unsound, and is not compatible with the enormous wealth of our country. There is no need for this insecurity, and I shall give facts and figures to show that from the point of view of most hon. Members it would be a good business proposition to eliminate this insecurity as it would be a great stimulus to the home market. We have often heard from the Gallery of this House a cry which many hon. Members have treated with ridicule, that social credit is the only remedy. While that may be a slogan, that shout represents the insecurity of our people. It represents urgent economic needs, and I want to draw the attention of the Committee to three urgent reforms which I suggest should be made as early as possible. They would be a small step to- wards bringing about a redistribution of wealth and cementing our people together to face the desperate situation as we on these benches want to face it.

The first reform I want to suggest is that there should be an immediate increase in old age and widows' pensions. The men and women of the class to which we belong are entitled to at least £1 a week when they reach 60 years of age. The second elementary step is that the time has arrived when there should be introduced a system of State family allowances. I am not speaking critically of those who are responsible for running our industries, but what I am saying is that the responsibility rests upon every hon. Member to carry this legislation. As in the past 150 years we have set an example in the development of constitutional government we should set an example to the world in the development of our social services and so cement our people together that they will be ready to face any potential aggressor. Therefore, I suggest that a system of State family allowances should be introduced. In many cases wages are too low, they are a disgrace to every one of us. The parents of our children are eager to do the best for their children. Working people love children, but they are bound to have regard to the serious economic position and the present state of insecurity. The husband and wife talk things over, with the result that the country is now faced with a serious situation in regard to population. Therefore, in order that our people can do justice to their children the time has arrived when a State family allowance scheme should be introduced in order that innocent children can be taken out of the firing line of industry in which they have been placed too long.

The next elementary reform is that there should be an immediate increase in unemployment benefit allowances and a reduction in the rents of our people. They are all reasonable reforms in themselves and would be a considerable help by increasing the spending power of our people. They would spend the money over the local counter, and would stimulate the home market. In that way we should bring about a fairer distribution of wealth and deal with many social anomalies which should have been dealt with long ago. Now may I turn to the hon. and gallant Members who are absent? Proposals which were made in 1938 meant changes in the Army.

Brigadier-General Sir Henry Croft

Where are the Members of the Labour party?

Mr. Smith

I do not mind my attention being drawn to them, but I will put the average attendance of our people against that of hon. Members opposite at any time, including the hon. and gallant Member himself.

Mr. McKie

Has the hon. Member inquired the average attendance of his party during the last Session?

Mr. Smith

I do not mind party averages being considered, but if we go too far on that matter we should be called to order. In the Army changes made in 1938 the age of Generals and Lieutenant-Generals, was reduced from 67 to 60, Major-Generals from 62 to 57 and Majors from 50 to 47. The effect of these proposals was considerably to accelerate promotion, thereby giving increased pay. Then we find that a Major can retire at 47 years of age and receive nearly £9 a week as pension. The 1938 proposals mean an increase approximately in a Major's pension of £2 10s. a week. He gets £9 a week for 23 years' service, and then he can accept another job, probably as a chief constable, if he likes, and there is no means test at all. On the other hand, it is 10s. a week for the people to whom we belong, who have to toil in the mines, in the workshops and in other ways for 51 years with no unemployment pay, plus being subject to the means test.

I was reading the other day in a newspaper an advertisement which in itself is a condemnation of every one who is prepared to acquiesce in the status quo, in the present financial position of this country. It is an advertisement which is typical of the position. Too long have our party and our people been prepared to acquiesce in this state of affairs. What an indictment against our social conscience that firms can capitalise poverty and insecurity in an advertisement for profit-making purposes! This is what a mother of three children says: I often wish I had more to spend on food but with over £1 going out in rent and rates we cannot afford more than 24s. a week for food for all of us. I shop as carefully as I can because I do want the children to get good nourishing meals What a tragedy lies behind that speech; and this woman is relatively well off compared with thousands who belong to the party to which we belong, and on whose behalf I am speaking in the House. My plea to-day is that this insecurity should be dealt with. It is a reasonable step which should be taken. During the past few years there has been an enormous increase in production in this country and, therefore, an enormous increase in wealth. Even if we are prepared to accept the present social system, surely the time has arrived when our people are entitled to more security.

The next point I want to touch upon is the serious international situation in which we find ourselves. In the next few years we are going to require the maximum amount of good will in this country and the maximum amount of security and unity. We shall require it in the countries who may be our allies. I want to pay a tribute to the initiative taken by President Roosevelt, who has won the admiration of all thinking people in the world. He has stated time and time again that it is no use embarking on huge expenditure on defence unless at the same time you pursue a social policy which will extend and improve the security of your own people. Therefore, I want to draw the attention of the Government to the statement of President Roosevelt. I hope that the Ambassador who is now living in retirement in America will remember that, although he has been disappointed and that his daughter has put upon record the disappointment—let Sir Eric Phipps and Lady Phipps also take some consolation—that the common people are beginning to learn the truth as to how some people have carried on in Berlin during the past few years. If we are in doubt I should like every hon. Member to read a book which has just been published, "My Years in Germany," by Miss Martha Dodd, the daughter of the American Ambassador, who has recently retired from Berlin. In America, in New Zealand, in the U.S.S.R. more and more the people are being welded together. The eyes of our people and of the whole world are looking with admiration at the example set by our Colonies, New Zealand in particular. I am standing here because of the sacrifices made by our people during the past 150 years.

I am a relatively young man. The reason I am here is to be found in the ster- ling qualities and characters of hon. Members among whom I have the privilege of sitting, men who have toiled in the pits and who have won their way to this House by reason of their sterling work. Having done that, and having helped to build a capitalist democracy in this country, we say that it is worth preserving, and that the only way in which we can preserve it is by uniting our people, basing that unity on a foreign policy which they can accept and upon a social security policy. President Roosevelt, and the New Zealand Government and other Governments, are setting us an example which we ought to follow as soon as possible.

The hon. Member for East Aberdeen spoke about this being an admirable Budget. I say that it is all right provided that you want to maintain the status quo. I want to call the attention of hon. Members to a proposal that has been made as to how wealth can be conscripted. During the speech of my right hon. Friend the Leader of the Opposition, I noticed that one or two hon. Members opposite were sceptical as to the possibilities of carrying out such a policy. I would draw their attention to a proposal that has been made by Mr. Douglas Jay, the city editor of the "Daily Herald." He says that if a 2 per cent. tax were placed upon individual fortunes, it would yield £500,000,000 in one year. I do not suggest that that should be done immediately, but why should there not be an instalment as soon as possible? Therefore, I will be reasonable. I will not suggest a 2 per cent. levy on private fortunes, but will be satisfied with a 1 per cent. levy, which would produce £250,000,000 immediately. This would enable us at once to increase the old age and widows' pensions to £1 a week, to give family allowances of 5s. for each child, and to carry out a few other reforms that would make the lives of our people happier than they are at the present time. I want to call the attention of hon. Members to a book that was published for business men only a few months ago. It was entitled "Marketing Survey and Purchasing Power Distribution," and it was prepared for the guidance of business men. Here is an extract from it: Brighton and the Rhondda have nearly the same population, yet Brighton has 139 doctors, while the Rhondda has only 61 doctors. That is a typical example of the maldistribution of wealth in this country, as reflected in that particular way. Then, to discover the total market that could be "tapped" from a given centre, an examination was made in that book in order that the purchasing power could be checked in any centre. It showed that the purchasing power index, in 1938, in Bath was 135.8; in Bournemouth, 159.2; in Bedford, 165; and in Worthing, 157.4. In those four places, generally speaking, the residents are well placed, and no real wealth is produced there. Let us com pare the purcasing power in four places where wealth is produced and where work is done. In Stoke, the purchasing power was 113,2; in Merthyr, 107.6; in Sunder- land, 111.9; and in Oldham, 96.5. What a tragedy that represents—in Oldham, where 99 per cent. of the men and women have to go daily into the mills and the workshops, they have a purchasing power of 96.5 per cent. compared with 159.2 per cent. in Bournemouth. In Bournemouth, where they do not work, where they do not produce real wealth, and where, compared with the industrial areas from which many of us —

Sir H. Croft

The hon. Member does not seem to be aware of the fact that we have some 60,000 workpeople in Bournemouth of one kind and another, and if the purchasing power of Bournemouth is so great, from where do they purchase their goods, except from British labour as a whole, and why, therefore, should the hon. Member desire to destroy that purchasing power?

Mr. Smith

I should be very pleased, if an opportunity presented itself, to deal with this matter in Bournemouth, if the hon. and gallant Member desired. There is nothing I would like better than to put the case I am presenting from any platform against any hon. Member opposite. At the present time, many people are clamouring for conscription. I want it to be understood quite clearly that we on this side are prepared to defend this country, to defend the people to whom we belong, and to support a foreign policy that has as its object the rallying of the whole of the peace-loving peoples of the world; but there must be equal treatment in the country, and therefore, if we are to be called upon to defend our land, the land must become ours. If we are to be called upon to defend our country, as my generation did from 1914 to 1918, instead of the land being left in the hands of the landlords, as it was then, it must belong to the people. I have never forgotten a sentence that was uttered by the late Mr. Bonar Law. He said: Never let it be said that you willingly gave of your sons and withheld your money That has been indeliby impressed upon some of us. If a demand is to be made in this House for conscription, there will be an overwhelming demand outside that, along with conscription, there must be conscription of the wealth and the whole resources of the country in order that we may all pull together.

Mr. Radford

When the right hon. Gentleman the Chancellor of the Exchequer introduced his Budget to-day, did he suggest that the taxation he was imposing was on a voluntary basis? When he called upon the people of the country, in accordance with their means and position, to contribute this money, it was not on a voluntary basis; it was compulsory. To that extent, there is a limited conscription of wealth.

Mr. Smith

I appreciate the hon. Member's interruption. What he said is true, but, at the same time, these people will have millions left in the aggregate. They have never been better off than they are at the present time. As I go about London, I see more Rolls-Royces and Chryslers than ever before. One has only to go to the Cumberland Hotel, and all those places, to see signs of wealth. Compare that with the position of the people we represent. When the hon. Member interrupted, I was about to refer to what took place between 1914 and 1918. During that time, the wages of the miners increased by 78 per cent.—and if these figures can be put in bold type in the Official Report, I should like that to be done. During those years, the cost of living increased by 120 per cent. I remember Bob Smillie—whom I am proud to have known, who was one of the greatest characters our movement has had—saying that the miners would agree to withdraw their demand for an increase in wages if the Government would control food prices. But food prices never were controlled. The Government promised they would do so, but they never did. I will give a typical example of the profiteering that took place. The coal-owners' profits were, in 1913, £13,000,000; in 1914, £14,000,000; in 1915,£25,000,000; in 1916, £32,000,000; in 1917, £26,000,000. And Mr. Bonar Law said: Never let it be said that you willingly gave of your sons and withheld your money

Mr. Wragg

The hon. Member must be wrong, because in those years the coal trade was controlled, and all the excess profits, with the exception of, I think, 5 per cent., went back to the State. I think the hon. Member is quoting the gross profits of the industry, and not the profits after the Excess Profits Tax had been paid.

Mr. Smith

The hon. Gentleman, who is familiar with the coal industry, objects to the figures I have given, but I think they are right. As a result of the feeling that was created in 1919 and 1920, the miners of the country were bubbling over with indignation at the way in which they had been treated, and there was growing unrest among them. The Government of the day appointed the Sankey Commission, and that Commission recommended a seven-hour day. Later, a six-hour day was recommended, and then nationalisation was recommended; but at the present time, the miners are working longer than they were in those days. During the last weekend there was a meeting of the Association of British Chambers of Commerce, and at that meeting a number of statements were made which are typical of the mentality and outlook of many hon. Members opposite. I will quote from the report of that meeting in the "Manchester Guardian": National service as a condition of relief for the unemployed man whose contributory benefit is exhausted was advocated at the Conference of the Association of British Chambers of Commerce in London yesterday. The suggestion was made by the President, Sir Granville Gibson, M.P That statement is most unfair. Made by the people who were responsible for suggesting the means test, it will cause a good deal of indignation in the country. He went on to say that Britons are becoming too pampered: Sometimes I fear that some people are so well looked after by social services at home that they will not take the risks. They are in many cases so pampered and so accustomed to the easy way that they will not take the rough road of the pioneer. I want to say calmly and coolly that that statement is deep-rooted impudence. Here I have invitations to the annual dinners of this organisation. Year after year they invite hon. Members to participate in their annual dinner at two guineas a time, and yet they have the impudence to make statements of that kind. The time has arrived when Members of this House should realise that, as a result of the education which we have received and of developments in the country, we are not prepared to acquiesce in a state of affairs which means the status quo, which means £36 a week for bank directors, some of whom hold from 10 to 26 directorships, and -£9 a week pensions for ex-colonels and generals, while the men and women of the class to which we belong have to toil in industry for 50 years and are entitled to only 10s. a week as an old age pension. The elementary step ought to be taken to increase immediately the old age pension, to introduce a State system of family allowances, and to increase unemployment benefit so that this country can be welded together as closely as possible in order that the indignation which is more and more developing can be removed. At the same time we should adopt the policy which President Roosevelt, the New Zealand Government and the Union of Soviet Socialist Republics have adopted in order that we can weld together all countries that stand for the preservation of peace.

6.33 p.m.

Lieut.-Colonel Moore-Brabazon

The traditions of this House change slowly from year to year. There was a time when, after the Budget statement, the House rose almost immediately. I have had no experience of a fine full-blooded election speech being made on the first day of the Budget in so admirable a way as that to which we have just listened from the hon. Member for Stoke (Mr. E. Smith). I do not expect, and I am sure he does not expect, that any hon. Member will reply in detail to him, because he ranged from bank directors to foreign policy, and altogether he had a fine enjoyable time. I do not know whether the new Financial Secretary intends to deal with the complete range of the hon. Member's speech. If so, I shall be delighted to listen to him because the hon. Member's speech was a comprehensive review of practically everything except the actual Budget.

It is, of course, rather extraordinary that the Chancellor of the Exchequer is not here to listen to the few remarks which are made at this time upon his Budget. I understand perfectly well that not only has he a Cabinet meeting but that he is going to broadcast. That is another new departure in our world. I think we are coming to the time when the Budget speech will be broadcast from that Box. We have broken down the idea that there must not be a microphone there, because only a few weeks ago the Prime Minister spoke into a microphone in order that Noble Lords might hear him along the passage. Once we have broken down the tradition that you are speaking only to this room, and once you speak mechanically to another room from that Box, the whole idea against broadcasting has gone. I am certain that the Chancellor of the Exchequer will soon be speaking to the whole of England when he makes his Budget statement.

I rose to speak on only one matter, namely, the contribution which is asked for by the higher horse-power tax on motor cars. This is a question which wants grave consideration because it butts into one of our only really successful light engineering industries, that is, the manufacture of motor cars. All through the difficult times through which manufacturing industries in this country went, the motor car industry pulled us out of grave trouble. The tax on motor cars was started in a curious and haphazard way by the original horse-power tax, and it had a serious and wonderful effect. It was first directed against the Ford motor car. The tax of -£25 a year on the Ford car was really a tax of 25 per cent. per annum, and it killed that car in this country. On the back of that curious horse-power tax was born the motor industry in this country. We must, however, get into our heads that when we are talking about horse-power we are really from a legislative point of view only talking about bore of engines. Horsepower and bore of engines are not wholly related to each other. These are technical details into which I do not now want to go.

I want to call the attention of the Financial Secretary to the fact that this particular tax may have a bad effect upon the export market. The low pressure American car has a great advantage from the point of view of easy running in foreign countries and in the export market, whereas our homely high, efficiency little cars have not so far been too successful in that market. This tax will have a serious effect on it. The Chancellor might have taxed the whole movement by an increase in the petrol tax if it had not butted into the commercial world. Here is a tax devoted to the private motorcar, and I think that in the circumstances the Chancellor was perfectly entitled to tax this particular part of English life. Here are people who ought to be very pleased with the fact that they can afford a motor car, and the more powerful the car they have the more they ought to be prepared to pay.

Let us remember that the motor car tax in this country was based first on the idea that the proceeds should go to our roads. That has long ago, unfortunately, gone, but it should sometimes be remembered. I do not know whether the Financial Secretary has read the Alness Report which was got out as a result of a Select Committee set up in the House of Lords to go into road accidents. It was published on one of those days when there was one of our usual three-weekly crises, and nobody took any notice of it. It is a very interesting document in which the committee said clearly that they could not agree with the attitude of the Ministry of Transport that deaths upon our roads would not be altered if our road system were improved. In view of that, the Treasury have to take into consideration the fact that their refusal to spend money upon our roads is largely responsible for the enormous death roll of 6,000 in the year. If motorists can feel that some of these deaths are to be avoided by increased spending on road facilities, this money will be paid with pleasure and gratification. I am not pretending for a moment that it is not a good tax. I think, under the circumstances, it is, but I hope, that the manufacturers have been consulted and that they agree that that type of tax is one which will best affect the export markets and a very successful industry. The Chancellor of the Exchequer was here long enough to hear the first two speeches in this Debate, and an experienced Parliamentarian like he is can judge from them what sort of reception he will get during the subsequent Debate. He must now be broadcasting, I feel, in a happy vein because I do not think his Budget will have much trouble from the House of Commons.

6.40 p.m.

Mr. Alan Herbert

I should like, especially as the Chancellor of the Exchequer is one of my principal constituents, and I, therefore, take a kind of paternal interest in him, to add my congratulations on his performance and its reception this afternoon. Clearness is so much part of his nature that I believe he does not like to be told he is "lucid," but perhaps he will not resent a kindly reference to his brevity. He spoke of the first Budget of Gladstone, another Oxford man, and one of my predecessors. I am sorry he did not quote an extract from Gladstone's diary about the Budget speech of 1860, when he said: Spoke from four to nine. Aided by a great stock of egg and wine. Thank God! Home at 11 I do not know whether he thanked God for the egg and wine or for being home at 11. In 1853 Gladstone took nearly five hours to get rid of the miserable sum of £50,000,000. Our Chancellor 80 years later has got rid of more than £900,000,000 in less than 90 minutes. So Mr. Gladstone's rate was £10,000,000 an hour and our rate in this decadent age is £10,000,000 a minute. On his brevity, then, I congratulate the Chancellor of the Exchequer.

In such a Budget at such a time anyone who gets anything at all must be duly grateful and is bound to express his thanks. I should like, on behalf of many Members in all quarters of the Committee who have for many years pressed the case of the living theatre for relief from the Entertainments Duty, to thank the Chancellor for what he has done. I will not say we did not hope for more, but we must not look a gift-horse in the mouth. It is gratifying to realise that private Members messing about in Budget Debates can get at least something in the end. In the last two years my hon. Friend the Member for Huddersfield (Mr. Mabane) and I have twice put down the same Motion. Last year the result was that the Chancellor said he would not automatically re-impose the tax without going into it.

We know that he has done that; that he has taken a real interest in this matter; and we thank him for going so far as he has been able to do to-day.

Mr. Boothby

Will my hon. Friend tell us precisely what he means when he refers to hon. Members messing about in Budget Debates?

Mr. Herbert

It was a modest description of the kind of contribution I make myself to these high affairs. What the Chancellor has done is to give us one-quarter of what we asked for. The total abolition of the tax would mean a loss of revenue of £1,250,000, and he is losing £300,000 in a full year. I will not say it looks like a farthing damages, for it is something. I wish he had been able to say a little more. It would have been a fine thing, as we said when we went to him on a deputation, if at this grave time, when we are compelled to spend these incredible and unprecedented sums on weapons of destruction, he had been able to say, "We are not pressed so far by that barbarous necessity that we cannot afford to take away altogether what is generally regarded as an undesirable tax upon the things of the mind."

But we do thank him for what he has done. If it does not seem churlish I should like now to express regret that he has not, in collecting this extra £24,000,000, made use of another tax which has not so far been mentioned at all; that is a tax upon betting. Our attitude towards this matter is one of the things which justifies the foreigner in the very prevalent conclusion that the English are raving mad. A Frenchman curiously pursuing the average man through an average day would be very much surprised. He would see that that average Briton was taxed upon almost everything he does, makes or consumes. He is taxed at breakfast time, and if he is so vicious as to smoke so early, he is taxed before. He is taxed upon almost every liquid that enters his mouth during the day, whether it is described as a little comfort of the poor or one of the loathsome luxuries of the rich—they are very often the same thing. He is taxed upon going to work and upon coming back. His industry, his earnings, the savings of the old, the pension of the widow, art and culture, the masterpieces, if any, of music and drama—all these are taxed.

But there is one activity, one form of expenditure, which goes absolutely free, and almost one alone. What is that? Is it some special cultural or spiritual activity which is dear to the State? No, it is not. It is an activity on which the State frowns, at which the State sniffs, an activity as to which, when hon. Members confess to it, they generally confess facetiously and rather shamefacedly and not openly as I do, regarding it not as a crime but as a folly which is really desirable in very small ways. This activity, which is really a national imbecility, the setting of our puny human judgments against the concatenation of forces which govern the incalculable movements of temperamental beings such as the horse, the dog and the professional footballer, is the only activity which is not taxed and yet has not been mentioned at all in this Debate. The sums staked upon that activity have been estimated, not by wild persons like myself but by a paper called the "Economist," which no one can describe as a wild or a heady organ, at £400,000,000. It is true, no doubt, to say that some of that money is money spent or staked again; but that observation applies to all money and all taxes. At all events, no one seriously denies that the figure is within the region of £300,000,000 or £400,000,000; and as my right hon. Friend the Member for Epping (Mr. Churchill) might say, I hate to see this mighty river of revenue flowing past to the sea untapped for the service of humanity or for the benefit of the Exchequer.

Why do we not tap that might river of revenue? Is there some practical difficulty in the way? There is not. It is one of the things which is done with perfect ease and order in other countries but cannot be done in this country. In France every bet, on the course or off, is taxed 12 per cent. In all the States of Australia they are still, I think, taxing betting. When I was there in 1926 the tax in New South Wales at least was 10 per cent. on every bet and, I think, 12½per cent. on winnings, on the totalisator. There is no real practical objection to such a tax at all provided the law and the arrangements are sensibly adjusted. Secondly, is there any moral objection? I do not think so, because the same people who do raise that kind of objection, the objection that the State should not taint itself with money from this base indulgence, see no particular harm in the State extracting a great deal of money from indulgence in alcohol; and in any case, considering the elaborate arrangements which the State makes for the benefit of betting and the extraction of a certain amount of revenue from betting in various small ways, that objection is untenable also.

The real objection, I am afraid, as I shall be told, is that my right hon. Friend the Member for Epping tried such a tax and that it failed. That great figure stands like a colossal spectre in the path of this reform. I have no wish to attack him, especially at this moment when all his heresies have been gradually absorbed into the official ritual of Holy Church and though it may be said that he is still languishing in the condemned cell it looks as if he may be released in a short time. The great tragedy of my right hon. Friend's life has been that there has been a certain tendency to concentrate rather upon the rare occasions on which he has been at fault instead of on those massive and numerous occasions when he has been abundantly right. This particular tax was an example of both; for it was an example of his doing the right thing in the wrong way. He introduced his betting tax with less than his usual thoroughness and attention to detail; and he prosecuted that enterprise with less than his usual resolution.

There were a great number of errors in the practical application of the tax. I remember it well because I had just come back from Australia, where I had been to the third Imperial Press Conference; and we all came back full of the good order and the common sense of the betting arrangements in Australia. I believe it was the amount that we wrote about it that caused the tax to be introduced here at all. Let me give an example of the wrong way of doing the thing. In Australia you go to the course and you take a ticket from Titus Oates in the ordinary way and on that ticket is stamped "Government tax 2s." or "10s." or whatever it may be. It is already stamped, so that I know the bookmaker has paid the tax and he knows that I have paid it, and all is well. I took the trouble to send one of those tickets from Sydney to Sir Edward Marsh for conveyance to my right hon. Friend and I am sure that it reached him.

But what was done in this country? Here, in addition to the usual ticket, the bookmaker was supposed to have a betting-tax book, to fill up a counterfoil —a typical English proceeding—and hand a sort of receipt for the tax to his client. In other words, one had to make two or three motions instead of one. It opened the way to evasion; and anybody who had the smallest practical experience on a racecourse would have known that it would be a failure. That was one of the details which caused the tax to fail; but, it was one which could easily be remedied.

But the fundamental reason why that effort failed was that an enormous volume of the betting in this country—I have seen it put at 50 per cent—is unlawful, illegal, betting with street bookmakers; and you cannot tax what is unlawful, because you cannot control it. Therefore, if you tax betting and permit, as you must, a street bookmaker to go on you have a situation in which the lawful bookmakers say, quite naturally, "This is a nice thing. Here I am having to pay a tax and those unlawful fellows are getting away from it" Further, you have a tendency for the lawful bookmaker to pass over into the low legions of the unlawful. That is what happened. Eventually, there was so much evasion that, after the bookmakers had marched indignantly down Whitehall, the tax was withdrawn.

As I have said, you have got to alter the law before you can impose a tax. I, at least, am prepared to do that, and I have already taken steps; because last year I introduced a Bill which followed the recommendations of the Royal Commission and would have been a basis for an effective, easy and equitable tax. I made a long speech on 13th May which I have no doubt every hon. Member here has read with interest and instruction; and I say to my right hon. and gallant Friend whom I congratulate on his appearance on the Treasury Bench in his new capacity—another constituent of mine—that if the job is given to me I will get 20,000,000 a year not out of the productive energies of the people but out of this very foolish practice of betting, which I am very far from condemning in a pious manner, because I do it myself.

There is one more consideration. We hear a great deal at the moment about the new sense of discipline and earnestness of purpose which has been instilled into our people by the foreign policy of foreign Governments and lately of our own Government, and I think it is true. We have been told that unless we have some form of military service our allies will not be persuaded of our earnestness, and that may be so; but I should have thought that if any foreigner were looking for evidence of lack of seriousness he would take as an example our attitude to questions like this. I wish that some of those elegant young gentlemen who are going about in grey flannel trousers muttering vague, nebulous, platitudinous stuff about moral rearmament, but have no single solution for the smallest practical problem, would face some of these difficult questions in which morality and politics are so closely intermingled.

Let us regard the matter from that point of view. What is going to happen if war comes? Is this vast business of betting to go on uncontrolled and untaxed while every other activity is rendering its appropriate due to the revenue? I do not know. I conclude by congratulating the Chancellor of the Exchequer on the Budget, which, I think, on the whole, will have a very fine reception, and I thank him in particular for what he has done for the living theatre: but it still remains true that all the productive earnings and industry of the people are taxed, that music and the drama are taxed not only on their profits but on their losses; while this, to say the least, improvident activity, rising to the enormous height of £400,000,000 a year, goes absolutely free. God forbid that I should have a Government job; but if the Government will make me their unofficial agent, and give me Government time to push a Measure through, I will square the bookmakers and the bishops— one are my friends and the others are my constituents. If I am given a free hand by His Majesty's Government I will undertake to get that Bill through and make it a foundation upon which in a normal year they can get £20,000,000 of revenue; and, as the monkey said to the bishop, "I can't say fairer than that."

7 p.m.

Mr. Tinker

The hon. Member, with his levity and humour, gets the House every time, and that makes it rather difficult to follow him. On the main point with which he dealt I think he will find a fair amount of support. It is known that many Members buy sweep tickets from Ireland, and thousands of pounds go from this country to Ireland every year, but we are too prudish to do it here. I think a national sweepstake would certainly have some hold if it were brought forward. The Chancellor of the Exchequer had a difficult task. The surroundings of the Budget certainly give a very gloomy prospect of what we have to face. Hundreds of millions of pounds have to be found for a purpose which none of us really like, yet it has got to be done, and with a position of that kind, the prospect can only be gloomy.

The right hon. Gentleman proposes to borrow £400,000,000. That is a tremendous sum and, as I listened, I asked myself who would lend it. It will be lent by the rich. Some will be found by the poorer people, but the vast bulk of it will be found by the rich. It is being borrowed to stave off immediate taxation. If rich people provide it and get interest upon it, I claim that the Chancellor had the right to call upon them for something more than he has done. It will cost: the Government 2½ per cent.—that is £10,000,000 a year for £400,000,000. I claim that that interest ought to have come: immediately from rich people. It ought to have been found by the Income Taxpayer. If the money were found by taxation instead of by borrowing, it would have meant a tremendous burden, and you could only have called upon the rich. By staving it off it has been made easier, and the rich people ought to meet that debt charge of £10,000,000. The right hon. Gentleman has done wrong in not dealing with that aspect straight away.

With regard to the taxation of motor cars I never use a car myself; I am too fond of walking. But I claim that those who use motor cars can very well pay a little more for them in times like these, and I do not think there will be much objection to it, because a man who can afford a car is not in immediate want. Where motor cars are used for pleasure and for joy-rides I do not think anyone can object to increased taxation. I welcome the increase in Death Duties. That is a source of revenue which ought to be exploited to the full. The people who leave the money have no further use for it, and it is a windfall to those to whom it comes back, and they could very easily give the State much more than they do at present. Again, in regard to Surtax I think no one will grumble, because there has been increasing wealth over a period. Figures that I have show that there has been an increase since last year of 4,358 people who pay Surtax. Hon. Members opposite, who are regarded as the defender of rich people, cannot very well complain of the way the Chancellor has dealt with that point. The Surtax payer can very well meet the extra charge. I think the right hon. Gentleman could very well have left out the increased Sugar Duty. I do not think there is any need to call upon consumers of sugar at a time like this. If falls on so many poor people that I do not think he has done the proper think in calling for that kind of tax, and I think it will be resented, because the burden that the poor have to bear is growing heavier every time. The hon. Member for Chislehurst (Sir W. Smithers) has sent out a statement. He is one of the good old Tories. There are no half measures about him. He stands for the present Conservative system, and all credit to him. I like a down-right man when I come across one. He is one of those who stand definitely for Conservatism. On many occasions papers have been issued in his name which show how strongly he stands behind the present system. In this statement that he has sent out to-day he shows that the cost of living has gone up since 1931 by 9½per cent. Perhaps, in order to put all the facts before us honestly, he put that down to show what his Government has done since 1931.

Sir Waldron Smithers

The hon. Member has omitted to say by how much wages have also increased in the same period.

Mr. Tinker

I read the whole statement. The hon. Member has done well for the Tory party.

Sir W. Smithers

I must repeat the point. During the same nine years in which the cost of living has gone up, wages have also increased proportionately.

Mr. Tinker

I admit that, but it is not disputed that the cost of living has gone up by 9½per cent. I had hoped that the Chancellor might consider appeals that have been made to him with regard to old age pensioners. When I saw his photo in the "Manchester Guardian" yesterday I examined it to see if there was any hope at all, but he is like a sphinx. I could not see any sign of giving way. The cost of living has gone up by 9½ per cent.

Mr. Marcus Samuel

It has gone up from 147½ to 156. That is not 9½ per cent., but 6 per cent.

Mr. Tinker

It has gone up from 131 to 140½.

Mr. Samuel

We are talking about the cost of living.

Mr. Tinker

It has gone up by 9½ per cent.

Mr. Samuel

By 9½ points—not 9½ per cent.

Mr. Tinker

What is the difference? I hope, when the hon. Member interrupts me again, he will have something more substantial. The old age pensioner has to meet the increased cost of living without any benefit from wages rising or from the Surtax money being greater. No one can say that the burden of taxation is being distributed evenly. It is far heavier on these people than it was in 1931. I have figures showing 250,000 people going to the Poor Law authorities for relief over and above their 10s. a week, showing quite definitely how they are suffering, and yet no regard is paid to it in the financial statement. How can we expect people to respond to the call when this kind of treatment is being meted out to them—wealth on the one hand and extreme poverty on the other, and no attempt to meet it? On Saturday I addressed a meeting on old age pensions. One man told me how he was living. The barest necessities cost him 15s. a week. He asked me how he was going to get something better than that. I told him that the only alternative was to go to the Poor Law authorities. Then he asked me, "Do you advise me to go to the Poor Law authorities?" Here was a man who had reared seven children and was now left with his wife, and only 10s. a week between them, because she had not reached the age of 65. Is a man in that position to be advised to go to the Poor Law for relief?

That is what is happening at the bottom end of the scale. The case which we put to Members of the House of Commons in this connection may not have a direct bearing on the financial statement to which we listened to-day, but it has a bearing on the position of our people, who have a right to expect that some regard shall be paid to them in relation to matters of this kind. When we put forward this case we are generally met by the statement that the financial position of the country would not stand any concession such as we demand, but that argument cannot be used much longer. That was the argument 10 years ago, and even five years ago. Now, when there is a demand for arms, we see how hundreds of millions of pounds can be found, somehow or other, to defray the cost, but nothing can be found for the old age pensioner. In the last Debate on this subject the right hon. Gentleman the Minister of Transport, who was then Financial Secretary to the Treasury, used the stock argument that the money could not be found. He went on to say that the old age pension of 10s. a week was never meant to keep a man or woman, but was meant as an addition to the pensioner's resources. That argument is not sound or valid. The man of whom I spoke just now, told me that he was an ironmoulder and had only had intermittent employment since 1921. How can a man with seven children, who is in and out of work in that way, have any resources in his household when he reaches the age of 65? There are thousands of people who have no resources when they come on to the old age pension, and who are then dependent on Poor Law relief.

That brings me to this point. To put that kind of thing on to Poor Law relief is not fair. The average rate in respect of Poor Law relief all over the country is 4d. in the £, but in Merthyr it is 3s., and in some places in Lancashire it is 2s., and in other places it is Is. in the £. Many of these poorer parts are very heavily rated, because of this extra charge. When we are dealing here with the financial position of the country and trying to put the burden fairly on every citizen, I claim that we ought to have a greater regard to the two ends of the scale. If this country were assailed by an enemy, and if by any chance we should lose, rich as well as poor would go to the wall. When danger of such an eventuality arises, it ought not to be out of accord with the feelings of the rich people to say, "Now is a time of crisis and we are prepared to give all we can to help the country out of its difficulties." Is it too much to ask them to do so? We know now that there is accumulated wealth in this country, and we know that the country is involved in extra cost because of the imminence of danger.

Hon. Members opposite who, I submit, represent the richer people of the country, ought to urge upon the Chancellor of the Exchequer that when he wants extra taxation the burden should be placed on the shoulders of the rich. At the same time if national unity is wanted an effort should be made to lift up the poor people and there are no more deserving poor than the aged poor. It is wrong that at a time like this, when the finances of the country are being examined, no regard should be paid to the old age pensioners. I know that it is too late this time to do anything, but I hope that the agitation which we are creating on this question will achieve something and that when the next financial statement is being prepared, the claim which we are making for £1 a week for old age pensioners will be recognised as not excessive.

Mr. Stephen

I would not like to accept the hon. Member's statement that it is too late to do anything now. I think we have to take account of the fact that there may be Supplementary Estimates. While I am in full sympathy with what he has said, I think that something should be done this year.

Mr. Tinker

I would be glad to think that something could be done, but, having a practical turn of mind and knowing what has happened in the past, I feel it is rather too late to expect anything this year. However, if we can expect the Chancellor of the Exchequer or the House to do something this year, I shall use every effort to that end. If we fail, however, I want hon. Members to realise that a great crime will be committed against these poor people. I hope that hon. Members opposite when they get a chance will attend meetings of these people and get to know the point of view of those who are most concerned. Remember that they are the men and women who have helped to build up the greatness of this country. They are ready, and their sons and daughters are ready, to do all they can to keep this country as great as ever, and I hope that the House of Commons will not forget them.

7.22 p.m.

Sir W. Smithers

It is a pleasure to be called upon to speak after my hon. Friend the Member for Leigh (Mr. Tinker). If I may say so with respect, he always put his case fairly. I honour him for what he said, and I agree with him entirely that the main object of the expenditure included in this Budget is to do a job which we do not like, but which must be done. My hon. Friend twitted me with being an upholder of the present system. I do not want to go into details now, and I will only say that I stand for my political principles just as sincerely as he upholds his, because I believe that with all its imperfections and with all its inequalities, the present system is better for everybody, including the very poorest, than a system under which the principles advocated by the hon. Members opposite would be put into operation. That is my sincere belief.

I desire, however, on this occasion to make some remarks about the Budget. I think the outstanding feature of the Budget is the fact that it shows that with all the demands which are being made upon our resources, there is still an amazing reservoir of financial power and strength in this country. But the situation to-day is very serious and I think it only right that someone from this side of the House should utter a warning to the Chancellor of the Exchequer and the country as a whole, to the effect that that reservoir of financial power and strength is not inexhaustible. We must remember that there is a limit to our resources, and that it is the last straw that breaks the camel's back. The trouble to-day is that we are faced with such great uncertainty. We do not know how many more Budgets we shall have to face which will make further demands upon the taxpayers of the country for the provision of armaments. Therefore, I beg the Government to prepare and to look ahead as far as possible. The Prime Minister the other day referred to the mad rush for armaments, in which the world is heading for bankruptcy. It is some comfort, though but a small modicum of comfort, to think that we can probably hold out longer than most other countries. But at what cost? The mounting expenditure with which we are faced to-day is very serious.

I was glad that the Chancellor of the Exchequer, in referring to the debt bur- den of this country, included the debt of the local government authorities as well as the National Debt. In considering the debt of the country it is necessary to consider the National Debt in conjunction with the local government debt. Both are incurred by the ratepayers and taxpayers together, who are to a great extent the same body of people and those two debts constitute a burden on the whole country. We must secure the most stringent economy in all expenditure, excepting only that required to make vital provision for defence, and we must make very sure of getting value for our money in all public expenditure, both national and local. I have made a great deal of inquiry recently into these questions and I have come to the conclusion that a growing number of people feel that at a time when no expenditure is too great to make our nation's defences secure, other Departments than the Defence Departments have seized the opportunity to dip their hands far too freely into the Exchequer. The truth is that the people of the country simply do not realise the magnitude of the national expenditure, and the Budget discussions give one an opportunity to produce a few figures.

On 31st March, 1938, the net total of deadweight National Debt was £8,026,000,000 and in the last year for which figures are available, that is 1935–35 the gross loan debt of local authorities was £1,451,000,000. In the Chancellor's speech he showed that the net total of deadweight debt had increased. So we have, in round figures, a combined national and local government debt of £9,500,000,000.

In parentheses I would make the remark, which I hope will reach the Ministry of Health, that it seems a great pity that the accounts of local authorities are so far behind. The last figures available are, as I say, those for 1935–36 and I think the presentation of these accounts for local authorities could be expedited considerably.

I have pointed out that the total combined national and local government debt of the country amounts roughly to £9,500,000,000. The total national expenditure of the country is £1,266,000,000 and the total local government expenditure on revenue and capital accounts, is £567,000,000. That is a grand total of £1,833,000,000.

I am fully aware that account must be taken of the accrued interest on National Savings certificates, principal and interest on war debts, certain assets, and Exchequer balances, but my object is to try and give, in round figures, a picture which will show the enormous size of the financial problem with which we are faced. Owing to the necessity of defending our country and owing to the crisis, it is generally agreed that, for the moment anyhow, no reduction can be made in the expenditure on Defence services, but I think it was the Foreign Secretary who, in a speech the other day, quoted some rather remarkable figures. Even in these times, under democracy, under our system of Government, and under our political system, in the last Budget, which we have just left behind us, the social services took 29.6 per cent. of the then current Budget and the Defence services took 26.8 per cent. It is like running two horses in a race and expecting them both to win. I was glad that the Chancellor of the Exchequer today had the courage to say that for the moment—I quote from memory—no major increase in expenditure was possible. There is another large figure to add to my picture, and that is the gross cost of social services for the year ended 31st March, 1937, which was £494,000,000. Even under this system which is despised by some people, the amount of money which we can still, in these difficult times, spend on social services is very remarkable.

I want to make one constructive suggestion and to reinforce a plea that I made in this House a year ago. I want the Government, if they possibly can, to set up a committee of inquiry or a commission to inquire into the whole working of local government. I am sure that there we can economise a great deal. [Interruption.] Before I am interrupted, I want to say that by economy I do not mean parsimony. Economy means the proper ordering of a household. I want to make it quite clear that I am not against social services being increased and extended as far as possible, but my plea to-day is on the broader issue. I want to appeal to the Government to do nothing which will hurt or injure in any way the whole financial structure of the country, for if we do spend more than we can properly afford, the social services will suffer and we shall not be able even to maintain them. I want an inquiry to overhaul the whole system of local government, and I am sorry to say that I think the Ministry of Health is not showing all the courage that it might in facing what must be a difficult and intricate problem. They rather take the view that if the local electors vote for certain councillors and get them to carry out certain policies, it is their fault. That may be true, but it is our duty in this House to tell those local electors that they should support this appeal which I am making for more efficient, more economic and more effective local government. Local government as at present organised is organised for extravagance. One of the difficulties is that committees in local government are both executive and deliberative bodies, and to my mind there is no proper efficiency and no effective financial control of local government expenditure.

Mr. E. J. Williams

Does the hon. Member suggest that the ratepayers of this country are blind to their own interests?

Sir W. Smithers

I do not, but if the hon. Member will look at the percentage of electors who vote at local elections, I think he will find that it is round about 30 or 40 per cent.— perhaps more in other places. I think they are very apathetic and that it is the duty of all of us to tell our local electors, at a time like this, that they ought to do all they can to economise without cutting down necessary services, while we are all agreed that we want all that we can get for Defence services.

I want now to call attention to the experience of our allies in France in their recent financial difficulties, and I would ask hon. Members, if they have not done so already, to read a translation of a report by M. Reynaud and M. Daladier published in the "Economist" of 19th November last. There are some remarks there laying down general principles which were learned and proved by the bitter experience of the last two or three years in France. I will quote quite shortly from that translation, which applies so closely to the conditions in this House to-day: The financial problem is a whole which it is useless to try to split up it the hope of an easier solution. The facts of the problem are simple, but they must be considered in their entirety…One Treasury must defray all public expenses; one money market is called upon to supply the needs of the State and of the other public bodies. It should be possible … to secure the establishment of an order of importance and urgency among the national expenses. A financial policy is, above all, a choice. We have lately had the principle laid down in this House when the right hon. Member for Luton (Mr. Burgin), who has recently been appointed as Minister of Supplies, has been given power to see that certain orders have priority over others. I suggest that that kind of principle should be pushed further into national and also local government expenditure. There are certain things now which may be very welcome to the country but which are not essential for our immediate needs.

Mr. McGovern

For instance?

Sir W. Smithers

I could give many instances, but I will give one. Lately they have laid along a country road which has very few houses, near where I live, for seven or eight miles of kerbing stone at a cost of £400 a mile. It is a very old road, which has been there for hundreds of years, and why at such a time—it was about a year or two ago—they should want to spend £400 a mile on putting a kerbstone along a country road passes my understanding.

Mr. Lipson

I imagine that that is a trunk road, and, if so, that expenditure was incurred by the Ministry of Transport and not by the local authority.

Sir W. Smithers

That is the very reason I am trying to combine the responsibility for both local and national government. There is one point which I think is important. I have referred to the financial difficulties of France, and I want to make this point, which cannot be made too often. France or any other self-supporting country may play ducks and drakes with financial and economic laws and may have to bring in very drastic regulations to put the country right, but in the last resort, speaking broadly, if their credit is smashed, the people of France can still get something to eat. It is not so with this country. We are not self-supporting, and every effort must be made, by all parties and by all classes, for the good of all, to see that nothing is done to injure our credit or to depreciate the purchasing power of our pound. If we do, we, unlike the self-supporting countries, shall be faced with want and starvation in a comparatively short space of time.

Much has been said to the effect that some foreign countries do not yet believe that we are in earnest. We must in the end rely on our own strong right arm. There are two questions before the country to-day of almost equal importance. One is to raise the necessary manpower, and the other is to keep our finances sound and to raise the necessary money. As this is a Budget Debate, I want, in conclusion, to say this about finance. Of course, the man-power is important, but I want to stress the importance—it cannot be stressed too often —of confidence in our credit and stability in our finances. The lifeblood and success of our stand for freedom and liberty is a strong and stable financial position, in which not only ourselves but. the whole world can have confidence.

7.42 p.m.

Mr. Silverman

I make no apologies for the departure from convention which this Debate represents. On the contrary, I think we are having an exceedingly interesting and useful Debate, and I think the Committee is indebted to my hon. Friend the Member for Stoke (Mr. E. Smith), not merely for the speech which he made, but for the way in which he made it. I think it is quite right that these Budget Debates should be used as the occasion for seeing the social background against which these financial balance-sheets and stock takings are to be considered, and I think those who have taken part in the Debate have for the most part followed upon those lines. I was extremely interested in the speech to which we have just listened. The hon. Member began by saying that he sincerely believed in the principles of the political party to which he belongs, and I am sure he does. No one would question the sincerity of the hon. Member's convictions, but when he went on to say that he thought he held those convictions because he thought everybody, including the poorest people, for whom my hon. Friend the Member for Leigh (Mr. Tinker) had just been speaking, were better off under the system which he defends than under the system which we would prefer, I wondered whether he meant that the old people for whom he made his plea were better off without proper old age pensions than they would be with them.

Sir W. Smithers

Has the hon. Member forgotten the crisis of 1931? It is not a question of the amount. I believe sincerely that if the policy advocated by the hon. Members opposite were brought forward, there would not even be 10s. a week for the old people.

Mr. Silverman

I am grateful to the hon. Member for his interruption, but it was unnecessary for him to remind me of 1931, because I shall have a remark or two to make about 1931 in relation to this present Budget, but I still ask him—I gave way to him, because I thought he was going to answer—whether he meant us to infer that these old people were better off without adequate old age pensions than they would be with them. The hon. Member is bound to admit that they have not adequate pensions. That is beyond controversy. These old people at the end of a long, penurious life time, during which they have given of their best to the full extent to which our economic system would allow them to contribute, at the end of perhaps half a century of hard work, in the evening of their days are living still harder lives, made penurious by a pension of 10s. a week, which everybody admits to be inadequate. It is our duty to see that these old people pass their few remaining years under conditions of at least comparative dignity and comfort. That is a debt of honour which society owes to them. It is as much a debt of honour as the maintenance of our own parents is a debt of honour.

Mr. Wragg

Why did you not do it in 1929?

Mr. Silverman

I was not here in 1929. I invite the hon. Member who interrupted me to say whether it is or is not a debt of honour which society owes to these old people that their last remaining years shall not be passed in the bitterness not merely of poverty but of destitution. It cannot be denied that it is destitution that is involved, because it is only destitution which the public assistance authority is entitled to relieve. The mere fact that people with old age pensions are in such large numbers receiving public assistance is an admission that they are destitute. We as a community have no more right to leave these people destitute than any one of us individually would have a right to leave our own parents destitute if we had the means to maintain them. To those who defend the present system as being better than any other system, I would say that if we cannot discharge that ultimate debt of honour we should change the system for some other system that holds out the hope, the promise, of being better able to discharge that debt of honour. Those hon. Members who take that view do pay a poorer compliment to their own system, than I, who am opposed to that system, would pay. I do not think that we are so hard up as all that. Even under our wasteful competitive system I do not believe that we are not able to discharge our debt. Our failure to discharge the debt is failure through lack of will.

I now come to the position in 1931. I am sorry that the hon. Member who drew my attention to 1931 has left the House, but I hope he will do me the honour of reading my reply to his question tomorrow in the OFFICIAL REPORT. In 1931 there was a financial crisis. We were said to be all heading for bankruptcy. This disastrous Labour party had to be turned out and men of good will, other than those belonging to this party, had to come together and form a National Government, in order to deal with the impending national crisis that was driving us into bankruptcy. That was the case made against us, fraudently, dishonestly but successfully, in the country. I say fraudulently and dishonestly. What was the size of the debt that caused the controversy? It was approximately £110,000,000.

Mr. McGovern

That had been accumulated over a number of years.

Mr. Silverman

The £110,000,000 had been accumulating for a number of years. What did the Chancellor of the Exchequer tell us to-day? In the year before last we spent on armaments alone £265,000,000, last year £400,000,000, and in the current year we are budgeting for £630,000,000. I would contrast the present debt and examine the bankrupt balance sheet of to-day that can be made to balance only by unprecedented borrowing, and I would compare it with the paltry £110,000,000 of 1931, and when one does that, the dishonest and fraudulent character of the political controversy is seen clearly.

The hon. Member for Chislehurst (Sir W. Smithers) asked how long the present spending is to go on. He said that it will end in bankruptcy, not only for this country but for every nation in the civilised world. What does bankruptcy mean in this sense? At the end of it we should still have the land, as rich as ever. We should still have the natural resources of the land, all the minerals, all its power, and we should still have and would perhaps be compelled to use the skilled, semi-skilled and so-called unskilled labour of the workers of this and every other land. Later on, with those resources and that land, we should be in a position, perhaps, to build a civilisation worthy of the name. The whole lesson of the rapidly increasing expenditure, the colossal astronomical expenditure of the last few years, is that this financial question, properly understood, may be a very much less a thing, seen economically, than hon. Members like to pretend.

I should like to congratulate the Chancellor of the Exchequer on his Budget statement and on the skill with which he succeeded in disguising from the common people of this country the cost of National Government since 1935. He boils it all down to a measly £24,000,000 to be found, and he puts on an increase in the horse-power duty on motor cars, ¼d. a 1b. on sugar, and then says: "It is not so terrible as you thought" He was honest enough to point out what most people will very soon forget that borrowing to meet your expenditure does not abolish the duty to pay. You have to pay later on, and you have to pay more. The right hon. Gentleman succeeded in so framing the Budget as to disguise for the moment the cost. The rise in the cost of armaments from £265,000,000 one year, £400,000,000 the next year and £630,000,000 this year, is the cost of appeasement. What is that but the cost of the Government's foreign policy? I should he out of order if I attempted to discuss that matter in any detail, but I am entitled to say that you cannot divorce expenditure from foreign policy, and that the greatest possible condemnation and the most obvious condemnation of the Government's foreign policy in the last two or three years are the figures that I have just quoted, rising from £265,000,000 to £630,000,000.

If you begin, as this Government began, by saying: "We must depend on our own strong arm," you must see that your arm is really strong. If you are going to throw over every possible ally, if you are going to throw over the system which depended on bringing into one bloc, and keeping them there, an overwhelming majority of nations which want peace, and you want to depend on your own strong arm, then, obviously, the cost of your defence forces must increase. If at long last the Government sees the error of its ways and turns round, when, as we hope it is not yet too late, they see the cost of their folly, if it be folly, the cost of their wickedness, if it be wickedness, is seen in the colossal figures given this afternoon. That is the cost of National Government and the price which we have to pay, the price which the working people have to pay for the Government's mistakes, to put it no higher than that, in the last three years.

I hope the time will come when we shall have a different kind of Government and a different kind of social and economic outlook responsible for presenting Budgets to this House. I hope that time will come soon. I am confident that there are vast resources behind this nation, so vast that it would be unnecessary, if they were properly used, for people to come here humbly apologising for cravenly rejecting the duty that they ought to perform towards the claims of the old people. During all the years of unemployment much has been said about relief in the Special Areas, relief of the unemployed and the Government's great efforts to do something for the unemployed. One notices that in the year 1938–39 the Special Areas Fund was £7,500,000, but this year we are budgeting for just one-half of that amount—£3,750,000. That sort of figure is to be found on every page of the financial statement, small savings here and there, larger savings somewhere else, but always at the expense of the poorest people. That is unnecessary, but in so far as it is made necessary it is due to a false view of what social economics really mean. If we could only get a Government pledged in a fundamental sense to a reform of the system, we should be able to discharge our duties as a civilised community to the children, the old people and to other people of mature years. I believe that if the time ever came when we really could tackle the problem of poverty as it ought to be tackled, then we might find that in so doing we had solved the problem of war.

8.0 p.m.

Mr. Samuel

I shall not follow the arguments used by the hon. Member for Nelson and Colne (Mr. Silverman) or those of the hon. Member for Stoke-on-Trent (Mr. E. Smith), but I shall take a view which, I hope, will explain itself to the Committee. I am not going into detailed figures, and I am neither surprised nor disgusted at the Budget. Spending as well as lending is necessary in these days. It is a question of the equitable distribution of taxation, which the Chancellor has again achieved. The burden of lending will, no doubt, fall upon those who are able to bear it, or who find themselves having to borrow in order to lend to the Government. In these days we have to raise money by hundreds of millions of pounds just as we had to do in the years from 1914 to 1918, and we have to adopt methods that none of us like. Orthodoxy forbids, but necessity compels. We have always with us professors and economists whose chief object in life seems to be to teach us to be unorthodox on a wholesale scale, but if we had followed their advice about borrowing ourselves into prosperity, where should we be to-day? Has that policy been successful in the way it was adopted in the United States, I believe upon the advice of an English economist? Of course not. By no manner of means. Our opponents have often adopted an old war cry, which we have heard several times this afternoon and shall undoubtedly hear again in the next few days, namely, that the foreign policy of the Government has made this expenditure necessary. [HON. MEMBERS: "Hear, hear !"] I thought I should hear a few hear-hears, although there are only about six Members on the Opposition benches.

There are always to be found those who are keen and eager to supplant us in our position as a world Power. I ask hon. Members on the opposite benches, what greater encouragement could be given to such ambitions than to see the same debilitating forces working in England as nearly brought France to her knees under the Popular Front and which plunged Spain into a blood bath? These things are noted by the dictators as a sign of weakness in this country, but they do not understand our peculiar form of democracy which includes what I should like to call a united affront. All they see is a sort of official ministry for a coordination of offence from the benches opposite. It includes a continual supply of more or less offensive questions, and the washing of more or less dirty linen in public which we know is only our democratic method of opposition and party politics in this country. Hon. Members opposite would do well to ponder upon this question. In these difficult times, instead of putting all the blame for our financial stresses upon the shoulders of the Government, hon. Members would do better to wrap themselves in a red sheet rather than in a white one. I present this vision to them as a matter for their consideration.

I come back to the Budget. Whatever may be said of the foreign policy of the Government there is no doubt that the whole credit for the home policy is entirely due to this Government. We have raised our Income Tax to 5s. 6d. in the £ and have raised the National Defence Contribution to whatever it may be, the Surtax to 7s. 6d., plus 10 per cent. and plus the other plusses announced, and Death Duties have been put up to 10s. in the £; yet we are still able to raise enormous sums by loan. That is only possible because of the wise actions of the present Government during the past eight years. We cannot too clearly or too repeatedly emphasise that only the careful husbanding of the national resources by the National Government has made it possible for the present financial effort to be made at all.

How different would have been the position if hon. Members opposite had come into power four years ago. The hon. Member opposite was talking about wishing another Government to come in. I should think that was the last thing hon. Members opposite would want to happen when they remember what happened between 1929 and 1931. How different would have been the position. Having issued a variety of promissory notes for votes, as the hon. Gentleman was doing just now, they would have been bound to attempt to redeem them by their make- the-rich-poor-quick system and as a result of having raided the hen's nest they would have had no hens and no eggs at all.

Mr. Silverman

Would the hon. Gentleman allow me to interrupt?

Mr. Samuel

No. We have heard to-day many references to the old age pension, but that is only one of the multitudinous promises made by the Socialist party which would need for their redemption an increase in taxation of about £80,000,000. It is only one of a long list of their promises. The argument is used that if we are able to spend, say, £2,000,000,000 upon armaments we ought to be able to find an extra £80,000,000 for old age pensions.

Mr. Silverman

That is not the argument at all. The argument is that even in the days when we were not spending£2,000,000,000 on armaments the hon. Member and his friends were saying that we could not afford £80,000,000 for old age pensions. I should be grateful if he would tell me the answer to this argument: Why was it impossible to find £80,000,000 before this armament expenditure became necessary, when it has been clearly demonstrated since that we can raise colossal sums for a quite different purpose without suffering any financial strain at all?

Mr. Samuel

The hon. Member is always very impatient. He never likes to wait and hear the answer to his argument. I will tell him the answer if he will wait. Even disregarding the fact that the yearly cost of such pensions would be £80,000,000, the extra cost of their programme would be something like £1,000,000,000 or £2,000,000,000. Those figures are absolutely appalling. We cannot go on indefinitely spending at such a rate on armaments, but our armaments programme is not being financed out of income but largely out of borrowed money. Suppose the £2,000,000,000 has to be borrowed at 3 per cent.; for that we should have to pay interest which would amount to £60,000,000 a year, but that figure is £20,000,000 a year less than the cost of the old age pensions scheme of hon. Gentlemen, so that this single item of their election promises would have been equivalent to pledging the nation's credit to an annual 3 per cent. in perpetuity on a capital of £2,666,000,000. Does anyone imagine that, the nation's credit having been pledged to a whole series of new taxes such as that, it would now be possible for the Chancellor to borrow on favourable terms, or perhaps on any terms?

Hon. Gentlemen opposite are very anxious to interrupt, but when one gives a reply they turn their backs and smile and amuse themselves in a very rude manner. I do not object in the slightest to that sort of thing because I only look for it in them; anyhow, the answer, as I say, is obvious. There would be no possibility of raising such sums. The Government have not curtailed the amount spent on the social services— quite the contrary. The social services are always increasing, both automatically and purposefully, and, as far as we can possibly see, within the limits of safety.

We are told over and over again that more should be raised by taxation and most of it put on the backs of those who can best bear it, but if our friends opposite would only look into the facts we should hear less of this sort of argument. They should remember the camel. There is no doubt that for years past every 6d. put upon the Income Tax and the continuance of high rates of Surtax and Death Duty have thrown thousands of people out of employment. The ridiculous idea put forward by irresponsible optimists is that it is possible by taxing the rich and curtailing the use of luxuries to increase the demand for necessities, but that is perhaps the stupidest bit of propaganda that has ever been used. Let me illustrate what I mean. Motoring is a popular method of spending money just now with all classes of the community, but if a man, on account of extra taxation, has to dispense with the services of his chauffeur, this chauffeur is thrown out of employment. His demand for necessities is the same when he is out of employment as when he was in employment, but he no longer has the means to live, and becomes a charge on the community until he finds other employment. This is the sort of argument on which hon. Gentlemen opposite rely. We already have an Income Tax level almost equal to that which we had under war conditions. Borrowing on a large scale is necessary, and, happily, loans can be raised from willing lenders. I saw the position well illustrated in a recent letter to the "Times," in which it was stated: The annual burden of the National Debt is approximately £120 millions per annum lower to-day than in the first year of this decade. The greater part of this 'saving' arises from the cessation of annual payments on the American Debt, suspension of Sinking Fund provisions, and the abnormally cheap rate of Treasury bill borrowings. If any or all of these are temporary (though the first two already wear an air of permanence), the saving effected by War Loan and other conversion operations and cheap short-term borrowing is of the order of £50 millions per annum, most of which is an enduring economy. As regards the American Debt, there are two sides to the ledger. If we could collect, as our Socialist friends did, enough to enable us to pay, we should be quite willing to start paying out again. The writer of the letter from which I have just quoted added: From these considerations it follows that substantially new Government loans can still be issued without bringing the annual interest burden to the level of 10 years ago, and the interest burden is surely the principal cause of concern to the taxpayer when so much of the National Debt is irredeemable, or, what is nearly the same thing, redeemable only at the option of the borrower. In making my remarks to-day, I hope I have shown that the claims of hon. Gentlemen opposite that it is the Government's foreign policy which alone has caused the present expenditure on armaments are mistaken; and I have also tried to illustrate that it is the Government's policy alone that has conserved the nation's finances and enabled us to face up to our present expenditure. I have made somewhat of a study of conditions in the dictator countries, and, from what I can learn, they find it difficult to bear their present expenditure on armaments. The conditions of the people are immensely worse morally, intellectually and materially than those of our people in this country. They are at full stretch, while we in this country are just getting into our stride. I congratulate the Chancellor on producing an equitable Budget, and one which is likely to cause the least possible disturbance and discomfort in circumstances of the greatest difficulty.

8.20 p.m.

Sir John Mellon

Of the Budget in relation to its primary purpose of getting revenue, I have no substantial criticism to offer. I consider it to be a good, sound, honest Budget, and I congratulate the Chancellor of the Exchequer upon it. I think that, in view of the critical times in which we have been living for a considerable period, it is right that the Budget should also have an ulterior, or, perhaps I should say, a secondary object, and that is to endeavour to restrict luxury consumption and expenditure. The present Budget goes a certain way in that direction, but, in my view, not nearly far enough. The Chancellor is proposing to increase the taxation on private cars, and I welcome that, not only from the point of view of revenue, but in so far as it may tend to restrict luxury expenditure f only wish, in passing, to make this co-n-ment, that I think that, in the imposition of this increased taxation on private cars, special consideration should be given to cases where cars rated as private cars are used mainly or partly for business purposes. The Chancellor is also proposing to increase the taxation on tobacco, and that I welcome too, because I feel that the country should use its available foreign exchange, and especially its available exchange in the United States., for the purchase of articles which are more vitally required by us at the present time than tobacco.

I should be prepared to welcome the taxation of any luxury at this time, and I use the word "luxury" in the widest sense. I should welcome the taxation of anything which is not essential to a moderate standard of life, and I feel that such luxury taxation should be applied especially in the case of any industries whose production is in competition with the requirements of national defence. I think the Government should very soon be prepared to take steps to give an absolute and unqualified priority to the requirements of national defence over other forms of production. Meanwhile I think that the special taxation of production which is not essential to our national life would have a very useful effect in diverting skilled labour, material, plant and premises away from non-essential production to the service of our military requirements. One very useful result of a reduction of luxury expenditure would be to increase the savings of the nation and make them available for investment in Government loans, and so would go far to assist the Government in borrowing the very large amounts required to bridge the gap between expenditure and revenue.

I am very glad that the Chancellor has decided not to increase the standard rate of Income Tax, because, although immediately an increase in the rate would have the effect of increasing the yield, none the less, in subsequent years, owing to the discouragement of enterprise, an increase in the rate now might well ultimately reduce the yield. It would further, by discouraging enterprise, affect our export trade, and the balance of our trade is one of the things which the Government have to watch very carefully at the present time. I welcome, for this reason also, the Chancellor's decision not to increase the standard rate. That rate is already very high. The increase to its present level was justified on the ground that a sacrifice had to be demanded, and that sacrifice was cheerfully made by the direct taxpayer. It would be unfair if the present rate were taken as a datum line, and upon that datum line further sacrifices were imposed. I particularly welcome the fact that the Chancellor has refrained from increasing the rate of the National Defence Contribution, because that is a tax exclusively imposed so far as companies are concerned upon ordinary shareholders, and one from which holders of fixed-interest bearing securities escape altogether. In the present very exceptional circumstances, the Chancellor has been entirely justified in being prepared to borrow a very substantial amount. I should be prepared to see him borrow even more liberally. It is perfectly sound finance to be prepared to borrow in times of strain and emergency, provided that provision is made to repay in times ahead, which we trust will be less critical and more prosperous.

8.27 p.m.

Mr. Simpson

An hon. Member opposite has complained that on these Benches we are irresponsible optimists. If there is anything worse than an irresponsible optimist, it is an irresponsible pessimist. Therefore I do not propose to follow the hon. Member in his rather melancholy interpretation of history. It is rather difficult to understand some of his definitions and similes except as decorations on some Conservative party back-cloth. I rise to intervene very briefly, to support the very moving and impressive human plea made by my hon. Friend the Member for Leigh (Mr. Tinker) in regard to old age pensions. We have had to-night some interesting declarations of political and economic beliefs, and we appreciate the sincerity of those declarations. But it was frankly admitted by hon. Members opposite, in defending their own doctrine, that it had its imperfections. I cannot imagine any phase of those imperfections at present more urgent than those associated with the position of the old age pensioners. Although we seek a change in the political system, even under the most speedy processes of electoral and legislative change, that takes time, but the day of these old and deserving people is passing. If there is no improvement in their position immediately, there will be no improvement at all.

With the increase in the cost of living which is admitted, the fact that it is related to an increase in rates of pay is of no comfort to this class. They have no means of improving their position except through an increase in their pensions. It seems an indefensible suggestion that these people should be compelled, in their distress, to have resort to public relief. That means that those parts of the country that have the greatest need will be compelled to bear the greatest financial burden, and that, obviously, means an addition to local rates and a further handicap upon those local industries which are already depressed. It is argued, of course, that we live in difficult financial times, with big problems confronting us, and that is undoubtedly true. Those whose position in life-enables them to lend money can share in the interest that will be paid as a result of the policy of borrowing, but we should remember that the payment of that interest for the future can be guaranteed only by the existence of ordered industry and the continuity of loyalty and work-willingness on the part of the mass of the people, who are the successors of these people for whom we make this plea. Apart from any academic, political or economic considerations, apart from questions of high financial principle, this is an immediate human need, to which we ought to give our attention, inspite of all the other obligations that we have to meet.

In regard to the respective merits of the two systems, about which we have argued to-day, I think our friends opposite would have a two-fold advantage if they would pay attention to this plea. In the first place, it would minimise the argument we are able to make against the old system, and it would reduce the degree of apology that they have to make for it. Therefore, they would benefit, even in regard to the possible continuity and future security of their own system. This is an immediate human plea, which should make some appeal to hon. Members opposite, apart altogether from our plea for a fundamental change in society. It is designed to give these people greater comfort and security in their old age, after a hard working life. Therefore, I hope that the plea made from these benches on behalf of the pensioners, however difficult it may be from a financial point of view to respond to it, may not fall on deaf ears, and that something may yet be done to assist this part of the community, who, in their own way, have contributed to the spirit of unity for which an appeal is now being made.

8.35 p.m.

Lieut.-Colonel Sir William Allen

I am very glad of the opportunity of being able to occupy the time of the Committee for a few minutes in order to refer particularly to one of the subjects which is of great interest to our people in Northern Ireland. A number of hon. Members have spoken about old age pensions, and I would say to them that those who sympathise with old age pensioners are not all to be found on the benches opposite. I have always listened with the greatest interest to the moderate speeches of the hon. Member for Leigh (Mr. Tinker), and I believe that there are a number of Members on this side of the Committee who are absolutely in accord with him in regard to old age pensions. I would like to know how we could find the money with which to increase old age pensions. We may be told that we can find money for armaments. I agree, but armaments are absolutely essential, and the supply of armaments is the policy of all sides of this Committee. We must provide money for armaments. If hon. Members say that, in addition to armaments, we must increase old age pensions, it would only be reasonable to show how the money could be obtained. Would it be by increased taxation? Is it suggested, for instance, that increased taxation should be put upon the working man's pint of beer, or upon any other commodities? Is it suggested that the Tea Duty should be increased for that purpose, and that there should be a further increase of taxation put upon sugar? I hope that the time will come when we shall be able to increase old age pensions at least to £1 per week, and I hope that I may be in this House when that time comes.

An hon. Member opposite spoke of the present state of affairs being the result of the bad foreign policy of the present Government. It is my considered opinion that we are in this financial predicament because of the policy of disarmament that was indulged in several years ago. If we had maintained our position among the nations as an armed nation we would not have had this policy of spending so many millions on the increase of armaments today. An hon. Friend on this side wanted to issue a warning to the Government and to those responsible for expenditure in local government. It is a very simple thing to issue a warning, but I would like to put before my hon. Friend some of the questions that loom very large in the expenditure of local authorities. There is a unanimous cry for the abolition of slums, which should be carried out by local government authorities. There is the cry for the building of more houses by local authorities, for an extension of Poor Law relief in order to help old age pensioners, for the improvement of many hospitals, the conditions of which are a disgrace to the country, and for the provision of sanatoria all over the country. Not long ago I listened to a Debate in this House on the slum schools of Wales, when shocking revelations were made. It is absolutely necessary that these things should be put right, but we cannot help ourselves. Local authorities are also largely responsible for providing employment schemes.

However, on the whole, I have no doubt that the country will be very satisfied with the Budget as propounded by the Chancellor of the Exchequer. He has done a great service in maintaining the Income Tax at the present rate, and there will be a sigh of relief all over the country because the Income Tax has not been increased. I was particularly pleased to notice that there was to be no increase in the Tea Duty, but the one thing that I regret in connection with the whole business is the increase in the cost of a pipe of tobacco to the old people. I do not know what the big tobacco companies will do. They distribute to their shareholders vast sums of money which have been provided to a large extent by the poor fellows who smoke the humble pipe of tobacco. [Interruption.] The ladies smoke their cigarettes, no doubt, also contribute very largely to these profits. When I heard the announcement of the increase of taxation on tobacco, I wondered whether it would be possible for the large tobacco companies to utilise some of their enormous financial resources so as to avoid any increase in the price of tobacco to the old people.

I must confess that my heart gave an extra jump when I heard that there was to be an increase in the motor car tax. Last December my constituents, thinking, no doubt, that perhaps I was becoming decrepit and would not be able to carry on with my work much longer in the British House of Commons, in which I have served for 21 years, thought fit to present me with a motor car. It was very kind of them. At first I thought that I would have to pay the extra tax, but I remembered that this tax does not apply to Northern Ireland.' The Finance Minister of Northern Ireland is in the habit of following the legislation of this country step by step. He has been able to balance his Budget this year, as in previous years.

Mr. Logan

They get £10,000,000 from this country.

Sir W. Allen

When I hear a story like that I wish the hon. Member would take a little more interest in the financial matters of Northern Ireland. Where does that £10,000,000 come from but Northern Ireland? We pay the same taxes as in this country, and the money comes right over here, a flowing river of money. Before condemning us I wish the hon. Member would find out the actual facts of the situation. We have had a Budget statement which has been more or less satisfactory. We are in a condition of affairs which I believe and hope and pray will pass. As far as Northern Ireland is concerned we are heartily with you and the Prime Minister in everything he has done and may do for the peace of this country and the peace of the world,

8.46 p.m.

Mr. Lipson

I am sure that every Member of the Committee would like to congratulate the hon. and gallant Member for Armagh (Sir W. Allen) on the gift which he has received from his constituents, a gift he has so well earned, and also on being so fortunate as to represent a constituency which has been able to escape the net which the Chancellor of the Exchequer has flung so widely in his Budget proposals. I am sure I shall carry every Member of the Committee with me when I say that I hope he will be able to enjoy the use and pleasure of the car and that he will represent his constituency for very many years. It gives me the greater pleasure to say that, because I often find myself in agreement with the hon. and gallant Member even when we both disagree with the Government which we generally support. Last year I accompanied him into the Opposition Lobby and voted against the Tea Duty, but I am glad that the action of the Chancellor of the Exchequer this year has been such that it will not be necessary for me to perform that painful operation a second time.

I was glad my hon. Friend also pointed out that it is not only on the other side of the Committee that there is a very real appreciation of the position of old age pensioners and others who are unfortunate under our social system. I must say that I had hoped that at least one anomaly in the present position of old age pensioners would have been remedied in his Budget by the Chancellor of the Exchequer. I refer to the position of the old age pensioner who receives his pension at 65 and then ceases to work, but whose wife may be 60 or more, but not yet 65. These two have only the 10s. on which to live. I think with a cost of £4,000,000it might have been possible for the Chancellor of the Exchequer to have said that the wife shall receive the old age pension at the same time as her husband. If he had been able to find the money for that purpose it would have met with the approval of hon. Members on all sides of the Committee, because that is a very grievous anomaly which does result in a great deal of hardship and suffering. I do not believe it is beyond the financial competence of this country to alleviate this anomaly even in these difficult times.

In fact, I hold that it might have been possible either to pursue the idea suggested by the hon. Member for Oxford University (Mr. Herbert) and see whether some money could not be forthcoming from the betting fraternity for this purpose, and, if not, whether a new tax on patent medicines would not find sufficient income to meet this reform. I listened with interest to the Chancellor of the Exchequer when he said that the tax on patent medicines at present was based on an archaic and confused law. I imagined that a repeal of this old law was to be followed by a new one which would bring it up to date, and make for the first time this particular tax effective. I believe there is a great source of revenue there, and if we are out to discourage certain industries or luxuries I think we might consider patent medicines in that category.

For reasons other than those advanced by the hon. Member for Armagh I was very disturbed when I heard of the increase in the horse power tax on motor cars, and I came to the conclusion that it was done for political reasons; that in the present emergency it was considered, for one reason or another, that the industry might at least for the time being be slowed down, and that therefore the tax was imposed. I realise that the motor industry will suffer as a result of this horse power tax; it seems to me that it is bound to suffer considerably. The export trade will certainly be much affected and also the home market, because there are a great many people who, under present conditions, can only just afford to run a car out of which they get a great deal of pleasure, and sometimes also for business purposes. It is not a luxury, and it will mean that many of them will find that this increase in the horse power tax will just make it impossible for them to continue to do so. That is bound to have an effect on garage proprietors and others associated with the motor industry. Big motor firms will be able to shift for themselves. Morris, Austins and Rolls-Royce will probably turn to armament work, but it is bound to have a serious effect on the sale of motor cars; and the necessity for it I very much regret.

We have heard during the course of the discussion a great many speeches expressing varying views, but I think that every speaker without exception has been able to congratulate the Chancellor of the Exchequer on the manner in which he presented his Budget. I should like to join; in doing that. I agree that he has done his jab extremely well. And what a job he had to-perform this afternoon? The Budget which he had to introduce, and which he was compelled to introduce owing to the state of the world, is a pathetic monument to human folly.

We in this country are called upon to spend hundreds of millions of pounds on Defence. It has been suggested that this expenditure is due to the policy of the National Government. I challenge that statement. Bad as the position is to-day, and heavy as is the budget that has been introduced, I tremble to think of the Budget that we should be dealing with now if the policy of the Prime Minister last September had not prevented the outbreak of a world war. I think the Government can take the credit for that. In fact, when the blame for this colossal expenditure is placed upon the Government, it must give much more satisfaction to certain governments in other countries than it can do harm to the Government of this country. But the Chancellor must have been aware that even about the Budget he has introduced there is no finality. Even he cannot be sure that before this year is out the country may not be called upon to bear still further burdens because of the international situation. That must be a very unpleasant fact for him to face, as it is for the people of this country. I should like to say that if any statesman could be found anywhere—I hope it might be a British statesman—who could lead the world in the paths of peace which would put an end to this intolerable burden that we are called upon to bear, the world would acclaim him as its greatest statesman.

There is one question that we must ask ourselves in regard to this colossal expenditure on armaments. What are we buying with the money? I suppose it will be argued that we can regard this very heavy expenditure as an insurance, but the question then arises, as an insurance against what? Is it an insurance against war? If it succeeds in that, I think the country will be prepared to pay the price. But if it is not that, is it an insurance against defeat? Here again, I think the country will be prepared to pay a very high price to make sure of that, because we in this country have something of value to defend—our freedom, our free institutions, our tolerance, and the other things which have made this country and Empire great. I think there is no sacrifice that we would not be prepared to make to that end. It is because of the need to do that that we find ourselves in this difficult financial position. When the country is spending money on the very large scale that it is, I think it is imperative that every precaution should be taken to see that the country is getting full value for its money. With regard to the expenditure on armaments, very few voices are raised to suggest that we are spending too much. For the most part, such cries as we hear—I am not at the moment going to say whether they are right or wrong—suggest that, in view of the danger which faces us, we are not spending as much as we ought. Therefore, when money is being spent, with very little opposition, for any particular purpose on such a very big scale, it seems to me that there is a very grave danger of that money being spent without due regard to whether full value is obtained.

I have heard, this evening and on other occasions in the House, criticisms of the expenditure of local authorities. I have had some experience of local government as a member of two different local authorities, one of them a county council and the other a municipal borough council. My experience on both those bodies is such that I would not for a moment support any statement to the effect that there is extravagance in the work of those bodies. What has amazed me since I became a Member of the House is the very little control that the individual Member of Parliament can exercise over national expenditure. I know it will be said—and truly said—that expenditure must depend upon policy, and that policy is controlled by the House; but there is an economic way of carrying out a particular policy and there is a wasteful and extravagant way. All I can say is that, as a Member of the House, I do not know whether the particular policies that have been approved by the House are carried out in an economic or an extravagant way. I know that, as a member of a local authority, every item of expenditure of any importance is always very closely scrutinised and examined. I should like to express the hope that it will be possible for more control to be exercised by Members of the House over expenditure so that we may be quite sure that there is adequate and proper control, and that the country is getting full value for its money.

We have to realise that, whether we like it or not, we are spending more money than we can afford, and that we are not able to meet our expenditure out of revenue, and have to have recourse to borrowing and unbalanced Budgets. But the country is aware of the need for this and of the danger in which it finds itself, and is prepared to face all that that means. At the same time, the country has a right to expect that this expenditure should be closely scrutinised, and that by statesmanship every effort should be made to secure a reduction in this unproductive, wasteful, and in many respects alarming expenditure. Given the conditions of the time, I think the Chancellor of the Exchequer has done extremely well and that the Budget will give very general satisfaction; but I hope that in the immediate satisfaction which many will feel that the burden for the time being is not too serious and not to heavy, we shall not be lulled into a fool's paradise and think that all is well financially and in other ways as long as things continue as they are at present. I conclude by expressing the hope that it will not be long before the Chancellor of the Exchequer may be able to bring forward a Budget nearer to our hopes, and one that will be more worthy of the twentieth century.

9.4 p.m.

Mr. McGovern

I have listened to the Chancellor's statement and to part of the Debate, and frankly, I fail to see why all these congratulations should have been showered upon the Chancellor for the things he has done in the Budget. I rather suspect that a large number of hon. Members opposite have complimented the Chancellor for the things he has not done, the things that they were afraid he might do. There was much holding of heads, quickening of pulses and beating of hearts when they thought there would be some addition to taxation, especially Income Tax. Now that they know the Chancellor has avoided placing taxation on the shoulders that are best able to bear it, there are compliments from all over the House. What has the Chancellor done to-day? He has simply postponed the evil day. He has handed down to posterity the right to tax themselves to the limit in order to pay back to the money-lending fraternity the money which has been lent patriotically at so much per cent, per annum. The people of the country have paid for the preparation for wars and the fighting of wars in that way all through history. During the last War we borrowed£2,000,000,000 at 5 per cent. and the people of this country have since then given their treasure and their lives in order to pay the money-lenders another £2,000,000,000 in interest, and yet we still owe that sum. Then we are told of the spirit of sacrifice that imbues members of the rich fraternity.

I am always sceptical about this desire for national unity in order to prepare ourselves for another Armageddon and to find the money to assist us during the struggle on the battlefield, on the sea and in the air. In this country we are appealing to the people to render some service and to give their energies in preparation for war. It can mean nothing else. It is not preparation for peace; it is preparation for war. Do not let us fool ourselves about that. Germany and Hitler shout out that their preparations are for peace. Before 1914 we were told that the British Navy meant peace, but we knew that in the end it meant war. We are raising money for the purpose of defending the country. What are we defending? We are defending the rights of the bond-holding community, the money-lenders and the landlords who own the country. The workers own nothing but their poverty and slums. When we plead with the Government for an increase in the 10s. a week pension for the old people the familiar bogy is trotted out, "where is the money to come from?" One of the hon. Members from Northern Ireland spoke of the £10,000,000 which is handed back to the Government of Northern Ireland, the puppet Government, the plaything of the Government of this country. That amount would at least provide for the first half a crown towards an increase of old age pensions. The hon. Member told how they were escaping the motor-car duty. If they are escaping something which the British taxpayer has to bear and in addition are having £10,000,000 handed back, there is serious need for inquiry.

The old story of where the money is to come from was heard when better housing was advocated and we were told that the miners would fill their baths with coal because they did not know how to use them. Every Tory argument is put for- ward to prevent justice being done. I want it to be noted that to-day, before we have struck a blow in war, we are raising more money for preparations for war than we spent during the whole of the last War. That money and the interest on it have to be contributed out of the energy and sacrifice of the poor. All wealth comes from human energy. Hitler has said that Germany had no gold reserve or credit, but only the ability of the people to labour. That is the only wealth which any nation possesses when applied to raw material. The people who produce the wealth give their energies and fight and die in agony, and those who survive are given in their old age a meagre 10s. a week on which to live. Let us supplement it in order to make their last few years more tolerable. When we ask that, we have the mean low-spirited cry of the so-called British sportsmen, "Where is the money to come from?" while their own class are languishing in riches and parading their tens of thousands of pounds in the divorce courts and spending their lives in profligacy. Then they say to the poor old people who have lived a decent life that they cannot give them the few extra shillings to enable them to live in some form of comfort.

We are told that the £100,000,000 paid over a long period of years for the unemployment created a financial crisis in 1931. This money was spent to maintain the standard of food, clothing and shelter of a very low order. But the £2,000,000,000, spent before we had struck a blow, has not produced any panic because selfish materialists' possessions are in danger of being assaulted by another crowd of gangsters in another part of the world. The sons of the old men who are denied a comfortable existence are now being asked to fight and to contribute to national unity. On the one hand, there is the Marquess of Bute, who sells £20,000,000 worth of land in Wales, and, on the other hand, the means test victim and the old age pensioners have to join up in common fellowship to defend the possessions of the Marquess of Bute, who refuses to allow houses to be built on the Isle of Bute and orders have to be obtained in the court to compel him. I believe that we are now in the next war. It is not a question of when the war will come. We are in it. There are cunning manoeuvres in the Balkans and on the Continent and they are getting ready for the final assault.

The sons of the men who fought in the last War are now being called upon to fight. I come across many cases of men who are denied pensions, whose disease and failing health are attributable to the last War, yet they are denied pensions. The medical men and the pensions Ministry are paid, not to see that pensions are granted, but to see that no pension is granted in spite of the medical evidence that is brought forward. I wish I could see a change in attitude towards the men who carried our burdens in the last War. I had a case last week of a man whom I knew during the last War. I did everything I could to prevent him joining up. He went to Lord Curzon's meeting in Glasgow when the father-in-law of Sir Oswald Mosley made a great appeal for the Empire and asked for men to go out and light the Germans—those whom his son-in-law is now using all his powers of oratory to protect. That man was carried away by what he heard and joined up. He was a fine type of manhood from the Highlands. When he came back from the War, one could see in him the gradual development of the effects of shell shock. To-day he lies a hopeless wreck, but because he cannot prove that the loss of power of his legs is the result of shell-shock, because it is said that it may have developed in the normal course, there is no pension for him. No evidence will be accepted on behalf of that man.

I knew another man in the same area, a gardener in the employment of the Glasgow Corporation and also a Highlander. He fought in the last War and was wounded and lay for three days in the open. He was wounded three times and as he was anxious to get back his job he did not press for a pension. Finally he got a pension of 8s. a week. That man, because of his inability to carry out his employment, finally landed in Lochgilphead asylum. His case was examined and analysed by every medical and other test and the doctor said that he was a victim of the War but he has been refused any increase in pension and his wife and child are on the Poor Law. They were driven from their home, which was a fine type of home, because they could not keep it going. To-day their son? are being asked to fight in the defence of freedom which means in the defence of the means test and of the ten bob old age pension, and we are expected to get enthusiastic about it.

If the country is to be defended—and I do not say that I am necessarily going to agree with defence even of the country —but if it has to be defended, you could at least say to the men who defended it in the past, "We will see that you get proper pensions and proper treatment. We will see that the fathers and mothers of the men who have created the wealth of the country will get decent treatment." I could understand the present position if there was a shortage of wealth. If we had not the wealth, of course we could not give it, but when a nation can give £10,750 a week for the Monarchy and only 10s. a week to the old age pensioner, it seems that there is something radically wrong in the system. A rearrangement is wanted. If there is a rearrangement of society and if everybody is given a decent stake in the country you could then appeal to us on the basis that we are all in this struggle and that there is something worth defending. We have heard from an hon. Member about certain expenditure which could be abolished and a demand has been made for an inquiry into the expenses of local authorities.

What expense is it suggested should be abolished? There are to-day in Glasgow people living in overcrowded rooms; there are tubercular children living among and infecting healthy children. There are people living under conditions not fit for the brute beasts of the field. They were promised homes by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) at the end of the last War. We were told that that War would give the nation freedom and provide homes for heroes, but these people have been living in those apartments for years. Families have grown up under these conditions. Is it then suggested that expenditure on housing should be abolished? If we had any conscience, we would be trying to quicken the pulse of the nation in this respect, and trying to increase grants in order to solve our tremendous housing problem. In spite of the dictatorship and the brutality in Germany, I have seen around Berlin housing schemes that would do credit to any country. I saw near the Templehof Aerodrome in Berlin, flats built for the German workers, finer than any I have ever seen elsewhere. If we are to set an example to the dictator countries we must eliminate selfishness and meanness and raise the standard of life for our people and give them opportunities for decency and comfort.

Is it suggested that hospital grants should be cut down when there are tens of thousands of people in every working-class area like Lanarkshire, Glasgow, Dumbartonshire, Stirlingshire and Fife-shire, as well as in Wales and other parts of the country, who have been on the waiting lists for months for hospital treatment? Many of them die while on the waiting lists and they cannot be treated in a proper and civilised way. Is it suggested that education grants should be reduced when there are schools with 40 and 50 children in a class? There are even 50 and 60 in a class in some areas in Glasgow where schools are not being built, because the capacity of the people to provide them has been taxed up to the limit. Many old age pensioners are compelled to go to the Poor Law and the money required for them is being found by the local people in areas which are being taxed up to the hilt.

I say that no person in this country should draw more than a certain sum, and all in excess of that sum should be confiscated by the State. These people did not create that wealth; it was created by the workers. These people are enjoying stolen wages, stolen wealth, produced by the energy of the working class. They are living on the proceeds of the workers' labour and a person in that position has no right to own five or six motor cars and have 30 or 40 servants while people of the country are being taxed up to the limit and kept in poverty. The Chancellor has made his speech and has gone off to make other speeches. He is glorying in the sunshine of a great achievement in this House, but behind the scenes we know how much wreckage and poverty exists. I am prepared to advocate that people should fight, but I want to know whether it is necessary to fight and what they are to fight for and whether it is worth fighting for. If there is any struggle, wealth should be put into the common pool.

I am prepared to consider the matter on that basis, but not if we are to be asked to fight the old fight, as in 1914 to 1918, and if, when we come out of it, we are to find that we cannot get houses and cannot get jobs. I am not prepared to consider any such appeal if we are to have means tests and every kind of petty mean persecution, with people going round the doors to find out whether a boy is selling papers and earning an extra half-crown, and looking under beds to see whether a family has been selling bundles of sticks made out of broken boxes in order to get a few coppers; if we are to have inspections to find out whether a woman is making a little extra money by hair-cutting; if we are to have every kind of petty presecution that can only spring from inhuman minds on that bench and behind that bench—for I am not "kidded" into the belief that it is those on the Front Bench who declare policy. There is a power behind the scenes, the power of the financiers, who not only decide the taxation but decide the policy of the Government of the day.

I see this nation going into another bloody struggle. I see money being raised in preparation for it. We are having fire brigades, gas masks, underground tunnels and shelters, ambulances, air wardens, bombing squadrons, aeroplane squadrons; in the Navy aeroplane carriers, submarines, torpedo boats, destroyers—every form of deadly weapon. It is not that human nature is at fault. It is not that the Germans are worse han the British or the British worse than the Germans. It is simply a question of continual warfare owing to the economic struggle of the few who use die many as tools in order to carry out their bloody struggle on the battlefield, and in order to safeguard the bondholding possessions of the ruling class. I realise that there are limits to what capitalism can give, because capitalism is going down and ruining itself owing to the developments of the very system itself. Its trade is being wiped out because the countries which were once your customers are now your opponents. They are producing themselves, and they are all looking for the markets which cannot be found because they are wiped out by the developments which have taken place. That throws the workers at each others' throats. It compels the Government to raise money for these deadly weapons in order to disembowel and blow one another asunder.

After 2,000 years of Christianity we hear a representative of a Government priding himself on the fact that we are raising £2,000,000,000or £3,000,000,000 in order to throw millions of human beings at one anothers' thoats and murder one another on the battlefield. We are preparing for that deadly struggle. There are no limits to the power of the machine, to the power of human energy to produce if it were freed from the shackles and the restraints of capitalist production, but to-day there is a limit everywhere, and therefore you go on encouraging the people to serve. When the people of this country, the people of Germany the people of France, the people of all the countries in the world, once realise that they are periodically used as dupes to defend the possessions of the selfish few, war will come to an end, your bluff, your class antagonism will come to an end, and on that day a new system will be ushered in. It is up to every intelligent man— every Socialist—to point out to the workers that this system is going down in the struggle. It is not their duty to defend it. It is their duty to assist in its complete overthrow, and to appeal to the German workers in the same way to overthrow their tyrants and their rulers. Only then can there be peace in the world. Only then can we live in harmony and raise money, not to destroy one another but to build up and create life, to give the people an opportunity to look forward to long life, happiness, comfort and security. Your capitalist system cannot give that because of the greedy, selfish, soulless class interest which you are out to protect in every land.

9.30 p.m.

Mr. Loftus

I have listened to almost every word of every speech made during the Debate, and I am tempted to reply to various criticisms of the Government and of the social and economic systems. I hope that the moving and eloquent speech to which we have just listened is an indication that certain rumours that have appeared about the hon. Member's party are untrue and that it will remain for many years to sound a very essential and admirable note in this Assembly. We have heard many old phrases used. I heard the hon. Member for Nelson and Colne (Mr. Silverman) use language which recalled the kind of stuff that I used to read in the newspapers many years ago by the kind of journalists who disregarded accuracy in search of a picturesque phrase. He called the Budget a bankrupt balance sheet. Journalists in the old days used to talk of the Budget as the balance sheet of the nation. Of course it is nothing of the kind. It is a mere cash account of expenditure and receipts, lumping in capital and revenue quite indiscriminately. I sometimes wish that our statistical methods were advanced enough to give us a real annual balance sheet of the nation with the total assets, the increase of assets, the increases in housing, in factories and in potential productive power achieved during the year. With such an annual balance sheet we could achieve such statistical accuracy as to help very much in getting a view of the economic life of the country and help greatly in framing our Budgets. Such a survey might well include what my hon. Friend the Member for Chislehurst (Sir W. Smithers) was so concerned about, the total rise in the amount of debt. We might then get an exact picture of the yearly increase of debt—not only national and municipal debt, but fixed interest debt of every kind.

I congratulate the Chancellor of the Exchequer both on the matter of his Budget and on the very clear and admirable manner in which he performed his task. I take it that it will be a popular Budget, or rather let me say it will be as little unpopular as any Budget could be which had to raise that amount of money. It is a Budget on orthodox lines and, within orthodox limits, it does as well as such a Budget could possibly be expected to do. If I have any criticism to make, I fail to see why we sacrifice a revenue of £770,000 derived from the tax on patent medicines. I heard my right hon. Friend's explanation of the anomalies of the tax, but I feel that it could have been retained and the anomalies removed. If a definition of patent medicine is wanted, I should suggest taxing any medicine advertised and sold which does not clearly have a label giving its exact composition, certified by proper hands.

Another point that causes me a certain concern is an omission of expenditure. I think, speaking from memory, the sum authorised for expenditure on reserves of essential foods was £5,000,000. I thoroughly agree with the junior Member for Oxford University (Sir A. Salter), who had experience in food control during the last war, and who for two or three years past has been urging the necessity of storing very considerable stocks of food and petrol. Instead of an allocation of £5,000,000 I should have preferred that perhaps 10 times as much should have been allocated, because the one thing we have to guard against at all costs is the possibility of continued interruption or diminution of our food supplies.

This mass of taxation, amounting to £1,000,000,000 a year is a crushing burden. It reminds me of the words of Matthew Arnold about the weary Titan bearing a burden almost impossible to bear, but staggering on. I think this burden will become almost impossible to bear unless we take certain measures. The Leader of the Opposition Liberal party asked, "How are these great burdens to be borne?" We can help to bear them by the fact that, luckily, we have abandoned the Gold Standard, that, luckily, we have destroyed the idea, I hope for ever, of money having per se a commodity value, and I hope we shall never return to that position. That will, and does, help us to bear this immense financial burden.

But there is another thing. My hon. Friend the Member for East Aberdeen (Mr. Boothby) said truly that we can bear the burden of taxation only by increasing national production. I myself have said that many times in this House. I have spoken on almost every Budget since I have been here and every time I have pointed it out. If we maintain our national production at the present level the burden will become intolerable, and, therefore, the whole essence of our policy must be to utilise to the fullest our resources in man-power, in land, in machinery and in wealth. I do not know whether hon. Members realise the enormous financial loss, looking at the question without sentiment and as a purely business one, caused by unemployment. All economists to-day are agreed that a man in employment in such a country as Germany, or Great Britain or France, produces on a average £250 worth of goods or wealth of some kind or another in a year. Some produce far less—some peasants in France, for example—and some far more—the very highly skilled men working with the latest machinery, far more—but it is an average of £250 a year. If we put 1,000,000 unemployed men to work we increase national production, that is, increase the creation of some kind of national wealth, by £250,000,000 a year.

I do not think hon. Members quite realise exactly what Germany has done. Germany, of course, has very strict controls of all kinds which we do not want to copy, but we often wonder how it is that in one year Germany can spend over £1,000,000,000 on rearmament—probably £1,200,000,000—and, in addition, spend vast sums upon new motor roads and drive great streets through Munich, Berlin and other cities. How is it done? When the present German Government came into power there were nearly 6,000,000 unemployed. They are all absorbed.

Mr. E. Smith

Under what conditions?

Mr. Loftus

If we take the annual production of one employed man as £250 a year, which is the sum recognised by all economists and we employ 6,000,000 men, the national production of wealth increases by £1,500,000,000 a year. That is how Germany has rearmed and indulged in this vast capital expenditure.

Mr. McGovern

She limits profits to 6 per cent.

Mr. Loftus

She limited profits to 6 per cent. provided the balance is invested in Government securities, but I believe that system has been altered, and that at the moment there is no limitation, although I speak subject to correction. But I suggest that, apart from increasing national production, there are other methods by which we can ease this burden of taxation. On Thursday I asked my right hon. Friend the Chancellor of the Exchequer a question bearing upon this point. I asked about the export of British capital to purchase foreign securities, and he gave me an answer which has caused some comment. He said: I am sure that the good sense of investors will indicate to them that the export of capital at the present time when the requirements for National Defence are so great would be deleterious to the national interests."—[OFFICIAL REPORT, 20th April, 1939; col. 518, Vol. 346.] I recognise that capital investments abroad can be a useful asset in war time, as they were in the last War, when the Government realised private investments abroad to help to pay for supplies, but I suggest that when we are raising a loan expendi- ture of £380,000,000 in one year, it will absorb nearly all our savings, and that we should not take the risk, with the pressure, of these huge loans coming out, of allowing an unlimited export of our capital to purchase dollar securities and other foreign securities, because we must retain our savings at home to finance our rearmament programme. I think it will be a narrow thing and that we shall require all our savings to do it this year.

I suggest another way by which we could ease this pressure—and in the coming year we shall endure both financial and economic pressure, and our imports may present a problem affecting the balance of trade, as pointed out by the hon. Member for East Aberdeen. We have vast foreign investments, and it would greatly help if we could encourage the payment of the interest due in the form of goods demanding no payment for them. A great mass of our foreign investments are to-day in default. I suggest that a slight rise in the price-level, as advocated by my hon. Friend the Member for East Aberdeen, would enable many defaulting foreign securities to become solvent, and enable those foreign debtors who now cannot pay, to pour goods of various kinds into this country in payment of their debts, which would demand no exports from us to pay for them. The Leader of the Opposition, who, I regret, is not in his place, said "Borrowing means inflation—must mean inflation" I suggest that it is not always so, that it is a great mistake to regard borrowing as at all times and under all conditions undesirable and as of necessity meaning inflation.

We have to steer between Scylla and Charybdis, between the dangers of inflation and the miseries of deflation, and they are very real miseries, as hon. Members know because of what happened from 1929 to 1932. I think there is one principle which may guide us on this question of the dangers of inflation, and I suggest that it is this: At a time of falling prices and rising unemployment, taxation should not be increased but should be unbalanced and borrowing resorted to. On the other hand, at a time when unemployment is decreasing and prices are rising and threatening to rise, that is the time to tax, and to tax heavily. That is exactly opposite to the orthodox, old-fashioned policy, according to which, at a time of slump and depression, you intensified taxation and so intensified the slump and the depression and the unemployment, and at a time of boom you decreased taxation, and the inevitable slump followed. I suggest that there can be no inflation— this is in reply to the right hon. Gentleman the Leader of the Opposition—no matter how much money you create, while prices continue to fall and unemployment to rise.

Last year, in the Budget Debate, I ventured to criticise the increase of the Income Tax by 6d. The right hon. Gentleman the Leader of the Liberal Opposition suggested that we should have raised the Income Tax this year, but I disagree with him, and I think it was a mistake to have increased it last year. I said in this House on 27th April last year: I view this Budget with a certain amount of hesitation. We have had in the past 12 months a period of falling prices and increasing unemployment, and, in such a period, we want to do nothing to intensify such movements. Rather should we do everything to counteract them, and I fear that the effect of this Budget may be deflationary and that it may tend to intensify those movements to which I have referred It did—that extra 6d. on the Income Tax. I added: Judging by commodity prices to-day, I feel that the general effect of this Budget may be deflation, and, frankly, in view of the fail in prices and the rise in unemployment during the past 12 months, I am of opinion that greater recourse might have been had to borrowing. I would have no hesitation in borrowing if it did not force up the price level. I am not afraid of the word 'inflation.' Inflation is only dangerous when it forces the price level above that which is desired. Then I said: My right hon. Friend the Chancellor doubtless felt, and rightly felt, that the colossal future expenditure on rearmaments, coming in the next 18 months, must circulate a greatly increased amount of money and that then, when the full programme comes into operation, there may be a tendency for prices to get out of control and to rise too sharply. Probably in view of that tendency he thinks it better to tax heavily to-day. That is a matter of opinion, of course, but if I may humbly express my opinion, I repeat that I think it would have been better to have waited until inflationary tendencies were clearly evident before imposing additional taxation"—[OFFICIAL REPORT, 27th April, 1938; cols. 218 and 221, Vol. 335.] There is always a great human temptation to say, "I told you so," but reading that quotation from my remarks on that occasion, I feel that the criticism that I then made, that it might intensify unemployment, has been justified on the whole. How does this apply to this year's Budget? Are the inflationary tendencies so marked as to warrant an increase of general as apart from special taxation? I would suggest again that the symptoms of general inflation are not so marked to-day as to encourage a general increase in taxation. The danger of a general increase in all kinds of taxation such as we have is this, that it may intensify the boom in rearmament work and cause a reduction of purchasing power for other commodities, and while you have a boom in your rearmament work, you may have a tendency towards a slump in your other work, in the production of commodities for general consumption. I think the only inflationary symptom that we ought to guard against, using our Budget as an instrument for that purpose, is this, that there will be, there is bound to be, an inflationary tendency in all industries catering for rearmament. You are bound to have an inflationary tendency in the commodities that the armament industries want; you are bound to have a tendency to inflation in the prices of such things as tin, copper, and so on, and that is the danger that we must do our utmost to guard against. But it is unnecessary and undesirable to raise the general level of taxation to guard against the particular danger of inflation of prices in the commodities with which rearmament deals.

I agree with the remarks of the right hon. Gentleman the Leader of the Liberal Opposition party as regards motor cars, and I suggest that we ought to tax those industries that compete with the rearmament industries on materials such as steel, tin, iron, copper, and so on. We ought to tax those industries so as to prevent them competing with rearmament work and forcing up the price of those commodities that I have mentioned. I suggest that it would be quite right to discourage the production of motor cars, especially expensive motor cars, at a time like this, when we want to concentrate all our supplies of metals and skilled workers as much as possible on rearmament. Therefore, I advocate the taxation of motor cars, and I suggest that it might be well worth considering putting a sales tax on new cars rather than taxing the horse-power as has been done in this Budget. We must, as my hon. Friend the Member for East Aberdeen specifically emphasised, watch the import situation and the question of the balance of trade, and here again I think that a Budget working on slightly unorthodox lines could be used as an instrument to help that situation by taxing imported luxuries and therefore decreasing luxury imports. Those are the two methods of taxation which I should like to see employed in the present Budget and which I believe would help to prevent any inflationary tendency and to keep an even balance between our rearmament and our general industries.

One other point was made by my hon. Friend the Member for East Aberdeen in his very interesting speech. He pointed out how necessary it was to keep the volume of money correct. I feel that it is very essential that the Treasury, controlling as it does the Bank of England, should see that the right volume of money is supplied or allowed to the joint stock banks. A slight rise in world prices would probably do more, not only for prosperity for the mass of human beings, but for peace itself and the preservation of peace, than most other actions that could be taken. I agree with the hon. Member for Cheltenham (Mr. Lipson) that this vast expenditure on armaments, on the instruments of death, is a reflection not only upon European civilisation but upon mankind. I would end by saying that this time next year we shall be faced either with another Budget worse than this, nominally a peace Budget, or we shall be faced with a war Budget, or with a real peace Budget, and consequently greatly decreased expenditure. I am hoping that it may be a real peace Budget. I would make an earnest appeal that this nation should again take a lead in a great effort to secure peace. I know the difficulties that face us. The proposals of President Roosevelt should not merely have our support, as they have, but we should even make an effort to go far beyond his proposals. We should be prepared to consider making economic concessions to the greatest possible extent. The money that is represented by the Ottawa duties or the preferences to the Crown Colonies represent a very small sum, very trifling compared with the cost of war. I hope and pray that our Government may make a wise and definite offer to their willingness to consider every possible economic concessions that will bring about satisfaction, peace, a better feeling and a higher standard of life to all the nations of the world.

9.57 p.m.

Mr. Tomlinson

I have listened with interest not only to the Budget speech of the Chancellor of the Exchequer but to the many interesting speeches that have followed. 1 understand that it is unusual for the Debate to range over a wide field on Budget Day, but I am glad that we are getting away from that tradition of the House, because of the fact that several hon. Members sat for the greater part of 21 hours on the last occasion of the Budget discussions and were unable to make a contribution. The desire to express an opinion upon what has been described as the nation's balance sheet, ought to be fulfilled on the first day when the opportunity presents itself. The hon. Member opposite said that this is an orthodox Budget, but the way in which he described it left me guessing as to its orthodoxy. If this is orthodox finance, then 1 suggest that it is because of its orthodoxy that it met with so much approval from hon. Members opposite.

I was intrigued by the way that the Chancellor of the Exchequer successfully balanced his Budget, but running through my mind all the time was the thought of thousands of people who week after week have to attempt to balance the family budgets. The task of the Chancellor of the Exchequer, with all the resources available, was child's play compared to the balancing of the budget which was brought to our notice by the hon. Member for Leigh (Mr. Tinker) of a man who with 10s. a week was called upon to face expenditure of 25s. or 26s. That man has a much more difficult task than the Chancellor of the Exchequer has had to-day, and he does not receive nearly so many plaudits or encouragement in the balancing of his budget.

It has been pointed out that we are incurring these vast debts and raising such huge sums of money in order to defend our country, and at the same time we are making appeals to people to come forward and render national service. I am one of those people, I may be in a minority, who believe that you ought not to contract new debts until you have paid your old ones, that before you enter upon new obligations you should liquidate those that are outstanding. How does that apply to the State? There are many men to whom the State owes obligations. I have had a letter from one of these men during the past month, and I have sent him the reply of the Minister of Pensions to-day. That man gave four years of his life in the service of his country, and was shot through the forearm. He was supposed to have had his debt for the injury he suffered liquidated at the end of a given period; but he has developed, as a consequence of that war wound, a disability which is preventing him from obtaining employment with the labour market in its present state. Men who are sound in wind and limb are finding it difficult to obtain employment in some directions, and this man, who is a painter, finds that he is not wanted. The reply that I have received from the Minister was in very good English, in such good English that the man is almost expected to apologise to the Minister for having troubled him to inquire into his case. The consequence is that the man receives nothing. The debt of the State has been liquidated.

Anyone connected with that man who is appealed to at the present time to volunteer in the interests of this country will not be an enthusiastic volunteer. It seems to me that they will be about as enthusiastic as volunteers for National Service as certain hon. Members may feel enthusiastic about the Budget. Their attitude may be somewhat like that of the minister who looked round his congregation at a prayer meeting and said: "We are doing badly, but thank God the Baptists are doing worse." They may feel inclined to say that, bad as the Budget statement is so far as we are concerned, the position must be much worse in Germany and other places. When it is suggested that the nation should be brought to a pitch when it will be worth while making some sacrifice for it, it is suggested that there is no money in the kitty. Old age pensions must remain as they are because there is no money, but we can always spend money on armaments. There is always money for armaments when it is wanted, but never money when it is required for the uplift of the worker. The suggestion is that it must be found. The hon. and gallant Member for Armagh (Sir W. Allen) asked where the money was to come from; the Chancellor of the Exchequer has told us to-day where some of it does come from.

I heard the hon. Member for Lowestoft (Mr. Loftus) say he was sorry that the Budget statement was not an annual balance sheet but was only a statement which dealt with income and expenditure. He wished that we could have an annual balance sheet. We can get some very interesting figures from the report of the Inland Revenue Department for the year ended 31stMarch, 1938, and they give us one side of the nation's balance sheet with respect to a large number of people. The report deals with the returns of people who were called upon to pay Income Tax. The hon. Member asked where the money was to come from. There is only one place from which money comes. It is obvious that the only place where you can get money is where it is. It is not much good looking elsewhere. Here are some of the people who might be called upon to find some of the money about which we were speaking. I discovered among the returns that last year 539 people in this country had incomes of £40,000 per year or over, which means that they were in the millionaire class. I do not want anybody to get up afterwards or during the next three days and tell us about the money that we take from these people. It is not the amount that we take from people that matters but the amount that is left with them.

Before I came to this House I never had the very pleasant task of paying Income Tax. I am paying it now, and I do so quite cheerfully. I always said that I would pay Income Tax cheerfully if ever I got the opportunity. The people who would pay cheerfully are usually those who never have sufficient money to give them the opportunity of paying. Do not talk to me about the poor taxpayers. I cannot weep crocodile tears about the effect that these taxes will have upon the people who are called upon to pay them. After all, these people are never in penury when they have paid the taxes. The Inland Revenue people are not very bad after all. I never had much to do with them before I came here, but I find them very accommodating. I know that they are not accommodating because they happen to be dealing with me. It makes a difference to come here, but I do not suppose that it makes all that difference.

I find from these returns that we had 95,000 people in the country whose incomes exceeded £2,000 a year. They are subject to Surtax. Their incomes for the year amounted to £483,000,000. I do not want to work out the percentages because that would take too long and I do not want to keep the Committee waiting. The point is that there is a source of revenue for the Chancellor of the Exchequer.

I was glad to hear the right hon. Gentleman say this afternoon that he had prevented some of the mice from running down the hole which he had stopped up last year. He was dealing with the question of tax-dodgers, or tax-evaders, which I think is the proper term, and he said he had found that as he stopped up some holes clever people were making other holes. He referred to the calling into being of the one-man companies. I can assure him that I wish him well in his task because people who are seeking to evade taxation of any kind ought to be discouraged. I have a very kindly feeling in my heart, because I know that most of the voters in my constituency will not lose any sleep because the Chancellor of the Exchequer is going to prevent the setting up of these one-man estate companies in order to prevent tax evasion. I wish that the people at the top of the social scale who have money to burn— it is there we see them burning it regularly—would realise the position of the unfortunate people who are called upon time after time to balance their budgets and to attempt the impossible task of making ends meet when foodstuffs are rising in price and when the increase in the cost of living far outweighs over a period any improvement that takes place-in their meagre wages.

I was in thorough agreement with one phrase used by the hon. Member for Cheltenham (Mr. Lipson). He described this Budget better than anyone else has done. In one sentence he said that it was a pathetic monument of human folly. I wish that the Chancellor of the Exchequer had been on the Front Bench to hear the hon. Member, because the right hon. Gentleman seems to me to be one of the humans whose folly has led to the bringing in of this colossal Budget. I am as certain of one fact as I am that I am standing here: References have been made in this Debate to the so-called financial crisis of 1931, but I am certain that the policy that has been followed by the Government since that date has rendered necessary this colossal Budget. If that is not so, how was it that in spite of the -so-called world crisis, or the financial crisis, there was at that time no talk of air-raid precautions? Instead of talking of armaments we were talking of disarmament, and instead of a Budget of £1,000,000,000 we were talking in terms of domestic needs of the community and not of war scares, which have developed while the present Government have been in control.

Mr. Allan Chapman

Would the hon. Member tell the Committee whether his party would have advocated rearmament in 1931?

Mr. Tomlinson

I am pointing out that the Budget is a pathetic monument of human folly. In 1931 the need for rearmament was not there, and had it not been for the attitude taken by the National Government I question whether the uprising of Hitler, which is given as the reason for this colossal expenditure and the preparations that are being made, would ever have taken place. When you compare 1931 with 1939 you must take into consideration all the factors. It is not enough to go back to 1938 and to say that had the appeasement policy of Munich not been carried out we should be facing not this Budget but a more colossal one, you are not going back far enough. You have to go back to the 1931 period and to the time when the whole policy of the Government changed. As a consequence of that change, the need for rearmament began to reveal itself and to make itself felt.

The hon. Member for Chislehurst (Sir W. Smithers) suggests that the best thing we can do is to call for an inquiry into local government expenditure. I am not surprised at such a call; whenever any economising is to be done, it is always at the expense of the other fellow; there is always somewhere else where the economies can begin. If the hon. Member is so concerned about the debt that is being built up by the local authorities, I would ask him to distinguish between debts. One cannot look upon a debt backed by real assets as something to be ashamed of. The assets which back the debt of the local authorities represent something that is real. You cannot compare a debt that has been contracted for the building of houses, when the houses are there, with the debt that is being built up by the creation of armaments which are going to be destroyed and at the destruction of which, if it could be carried out without destroying human life, I should rejoice. The two kinds of debt are not on an equality.

How has the increase in the expenditure of local authorities come about, and what is there in the Budget that is going to assist the local authorities? As my hon. Friend the Member for Leigh (Mr. Tinker) has pointed out, the expenditure of local authorities has grown because of the burdens which they have been called upon to bear, and which ought to be borne by the Government. Is the expenditure in the County of Lancashire on the augmentation of old age pensions at 65, which is costing a 4d. rate this year, going to be questioned? Are the improvements that are to be made in the amenities of our children and elderly people to be cut down? Are we to deprive ourselves of the principal things that make life worth living in order to defend it at the point of the gun or the bayonet? I wish hon. Gentleman opposite would try to remember that, if the country is to be saved, the more it is made worth while to save it the better chance we have of saving it, and the more adequate will be the response to the appeal for voluntary service when the individuals who are called upon to volunteer are given a standard of life that is worth while.

There is a great gulf between two sections of the people of this country. It is not only a case of the haves and have-nots in our European diplomacy. It is not only a question of nations being deprived of things which they think they ought to have, and about which they are creating trouble at the present time. Just as surely as in the days of Disraeli, there are in this country to-day two nations, a nation of haves and a nation of have-nots. From the Budget statement to-day, colossal as it is, the people who have will go to-night comfortably to their beds saying that it might have been much worse; but to the people who have not—and they are the vast majority of the people in this country—it means that they have a little less sugar in their tea, that they dispense with a little tobacco because the Chancellor has found it necessary to tax those articles, and they go on their way, hoping against hope that their domestic budgets will ever be balanced, and unconcerned in the main about the efforts that the Chancellor is making. Give them an opportunity to sleep with as comfortable a sense of economic security as the people who have the wherewithal to pay your taxes, and then you can call upon them for sacrifices, in the hour when sacrifices are needed, with some hope of response. The response will be tardy at the present time, because of their economic sufferings.

10.19 p.m.

Mr. Magnay

I have sat here for seven-and-a-half hours all but ten minutes, and have heard the whole of this Debate, and I would like to say that in my opinion, for what it is worth, it has not only been an interesting Debate, but has been worth while and has justified all those who wished such a Debate to take place. I would like, first of all, to congratulate the Chancellor of the Exchequer on what I deem to be a fair and reasonable Budget. I am certain that the whole of the North-country, for which I speak, at any rate on this side of the Committee, would agree with that opinion. If you want to know what the North-country thinks, always listen to me. I am a typical North-countryman, and the people in the North-country know that what I say goes. I should like to congratulate not only the Chancellor but the nation on the fact that, notwithstanding the huge outgoings, the social services are being maintained unabated and intact. I rejoice at that for the working people I represent.

It is true that there is borrowing as well as taxation, but what about that? I am quite prepared to take up the challenge which has been thrown down. Hon. Members opposite have spoken as though there was something indecent about borrowing. Many of them have said it is the rich people who do all the lending. Have they ever heard of the Prudential and other big insurance companies? How on earth do they pay the huge benefits they give to their subscribers, except by lending their money to great advantage? One of the ways they secure these profits is by lending on the safe security of the Government.

The right hon. Member for Caithness and Sutherland (Sir A. Sinclair) asked what will happen when this has to be repaid. I can tell him that when it has to be repaid the lenders will be very glad to lend again on the same security. How do hon. Members think the banks keep going? They do so on the interest on the overdrafts, and it is the interest on well-secured funds such as these which keeps these huge societies in being. There is £24,000,000 to be raised by taxation. I am quite certain, being an accountant and knowing something about industry in the North, that industry will be very glad that there is no increase in the Income Tax to cripple it in these very strenuous times in the North-country.

It is amazing how very little has been said about the Budget in the speeches to-night. There are two or three items about which I wish to speak. The first is the horse-power duty on private motorcars. It seems to me that this is a very easily got and easily assessed Income Tax on those who show proof that they have something to spare over the needs of living. If armaments are to have a prior claim it is quite obvious that they must get the skilled workers in the motor-car industry. The right hon. Gentleman the Leader of the Liberal Opposition said he would take it upon himself to stop the motor trade, if necessary, altogether. I would not think of doing that. Income Tax has to be raised, and one cannot pay Income Tax until one makes income or profits. How to keep the finances of the country going if there is no income and no profit is a mystery to me. I can call "spirits from the vasty deep," but will they come? [Interruption.] If hon. Members opposite will listen to me, it will be to their advantage. Subsidised foreign makes of cars will not be bought so easily and readily. This tax may make all the difference in the choice of a foreign or a home-made car.

I understand that the additional taxation of tobacco means an increase of three halfpence an ounce. If a man is a moderate smoker, he ought to pay on not more than two ounces a week. When the doctor asked me how much tobacco I smoked per week, I said, "Two ounces," and he replied that I should smoke one ounce. I believe that if I had said that I smoked four ounces a week, he would have said that I ought not to smoke more than two ounces. Two ounces may be regarded as a moderate consumption, and I believe that most men will be able to afford the extra 3d. per week in taxation. I am sure that, as far as my constituents are concerned, they will not grumble, nor will the housewife in having to pay a farthing a pound, or an extra penny on every four pounds of sugar. I think that she will be rather proud of the fact that she is contributing a little towards the huge expense of the nation in order to make this country safe for her kith and kin.

I regret that no mention was made of any increase in old age pensions. In the Budget Debates last year and the year before, I made a plea on behalf of these old people, and I suggest to my right hon. Friend the Chancellor of the Exchequer that he should give this matter his most earnest consideration. Thousands of old people, who receive only the pittance of the old age pension, have to go on public relief, and are therefore receiving money from public funds. Why cannot the Government pay them in one payment instead of in two payments. [An Hon. Member: "How would they get it?"] They would get it by means of a block grant, as is the case now. I am old enough in politics to know that £4,000.000 saved by Mr. Asquith when Chancellor of the Exchequer was dispensed by his successor the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George). It was said in this House that the payment of old age pensions would sap the moral fibre of our people. As a matter of fact, it is common knowledge that it irrigated channels of trade in that this £4,000,000 was circulated, making trade better, not because of sentimental reasons at all but because it increased the purchasing power of our people. The fact ought to be considered that we are paying old age pensioners public relief through public sources, and it would be more dignified for the old people to be paid in one payment direct from the Exchequer.

The Leader of the Opposition said there was no background to this Budget. I think he has made a mistake, and I regret that he is not present to hear what I have to say. The dogs and the stones in the street are eloquent about it. He was answered by the right hon. Member for Caithness and Sutherland who said that rearmament was the cardinal issue. That is the background of the Budget. For once I agree with the right hon. Member for Caithness and Sutherland.

The right hon. Member who opened the Debate for the Opposition also said that it was a policy of borrowing and inflation. I would like to know what is his alternative to borrowing. I think everyone else would be interested. Inflation—what a blessed word it is for some folks. What a bogy it is. I am terrified of deflation, but I am not at all afraid of inflation. There are terrific checks against inflation, but very few checks against deflation. Of all men the hon. Member for Chislehurst (Sir W. Smithers) agreed with the right hon. Member who opened the Debate for the Opposition that inflation was a dreadful thing to contemplate. There is nothing static in the national income. The old idea that there is a reservoir with a fixed quantity and that once it is tapped there is nothing else to replace it, has gone. The national total capacity is now X; it is an unknown quantity, in fact, there is no limit to it. We can produce to any extent we like, and these Rip Van Winkles simply amaze me. It would never do for them to come up to the North country and stand as candidates, because the people are politically educated there. Hundreds of millions are saved each year by the community, but the trouble is that it is not invested in industry, but put into gilt-edged securities and thousands of other things for safety, instead of the community taking the risk of investing it in industry. The consequence is that we have unemployment, and other things which we mourn so much.

The right hon. Member for Caithness said that this was a pedestrian's Budget. I thought he gave it the best recommendation that it was possible to give it. It is a pedestrian's Budget; both feet are on the ground. The right hon. Gentleman also talked about borrowing and asked how we were going to repay. I repeat that it depends on circumstances. Nobody can argue with a prophet; you must either believe him or disbelieve him. When we come to the bridge we shall cross it, not before. I was very sorry to hear him of all men say that appeasement had failed— and he was not sorry about it. I should expect a Liberal of all men to mourn the fact that appeasement by negotiation had failed.

Mr. Logan

This is calling "spirits out of the vasty deep."

Mr. Magnay

The hon. Member may be a judge of spirits; I am not. The right hon. Gentleman said, almost in tones of rejoicing, that appeasement had failed. I was sorry as a Liberal, trained in the old Liberal traditions and a Liberal still, to hear any Liberal so far forget his traditions and his teachings. I repeat that I am certain the North Country will agree with me that this is a fair and reasonable Budget, and will congratulate the Government and the Chancellor of the Exchequer on it.

10.36 p.m.

Mr. Gallacher

I should like to deal with two points that were raised by the Chancellor of the Exchequer before I make some general observations on the Budget. First of all, the Chancellor referred to the fact that, despite every effort that has been made to produce legislation that would bring tax-dodging to an end, there are certain people in this country who are so cunning, so clever, and so ready to use the most unscrupulous means, that they are still able to dodge taxes. I want to know from some Member of the Government why these tax-dodgers are not put in gaol. I am absolutely certain that if any unemployed man tried any trick of that kind at an Employment Exchange, there would be no hesitation in putting him into gaol. I demand from the Chancellor of the Exchequer a definite decision that these men will be picked up and put into gaol. That is the treatment they should receive. I hope that there are certain Members of the House who will come into that category. There are one or two of them I would like to see behind the bars.

The other point to which I want to refer is the Chancellor's reference to the National Defence Contribution. The right hon. Gentleman still intends to carry on, with the National Defence Contribution, the totally unjust tax on the co-operative movement. It is one of the outstanding scandals of this Budget and the previous Budget that this National Defence Contribution, which was first introduced by the present Prime Minister as a means of getting a special tax on to armament makers, should now be utilised in such a way as to penalise the co-operative movement and take money from the very poorest of the poor. I hope that when we discuss the Budget on the Committee stage, we shall be able to do something to rectify this very great injustice. The hon. Member for Gateshead (Mr. Magnay) referred to the remark made by the Leader of the Opposition that this is a borrowing and inflationary Budget. The hon. Member, who claims to know all about it, asked what was the alternative He does not know very much if he does not know what the alternative is. The people from whom you are borrowing have the cash. Instead of borrowing it and paying a percentage of interest on it, just take it from them.

Mr. Magnay

Do I rightly understand that the hon. Gentleman is advocating confiscation?

Mr. Gallacher

It is a good thing that the hon. Member told us that he knows all that is to be known, because if he had not done so, many of us would have been of the opinion that he did not know anything. Let the hon. Member ask his colleagues what is happening in connection with the 5s. 6d. Income Tax. What is that? If there is a rate of Income Tax of 5s. 6d., you do not introduce any new principle if you increase it to 10s. You can make it 15s. and no new principle is introduced, but it means that instead of borrowing money and loading the country with a burden of debt, you are taking and using the money for the purposes of the country as a whole. The hon. Member for Lowestoft (Mr. Loftus) said that he hoped the Prime Minister and the Government would be prepared to make the widest possible economic concessions to Germany. I am quite certain that some hon. Members opposite would agree with that. I am absolutely opposed to any economic concession being made to Germany, for every concession would simply strengthen Germany's aggressive power and desires. But why not economic concessions to the masses of the people? Those are the economic concessions that are wanted.

The hon. Member for Oxford University (Mr. A. Herbert) tells us that the Chancellor in his speech disposed of money at the rate of £10,000,000 a minute. It is certain that the people will not dispose of their heavy burden as the Chancellor disposed of the millions in his speech. It is a terrible burden arising out of a war that is past and preparations for the possibility of a new war because of the policy of the National Government. It is some- thing against which we have a right to protest—this heavy and growing weight, this mass weight that is resting on the shoulders of the people and bearing them down into poverty. The Chancellor said that there was very great expenditure on the social services. We are always getting hints about that expenditure, but the Government have to take note that in spite of the expenditure on social services the population is not holding its own. If it were not for the fact that for the past 40 years, since the coming into the political field of the Labour movement and the terrific campaigns it has waged in order to advance social services, we would have had in this country by this time a terrible slaughter of the population because of the character of the economic exploitation that is carried on.

With all the expenditure on social services about which there is so much talk the population is not increasing and is scarcely holding its own. We can have, as I pointed out the other night, a world-famous athlete coming to Scotland and, in an interview with the Press, saying that from his experience Russia takes the first place in the world for physical fitness and that Britain takes sixth place. Why do we not get facts like that brought out when the Budget is presented? The fact that we take sixth place in physical fitness demands a great increase in the expenditure on social services. What is the use of expending great masses of wealth, in piling up armaments, if we are not able to build up a population that is capable of defending itself against attack? We want a strong, virile, healthy manhood, womanhood and childhood before we can talk about the people being concerned with the defence of the country. Why did not we get something in the Budget about taking the land out of the hands of the private owners and making it the land of the people, of taking industry and wealth out of the hands of private owners and putting it in the hands of the people? Then they would have something to defend.

Take the question, which has been raised by many Members on this side, of old age pensions. How is it possible that the Chancellor can come forward at this stage, with all the knowledge and experience we have, with all the advance that has taken place and all the development we have seen of social amenities and culture, and refuse to do anything whatever for the old age pensioners? After 50 years of service in the mines, the mills or the factories—10s. a week. The Chancellor of the Exchequer and others talk of the sanctity of home life in this country and the necessity of protecting home life, but the mother who makes home life possible gets, after 50 years of devoted service, 10s. a week. Those who oppose the demands made on behalf of these old folks always ask, "Where is the money to come from?" and say that too much is being spent upon the social services. They themselves will, as the Member for Stoke (Mr. E. Smith) pointed out, go to a dinner costing two guineas a head—mere than an old age pensioner gets for a month, after 50 years of service.

When the Chancellor of the Exchequer comes forward with a Budget to raise hundreds of millions of pounds for armaments, do they ask, "Where is the money to come from?" When there is a subsidy to be raised for the sugar-beet growers, or the shipowners, or for the landed interests, or any of the others, do we hear hon. Members opposite asking, "Where is the money to come from?" No; it is only when there is a question affecting the poorest of the poor, only when it is a question of trying to raise those who are down in the depths of poverty. Yet it is the masses of the people who produce the wealth. There is no other source of wealth but the labour of the working classes. Those who have the wealth do not get it because it falls from the clouds; they do not pluck it. from the trees or pick it from the roadside. They get it out of the unpaid labour of the masses of the working classes, and yet the masses of the working classes who produce the wealth are faced continually with bitter poverty. Much of what has been said about heavy taxation, Super-tax and all the rest of it is illusory. The rich who are paying those taxes are becoming richer. The armament makers and the financiers are piling up huge fortunes. The millionaires are increasing. Does this mean that they are paying for the armaments? No. They are profiting out of the armaments. They are not emptying their pockets, but filling them. When it comes to paying for the armaments the masses of the people are unanimously elected for that job. There is a variety of ways in which the money is got out of them.

Therefore, in discussing this Budget we want to face the fact that the burdens which are being thrown on the masses of the people are associated with policy, and we cannot get rid of those burdens, we cannot begin to organise a Budget for the development and betterment of human life and human society, unless we have a policy that will provide us with the possibility of a firm basis of peace in Europe. That is the problem that confronts us. If we are to face all the consequences that must follow from borrowing it is necessary to take up the question of policy. The Prime Minister would rather be the junior partner of Hitler in a capitalist Europe than risk the consequences that might follow from the defeat of Hitler, and the same applies to members of the party opposite. We are told that there is a change in policy. 'There is no change.

The Chairman

The hon. Member is getting rather far from finance now.

Mr. Gallacher

The discussion has been on a very wide range and all these things have been brought in during it. I am only trying to show that, in facing this question of finance and how we are to overcome the heavy burdens being placed on the masses of the people, how we are gradually to produce a Budget concerned, not with weapons for the destruction of human life but with the building and extension of institutions which will make for the highest possible form of human life and culture, it is necessary to take into consideration the question of policy. That is how I have introduced this question, which has been talked about by very many who have preceded me. There are so many indications going to show that we are still pursuing a policy which will impose upon us still greater burdens in the future, not a policy which is going to establish peace in Europe but a policy which is going to lead to the strengthening of the Fascist forces in Europe, and will therefore throw upon us the consequences of still heavier commitments—the building up of armaments instead of the development of the social services. I cannot close my eyes to the fact that recent events—the return of the Ambassador and the appointment of Lord Lothian to America—are all indications to Hitler that his friends are still in power.

The Chairman

I really cannot let the hon. Member continue that line of argument.

Mr. Gallacher

I accept your Ruling, Sir, and I will not pursue it, but I am sure that everyone present has a clear understanding of what I am getting at. I object very much to the sugar tax. It is one of those mean, petty things. Someone has referred to the last straw that breaks the camel's back. Every time we are getting new straws placed on the backs of the poorest of the: poor. Last year it was a small tax on tea; this year it is a small tax on sugar. Always new small taxes are being placed on the backs of those unable to bear them. It means a little less for those who have too little already. The Chancellor said that it was a duty, and he believed it would be accepted as a duty by all, to contribute their share. I say to him and to every Member opposite that it is a crime against humanity to take however little from those who have not the necessities of life, to take from those who have no surplus of any kind, even the smallest, until you have taken every penny of the surplus from those who have the money. The Chancellor has no right to impose a tax upon the poorest of the poor while there are masses of wealth capable of taxation. I am opposed to the Chancellor on the question of the co-operative societies and National Defence Contribution. I am opposed to his leniency towards tax-dodgers. I consider that this Budget places an unbearable burden on the masses of the people, and that we shall only get rid of those burdens and get a Budget directed towards human well-being and happiness, when we get rid of this Government. The task of all intelligent men and women in this country is to strive with all their power to get rid of the Chancellor and the Government with which he is associated, and then there will be the possibility of peace and high hopes of progress.

Several hon. Members rose

The Chairman

May I ask the Committee to allow me to read the Resolutions which have to be disposed of to-night? I am, of course, in the hands of the Committee, but I would point out to hon. Members that those Resolutions have to be read, before we can bring the Debate to an end.

Mr. Mander

But I understand that the Eleven o'Clock Rule has been suspended.

The Chairman

I realise that, and I merely wanted to put it to the Committee that nothing can be done to end the Debate until we have read the Resolutions, but there is nothing to prevent the Debate continuing to-night on the last Resolution in the same way as it would continue in the ordinary course to-morrow.

Mr. Aneurin Bevan

Are we to understand that after the Resolutions have been put, the Debate can continue?

The Chairman

The usual custom is that the last Resolution remains un-disposed of after the others have been passed to enable the general discussion to continue. That is what would have happened in the normal case, in regard to the remaining two days' Debate, and the same thing would happen as regards the continuation of the Debate to-night.

Mr. Bevan

If the last Resolution remains undecided the Debate can continue to-night?

The Chairman

The Debate can continue on the last Resolution.

Mr. Bevan

I am only trying to help. Do I understand that the first Resolutions can be carried at the moment and that we can then go on to Debate the last Resolution?

The Chairman

That is the point. Nobody can move any Motion to or, rather, the Committee cannot well agree to report Progress until these Resolutions have been disposed of, and that is why I am asking the Committee to allow me to read them and put them, and then the Debate can go on upon the last Resolution until the Committee decide to report Progress.

Mr. David Adams

That will not narrow the Debate?

The Chairman

No, certainly not.

Question put, and agreed to.