FINANCE BILL.

HC Deb 25 May 1939 vol 347 cc2561-663

Question again proposed, "That the words proposed to be left out stand part of the Question."

5.12 p.m.

Mr. C. Davies

I think the Chancellor of the Exchequer, either in his Budget speech, or in moving the Second Reading of the Bill to-day, ought to have given us the benefit of a general review of the financial position of the country as compared with other countries, especially the European countries. No one is better served so far as advice is concerned than the Chancellor of the Exchequer. I suppose that we have the finest advisers that can be found in any country. Again, as we all know, no one can present the advice that has been given to him in a clearer or more attractive form than the Chancellor of the Exchequer. I only wish that the House and the country had had the benefit of what I might call a general exposition of the situation to-day, what are the principles which are really guiding him, why he is taking so much from revenue and so much from capital, what are his reasons for doing it and what, he hopes, will be the position during the course of the year.

A great change has occurred since the Finance Bill of last year was introduced. Since last year we have entered inexorably into the war atmosphere, and we are expanding and perfecting our armaments so as to defend ourselves and to assist in the defence of our friends. All this intense preparation for war has necessitated, and will necessitate, profound changes in the economic life of the nation. The folly of the slogan "Busi- ness as usual" was soon apparent in 1914, and to try and act upon it to-day would be more than madness. The Germans have recognised this, and their economic journals for some years now have, week after week, devoted pages to the economics of defence. What is more, they have carried their theoretical speculations into practical effect.

If war should come, the interference with the economic life of the country would be so intense as to make the position unrecognisable from what it is in peace time. But even if war does not come, there is little chance of a return for many a long year to the peace economy to which we have been accustomed. The totalitarian States have for some years been conducting their affairs on a war basis, and if and when a change of policy arrives the transition from war economy to peace economy will take a very considerable time. Unfortunately, the younger generations have been reared in a war atmosphere, an atmosphere of extreme nationalism, intolerance and hatred, and it will take at least one generation before we can again enter the placid waters of tolerance, understanding and friendship.

In the coming years we shall need courage, which fortunately this country has never lacked, and we shall also need vision, and too often that vision has been dimmed and blurred. For the moment labour and materials have been diverted from the production of what I may call everyday articles to the production of armaments and means of defence, and although we have at the moment a surplus of labour and a productive capacity to engage in this task, that reserve is not inexhaustible and, therefore, we shall have less to consume, and we shall have to work much harder in order to obtain it. Therefore, it is necessary to direct our financial policy so that it may promote the production of essential everyday goods. We can congratulate the Chancellor of the Exchequer on a judicial planning of his calls upon the nation's reserve; his call upon the revenue for one part and on its savings for the other.

Should war come, which God forbid, I certainly do not doubt or fear the issue, but should it fortunately be avoided, then we must not sit back and rest in an attitude of sweet complacency. Imports are bound to rise, and we shall also be carry- ing, as we are to-day, the deadweight of a huge bureaucracy. The economic and financial fabric of the country, and, indeed, of the Empire and the world, depends upon the balance of payments for both capital and current account. We shall have need to stimulate exports. We cannot afford in the future to conduct ourselves in a disorganised manner. We must meet organisation with organisation. More and more the old doctrine of laissez faire will have to be sacrificed, and many of our great industries which have provided in the past, and are providing to-day, our main exports, will need not only overhauling, but complete reorganisation to meet the organised competition which is bound to come from the totalitarian States with their organised industries.

Particularly is it necessary to encourage our mutual trade within the Empire. They are the suppliers of our necessary raw materials and of our foodstuffs, and in turn they, of course, should be the main buyers of our manufactured goods in order to pay for the goods which they supply to us. It is necessary to stimulate still more that trade to-day so that we may strengthen one another at this hour of common peril. It is of the utmost importance to look to the future and what should be done in order to organise the country to meet that future, and I should have liked the assistance of the Chancellor of the Exchequer.

Let me pass to another subject. The Chancellor of the Exchequer, I feel, must be congratulating himself to-day on the fact that he and the Prime Minister in 1937 dropped their first proposal for a National Defence Contribution and adopted the alternative suggestion that we should have a flat tax on profits. As events have developed since 1937 his proposal, which was an Excess Profits Tax, would have yielded but a modest return. The profits of 1938 were down on those of 1937, and so far as we can see the profits of 1939 promise to be even worse than those of 1938. If the Chancellor of the Exchequer had stuck to his original proposal he might indeed to-day have had to bring in a minus quantity by reason of the deficiencies. But this development from which the Chancellor of the Exchequer was saved brings out what I may call the basic injustice of the National Defence Contribution.

The tax was conceived in a burst of optimism in 1937 by reason of the expenditure on Defence. It was thought that profits would increase and that these profits would accrue to the equity holders. It was a tax on equities in anticipation of a coming prosperity. The holders of priority shares and preference shares were not to be called upon to make any contribution as it was said they would not be sharing in the prosperity. But what has happened? The expected prosperity was still-born and the political unrest which has created the need for arms is stifling business and depreciating and deflecting profits. The prosperity and increased profits, therefore, did not come, but, nevertheless, equity holders remained last year, and under this Bill will still remain, saddled with a prosperity tax at a time when they are suffering the major burdens of a recession of business. It is time that this was recognised and the burden raised from the selected few and put upon the more general body of taxpayers. In 1937 I was partially responsible for the suggestion to the Chancellor and the Prime Minister of the proposal which was ultimately adopted, but I pointed out then that I only preferred it to the one which had been suggested by the Prime Minister and the Chancellor of the Exchequer. Speaking for myself then, as now, I prefer to place it on incomes, which, after all, however much grumbling it may cause, is the fairest of all taxes.

In 1937 the Chancellor of the Exchequer said that an increase in the Income Tax would be prejudicial and, therefore, he was not going to raise his revenue from that source. But in 1938 he had changed his mind, and added another 6d. to the Income Tax to provide himself with the, £26,000,000 which was required. He realised in 1938 that the prophecy he made in 1937 of coming prosperity had not materialised, and he could not add, therefore, to the National Defence Contribution tax when the prosperity was not there. It would have been far better if he had been quite logical in 1938, and if he had been logical again to-day and recognised that the equity holder has not had the prosperity which was prophesied in 1937, and do away with this tax and place it upon the Income Tax. There is another matter. The machinery of the tax is creating many anomalies indeed, and there is dissatisfaction at the hard manner in which it is administered. The Revenue have staked out their claims, leaving the taxpayer with the option of paying or fighting. The amount involved as a general rule does not justify the expenses of a law case, especially as the taxpayer runs the risk of having to pay the costs whether he wins or loses. Therefore, what the taxpayer does is to pay. His option, if I may so describe it, is that of Hobson's Choice. He has to pay, and has no remedy whatever against any injustice.

There is one other matter I want to deal with. I want to make an appeal to the Chancellor of the Exchequer to lighten the burden upon the Colonial civil servant. I and three of my colleagues in this House recently visited the West Coast of Africa where we were most hospitably received by the Colonial civil servants. We could see the tremendous strides that have been made in West African conditions during the last 20 years, and everyone agreed that, in the main, life had been made much easier and better in West Africa thanks to British wives being able to go out there and look after their husbands. We were told what the conditions were as recently as 1920 before wives began to go out. Now they are allowed to go out. We saw one who had gone out as a bride taking her wedding presents with her, and whose house was almost the same as that of any young couple in this country. Right out in the bush she had made a home of it for herself and her young husband, and was prepared to go with him day by day and share the same risks and trials which he had to bear.

When a young family begins to arrive she has to come home. The child is born here, and after a few weeks she goes back to her husband but she cannot take the child with her; she has to leave him or her here. Back she goes to look after her husband. But one feels all the time that while physically she is in one place, mentally, worriedly and anxiously she is in another place. If she is here with her child she is worried about her husband, and if she is in West Africa she is wondering how her child is getting on. She is undoubtedly adding to the economic wealth of the country, because she has so improved conditions that her husband is able to give better service than he has ever been able to do before. What happens? If she comes home fairly often and stops here for a period of three months or longer, all the money which the husband sends home from his salary becomes subject to Income Tax in this country, and it specially becomes subject to Income Tax if in the end these two have saved sufficient to enable them to buy a house.

I have several friends who are situated in the way in which I have described. Fortunately, I am able very often to take their children to my little home in the country, either at Christmas or at Easter. I and my family do our best to make the children think they are at their home, but the children realise only too well that it is not their home. That is the story of all these children who have not a home, whether they are left with their grandparents or with relatives. At last, the parents succeed in buying a house in order to put the child there, so that the child can say, "This is my home." I had an instance of this when I went to Nigeria; one of the finest civil servants in Nigeria had only recently succeeded, at long last, in buying a small cottage so that his boy of six could have a home. When he had bought the house, he was immediately served with Income Tax papers. I ask the Chancellor of the Exchequer to give some consideration to these people, especially when the women are doing so much, by assisting their husbands and looking after them in those tropical lands, for the economic welfare and prosperity of the Colonies. I hope my right hon. Friend will listen to this appeal and will do something to meet it.

I come now to another matter. Some time ago I asked the Chancellor whether he would consider making any change in the rules which at present prevail with regard to double taxation. At the present time, money which is earned in some foreign country is subject to the taxes that are levied in that country, and then when it is brought home, it is subject to tax here. That is what is known as double taxation. Either double taxation is right and should be continued, or it is wrong and something should be done to meet it. I think the feeling is that it is wrong, because within the Empire itself rules have been made in order to relieve the situation so created, and the results in greater business. But when I have asked the Chancellor whether he would consider an extension of those rules so as to further trade between this country and other countries, I have been met with a flat negative. At a time such as this, when we are so anxious to increase our foreign trade and to improve our exports to foreign countries, surely every encouragement ought to given to them rather than that a damper should be put upon them by continuing this double taxation.

There is one other matter to which I want to refer. One of the taxes which the Chancellor is increasing is the tax on motor vehicles. I do not intend to enter into the merits of that tax one way or the other, except to say this. Transport is the handmaiden of every form of industry, and transport is a nuisance, but a very necessary nuisance. Therefore, for the sake of the community, it should be as efficient and as cheap as possible; for at all times it is the community that has to pay the cost of transport. If it is inefficient or if it is expensive, the producer has to go with less and the consumer has to pay more for a service which, after all, is only a necessary nuisance. I should have thought that, especially at this time, the Chancellor would have borne that in mind. While I do not know whether this tax will increase efficiency or decrease it, undoubtedly it increases the expense, and any expense placed upon the community which does not bring in a return to the community, is wrong.

5.36 p.m.

Mr. Graham White

Several topics have been raised by the hon. and learned Member for Montgomery (Mr. C. Davies) on which I find myself in sympathy with him, and on which, if I were not anxious to adhere to the advice given to us this afternoon by Mr. Speaker, I should be tempted to follow him. There is one observation made by the hon. and learned Member with which I should like to associate myself, and that is his appeal that we should have a general exposition of our financial position. I think that would be of value, especially if it included the various extra-Budgetary funds of one sort and another in the country, and would reveal the strength of our financial position. Also, as the hon. and learned Member said, it would enable us better to make a comparison between the resources of our country and those of other countries with which we might be in conflict.

The Finance Bill is one of the instruments of our preparedness. It is the instrument of financial preparedness for an emergency of any kind, and also for maintaining our economic fabric and the most important element of the social services. From the point of view of preparedness for the emergency of war, I am not sure that finance is not the most important of all things. Certainly, it is of very great consequence, for in the long run our strength will depend upon the fact that we are better able than any other European country to divert a larger proportion of our national net income to defence, and to do so for a longer time than any other country. I must go on to say that, at the present time, we know less of our financial preparedness than we know of any other aspect of our arrangements for defence. In Civil Defence, we know the policy and a great many of the means of carrying it out, and in military matters, the same thing applies; but in finance, all is lost in obscurity and uncertainty. I think that there is at least one sentence in the Amendment which must appeal to every hon. Member. It states that the Bill shelves all the major financial problems. It is true that the Bill deals with some great financial matters, but equally it is true that many of the major financial problems that will clearly confront us in the very near future are shelved. It is time that we were giving our consideration to those problems. To a large extent, the Bill presents an artificial view of the position, because since the Budget was introduced new burdens have been placed upon us and new financial problems have been raised; and the Bill does not give any indication of the principle on which those major problems are to be faced. When we started on the rearmament programme, there was a principle that only non-recurrent expenditure would be raised by loan and that recurrent expenditure would be raised from taxation. I do not know how far and for how long that applied, but it has little or no application to the situation at the present time.

I should like now to deal with the speech that was made by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence). I think he has done a public service by raising the question of what he called an emergency tax. By whatever name it may be called, something of that kind is necessary. Whether it be by the right hon. Gentleman's scheme or by some other scheme, somebody has to produce a plan that will deal with the financial emergency which is upon us. The right hon. Gentleman terminated his speech with an eloquent oratorical question, which I gathered the hon. and learned Member for Montgomery answered in the affirmative. The right hon. Gentleman said that in order to wage modern warfare, men and money are required, and that if conscription is applied to man, it should be applied also to money. With regard to the question of an emergency tax or levy—whatever it may be called—I think there is a general acceptance of the idea in every quarter of the House. The generality of that acceptance, however, is accompanied by a general ignorance as to exactly what it means, and as to how it should be applied. It is vitally necessary that we should consider how and when a further portion of our national resources can be diverted to the immediate purposes which lie ahead of the nation. Perhaps a moral issue is involved, but I do not think there is any difficulty over that, for it has only to be stated to be swept away. The essential thing, in considering any such tax, is that it should be considered solely from the point of view of its effectiveness in achieving its purpose. As the hon. and learned Member for Montgomery said, it involves no new principle, for compulsion is applied to many aspects of our national life, not least that of finance. But if it be suggested that, because there is compulsion in the matter of Income Tax, Death Duties, Supertax and the like, that answers the case sufficiently, then I must differ; and in doing so, I call the Prime Minister to my aid.

In introducing the conscription scheme to the House, the Prime Minister recognised that it would be unjust to apply conscription to manpower without providing for conscription of wealth. He went on to say—and there were some who thought this would be carried out in the Bill—that the Government would introduce legislation to tighten the control of armaments profits. He said that in time of war, measures would be taken to impose special penalties on profiteering—there were some of us who hoped that measures would be taken to prevent profiteering arising at all—and to provide that any increases in profits or in individual wealth should be appropriately controlled to the benefit of the State. The right hon. Gentleman stated that his proposals would meet the case justly. I do not think anyone will suggest that either justice or the necessities of the case would be met in this case merely by taking steps to curtail an increase in profits or an increase in private wealth. Anyone who contemplates the situation as it exists to-day, and as it is likely to exist, will realise that there must also be further heavy exactions upon income and wealth, in addition to those which are made to-day.

Whether the scheme which the Prime Minister eventually brings forward will enable us to meet these financial necessities or not, I do not pretend to say; but I venture to express the opinion that it is a scheme which can be worked only in time of peace. In time of war it would be impracticable, for various reasons into which I need not go in detail, to carry out such a suggestion. In time of war the State would have no use for collections of property such as grouse moors in Scotland, or shares in insurance companies carrying with them liabilities, which the State would have to shoulder, or shares in companies abroad involving all sorts of difficulties. Such a scheme would not be a practical aid to the State in time of war. Indeed it would probably add to our difficulties. But whether some such scheme would be practicable in peace time is a question to which we ought to apply our minds from now onwards.

The problem of the State in time of war is how to acquire spending power, and this can be done in various ways. One is by means of inflation, which was a method used during the last War, but which, I hope, will be ruled out now, because it is clumsy, unjust and hopelessly inefficient. The other way is that of persuading the citizen to make the necessary contribution either in the form of loans or of taxation. A little consideration shows that in the interest of the community this expansion of spending power should be obtained in the form of taxation rather than that of loan. To quote Mr. Chancellor of the Exchequer himself, the piling up of loans merely transfers the burden to a later date and if we were to proceed, in a time of emergency or of war, to transfer the spending power of the citizens to the State by means of loans, we should be faced afterwards with the intolerable legacy of a grossly inflated National Debt. It is, therefore, to taxation, whether it takes the form of an excess Income Tax, whether it is by the development of well-tried existing taxes or by the introduction of some new tax such as that suggested by the right hon. Gentleman the Member for East Edinburgh, that we must look for the solution of the very difficult problem which will arise, even if we continue, as I hope and pray we may, at peace.

With regard to the actual content of the Bill I would make this observation. One of the considerations which make the payment of these vast and growing exactions from the private citizen tolerable, and cause them to be borne as cheerfully as possible, and one of the things which will enable us to maintain the incentive to productivity and the creation of taxable capacity, is certainty in the mind of the individual that there is no waste and that there is wise direction of spending. For that reason I am surprised that no reference has been made to the suggestion of my hon. Friend the Member for South-West Bethnal Green (Sir P. Harris). He reminded the House in a previous Debate that in 1917, when the country was engaged in a terrible war, a Select Committee was set up presided over by Sir Herbert Samuel, as he then was, to deal with questions of this kind. The terms of reference of that committee required it to examine current expenditure defrayed out of moneys provided by Parliament, and to report what, if any, economies consistent with the execution of the policy decided by the Government, could be effected therein. That committee as I say was set up in time of war. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) was then Prime Minister, and the late Mr. Bonar Law was Chancellor of the Exchequer. I cannot help feeling that if it was worth while in a time of war and of great anxiety to establish a committee of that kind, it might be much more worth while in a time of peace such as we are in at the present.

At Question Time to-day, there was an incident which impressed this matter more forcibly upon me and fortified my opinion about it. The hon. Member for Ipswich (Mr. Stokes) raised a question with the Lord Privy Seal regarding the price of air-raid shelters. It was suggested by the hon. Member—and we know that he is not likely to make such a suggestion lightly—that it was possible to obtain quotations at very much less than what has been stated to be the standard price. The hon. Member for Evesham (Mr. De la Bère) then asked whether this whole matter was not wholly unsatisfactory. I do not go as far as to suggest that what the hon. Member for Evesham suggests to-day, the whole of England will think to-morrow. But this I do know, that these quotations and prices will be looked into and canvassed from one end of the country to the other, and unless some definite step is taken to put this matter right and to arrest and allay these suspicions, a situation will arise which will not be calculated to promote confidence in those who are responsible for air-raid precautions. That is without question. If we had a committee such as I am suggesting, a matter of that kind could be referred to it and dealt with promptly. I hope, therefore, that some consideration will be given to the suggestion.

I desire to associate myself with the remarks of my hon. and learned Friend the Member for Montgomery with regard to the taxation of transport, and also to support what was said by the right hon. Gentleman the Member for East Edinburgh on the same subject. I hope the Chancellor of the Exchequer will consider some modification of his proposals in this respect, with a view to lightening the crushing burdens and the capital losses which are being inflicted upon those engaged in this business. I have some difficulty in understanding this tax. I believe it is intended to be purely a revenue tax. I could understand the Chancellor of the Exchequer saying that it was in the national interest that the manufacture of high-power cars should cease, because we required the skilled labour employed in their manufacture for other national purposes which could not otherwise be fulfilled. We must remember that it is not the use but the manufacture of high-power cars which absorbs labour. I hope that something will be done in this matter and some concession made. I make bold to say that, if the time should come when it will be necessary for the Chancellor of the Exchequer to say to those engaged in this business, "We require your plant and your skilled labour," these firms will willingly co-operate, but in the meantime I suggest that in the interests both of the revenue and of transport, some modification might be made in this proposal.

Then I am at a loss to know why at a time when money is so badly needed, the Chancellor of the Exchequer should have so precipitately abandoned an income of £750,000 a year in connection with the remission of the Medicine Stamp Duties. Perhaps the word "precipitately" was ill-chosen since the matter has been under consideration for about a century or more, but after the report of the Select Committee I cannot conceive any reason why it need have been dealt with at this particular time and why this revenue should be thrown away. I admit that the position in regard to these duties was unsatisfactory in some aspects, and the Chancellor of the Exchequer seems to have been haunted by the memory of Sir Harbottle Grimston and his Book of Tunnage and Poundage. I do not see any reason why this income should be abandoned at this stage. There is a case for reviewing the position and seeing whether, out of the recommendations of the Select Committee, some better and more appropriate way could be found of dealing with this subject and perhaps increasing the revenue. In fact, it has been suggested that it would not be unsuitable, if the Excise stamp or registration stamp were doubled.

I would also ask whether the Ministry of Health were consulted and what is the opinion of the Minister of Health on this question. There is no wish to curtail the privileges of those who have been in the habit of selling and distributing these products, but it seems to me that the way will now be open for the sale of drugs without disclosure of content or formula, through slot machines, by hawkers and in other ways and I do not think any one can suggest that that is desirable in the interests of the health of the community. Many of these prescriptions and nostrums are in the nature of pain killers. A person who has a pain takes one to relieve the pain. Then he goes on taking them and inflicts great injury upon himself. It will give satisfaction in every quarter of the House if the right hon. Gentleman promises to reconsider this matter.

Clause 19 requires information to be supplied on a matter which is, I think, a very proper subject for inquiry, namely, the practice which, I understand, prevails of paying remuneration in the form of a small salary and large allowances for expenses. That is a practice about which information ought to be obtained, and as far as it exists to the detriment of the revenue it should be rigorously stopped. I would point out, however, to the Chancellor a difficulty which arises in this connection in relation to paragraphs (a), (b) and (c) of Subsection (1) of the Clause. In the case of many large businesses no allowance is made to employés for expenses, but there are small amounts incurred as expenses by them, for which they have to be reimbursed by their employers. These amounts are not such as would affect any tax liability, but under the Clause as it is now drafted in the case, say, of a large insurance company transacting its business through perhaps 60,000 or 70,000 agents scattered throughout the country, the mere task of compiling the returns called for under this Clause will be an immense addition to the labours of the company, although they are not of the type or description which are sought to be caught by the operations of the Clause.

I wonder whether it will be possible to put some limit into the Sub-section which will save an enormous amount of work. The point is of greater practical importance at this moment than it might be at any other time for a reason that will appeal to the Chancellor of the Exchequer. Many businesses are now engaged in considering their staff questions in order to decide how they can let men off for the Territorials. They are also facing difficulties in the junior sections of their staffs and are having to consider how they will be placed when men are called up for military training. At a time when they have all these staff difficulties they should not have to set to work to make returns in great volume and detail which will not serve any practical purpose or lead to the production of a single pound to the Treasury. I hope that that matter may receive some consideration at a later stage of the Bill.

If we are to face these growing responsibilities and growing exactions on capital or income, whichever it may be, we shall, as time goes on, have no choice whether we shall impose them or not. The only choice will be as to the method by which we shall divert income or capital and the resources of the citizen for the service of the State. If that is the case, there are certain conditions which must be complied with. They must be just as between one section of the community and another, and I do not think we are in a position in this House at the moment to say what is just between one class of taxpayer and another. We used to have a balance struck between the direct and indirect taxpayers, but to-day nobody knows what the burdens of the indirect taxpayer really are, because we have set up so many independent machines outside Parliament which are, in fact, taxing instruments. There are so many boards of one kind and another which raise the prices of various articles, such as sugar, wheat and the like, that nobody knows exactly what burdens they are placing upon the indirect taxpayer. The best estimate I have seen puts the sum at something like £100,000,000.

That is another reason why I should like to see a full statement of the national finances, as called for by the hon. and learned Member for Montgomery, because then we should really have some comparative figures in regard to our internal taxation and be able to compare the taxation of this country with other countries. This will enable us to have a true picture such as we cannot obtain at the present time. Let us have justice as between one class of taxpayer and another. We must have certainty that there is no waste and that there is wise spending. We want a thoroughly well-equipped, full-powered Ministry of Supply working in co-operation with the Treasury and the financial Departments of the spending Ministries so that the productive capacity of the country may be devoted in the most efficient and effective way to the nation's needs.

6.5 p.m.

Mr. Mabane

As was said by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence), this is no ordinary Budget. Indeed, Budgets now are quite different from those we used to know. That is indicated in the change in the nature of the Debates in this House. In earlier days we used to examine closely the estimates of expendi- ture and revenue, feeling that it was the duty of the Chancellor to present estimates which would not vary in the course of the year, and by our examination to discover how the burdens on the taxpayer might be lightened. In recent years we have become accustomed to Budgets that are not fixed. One by one items of varying character have been introduced into the Budget beginning with the provision for unemployment assistance and going on now to the vast provision we have to make for rearmament. Even as we look at the estimates for the present year, we can be fairly certain that before the year is ended they will be altered. There is in the present Budget a margin allowed for supplementary estimates, and more than likely that margin will have to be increased during the year.

It appears to me, therefore, that there are two ways in which we might look at this Bill and the Budget which lies behind it. We might, as some hon. Members have already done, concentrate on the question whether, within the limits of the tax revenue, the methods proposed by the Chancellor are the best; or we might, as has been done by the right hon. Gentleman the Member for East Edinburgh, concentrate our attention rather on the question whether the amount of tax revenue should be larger, or, in other words, whether the allocation of expenditure between loan and tax is justifiable. On the first question I do not propose to say much. There are small variations in the tax proposals within the limits of the Budget. I may perhaps be permitted to refer to one, namely, the reduction in the Entertainments Duty on the living theatre, because I have had the privilege of working with other Members to persuade the Chancellor of the Exchequer that this was a wise and justifiable reduction to make. The fact that it has excited no opposition from any quarter is some justification for the point of view we took. There have been other alterations to which reference has been made, such as the Motor Vehicle Duty and the abolition of the Patent Medicine Stamp Duty, and in certain directions we hope on the Committee stage to persuade the Chancellor to make changes. On the manner in which the revenue is provided, there has been little criticism. As the right hon. Gentleman the Member for Caithness and Sutherland (Sir A. Sinclair) said, the Budget might have been worse. I am sure the Chancellor will not judge the criticism merely by its existence, but by its volume, and this year the volume of the criticism of the tax changes and proposals has been very small.

It is not surprising, therefore, that the Opposition has based its major attack on the question of the amount of revenue which might have been collected. I think that that is clearly what the right hon. Gentleman the Member for East Edinburgh was endeavouring to do. He wants less money to be provided by loan, and he seemed, by his argument, to agree by implication that existing measures of taxation are now stretched pretty well to the limit. He proposes, in order to secure more revenue, to go outside the ordinary and existing methods of taxation and resort to a new, extraordinary and unorthodox measure. I want to consider this proposal which, according to the right hon. Member for Keighley (Mr. Lees-Smith) would mean that no portion of expenditure need be met by loan. I do not know whether the Opposition have fallen into discord on this matter, but the right hon. Member for East Edinburgh this afternoon seemed to indicate that some money would still have to be provided by loan, whereas the right hon. Member for Keighley said that this proposal would extinguish all need for loan. The basis of the proposal by the Opposition is that the times are unusual; we can all agree on that. Also that we are now living in a state of emergency; we can all agree on that. We can agree, too, with the rhetoric at the end of the speech of the right hon. Member for East Edinburgh, but it did not seem to me a sufficient argument to justify a proposal of this character to suggest that it merely satisfies a sentiment.

In order to justify his proposal for an emergency tax on wealth the right hon. Gentleman must do something much more than that. It is interesting to note that he and the Opposition generally now prefer this phrase "an emergency tax on wealth" rather than the phrase "conscription of wealth," or the other phrase, now a little fly-blown, "a capital levy." I was interested to listen to his speech on 26th April, when the right hon. Gentleman suddenly produced this proposal for an emergency tax on wealth. I took it, at first, for an almost unpremeditated aside. I was more surprised when I heard him say that he outlined it in embryo last year. I have searched his speeches and have been unable to find such a suggestion. Last year he said something quite different about the outlook of our national finances. He said: What is the only way in which we are going to meet this bill? I emphasise the phrase "the only way." He went on: The only way is by a vast increase in the national income as a whole; and there is really no reason economically, potentially, why that should not come about.—[OFFICIAL REPORT, 26th May, 1938; col. 15–36, Vol. 336.] In saying that he was agreeing with the sentiments expressed by many hon. Members last year, including the hon. Member for Hastings (Mr. Hely-Hutchinson), the hon. Member for Stockton-on-Tees (Mr. H. Macmillan), myself and others. We can agree with that sentiment. We took the view, and we still take it, that revenue now can best be increased, not by increasing the ratio of taxation to total wealth, but by securing that our economic and financial policy shall so be guided that the gross total of wealth shall be increased. Thus will it be possible to increase confidence and to create a condition in which enterprise may prosper and wealth increase. The right hon. Gentleman, however, has this year apparently abandoned that notion. He has changed his tune and now wants an emergency tax on wealth. He relates it to the mobilisation of man-power. The phrase "the mobilisation of wealth" is a very easy phrase like "taking the profit out of war." It indicates a sentiment with which we can all agree, but I think we may rightly feel some suspicion with the proposals now made and wonder whether they are made because they are considered to be the most direct way of meeting the expenditure with which we are faced.

Some us feel that the Opposition see in the present abnormal times an opportunity to kill one bird while pretending to aim at another, to achieve the redistribution of wealth and, possibly, some degree of nationalisation under the guise of an emergency tax for purposes of defence. I have no objection to the redistribution of wealth providing two conditions are satisfied. The first is that the intention shall be frankly declared, and the second is that we should be certain that the result would not be a diminution in the total of wealth. Sentiment alone, particularly at the present time, is not a justification for a proposal such as this. We must be satisfied that any such proposal will really do the job.

Whatever gloss we may put on this proposal for an emergency tax on wealth, it is, as the Chancellor said, nothing more nor less than an annual capital levy. The right hon. Member says that his proposal is temporary, but I observe that neither to-day nor formerly did he set a term of time to this tax. What does he desire? I gather that he is not quite certain about it. From his earlier speech I gathered that he desired to extract from capital fortunes of more than £20,000 in value an annual levy at an average rate of 3 per cent. There is no doubt that on the occasion when he first put this proposal to the House he did propose a levy at the rate of 3 per cent.

Mr. Bellenger

1, 2, and 3 per cent.

Mr. Mabane

I certainly observed that during his earlier presentation of the case, so carried away was he by his own exuberance, that he managed in the short course of five minutes to increase the amount of the tax from £80,000,000 to £300,000,000. He began with a tax of 1 per cent. on fortunes over £50,000 and he ended within five minutes with a tax of 3 per cent. on fortunes over £20,000, which would bring in an amount of £300,000,000. That is his own proposal, and stated in that simple form such a tax would in practice clearly be a kind of Income Tax calculated in a different, an extraordinarily difficult, and a most unfair manner, devised, apparently, to let off the spendthrift and to penalise the saver—a kind of exaltation of the prodigal son. He does not appear to be quite certain about it, but I think the right hon. Member intends to add this tax to existing Income Tax, Surtax and Estate Duty, and if that is so it needs only a little simple arithmetic to demonstrate that, as the Chancellor of the Exchequer said, on a great range of incomes the amount actually taken would then be 20s. in the £, or even more. If that alone were not sufficient to put this proposal completely out of court I think there are quite compelling reasons why the House should now show its entire disaproval of and scotch at the very outset this proposal for emergency tax on wealth. I think this proposal, of which, unless we deal with it promptly, we shall probably hear a lot in the country, deserves condemnation as a means of meeting our present needs because it is not practical, because it is not fair and because it will be economically disastrous.

It is not practical. We have to imagine that if hon. Members opposite were in power they would have to present to the House a Measure indicating the manner in which this tax would be arranged. First of all that Measure would have to provide for capital assessment I gather that what my right hon. Friend had in mind is that the capital shall be assessed in the same way as estates are now assessed for probate, but it is clear that if in any one year we had to assess not merely the estates of those who had died but the whole of the estates in the country we should be presenting the Treasury with a task of almost incalculable magnitude. But the difficulties do not stop there. The calculation would have to be made not once but in every year, for capital values would vary up and down, some passing either below the taxable limit or above it. Therefore, clearly, the calculation would have to be made every year.

I do not know whether the Opposition feel that either the House or the country would support any such proposal. I think not. Then, even if they were able to suggest a reasonable method of getting over this difficulty of capital assessment they would be in further difficulties over the collection of the tax. They would be faced with this dilemma—are they going to insist on money, or will they accept assets of another kind? If they insist on money clearly they destroy the value of capital, because it is indisputably the case, as the hon. Member for Hastings said, that all would then be sellers; and if they are not going to insist upon money but will accept assets it seems to me that at best they will be getting not the money they want but only the title to the income while, at worse, they will be getting a lot of useless lumber.

Next, the proposal is not fair. Income Tax is fair. Of all taxes it appears to me to be the fairest. It falls upon all. A year or two ago we put upon the Statute Book a tax which I think is not fair, the National Defence Contribution. It is not so fair as Income Tax because it is discriminatory as between incomes and is not graduated. But if that is not fair how much more is this proposal of the right hon. Gentleman not fair. I take it that anyone with an income of £10,000 a year who was wise enough to spend it all would completely escape. The thrifty man who saves would be caught. If such a proposal did not stop saving altogether at any rate it would discourage it.

I come to my third point which is that the effect of such a levy upon the economic life of the country would be disastrous. It has been suggested that this proposal is but little different from the proposal for a capital levy which was made after the War. I suggest that there is a very little in common between this proposal and the post-war proposal for a capital levy. In my view the great argument for a capital levy after the War lay in the inflation that had then taken place. A capital levy then would not have been unlike the reconstruction of a company and getting down to bed-rock again. And, anyhow, the capital levy after the War was to be a levy once and for all. Today there is no inflationary tendency yet a tax of this character would undoubtedly tend to create a deflationary tendency, and thereby it would destroy confidence and destroy the sources of revenue on which we at present depend. In short it appears to me that this proposal of an emergency tax on wealth as proposed by the right hon. Member for East Edinburgh is nothing more than a clumsy attempt at the simplification of a problem which is not really simple at all.

We are all agreed that we desire to prevent the undue accumulation of wealth, and that in times of emergency all our material resources must be thrown in, but to achieve that desire is not a simple task and cannot be solved in this simple way. Before very long we may have to consider further means of enlisting our material resources for the great national purpose on which we are engaged. It has already been indicated, both by the Prime Minister and the Chancellor of the Exchequer, that some proposal to that end will shortly be laid before us. We are all agreed that there should be national service for wealth no less than for men.

Mr. Bracken

Will the hon. Member explain what he means by that?

Mr. Mabane

I was going on to explain the sort of thing which I understand to be meant by these phrases that are so commonly used, this talk about the "conscription of wealth." But I take it that the hon. Member will not differ from the general statement that in the event of war the whole of the resources of the country must be devoted to prosecuting that war to a successful conclusion. I take it that the hon. Member fully agrees with that, that silence, as usual, gives consent.

Mr. Bracken

I was waiting for an answer to my question.

Mr. Mabane

I wanted at the outset to know whether I had the agreement of the hon. Member to my main proposition that in the event of war we are all agreed that, whatever our possessions may be, they must be thrown into the national pool. I suggest that there are three, and possibly four, steps we might take which would certainly be practicable, which can be safely applied, and which will secure general assent. The first is the control of costs at the source in the rearmament programme. The right hon. Member for East Edinburgh knows as a member of the Public Accounts Committee that steps are being taken by the various Departments to control costs. We know perfectly well that that control is by no means complete or as satisfactory as we would wish it to be, but those who have had occasion to study in detail as members of the Public Accounts Committee the measures taken would certainly agree, on whatever side of the House they sit, that the measures being taken are improving as time progresses. The next step we should have to consider is a further use of the existing methods of taxation. It was suggested earlier that if there is further need then we must consider increasing Income Tax. I am quite sure that the country will accept further increases when it is clear the need exists.

The third method, and one which we should, I am sure, adopt in the event of another war would be to limit the area of spending more rapidly and more drastically than was done during the last War. It has been suggested that the Chancellor, by his increase of the motor licence duties, desires in one small direction to limit the area of spending. Clearly in the case of an emergency we should rapidly and drastically limit the area of spending by negative measures, by restrictions. Fourthly, if we then found it necessary to appropriate wealth for the national purpose there is then a further measure to be considered. It was suggested during the last War and secured, I think, a great deal more approval than the proposal for a capital levy, and that is the proposal for a forced loan. In the last resort it seems to me that a forced loan indicates what should be intended by the phrase "conscription of wealth."

By these four means which we may well have to employ progressively if the emergency continues, and certainly if ever we are flung into war again, and not by the one simple measure such as is suggested by the right hon. Gentleman, shall we meet our financial difficulties and carry through the struggle while maintaining our financial integrity. It is clear that we are already beginning to develop these methods as the emergency continues, and I am certain that such measures are likely to achieve the end desired far better than any of the proposals we hear from the other side of the House. Surely it is one of the greatest tributes to the present Finance Bill that the Chancellor of the Exchequer has been able to introduce it without shaking the confidence of business and of finance in this country, I cannot imagine that any proposals coming from the other side of the House, particularly if they were of a character such as has been suggested by the right hon. Member for East Edinburgh, would have been similarly received. On the contrary, they would be likely to destroy confidence, likely to destroy business enterprise, and for that reason I much prefer the proposals now before the House to any which I can imagine might come from the benches opposite.

6.29 p.m.

Sir J. Simon

It might, perhaps, be convenient to the House if I now deal briefly with some of the matters which have been raised. The Financial Secretary, who will be speaking at the end of the Debate, will deal, no doubt, with other topics if they have not yet been sufficiently developed. On occasions like this two kinds of questions always arise—queries about the actual proposals in the Finance Bill regarding particular taxes and the like, and more general questions which, I agree, are specially appropriate to a discussion on the Second Reading of the Finance Bill. I should like to say something on both classes of subject, but I would make one or two comments to begin with on the more detailed criticisms.

Take, for instance, the point that was mentioned more than once by hon. Mem- bers and particularly by the hon. Member for East Birkenhead (Mr. White). He called attention to Clause 19, the object of which is to extend the powers of the Treasury to obtain information from employers about payments which they may make to persons employed in their trade or business, payments which may go by the name of expenses, but in some cases should be further examined. When we come to discuss the Clause I do not think the House will doubt that it is right that the Inland Revenue Department should have further powers than they possess to-day. We really must see to it that matter which is properly subject to Income Tax does not escape Income Tax because it is called by the wrong name. This does not mean that you should seek to charge Income Tax on expenses as though expenses were a profit; they are not a profit, they are an expense. If cases arise, however, in which a man receives, in addition to his salary, a very generous and even extravagant additional payment which is labelled "expenses," whereas in fact it does not represent his expenses at all, but is in the nature of an additional salary, everybody would agree that that sort of case should not escape proper treatment.

I wish to make two points quite plain, because I know that many people are concerned about this Clause for fear it may involve too elaborate an inquisition and may even develop into something which is oppressive. The Clause does not make payments for expenses to employés liable to tax. It does not extend the present area of taxation at all. If the payments in fact are expended by the employé to meet expenses in performing his duties they will not attract Income Tax in future any more than they have done in the past, but if they are not so expended, and if, in substance, they constitute remuneration, they are liable to tax under the existing law. A good many people, I dare say quite honestly, imagine that because the sum they are receiving is called expenses, and because they get it for expenses, they are justified morally and legally in saying: "That need not be included in my Income Tax return because it is expenses."

Mr. Bellenger

May I interrupt the right hon. Gentleman? I take it that the purpose of the inquiry will be to ascertain whether such payments are expenses or income? If it is found that they are not really expenses, how will the tax fall? On the firm who remit the expenses to the employé and under Schedule D, or will the individual be taxable on that part of his expenses assessed as income?

Sir J. Simon

I think the answer to that is clear. We are not discussing at the moment the details of the Clause, but if it is the case that a company pays to a director a director's fee of £500 a year and £2,000 for his expenses, and if, in point of fact, the director does not incur £2,000 in expenses but something much smaller, that director ought to pay Income Tax not only on the first sum but on part of the larger amount. I think that is a principle which everybody recognises.

Then there is the second point, which I wish to make plain at once, that if this necessary power which we wish to have were used foolishly and without real reason, it might produce in many cases a great deal of wholly unnecessary anxiety and a great deal of unnecessary work. I realise that, and I have had in mind what I know the Inland Revenue also realise, that instructions shall be issued that this power shall not be used to put concerns to the trouble of reporting all such payments, however small and however obviously reasonable. It is not in the least necessary to do that. If we get this power we intend to use it in practice so as to exclude from the return of expenses those payments which are really no more than a recoupment of or provision for expenses actually incurred by an employé in the carrying out of his duties. It would be intolerable if everybody in the country were to be made to answer questions about this matter because he had allowed a proper expense to a servant or an employé.

I am confident that the good sense of the Department and the co-operation of all reasonable and honest citizens can make it possible to apply this new power, if we are granted it in this Finance Bill, in a way that is reasonable in itself and satisfactory to every honest citizen, who knows, of course, that he ought to pay Income Tax on what is really the total of his genuine income. I want to make that observation now because I wish to relieve anxiety which is felt, I know, in some quarters, lest this principle should be applied so literally that it becomes an unnecessary burden.

Mr. Watkins

In view of what the right hon. Gentleman says and which seems to be admirable, is it necessary to fix the limit so low as £15 a year? Would not that low figure mean that employers and employed would be put to an extraordinary amount of unnecessary work with no advantage whatever to the Treasury?

Sir J. Simon

I am obliged to the hon. Gentleman for making the suggestion. It is very proper that he should make it now, and perhaps he will excuse me if I do not actually deal with it. It will be considered, and when we come to discuss the Clause I hope that we shall come to a general agreement on the matter.

Mr. Macquisten

If the trade unions are to be put under the microscope in this matter, might it not be most embarassing?

Sir Adam Maitland

Does the right hon. Gentleman not think that the kind of case which he has in mind might be met by asking individuals when making their returns to state the amount which they receive either by way of remuneration or by way of expenses? It would then be for the Revenue to determine from the individual returns to what extent the tax should be charged without involving a great deal of unnecessary work on the part of accountants.

Sir J. Simon

I am not sure whether that would meet the case, but my hon. Friend has been kind enough to make the suggestion here and now, and I will have it considered so that we may deal with it in the right way when we come to Clause 19.

There is another point on which I should like to make an extremely short statement, because we are not yet discussing the Clause in question. I have very much in mind the advice which was given us in regard to the Medicine Stamp Duty. I would only say with reference to that proposal that it is not correct to say, as was stated by an hon. Member below the Gangway, that I took the action precipitately. As a matter of fact, I mentioned the topic in my Budget Speech a year ago, when I said that I must examine it closely before I decided what I could do. There has been most careful work done on the subject by a Select Committee of the House, to whom we are all grateful. I have examined the report of the Committee most carefully.

The Committee were entirely convinced that the present archaic scheme of taxation should be repealed and they suggested something to take its place. I should naturally much prefer on this subject to lose no revenue at all, because this is not the time to lose revenue; I am just as conscious of that as is anybody else, and perhaps more so. In point of fact, the present duties could not be maintained, for the reason that they are unworkable and that we are challenged whether we are working them lawfully. I am advised that it would be impossible to say that they are being worked lawfully as a practical scheme. I hope that the House will accept from me the view that the alternative scheme suggested, though worked out diligently by the Committee, is not a practicable scheme. Naturally, members of the Committee will not agree with me, but when we come to discuss the matter in detail I think I shall be able to show very good reasons.

I must in candour add that I do not think that the proper way to deal with quack medicines—even if you could identify them by this sort of process—is by charging a small tax on those which are sold. It is essentially a matter for control and regulation by the law of public health. I cannot think it is sound to say: Some medicines are good and those we are not going to tax; others are quack medicines and these we will permit people to sell provided that they pay a small tax. It is the most difficult thing in the world to draw a line between a good medicine and a bad. Hon. Members will no doubt appreciate the kind of difficulty which faced the Chancellor of the Exchequer when he had to do something in the matter. The hon. Member for East Birkenhead asked whether there was any fear that by such a repeal of the Stamp Duties anything would be done to injure public health. That was a very important question and in connection with it I would call attention to an answer which was given on Tuesday, 23rd May, in this House. In answer to a question whether the Minister of Health was satisfied that the proposal in the Finance Bill to repeal the tax on proprietary medicines was in the interest of the health of the nation, the answer given by the Parliamentary Secretary to the Minister of Health was: My right hon. Friend does not think that the repeal of the Medicine Stamp Duty should have any adverse effect on the health of the nation."—[OFFICIAL REPORT, 23rd May, 1939; col. 2117, Vol. 347.] Before deciding on the subject I was concerned with that aspect of the matter. Although I had nothing to do with the answer to that question, and I saw it only by accident in the OFFICIAL REPORT, it corresponded with the information of a witness before the Committee, on behalf of the British Medical Association who, I understand, expressed the same conclusion. I do not ask that we should discuss to-day this extremely difficult question of quack medicines and all their ramifications, because it is a very large subject. There is, for example, the question of advertisements in many of our newspapers. We had better not discuss it now, but I thought it right that I should make that statement because it was raised by hon. Gentlemen.

Mr. Lathan

While the Committee concerned in reviewing this question were appreciative of the difficulties, and were, I think, agreed on the point to which the right hon. Gentleman has referred, they did not recommend repealing the duties. Is the right hon. Gentleman aware that there is the greatest apprehension that the repeal of the duties may mean additional income to those who have purveyed these patent medicines and so-called remedies, and a corresponding loss in revenue?

Sir J. Simon

I am most unwilling to prolong the discussion on this subject, but let me answer one of the points put by the hon. Gentleman. He speaks as a member of that Committee. Of course, it was some little time ago but, on looking at the report of the Committee, what I notice is: Your Committee reached the following conclusions, and the first conclusion is: (1) that the existing Stamp Acts passed over 100 years ago are out-of-date, largely obsolete and quite inappropriate to modern requirements. The Committee proceed to say: Your Committee therefore make the following recommendations, and the first recommendation, the first of all, is: that the Acts of 1802, 1804, 1812, Section 2 of the Finance Act, 1927, and all other existing legislation on the subject of the Medicine Stamp Duties, be repealed.

Sir Reginald Blair

As another Member of the Committee, may I point out that further on we asked for a simplification of the law? We never thought that it was going to be repealed altogether.

Sir J. Simon

I understand my hon. Friend's feeling, and I sympathise with him. All I am saying is that there is really no difference between us in our view that the existing laws are in fact perfectly unworkable, and, indeed, I am advised that, in our attempt to work them, it was extremely doubtful whether we were not ourselves breaking the law.

Mr. Macquisten

Is it not the fact that all this money will simply go into the pockets of the newspapers who do the advertising?

Sir J. Simon

I have no doubt that I shall hear a good deal on that point when we come to the Clause, and I shall be well prepared to deal with it. On the Second Reading I cannot be expected to argue the case from beginning to end.

I was asked a more general question by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick- Lawrence). He pointed out that, large as the proposals of the Budget were for raising money, the development of our defence preparations continued to increase, and it was not until the day after the Budget speech that the announcement was made on the subject of compulsory military training. The right hon. Gentleman suggested that this might have the result of throwing the calculations of the Budget out of scale. The House may remember that I did point out that, since my previous statement, I think in February, of the way in which I was contemplating the division of defence expenditure this year between loan and taxation, there had been a substantial increase, and I selected a figure which I thought would mean another £50,000,000 added to the figure I had first mentioned, and I indicated that it might be more. I do not think that the particular circumstance to which the right hon. Gentleman referred requires me to revise my figure now. I had, of course, thoroughly in mind the decision which was announced on the following day, but I was not in a position to mention it when I made my Budget speech. I think there are quite good reasons for hoping that we shall be able to keep within the sort of limit which I had in mind; at any rate, I do not think the year's requirements ought to be greatly in excess of the figure I named. I take the view that there is reasonable ground for hoping, in the light of the general trend of recent days and the diminution of unemployment, which I hope will be found to be continuing, that the revenue yield will be favourably influenced by those facts, and that the Budget outturn may show a surplus available for covering any further Supplementary Estimates. Therefore, I have been disposed to form the view that the very substantial additional provision of £50,000,000 does not require to be still further revised in the light of what has now been announced. That is not to say that the new proposals are not, from the point of view of finance, a very serious addition. Of course they are. But I am concerned with the provision for the year, which is already some way through, and I am not disposed on that ground to revise the figure I have presented to the House.

I should like now to say a word on the subject which was developed by the right hon. Gentleman to-day and which was also examined by other hon. Members including my hon. and learned Friend the Member for Montgomery (Mr. C. Davies) and my hon. Friend the Member for Huddersfield (Mr. Mabane). I agree entirely with the right hon. Gentleman opposite that it is possible to conceive of the construction of a system of taxation of accumulated wealth either by taking something from the owner of it every year as an annual percentage, or by the process of exacting a large fraction of it in the form of Death Duties when the property changes hands on the death of the owner. I agree that either method is conceivable as a fiscal instrument, but it seems to me that there are very considerable practical difficulties in preferring the method of an annual percentage taken from the capital total. It is a very serious point to be weighed that that would necessarily mean an annual valuation. Anyone who has had anything to do with the valuation of an estate when Death Duties accrue, knows that it is a most complicated business. The revenue autho- rities spend a great deal of time on it, because it is necessary to do the whole thing as exactly and justly as possible; and complications can easily arise, and do arise, which may cause such a valuation to extend even over several years. I think the right hon. Gentleman suggested that there might be 50,000 cases to be dealt with in the course of the year, and on these figures, merely from the point of view of practical administration, I should have feared that it would be an almost impossible matter for the revenue authorities on the one hand and the representatives of the owners of these accumulations on the other hand. I do not in the least agree with the further observation of the right hon. Gentleman that it would be so much easier to do this because the owner was alive. I should have thought it would be much easier to do it when he was dead. I am convinced that we should have thousands of people complaining, "What in Heaven's name is the Revenue doing? It was only yesterday that, with a great rush, I finished my valuation for last year, and here I am asked now to pro duce the figures for next year." Properties change in size, and, what is much more important, in value, from year to year—

Mr. Macquisten

From day to day.

Sir J. Simon

I hope the right hon. Gentleman understands that I am not saying that on this ground it is an impossible principle, but one of the most important tests of a good tax is whether it is devised in such a way that it can be administered without inflicting on people an incredible amount of trouble and inconvenience. As I said before, I can conceive that you might take an annual percentage of the global total of an estate, and that you could regard that as a different way of stating what would happen if a larger amount were taken at longer intervals, but I have the greatest difficulty in seeing how you can do both. It is no use blinking the fact that the Death Duties are tremendously high. That is a matter about which there is not likely to be any difference of opinion; anyone can test it by looking at it. I can understand the argument that, even after heavy taxation, the richest people are left with more than others have, but that does not alter the fact that the Death Duties are tremendously high, and if you had, in addition to the Death Duties at their present extremely high rate, this additional tap, tap, tap every 12 months, and put the two things together, I cannot see that you are going to create a very successful fiscal system. Unquestionably you would diminish at a very rapid rate the size of the estates, you would reduce at the same time the Income Tax or Surtax which they produce, and I should fear that the result of such a system would be that you would not in the end bring to the resources of the State the constant large contribution that we are seeking, and would not conserve the sources of future Income Tax and Surtax, but would, by a steadily descending process, slide and slither down until the country had lost the factor on which it depends for taxation, that is to say profits and income. [Interruption.]I have no doubt that the hon. Member for West Fife (Mr. Gallacher) has a different theory, and it may be that it would work very well, but I am thinking, in my modest, bourgeois way, of the practical business of producing a great deal of money this year, next year and the year after for various national purposes. I throw out these observations, not in the least as conclusive or final, but as reflections that I would put forward to the right hon. Gentleman.

I desire to say just a word on the phrase "conscription of wealth." I am rather sorry that this phrase has come into common use, because it appears to me to be one of those phrases which may easily be employed as a substitute for thought and for really fairly facing what the true position is. I certainly count myself among those who consider that the people who are fortunate enough in this country to have the largest incomes and the largest accumulations of wealth are the people who ought to be made differentially to pay a big contribution. I have not the slightest reservation about that. But really, if we are to employ the word "conscription," a word which has been long in use, I suppose it implies that force will be applied, and that you have to do the thing whether you like it or not, because it is done in the interests of the State, to make the State stronger. If these are the tests of the conception of conscription, they must undoubtedly apply to most direct taxation. I can assure the House that there are very few volunteers in the payment of taxes. As far as I know, as regards taxation everyone is a conscript, and there are no conscientious objectors—

Mr. Gallacher

But there are a lot of artful dodgers.

Sir J. Simon

The Income Tax payer who came forward and said that he would willingly make his contribution, if it were not for the fact that his conscience told him it was wrong, would get short shrift. I should have thought it might well be said as a matter of analogy that taxation of incomes, etc., is a form of conscription. My only concern, however, is whether the contribution to be got from the very rich, whether in respect of income or of total accumulation, is adequate. Do not let us make the profound mistake of thinking that a country which has to raise every year the sort of sums we are now spending could get them all out of the very rich. It simply is not true. Anyone who looks at the revenue returns sees that the proportion between the number of people who are in that fortunate position and the great mass of people who enjoy more moderate wealth is such that it really is not arithmetically possible to say that you can get the whole of this vast revenue out of a short list of specially fortunate people. Get from them by all means the differential contribution which is right, and no doubt can be and ought to be made, but do not fall into the delusion, because the circumstances of the country do not admit of it, that you can raise such sums as are now needed for the purpose of our annual revenue by the process known in certain quarters as soaking the rich. Fortunately or unfortunately, the process of raising revenue is bound to be spread throughout the population and it is not possible to say that a limited number of people of great wealth ought to be made to carry that great burden.

Now I wish to endeavour to meet the challenge about a general review. As I conceive it, a Chancellor of the Exchequer who has the responsibility of proposing to the House of Commons the scheme of finance for the year has to do his best to produce a plan which will satisfy several conditions, and it is not at all an easy thing to satisfy them all. What is the prevailing characteristic of the present situation which is bound to govern his plan? I think it is this: We are living in a period of rising expendi- ture, and the main explanation of that rising expenditure is Defence expenditure and rearmament, though there are other elements too. I am not going to touch on the subject of the social services. I know how some hon. Members opposite feel about it, but let us remember that we have succeeded in doing what I do not think any other country has done. We have succeeded in fact in maintaining, as we all mean to maintain, our social services. We are finding this year something like £50,000,000 out of taxation more than was found—I will not go back to a particular year—some years ago. Our social services unquestionably as a whole are the finest in the world, but we must not eat into them.

In the second place, it is essential that we should so frame our Finance Act as to maintain confidence as far as we can. There may be Members who do not think that as important as I do. I am looking at it simply as a necessary condition of raising revenue. There is nothing easier than to find your revenue slipping away. This very year the return from Income Tax was not as big as I hoped it would be. Undoubtedly that is explained by the shocks and the anxiety that we have passed through. You ask for a principle. Here is one. I said to myself, "I must frame this Budget in such a way as will not, by the very proposals of the Budget, further tend to undermine any growing confidence." There was a very special reason why I should do that. In February I announced that out of a total charge this year of £580,000,000 for defence—an enormous sum—it seemed to me that we ought to divide it in the particular way that I mentioned as between borrowing and taxation, and undoubtedly that announcement had a directly encouraging effect on the creation of some confidence where confidence was needed.

In April I had some extra difficulties to face. I asked myself, "Can I properly devise a Budget in such a form as will not knock down again that rising spirit of confidence which I believe is going to be so important for all of us, not only psychologically but from the point of view of future financial prosperity? Then comes this, which may not be a principle. It may be called nothing more than a rule of thumb but it is a necessary thing to bear in mind. I should like the House to realise that it is not possible to make between one year and another so stupendous an increase in taxes as to fill the whole of the gap that has to be filled in expenditure rising as rapidly as our expenditure has risen in the last year.

The right hon. Gentleman the Member for East Edinburgh has moved an Amendment which reproaches the Budget because it relies on borrowing. His patent medicine or specific would not bridge the gap at all. You cannot, by simply turning the screw of taxation between one year and another, fill up such an enormous gap. On the other hand, it is the height of imprudence and folly to seek to borrow it all. There is a very definite limit to what you can borrow and, broadly speaking, it is conditioned by the amount of money that there is to borrow. Savings are normally invested or used to assist the financing of business, or lent to local authorities, or to foreign countries though this is not a time when we can do that and we have to put restrictions and limits on foreign issues. But there is a certain amount which you may fairly expect to be able to borrow and, as long as you bear that in mind, I believe it is possible in difficult times like these to carry the finance of the country by resort to a certain amount of borrowing combined with a certain amount of taxation.

Consequently my principle was this: We must not go beyond the point which is safe for borrowing. We must not make such increase in taxation as is going to dislocate the whole machine and throw everyone into gloom. We must see whether it is possible to divide this great burden in such a way as is best calculated to cause these two sources of strength to be used together. Whether my division is right or whether someone else's is better no one can say, but what I do know is that the load of taxation which we are asking the people of the country this year to carry is a most tremendous burden. I believe it is possible for us to get the assistance of borrowing to provide the sum that I have mentioned and that we shall succeed in meeting the difficulties of this year by a combination of the two.

The right hon. Gentleman referred to what the Prime Minister said about the future. It will be no good for any of us to be too lighthearted and careless about the future. I certainly take the view that we are living in times and under conditions which cannot possibly be expected to go on for ever and ever. We are passing through a period which we all hope will soon be seen to end in a turn for the better. That does not depend merely on finance but on a lot of other things. If you challenge the Chancellor of the Exchequer as to his principle, you are not entitled to accuse him of living from hand to mouth because he recognises the undoubted fact that we are passing through a critical period which we have to finance by methods such as this. I hope, therefore, that the House will feel that I have not acted without any principles, and I think the principles which I have expounded are principles which will commend themselves to the House of Commons.

7.12 p.m.

Mr. Benson

The right hon. Gentleman has told us that the principle upon which he constructed his Finance Bill is that we should not shake public confidence. We have often been told by the party opposite that an increase in direct taxation is one of the surest methods of shaking public confidence. If we had in the country an informed public, surely one would expect that confidence would be shaken far more by the State having to borrow because it is having a series of deficits rather than by the State meeting its expenses year by year out of revenue. Surely it is deficits which should shake confidence rather than increased taxation. The hon. Member for Birkenhead (Mr. White) raised a very interesting point, which was taken up by the hon. Member for Huddersfield (Mr. Mabane)—the question of war-time finance. I think really it is time we were considering—not necessarily in the House of Commons, because it is rather a complicated matter—what we propose to do from a financial standpoint if we have to face war. It is certain that our present financial machine and the old methods adopted in the last war are not going to carry us through, and that no financial structure is going to stand the piling up of another £7,000,000,000 on top of the present debt. If we have to face war we shall have to envisage an entirely new financial and possibly industrial structure. The hon. Member for Huddersfield suggested control of costs. We are trying to do that now—more or less ineffectively. He suggested the extension of existing taxes; but he himself said that already these taxes were at a maximum. He suggested a forced loan instead of a capital levy; but a forced loan has all the disadvantages of a capital levy. It has to be based on some valuation of assets, and to the State it has the disadvantage that it is a loan and not an influx of assets.

The last War was an example of how a great national emergency should not be financed. We finished that War with a National Debt of £7,000,000,000 or £8,000,000,000. We ought to have finished with a National Debt of not more than £2,000,000,000, against which we should have had assets—doubtful assets, I admit—of loans to other countries amounting to £1,000,000,000. We borrowed £1,000,000,000, which, in effect, we lent to our Allies, and we sold securities of foreign investments amounting to approximately another £1,000,000,000. The whole of the rest of the material costs of the War were created year by year in this country, and the wealth that was created year by year, month by month, ought not to have been allowed to flow into private pockets and then lent to the Government. Had we taken the wealth as it was created, our total increase in debt would have been £1,000,000,000, which we borrowed from America, and our total decrease in wealth—apart from human life—£1,000,000,000 of assets sold abroad. We shall not be able to finance our next war in that way. We shall certainly have to see that the cost of the war is borne by the day-to-day creation of wealth in this country, and there will be no possibility of the loan-monger intervening between production and the community.

If I may get back to something more germane to the Finance Bill, I should like to refer to the evasion Clauses. I see that the Chancellor is still going on with the slow business of trying to stop up one hole at a time. I am sceptical as to whether he will be any more successful now than he has been in the past. I am very doubtful whether he will get any increased yield from his increased Surtax, because he is also enormously increasing the incentive to avoid Surtax. The tremendous avoidance of Surtax which has taken place, and which I hope to show is still taking place, dates very largely from the increase in Surtax that took place in 1929 and 1930. Surtax then jumped from 6s. on the maximum income to 8s. 3d., and the result was an enormous increase in evasion. Income Tax and Surtax now run up to 13s. 9d. on the top incomes.

Mr. Hely- Hutchinson

Will the hon. Member remember what Government was in power in 1929 and 1930?

Mr. Benson

I am not concerned with what Government was in power; I am merely stating a fact. Nor am I concerned with making debating points against the party opposite. If you put Surtax at 13s. 9d., you are putting an enormously increased premium on evasion.

Mr. Macquisten

And people am also not trying to earn the money.

Mr. Benson

I am not concerned with that now. The Chancellor has increased his safeguards against evasion simply by one or two Clauses which really come down to one very tiny, narrow point. I said that evasion was going on on a large scale. I want to give some facts to show that that is so. I am willing to admit that a good deal has been done to prevent what I might term the cruder forms; transference of assets abroad, I am told, is now practically impossible as a method of avoidance; but it is quite obvious that there are other methods still going on. It is very curious that although the country as a whole has completely recovered from the 1929–31 world economic slump, and is possibly even wealthier than before 1929—[Interruption.] The index of production is from 21 per cent. to 30 per cent. higher than in 1929. There are more than 2,000,000 more people employed than in 1929. Surely that is an indication that the wealth of the country has increased; and if we take the taxable income of the country, and exclude from it the taxable income of the weekly wage earners and of the Surtax payers, we find that from 1929 until now there has been a sharp increase.

I think there is every reason to say that the country is wealthier now than it was before the great slump, but the curious thing is that this recovery—I will not press the question of increased wealth; I will take my stand on the fact that we are no worse off than in 1929—appears to affect everybody but the Surtax payer. Wages are up, Income Tax is up—[An HON. MEMBER: "Surtax is up."] No it is not, except the rate. The yield is not up, and neither is the amount of income coming under review for Sur- tax. If we take 1928–29 as the basis—that is the first year in which Surtax was separately assessed—and compare the figures with those for 1936–37, which are the latest given in the Board of Inland Revenue returns, we find an extraordinary thing. We find that Surtax income is down—and down very much more in the higher ranges than in the lower ranges. Where the incentive to avoidance is greatest, there is the greatest drop. If you take Surtax incomes below £10,000, the drop is only 11 per cent., but on those over £10,000 the drop is 31 per cent. Does anybody really believe that in the period between 1928–29 and 1936–37 the very rich really lost one-third of their income?

Mr. Hely-Hutchinson

There is no doubt about it.

Mr. Benson

There is certainly no doubt that their returns suggest that, but whether their returns are accurate is an entirely different thing; and I dispute very strongly any suggestion that those returns are accurate. The Chancellor of the Exchequer, quite unintentionally, in his Budget Speech gave evidence that avoidance was still going on. He referred to the fact that last year he had received an increased yield from Surtax, and he said that it was materially due to the evasion legislation. If that is correct—and nobody has a better chance of knowing than the Chancellor—what has happened to the increase in prosperity that seems to have missed the Surtax payer? In the year 1936–37, to which the Surtax returns for last year applied, there was shown in non-Surtax incomes an increase of £130,000,000. It was only the Surtax payer who did not share in this expansion. There should have been a double growth in Surtax returns: a growth as a result of our tax evasion legislation, and another growth as a result of the Surtax payer sharing in the increase in our national prosperity that year. But there was only one growth, which was due to legislation. Obviously, that means that there is still avoidance going on, and the Surtax payer, although caught partially by the legislation, was able to sidestep his share in the increase of national prosperity.

Colonel Sandeman Allen

Has the hon. Member considered the effect of high Death Duties on Surtax payers in recent years?

Mr. Benson

I am glad the hon. and gallant Member has referred to that, because I am going myself to refer to it in a moment—or not so much Death Duties as estates coming under review. Either there has been a redistribution of wealth, a shift of wealth from the very rich down the social scale, or there has been avoidance. There is no third alternative. Let us for a moment examine whether there has really been any redistribution. I think we shall find that that explanation simply will not stand. In the first place, we have the long-term examination of such statisticians as Messrs. Danuls and Campion, of Manchester University, who inquired into the distribution of wealth between 1914 and 1934. After the most careful examination, they came to the conclusion that there had been no wealth shift. In 1914, 60 per cent. of the wealth of this country was held by 1 per cent. of the population, and that an identical amount of wealth was held by exactly the same percentage of the population in 1934. Mr. Colin Clarke in 1937 made a similar calculation, that the most remarkable thing about our social system was the relative stability of the economic distribution of wealth. On a long-term scale, sccording to our economists and statisticians, there is no evidence of this extraordinary shift of wealth which the Surtax figures would seem to suggest.

The hon. and gallant Member for Birkenhead, West (Colonel Sandeman Allen) raised the question of the Death Duties. Here we have, in the annual returns for estates coming under review for Death Duties some index of the actual distribution of wealth. Had there been this extraordinary diminution in the wealth of the very rich, it ought to have shown itself in the estates that came under review for Death Duties. If there was a decrease of 30 per cent. in the incomes of the taxpayers with £10,000 a year and over, that decrease ought to have shown itself, not in the amount of estates coming under review, but in the proportions of those of very rich folk. I am not trying to argue that because the value of estates has gone up in 10 years, therefore incomes ought to have gone up—differential rates of interest make that rather complicated—but it is fair to say that if you get an enormous decrease in the amount of the incomes paid, while at the same time the incomes of the rest of the community are either as large as or greater than they were, there ought to be some shift in the proportion of the estates over the previous 10 years, but if we turn again to the Board of Inland Revenue returns, we find that there is no such shift. Take the proportions of the three groups—up to £10,000, between £10,000 and £100,000, and between £100,000 and £1,000,000. For the year 1928–29 the proportions were 27, 39, 23; 10 years later they were 31, 41, 21—practically no change at all. I hope the hon. and learned Member for Ashford (Mr. Spens), if he is going to reply, will explain how it is that you can get an enormous shift in the proportion of incomes, but no shift in capital values.

More than anything else it is the fact that the very rich are still, when they die, presenting for taxation exactly the same proportion of estates that makes me convinced that that drop of 30 per cent. per annum in the incomes of the over £10,000 a year Surtax payers is not a real drop, but a fictitious drop, and is largely due to some form of tax evasion or avoidance. We have very largely stopped the cruder forms of evasion, but I am told that there has recently been a very large development of the formation of irrevocable trusts for settlement upon children, not under, but over 21 years of age. I do not raise the question of whether this is or is not justifiable. We are discussing the question of the yield of taxation, and our prime concern is the defence of the fisc. If it is found that for the purpose of avoiding high differential taxation, parents are making large settlements upon their adult children, this House will have to take cognisance of it, and it may be that we shall have to raise the age at which the income remains the income of the settlor from 21 possibly up to 30. I am not suggesting that as a definite, concrete proposal. It may be that the age will have to be varied according to the size of the settlement, but it is obvious that we shall have to take some cognisance of what is obviously a very large loophole in our assessment of Surtax. Although it may be perfectly natural for parents to say, "I may as well give it to my son as to the Exchequer," we shall have to take steps to deal with the matter. In this Budget the Chancellor of the Exchequer has very largely increased the in- centives to evasion, and he has taken a very, very timid further step in checking it. It deals simply and solely with companies that own companies that own companies, and it is only one very limited method of evasion. What we shall have to do is completely to overhaul the whole question of our tax evasion machinery; we shall have to take far more drastic steps and, if necessary, adopt entirely new methods.

7.37 p.m.

Mr. Spens

I entirely agree with the hon. Member for Chesterfield (Mr. Benson) that every increase of Surtax increases the incentive to try and avoid it. There was a time when the increase of the duty on whisky had the result of less and less whisky being drunk in this country and less and less revenue coming in. Every time you raise taxation, there comes a point at which your revenue begins to decrease. I think the hon. Member is right, and that so high is the existing Surtax that at present measures are still being taken to avoid the payment of those rates. When the hon. Member says there is a drop of 31 per cent. in the highest classes, again I would not differ from him. I differ from him only in this, that I am satisfied that the method of avoidance now, when so many gaps have been stopped up, is that certain persons are giving in their lifetime to their children or relations what would ordinarily pass at their death, and that has the result of lowering them from the topmost category and of increasing the numbers in the lower Surtax category. The figures which he quoted appear to justify my assumption.

Mr. Benson

If these Surtax payers in the higher ranges are actually giving their wealth away during their lifetime, why does it not show when their estates come under review for death duties?

Mr. Spens

I will try and deal with that point in a moment. I hope both the House and the hon. Member will realise that I am answering a speech of which I had no forecast and which has given one a good deal of difficult conundrums to answer. The one thing that, it seems to me, this House cannot do at the present time is to prevent people giving away their property out and out. You cannot prevent people giving away their property to individuals any more than you can prevent them giving it away to charity, and I believe that the only loophole that really exists for a very rich man to get out of the highest category—and he will get out of it if he has to pay enormous sums, as he has at present—is by actually bringing himself into the lower category by giving away his property out and out. I cannot see how any legislation will stop that. You cannot say that what a man has given away out and out shall be deemed to remain his property when someone else is using it and has become the owner of it.

Let me now deal with the second point, which occurred to me thanks to a short discussion with an hon. Friend behind me. Surtax income, of course, does not come solely from capital; it comes as well from earnings, and there is a large proportion of the higher class of Surtax payers who in fact have an earned income as well as an income derived solely from capital. Therefore, you will never get an exact proportion or relation between income which is subject to Surtax and capital which subsequently passes at death. I promised that I would make only a very short speech, and I am supposed to keep my promise, though perhaps five or six minutes have been used in trying to answer the hon. Member for Chesterfield. I want to criticise from quite a different point of view these definite proposals for reducing tax avoidance. The hon. Member says that they are confined to one particular type or method of avoidance. Certain it is that the most savage attack is made in these Clauses on what is called the small private investment company. It is perfectly true that the small private investment company, known as the one-man company, has been a method which has been used since the Surtax got high as a method of trying to get out of the high rate into a lower rate, and, therefore, to the extent to which it is stopping up gaps against those who use the small private investment company to avoid taxation, all of us must be with the Chancellor in his efforts to do so.

The first point that I want to make is this: The small private investment company—what we used to call the small private company—was, of course, brought into existence by Parliament, not for anything to do with taxation, but in order to encourage the trade and industry of this country, to enable individuals who were trading, and who would otherwise be liable to their creditors to the last penny that they possessed, to limit their liability by incorporating themselves either in small private companies under the Companies Act or in small societies under the Industrial and Friendly Societies Act. So far as they actually carry on trade or business, the provisions against them in this Bill are negligible, but in the course of time it is constantly found that you get a small private company which is incorporated for the purpose of becoming the controlling company owning the shares of a number of industrial concerns. It is incorporated solely for the purpose of carrying on those businesses. It is a bit of machinery, and it is generally incorporated for the purpose of doing the finance of these subsidiary businesses.

Take a specific instance of a father and three sons, engineers, incorporating themselves in a small private company for the purpose of acquiring the shares of five or six actual industrial concerns connected with the engineering trade. The controlling company do the finance. They do not distribute anything like all their profits; they retain them for the purpose of financing the actual trading concerns that they control. The reserves and so forth are in the controlling company. Technically, under the definition of investment company in the Clauses with which we are dealing, that controlling company will come under the full rigour of this law. The persons who own that controlling company will be deemed to have distributed every year—no option is given to them—every penny from every available source of income, and they will be charged to Surtax on every single penny of that income. What was the previous position? It was that the Special Commissioners only made a determination to that effect if they were satisfied that money was not being distributed in order to avoid taxation, or, in other words, otherwise than for the benefit of the company. If you are getting at the people we all want to get at, you are certainly going to do severe damage to one type of small private company which is an important part in the machinery of industry in this country. Therefore, I suggest to my right hon. Friend and to the Financial Secretary that at some stage we should have a better definition of the investment company—the one-man investment company—which we want to get at than we have at present.

There are other types of these small companies besides those intimately connected with trade much narrower than the pure investment company which also have nothing whatever to do with avoiding taxation. Constantly, when you come to wind up a difficult estate, you do, in fact, find that you have a block of shares which control some big business, or something of the kind. These may be left in a man's will to, say, four girls, two of whom are infants and two just of age, who have no more idea of business or of how to deal with shares than any child. It is the commonest bit of machinery in these circumstances to incorporate a small private company and to put a trained accountant or somebody in charge of it, so as to preserve and work out the estate for a period of years for the beneficiaries. There, again, in the past the Special Commissioners have not dreamed for one moment of suggesting that that type of private company should have to distribute every penny of its income and make the people liable to Surtax if they did not do so. Whatever has been the reasonable business point of view to take has been taken without question, and if that type of company is to be caught under this provision, then we must look into the definition of an investment company which is going to be affected by this Bill. It is not companies only, because coming within the definition of companies are also societies under the Industrial and Friendly Societies Act, and so forth. This goes a great deal beyond companies incorporated under the Companies Acts.

Now I come to the investment company proper. These are very severe measures. The only criticism I have to make is one which I have made before. When you come to hunt your quarry like this, it is perfectly legitimate to do it as from this year or as from a date of which the Chancellor of the Exchequer has given a warning, but it is not legitimate to do it from a date long before there has been any warning, or before anybody has had any reason whatever to consider that they were doing anything which brings them within this sort of penal provision. I would draw the attention of the House to the provision of Clause 13 (5). This is a provision which we have never before seen in an Act of Parliament, the savageness of which, as a matter of retrospective taxation, almost appals one: The provisions of this Section shall have effect for the purposes of assessments for the year 1936–37 and subsequent years, and shall so have effect in the case of all persons notwithstanding that the liabilities of those persons to tax have been finally determined in whole or in part before the passing of this Act, and notwithstanding that all or any of the relevant powers of the Special Commissioners have, by virtue of something done or omitted to be done before the passing of this Act, ceased to be exerciseable. Retrospective legislation is all very well, but this is retrospective legislation which is going to open up assessments of four years ago, and actually, when we come to work out the provisions of this Clause, it will be found that some people will have paid tax which they otherwise would not have had to pay, and that those people who have paid tax and have their receipts for it and think that it is all over, will have their assessments opened up again for these series of years.

Mr. Bellenger

For two years.

Mr. Spens

In 1936–37, 1937–38, and 1938–39. The period is three years.

Mr. A. Edwards

Is it not true that the Chancellor of the Exchequer at the time warned these people?

Mr. Spens

No, but it is a very technical point. Parliament made a slip in the drafting of the Bill in 1937. In the Finance Act of that year they made a slip with regard to the sub-apportionment where one of the five members of one of these companies happened himself to be a company. It is a very technical point.

There is another matter to which I wish to refer. We are getting at people who are receiving, or have, or ought to have, received the income from these companies, but here, for the first time, we are putting into a Clause—Clause 15 (3)—that a Special Commissioner shall be given power to say that someone who is not a member of the company in any legal sense, who has no legal or equitable claim to any part of its income, but who, the Special Commissioners think, is likely to be able to cause the people who are controlling the company to act as he wishes, shall have to pay the whole of the Surtax on the income of the company. If we are going to give to any tribunal—and I have often said in this House that no one has a greater respect for the Special Commissioners than I have—the right of saying that A, B, C, D and E are five members of the company, but the brother of C, or the sister of E, or the mother of A are in a position that they may be able to get part of this income out of these members, and therefore they themselves are to be treated as members and are to be taxed, then I say, "Why not do what has been suggested before and give to the Special Commissioners the right generally, once and for all, to say that any transaction which in fact does avoid, and which, in their opinion, was entered into for the purpose of avoiding, taxation shall be invalid against the Crown? If you were to give this tribunal, or any other tribunal, such enormously wide powers to go the whole hog and to have a Clause to say that any transaction which did avoid, or which, in the opinion of the tribunal, was intended, or mainly intended, to avoid any transaction should be invalid against the Crown, you could not give them greater powers than you are giving them here. I do not know what sort of appeal there is to be against them. This is the strongest thing that this House has ever contemplated, and I view it with very considerable dismay.

7.55 p.m.

Colonel Sandeman Allen

I would like to join in offering thanks to the Chancellor of the Exchequer for the explanation which he gave of some of the Clauses about which some of us were worried. I was surprised when he repealed the Patent Medicine Stamp Duties, and I feel sure that he has gone into the matter very carefully and realises the effect it is going to have upon the chemists themselves and upon various other aspects of our national life. I, personally, am very grateful to him for having reduced the Entertainments Duty, because the hon. Member for Central Newcastle (Mr. Denville) and I and others had done a considerable amount of work to show that it was going to make a tremendous difference to the life of the theatre; we hoped that he would have been able to go further than he has done this year, but I am grateful for what he has done.

The object of taxation is to obtain revenue, but as far as the horse-power tax on motor cars is concerned, I am not at all satisfied that the Chancellor of the Exchequer will obtain the revenue he hopes to receive. No tax is popular, but when we are imposing taxation we have to look at four questions. First of all, Will it bring in the revenue that is required? Does it affect other taxes so as to reduce them in bringing in that revenue? Does it penalise a particular section of the community? How will it affect the national life? This tax in particular one might call a voluntary tax, because the taxpayer can control the amount which he is going to pay. He can refrain from buying a new car. He can buy a car of a smaller horse power than he would have normally bought. He can change a higher horse-power car for a smaller horsepower car. He can lay up his car in the winter or during certain other periods of the year, and each action he takes in that direction will have the effect of lowering the licence duties and of lessening the amount of petrol duty received by the Chancellor of the Exchequer.

Each defect places a burden upon certain sections of the community. The motor agents, as the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) rightly pointed out, have already lost over £3,000,000 in capital value, never mind the private owner. It is unfair that one section of the community, because in their normal trade they have a fairly large stock of secondhand cars, should suddenly be fined over £3,000,000, none of which has found its way into the pocket of the Chancellor of the Exchequer. The manufacturers are keen sufferers from this tax, and in particular the manufacturers of high-powered cars. I am not going into the details of the tax, because I hope to do that on the Committee stage of the Bill. A car, to a great many people, is a necessity, and especially to some of the smaller people who have gone to live on the estates outside large towns. They have gone there with their income very carefully worked out, and they have bought a car in order to take their children to school and to use it in order to go to business.

To increase the tax so suddenly is a very important thing for them, but much more important from the point of view of the Chancellor of the Exchequer is the danger to the export trade. Any retardation of the output of the high-powered cars—it is the high-powered cars which are sent abroad—will retard the advance in design of these cars. It will ultimately put up the cost of production and make it more difficult for us to compete. Take the first reaction. The Americans are saying, "This is a good thing. We do not gain very much in the British market, because we have not a very big foothold there, but we are going to get what the British manufacturers are now exporting to the rest of the world." I hope the Chancellor of the Exchequer will go extremely carefully into that matter, on which I shall enlarge in the Committee stage, unless my right hon. Friend can see his way to reduce the taxation from 25s. to 20s., which I believe would be accepted by everybody and would not dislocate industry as the present proposed taxation undoubtedly has done so far.

There is one small point which I hope the Chancellor of the Exchequer will look into, and that is the question of making the licences payable at monthly intervals instead of by annual payments. The small man is accustomed to getting his income monthly or even weekly, and if arrangements were made for the licence to be payable monthly it would be very convenient. There seems to be no reason why it should not be paid monthly. At the present time if I want to license my car to the end of June I cannot do so, but I have to take out a 12 months licence and then to claim at the end of June for a six months rebate, whereas at the end of June I can take out a six months licence to the end of the year. The machinery needs overhauling in this respect and I hope the Treasury will see their way to do it. It is perfectly simple, although I suppose they will say that difficulties may arise.

The question of the administration of Income Tax where it touches the administrator, the trader or the soldier who is serving overseas, also calls for attention. For example, the officers who are serving overseas find that they are being charged by the Cingalese Government on the income they receive beyond their military pay and allowances, no matter whence it is derived or where it is spent. If it is income received from investments in this country the tax is deducted here, and these officers are having extraordinary difficulty in getting the matter adjusted as between the Cingalese authorities and the British Treasury. Some of them, I know, at the present time are out of pocket to the tune of about 7s. in the £. To the rich man that is not a great inconvenience, but to the officer who is not particularly rich it is a matter of great importance, especially when he may be transferred in the interim and has the expense of moving, and all the while he is trying to recover money from the Treasury. I hope the Treasury will collaborate more with the Colonial Office over this matter.

I should like to reinforce what my hon. and learned Friend the Member for Montgomery (Mr. C. Davies) said on the question of colonial officials and their wives on the west coast of Africa. I will not repeat what he said, because he said it very clearly and forcibly. I agree with every word that he said. He did not, however, mention the case of officers who are home on sick leave. If they stay here for a certain period they become liable to pay Income Tax. That is not in the interest of the inhabitants of this country or of the Colonial Service, because a man who suddenly finds that he is taxed because he is staying longer on account of being physically unwell, decides that he cannot afford to be ill any longer and goes back to the tropics, not fully recovered, in order to sacrifice his health for the benefit of his wife and children. That needs grave consideration by the Treasury, in consultation with the Colonial Office. I hope they will look into this matter, because it is extremely important that a man should not be penalised owing to ill-health. I hope that I have made my point reasonably clear.

I will not detain the House much longer, because many of the points with which I had hoped to deal have already been made. I was, however, glad to hear what the Chancellor of the Exchequer said about Clause 19. It seemed to me as if he was using a steam hammer to crack a nut. If that Clause can be overhauled, the question of insurance companies and the expenses paid to their various agents and travellers can be looked at more from the point of view of trapping those who are using that method of expenses to avoid taxation, rather than putting people to a lot of unnecessary trouble and expense in finding out twopenny-halfpenny returns. The Finance Bill certainly deserves a Second Reading and I doubt very much whether the Opposition will think that it is worth while to oppose it.

8.11 p.m.

Mr. Ridley

Life, according to Horace Walpole, is a comedy for those who think but a tragedy for those who feel. If it were not for the seriousness of the problem of tax evasion it would be a comedy to watch hon. Members on the other side of the House chasing their own criminal friends and even pretending to chase themselves. I am sure there are other hon. Members who would be amused by the lament of the hon. and learned Member for Ashford (Mr. Spens) that in this case the criminal has not been warned that if he committed the crime again he would be rather severely dealt with. He said that some of the measures that were being taken against tax evasion were to be retrospective for two years, and he thought that was cruel. The inference was that he thought that they might at least have had a warning in order that they might get away from punishment. When I think of the sort of punishment that is meted out to humble men in my constituency and in many other constituencies who, goaded by cruel hunger, seek not to disclose particulars of all their family income in connection with the determination of the means test, I cannot think that the terms in the Finance Bill in regard to rich tax evaders are more severe than they ought to be.

We are told that increase in taxation must in the end tend to diminish revenue. I hold in my hand a series of quotations from speeches made in this House in 1907 when it was proposed to increase the Income Tax to 1s. in the £. The gloomy forebodings that were expressed in 1907 have been entirely unjustified by subsequent events, and so will the gloomy forebodings made now by the hon. and learned Member for Ashford. I am sorry that the Chancellor of the Exchequer is not present because I desire to say a few words about some of his observations. No one can show so much pride in his own accomplishments as the right hon. Gentleman. He spoke of the rising spirit of confidence. Many of us still live in our own little world and have no knowledge of the world in which other people live. I do not want to say this for the sake of introducing pathos, but there is no rising spirit of confidence in Durham, in South Wales or in my own constituency. On one day last week a pit closed down in my division, and there is now a stricken village. There may be rising confidence in Throgmorton Street, but not in the Special or depressed areas.

I do not think that any Government in modern history has so frequently changed its attitude in regard to major events and has managed to persuade itself at the same time that it stands exactly where it did, as has the present Government. The right hon. Gentleman spoke with optimism and rather discounted the idea that we need necessarily anticipate a further expansion in arms expenditure or an increase in the amount of money to be raised by loan, such as seemed to be his view recently. He discounted that view because of what he described as the favourable turn of events in the last few days. That favourable turn of events means that the Government have had to take a course which they have vigorously opposed. They have been compelled to bend under the pressure in this House and under the pressure of public opinion. That has created a change which in the view of the right hon. Gentleman may mean that there will be a decrease in the armaments burden and in consequence a decrease in employment. It is in these days a grim prospect that many men can only earn a living if they can manage to find employment in producing instruments by which other men will die.

The right hon. Gentleman spoke with ringing pride of the rise in the employment figures. There would be justification for pride if that rise was a planned rise; if it was a rise which was the consequence of a planned economy. It is not. The Government have consistently refused in the last seven years to engage in any kind of planned economy designed to raise the employment figures. To the extent that there has been a rise in the last year or so or in the last few months, it has been a rise due not to planned economy but because of the grim necessity of a situation brought about by the Government's foreign policy. Therefore, in our opinion there is no justification for pride on the part of the right hon. Gentleman.

I am sorry that the hon. Member for Huddersfield (Mr. Mabane) is not in his place. He delivered a speech which was a debating speech but not in the best sense of the word. He said that in regard to the proposal to place an annual levy on wealth, made by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) it was best to deal with it once and for all, so that we might hear no more about it. I suppose that when the hon. Member sat down he thought that he had dealt with it once and for all and therefore there would be no occasion for supposing that we would introduce the subject again. It must be clear that the whole political issue of the future ranges round this simple question—who is to bear the cost of the defence burden? Is it to be borne in increasingly uncomfortable measure by people who cannot afford to bear it, or is it in some way, whether it be the way devised by my right hon. Friend the Member for East Edinburgh or in some other similar fashion, to be borne by people so comfortably situated that they can the more easily afford to pay.

The hon. and gallant Member for West Birkenhead (Colonel Sandeman Allen) spoke about motor taxation with a familiarity that I am afraid I cannot equal. I cannot say what the tax on my motor car will be next year, because I do not possess one. I saw in New Palace Yard last night a most extraordinary car owned by a Member of this House. I cannot believe that the owner of that car could not afford to bear this extra taxation. Even if he had to buy a cheaper car it would still be a costly car. Certainly, he could well afford to pay heavier taxation than is now the case.

Let me deal with the terms of the Amendment which is before the House. The policy which has been pursued by the right hon. Gentleman in the matter of taxation is in our view a violation of equity and justice. In the last two Budgets there has been a substantial increase in indirect taxation. In former days the right hon. Gentleman was a strong advocate of taking all taxes off the people's food, and providing them with a free breakfast table. What justification can there be in these days for the right hon. Gentleman to abandon these sound canons of taxation? If he will look into hundreds of homes in many constituencies he will find uncomfortably abundant evidence of food insufficiency. Our people cannot buy in sufficient quantities, or in quality, the right food. They lack meat, milk, butter, fish, eggs; all the protective foods, and the right hon. Gentleman by his food taxation in the Budget of last year adds to that grave insufficiency in the Budget of this year in a totally unnecessary and despicable fashion. He deepens poverty and sharpens cruelly unbearable hunger. It was Burns who said: An idiot race to honour lost; Who know them best, despise them most. I do not propose to employ terms so strong as that to hon. Members opposite, but I have no copyright in the quotation, and if any other hon. Member likes to use it he is at liberty to do so. There are many other ways in which this money could have been raised without so much discomfort. The hon. Member for Chesterfield (Mr. Benson), whose knowledge on these matters is very great, quoted from the latest returns of the Commissioners of Inland Revenue. May I give one more quotation from it? The Chancellor of the Exchequer said this afternoon that Estate Duty was very high indeed. What are the figures? About 95,000 people left £578,000,000, and the Death Duty was less than £80,000,000, so that they were still left, or their heirs were still left, with some £500,000,000 of inherited wealth entirely free from taxation. Of the total number who died last year, 78 per cent. died without nay property at all, 8 per cent. left only 3 per cent. of the property, and 13 per cent. left 90 per cent. of the property chargeable to Estate Duty. The hon. Member for Huddersfield inquired whether the proposals of the right hon. Member for East Edinburgh were designed only for the specific purpose in view or for the wider purpose of the party on this side of the House; an equal distribution of wealth. If the proposals did both things at the same time they would have in our opinion a double value and virtue. Of course they are designed to do both things. I think it was Mr. Irving Fisher, the American economist, who said: The distribution of poverty depends on inheritance, constantly modified by thrift, ability, luck and fraud. It depends also, in my view, on being able to pack the legislature with people who desire to see the process continued. The number of people who pay Surtax rises year by year. In 1933–34 there were 84,000 and in 1936–37, 95,000; and they had property of £483,000,000. If you make the maximum deduction from that £487,000,000 in Income Tax and Surtax, you still have 95,000 people with an income in excess of £300,000,000 a year, and it is owned by .0002 per cent. of the total population. In the matter of the Surtax there is still an instrument which can properly be used to secure a more equitable distribution of wealth and also for the more immediate purpose of lightening a burden which falls with unjustifiable severity on the lowest-paid sections of the community. I think much more serious and special attention should be given to incomes in excess of £100,000 a year. There are 80 of these in the last returns, with an average income of £190,000 a year. Nobody can justify an income of that kind on ethical or economic grounds. It is outrageous that there should be incomes such as these. They should be taxed more heavily and with a much steeper gradation of tax throughout. There is no reason why the basis of the Surtax should not be dropped from £2,000 to £1,500 with a less steep gradation in the lower incomes.

Let me say a word or two about the Amendment which appears on the Order Paper in the names of other hon. Members and myself, which draws attention to the question of land values. I have had in this matter a curiously informative experience. Fourteen years ago I lived in what we humorously described as the last house in London. From my doorstep there was six miles of open country to Harrow, the poorest grazing land around London and not worth more than £40 or £45 an acre. Great arterial roads were made, public authorities came along with plans and the Government gave grants. Huge fortunes have been flying into the pockets of people who have done nothing to provide any sort of public amenities or services and who have made no sensible contribution to the development of what is now a very thriving suburb. It has all gone to enrich the private speculator. I would not mind so much if it had gone to enrich the original owners, but it has not always done so in this case. The Treasury ought not to stand idly by in a matter like this and Watch these huge fortunes being made without tapping this tremendous reservoir of wealth.

A tax on land values would go a long way towards solving our present financial problems, would enable us to extend our social services and develop those things which bring happiness and comfort into the homes of our people. In the matter of our social services it is obvious that the objectives of the two sides of this House are entirely different. That is typified in this Budget. On this side we increased the prospects of world peace and world security. This Government believes in neither. This Government is typified in the Budget of to-day. It desires to do nothing whatever except to defend the imperial economic and territorial interests of those who electorally support it. It must be realised that the question propounded by the hon. Member for Huddersfield epitomises the point around which the great political struggle of the future must necessarily rage, that is whether it is to be a society typified in this Budget, which leaves certain people with an extravagant income of £50,000 a year, enabling them to live entirely and completely unhealthy lives, or whether the instrument of taxation will be used to equalise wealth on the one hand and to diminish the discomforts invariably associated with poverty on the other.

8.25 p.m.

Mr. Wakefield

The Chancellor of the Exchequer has an unenviable task at any time, but in this year of all years, owing to the international situation, it is particularly so, and I think we can congratulate my right hon. Friend the Chancellor upon doing his best to raise the necessary revenue to meet an increased expenditure for social services as well as the gigantic expenditure required for National Defence purposes. I should like, first, to refer to the increase in the horsepower tax, by which my right hon. Friend presumably proposes to raise some extra revenue. My hon. and gallant Friend the Member for West Birkenhead (Colonel Sandeman Allen) made considerable reference to this matter. He pointed out that there was a likelihood, not of increased revenue, but of decreased revenue as a result of the greatly increased taxation on the horse power of cars. I should like to add that by increasing the horsepower tax, the Chancellor is seriously jeopardising the export trade that is now being built up in this industry. Eighty per cent. of the cars of the world are over 16 horse power, and if the manufacturers of this country are to have their home market almost completely cut off, they will not be able to export these cars into the markets which they were beginning to gain in other parts of the world.

This will mean unemployment in an industry which, I think, it is of the utmost importance to foster. People will not buy new cars. They will lay up their high-powered cars and buy smaller cars, and worse, the people who have been using smaller cars will not use a car at all. This means that the motor industry will suffer from unemployment. I should have thought that it was of the utmost importance, from the National Defence point of view, to encourage employment in this important engineering industry. Should war come, the more men we have trained in engineering production, and particularly internal combustion engines, the more valuable will it be from the point of view of National Defence. Men who are accustomed to making and repairing motor cars will obviously be required for all forms of transport, which will have to be increased in time of war. I should have thought that it would have been the endeavour of the Chancellor, not to decrease employment in this industry, but to do everything possible to encourage more youths leaving school to become apprenticed in the industry and to try to earn their living in it. I hope that my right hon. Friend will see his way at any rate to reduce the tax from 25s. to £1. If he did that, I feel that he might well expect to obtain an increase of revenue rather than the decrease which I think is bound to occur if the present proposals are maintained. The Chancellor also referred to the repeal of the Patent Medicines Stamp Duty.

Mr. Edwards

Before the hon. Member leaves the subject of the horse-power tax, I would like to put one point to him. He said that 80 per cent. of all the cars in the world are of high horse power. Is it not a fact that most of the cars in this country are light cars, and if the increase in the horse-power tax drives people from heavy cars, will it not be to the advantage rather than the disadvantage of the manufacturers of this country? The hon. Gentleman also said that the increase in the tax will mean that our manufacturers will lose some of their export trade in heavy cars. Can he tell me what percentage of the production of cars is for the export market?

Mr. Wakefield

The hon. Member said, quite rightly, that the bulk of the cars in this country are small cars, and it is for that reason, I think, that we are not exporting into the world markets in the way that we ought to do. He suggested that the increase in the horse-power tax will cause people to buy small cars rather than large ones, and that in that way the sales of small cars will be increased. That may be so, but surely there are far more people who were looking forward to the pleasure of purchasing a small car but will not do so now because of the increase in the tax. That is a point which must not be overlooked. Moreover, we want to develop our export trade, and to do that, there must be some basis on which to work. If there is no demand for any high-powered cars in this country, it means that the export market, which is very wide and open to our manufacturers, will not be exploited by them, because, as I think the hon. Member will agree, in order to be successful in the export market it is of great assistance to have first some assured home market on which to base costs and estimate factory production. If there is that basis, one can go into the export market with confidence; but if that basis is not present, it is impossible to develop the export market. At this time, when in many countries there is a very real desire to buy British goods and British cars, it seems to me to be the height of folly to cut off a valuable export market. After all, it must be remembered that the motor industry is the third largest industry in the country.

Before the hon. Member interrupted me, I was about to deal with the repeal of the Patent Medicines Stamp Duty. The Chancellor said that the present tax might be unable to be collected because it was illegal, and he said that he would explain the position further on the Committee stage. He also quoted a reply to a question that was put to the Minister of Health to the effect that that Department did not think that the health of the people would suffer as a result of the repeal of these duties. I should like to know the reason for that statement, because as far as I can gather, informed medical and other professional opinion very definitely is that harm may come to the people as a result of the repeal of these duties. It is generally felt that the door will be left fairly wide open for indiscriminate advertising and for placing various remedies on the market in a way which cannot be done now. This will, undoubtedly, be harmful to the health of the people. I hope we shall have some further information in support of the statement that no harm will be done to the people of the country as a result of this step.

There is a professional body of men who will be harmed by the repeal of these duties. I refer to those qualified chemists who have spent several years in being trained for their profession, and who constitute an essential unit in our National Health Insurance system. Up to the present these chemists have had certain privileges in the sale of these medicines, and it is only right that they should have those privileges having regard to the money which has been spent in providing them with special knowledge and to their years of training and experience. In that way the public has been safeguarded. If these privileges are no longer to be given to chemists, there will be a considerable falling off in the number of suitable candidates for the profession, and in the years to come that will interfere with the proper provision of a suitable dispensing service.

Mr. A. V. Alexander

What is the privilege which is to be withdrawn by this action?

Mr. Wakefield

Chemists, as is well known, have certain privileges in the sale of medicines.

Mr. Alexander

Does the hon. Member mean that in the past the qualified dispensing chemist has been excused from the payment of stamp licence duty upon ordinary common remedies manufactured by wholesale chemists and yet has been able to charge the same price as that which is charged elsewhere and thus make an extra profit? I take it that these chemists are not to have the privilege of supplying these medicines withdrawn. This simply means that they are not now to have that sheltered competition which existed previously.

Mr. Wakefield

It is true that there is a certain amount of sheltered competition, and surely it is important that that sheltered competition should be maintained, because of the service which these professional men render to the community as a whole. If you remove this sheltered competition, you will not get efficient service such as has been enjoyed by the public generally hitherto. I hope that the Chancellor of the Exchequer will look into this matter with the greatest care and sympathy. He is throwing over £750,000 of revenue, and I hope he will look for some other means of securing that revenue, while, at the same time, protecting a section of the community which deserves some form of protection for the service which it renders to the public at large.

We have frequently heard of late from hon. Members opposite that it is high time that wealth was conscripted. The answer given from this side to that argument has been that wealth is now conscripted. We have heard this evening of the amounts which are taken from people by way of Super-tax, Death Duties, and so forth. I would put this case to hon. Members opposite. Suppose any hon. Member opposite were given £1,000,000, on condition that after the normal period of a generation that sum was to be handed back intact. The person to whom the £1,000,000 was given would have the use of it for that period and the enjoyment of the interest upon it. It would be impossible for such a person to hand back that sum intact, even though he had had full enjoyment of interest on it at the normal rate applicable to gilt-edged stock and presuming that there had been no capital appreciation or depreciation. What with Super-tax and Estate Duty that sum would be well eaten into before the time arrived to return it. I do not see how it can be shown that wealth is not conscripted at the present time. I am not saying that that course is not just or that the present position is not right. I am merely pointing out that the argument that wealth is not now conscripted cannot hold water, and I hope that in future hon. Members opposite will not use an argument which is not true.

8.42 p.m.

Mr. Sexton

I rise to support the Amendment. It refers first to the question of unbalanced Budgets and in that connection I would point out that in 1931 when the Labour party ceased to hold office, it was largely because of a world economic blizzard, accompanied by a high peak of unemployment. But on the ground that they had an unbalanced Budget, they were driven out of office by hon. Members opposite. Ever since that time we have had a continuation of unbalanced Budgets, in spite of the existence of a Government of all the qualities. I take it that there are three ways of maintaining a balanced Budget. The first is to cut your coat according to your cloth; the second is to borrow, and the third is to tax. The National Government have followed the two last methods but have not done what an unemployed person has to do when his budget becomes unbalanced, namely, Jo without. The old age pensioner and the ex-service man would frequently have unbalanced budgets if they did not cut out even some of the necessities of life.

The reason for this year's unbalanced Budget is stated to be the demands of national defence The present state of chaos seems to be growing permanent in character and is increasing in cost. It would appear that no future Budget will be balanced, and it has therefore become necessary to do something of a major and fundamental kind to prevent the debt of this country mounting higher and higher. We on this side have frequently recommended some form of levy on capital, it may be for one year. Whatever form it may take, a major operation in the financial affairs of the country is essential if we are to bring about financial stability. What is certain is that borrowing cannot go on year after year. The piling up of debt for posterity will incur, and rightly incur, for us the wrath of our successors, and the legacy which we shall leave to them will be a legacy of lunacy. The National Debt is staggering enough, in spite of the fact that the payment of interest on it during the last 20 years amounts to more than half of the total sum of the Debt, and yet the Debt, instead of being smaller, is actually greater now than it was then. I was born into this scheme of things with my share of the National Debt as about £22. By 1900 that had been reduced to £15. After the Great War every child born into the country had for an inheritance a debt of £160. By the present Budget that will be increased by another £10, so that the legacy of debt to the children born now will be about £170. Even the "Times" has been alarmed recently at this increase of debt. On 23rd February it said in the leading article: Every month of armament expenditure at the present rate implies a further addition to a debt structure which is already excessive and will make the restoration of economic order the more difficult if and when the normal conditions of peace return. When sanity does return to the nations of the world the job of rebuilding this shattered universe, shattered financially if not by war, will be infinitely difficult. I repeat, therefore, that something more fundamental must be done to the financial arrangements of this country if our economic future is not to be jeopardised. All those who have great possessions must yield more to ensure the greater possession of a sound economic position.

The Amendment speaks of the failure to obtain from those who own wealth an adequate contribution to meet the emergency. Time and again reference has been made in the Debate to the returns of the Inland Revenue Commissioners. These returns show the enormous wealth which is concentrated in few hands. People who have £2,000 a year or more number only 95,000—a very small handful in a nation of almost 50,000,000 people. Their total income is astronomical, amounting to £483,000,000 a year, an average of £5,050 each. The net tax on that income was £57,000,000 a year, and after paying Surtax and Income Tax these people still have left on an average no less than £3,500 per year. In the higher realms of people who have £10,000 a year or more, there is a small coterie of 7,500 people with an income of £155,000,000 a year, or an average of £20,000 each.

There is little need, therefore, for the increases in the taxes on tobacco and sugar. I have related before in the House how the old age pensioner lives, and I remember telling of one old age pensioner who told me that his only solace was half an ounce of Empire twist. Imagine the irony of it—a citizen of the greatest Empire the world has ever known, whose only solace is half an ounce of Empire twist, the cheapest form of tobacco, for which he paid 4d. before the increase in the tax. He will now not be able to buy his half an ounce of tobacco. The National Government have denied him that solace, and they have no right to do it. If the Budget had been the Budget it should have been, the old age pensioner might have had his pension raised to 15s. a week. An increase of 1s. in the £ on that big total of £483,000,000 would have produced £24,000,000 a year, and that would have gone a long way towards paying an increase in the old age pension of at least 5s. That would still have left these rich people with enormous incomes. It would still have left them with £65 a week, or as much as the old age pensioner gets in two and a-half years. Steeper taxation on high incomes would have provided more also for the Special Areas. More money could have been spent in those districts referred to by my hon. Friend the Member for Clay Cross (Mr. Ridley), the county of Durham, Scotland, South Wales, and other distressed parts of the country. Schemes of afforestation could have been extended—

Mr. Deputy-Speaker (Colonel Clifton Brown)

We are not now discussing how to spend money, but how to raise taxes.

Mr. Sexton

I bow to your Ruling. I was saying what could be done if the Government really tried to redistribute the income of the country. We have heard a lot about the conscription of wealth from the other side, but their idea of conscription differs very much from our idea, and it differs very much from the conscription of the young men whom they are taking over. In South Wales and Durham this Budget could have provided far more work, and it could have done something to bring joy to the people there. The amount to be spent on Special Areas in the Budget is reduced to almost one half of last year's amount. I cannot see, therefore, how there is to be any hope for the people who live in those areas. Several Commissioners of the Special Areas have resigned. I do not know whether they resigned because their hearts were broken, but I do know that they have left behind them the broken hearts of people who have looked longingly with hope to the Government to do something to relieve them. I would make an appeal to hon. Members on the other side of the House to think on all possible occasions of the great wealth that this country has produced, produced by the workers and by the 10s.-a-week old age pensioners; wealth which is enjoyed now by the millionaires to whom I have referred. When we are trying on this side of the House to get an increase for these old people, I ask hon. Members opposite to line up with us and demand from the Government, as we demand from the Government, something more for them. We on this side of the House cry shame on the National Government who have denied these old folk the little addition to their pensions which they have for so long desired and deserved.

8.54 p.m.

Miss Horsbrugh

I would have liked to follow the last speaker into a discussion of expenditure on social services and where money could be expended in a better way, but, as we have already been informed from the Chair, that would be out of order. We have merely to discuss on the Finance Bill the question of taking money rather than of spending it. I want to plead that in viewing the taxation which is in this Finance Bill we should bear in mind, above all things, that the greatest social service, that which must lead to the greatest benefit to the people of this country at present which is the prosperity of trade and consequent increase of employment; and that in dealing with the taxation which we have before us in this Bill we have to bear in mind how it can be arranged to dislocate as little as possible the trade of the country, which is the livelihood of the people. I would refer in particular to the taxes on cinematograph film, a subject which has interested us for some time and was referred to in the Debate on 2nd May. So intricate is this industry and so intricate is this form of taxation that even at that time I think it was not realised what an enormous tax was suggested and how difficult it would be for the industry.

This would not be the occasion to go into the subject of the tax in detail, but I would like hon. Members in all parts of the House to consider it from this point of view. Here we have an industry that Parliament, by the Act passed last year, has definitely taken upon itself to foster, to try to see whether we cannot get a prosperous film industry in this country for the sake of employment, for the sake of entertainment and for the sake of its publicity value throughout the world. When that Act was passed it was with the idea of helping the British industry. The tragic thing, it seems to me, is that the taxation in the form in which it is presented to us will bear a great deal more hardly on the British film industry than on the films sent in from other countries.

I should like to explain that point. One of the great difficulties of the British film industry, and perhaps it is a natural result of what has happened in the past, is to get sufficient capital put into it to make it possible to produce good films. By the excise duty we put a tax on the raw material, the film. The British film industry will have to pay that tax upon the whole of its output. The American films made outside this country, not bearing, of course, the excise duty on the film, can bring back into their industry the capital that is necessary to it; and besides having that assured market, a tax-free market, behind them, they can show them also in this country, bearing the cost of the import duty. It is only a very small proportion of their takings that will come under the duty which is put on as an import duty. Their big market, which finances the industry, is outside this country.

Another point I wish to make is that the tax bears very unfairly as between the producers of one class of films, the expensive films, and another. Figures were given by the hon. Member for Don Valley (Mr. T. Williams) on 2nd May, and now that we have gone into the matter more clearly I think that those figures were not large enough. The fact remains that the film that earns, say, £20,000, will be paying £800 in taxes, and the film that earns £100,000 will also be paying £800. I think that cannot be considered a fair measure of taxation. We are going to tax the raw product, the film. It may be suggested that more copies will be made of the picture that is going to earn £100,000, because the tax is not levied simply on the first copy. I have been into the matter carefully and I find that at least 50 copies are necessary. It may be said that as the cheaper films will not have so great a popularity there will be no need for 50 copies of them, but when a programme is being arranged it includes one of the more expensive films and one of the less expensive. The less expensive film will have no chance of being shown unless the same number of copies of it are made as of the more expensive film, because the programme must be made up of the two. I believe that the British film industry cannot be built up simply on the super film, the film which we are dealing with under the quota system. Behind that we must have the less expensive film, the type which I believe is the nursery of the British film industry, and it is that film which is going to be hit, and hit tremendously hard. The exhibition of a film like that will not earn a large amount of money. The return will be absolutely out of proportion to that from the expensive film, because the tax is on the raw material.

Now I come to the news reels, and to the question of the import duty on the news reel and the excise duty on the film. I wish they could both be abolished. When we get into Committee on the Bill I hope that we may be able to salvage the news reels at least. It is a tragic thing that at this moment there are in bonded warehouses in London thousands of feet of news reel that will never be seen by the public, because it is not economically possible to pay the excise duty to take them out of bond in order to show them. As a consequence we shall have smaller or less varied news reels, and that at a time when all our people want to see, and ought to be able to see, as much as possible of what is going on in Canada and will be going on in the United States. Thousands of feet of news reel which will be sent over here will be subject to this import duty. As a result, a small proportion of it is taken to be mingled with other news. The public cannot be shown the full footage which they ought to see. That remark applies not only to news films coming from the United States, but news films of the work in general, although we are to-day trying to get the different peoples to know more about one another, want to be able to bring the world closer together, and want to be able to show people what is happening in this land. That is of importance from the educational point of view and it may have the biggest consequences for human beings all over the world.

I remember the Debates in this House on the subject of newsprint being put on the free list. We said then that nothing must be done to hinder the circulation of news. That is the very thing we shall be doing if we cannot get some different arrangement in regard to this taxation upon news reels. Apart from the imported news reels dealing with events in other parts of the world there are the news reels made in this country to be shown here and for export. I believe that if the tax remains as it is at present that side of the industry will be killed. The excise duty on film is bad enough in the case of the feature film, and it is very heavy on the smaller and less expensive film, but it is a quite impossible burden for the news reel, which has only a limited life and then is of no use. There are feature films showing now which we saw, perhaps, several years ago. For several years they have ranked for quota. It has even been suggested that those more than four years old should be brought out again and ranked for quota. Such a feature film can be shown over and over again, but news reel films cannot. The expensive taxed raw material is going to be too expensive for these temporary films.

I feel that a blow is being dealt at the British film industry and I hope very much that, as the Chancellor said on 2nd May, it may be possible to reconsider some of these proposals. Such action would give this industry, which is struggling for a chance, some hope. We know the difficulties of the past, but I believe they are being overcome, though it is going to be slow work. We want to get finance into the industry, but not only shall we drain finance out of it, but we shall prevent more finance coming in, because with this tax it will be seen that it is not a paying proposition. I think it was not realised at first how serious this duty would be. To say that a man whose film can earn only £20,000 has to pay as much as the man owning the film which earns £100,000, is not applying taxation fairly.

I do not wish to keep the House, but I have a little more to say. On 2nd May, another Resolution was put forward. I did not realise at that time that because a Resolution dealing with linseed oil was on the Paper, the Indian Trade Agreement would be fully discussed. I realised that my right hon. Friend the President of the Board of Trade, when speaking on the subject of a drawback on linseed oil, was able to explain what he hoped would be the advantages to the cotton industry in that agreement. I knew very little about the procedure of this House. I was told then that upon the Second Reading of the Finance Bill that subject could be raised. The Second Reading of the Finance Bill can never be a very exhilarating performance; it is not a recreation. We find very little to cheer us as we turn the Paper, but on this occasion I found something which was very disappointing, and which I had never found before in the Finance Bill, when I saw the results of the Indian Trade Agreement there.

This House passed a Resolution that in the next trade agreement—a trade agreement had just taken place with India—the jute trade would be put in the forefront. It does not even come in at the tail end. It has been entirely left out. We talk about the subject of, employment; that is the thing which the people of this country are demanding. It is something that must mean much more than the ½d. on sugar. I know that 36,000 workers in the jute trade will not have a chance of decent and steady employment unless something is done. I know the difficulties at the present time. I realise them and I am told that we still have a chance of helping the jute trade in Article 15 of that trade agreement. It seems that that is the only consolation given to us who have been working for the jute trade for many years. The position, however, appears to me as though, from a vessel that was going through bad weather certain of the passengers had been thrown overboard in order that the others might have a better chance. Those that have been thrown overboard are told that they must struggle still in the sea, but they may be rescued by Article 15. They are told: "You sink and come up three times before you go down finally, and by Article 15 we will do our best to see whether we can throw you a lifebelt just in time." If Article 15 is to be used in that trade agreement it must be used in time, and when we are not going down for the third time. At the present time one part of the jute trade is, I agree, in a better position because of the orders connected with Defence. I ask that the powers that exist be used before we go through such a severe time of depression as we have had in the past. Use those powers in time, if they are really there.

I have spoken of employment because I believe that more people in this country are realising what finance and taxation mean. An hon. Member opposite said that we wanted an informed public opinion on finance. I think the thing which has struck me ever since I came into this House in 1931 and had anything to do with politics, is the extraordinary fact that men and women living on the smallest possible means, where shillings are to them more than appears, while we here talk in millions have, in the majority of cases, a considerable sense concerning finance and industry. They are demanding not so much an increase in the social services but a chance to work. They believe that their chance to work will be jeopardised if money is not collected as in the Budget, and they are prepared to bear the burden. It is difficult for them to realise, as it is for us, why the Chancellor has given up the Stamp Duties, which were bringing in £750,000, and why it looks as though we were about to ruin a trade which has been just going up again, the film trade.

It is difficult for us to understand why those things are done. We are told that these taxes are archaic, and we are told the time has come to take them off. I would reply to the Chancellor of the Exchequer that if they have gone on so long let them go on for another two or three years. We are told that it is expected to get £1,000,000 from the film industry but £750,000 is being given up by the repeal of the Medicine Stamp Duty. I would point out to the Chancellor of the Exchequer that £1,000,000 may be got in one year but after that there will be ruin to a trade, and because of that I would ask him to consider the facts and to see whether it is not possible to have the archaic duties on medicines a little longer, in order that the health and prosperity of trade may be considered.

9.11 p.m.

Mr. Ellis Smith

I have asked one of my hon. Friends to be good enough to pull my coat when I have been speaking for 14 minutes. The Chancellor of the Exchequer referred to the social services and said that he knew we were very interested in them, although he did not intend to say much about them. I desire to spend my time dealing with the social services, speaking in particular to the Amendment which is on the Order Paper in the name of my hon. Friend the Member for Leigh (Mr. Tinker), other hon. Members and myself, and which reads: That this House declines to proceed to the Second Reading of a Bill that makes no provision to increase the weekly allowance paid to old age and widow pensioners and does not provide for the wives of old age pensioners to receive the pension at the same time as their husbands. I have sat here during the whole of to-day and I have thought time after time that if only I could have more time I could answer a number of hon. Gentlemen who have spoken from the other side. The best answer would have been to give extracts from the "Economist," which has been dealing with this question during the past three weeks. The "Economist" has made a suggestion in one of its articles that the time has arrived when we should seriously consider the introduction in this country of a new tax, to be called the Excess of Income Tax. If I had much more time I should be delighted to show the need for the introduction of a tax of that character. My purpose, however, is to deal only with the social services, and I shall quote more figures than usual because the time has arrived when, from the working-class point of view, those figures should be placed on record. If any Member desires to check my figures I hope he will obtain from the Vote Office Command Paper 5906, which deals with the public social services. He will be able to check every figure which I will attempt to give this evening.

I base my analysis upon the financial position of this country, as I desire to show, after making that analysis, that the proportion of money being spent on the social services is less now than it was 10 years ago. Differently from my hon. Friend the Member for Chesterfield (Mr. Benson) I say there can be no doubt that production in this country has enormously increased during the past few years, and, secondly, there can be no doubt that there has been an increase in the aggregate total of profits in this country. Had there been time I could have produced the "Economist" which would have proved the point beyond any doubt. In addition to that, there has also been an increase in the production of wealth. A few weeks ago the ''Economist'' made an examination of the profits made in this country during the past 50 years and showed the trend of total profits. As a result of that examination the "Economist" proved the case that we are making to-night.

As a result of the examination of that Command Paper 5906—I shall quote from official figures all the time—I find that the net expenditure on public social services in 1922 was £277,000,000 and that in 1936 it had gone up to £354,000,000. The contributions paid by the people we represent to National Health Insurance and Unemployment Insurance—and this is a fact that is too often lost sight of—which amounted to £70,000,000 in 1922, had gone up by 1936 to £79,000,000. The national income in 1922 was £4,000,000,000, and it had gone up in 1936 to £4,800,000,000. The figure for industrial production in this country, according to the Board of Trade figures, was 100 in 1922, and in 1936 it had gone up to 128.6. Anyone, therefore, who examines these figures will see that relatively speaking the insured contributors in industry are paying more in insurance contributions in proportion to their wages than they were paying in 1922. Industrial production had gone up by 28.6 per cent., and we say that the social services ought to have increased at least in the same proportion. Seeing that that has not been the case, we on this side consider it reasonable to suggest an immediate increase in old age and widows' pensions and in unemployment benefit, and the introduction of family allowances, in order that the standard of living of our people may be maintained in the same proportion as the increase in the production of wealth. Here are some other figures which ought to be examined when we are considering the social services. An estimate was made by the Colwyn Committee, and this was supported by the Westminster Bank Review of September, 1937, which says: It is improbable that the present position differs very greatly. The Colwyn Committee in 1925–26 said that a person with an income of £100 a year paid 11.9 per cent. of his income in taxes, while in the case of a person with £200 a year the percentage was 10.2. It is necessary to remember, when we are considering the position of people with incomes of £100 to £200, that, in addition to paying their ordinary taxes and their indirect taxes, they also have to pay National Health Insurance and Unemployment Insurance contributions. In the case of persons with £500 a year, the percentage of incomes paid in taxes goes down to 6.2, and they are not paying one penny towards the maintenance of those who are unemployed or sick, or old age pensioners. These figures show, also, that people with incomes up to £5,000 a year are taxed relatively less than they are in any Continental country. If anyone doubts these figures, they have only to examine the Colwyn Report, the Westminster Bank Review, and a number of other official publications which can be obtained in the Library at any time. They show that the national income, and especially profits, have increased considerably faster than expenditure on social services during the past few years.

Another way in which our people are affected is in regard to Customs and Excise. My hon. Friend the Member for Barnard Castle (Mr. Sexton) spoke feel- ingly on this matter, because he comes from an area where the economic conditions are such that any Member of the House who does his duty is bound to consider them. The Customs and Excise figures show that in 1913–14 we were paying £75,000,000 in this respect, In 1927 the figure had gone up to £250,000,000. In 1930, as the result of a Labour Government, there was a reduction in Customs and Excise to £245,000,000, but in 1938 the figure had again gone up to £344,000,000. This brings me to a question that I have asked on two occasions in the House during the past few years. On 9th February, 1939, I asked the following question of the Financial Secretary to the Treasury: Whether he can state the estimated amounts in customs and excise revenue per head of the population for the year ended March, 1938, in respect of food, drink, and tobacco?"—[OFFICIAL REPORT, 9th February, 1939; cols. 1142–3, Vol. 343.] I asked a similar question in 1936. In reply I was told that the estimated amount of taxation in Customs and Excise revenue per head of the population of Great Britain for the year ending on 31st March, 1936, in respect of food, including tea, coffe and cocoa, was 15s. 6d., and the corresponding figure for 1938 was 18s. In the case of drink, including alcoholic liquors, table waters and fruit juices, the figure for 1936 was £2 5s. 7d., and that for 1938 £2 8s. 2d. In the case of tobacco, the figure for 1936 was £1 12s. 3d., and that for 1938 £1 15s. 4d. Thus a higher percentage of the incomes of our people is now spent on these commodities than is spent upon them by people who are relatively better placed. A very high proportion of the income of people with less than £300 a year is spent on food, and, therefore, this continued increase in Customs and Excise taxation per head of the population is a very serious matter for our people. They are also affected by the increase of rates; it cannot be emphasised too strongly that the main burden of rates falls upon our people, and the lower middle class people in particular. The Westminster Bank Review of September, 1937, stated that: Local rates paid as a part of weekly rentals must form additional taxation running up to as much as 5 per cent. of total incomes of, say, £3 a week or under. It is clear, therefore, that the rate burden of the expenditure on social services is mainly paid by the people themselves. It is too often forgotten that, in proportion to their income, working' people have relatively high taxes to meet in the form of indirect taxation, Income Tax, rates, and National Health and Unemployment Insurance, and I want to emphasise, as arising out of these figures, that the social services are certainly not a present from the rich people of this country, but are being paid for by the people who are benefiting from them. I would appeal to the House to give serious consideration to the question of the need for an increase in old age and widows' pensions. I realise that one has to be careful because of the Rules of the House, but the Finance Bill proposes to allocate expenditure in a number of directions. I am pleading that some of this finance should have been allocated in a different direction in order to enable the Chancellor of the Exchequer to carry out our desire.

Mr. Deputy-Speaker

I must point out that the Finance Bill makes no allocation of money.

Mr. Smith

I thank you, Sir, for your guidance. I am getting a little tired of speaking about this. Going about the country and meeting the people that we do meet, who come to us with tears in their eyes, makes us feel that it is time we tried to bring even greater pressure than we have done in the past. It is with that in our minds that my hon. Friends and I placed our Amendment on the Paper. We know that it will not be called but, when we are embarking upon an expenditure of millions of pounds in other directions, we feel that our people should have a better income when they reach the age of 65.

9.28 p.m.

Mr. Boothby

I have been for 15 years in the House and I have never spoken for more than 22 minutes, although nobody believes it, which is a reflection upon me. I hope to keep well within that limit to-night, as the hon. Member who has just spoken kept within his. I agree with his concluding sentences about old age pensions; and there are a great number of us on this side who go as far as to say that we think that some increase has become very necessary, and that we should like to see something done in this direction. We hope and believe that the Chancellor of the Exchequer, as soon as any possible opportunity presents itself, will give very favourable consideration to this reform; because I am sure Members on all sides are agreed that it is the most urgent of all measures of social reform at the present moment.

With regard to the Budget as a whole, I think my right hon. Friend has struck an admirable balance between taxation and borrowing. I cannot bring myself to believe that the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) really thinks that at this moment, when we have still the best part of 1,500,000 unemployed, my right hon. Friend should have substantially raised taxation. It seems to me that he has reminded us all, by imposing an additional £20,000,000 of taxation, that one day we shall have to pay the bill. But in existing circumstances, by being courageous enough to announce his intention of borrowing £380,000,000, he has done, from the economic point of view, precisely the right thing. I still believe, in spite of the criticism that has been offered, that the horse-power tax is fundamentally sound in principle! and, in so far as it will divert skilled workmen from the manufacture of luxury cars to the manufacture of essential mechanical war materials, it will be a good thing, and it is no good disguising from ourselves that that will be one of the effects. Minor adjustments in the tax will have to be made—they are inevitable sooner or later in all new taxation—but I am convinced that the tax in principle is sound.

I should like now to say a word on the question of tax evasion. I want to ask the Chancellor whether he really thinks we ought to go on indefinitely with this intricate and somewhat exhausting process of pursuing, stage by stage and step by step, the deliberate tax-dodger. It involves from time to time retrospective legislation, which I believe is in itself a rather vicious thing; and I do not believe in the long run you can ever hope to succeed, because we always start some way behind and, by the time we have caught him up on one point, he is likely to have thought of a better one. So the process goes on almost interminably. Then what about the legitimate tax-dodger? I mean in particular the man who seeks to avoid Death Duties. Under the existing system a man may find himself and his family pilloried in the House and in the national Press, or commiserated with, according to whether he succeeds or fails in evading a certain proportion of Estate Duty. It is regarded as trmendously bad luck if someone dies at the wrong moment. On the other hand, if someone dies at the right moment, everyone congratulates him. It does not seem to me that this is a very equitable system of taxation. If an estate should pay duty, say so, and impose the duty. If a proportion of an estate should, in the interests of the State as a whole, be transferred and relieved of duty, then say what proportion can legitimately be transferred.

Another point to which I would direct attention is the question of insurance. I have never quite been able to see why people should not only be allowed but encouraged to insure against Death Duties. That goes some way to meet the point raised by the right hon. Gentleman the Member for East Edinburgh. It would mean an annual toll on very rich estates; but I think, if that were to be permitted or encouraged, it would be necessary not to aggregate the whole estate into one unit for the purpose of assessing the duty payable. I submit that far too much at present depends on the caprice of the individual, and the accident of death, and any tax which is as dependent as the Estate Duty is upon pure caprice and fortune is not fundamentally a sound or equitable tax.

There is another aspect of the question which I hope my right hon. Friend will look into before the next Budget, and that is the question of one-man companies. The distinction that is drawn between public and private companies was made when the capitalist system was in its early stage of rapid expansion and it is not applicable to modern conditions. To-day there is no real fundamental distinction between public and private companies. I think that is a point which ought to be considered from a long-term point of view by the Chancellor. I sometimes wonder whether the ultimate long-term solution to the whole of this problem may not be found in the appointment of a permanent independent commission or tribunal, "with powers to send for persons and papers": a tribunal or commission to decide in all doubtful cases the amount of income on which tax should be paid, with full knowledge of the facts. That may be found to be the solution to the problem of deliberate tax evasion, which this House is showing in- creasing reluctance to allow to continue. I think the House looks to my right hon. Friend, with his great experience in the law and his tremendous reputation, to study this problem from first principles; and I am sure the House will be ready to take from his hands, either next year or the year after that if it is necessary to take so much time to consider it, any long-term permanent solution. I believe the present situation is completely unsatisfactory, and I do not think that, by introducing two or three extremely intricate Clauses in the Finance Bill, in an attempt to pursue the tax-dodger to the point which he reached 12 months ago, you are ever going to succeed in dealing radically with this very difficult problem.

My right hon. Friend has not told us in precise terms how he intends to finance the rearmament programme of the Government, and he has told us why. This Finance Bill is merely an indication—and an encouraging indication, I think—of the way his mind is moving. The problem confronting the Chancellor is of absorbing interest, not merely to financiers and economists, but to the workers. In this Bill, my right hon. Friend is pulling levers which are bound to alter fundamentally, if not to obliterate, the problem of unemployment as we have known it since the War. I do not think the opinions of Mr. Keynes are seriously challenged in any quarter at present. I do not say that the problem will be completely solved in the next six months; but it will differ enormously from that which we have hitherto known.

In the beginning of 1938, there was every indication that we were heading for a bigger and nastier slump than that of 1931. The second post-war boom ended in the summer of 1937, with the "gold scare." There seemed little doubt at that time that we were once again on the slippery slope of the downward phase of the trade cycle—and it was a very steep slope. Then suddenly, almost miraculously, the tide turned. Can anyone doubt that the main cause—I might almost say the sole cause—was the rearmament programme of His Majesty's Government, which forced my right hon. Friend to spend more than he raised in taxation? This is a very significant fact, which I think will be pondered over for many generations to come; and it may mark a turn in the economic development of the world.

I hope that the Chancellor is never again going to under-estimate the enormous power that he wields. He is at present in absolute control of money—of its volume, of its purchasing power, and of the rates of interest it commands at any given moment. A few months ago so staid and orthodox a paper as the "Economist" went so far as to say that the Chancellor of the Exchequer in this country was in such a position that he could announce the rate of interest he thought right, and the market would accept that rate. I believe that that is not an exaggerated statement.

Mr. Bellenger

Can the hon. Member explain how it was that not even the Chancellor of the Exchequer was able to prevent a considerable rise in short-term loans?

Mr. Boothby

I am coming to that. The Chancellor's instruments are open market operations by the Bank of England, acting as agent for the Treasury; and the Exchange Equalisation Account. Under the old system, before we left the Gold Standard, if gold left this country the Bank of England automatically raised its rate and restricted credit until the gold flowed back, and vice versa. If hon. Members will forgive me, I will now refer to one paragraph of the Cunliffe Committee on Currency, which reported, just after the War, on the effect of a rise in the Bank rate: The raising of the Bank discount rate necessarily caused a rise in general interest rates and a restriction of credit. New enterprises were, therefore, postponed and the demand for constructional materials and other capital goods was lessened. The consequent slackening of industry also lessened the demand for consumption goods, while the holders of stocks of commodities held largely with borrowed money, being confronted with high interest charges, found difficulty in renewing their loans, and the prospect of a fall in prices tended to make them press their goods on a weak market. The result was the general decline of prices in the home market. That acknowledgment, by the Cunliffe Committee itself, does clearly show the blighting effect on trade, industry and finance of a rise in the Bank rate. It is a most remarkable thing that the withdrawal of practically all the foreign balances accumulated in London in the years 1936 and 1937 should have been accomplished without any rise in the Bank rate at all. During the accumulation the Exchange Equalisation Fund prevented an undue rise in sterling by buying gold. Subsequently, when the balances were withdrawn, they sold the gold and bought Treasury bills; and at no point was it found necessary to raise the Bank rate.

Now I come to the point raised by my hon. Friend. There was a curious interlude a few weeks ago. It looked, for one appalling moment, as if we were at the end of cheap money. There was a shortage of Treasury Bills. That was due to the sale of gold by the Exchange Equalisation Fund. It was inevitably followed by a shrinkage in bank deposits. Then the cash basis of the banks began to be seriously impaired. Still the authorities failed to increase the supply of bills, and at the same time they did not increase the cash basis. On the contrary, the cash basis was further reduced. The result was that, for one comparatively brief moment, we entered upon what seemed to be a deflationary trend. The banks began to sell their gilt-edged securities, the gilt-edged market fell, all interest rates began to rise—short-term, medium and long-term rose in roughly the same proportion. Then my right hon. Friend announced in this House that it was his intention to continue a policy of cheap money, and the cash basis of the banks was restored. In a few days the whole position was completely restored. This episode—and thank God we can now describe it as only an episode—is one more illustration of the enormous power wielded by my right hon. Friend; and that makes his position and his problem all the more interesting with regard to the future.

I believe that the right policy to carry out is the policy which my right hon. Friend has adopted during the past few months and that is, a policy of expansion—so long as we still have a considerable volume of unemployment—of expansion plus confidence. I believe that one of the greatest mistakes that people all over the world have made during recent years is to suppose that you cannot pursue an expansionist policy without loss of confidence. The present Prime Minister showed that he could do it when he was Chancellor of the Exchequer. My right hon. Friend has carried on that tradition; and it has been, I think, carried to an even more strikingly successful conclusion by M. Paul Reynaud in France than by anybody else, because he has always been what some hon. Members would call an inflationist by nature, or what I would call an expansionist; and at the same time he has always recognised the necessity of maintaining confidence if an expansionist policy was to be successful. If I may respectfully say so, there is another and even higher authority on the other side of the Atlantic who has not yet grasped the necessity for maintaining confidence if an expansionist policy is to be successful.

With regard to general policy, if my right hon. Friend is to succeed in his long-term financial policy he has to see that revenue expands; he has to see that the national income expands; he has to see, therefore, that production expands; and also that trade expands. The essential basis of all those four things, the expansion of revenue, income, production, and trade, must be, for the time being at any rate, a cheap money policy. If money is to be kept cheap—and I have said this in this House till I am tired of saying it, but it does pot do any harm to repeat it—the Government must see that always and at all times the cash reserves of the joint stock banks in this country are ample; and they have it in their power to do so. Deflation under existing conditions can only affect adversely the volumes of funds available for investment, and increase the cost of borrowing to the Government. It is, therefore, clear that until the rate of interest is low enough to suit my right hon. Friend, he ought to finance our rearmament programme by means of Treasury bills. He can afford to wait. The market is bound to come his way as there is bound sooner or later to be a flow of savings into the longer-dated Government stocks. And when these have risen to the level which my right hon. Friend requires, then will be the moment to issue new loans. That is the way in which he can keep the rate of interest, in my judgment and in that of many other people, at least down to 3 per cent., and, I hope, to 2½ per cent.

On the question of raising additional taxation, there is the interesting suggestion put forward by the right hon. Member for East Edinburgh for a tax on capital, which ought, I think, to be considered very carefully; but it cannot be done on the first day on which it is put forward. All these suggestions for increasing taxation will arise when we get to a condition of full employment in this country; but until that time comes there is no danger of real inflation. Therefore, I think the Chancellor of the Exchequer is perfectly right to borrow on the scale in which he is borrowing at the present time. The time for increasing taxation, the time for increasing rates of interest, has not yet arrived; and it will not arrive until the whole of the slack has been taken up, until at least another 700,000 or 800,000 men are absorbed into industry.

The last point that I wish to put to my right hon. Friend—and I assure hon. Members opposite that it is my last point—is that anxiety is being caused about the balance of payments, and I think that anxiety will increase during the months and years that lie ahead. We need raw materials; and we shall need them in greater quantities than ever as our rearmament programme proceeds and as war requirements and reserves need to be replenished in this country. We need raw materials not only for current consumption, but for storage. I suggest that we should take them as far as possible from our Allies—and we have quite a lot of Allies, I am glad to say, in the world to-day. These Allies on their part need arms, equipment, capital goods, and manufactured goods from us; and they are not at present getting these things. I want to say, very emphatically, that I do not believe that our present machinery for the conduct of export trade is either powerful enough or sufficiently flexible. I do not think the resources of the Export Credits Guarantee Department are anything like adequate for the purpose of conducting British export trade under existing conditions, in competition with Germany. I think that the Act which we passed the other day, with £75,000,000 odd to be peddled out under conditions very tightly drawn, is wholly inadequate for the purpose immediately in view; and I believe that in this field of export trade we are at present making very little progress in competition with Germany.

This is a point to which I am sure the House, and the Chancellor, and the Government, will have to direct their serious attention in the weeks and months that lie immediately ahead; because it is absolutely vital, if other things are to be kept in equilibrium, that we should maintain an adequate volume of exports to enable us to pay for the imports of which we shall stand ever more urgently in need. I beg my right hon. Friend to direct his attention to this particular aspect of the problem, which seems to me to be a greater cause of anxiety than anything else in the economic field. Meanwhile, he has a tremendous opportunity for experiment, and I hope it will be bold experiment; and he has almost unlimited power. I think that hon. Members on both sides of the House will wish him the best of luck and success in his task, which is no less, and probably more, important than the task of any other Minister in the Government at the present time.

Mr. Mathers

Before the hon. Member sits down, may I ask him whether he is aware, if his statement that he has never previously spoken for more than 22 minutes is correct, that he has now delivered the longest speech in his career?

Mr. Boothby

I am delighted to hear it.

9.53 p.m.

Mr. Gallacher

I am due to finish by 10 o'clock, according to the arrangements that have been made for the Front Bench speakers. I am sure that no one who listened to the speech of the Chancellor of the Exchequer could do anything but admit that the bourgeois money-changers of this country have an efficient special pleader. Were it not for my association with Marxist economics, I might even have been persuaded that the Income Tax or the Super-tax was eating into the wealth of the wealthier classes. That is the idea that the Chancellor of the Exchequer tried to get over, but never was there anything further from the truth. I would like to direct his attention to this fact—and I am prepared to provide the necessary figures or to meet the Chancellor or any other representative of the other side on any platform anywhere on this fundamental proposition—that the rate of exploitation of the working class increases far more rapidly than any increase of Income Tax or Super-tax. As a matter of fact, Income Tax and Super-tax have always followed behind the rate of exploitation, with never any possibility of catching up with it; and so you get this situation, that in spite of all the talk there is about the enormous amount of Income Tax and Super-tax, the wealth of the wealthy does not decrease, but increases. Nobody can dispute that—[Interruption.] The hon. Member opposite, from the depths of his Conservative lack of knowledge, may laugh, but the facts are indisputable. The wealth of the wealthy is increasing all the time.

An hon. Member opposite suggested that if an hon. Member on this side were given charge of £1,000,000 to be handed back at his death, that with full right to the income, with no appreciation or depreciation, when he came to die, there would not, owing to Death Duties, be £1,000,000 left to hand back. If I were responsible for £1,000,000 and invested it at 5 per cent. and there was no depreciation or appreciation, when it came to my death, if it was 20 years hence, the £1,000,000 would be handed back and a fortune would be handed over to those who were to come after me. But there must always be a very considerable appreciation. You might get a slight depreciation in some directions, but because of the character of exploitation, there is always, year by year, an enormous appreciation of any capital.

The Chancellor of the Exchequer says that he is not going to interfere with the social services, and that we have the greatest social services in the world. That also I would challenge, but I will not introduce the question of the Soviet Union into this discussion, because I am certain that it would not be in order, although the Chancellor of the Exchequer said that he was dealing in his Budget with a critical period and he hoped that very soon there would be a turn for the better. No doubt the Chancellor of the Exchequer, when he was making that remark, had in mind the Soviet Union, because it is quite clear that, if we become allied with the Soviet Union, there will be a very considerable turn for the better as far as our financial commitments are concerned. The Chancellor of the Exchequer speaks very highly of our social services. Nobody will dispute the importance of our social services, but I would remind him that this is the most highly industrialised country in the world, with an industrial population in relation to the general population far in excess of any other country. That means that there is a greater degree of depreciation in the human material year by year, and, therefore, there is a greater need for social services than there is in any other country in the world.

Has the Chancellor of the Exchequer ever considered that? If it were not for the social services the population of this country would be wiped out because of the ravages of capitalist exploitation. An enormous amount of money is spent every year on social services, and yet the population is not maintaining its own against the ravages of disease and death. The population is declining. Try to imagine the depopulation of this country that there would be if it were not for the social services, which are an attempt to overcome the terrible ravages of the capitalist method of exploitation. That is the situation.

I wanted to deal to-night with the question of the Sugar and Tobacco Duties, and I would remind the hon. Lady the Member for Dundee (Miss Horsbrugh) that, while no one will justify the tax on films, I am certain that her constituents will be more concerned about the taxes on sugar and tobacco, and about the need for increasing old age pensions than they are about news reels, however desirable and important news reels are. If the Chancellor of the Exchequer had any real consideration for the most deserving section of the community, he would have raised the necessary £70,000,000 of £80,000,000 in his Budget in order to provide increased old age pensions. When the hon. Member for East Aberdeen (Mr. Boothby) was speaking about old age pensioners and the necessity for consideration being given to them, I saw the Chancellor of the Exchequer nodding his head. I wish that the Chancellor of the Exchequer, or whoever is to reply, would make a statement to-night that at any rate an investigation of some kind will be made to see by what means the necessary finance can be raised. The working classes of this country—the men and women who have to live under very great difficulties and hardships in many cases—I am sure, would be willing to contribute a little more to ensure security and comfort for the old folks.

I would appeal to the Chancellor of the Exchequer because this would mean so much not only to the old age pensioners, but to their sons, daughters and relatives and to the masses of the people in every industrial and agricultural area in the country. I ask the Chancellor of the Exchequer—and I can speak on behalf of every Member on this side of the House as far as this question is concerned, and it is also the desire of most of the Members on his own side of the House—to say that consideration will be given to this question, and that an effort will be made to discover ways and means whereby the necessary £60,000,000, £70,000,000 or £80,000,000 may be raised in order to bring about this necessary and essential measure of relief for the deserving old folks of the country.

10.2 p.m.

Mr. David Grenfell

After this very interesting Debate I will endeavour to make a brief address and to direct my remarks, as far as I can, to the Amendment which we are submitting to the House. The Chancellor of the Exchequer has given us the benefit of his presence during the whole of the day, and I think that the whole House was grateful to him for the very clear exposition he gave of certain passages in the Budget and the principles which are involved. The House is concerned about the tremendous financial problem which this Budget envisages. It is a Budget on the way towards larger and larger expenditure. The figures on this occasion have reached a total higher than that which this country has ever known before. In the Budget of 1938–39 we raised by way of ordinary revenue no less than £927,250,000. That is a tremendous figure, but that has to be taken into account with the expenditure of that same year. In the last financial year the Treasury and the Chancellor of the Exchequer were responsible for the disposition of an expenditure of no less than £1,204,750,000. The Chancellor of the Exchequer, in his Budget speech, and again to-day, gave some account of the disparity between these two huge amounts. He has not said to-night, but he did say in his Budget speech, that the deficiency in the ordinary revenue was slightly over £12,000,000, but the excess spending was a sum of no less than £277,750,000. He gave an account in his Budget speech of the gap between the ordinary revenue and the extraordinary and ordinary expenditure. These details are given in the Financial Statement, and I have no time to-night to examine any of them, and I do not think that it would be profitable to do so at this stage.

I would like to comment upon something to which the Chancellor of the Exchequer gave attention to-night. The Chancellor of the Exchequer reminded us in his Budget speech—and it cannot be said too often both inside and outside this House—of the enormous growth of national expenditure. The hon. Member for West Fife (Mr. Gallacher) said it revealed a tremendous change in our industrial life and capacity, and in the measure of our production. The Chancellor of the Exchequer said that in 1853 Mr. Gladstone brought in a Budget for an expenditure of £53,500,000, and he looked upon the collection of that amount as a great achievement. Mr. Gladstone was called a great Chancellor of the Exchequer, and rightly so. Working on slender resources, it was a tremendous achievement to have made that financial provision in those days. That is less than two generations ago, and for every 1s. which Mr. Gladstone collected then the present Chancellor of the Exchequer collects almost exactly £1. For every 1s. that Mr. Gladstone expended in 1853 the present Chancellor of the Exchequer last year had to provide for an expenditure of 24s.

There is no attempt on the part of the Chancellor of the Exchequer to balance his Budget nowadays, but Mr. Gladstone always balanced his Budget. He was a financial purist and would probably never have survived the shock if there had been any deficit in any of his Budgets. The present Chancellor of the Exchequer never attempts to balance his Budget. He has declared that last year, although he collected a certain amount, there was a very large deficit, which had to be made up by borrowing. For the next year he said that he was going to raise by normal methods of taxation, from normal sources, £942,000,000, but that he will have to borrow, in addition, £380,000,000. I think the Chancellor of the Exchequer said tonight that his estimate of future borrowing was on the low side. We do not know the exact amount, but we do know that he has declared that he has no intention to balance his Budget. All that he has been able to say to-night is that he has been carefully considering the balance between these two methods—the claims of taxation against borrowing and borrowing against taxation. The hon. and learned Member for Montgomery (Mr. C. Davies) congratulated the Chancellor of the Exchequer upon the judicious blending of these two methods, but expressed some doubt as to whether, having given his congratulations, there was not some danger that the Chancellor of the Ex- chequer might go too far in one direction and fail to hold the exact balance which he believes to be essential.

The hon. Member for East Birkenhead (Mr. White) said that much of the present expenditure was in the way of preparedness, but I gather that he was not much in favour of borrowing, because he feared inflation. The Chancellor of the Exchequer has not told us where he thinks the danger of inflation may come in. He has not told us where lies the line of demarcation when he borrows £400,000,000 this year, and perhaps next year £600,000,000. How can you add to your National Debt in this way without very serious consequences? The right hon. Gentleman dared not commit himself. He does not know. He was optimistic about next year in regard to the prospects of employment and the national turnover. It would be very strange if we spent £500,000,000 to £600,000,000 on armaments without the national turnover increasing, employment increasing, and the taxable capacity increasing. But we must remember that every loan that we issue adds to the National Debt.

Hon. Members who are familiar with the history of this process know that in 1931 this National Government came into existence because it was said the previous Government were incurring excessive national liabilities. Since 1931, with a National Government pledged to economy, our National Debt has increased by £600,000,000, and before the next Finance Bill the debt will have gone up by more than £1,000,000,000. That is a very dangerous thing. When is the right hon. Gentleman going to stop borrowing, and what are the conditions upon which he will venture to make the demand upon capital which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) has adumbrated several times and again to-night? There must come a time when you must stop borrowing in peace. In time of war you may have to buy loyalty and service, but it seems to me that there is no good reason why this country cannot organise its finances in emergency without having to pay special rewards to special classes.

The right hon. Gentleman said: "I must so base my plans so that I shall secure the support of a small list of people." That is, the fortunate, rich people. They are the small list of people who have this financial capacity. The right hon. Gentleman must know that he cannot do justice to the nation as a whole if he considers primarily, mainly, the interests of this small list of fortunate people. These people may be small in numbers, and one might think that they are rich because of some Divine right, but they are not. They are rich because of the many Budgets that have been made in their favour. It is because the Budgets of the present Chancellor of the Exchequer and other Chancellors of the Exchequer, in the last seven years in particular, have enabled the rich people to become richer at the expense of the poor.

Sir J. Simon

I should be very sorry to leave the hon. Member under a misapprehension, because he is always so fair. He is mistaken. I was not using the argument that I had specially to consider the favoured few. It was in quite a different connection that I was using the argument. What I was pointing out was that in a community where the number of people who are very rich are few and the great mass of the population is not in that condition, it is not really possible to raise the whole of the revenue that the country needs solely by what is called "soaking the rich."

Mr. Grenfell

I remember the phrase "soaking the rich," and although I may have put it badly, the right hon. Gentleman was, I think, warning the House about killing the goose that lays the golden egg, the goose being represented by this small body of rich men who can be relied upon to meet taxation at all times.

Sir J. Simon

It is rather that the goose is too small and will not lay enough eggs. Other people must lay a few as well.

Mr. Grenfell

There are two nations in this country, and the Amendment calls attention to that fact. There is a large body of people in this country numbering at least 50 per cent. of the people who are not exempt from taxation. There are 10 per cent. of the people of this country with an income per week of less than 10s.; the next 20 per cent. have an income between 10s. and 15s. per week and the next 20 per cent. have an income of between 15s. and £1 per week. Half of the population of this country have an income of £1 or less per week. That is the condition of the mass of the people of this country, and it is a condition which this Budget does nothing to ameliorate. The question of nutrition has been referred to. It is well known that 40 per cent. of the income of people with small incomes goes in the purchase of food, and the remainder in the purchase of necessities.

We complain that in this Budget there is heavier taxation on the poorest of the poor. I am not a smoker, but I have lots of sympathy with the old workman who has always bent his back to the performance of his daily task and in his old age must have his pipe and tobacco. I have every sympathy with such persons, and it is rank injustice to require the aged worker to pay more for his tobacco which is a solace and a comfort to him. Then there is the tax on tea, which is the great beverage of the poorest people in this country. They cannot get any other beverage. There are large masses of the people of this country who just have to buy what is within their power, and to tax tobacco and tea, the modest indulgences of millions of our people, is to fail to appreciate the great needs of these people. The Government have put a heavier tax upon them this year. There is also sugar, and then the question of the pictures. I am a believer in the pictures. I think they have a tremendous influence for good in the lives of our people, and I do not see why the poor people should not be relieved from the entertainments tax when they go to the pictures or to a theatre. At the present time they have to pay a contribution which is far greater in proportion to their means than the much higher contributions which are paid by other classes of the community.

I must refer to the old age pensioner. I have been a workman all my life; I could never be anything else but a workman. I do not want to lose the intimate direct contact with people to whom I belong and who understand me. In my first election address I referred to working class conditions, visualising the problem of employment. If we had not the special conditions to which the Chancellor of the Exchequer has referred, if there was no armament programme to-day in Europe, unemployment would bring down civilisation with a crash. At the present time, there would be tens of millions of unemployed men in European countries and scores of millions of unemployed men in the world, were it not for armaments work. In spite of all this, however, the machine is playing an increasing part in displacing men. I do not intend now to argue whether that need be so. I say it need not. But in the conditions that have been supported by hon. Members opposite, the machine has been brought into competition with men, and the economic value of men has declined as the economic efficiency of the machine has improved. I foresaw the problem of unemployment in my first election address, and in that address I pledged myself to demand retirement pensions for all men and women at 60 years of age. That may have been a very ambitious, a very optimistic, and some may say an unreasonable thing to do, but I won my election. [Interruption.] I did not make foolish pledges; the people in my constituency know me to be serious. I have fought seven elections and I have made the same claim at each one of them.

Therefore, in this House I am under an obligation to claim that pensions should be given to these men who have spent themselves in the service of the nation and have made their contribution to the building up of that immense fabric of national wealth which enables the Chancellor to have £1,000,000,000 a year at his beck and call. How is it that those £1,000,000,000 can come into the hands of the Chancellor each year? It is because men work, it is because they produce more than they consume. I am exceedingly disappointed that in this Budget there is no provision for pensions for men of 60 years of age. The Chancellor is content still to allow the burden of supporting the aged poor to remain on the shoulders of the distressed areas, such as Merthyr Tydfil and the Rhondda Valley. This House is unwilling to accept the responsibility. I think that the Chancellor would do well, even before the passage of this Finance Bill, to consider the financial possibilities of giving these pensions. He could do it without causing any dislocation or difficulty. It is simply a question of his will and the will of the Government and hon. Members opposite. We on this side are pledged to the pensions scheme. The difficulty lies on the other side of the House. I ask the right hon. Gentleman and his colleagues to take this opportunity of making that honourable provision for these men and women.

There is another matter to which I wish to refer—the horse-power tax. This is not a subject that comes within my special interest, but I know something of the way in which men of modest circumstances get their motor cars. I have been tempted on some occasions to venture so far myself, but I have kind friends who pick me up and drive me in their cars, so that I have been saved the risk of committing myself to the purchase of a car. But I know that a large number of people of modest means want to buy cars, and these people, in buying a car, have always very closely to count up the costs of insurance, taxation, repairs, maintenance and garage accommodation. To my knowledge, there is a proportion of people who would have been buyers of new cars this season, but who have been scared off because they cannot contemplate paying the additional £6 or £8 horse-power tax that would be an additional burden of maintenance of the car. I should like to call the attention of the Chancellor to the worst aspect of this increase in the tax. The majority of people who buy new cars have old cars to sell. The process is, "New cars for old." Anybody in a small way who buys a new car, hands in his old car in part payment and the allowance in respect of it, is determined by the market for second-hand cars.

If somebody were to write the autobiography of a car, it would be a very interesting story. It would show the first appearance in all its shining youthfulness of the new car, careering and cavorting along the roads, enjoying all the respect which is tendered to a new member of the fraternity of the road. Then could be shown its gradual decline in efficiency, the first appearance of old age, the development of the chronic infirmities to which old age is subject and, finally, its creaking pilgrimage to the scrap-heap. All cars pass through that circle of operations, always under the watchful eye of the car retailer, who takes his part in the transition of the car from the higher to the lower levels. It is in this way that the ambitious purchaser of a new car is helped. In many cases, unless he is able to realise on his old car he cannot buy a new car, and there is always on the market an enormous number of used cars—I think the figure is about 180,000.

Already it is becoming much more difficult to sell these old cars. Their value has depreciated. The stock of old cars which was valued, I am told, at £12,000,000, has already declined in value by £3,000,000. There is a steady decline in value which will, one day, result in the retailers being unable to buy any more used cars. The way of the new car out of the factory will be blocked by the procession of old cars standing there immobile and immovable, because of the action of the Chancellor of the Exchequer. I ask the right hon. Gentleman to look at that aspect of the question. I do not know the relation of his financial policy to industrial policy, but I know that here is a problem which goes much further than the mere transaction in the factory or the retailers shop, and I would like the Chancellor to pay close attention to it.

In my last word in this Debate I would make an appeal not only on my own behalf but, I feel sure, on behalf of a large number of hon. Members on the other side of the House. I appeal, on behalf of all those who will join with me in doing so, to the Chancellor to take into account the claims of our older people and to see whether it is not possible, in this Budget, to squeeze out a sufficient financial provision to help these old people and to make due recognition of their life work in the form of an addition to the old age pension.

10.28 p.m.

The Financial Secretary to the Treasury (Captain Crookshank)

Not only in his final words but in the earlier part of his speech the hon. Member for Gower (Mr. Grenfell) dealt with the case of the old age pensioner. I do not propose to go into that aspect of our national problem to-night but I would like to be clear upon this point. I understood the hon. Member to say that at the last seven Elections, he pledged himself to vote for a pension of £1 a week at the age of 60. In 1929 and 1930 he was a Parliamentary Private Secretary. He was not himself in office, but he was in Government circles and was in and out of the Department in which he gave assistance. He said just now that any Government could do this. I think he probably found out then, as a great many other hon. Members opposite found to their surprise, that it is one thing to make these extraordinary pledges in the country and that it is quite a different thing, when one is in a position of responsibility, to say how these projects are to be financed. The difficulties in 1929 and 1930 were considerable against adopting a proposal of this kind, but the House will realise that the general financial situation of today would make it immeasurably more difficult.

I want to come back for a moment, as one normally does during a Second Reading Debate, to discussing the principle of the Bill with which we are concerned before we pass to some of the details. I think that, as unfortunately my right hon. Friend spoke when the House was not as full as I should have liked it to have been to hear his remarks, it is worth while reconsidering for a moment the principle which had animated him in framing his Budget. What was obviously at the back of his mind, what was his chief object, was to try and raise the vast sums with which we are concerned with as little harm to industry as possible. That seems to me to be the guiding principle, and his new taxes were proposed with that consideration in mind. It is quite true, of course, that both Surtax and Death Duties are increased; but not the standard rate of Income Tax. It is true also that the tax on horse-power is increased for private vehicles; but not for trade vehicles or public service vehicles. The object is the same in both cases—to avoid placing further burdens on industry as a whole or on industrial transport.

If that is the principle on which these further moneys are being collected from the taxpayer, let us look at it from the taxpayer's point of view and see the use to which the £492,600,000 which is to be raised is to be put. After all, the nation is entitled to know what it is getting for the money; the Finance Bill is the method by which we raise it, and it is not a bad thing that the world at large should know what it is with which we are coping. If we exclude the £5,000,000 which my right hon. Friend has set aside for Supplementary Estimates we find that £442,500,000 is required for Civil Supply Services—£12,000,000 more than last year. This is not the time or place to go through the whole expenditure, but I would like to ask the House to remember three points that this amount covers and compare them with the position 10 years ago. As the hon. Gentleman opposite has raised the question of old age pensions, let me give the figures. Ten years ago the non-contributory old age pensions cost £35,500,000. This year the estimate for them is £49,000,000, an increase of nearly £14,000,000 in a decade. As to contributory pensions—old age, widows' and orphans'—in 1929 they were only at the beginning of their career and the cost to the Exchequer was no more than £4,000,000. To-day the figure is nearly £20,000,000. So that in that decade the cost of these pensions to the Exchequer has risen from £39,500,000 to £69,000,000.

In housing, 10 years ago the cost to the Exchequer was just under £13,000,000. This year it is to be £18,500,000. Again, education 10 years ago required from the Budget £48,500,000; this year the amount has grown to £58,000,000; and—in passing—in spite of all our other preoccupations, this year is seeing the raising of the school-leaving age. Those are, of course, only three instances. One could go through the whole list. I think that the fact that we are able to pay for these great social services at a time when so much public attention and public expenditure are, unfortunately, but necessarily, as I think we all agree, directed towards rearmament, is a very great tribute to the British taxpayer and to the financial strength of our country.

It shows that rearmament has not pushed out social improvement. But the very magnitude of our expenditure must remind us that all these resources become available only when trade and industry have confidence not only in their own future—and that is the answer to points which have been occasionally raised in the Debate—but also in the general financial policy of the Government of the day. There is another contributory factor to that confidence to be found in this consideration, that in this country we have full public information always available about national expenditure. There are no secret taxes and there is no secret expenditure—except, of course, the one small item of Secret Service. The Estimates have all to be presented here, they are all debatable, every taxpayer can find out exactly in what direction the money which has been voted goes, and ex post facto the Public Accounts Com- mittee investigate and make quite sure that it has gone in the right direction according to the law. Those are, I think, very valuable safeguards. It is nothing new to remark upon them, but it is just as well for the House to be reminded of their importance. I am taking no credit for them, but they are a great credit to our national system which we all share, and they are inherent in the long-established practice of this House. I think that that fact of itself is of great importance from the point of view of ensuring confidence.

While we may feel some pride in the resiliency still shown by the direct taxpayer, it is also worth while to keep in mind that although Income Tax does bear very heavily on the higher ranges of income there are millions of wage-earners and salary-earners entirely outside the scope of it—and very properly so. No one is questioning that, but I think hon. Members do not always realise how very large is the number of people entirely outside this form of taxation. For example, do hon. Members realise that a married man with two children—the number which is usually taken as the normal when discussing these problems—can earn as much as £375 a year, or over £7 a week, without paying a single penny in Income Tax at all, and can earn as much as £635 a year, or £12 a week, before he has to pay as much as 1s. in the £ in Income Tax. I am merely pointing out some factors which make for the financial strength of our country, because I think I should be right in saying that, compared with the taxpayers of certain other great European countries, the corresponding classes of wage-earners or salary-earners here are, from this point of view, considerably better off, indeed, in a very favourable position.

The other great charge with which we are dealing through this Finance Bill is Defence expenditure. The figures have already been quoted so often, both during the Debate and previously, that it is not necessary to go into details except to recall that the expenditure, borrowing and taxation together, which was £265,000,000 two years ago and was £400,000,000 last year, will be £630,000,000 this year.

The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) in his very interesting opening speech to-day, during which he carefully did not mention the Finance Bill and I do not think mentioned his Amendment at all, or only very casually, continued—as was perhaps more valuable in the circumstances—the discussion of the proposals which he had outlined at an earlier stage. This is a very interesting way of carrying on a discussion. Of course, the right hon. Gentleman has had three weeks in which to think of the answers to the questions which my right hon. Friend propounded to him, but my right hon. Friend has answered in less than three hours the further addition made to-day by the right hon. Gentleman, and in doing so my right hon. Friend showed all his customary skill. This may develop, and perhaps the arguments between the two right hon. Gentlemen will reach the height of interest of the old arguments which we used to get between the late Lord Snowden and the right hon. Gentleman the Member for Epping (Mr. Churchill), which were carried on through a long series of Budgets.

The right hon. Gentleman did casually mention the increase in the horse-power tax on motor cars which he described as anti-social. I am not quite sure what the use of that expression means in connection with a higher tax on motor cars, but other hon. Members have also discussed this, matter generally. It is, of course, true that since my right hon. Friend proposed this tax there has been a considerable amount of public discussion upon it. I do not think it is necessary in the few minutes which remain to me to detain the House by re-arguing the case. We can do it later on in Committee, but it is necessary to remind the House that this is direct taxation and graduated taxation. I would also remind hon. Members that while, stated baldly, an increase of two-thirds in the rate does sound a very heavy increase, they should put the matter to themselves in this way: Last September, which is the last period for which I have the licensing figures. 58 per cent. of the cars in this country, that is over 1,000,000 cars, did not exceed 10 horsepower. The additional contribution that that section of the motoring public is being invited by this taxation to make is something less than 2s. per week. About half a million of these will only pay 1s. 6d. a week. I do not know how many hon. Members would maintain that a burden of this size—think of what a gallon of petrol costs—which is estimated at less than 2s. a week will really mean that any very large part of that section of the community will give up its motor cars.

If you take the next group, between 11 and 15 horse power, which represents something like 28 per cent. of the motor cars in this country, or 500,000 motorists, the increase in licence duty is less than 3s. a week. The remaining 14 per cent., or 300,000 motorists, who have cars over 15 horse power, will pay more than 3s. a week. Of course any extra taxation has its disadvantages, but I find it very hard to accept the argument that an extra impost of 1s. 6d. to 2s. per week for the smaller cars, 4s. for the medium cars and 6s. for the very largest cars, will stop many people, not this year at all but next January, from using the motor cars which they do now. In passing I may point out that the additional payment in respect of the motor cycles is very small indeed. Those who have expatiated on the burden on workers using motor cycles for going to their labours and so on may be reminded that, in the case of the lightest type of motor cycle, the extra impost comes to 1¼d. per week, and on the medium size to 3½d. [An HON. MEMBER: "48 per cent.!"] It is no use talking about percentages in a matter of this kind. People do not pay percentages out of their pockets; they pay pennies or shillings.

As I have said, these matters can be enlarged upon during the Committee stage, but I would like to answer now a point that was made by the hon. Member for East Birkenhead (Mr. White). He asked whether it would be possible for a Select Committee to be set up to deal with various aspects of public expenditure, on the lines of the Committee of 1917. I think that what he had in mind was that such a committee should deal more particularly with contracts. I was not here in this House in 1917; I was busily engaged on more military matters; but I recognise that the work of the Committee at that time was extremely valuable. I would, however, like the hon. Gentleman to bear in mind that in 1917 we were at war, and that very likely owing to the rapid expansion which had taken place between 1915 and 1916, some of the customary checks had gone by the board, and a considerable amount of waste was apparent, or at any rate discoverable by that Select Committee.

The position to-day is surely very different. In the first place, we are not at war; and, secondly—and this is an important factor—we have the benefit of all the experience that was gained at the time of which the hon. Gentleman was speaking, including the reports of that Committee. Moreover, to-day there is a far greater control over this contract expenditure than there was formerly. The matter has already been explained to the House on many occasions, and the system itself has been investigated both by the Public Accounts Committee and by the Estimates Committee, which latter, of course, is a post-War body, and did not exist in 1917. Besides this, there is the Treasury Inter-Service Committee to watch the problem. I would ask the hon. Gentleman to agree with me that there may be some danger in indiscriminately multiplying inquiries at a time when all concerned are working at great pressure, but I assure him that the Government are very anxious—indeed, no one is more anxious than those who sit on these benches—to see that there is no waste and that we get our money's worth. These matters are under our constant review, and the hon. Gentleman's suggestion, like many others that we have received, will certainly be borne in mind.

The hon. Lady the Member for Dundee (Miss Horsbrugh) spoke about films, and I should like to say a few words on that subject, not to answer the whole argument, but to remind the House that on the Report stage of the appropriate Budget Resolution my right hon. Friend did deal at some length with various considerations involved in his proposal. On that day he concluded his remarks by saying that he strongly commended to the House the basis and principle of this new tax; but at the same time he gave the assurance that he appreciated that modifications might be necessary, and that he would consider the question with the help of the trade. The hon. Lady will recognise that we were entering into a very difficult and technical field in these proposals, and since that date there have been close consultations between the interests which are most knowledgeable on the subject and our advisers in the Customs and Excise Department. Only on Thursday of last week my right hon. Friend received a deputation which represented all sections of the film industry and he is now giving very careful consideration to their representations. But, as these questions are very technical and complicated, I would ask hon. Members to await the completion of that survey without pressing for an indication of our intentions in regard to any particular section of the trade. I can, however, say that my right hon. Friend is now satisfied that certain adjustments will be required in order to meet claims of hardship and inequality which have been brought to our notice. I have every hope, as has my right hon. Friend that the alterations and easements which are in contemplation will go a very long way to meet the genuine difficulties of certain sections of the film industry. Perhaps this matter had better be discussed on the Committee stage of the Bill. It is my right hon. Friend's intention that the Amendments shall be placed on the Order Paper well ahead of the Committee stage, and he hopes to table them soon after the House resumes after Whitsun, because it is obvious that as much time as possible should be available for discussing these technical points.

I want to take up one more point which is referred to in the Amendment, and that is the question that has been raised by several Members complaining that this is one of a series of unbalanced Budgets. Of course, to have a Budget unbalanced is obviously a very serious matter. No one would minimise that. The hon. Member for Barnard Castle (Mr. Sexton) said that in 1931 they had an unbalanced Budget. It may have been only a little unbalanced, but it created a great deal of despondency and alarm and it cost a large number of hon. Members opposite their seats. The hon. Member was a little sore that other Governments have unbalanced Budgets and that these dire calamities do not occur to them. That brings me back to what I said at the beginning, that the keynote of this problem is the confidence which people have in the future of their business, their trade, and their industry and in the general financial policy of the Government. As a matter of fact, this talk about a series of unbalanced Budgets is by no means an exact statement because, if hon. Members take all the Budgets for which different Chancellors of the Exchequer of the National Government have been responsible, they will find, first of all, that there have been more surpluses than deficits. They will find over the whole period 1932–38 that there is a net surplus of just about £20,000,000. They will also find that the net surplus and the annual new Sinking Fund together have during that period resulted in the application of £115,000,000 from revenue for the redemption of debt.

So that I do not accept this theory of a series of unbalanced Budgets. If by unbalanced Budgets hon. Members refer to the fact that borrowing has been necessary for defence purposes, the right hon. Gentleman opposite propounded a scheme by which extra taxation could be raised, but at the end of it all he had to admit that there would have to be some borrowing for defence purposes. He envisaged himself an unbalancing of the Budget since his scheme still left a gap which would have to be made up by borrowing to meet the present heavy programme of expenditure on defence.

It may be just as well at this stage to repeat two of the warnings which my right hon. Friend the Chancellor gave last year on the corresponding occasion. He pointed out firstly—and I quote his words: Borrowing may be paying later on rather than paying now, but it means paying all the same."—[OFFICIAL REPORT, 26th May, 1938; col. 1470, Vol. 336.] His second warning was that we must not assume that we should get back to lower figures as easily as we should wish. As a result of the programme of expanion of our Defence Forces, we have to look forward to an annual cost of maintaining these armaments which when the cost of interest and sinking fund on the borrowing is included represent a truly formidable load on the taxpayers.

I beg the House and the country to bear those two considerations in mind. And now let us look for the last time at the official Amendment. In seems to make some complaint about using borrowing powers to finance part of the Defence programme; but in the circumstances of the time, in view of the magni-

tude of the sums involved, there is no alternative. The financial resources of the nation cannot meet out of revenue alone the whole charge of the Defence programme, including all non-recurrent items and all capital costs. But let us not forget that in the last four Budgets Income Tax has been raised by a shilling, Death Duties raised, Surtax raised; and the net result of the increased direct taxation imposed is just on £100,000,000 a year. It is idle to contend that that is not a very heavy contribution, and the largest contribution comes from what the Opposition calls wealth. Direct taxation is at an unprecedentedly high level, and when the Amendment speaks of additional taxation of the very poor, as being done under the pretext of spreading the burden equally among all classes, it makes a false point. The policy of spreading the burden over the whole community is no pretext; it is right and necessary. By far the larger part of the new taxation imposed by this year's Budget is imposed on the rich and well-to-do; and, on reflection, I think that most people will agree that some further portion of the burden of the common task of Defence expenditure should be shared generally. The increase in the Sugar Duty was advisedly left small for the reason that it presses more heavily on the smallest purses.

I do not think the House will want to pass the Amendment. To expect the House to welcome these new burdens would be, perhaps, rather optimistic. But I think that what the House will do in the next minute or two will be to accept the budgetary facts as they are, and with firm determination press on with the urgent and necessary tasks to which we have set our hand.

Question put, "That the words proposed to be left out stand part of the Question."

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

Division No. 154.]	AYES.	[11.0 p.m.
Acland-Troyte, Lt.-Col. G. J.	Beaumont, Hon. R. E. B. (Portsm'h)	Brooke, H. (Lewisham, W.)
Albery, Sir Irving	Beechman, N. A.	Brown, Rt. Hon. E. (Leith)
Allen, Col. J. Sandeman (B'knhead)	Bennett, Sir E. N.	Brown, Brig.-Gen. H. C. (Newbury)
Amery, Rt. Hon. L. C. M. S.	Bernays, R. H.	Bull, B. B.
Anderson, Sir A. Garrett (C. of Ldn.)	Blair, Sir R.	Bullock, Capt. M.
Assheton, R.	Boothby, R. J. G.	Burghley, Lord
Baldwin-Webb, Col. J.	Bossom, A. C.	Burgin, Rt. Hon. E. L.
Balfour, G. (Hampstead)	Boulton, W. W.	Burton, Col. H. W.
Balfour, Capt. H. H. (Isle of Thanet)	Braithwaite, J. Gurney (Holderness)	Butcher, H. W.
Balniel, Lord	Brass, Sir W.	Campbell, Sir E. T.
Barrie, Sir C. C.	Briscoe, Capt. R. G.	Cartland, J. R. H.
Beauchamp, Sir B. C.	Brocklebank, Sir Edmund	Carver, Major W. H.
Cayzer, Sir C. W. (City of Chester)	Hoare, Rt. Hon. Sir S.	Reed, Sir H. S. (Aylesbury)
Cayzer, Sir H. R. (Portsmouth, S.)	Hogg, Hon. Q. McG.	Reid, W. Allan (Derby)
Cazalet, Thelma (Islington, E.)	Hore-Belisha, Rt. Hon. L.	Remer, J. R.
Cazalet, Capt. V. A. (Chippenham)	Horsbrugh, Florence	Rickards, G. W. (Skipton)
Channon, H.	Howitt, Dr. A. B.	Ropner, Colonel L.
Chapman, Sir S. (Edinburgh, S.)	Hudson, Capt. A. U. M. (Hack., N.)	Rosbotham, Sir T.
Cobb, Captain E. C. (Preston)	Hume, Sir G. H.	Rowlands, G.
Colman, N. C. D.	Hunloke, H. P.	Royds, Admiral Sir P. M. R.
Colville, Rt. Hon. John	Hutchinson, G. C.	Russell, Sir Alexander
Conant, Captain R. J. E.	Inskip, Rt. Hon. Sir T. W. H.	Russell, S. H. M. (Darwen)
Courthope, Col. Rt. Hon. Sir G. L.	Jennings, R.	Salmon, Sir I.
Cox, H. B. Trevor	Keeling, E. H.	Salt, E. W.
Cranborne, Viscount	Kellett, Major E. O.	Samuel, M. R. A.
Craven-Ellis, W.	Keyes, Admiral of the Fleet Sir R.	Sandeman, Sir N. S.
Croft, Brig.-Gen. Sir H. Page	Knox, Major-General Sir A. W. F.	Sanderson, Sir F. B.
Crooke, Sir J. Smedley	Lamb, Sir J. Q.	Schuster, Sir G. E.
Crookshank, Capt. Rt. Hon. H. F. C.	Lambert, Rt. Hon. G.	Selley, H. R.
Cross, R. H.	Lancaster, Captain C. G.	Shakespeare, G. H.
Cruddas, Col. B.	Latham, Sir P.	Simon, Rt. Hon. Sir J. A.
Culverwell, C. T.	Leighton, Major B. E. P.	Sinclair, Col. T. (Queen's U. B'lf'st)
De Chair, S. S.	Liddall, W. S.	Smith, Bracewell (Dulwich)
Denman, Hon. R. D.	Lipson, D. L.	Smith, Sir R. W. (Aberdeen)
Denville, Alfred	Llewellin, Colonel J. J	Somervell, Rt. Hon. Sir Donald
Donner, P. W.	Lloyd, G. W.	Southby, Commander Sir A. R. J.
Duckworth, Arthur (Shrewsbury)	Locker-Lampson, Comdr. O. S.	Spears, Brigadier-General E. L.
Dugdale, Captain T. L.	Loftus, P. C.	Spens, W. P.
Duggan, H. J.	Mabane, W. (Huddersfield)	Stewart, J. Henderson (Fife, E.)
Duncan, J. A. L.	Macdonald, Capt. P. (Isle of Wight)	Strauss, H. G. (Norwich)
Eckersley, P. T.	McEwen, Capt. J. H. F.	Stuart, Lord C. Crichton- (N'thw'h)
Eden, Rt. Hon. A.	Maitland, Sir Adam	Stuart, Hon. J. (Moray and Nairn)
Edmondson, Major Sir J.	Makins, Brigadier-General Sir Ernest	Sueter, Rear-Admiral Sir M. F.
Ellis, Sir G.	Manningham-Buller, Sir M.	Tasker, Sir R. I.
Emery, J. F.	Margesson, Capt. Rt. Hon. H. D. R.	Tate, Mavis C.
Emrys-Evans, P. V.	Marsden, Commander A.	Taylor, C. S. (Eastbourne)
Evans, Capt. A. (Cardiff, S.)	Maxwell, Hon. S. A.	Thomas, J. P. L.
Everard, Sir William Lindsay	Medlicott, F.	Thomson, Sir J. D. W.
Fleming, E. L.	Meller, Sir R. J. (Miteham)	Thorneycroft, G. E. P.
Fox, Sir G. W. G.	Mellor, Sir J. S. P. (Tamworth)	Thornton-Kemsley, C. N.
Fremantle, Sir F. E.	Mills, Major J. D. (New Forest)	Titchfield, Marquess of
Furness, S. N.	Mitchell, H. (Brentford and Chiswick)	Touche, G. C.
Fyfe, D. P. M.	Mitcheson, Sir G. G.	Tree, A. R. L. F.
Gluckstein, L. H.	Moore, Lieut.-Col. Sir T. C. R.	Tryon, Major Rt. Hon. G. C.
Glyn, Major Sir R. G. C.	Morgan, R. H. (Worcester, Stourbridge)	Wakefield, W. W.
Goldie, N. B.	Morris-Jones, Sir Henry	Wallace, Capt. Rt. Hon. Euan
Gower, Sir R. V.	Morrison, G. A. (Scottish Univ's.)	Ward, Lieut.-Col. Sir A. L. (Hull)
Graham, Captain A. C. (Wirral)	Morrison, Rt. Hon. W. S. (Cirencester)	Wardlaw-Milne, Sir J. S.
Grant-Ferris, Flight-Lieutenant R.	Muirhead, Lt.-Col. A. J.	Warrender, Sir V.
Greene, W. P. C. (Worcester)	Munro, P.	Watt, Lt.-Col. G. S. Harvie
Grimston, R. V.	Nall, Sir J.	Wayland, Sir W. A
Guest, Lieut.-Colonel H. (Drake)	Nicholson, G. (Farnham)	Webbe, Sir W. Harold
Guest, Mat. Hon. O. (C'mb'rw'll, N. W.)	O'Connor, Sir Terence J.	Wells, Sir Sydney
Gunston, Capt. Sir D. W.	Orr-Ewing, I. L.	Whiteley, Major J. P. (Buckingham)
Hacking, Rt. Hon. Sir D. H.	Peake, O.	Wickham, Lt.-Col. E. T. R.
Hammersley, S. S.	Peters, Dr. S. J.	Williams, H. G. (Croydon, S.)
Hannah, I. C.	Petherick, M.	Windsor-Clive, Lieut.-Colonel G.
Hannon, Sir P. J. H.	Pickthorn, K. W. M.	Winterton, Rt. Hon. Earl
Harvey, T. E. (Eng. Univ's.)	Purbrick, R.	Wise, A. R.
Heilgers, Captain F. F. A.	Radford, E. A.	Wood, Hon. C. I. C.
Hely-Hutchinson, M. R.	Raikes, H. V. A. M.	Wright, Wing-Commander J. A. C.
Heneage, Lieut.-Colonel A. P.	Ramsay, Captain A. H. M.	York, C.
Hepburn, P. G. T. Buchan-	Ramsbotham, H.	Young, A. S. L. (Partick)
Hepworth, J.	Rankin, Sir R.
Herbert, A. P. (Oxford U.)	Rathbone, Eleanor (English Univ's.)	TELLERS FOR THE AYES.—
Herbert, Lt.-Col. J. A. (Monmouth)	Rayner, Major R. H.	Captain Waterhouse and Lieut.-Colonel Kerr.
Higgs, W. F.	Reed, A. C. (Exeter)
NOES.
Acland, R. T. D. (Barnstaple)	Cocks, F. S.	Green, W. H. (Deptford)
Adams, D. (Consett)	Cove, W. G.	Greenwood, Rt. Hon. A.
Adams, D. M. (Poplar, S.)	Dalton, H.	Grenfell, D. R.
Adamson, Jennie L. (Dartford)	Davidson, J. J. (Maryhill)	Griffith, F. Kingsley (M'ddl'sbro, W.)
Alexander, Rt. Hon. A. V. (H'lsbr.)	Davies, R. J. (Westhoughton)	Griffiths, J. (Llanelly)
Ammon, C. G.	Davies, S. O. (Merthyr)	Groves, T. E.
Attlee, Rt. Hon. C. R.	Day, H.	Guest, Dr. L. H. (Islington, N.)
Banfield, J. W.	Dobbie, W.	Hall, G. H. (Aberdare)
Barnes, A. J.	Dunn, E. (Rother Valley)	Hall, J. H. (Whitechapel)
Beaumont, H. (Batley)	Ede, J. C.	Hardie, Agnes
Bellenger, F. J.	Edwards, A. (Middlesbrough E.)	Harris, Sir P. A.
Benn, Rt. Hon. W. W.	Foot, D. M.	Hayday, A.
Benson, G.	Frankel, D.	Henderson, T. (Tradeston)
Broad, F. A.	Gallacher, W.	Hicks, E. G.
Buchanan, G.	Gardner, B. W.	Hills, A. (Pontefract)
Burke, W. A.	Garro Jones, G. M.	Hopkin, D.
Charleton, H. C.	George, Major G. Lloyd (Pembroke)	Isaacs, G. A.
Cluse, W. S.	George, Megan Lloyd (Anglesey)	Jagger, J.

Jones, A. C. (Shipley)	Naylor, T. E.	Smith, E. (Stoke)
Kennedy, Rt. Hon. T.	Noel-Baker, P. J.	Smith, Rt. Hon. H. B. Lees- (K'ly)
Kirby, B. V.	Oliver, G. H.	Stephen, C.
Lansbury, Rt. Hon. G.	Parker, J.	Stewart, W. J. (H'ght'n-le-Sp'ng)
Lathan, G.	Parkinson, J. A.	Taylor, R. J. (Morpeth)
Lawson, J. J.	Pearson, A.	Thurtle, E.
Lee, F.	Pethick-Lawrence, Rt. Hon. F. W.	Tinker, J. J.
Leonard, W.	Poole, C. C.	Tomlinson, G.
Leslie, J. R.	Price, M. P.	Viant, S. P.
Macdonald, G. (Ince)	Pritt, D. N.	Watkins, F. C.
McEntee, V. La T.	Richards, R. (Wrexham)	Watson, W. McL.
McGhee, H. G.	Ridley, G.	Westwood, J.
McGovern, J.	Riley, B.	White, H. Graham
Mathers, G.	Sexton, T. M.	Whiteley, W. (Blaydon)
Maxton, J.	Shinwell, E.	Wilson, C. H. (Attercliffe)
Messer, F.	Silkin, L.	Woods, G. S. (Finsbury)
Milner, Major J.	Silverman, S. S.
Montague, F.	Simpson, F. B.	TELLERS FOR THE NOES.—
Morrison, R. C. (Tottenham, N.)	Sinclair, Rt. Hon. Sir A. (C'thn's)	Mr. Adamson and Mr. Anderson.
Nathan, Colonel H. L.	Smith, Ben (Rotherhithe)

Question, "That this House doth agree with the Lords in the said Amendment," put, and agreed to.