HC Deb 27 September 1939 vol 351 cc1402-54

Motion made, and Question proposed, That—

  1. (a)where the profits of any trade or business arising in so much of any accounting period as falls after the thirty-first day of March, nineteen hundred and thirty-nine, exceed a certain standard, there shall be charged on the excess a tax of sixty per cent.;
  2. (b)armament profits duty shall in no case be chargeable and the national defence contribution shall only be chargeable if it is higher than the tax chargeable under this Resolution;
  3. (c)the tax chargeable under this Resolution in respect of a trade or business for any period shall be allowed as an expense for Income Tax purposes incurred in that period but any repayment of the said tax allowed by reason of a deficiency of profits in a subsequent period shall be taken into account for Income Tax purposes as if it were a profit of the trade or business arising in that subsequent period;
  4. (d)special provision may be made as to the tax payable in the case of inter connected companies."

6.10 p.m.

Mr. Clement Davies

We shall require further time to consider this Budget and all its ramifications, and to-night I do not propose to detain the Committee for more than a few minutes. In the first place I should like to congratulate the Chancellorupon the clarity of his Budget statement, and also upon his courage and boldness, especially in the matter of the extra taxation which he is, in my opinion very rightly, asking the country to bear. In my view Income Tax is the fairest of all taxes, and if this burden has to be shouldered it is best shouldered by placing upon each of us a burden according to our ability to carry it. The Budget is certainly a comprehensive one. No one escapes an extra burden, and I think that is also right, when we all together have to face this terrible catastrophe of war. But I want to join to-night in the appeal which was made by the right hon. Baronet the Leader of the Liberal Opposition. A sacrifice will have to be made by every person in the land. As a result of this extra taxation some of us will certainly have to cut down our expenses. Some of us may have to change, to quite a large degree, our mode of life. That we are quite prepared to do, I will not say cheerfully, but we will do it resolutely. I am sure that is the feeling of the whole country.

It was manifest to-night, while the Chancellor of the Exchequer was delivering his speech, that the country as represented by this House—because this House does represent the country—is quite prepared to shoulder any burden which the Government calls upon it to undertake at this time. But if we individually are to be called upon to make these sacrifices then it is essential that we should get value for our money. It is essential that there should not be any waste. We ourselves will have to see to it that there is no waste in our own houses and our individual lives, and in the same way it will be absolutely incumbent upon each Government Department to watch expenditure with the greatest care. This war, like the last, will not be won only by the forces in the field or at sea; it will be won by the ability of this country to produce and to keep on producing, to show its continued and growing strength as the war goes on, just as we know that during the last war the enemy, instead of increasing in strength, were decreasing in strength. That being so, I support the appeal made by the right hon. Baronet for a Select Committee to watch this expenditure. The Chancellor of the Exchequer, who is the guardian of the public purse, made a very powerful plea and I am sure that his colleagues who will be responsible for expenditure will listen to his words, but I think that he ought also to have assistance in keeping an eye upon that expenditure, to have the assistance of a Select Committee such as was appointed during the last war. As I have said, we shall want time to consider all the ramifications of this Budget, and to-night I content myself with these few remarks and with congratulating most sincerely the Chancellor of the Exchequer upon the clarity and the lucidity of his statement.

6.15 p.m.

Mr. Tinker

I think we all realised on 3rd September, when we entered into the war, that we should have to pay the price, both in man-power and as regards providing the money. Everyone understood that, and it was with no light heart that we took on our responsibility, and I think nobody will grumble at having to meet the extraordinary expenditure which faces us. The question is, Is the money being applied in the best possible way. That is the point we have to examine. There are a number of the taxes of which we cannot complain. The Income Tax has certainly gone higher than many of us expected. On these benches we have been conjecturing whether there would be an addition of is. or is. 6d.; one of my friends behind me did venture to say that the tax would be 7s. 6d. I do not think anybody will complain about the Income Tax, because I have always argued that those who are called upon to pay Income Tax always have enough left over to provide for the ordinary needs of life. I have always found that I can afford to meet all the Income Tax calls upon me and still have sufficient for a decent standard of life, and what applies to me applies, I think, to all Income Tax payers.

I have always argued the same regarding Surtax, feeling that it might very well be raised to any extent in the case of those over a certain income, because even after a man has paid his Surtax he is always left with sufficient to live upon. As the hon. Member for Montgomery (Mr. C. Davies) pointed out just now, a man may have to modify his mode of life and cut out many of the luxuries he has enjoyed before, but at a time like this, when the nation's life is at stake and when, if we were defeated, possibly those luxuries would be taken away altogether, no one can complain if the Surtax cuts deeply. Death Duties too, have always been a very good source of income, and I have often wondered whether the Chancellor of the Exchequer might not examine further the possibilities of cutting deeper still with Death Duties—apart from the case of direct descendants. Where there are sons and daughters they expect to get something from their parents, but beyond the direct descendants we come to a point where the question arises whether anybody has any right to the money before the State gets hold of it, and at a time like this the State ought to have the first call, because we are needing money for a great national emergency.

There are other taxes with which I am not altogether satisfied. I think the case of beer requires examination. It may be said that beer is a luxury, but to the workers in many industries it is not a luxury. The mining community like to think that they can get a glass of beer or a pint of beer without having to pay an excessive charge for it. However, I will not dwell on that point, because it may be argued that they ought to pay some extra taxation at a time like this. But sugar is one of the commodities which I think might very well have been left alone. I regard sugar as being a necessity in many households, and many of those who will be called upon to pay the extra tax upon sugar can ill afford to do so. As the hon. Member for Dumbarton Burghs (Mr. Kirkwood) says, these are the poorest of the community, the old age pensioners. At this time they will be very hard put to it to get a decent or any standard of life. Sugar is going up and we know that other commodities have also gone up in price. Butter has gone up. I saw on Saturday that bread has gone up. Tea will probably go up too. With sugar, they are the four essential commodities that keep body and soul together for those of poor income. Nevertheless they are to go up in price because of war exigencies. It is very unfair to tax sugar when, added to the other increases, this increase will bear very hard upon the old age pensioners.

In reviewing his Budget statement the Chancellor said he thought that no one would complain at having to bear the extra taxation if it was put on evenly, and he said that he had tried to put it on evenly on this occasion. I do not think that he has put it on evenly. My argument is that these burdens of extra taxation brought about by the war—we all agree that they cannot be avoided in the present circumstances—ought to be borne by those who can well afford to do so without suffering a material fall in their standards of life. In a time of stress like this we ought to examine the matter carefully in order to try to give to the poor the feeling that they will not suffer unduly because of the war, but to-day, regardless of the point which I have been making about the old age pensioners, this Committee seems to be not thinking about them at all and to be putting extra taxation upon their shoulders.

I am wondering how long the House of Commons will allow this matter to remain in abeyance. Are these extra taxes to continue without regard to ability to meet the extra burdens which are put upon these poor people? We know that as we pass on in this war, organised people will fight to retain some standard to which they are entitled. We shall find there will be agitation for increased wages to meet the extra cost that will have to be borne in various ways, and those demands will have to be met. I can see various organisations demanding higher rates of wages because of the burdens they have to meet and the House of Commons, reviewing those demands will say: '' Yes, they ought to have them, "yet we never seem to think how the old age pensioners are going to meet these extra burdens. I put a question to the Prime Minister to-day and I hope that the Financial Secretary to the Treasury will pay some regard to it. It is not sufficient at question time simply to put us off by saying: '' This is not the time to deal with these matters," because so fierce is the agitation on this point that the Government will have to recognise it at some time or other, and will have to deal with this matter of old age pensions. If we go on, stage by stage, putting id. or ½d., and sometimes 2d. on various commodities, how can we expect the aged people to continue to exist as they are doing at the present time?

Because of the war and of what it is bringing in its train we seem to think in the House of Commons that we can put these matters on one side for the time being, and say: "We should have examined it if the war had not come." Believe me, if war had not come some grant would have had to be made this October, because the feeling on the matter was intense both in the House of Commons and in the country. Now that things are becoming worse for these people we are inclined to think or to say, as the Prime Minister has said, that owing to war emergencies we cannot deal with the matter at the present time. But something will have to be done before every long in this respect. The imposition of this extra burden by way of the Sugar Duty gives me an opportunity of emphasising that point at this time. I trust that there will not be any complacency on the Treasury Bench on this matter, or any thinking that we are overlooking or letting go this fight for the old age pensioners. We shall press this matter on all occasions, in the hope that we shall prevail on the House of Commons to see that justice is done to this deserving class of people.

6.26 p.m.

Captain Hammersley

In time of peace it has been customary on Budget Day for comment on the Budget to be confined to the formal congratulatory speeches from Front Bench Opposition leaders. There is a good deal to be said for a period of a few hours gestation to consider the very difficult problems which are put before us in the Budget statement, but we are living in times of war, and I make no apology for keeping the Committee for a few moments in order to make one or two observations upon the financial problems before the country and one or two comments on the Budget statement. First, I will join with other speakers in a word of congratulation to the Chancellor of the Exchequer upon the way in which he has faced the realities of the situation. He has imposed upon the community grim burdens, but I do not think that anybody who studies the position can believe for one moment that those burdens ought not to have been imposed or that they are burdens which we ought not to face without delay.

The financial objective of the Budget, as the Chancellor of the Exchequer has said, is to provide sufficient money to wage war successfully without leaving behind a crippling burden of debt for future generations. The Committee will remember that the last war was financed in this way: Over 70 per cent. of the cost of that was was carried forward to posterity. We imposed, as a result of the last war, a burden of very nearly £250,000,000 per annum on future generations, and that burden was intensified by subsequent deflation. The authority of certain sections of the community was enhanced by that burden and the position of the producers was depreciated. The result was a weakening in certain trades, including agriculture, and it was of such a character that up to this time those trades have never recovered.

To those who would endeavour to finance this war on something like the same kind of lines as those on which the last war was financed, I want to make one or two comments. I wonder whether it is realised by what kind of process the loans were raised. The banks utilised War Loan to the extent of 80 per cent. of value as a collateral security. That means to say that any person who wanted to invest £100 in War Loan was able to do so by providing only £20 of his savings. The remaining £80 came from manufactured bank credit. The result of this creation of a tremendous volume of bank credit was inflation, and we are all concerned to avoid the spiral of rising prices followed by the spiral of rising wages. It is impossible to avoid that spiral if we have monetary inflation, and monetary inflation cannot be avoided if we have excessive borrowing. In fact, if the borrowing of the community exceeds the real savings and we rely upon the manufacture of bank credit in order to finance our war loan, we shall inevitably get inflation and we cannot stop the rise in prices.

There is another consideration. If we endeavour to finance this war as the last war was financed, by borrowing some 70 per cent. of the burden, what will be the condition of the country after the war? on a basis of three years, it is a gross under-estimate to say we shall require to borrow £10,000,000,000. From whom shall we borrow it? We shall be able to borrow it only from those people whom the banks consider to be credit-worthy. Already, as the Committee and the country well know, the proportion of rentiers in the community is as high, probably higher than in any other country in the world, and we should, if we endeavoured to deal with war finance by a system of borrowing, end the war with our proportion of rentiers even greater, which would result in a burden on the producer which in my opinion would be absolutely unbearable. The final result would be to create a feeling of social injustice which would end in a demand for repudiation. For these reasons, as the Chancellor of the Exchequer has said—I agree with him entirely—it is necessary to finance this war by a far greater proportion of taxation and, if we carry out this resolve, we shall be able to finance it much less extravagantly than the War of 1914–18. We shall be able to control prices in the absence of monetary inflation and, expressed in terms of goods and services, the pound sterling will buy more.

How can we pay as we go? The Chancellor has told us his intentions. He has raised the Income Tax to a very high figure, he has extended its incidence, Death Duties have been increased and Super-tax has been more stiffly graded. These matters will provide a substantial amount of revenue. But indirect taxation will, as well as providing materials for monetary wealth, also tend to check unnecessary spending on luxury articles. The question one must ask is, Will these taxes, heavy as they are, produce sufficient revenue for the task before us? They will produce some £ 226,500,000 in a full year. I believe we have absolutely reached the limit of Income Tax. I think that 7s. 6d. in the £ with the possible addition of a Is. National Defence Contribution, whichmakes 8s. 6d., will probably result in diminishing returns, and I am very doubtful whether it will not result in an increase in evasion, but I agree that it is an increase which has to be faced and a risk which has to be run. But we have now, at the beginning of the war, reached what is in my view the limit of Income Tax. I think there is still a certain amount of reserve in Death Duties and in Super-tax, but all these are taxes on what I might call the active section of the nation's wealth. There still remains an impressive total of passive wealth which has not been taxed. I do not feel that a tax on capital is in itself a good tax. Capital is a very shy bird. You will frighten it on a number of occasions and it will disappear for ever. Another difficulty about a capital tax is this. Capital is difficult to assess and difficult to collect. Nevertheless, in the face of the emergency which confronts the country I feel that a proportion of the capital of the wealthier people in the community should be made available to help in the conduct of the war, just as all the resources of man-power between 18 and 41 are being made available. I feel that some kind of contribution from capital will, during the course of the war, have to be made.

What form shall that capital contribution take? I, personally, prefer that at the end of the war a substantial proportion of the growth of capital during the war should be taken by the State, and I was very gratified to hear that the Chancellor is studying that point. But I want to know, Why just studying the point? There are one or two things which in my opinion should and must be done now, and the first thing to do is to ask for a return of the capital of all Income Tax payers. By "a return of the capital" I do not mean a return of values—it seems to me that that is a later stage—but I think the taxpayer should now, at the beginning of the war, be called upon to make a return of the physical character of his assets—so many shares in such and such a company, a partnership in this firm, land in such and such a place. The question of the assessment of the particular capital can come later. But I think it would be a great pity in the national interest if at the end of the war we were faced with the situation of not being able to tax the growth of capital because we had not in the earlier stages got the necessary information. I realise the difficulties, particularly the difficulties of collection, but I would put this point to the right hon. Gentleman. When he issues his war loan he should make it available at its face value in payment of these Duties. If he does that, and an individual knows that by the altered direction of our war effort he is increasing the capital, he will be the first person to appreciate that in his own interest he should divert some of his capital into war loan because he would then be able to surrender it at the end of the war in payment of the Duties on the growth of his capital.

I am aware, of course, that in addition to the disadvantages of assessment and collection there is the further disadvantage that during the course of the war it does not give you anything to be going on with, but I think it would be a real and valuable asset to the community and to the financial resources of the nation if we stated that we were going to proceed with this plan seriously. I think the whole Committee welcomes the statement of the Chancellor, which shows that in this war we are going to tax more and borrow less. To achieve the proper proportion between taxation and borrowing, taxes on incomes and inheritance must, in my opinion, be augmented by the substantial taxation of the growth of all capital during the war.

6.41 p.m.

Sir Richard Acland

I appreciate the speech of the hon. and gallant Member for East Willesden (Captain Hammersley), which seemed to me to get down to the really deep problems of war finance instead of the small details of this Budget, which we are not in a condition to consider until we have had time to consider it. I, too, would like to deal with the question of the major problems of financing war. If the Chancellor's proposals today are to be regarded as being in the nature of a temporary expedient, to tide us over the six months or so before this country is organised for a war effort, I appreciate that they are the best that can be put forward, but if they represent the way in which we are going to fight the war as a whole, I am filled with the gravest forebodings. When he introduced his first Budget the Chancellor entertained the House with reminiscences of his predecessor, Mr. Gladstone. It seems to me that he still feels that his task is the same as Mr. Gladstone's, though rather larger.

But a war budget is an entirely different thing from a peace budget. The essence of a peace budget is that the Budget represents a small proportion of the total national income. The total national income is made up of the private payments of one private individual to another in return for the necessities, comforts and luxuries of life supplied by the other individual. Out of this the Chancellor regretfully takes a part of the money which he requires for national purposes. His whole object, under such an economy, is to maximise the national income, in order that he can more easily get his Budget. But, now that we have changed over to a war effort, the problem is completely reversed. The whole effort must be directed towards minimising individual expenditure on individual needs, in other words, minimising the national income, out of which the Chancellor is to draw his money by the conventional means of national taxation. That method is not likely to work. How unlikely it is to work is shown by the speech given by the Lord Privy Seal on the wireless a few nights ago, when he urged us to spend as usual, in order presumably to provide this pool out of which the Chancellor is to get his money. This means, I suppose, that if at this time of year I would normally be ordering another suit I should order it.

It will be said that production must be kept going. I agree with that, and until there is something more useful for the manufacturers of cloth to do I agree that they should manufacture cloth; but surely, in a war economy, that cloth should be sent to America and sold, even at a loss. That the words of the Lord Privy Seal should divert any part of that cloth to my back at the present time, in order to maintain the pool of income on which the Chancellor has to draw, seems to indicate that we are living in an Alice-in-Wonderland existence, and not facing up to the problems of a war economy. It seems to be thought that there are two pools of national endeavour, one fed by Government orders and the other by private enterprise, and that the Chancellor's task is to draw enough out of the second to fill up the first. But there are not two pools. Private enterprise, except on a very small scale, is, in fact, at this moment dead. You may have a cafe proprietor who is considering closing down in the City and opening in one of the resorts to which his late customers have now transferred themselves; that is going on; but the large-scale private enterprise except for war purposes has gone. Those who make decisions under private enterprise estimate probable incomes, probable costs and probable risks. To-day nobody knows the probable incomes, the probable costs and the prob- able risks. Therefore, nobody is trying to carry on any substantial private enterprise—and if anyone does try he is met by a barrage of Government restrictions. Therefore, there is only one pool of national endeavour to-day. The whole thing is in the hands of the Government, and the Government have to run it. We have not yet seen any indication that the Government realise that this task is now on their shoulders.

Take, for example, the coal industry, which may be regarded as a pattern of what might happen in other industries. Everybody knows that coal will go up in price; anyone who cannot sell the coal that comes to the surface can hold on to it, and nobody is going to bother about the export of coal or face the difficulties of doing business abroad under the supervision of a censor who, I understand, carries on from a seat in the grandstand at A in tree. As a result the price of British coal in Scandinavia has just exactly doubled in three weeks. The Germans are able to sell their coal at an enormous price in Scandinavia, and thereby to purchase iron ore at very low prices because it is not worth the risk involved to a British exporter in sending his particular parcel of coal to Scandinavia. That is a matter which the Government will have to take hold of and run. More pits have to be brought into production, the less efficient pits have to be brought into production, and their costs have to be covered. Are we going to have a level of prices which will enable them to do that? If we do, the shareholders in the most efficient pits are going to make a mint of money; and, even under the taxation which is proposed, they will be left with half or a quarter of the mint of money in their own hands. The Chancellor of the Exchequer will have to meet the fair costs of bringing that coal to the surface; it will then be his, and he will sell how he chooses, to whom he chooses for whatever purpose he chooses. That will have to be the pattern of our war economy.

Let me give another quite small instance which seems to me to show the unreal-mindedness of the Government in looking at our war problems—the insurance of stocks. The Government seem to have treated that question in a paper, peace-time way. Suppose that an incendiary bomb burns 100 bales of wool. The Government's attitude is that the im- portant thing is that we should be very sure that the owner is able to make a paper credit entry in his books. Therefore, there would be a fund. The money could be raised in any way in which anybody liked to raise it. For the sake of making the punishment fit the crime, the fund was raised by one of the stupidest taxes imaginable—the 6 per cent. tax on raw materials. It is a tax which has been passed on to the consumer goodness knows how many times by the producer, so that we are paying, in order to raise that fund, far more than we would have paid if it had been raised in any other way. Mean-while what is the real problem when an incendiary bomb burns 100 bales of wool? It is that the nation has lost 100 bales of wool, and that is all.

Mr. Marcus Samuel

May I interrupt the woolly argument, and ask the hon. Member what it has to do with the Budget?

Sir R. Acland

I am only suggesting that we ought to get away from the peace-time economy of looking on these things as a matter of balance sheets, and that we should realise that in war-time we ought to open our minds to the fact that these problems do not work themselves out on paper as profit and loss, but are real profits on materials and goods. What matters is that 100 bales have been burnt, and not the entry in somebody's account. The wool controller, reviewing the stocks of wool and the purposes for which they are required, could either replace the destroyed wool immediately if it is very urgently required, or when he can, if it is urgently required, or perhaps very likely not replace it at all, if the wool was not to be used for any very immediate purpose. It seems very arbitrary and shocking that somebody who was the owner of 100 bales of wool which had been burnt should not have it replaced.

Another thing which is arbitrary and shocking is that shareholders should not receive dividends which they would have received if you allowed the price of coal to go up to the level required in order to bring the inefficient pits into production. That would seem arbitrary and shocking. But war is very arbitrary and shocking, and a great many have to take arbitrary shocks. It is not good enough to ask people to believe that sacrifices are all equal merely because the rich, out of the larger incomes that they draw from the national endeavour, are asked to make a larger contribution to that national endeavour, unless the rich are going to be exposed to the same, shocks and arbitrary decisions of war. Nothing in this world is more arbitrary than two men going over the top and one being shot and the other not. You could not get anything more arbitrary than that. That is not all. The hon. Member for Abingdon(Sir R. Glyn) last night asked us to consider the case of two stable boys who had 48s. 6d. and left their jobs to receive 3 10s. in a Government factory. He asked organised labour to co-operate to prevent that kind of thing. What about asking organised employers to co-operate to prevent the opposite process which has been going on pretty strongly in the last three weeks? The Prime Minister said yesterday that we are a united nation, and I believe it. We are united, with very few exceptions, in our determination to end in international affairs the contemptuous disregard for the pledged word and the callous indifference of Governments to the sufferings of peoples and the attacks upon their liberties, which have been the feature of the foreign policies of more than one country in Europe.

The Deputy-Chairman (Colonel Clifton-Brown)

I do not wish to be hard on the hon. Member, particularly as on a Financial Resolution he can discuss almost everything, but I am bound to say that he is getting very far from what are relevant matters.

Sir R. Acland

I accept your Ruling, Sir, and I will leave that point. I am seeking to say that we shall not preserve this national unity unless, in our financial policy, we convince the nation that all people are being treated alike. Enormous numbers of people have lost the whole of their incomes in the last three weeks, and thousands have been dismissed their jobs after 30 years' service and put on the street, and wages have been reduced—absolutely arbitrary decisions. That is not all. Small business men throughout the country in their thousands have been ruined by the black-out, ruined by evacuation; ruined by petrol restriction; ruined by Government control; all this is absolutely arbitrary—without a penny-piece of compensation. These sacrifices are tolerably and willingly accepted because they are so much smaller than the sacrifices in the front line, provided that we know that the big men—the Vickers, the Armstrongs, the I.C.I's. and the Iron and Steel Federation and all the rest of them—are also standing with us, prepared to accept the shocks of war right on the point of the chin like any common soldier. That is the kind of spirit in which we have to mould the war-time finance.

We have sufficient resources to carry this war through to victory if we look upon our financial problem as one of paying the wages and salaries of the people who are going to work upon those resources, and convert them into usable goods which we as a nation then use and sell at home or abroad as seems best for our war purposes. I submit that morally, materially and financially we shall not come through this war if we face it in terms of orthodox finance, imagining that we can raise our money out of the great pool of private enterprise, regarding each item in our visible resources as being the property of a particular individual who is to be compensated or paid out in full, or given a fair and reasonable rate of interest, if his particular resources happen to be used for the purposes of the State. We take a man out and kill him and give no compensation, and why should we be so squeamish about property? I may be told that what I am suggesting means that we shall destroy, in the process of the war, everything that we are trying to defend. That is not so. We are going to defend our liberty of thought, liberty of speech, liberty of the Press, liberty of religion, but I do not believe that the ordinary people of this country desire to fight to re-establish the social order which we have seen in this inter-war period. I believe that humanity will demand equality above everything else at the end of this war. As we go into this war and face the sacrifices we must face, I do in all seriousness ask this Committee to consider whether there can be such a thing as equality as long as there is a small fraction of the population, representing none the less a considerable number of people, who are living lives wholly different from ordinary men and women of the country simply because they are drawing an unearned income by right of private property.

6.59 p.m.

Commander Sir Archibald Southby

The Chancellor of the Exchequer is to be congratulated on the way in which he has discharged a difficult and possibly an unpleasant duty. I think that he is most to be congratulated upon the fact that he put so clearly before the House and the country the fact that this war can only be financed in three main ways, first, out of taxation, secondly, by borrowing, and, thirdly, by the exercise of rigid economy. The hon. Member who spoke from the bench below earlier in the Debate said quite rightly that the experience of the last war as regards its being financed out of borrowing was in the main a bad one. It leaves behind it a trail which it is desirable should not be left. The Chancellor of the Exchequer referred to the savings of the community, including, of course, the large taxpayer, with whom he dealt drastically. I suggest that there are very few large individual taxpayers in the country who have been able, during the last few years at any rate, to make any savings whatever. It is better that this war should be financed as far as possible out of taxation from year to year, in order that an undue burden may not be laid upon those who come after us who will, I hope and believe, benefit by the efforts that we are making to preserve their freedom and their liberty. We shall win this war if we approach its difficulties as a united community and if we eschew any desire on the part of one section of the community to score a point off another. We are all in the boat together and we shall all sink or swim together. Only by our combined, united efforts shall we be able to bring the war to a successful conclusion. Therefore, we must face the war as a community trying to understand the particular difficulties that are experienced by the various sections of the community, whether they be blessed with this world's goods or not.

Obviously, extra burdens must fall upon the community as a whole. It is true that extra burdens should fall upon the shoulders of those who have most of this world's goods. Hon. Members and possibly people outside this House sometimes forget that a man is only rich—the term "rich" was introduced by the hon. Baronet who has just spoken—if his income exceeds his commitments. It may well be that a man with a very large income is not as well off as the man with a very small income, because his commitments may be much bigger than the commitments of the man with the small income. [An Hon. Member: "I would risk it."] The hon. Member opposite says that he would be willing to risk it. If a man's commitments are big and he is taxed, and rightly taxed, heavily, you reach a point at which he can manage to exist only if he reduces his commitments, and the cutting down of his commitments must in the end mean unemployment and the cutting down of the livelihood of many people who are dependent upon him in the state in which he is living.

If the war lasts three years there is nobody in this country, to whatever section of society he belongs, but will have to face a considerable diminution of the standard of life to which he has been accustomed. It will not affect one section of the community but all sections. What should be kept in people's minds is that you want, if you can, to prevent the spread of unemployment by the over taxation of any one section of the community. There was a jubilant cry from one hon. Member when the Chancellor of the Exchequer was discussing the increase in the Income Tax and the Surtax, but it is only fair to realise that there are less than 100,000 Surtax payers whose contribution alone at the present time is sufficient to pay for all the social services, without calling upon any indirect taxpayers to contribute one penny. Let it be remembered that there are only 3,500,000 out of 30,000,000 voters who pay direct taxation.

It seems almost a grim injustice that the Chancellor of the Exchequer should be asking for an increase in Death Duties at the same time that we are asking people to go overseas to risk being killed. I agree that it is necessary, but it does indeed seem to be a grim injustice that you should ask a man to go overseas to defend his country and thereby expose himself to the risk of an early demise, and let him know before he goes that his children will be penalised because of his earlier death in serving his country.

Mr. David Adams

What about the poor?

Sir A. Southby

There is no difference in sacrifice so far as going overseas to fight is concerned, but you are calling for a different sacrifice from those who are left behind. Let us remember that the sacrifice exists. I believe that Income Tax is one of the fairest forms of taxation that could be devised, but I suggest that from all income there should be a contribution, no matter how that income is derived. A contribution should be demanded from every person in the community, from myself and from the hon. Member for West Fife (Mr. Gallacher). Whether our incomes are derived from this country or from sources abroad does not matter. A contribution should be levied upon that income. If that be so and if the community is to have equal sacrifice, it would be fair to tax incomes, however small. The bigger incomes should pay the bigger contribution, but the smaller incomes should pay something proportionate in direct taxation.

I have always felt that to have allowances for this and that, a portion of income which pays no taxation and a portion which does is something which it would have been wiser never to have introduced. It is not right that any section of society should pay no Income Tax because the income is, say, £300. That encourages the man with £400 to say, "Why am I not exempt?" or the man with £500 to ask the same. In these circumstances it becomes manifest that these is a bartering at times of elections as to who should be exempt. The people of this country, and, above all, the working community, have always been willing to make a sacrifice if it has been put fairly to them, and the circumstances explained. I believe it would be fairer at this time of grave national crisis if a graduated contribution was asked for from every section of the community, from every individual. If you took some small contribution in direct taxation from the man with an income of £3 a week I believe it would be welcomed by the wage-earner as just. I wish the Chancellor of the Exchequer had had the courage to sweep away all allowances in regard to Income Tax. I wish he had had the courage to say that a small graduated tax would be levied upon all wages, because wages are income just as much as is income derived from investments. I believe that would be fair and that it would be welcomed by the people.

What we want is equality of contribution and sacrifice. There is no difference in the equality of sacrifice for those who go into the Services. It is only when it comes to the organisation of economy behind the lines that the difficulty arises. It is right that no one should profit out of thenation's need, and that no one should amass an enormous fortune or have unduly enhanced conditions of life by reason of the necessities of the nation in the prosecution of the war. I know hon. Members opposite will absolve me from any desire to be offensive and I know they realise the truth when I say that it is just as important that there should not be undue demands for the raising of wages because of our war efforts as it is that there should not be demands for increased dividends from companies' profits as remuneration for their efforts in the war. Reference has been made by the Chancellor of the Exchequer to economy. That is something upon which not only hon. Members of this House but the community outside are most insistent. Everyone knows that money is being poured out at the present time for things which could easily be arranged to be done by voluntary effort. One hears of people in London and elsewhere doing air-raid defence work and being paid £2 and £3 per week whose services are available for nothing.

War, I suppose, is the most stupid and futile thing that man ever invented. Unfortunately, it makes inroads not only upon individual happiness and well-being and individual incomes, but also takes a terrible toll of the national resources not only in man-power but in finance. But there is something which is of more value than any amount of money or any quiet and ordered life, and that is the preservation of freedom and liberty. It is no good having material goods if freedom of the spirit and of the individual has gone. I believe that there is no sacrifice which this country will not make, there is nothing which the community will not do, to preserve the freedom and liberty which we possess in this country and in the Empire. But let us have from first to last real equality of sacrifice. I beg hon. Members to let this country become a real community, where there shall be no jubilation because one section is taxed and another section happens to go scot free. Let us put our heads together in amity and common sense and devise a system of direct taxation to which everyone shall contribute. I am not afraid of asking the working man to contribute something out of his weekly budget because I believe he knows, as I do, that it is only by the mass contribution of the men and women of this country, made in good will, that we shall bring the war to a satisfactory conclusion.

7.13 p.m.

Mr. Richards

I do not intend to follow the hon. and gallant Member for Epsom (Sir A. Southby) in his disquisition concerning the equality of sacrifice. Anyone who knows the Income Tax system of this country knows that the poor are still paying a heavier proportion of their income by way of indirect taxation than the rich, and if the Chancellor of the Exchequer has done anything at all he has really done something in this Budget to rectify that anomalous position. No one in the House would envy the task imposed upon the Chancellor of the Exchequer this afternoon. It seems to me that a September Budget on the top of an April Budget is simply piling on Pelion and making the burden almost unbearable. I feel that the Chancellor of the Exchequer was looking back with some considerable regret at the considerable Budget he introduced at the end of April. That Budget, as he pointed out, assumed that he was going to get in taxation £942,000,000 and that he was going to borrow £380,000,000 in order to meet expenditure, but to-day he has told us that borrowing has leapt up to nearly £1,000,000,000. That is a basic fact which we must remember. As the hon. and gallant Member has pointed out, the question of borrowing is a very serious one. It means that we are leaving a considerable burden for probably a greatly impoverished generation to bear in the future. The Budget which the Chancellor of the Exchequer introduced in April—I am taking the old figures and not the corrected figures—was a total sum required by borrowing and taxation of £1,322,000,000, the heaviest Budget that has ever been imposed on the people of this country. It was heavier than any of the Budgets introduced during the late war. The Budgets of 1921 to 1924 are the only ones which really approximate to it.

The Budget introduced in April last was presumably a peace Budget; at any rate we were at peace, although we were making frantic efforts to arm ourselves for the catastrophe which has overtaken us. I was interested to compare it with the last peace Budget introduced by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) in 1914 just before war broke out. That Budget was introduced in May of that year and the total he expected to derive from taxation then amounted to only £226,000,000, about one-quarter of what was expected by the present Chancellor of the Exchequer as the result of his Budget of last April. Even in 1916–17 the total amount derived from taxation was only £336,000,000, about one-third of what was required by the Chancellor last April. It is quite obvious that a great mistake was made in our taxation system during the last war, because the amount that was levied, even in 1916–17, was only one-third of what has been levied this year when we were at peace. This brings me to the point that if you take the Budgets between 1914 and 1921 you will find that the amount which was raised by taxation was only one-quarter of the amount which was borrowed, and I think most people are agreed by this time that that is essentially the wrong way of doing it. It is better that we should get the bulk of the money we require for the war by direct taxation. This must have come home to the Chancellor of the Exchequer himself. Here we are facing a tremendous struggle, and he has had in the Budget of April last, which of course is still operative, to carry a considerable burden of not less than £230,000,000, which is the direct result of the bad financing of the last war. Consequently, the moral is fairly obvious. It is that in this war we should do everything we can to raise by taxation the money that is required, because borrowing really leaves the country very much poorer than does even a system of very heavy taxation.

Another point to which I wish to draw attention is the very different position in which we find ourselves to-day compared with 1914–1918. I do not think anybody can say that at that time the rate of taxation was heavy. I have pointed out already that taxes even in 1916–17 yielded just one-third of what they are expected to yield this year. Therefore, they were not extraordinarily heavy. We must remember also that in those years we were a very considerable creditor nation, the most important creditor nation in the world. British capital was invested in all parts of the globe and one of the results —unfortunate, I think, from some points of view—of that tremendous straggle between 1914 and 1918 was that we had to call on a great deal of that capital and the money had to be invested in war loan, as will be the case again. That had the effect that we were not able to get commodities from abroad as we had been able to get them when we were a creditor nation. Raw materials and food came to this country in the form of interest upon the money that had been invested abroad, and consequently, we were able to feed our people, clothe our Army, and provide munitions, because foreign countries were indebted to us and the form which the interest took was raw materials and foods.

This time we are not in that favourable position. We are not anything like the creditor nation that we were in 1914. I may receive the reply that we can borrow abroad, as we did to a considerable extent in 1914–18. When we speak of borrowing, what we mean really is trying to persuade other nations to hand over the raw materials and food we require and postpone payment for a certain time. I presume that all hon. Members remember the disagreeable story of the American debt. I do not know what is the position with regard to that at the present time. Perhaps the Financial Secretary to the Treasury will tell us exactly what is the position now with regard to the American debt. I suppose it is in a condition of suspended animation, but I think that if one approached an American and spoke to him about it, he would take a very different view. I am afraid that in future borrowing in America will not be nearly as easy as it was during the last war. I have raised these points because I feel that hon. Members have, perhaps, a false sense of security in some respects. The position with regard to taxation is very serious, and I think that the estimates last April of the product of taxes showed that there was a very serious decline in some of them. We must find most of this money at home this time. We cannot draw on those resources, which indeed in some cases have dried up; and our relations with America are perhaps not quite as favourable in this respect as they were in 1914–18.

The net result is that the money must be found in this country, and this raises a very important difficulty. As I see the position, there are two ideals even on the Government Front Bench. For example, the ideal of the Fighting Services, and even of the Minister of Supply, is that everybody should be either in khaki or in dungarees. They think that the war is going to be won by actual fighting. I recall the saying of Napoleon that he was defeated—and it galled him considerably—by a nation of shopkeepers. But Napoleon really sensed the true position. He realised it was not the navy and the army, as such, that had beaten him, but really the great industrial and commercial power of this country, which was then beginning to show itself. That has been the case with every subsequent war. Our soldiers and sailors, it goes without saying, have fought manfully, but behind them there has been the tremendous industrial productive capacity of the ordinary people of this country. If they are not allowed to pursue, to some extent, their ordinary avocations, if they are not prepared to produce the wealth which the Chancellor is going to seize, I do not see how we are going to succeed in the magnificent effort that we are making in other fields. I think this is possibly the most difficult matter which statesmen have to decide nowadays— exactly how to apportion the labour power and capital of this country so that we do not destroy our economic life. I was particularly glad to hear the Chancellor emphasise the importance of our foreign trade. We shall win this war, as we have won every war, because of the tremendous productive power which this country has, and which is to be put at the service of the community in order that we may pull through. This is a consideration of vital importance. It is of vital importance to the Government and to all of us. We must not run away with the idea that the people in khaki or engaged in munitions work are the people who are really winning the war. The war will be won by the ordinary workman sticking to his job and continuing to produce things which even the Army, the Navy, and the Air Force require, and which give us that resilience which we require when the struggle is at its worst.

7.29 p.m.

Mr. Loftus

As I know that several hon. Members wish to speak, I shall confine my remarks to a small compass and direct them practically to one point; but before doing so, I have a commission to execute. My hon. and gallant Friend the Member for the Exchange Division of Liverpool (Sir J. Shute), who has had to leave London, was most anxious to put to my right hon. Friend a question with regard to the National Defence Contribution, and he requested me to ask the question for him. It is this. The National Defence Contribution was origin-ally suggested as a tax on armaments profits only, but hon. Members will remember that it was then modified, and became a tax on all profits. My hon. and gallant Friend wishes to ask: Is this tax to be continued at is. on all profits where the profits have fallen instead of risen —and the whole underlying point was that they were all rising—on top of the 2s. increase in the Income Tax? That is the point which my hon. and gallant Friend wished me to put.

I do not propose to comment on the Budget in general. I realise that my right hon. Friend the Chancellor of the Exchequer had a most unenviable task. One of the main problems which he had to face was that of deciding the proportions to be raised by direct taxation and by loan, respectively. My hon. and gallant Friend the Member for West Willes-den (Captain Hammersley), in a most interesting speech, discussed that problem and pointed out that the amount raised by taxation depends a great deal on bringing into use all the productive labour and plant of the country. If you get full activity in employment and industry, you will raise your taxes, but today we have not full activity. There are still many unemployed, and my fear is that this Budget may have a deflationary effect, check the coming in of these taxes and intensify the fall that has already taken place in receipts from existing taxes.

I now turn to the main problem to which I wish to direct the attention of the House. I feel it is essential, when this heavy taxation is being placed on all sections of the community, that the money so raised should not be expended in paying unnecessarily high rates of interest on the new war loan. I am a little concerned as to what that rate is to be, as a result of what happened some four weeks ago. Then, the Treasury was borrowing great sums at approximately 15s. for every £100. I understand from a letter written by a banker to the "Manchester Guardian" to-day that the City expected that to go on. They expected that when war came the Treasury would intensify control; that the discount houses would be instructed to buy Treasury bills at that rate of interest; and that the banks and the big finance houses would be firmly requested to take up allotments of long-term war loan at very moderate rates of interest. What happened? There was suddenly a change. The Bank Rate, four weeks ago, was raised from 2 per cent. to 4 per cent. Under the old orthodox working of the Gold Standard, that was justifiable and necessary, but to-day we have abandoned the Gold Standard. We are living under a managed and controlled currency. There is the strictest control, and I submit that that was an unnecessary and heavy expense on the taxpayers, which could have been avoided.

Let us see what the result has been. Four weeks ago, we taxpayers, through the Treasury, were raising money at 15s. interest for every £100. The Bank Rate was raised and next morning we were raising that money at, approximately £3 15s. for every £100 instead of 15s. for every £100. What must not that have already cost the taxpayer? I suggest it may already have cost the taxpayer something equal to 6d. in the and I read that the City Editor of the "Daily Mail" has said that in one week's borrowing, the extra interest paid was £900,000. There is another result. To maintain the level of gilt-edged securities is of enormous importance. Gilt-edged securities had been sagging and, of course, the raising of the Bank Rate intensified that fall. So, control had to be applied at once and a fixed minimum price, otherwise they would have sunk lower.

I admit that before the rise in the Bank Rate, gilt-edged had been falling. Why? I think for one reason only. A psychological impression had got about that when the war came, the old level of credit in the last war of about 5 per cent., would be re-established, and it was the fear of capital losses that made the investor put his money on deposit, where he got only one-half per cent., instead of putting it in Government securities where he could get 3¾ per cent. Then, of course, when the Bank Rate was raised, instead of getting one-half per cent. the depositor got 2 or 2½ per cent. which was, again, a direct incentive to go on hoarding and depositing, in the hope of getting higher rates of interest, instead of investing in Government securities. I suggest very strongly that just as the hoarding of food at a time like this is a crime against the State, so the hoarding of money is against the interest of the State, and the Treasury should take every step to prevent it. They should even see that those who hoard money on deposit, waiting for the chance of appreciation in Government stocks, do not receive interest on those deposits but rather pay interest on their deposits, if that is necessary in order to force the deposit money into the investing market. I believe if we had had a larger issue of Treasury Bills we could have avoided the fall in gilt-edged Government securities.

Regarding the present position, we are about to float in the coming months great war loans. What steps will be taken to secure a reasonable rate of interest? By "reasonable," I mean about 3 per cent. I submit with all humility to my right hon. Friend, who is so experienced in these matters, that the first thing we must do is to banish from our minds all the old ideas based on the functioning of the Gold Standard. Secondly, we must discard completely the old idea which was prevalent during the last war, that the Treasury has to compete with other borrowers in the open money market. Under the control system which is established to-day, the Treasury has not to compete. It has the power to become the only borrower, for practical purposes, and to fix its own rate of interest. Further, I would say, with all the emphasis at my command, that at a time when the Government are, quite rightly, preparing to stop profiteering in goods and the prices of goods, they should be just as determined to stop profiteering in money and the prices of money. My hon. and gallant Friend the Member for West Willesden described very interestingly the actual procedure by whichthe war loans in the last war were raised and floated and the methods used by the great financial institutions. I recognise the very great services which the joint stock banks rendered in the last war and ever since, and the very great ability with which they are conducted, but I find a general feeling even in the most unex- pected quarters that during the issue of the war loans in the last war these great financial institutions did make large profits, and in a time of national emergency care must betaken that again there is restriction of profits in all directions, including any profits made on the issue of these loans.

Turning to immediate measures, I hope we shall see an immediate reduction of the bank rate to 2 per cent. This would indicate, first, that the Government propose to continue their cheap money policy; second, it would restore confidence in gilt-edged securities and cause an immediate and very sharp upward swing in the price of gilt-edged; third, it would drive the profit mongers into the investment market, which is just what we want. Let the Government issue Treasury bills at the old rate of 15s. per cent. If the banks were reluctant to take those Treasury bills, I think the Treasury could request and even compel the Bank of England to take them. Other banks would then have to conform or allow their cash deposits to be swollen, earning no interest whatever. In other words, a position would be reached very similar to that at the time of the great conversion in 1932, when a somewhat similar procedure was adopted. At that time some of us were told that the public would take cash for their loans, but they could not, because, owing to Treasury control, all securities had to conform to the low rates of interest of the new issues, and, therefore, cash was no use, because there was no opportunity to invest at the old rate that existed before the Treasury took these means to force down the interest. I hope my right hon. Friend the Chancellor will forgive me for bringing this point, which he did not mention in his interesting and able speech, perhaps rather vehemently before the House, but I feel that it is essential that a great proportion of the money that is to be raised in increased taxation should not be paying high rates of interest on war loans as in the last war, and I feel that I myself could not support any issue of war loans above a rate of 3 per cent.

7.44 p.m.

Mr. Gallacher

As I listened to the Chancellor of the Exchequer introducing his Budget this afternoon, I looked around and wondered to myself what hon. Members on the other side had to think about the whole situation, for it seemed to me to be a most terrible commentary on the capitalist system. Here you have proposals presented before this House to raise masses of millions of pounds, and no question of opposition being raised for the purposes of destruction. Yet if those millions had been raised in peace-time to better the conditions of the people of this country, we could have been living in a paradise. I am told, of course, that in connection with these taxes there will be a fair deal all round and that the wealthy will have to contribute a very considerable share of their wealth, but I am prepared 'to challenge the Chancellor of the Exchequer or the Financial Secretary on this point. I do not care how much they may have increased the Income Tax or the Super-tax, I am prepared to stake my life on it that at the end of the war the wealthy will be wealthier than they are to-day, unless we succeed in changing the system in the meantime. The Financial Secretary cannot get up at that Box and show where during the past year there has been the slightest decrease in the wealth of the wealthy, despite the Income Tax and Super-tax. On the contrary, there has been a continual, steady increase in the wealth of the wealthy. There is no question of a fair deal all round, and there never has been. How is it possible to talk about a fair deal all round when the workers every day are contributing their labour? Even now they are being asked to sacrifice hard-won trade union rights, which means an intensification of the rate of production. It is the workers who contribute everything, but the wealth is taken by a handful of the wealthy.

The hon. and gallant Member for Epsom (Sir A. Southby) told us that the Super-tax payers were only 100,000 in number and that they contributed, apart from any other taxation, sufficient to meet the whole of the social services. There is something to ponder about. Of course, he did not understand what he was presenting before the people of this country when he used that argument. It meant that 100,000 people in this country have as much to spend on themselves as is spent on the whole of the social services of this country.

Sir A. Southby

Perhaps the hon. Member does not appreciate the point that the argument goes to show that there is a large percentage of people in this country who are not directly taxed.

Mr. Gallacher

I understand that perfectly, but think of the millions of people who are absolutely dependent on the social services—mothers, children, old folk, unemployed, education, health services, the whole ramification of social activities throughout this country. Millions upon millions of people depend on the social services, and 100,000 people in this country are able to spend as much on themselves in a year as is spent on the whole of those social services. Such a system as that cannot possibly continue. What have we got at the other end? Taxation on beer. I never take beer but I know that it is a common refreshment for masses of the workers. There is taxation on beer, tobacco and sugar on top of the other taxation. That bears terribly on the masses of the people. It is utter nonsense for Members to say that every income should be taxed If the father of a family brings in a wage which is not sufficient to provide the essential food and clothing for his wife and children, how can anyone say that that wage should be taxed?

Sir A. Southby

Nobody has said so.

Mr. Gallacher

That was the argument of the hon. and gallant Member for Epsom (Sir A. Southby).

Sir A. Southby

It may be what the hon. Member thinks was the argument, but that does not make it the argument.

Mr. Gallacher

The hon. and gallant member said that we should have an equal tax on incomes.

Sir A. Southby

I never said an equal tax and the hon. Member must not misrepresent me. I said a graduated tax on all incomes—a very small amount for small incomes and a very large amount for big incomes. The hon. Member may criticise what I say, but he is not entitled to twist, alter and misrepresent it.

Mr. Gallacher

I am sorry if I used a wrong term and gave the impression that the hon. and gallant Member meant an equal rate for all wages and incomes. What he meant was that there should be on every wage and income, no matter how small or large, a tax of some sort approximating to the amount of the wage or income. He said that he was prepared to go to any section of the working class and advocate it and that the working class would be prepared to accept such a proposal. There are, however, many millions of people whose wages are not sufficient to meet the ordinary weekly commitments. That is why there is such trouble in many parts of the country about rents, for if they pay rent they have not the money to buy food and clothing. In this Budget the poorest of the people are affected by the taxes on beer, tobacco and sugar. My hon. Friend for Leigh (Mr. Tinker) asked what was to be done to make it possible for many of the poorer people to live, such as old age pensioners. How can they pay these extra taxes? Take an old man with I0s a week, accustomed to half an ounce or an ounce of tobacco. With this additional 1½ d. it means that he cannot buy it The extra tax on sugar means also that he cannot buy that commodity.

There is no question of the application of justice in these taxes. While we have in the hands of certain people countless millions which they cannot properly use, there should be no taxes on people who cannot get the necessities of life. Take the awful conditions that have been exposed as the result of evacuation in Scotland. Think of the unspeakable poverty that has been exposed and the suffering and neglect that have arisen out of it. How can these people pay extra for these commodities? I am certain that many of us on these benches are going to see to it that the present system does not last. It is impossible to carry on as things have been going. It is obvious that Members on the other side are beginning to feel very strange about the situation which will face them. The Chancellor of the Exchequer said that our position is very grave, but that we have the consolation that the situation in Germany is worse. That is capitalism. He went on to show how inflation worked before in Germany and how it is likely to work again. That means that the masses of the German people will suffer just as the masses of the people of this country will.

The Chancellor continually referred to the necessity of victory in the war, but if he is building up Budgets on the basis of a war lasting year after year with victor and vanquished at the end, he will be faced sooner or later with something much worse than making a speech at that Box. The constant desire for victory in the war will produce the same situation as faced both the victors and the vanquished in the last war. That is not what anybody should advocate. It is a war of extermination that will mean the massacre of the young manhood of Germany and the young manhood of this country. We do not want to raise money for that. We want to raise all the money we want and to direct all the energy and determination of the people of this country in order to get peace at the earliest possible moment with the minimum of sacrifice, a peace that will guarantee freedom for the people of Europe. That is what we should budget for and not this talk about a war of extermination.

Sir A. Southby

The hon. Member, I presume, desires to give peace to those people in Poland who have been overrun by Russia?

Mr. Gallacher

If the hon. and gallant Member cares to read the "Times," or, if he is not satisfied with that, cares to visit Poland, he will find that the one people in Europe who will have peace at the present time are those people in the Polish areas occupied by the Red Army. They not only have peace from the threat of Nazi bombs and guns, but peace from the landlords and capitalists.

Sir A. Southby

And peace for ever in their graves.

Mr. Gallacher

They have their own organisations in the towns which Russia has occupied and have begun to organise a new life free from all the robbery that went on before—robbery which is represented here by 100,000 people who can spend as much in one year as is spent on our social services. If we face the Budget from the point of view of victory and the extermination associated with victory, we shall never be able to meet the liabilities that are imposed upon us. Many of us on these benches are deter mined to do whatever lies in us to get a different conception—

Mr. David Grenfell

Do not say "us" please.

Mr. Magnay

At any rate, in this country we are not going to wipe out poor people by the million, as Russia did, by allowing them to starve.

Mr. Gallacher

The hon. Member for Gateshead (Mr. Magnay) can always be relied upon to present in our Debates something of a most irrelevant and utterly unintelligent character. If he wants at any time to produce evidence in support of what he has said, I shall be prepared to deal with it. I am now dealing with the fact that many of us here do not want a conception of a Budget that is designed for a war which is anything in the nature of the last war—a war of victors and vanquished in which millions of young men are simply sent to the slaughter. We conceive of the Budget as means of ensuring a determined effort on the part of the people of this country to win the people of Germany and all the peace forces in Europe for the earliest possible peace which will be of a lasting character and will guarantee freedom throughout Europe. That is what we desire, that is what should be in the minds of Ministers, that is what they should present instead continually presenting it in the form they do, which can only cause embitterment and strengthen the forces that are making for war. I feel very strongly that if at the moment, instead of a new Budget, we had got what the people of this country want, a new Prime Minister and a new Government, a Government which can be trusted by the people of this country and the people of Europe, it would not be long before we should see the end of our troubles and trials.

8.1 p.m.

Mr. Lipson

I hope the hon. Member for West Fife (Mr. Gallacher) will forgive me if I do not follow him in all the points which he has raised and if I say that I cannot agree with him when he brings in his King Charles'head by saving that the solution of all our troubles lies in a change of Government. I do, however, find myself in agreement with him when he says that the masses of the German people will suffer from the inflation which is probably inevitable as a result of the war, and I hope that he will use such influence as he has and such means as lie within his power to bring that home to the German people, so that they may realise where the policy of their present leader is likely to bring them. He said that the Chancellor of the Exchequer was raising these immense sums for purposes of destruction, but 1 do not believe that even the hon. Member would suggest that we ought not at this moment to be resisting the Nazi attempt to dominate Europe. Nobody would be more pleased than the Chancellor himself, no doubt, if those vast sums could be used for the constructive arts of peace, and I am sure everyone in the country would welcome it, particularly when one realises what use could be made of the money. But we have to be practical, we have to realise the menace to our freedom, and because of that, and primarily, I believe, through the folly of one man, we are called upon to bear this gigantic expenditure.

A great many people have been asking whether we were at war or not, but after the very grim Budget which has been presented to-day I think an increasing number of them will realise that we are at war and what modern war means. There is only one test which we ought to apply to this Budget, and that is whether it is the kind of Budget which is likely best to serve the national interests in this emergency. I think the people are prepared to make sacrifices provided they believe that those sacrifices will have the desired effect. I have tried to visualise the effect of some of these Budget proposals upon the lives of many of our citizens, on the lives of retired people who have to depend upon their dividends, on the lives of the people whom they employ, and on the shops with which they deal, and I am somewhat concerned about the effect this steep and sudden increase in the Income Tax is likely to have in many sections of the community. The retail trade will be very hardly hit by the war. The black-out is already having a serious effect on trade by reducing considerably the hours of business. The petrol ration will also have a serious effect on the motor industry. I believe that one effect will be a great rise in unemployment among people who cannot find alternative work in serving the wartime needs of the country.

More than one hon. Member has said that as a result of the Budget practically everyone in the country will have to revise his standard of life. As a result of that revision, which will be a revision downwards, a great many people will be thrown out of work. People will be prepared to make this sacrifice if they are satisfied that it is a sacrifice which is shared by all sections of the community, but I think they will hesitate to do so if they see that certain sections of the people are able, in spite of the Budget, to make considerable profits for themselves as a result of war activities. I would ask the Chancellor of the Exchequer why the amount to be taken by the Excess Profits Tax is limited to 60 per cent.? In my own constituency are many men and women living in retirement who have served this country in various parts of the world and whose children are to-day fighting for this country. They will have this very serious cut in their own incomes, and at the same time will know that those who are engaged in war industries will be able to keep 40 per cent. of the profits they make. I feel strongly that nobody ought to make a profit as a result of the war and I would wish that more drastic action was taken to deal with any profits that may be made.

We are promised that that matter is to be dealt with at the end of the war, that capital increases in private fortunes made out of the war will be subject to some levy. Frankly, I am sceptical not about the honest intentions of those who make the suggestion but about its practicability if it is left till after the war. During war, when there is a unity among the people, a sense of the justness of the action would make it possible to carry it through successfully, but after the war there will be an entirely different atmosphere, and I am afraid that steps will be taken to evade any such measure. I am doubtful of the practical results to be obtained by a levy on capital, because one effect of a levy on capital is that it tends to make capital disappear. The right form for taxation to take is the taxation of income. Therefore, I hope that the problem of war profits will be dealt with during the war by a very stiff levy on excess incomes made from the war rather than by taking only part of the increase now and leaving the rest to be dealt with afterwards.

I would remind the Committee that this Budget, heavy as it is in the burdens that it imposes on the people, is only the first war budget with which this country will have to deal. Nobody can say how many successors it is likely to have, and therefore one asks whether the Chancellor has left himself sufficient reserve to enable this country to face the additional burdens that are bound to accrue and the call that will be made upon the national finances if the war continues for any length of time. We have been told that the Germans started this war practically upon a war basis, so far as the life of the people is concerned, and that those conditions prevailed even before thewar broke out. I am wondering whether the Chancellor, in the proposals which he has made to-day, has not made too heavy his demands upon the public purse to enable him to meet his expenditure. I say that, not because I think the people of this country are not prepared to bear their fair share of the burden required, but because, if the trade of the country is to continue and if we are to carry on in such a way that we can make wealth by normal trade at the same time as it is being destroyed in the war, only in that way shall we be able ultimately to win the war, so far as finance is concerned. In this country we have the very great advantage over our opponents that, thanks to the Navy, the whole world is more or less open for trade with us. We must see that we do not take any step at home which will make it more difficult for that to be possible.

I do not want to sit down without saying that I share the views expressed by hon. Members on the other side with regard to no help being given to old age pensioners. If the case before the war broke out was strong for an increase it is even greater now. In spite of the fact that we are dealing with very great problems we ought not to lose sight of the men and women who are suffering very real and increasing hard ships as a result of the war. As we are fighting for great ideals and are calling upon our men and women to make great sacrifices, we ought to show that we appreciate the position of those old people and that we are anxious that everybody in the country should have a square deal. In spite of the very heavy demands upon the national purse I wish some means could be found to alleviate the lot of the old age pensioners. I feel so strongly about this matter that I am quite willing to co-operate with Members in other parts of the House to help to bring this about.

I share with other Members who have spoken the desire that there should be economy in public expenditure, and I hope that the Government will take note of the suggestion that a Select Committee of this House should be appointed to scrutinise very carefully the details of Government expenditure. I noticed during the Chancellor's speech that one of the passages which received the most applause was a request to the local authorities to exercise economy. Speaking from many years' experience as a member of two local authorities, I must say that I have never been able to understand the alarm and concern felt in this House about so-called extravagance on the part of local authorities. Those two local authorities and, I believe, every other local authority, do something which this House does not; they have finance committees that scrutinise most carefully every form of public ependiture that is proposed by their other committees. If we were to adopt the proposal of appointing a Select Committee of this House we should be following the example which local authorities have set and we should be in a much stronger position to advocate economy for them.

In this House we say that local authorities arc extravagant and we call upon them to economise. When I attend meetings of my county council or of the town council at home, the blame for the increasing expenditure there is always put upon this House. I think, therefore, the truth is that each body which knows how it spends its money is satisfied that the expenditure is justified and that it is getting full value. If there are possibilities for economy in local expenditure, I hope that they will be carried out. I want to say clearly and emphatically, however, that that should not be done by cutting down the social services. That is not my idea of economy. In conclusion, I should like to join with other speakers in testifying to the clarity with which the Chancellor has put his Budget before the Committee and to the courage with which he has faced a most difficult and what must have been to him a most uncongenial task.

8.18 p.m.

Mr. E. Smith

I desire to make a few observations upon the statement made by the Chancellor this afternoon and to raise a matter of urgency. I hope that the Financial Secretary to the Treasury will direct the Chancellor's attention to the matter which I desire to raise, and that notice will be taken of it by the represent tatives of the Treasury who are present. I also hope that between now and Friday the whole of this House will give attention to what I consider is a matter of urgency.

In the 1934 Finance Act, the Treasury agreed to the encouragement of the home production of petrol. At that time the Treasury were prepared to agree to an indirect subsidising of the production of petrol from fuel mined in this country. In addition, several deputations waited upon representatives of Government Departments, and at that time Ministers and officials representing Government Departments were prepared to give consideration to the suggestions that were being made, although the financial position did not warrant their embarking upon expenditure of that character. Those who have taken an interest in this problem and, in particular, those who are associated with trade unions and prominent research workers in the engineering and allied industries, as well as in the mining industry, are aware of the urgency of this question now, by reason of the rationing of petrol. I agree that the rationing of petrol was necessary. Anyone who knows anything about modern warfare and the consumption of spirit and petrol and other oils in the Air Force and for transport must be aware of the importance of rationing it, and not only in order that the maximum amount can be conserved and economised for the armed forces.

This is the effect of the rationing already. In the industrial areas the introduction of the internal combustion engine, and the perfecting of engines which derive their motive power from petrol, have completely revolutionised the methods of transport, and the lives of the people have been organised upon the basis of the transport in those areas. They depend upon transportation sometimes for five, six or seven miles outside the area, owing to housing schemes. London is not affected to the same degree owing to the larger amount of electrification—buses, tramcars and underground. The people have not felt it as they have in areas like Manchester, Stoke-on-Trent, Glasgow and Newcastle. I want to plead with the Committee to give attention to the problem before Friday in order that encouragement may be given to industrialists and research workers who are endeavouring to perfect alternative motive power as a means of transport. I suggest, in particular, that they should give attention to alternative methods in regard to producer-gas, crude oil and oil from coal in order to stimulate interest in it, so that municipalities and transport companies can convert their present engines as the result of slight adaptation. It would only mean removing two seats from the back of the omnibus and placing under them some of the modern bottles which can now be used for the purpose of carrying producer-gas. I am not suggesting any one alternative. It is for the Chancellor and the Financial Secretary and the specialists at the Board of Trade and Treasury officials to decide which is the best, but before Friday they should come to a decision, after consulting the Secretary for Mines and his specialists, in order to enable this to be done.

I welcomed the Chancellor's statement with regard to the desirability of avoiding inflation. I would join with the hon. and gallant Gentleman the Member for East Willesden (Captain Hammersley), who also supported the right hon. Gentleman, in regard to the need for the avoidance of inflation. We know how seriously it affects our people and what it gives rise to, and we want to plead with the Chancellor to do all he possibly can to avoid it. We have raised the matter several times in the past few months but have not seen much of a concrete character done by the Government yet. In a democratic State it is right to expect that simultaneously with organising to win the war and to win the peace there ought to be development of the social services. If the people of the country are to be called upon to make the sacrifices that they have done in the past, and to maintain the spirit that they are showing now, they also ought to be given greater hope than they have had in the past, and this can be done only by bringing about a fair distribution of wealth and the development of the social services.

Since 1930 we have been able relatively to maintain our standard of living. That has been done very largely through the movement to which we belong, by the collective bargaining system which has been built up. I should like to contrast that with what has been taking place in Germany. These figures are produced from German sources. Since 1934 real wages have been reduced from 13 to 22 per cent. While we are pleading for an increase in old age pensions, in Germany they have been reduced by 40 per cent. Taxation, until just before the war, has increased by at least 10 per cent. in most cases, and food has become poorer. There have been 1,266 new millionaires created and 180 multi-millionaires. Therefore, one has an unanswerable case in pleading for the development of the social services and an increase in old age pensions. I should have no hesitation in going on to any platform at any meeting packed with people diametrically opposed to us politically. I have so much confidence in the case we could state that I would guarantee to carry the meeting with me irrespective of the political opinions of the audience. It is good to hear the hon. and gallant Gentleman joining with us, and anyone with any humanitarian feelings is bound to join with us in our plea. The Chancellor says that the total outlay for this year would be £2,000,000,000. When he mentioned that figure I thought how few people realised what it means. Contrast that with the small amount that it would mean to increase old age and widows' pensions.

The Chancellor proposed an increase in Surtax. I noticed that this would only mean an increase of £8,000,000. He said he was proposing a penny increase on sugar. This is increasing the indignation of people with regard to the position of old age pensioners. Their purchases of commodities are confined within very narrow limits. The main essentials which they are bound to purchase have already gone up by Id., 2d. or 3d., and the cumulative effect of these additional pennies and two pences is very serious for them. In my division the other day I saw a man speaking to a woman who was standing at her door. He was a club collector, and had called for her weekly subscription. The woman said, "I have nothing for you this week; I have been buying blinds, black paper and all that sort of thing, and I cannot afford to pay." The people are ready to do all this sort of thing, but when their mothers and fathers, the old people, come to visit them, they rightly complain because, while they are prepared to make the maximum effort, so that the nation can pull together, the old people are treated in this way.

The Chancellor said that the Budget is intended to enable us to get the best out of the nation's resources. I wish to call attention to a resolution passed by the Transport and General Workers' Union executive—a responsible body, which does not come to decisions of this kind without justification—and which is supported by many trades councils in various parts of the country. It suggests that, owing to these pennies, twopences and three pences being put on the price of essential commodities, there is growing concern, and although the people do not want to give expression to that they are being forced to do so: first, because of the effect on limited incomes; secondly, because of the effects on old age pensioners; and thirdly, because they do not want to get into such a position as they were in during the last war, when inflation came along and they had to demand increased wages, and so got into a whirlpool which affected the whole nation. The hon. Member for Ince (Mr. G. Macdonald) put the following question to the Financial Secretary to the Treasury on 2nd August: whether he will state the total revenue received from indirect taxation during the financial year 1930–31; and the latest estimates of revenue from indirect taxation during the current financial year? The Financial Secretary replied: The figures are £240,918,000 for 1930–31, and £343,430,000 for 1939–40." — [OFFICIAL REPORT, 2nd August, 1939; col. 2389, Vol. That is an increase of £102,500,000 in taxation upon the food of the people of this country. When hon. Members are contrasting the sacrifices made by certain sections of the community they should not forget that since 1931 indirect taxation has been going up like this. Although there have been reductions, I could, if there were time, show from official figures that the aggregate effect has been an increase in indirect taxation since 1931.

Hon. Members have referred to the need for economy. Let them look at the financial accounts for the United Kingdom for 1938–39. They will see where economies can be carried through to the extent of millions of pounds. Thousands of pounds are being paid to retired civil servants of all descriptions. While I would be the last not to give credit where it is due, and while I believe in rewarding service to the State, when I contrast the pensions which are being paid to those people with pensions of I0s. a week to old people, I feel that economies should be carried through in this case before the Government start touching the social services or the expenditure for which the municipalities are responsible. If I had the time I could quote from page after page to show where millions of pounds could be saved at the expense of relatively well placed people, who would still be able to maintain a very high standard of living even after such economies had been carried through.

My final intention is to point out that from 1914 to 1918 the wages of miners increased by only 78 per cent., whereas the cost of living went up by 120 per cent. The Miners Federation of that day appointed a deputation which waited upon the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), when Mr. Robert Smillie, speaking on behalf of the miners, agreed to withdraw a demand for an increase of wages if the Government wouldcontrol food prices. The Government, through the right hon. Gentleman, agreed to control food prices, but they did not do so. Food prices went up and up, and profiteers went on profiteering. This is what happened as far as coal owners were concerned. In 1913 their profits were £13,000,000; in 1914, £14,000,000; in 1915, £25,000,000; in 1916, £32,000,000; and in 1917, £26,000,000. This gave rise to unrest among the miners and among other workers, and we are now pleading with the Government that there shall be no repetition of that sort of thing, but that as soon as possible concrete action should be taken to prevent the profiteering which is at present taking place. Additional pennies and two pences are being put on here and there at the expense of poor people, and pounds are being put on in other directions. The President of the Board of Trade has given an undertaking that the Government intend to introduce legislation to deal with the growing increase in prices. It is most essential that legislation should be introduced as soon as possible in order that our people should not be forced to take any action which they do not desire to take.

8.38 p.m.

Mr. M. Samuel

I am going to address the Committee only for a very few minutes, and I do not intend to follow any of the speeches which have been made, although I would like to refer to the speech of the hon Member for Stoke (Mr. E. Smith), who has followed the usual procedure of showing one-half of the balance sheet only. He mentioned that the taxation of the food of the people had increased by £100,000,000. As a matter of fact, although the taxation on food increased by more than £100,000,000, wages, between 1931 and the present day, I believe, have increased by £600,000,000 or £700,000,000. In an earlier part of his speech he admitted that the conditions of the workers had improved, so that he was not entirely hiding the whole of the balance sheet, except when he came to figures. I forgive him because I do not think it was intentional, and I am sure he will forgive me for mentioning the whole of the facts.

The Chancellor of the Exchequer has had a very hard task, and I think he has succeeded in imposing taxation, as he said himself, for a maximum contribution. In reading the Blue Book issued concerning the German-Polish relations at the outbreak of hostilities between Britain and Germany, I noticed that Sir Nevile Henderson reported to Viscount Halifax that Herr Hitler, when warned, said that Germany had nothing to lose and Great Britain much. That was the gambler's last throw, and if the Committee will allow me I should like to use it as the basis of the remarks which I propose to make on this new Budget. Truly, we have much to lose. Hitler has put the clock back—the clock of the social services and everything else. I do not say that the social services will be put back, but they cannot be put forward. We are not, however, going to follow his methods and ruin the works. We intend to keep going, so that we may not lose the social fabric which hon. Members opposite so much admire, the social machine which we have so carefully and cautiously built up for so many generations. Germany lost everything when Hitler lost his head. It is true that the Hitler machine gave employment, but what employment? The manufacture of a bloody mangle to squeeze the life blood out of the human race.

Since we were forced into rearmament we have heard much of the desirability of paying as much as we possibly can as we go and borrowing as little as possible. I think we are in agreement that the Chan- cellor of the Exchequer has gone as far as he possibly could to carry out the desires of all members of the community, without endangering the economic fabric. We must all work together, stick together and stick to our work. The bill is a tremendous one. It runs into astronomical figures. Our future taxation will undoubtedly be the heaviest in the world, as it has been since the last war; but our constitution and our institutions will remain intact. Some people think that it would be unjust for this generation to saddle posterity with an enormous load of debt and financial obligations. I will not make the obvious reply by asking what has posterity done for us, but rather I would draw attention to the fact that we have already done much for posterity, and surely we cannot be asked to do very much more. The limit of direct taxation so far as the present generation is concerned has been reached. Therefore, I think the Chancellor of the Exchequer has been well advised in the proposals he has put before us for distributing the burden in this war equitably between to-day and to-morrow.

This war is a job of work which we are performing not for ourselves alone, not for this generational one, but also for the generations to come. I feel it to be my duty to call the attention of hon. Members of all parties to this particular point. We are fighting the Germans to rid this generation and our children's children of a menace which could only end in the destruction of civilisation and in which all the good work which has been done by this country in the shape of social services and of honest dealings among nations would be lost. At whatever cost we have to fight this war, and there will be no complaints among the people. We have to deal with a ruthless foe who is fighting an unjust war. We, on our part, must do justice to all concerned. The Chancellor of the Exchequer has had to be ruthless. This Budget is a ruthless Budget, but it is in a just cause.

8.45 p.m.

Mr. David Adams

I desire to tender my warmest congratulations in no perfunctory spirit to the Chancellor of the Exchequer for his great Budget speech to-day. It will stand without question among the great efforts of Chancellors of the Exchequer of this country, and I think we may justly affirm that its clarity was not greater than its pungency, which the whole community of Britain will observe when the full weight of the Budget falls upon them. Nevertheless, it is true that there never was a cause for which the people of this country were more prepared to pay the full measure of the burden which is called for. I felt, as the Chancellor of the Exchequer developed his speech, that perhaps we were going to have what I have long desired, a restitution Budget, that is to say, that there should be either some remission of taxation as far as the poorest sections of the community are concerned or that at least it would be stationary so far as this Budget would affect them. But T was grievously disappointed, as no doubt other hon. Members were, to find that the tobacco and sugar taxation, which will largely fall, although not exclusively, upon the industrial workers of the country, will amount in a full year to £S16,000,000 in the case of tobacco and £18,000,000 in the case of sugar. But this is not the total amount of taxation raised on commodities. These are additional burdens which will be borne largely by the masses of the people.

When we contrast that with the treatment meted out to those who will pay Excess Profits War Tax and find that they are permitted to retain 40 per cent. of their income from this source, it does not seem that there is equitable treatment as between class and class. The Excess Profits Tax, which was imposed during the last war and which reached as it did 75 and 80 per cent. at one time, still left very high dividends payable to the shareholders of the concerns which were paying this Profits Tax. Old age pensioners and persons with fixed incomes, and workers generally, will feel a substantial added burden to the struggle for existence. I thought that it would have been recognised by the Chancellor and by the Government in these hard times, that there should be some better approach to equality of sacrifice. The statement made by an hon. Member opposite that every person in the State who earns anything, wages or salary, interest or dividend, should alike be called upon to pay Income Tax is carrying absurdity to very fine lengths.

It cannot be disputed that some 50 per cent. of the industrial workers are still not receiving an adequate return for the services which they render to the country. Their incomes are still too low, they suffer from unemployment, from insecurity, and, as a result of low wages, from under-nourishment, with continual attacks on their physical standard, comfort, general happiness, and social life. A greater part of indirect taxation is borne by the workers than by any other class in the community. If the bread-winner volunteers for service or goes to the war, the family at home suffers a reduction in income. If the home is bombed, they may, unlike any other section of the community, lose all. Therefore, hon. Members on this side are dissatisfied, and I am particularly dissatisfied, because the county of Durham is the most impoverished county in the kingdom, in spite of the fact that it has produced a greater amount of wealth over a period of years than almost any other county.

The Chancellor said that we should employ all the nation's resources. In view of that, I think a very singular thing has been done by the Ministry of Health. At their injunction, all housing progress has been brought to a standstill. We have not had an adequate explanation of why that should have taken place. It cannot be that the labour is required in some other field of activity for munitions purposes. The Ministry of Labour possesses the necessary powers to transfer labour by agreement from one part of the country to the other or to any industry in which it maybe required. As a result of this sudden, arbitrary stoppage of housing activity, the workers are suffering in many slum areas, which in the main are situated near munitions centres, and are, therefore, subject to greater possibility of assault than other parts of the country. I think the Chancellor might well make representations to the Ministry of Health as to whether there are not some parts of the country in which housing activity should be permitted in order that these workers may be removed from dangerous areas which are contiguous to arsenals and so on, as is the case in the North of England, particularly Newcastle. Factories are being laid idle as a result of the cessation of housing, and men are unemployed. In my area, we have something like 20,000unemployed in spite of the activity in shipping and shipbuilding and arms. Therefore, the policy to which I have referred seems to be a short-sighted one, and one which I hope will be rectified.

Permits for the export of goods to countries where the exchange is against us are rigidly forbidden. Are we satisfied that that is wise? When we consider the state of employment and of taxation would it not be better in the interests of the national income that the profit which will ensue to this country from the operations of trading concerns, large and small, should be preserved by allowing a certain amount of trade with those countries where the exchange may be, for the time being, against us?

A question which directly affects my constituency, and, indeed, the coalfields generally has been referred to by the hon. Member for Stoke (Mr. E. Smith) in his wise speech. That is the question of the additional production of fuel oils from coal. I notice that there are only 130 benzol plants associated with the great gas industry in this country. Motor benzol is urgently required, yet only 50 per cent. of the gas undertakings of the country have plants for its manufacture. If these were fully engaged, we should, it is estimated, produce an additional 200,000 gallons of motor benzol. That is a very important factor in the national economy. We have taken great powers to deal with the labour and industry in many directions. Have we not the power and authority to compel the gas industry to respond to the nation's requirements in this respect? I find, from inquiry, that where these plants have been set up they are running on a basis which is profitable to the industry and there can be no justification for a refusal to proceed on the lines I have indicated.

Another matter of some importance, if not of overwhelming importance, is that of the commodity war insurance tax. I doubt whether insurance is the right term to apply to it. It is a compulsory levy on industry, and its result has been to force up prices. A rate of 6 per cent. per annum imposes a heavy burden on certain industries. I am definitely advised, on excellent authority, that in the case of Tyne side it amounts to the last year's income of certain of the firms involved. This means the closing of works and the reduction of personnel and is not advantageous to the community. This arrangement should be optional and firms should have their choice whether they enter into it or not. At worst, it should be graduated. There are certain minerals and other commodities which, even in the case of a serious bombardment, would suffer little damage, while others would suffer much. This commodity war insurance tax, which is only in its experimental stage, should be modified in order to prevent the stagnation which it is producing in certain industries and the unfortunate rise in prices which it is causing.

I turn to a more interesting aspect of the Budget statement, and that is the question of additional resources for the Chancellor. I am certain that he will be glad of advice in these matters, for no doubt he has received very little advice during late months as to how we should foot the bill. He seems to have overlooked, say, the taxation of ground values. I am advised that that would give him a round sum of £100,000,000 in the first year, and, of course, it could be increased from time to - time. Perhaps the Financial Secretary will have a word or two to say as to whether he is converted to the view that these ground values, which are not created by the individual who enjoys them, but by the presence, by the necessities, by the expenditure of the general body, should be taxed; and, of course, the Chancellor of the Exchequer himself in other days was a most ardent advocate of the rating and taxation of ground values.

I now come to a point on which I have a grievance and on which perhaps the whole of the Opposition will feel that they have a grievance, and that is the question of a levy upon wealth. The Prime Minister specifically pledged this House that in the event of war it would be equitable that, when you conscript life and limb, you should impose a tax upon wealth. In my judgment, the Chancellor is not fulfilling the obligation of the Prime Minister in stating that any taxation of wealth must wait till the conclusion of hostilities. How do we know that the present Government will be in office then? What may be the condition of the country generally? There is no guarantee that it will be possible to impose a tax upon wealth sufficient to justify the benefits which the wealthy may have had during the war period. While I cannot say that the party on this side has committed itself specifically to the suggestion that I am going to make, at all events I believe that there should be a tax upon wealth each year that the war continues, and the tax might well be on fortunes over £20,000. I find that there are 120,000 persons in this Kingdom who own in the aggregate £10,000,000,000, so that a 2 per cent. tax would bring in to the Chancellor each year the sum of £200,000,000. Persons owning, say, £100,000 would merely pay the sum of £2,000 as a war tax upon wealth. It is not an inequitable or an unreasonable sum for the wealthy to pay, when we all know that during the progress of the war that particular class in the community is bound to make very large additional sums and that it will be in a position, without the slightest difficulty, to pay the amount that I have indicated.

The Government have set an estimated period for the duration of the war of three years. Surely a special additional tax for each of those years of 2 per cent. upon the wealthy section of the community cannot be described as inequitable, payment to be made in cash or title deeds to various forms of wealth. One of the arguments that used to be advanced that this was impracticable does not prevail to-day, because it is merely an extension of the valuation that takes place in order that the Death Duties shall garnishee their proportion of the wealth that may remain. The House will be interested in knowing that Sir John Anderson, as Chairman, as he then was, of the Inland Revenue, described this double valuation as quite practicable, so that we need not go to any higher authority for the case with which the Government can carry out this tax. There can be no allegation that it would be ruinous or unjust to any section of the community. It has already been promised by the Prime Minister. Let us see that the pledge is honoured, not at some subsequent date, but forthwith, and that the Finance Bill will be so reorganised that this taxation shall be included. I agree that there should be, if it is possible, equality of sacrifice. I know the ardent desire of the masses of the people that anything for which the State calls which is just and equitable shall be forthcoming from them and theirs, but just as they are prepared to make their full contribution to the State, so must other sections of the community play their part in this great national endeavour.

9.8 p.m.

Sir C. Granville Gibson

I was interested in what the hon. Member for Consett (Mr. David Adams) said about the advisability of the imposition of a capital levy on the wealth of the country, which he put at £10,000,000,000. I sometimes smile when I hear Members speak so glibly about imposing a capital levy as though the business and commercial men of the country kept all their wealth locked up in boxes.

Mr. David Adams

The Prime Minister has promised it.

Sir C. G. Gibson

I do not mind what the Prime Minister has said. I am a business man and I know perfectly well, and I know the Prime Minister and everyone on the Front Bench know, that as regards industrial and commercial interests there is probably not one in four which has a credit balance at the bank. If it were not so there would not be hundreds of millions of pounds overdrawn on the banks to-day. To-day not one in three of the business men in the West Riding of Yorkshire, where I come from, have credit balances in the bank. Hon. Members above the Gangway seem to think that you can just put your fingers on as many thousands as you wish as though it were liquid money which could be touched at a moment's notice. That is not the case. The hon. Member has just congratulated the Chancellor of the Exchequer on his wonderful Budget speech. I am one of those who realise the crushing severity of the burden upon all sections of the people, from the lowest to the highest. No matter whether it is the working man or the business man, it is a burden which will be very hard to bear, and it is one which can only be carried if there is a feeling and spirit of patriotism. The burden is so heavy that in the case of the higher incomes, as was pointed out by the Chancellor, it means as much as 17s. in the £, and no doubt hon. Members above the Gangway would be very pleased if it came to another 3s.

Mr. E. Smith

We are the patriots.

Sir C. G. Gibson

But they overlook one grave and important fact, which is that you can only build up the businesses and the wealth of the country from reserves. That is how the businesses and the wealth of this country have been built up in days gone by. It is those resources upon which we are able to call at this time to see us through the grave difficulties with which we are faced, and with which I believe the 46,000,000 people of this country are determined to grapple until the war has been brought to a successful conclusion. The Chancellor of the Exchequer said there would probably be a capital levy after the war. It seems to me that one is being imposed to-day.

There are two questions I should like to put to the Financial Secretary to the Treasury. The first is whether the Excess Profits Tax is to continue for any particular period or whether the period is limited. I believe that the old E.P.D. extended over a period of three or five years. My second question is,. If there is a limitation of the period when that period comes to an end is there to be any repayment of losses which are made after that time? If not, and if business men are paying these heavy taxes during the war, when the slump comes, as it inevitably will—it comes after any war, any type of boom—then we shall have the industries of the country going down like a lot of ninepins. That would have happened after the last war if it had not been for the repayment in many cases of E.P.D. which had been paid during the war. I think those two questions are of some importance.

The Chancellor of the Exchequer made two remarks which I thought were perfectly accurate, very much to the point and of very great importance. The first was that our export trade is vital to the prosecution of the war, and the second was that we must bend our energies to increase our export trade. I fully agree with those observations. In this House there is not a large percentage of business men—I mean business men actively controlling businesses of their own. I do not mean to say there are not a number of hon. Members who are not business men; I was referring to business men controlling businesses. We are not of a very vociferous nature, we are not very talkative in this House, but I feel that I ought to express, as I believe I can to a certain extent, the feelings of anxiety on the part of business men in the country at the crushing burdens which will be imposed as the result of this declaration of the Chancellor to-day. Anyhow we must face the issue, because it is realised that the most important thing for all of us is that we carry through this war to a successful conclusion, no matter how heavy the burden.

With regard to the export trade, if there is one thing which is necessary at the present time it is that we should be able to obtain our licences to export within a reasonable measure of time. If there is one Department of the Government in which there is absolute chaos today it is the Department which deals with the granting of export licences. I admit that it has been in existence for only three weeks. I understand that the chaos is so terrible to-day that there are between 20,000 and 30,000applications on the desk at Inveresk House. Thousands of applications for export are going in every day, but a large number of them remain unreplied to. This is going on day by day, and hundreds of thousands of pounds worth of goods are awaiting shipment, yet nothing can be done because no replies are coming. As one who is interested in the export trade, who only came back about a week ago from a business visit to Canada and the United States and two months ago was in Scandinavia, Warsaw, Finland, Norway, Sweden and Denmark, and who spends quite a lot of time upon foreign business, I realise that it is very important that we should have decisions quickly in regard to the granting of these permits, one way or the other.

The Chairman

The hon. Member must not pursue this subject too far. It is a question of administration, and not one which will come under the Finance Bill.

Sir C. G. Gibson

I only ask for your guidance, Sir Dennis. I want to stress the importance of the issue with all speed of these licences in order to assist the export trade, upon which the Chancellor of the Exchequer laid such stress, for the successful prosecution of the war. Will you please advise me where I am going astray?

The Chairman

The hon. Member has made his point and perhaps a little extra latitude was given in allowing him to do so. He must not make further observations on the subject.

Sir C. G. Gibson

I will leave that point, concluding it by saying that one way to expedite the granting of these licences would be by less decentralisation and by Inveresk House taking more responsibility on their shoulders. Now I would touch on the question of compulsory insurance referred to by the hon. Member for Consett. There is no doubt that the figure of 1½ per cent. for each three months—

The Chairman

That matter is not relevant at all to this Resolution. The hon. Member seems to have been led astray into thinking this is a Debate on the Adjournment, but we are not on that question. We are on the Budget Resolutions.

Sir C. G. Gibson

I was assuming I was in order because the hon. Member for Consett dealt with the matter for a considerable time and I was following on the same lines. Anyhow, I must obey your Ruling. Therefore, still dealing with the necessity for doing all that we can to foster the export trade, I will now come to the question of transport. Transport has a great deal to do with the economic production of goods for export. We are informed by responsible Ministers that there is enough petrol and oil in this country to last for years, but nevertheless road transport cannot get petrol for the conveyance of goods.

The Chairman

I am afraid again that this subject does not come at all under these Resolutions.

Sir C. G. Gibson

Well, I will deal with another point, Sir Dennis. I will come to the question of local expenditure, with which the Chancellor of the Exchequer dealt this afternoon. There is no doubt that in every large town and city in this country to-day an enormous amount of expenditure could easily be saved, because thousands of men and women are being paid £3 a week for doing work which in many cases should be done by voluntary labour. In my own city there are quite a number who are the sons and daughters of people of considerable means who ought to be only too glad to do it without payment whatever. I hope the Government will pay attention to the matter. I should like again to express my feeling, not of disappointment but of anxiety, as the result of the Chancellor's speech, and at least I hope that every section of the community will spare no effort to bring about a successful issue of the fight in which we are engaged by doing all they can, through industry and commerce, to provide the sinews of war.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—. [Major Sir James Edmondson.]

Resolutions to be reported To-morrow.

Committee also report Progress; to sit again To-morrow.