HL Deb 30 July 1919 vol 36 cc53-79

Order of the Day for the Second Reading read.


My Lords, as your Lordships know, it has never been the custom in this House that the Finance Bill when introduced here should be accompanied by a speech on the part of the mover; therefore I beg formally to move the Second Reading of this Bill.

Moved, That the Bill be now read 2a.—(Lord Hylton.)


My Lords, we are all well aware of the strict limitations by which this House is confined, if not in discussing, at any rate in dealing with questions of finance; therefore I have no intention of going into the provisions of this Finance Bill at length. On the other hand, it has been an almost invariable practice for many years past for the formal Motion for the Second Reading to be followed by a speech from this Bench. On some occasions when, as I well remember, that speech was made by so skilled a master of finance as Lord St. Aldwyn, the House obtained great advantage from the practice.

But to-night I will endeavour to mention only a few considerations which occur to me in relation to this Bill. It would be natural and tempting on this particular occasion to enter upon the whole subject for national expenditure and the methods by which that expenditure is to be met; but I am relieved from undertaking any such task to-night because of the masterly survey which my noble and learned friend Lord Buckmaster made only a few days ago on the subject of national expenditure, fortifying his statement by an enumeration of facts and figures which, as he has since reminded the House, have not been contradicted by any speaker on behalf of His Majesty's Government.

There are one or two features, however, in the general subject to which I should desire to draw attention. In the first place, I understand that it is still the practice, as it has been since the war began to draw to an evident close, that the realisation of national assets—amounting in some cases to a very large figure—should be treated as part of the national income and not devoted to the reduction of the Debt. That is a proceeding which it is not easy to reconcile with any sound canons of finance; and, if the practice is to obtain permanently until the whole of these stores and other assets have been liquidated, it will have to be borne in mind that our financial position is even worse than the ordinary bare figures of income and expenditure would lead us to suppose.

We know that the Income Tax remains at the high figure of 6s., and that the Super-Tax persists on its previous graduated scale. Some income Tax remissions are made in respect of small incomes, which I am certain will be welcomed both by your Lordships and by the country generally. In view, however, of the figures which were quoted by Lord Buckmaster the other night, it is impossible for us not to ask ourselves whether in the future the Income Tax or Super-Tax may not have to undergo a still further increase. If the uncontradicted figure of £800,000,000 which my noble and learned friend suggested as the necessary expenditure of the future is correct, or anything like correct, it is difficult to see how the expenditure of the year can be met by any means except by an increase of direct taxation. What effect such an increase would have on the reproductive energies of the country, I confess I hesitate to consider.

Even as it is, the scale of direct taxation is bound to affect those energies adversely; so much so that one asks one self whether, with such a scale of enforced national expenditure, the past industrial supremacy of this country can by any possibility be maintained. That supremacy is menaced as we now stand both by high prices and also—it is impossible to deny it—by high wages. After all, it is not in the natural order of things that we should possess or retain an industrial supremacy in Europe. It is due to a variety of causes which it would be useless to attempt to discuss to-night. It is due to some extent to our insular position; to our being placed on the western border of Europe in a position which makes us the natural entrepôt of Europe, and indeed of the world; to our great natural mineral wealth, and also to the peculiar circumstance that our climate is especially suited to the cotton industry.

I cannot, however, help saying that, so far as I am able to form an opinion on the subject, I anticipate something of a decline in our relative industrial position as compared with some of the other great countries of the world. It is by no means impossible that such a decline might be accompanied by a no little general prosperity among all classes in the country, by a greater diffusion of wealth, by a higher standard of living among the workers generally, even though the national wealth tends to diminish, as I fear it will. In any case I fear we may feel that what was almost the easy supremacy of the past has gone for ever, and that it will be a hard struggle to maintain. I will not say supremacy, but anything like economic and industrial equality with some other countries in the world. Nobody can say that the future prospects of the coal industry are rosy. Would anybody venture to foretell that an output of coal sufficient to produce an export of coal such as that which could be quoted, say, for the years 1912 and 1913, is likely to appear in the near future? I confess that all the signs seem to be adverse to such a conclusion.

What, is the outlook in the cotton trade? We all know that India, one of the great markets for cotton, claims an increased, or indeed a full measure of fiscal independence. Whatever arrangements may be made in favour of this country by India as part of a system of Preference, it may be relied upon that manufactured cotton goods will not go into the Peninsula at the low rate at which they now enter. Our trade in other parts of the world may undergo similar difficulties; and I fear that there, too, our amazing supremacy in that particular trade may be heavily threatened in the future. When we consider that in the year 1913 the exports of cotton goods amounted to one-third of the total exports of this country, one sees that any change there must affect our national wealth with certainty and promptness which would hardly apply in the case of any other product—except, indeed, coal. The shipping industry must also have a hard fight before it. It will be no easy matter for us to recapture that absolute predominance in the mercantile marine of the world which we possessed up to a few years ago. We have here advantages of practice and, I venture to think, a special talent which no other country may possess, but it will be a bitter struggle for us to return to anything like our position in this respect, too.

Those are general considerations, but there are one or two particular matters arising out of the Budget on which I wish to say a word. Clause 8 of this Bill introduces into our national economics the principle of Imperial Preference. I have no intention of arguing the pros and cons of Imperial Preference, but this I do say—that if the principle was to be introduced into our national system, it should have been introduced by the direct consent and action of Parliament and not as the fruit of a discussion round a table with some distinguished colleagues hailing from the different Dominions. It is impossible, as I think, not to regard this as one instance of the ignoring of Parliament which has, I fear, done something to depreciate the House of Commons in the public estimation. The subjects of preference are few and, among the figures with which the nation now has to deal, the amounts involved appear trivial. I do not think as we stand that it is altogether trivial to have to incur a loss, which at present amounts to two and a-half millions and in a full yea; will amount to three and a-third millions, for the sake of establishing a principle, popular no doubt with many of our friends and brethren in the great Dominions, but not in itself on a scale sufficient to be satisfactory to them.

We always have to remember that the grant to us by the Dominions of a preference is a distinct, feature in the protective systems which they—as they are, of course, fully entitled to do—prefer to adopt. We have no such ground as matters stand for a similar grant, because, with certain normal exceptions, we still, generally speaking, are living under a Free Trade system; and it is very difficult for an unrepentant Free Trader like myself not to suppose that this particular grant of preference must be designed as the portico of introduction to a general tariff, especially bearing in mind that the great majority of His Majesty's present Administration are, and have been long, in favour of what has been called Tariff Reform. It is very difficult to suppose that a system of Imperial Preference can be sustained without, being enlarged. It can only be enlarged in the direction of placing some taxes on food, with a preference to the Empire, and when some taxes are placed upon food it will obviously be exceedingly difficult, in the interests of equal dealing, to abstain from a certain taxation of raw materials.

We are told, of course, that we are uttering the ancient shibboleths of the Free Trader. That may be so, but they are neither more ancient—if they are, indeed, as ancient—nor more familiar than the shibboleths of the Protectionist. The principle which we hold is an exceedingly simple one—namely, that tire national system should be one of free exchange and of duties for revenue only, subject to such exceptions as may be shown by definite proof to be necessary and advantageous. Every exception, in fact, has to be definitely justified. The opposite view, which as we know is held by many thoughtful people, is that the general and normal rule should be the encouragement of production in this country itself, and that every departure from the encouragement of production by permitting free imports is in turn to be the subject of special justification. That applies also to the further point in this Budget of the retention of certain special duties on articles of luxury, which were imposed during the war for particular reasons—motor cars, clocks and watches, cinema films, and I think one or two others. Those duties, by their maintenance when we are no longer living under general [...] laws, can only be regarded as in their essence protective; and here again, it is difficult not to regard them as [...] the approach to a general tariff upon manufactured goods.

I have no desire to labour these points. I know very well that, if the House were full those who agree with we would form a very small minority of your Lordships' House. Some of us on these benches, however, consider that even if there was no other reason whatever for maintaining the separate existence of the Liberal Party this question of free exchange would, of itself, justify our existence. We know very well that the point of view of the Labour Party, who might be considered to march under the same standard, is somewhat different. So far as the taxation of food is concerned and the cheapening of the necessaries of life, we should find the Labour and Liberal opinion, I have no doubt, identical. But it is quite impossible for Liberals to deny that one objection in this matter of tariffs which we entertain—the kind of objection which we entertain on the grounds of undue State interference—will not appeal with the same force to many of those who belong to the Labour Party.

The fact is that devotion to State interference and State control is apt to bring the Socialist very near to the Protectionist's lines. That was pointed out long ago by the French Free Trade economist, M. Bastiat, who said, "After all is said and done, a Protectionist is nothing but a Socialist with an income of 50,000 franes a year." While fully admitting that a great many of the early Free Traders carried individualism to a point of almost ridiculous extremity in their dread of State interference on every or any subject, we do maintain that we occupy a special position of guardianship in this matter, which, as we believe, will prove to be of particular value to the country. Consequently, my Lords, although no action, as we know, is possible to any of us on this Bill I have thought it right, even at the risk of wearying the House, to register this definite protest against some of its provisions.


My Lords, I venture to hope that no apology is necessary for intervening in this debate even at this war of the evening. I have always felt that your Lordships' House should discuss every matter of importance which is before the country, and it is quite evident that the Finance Bill of the present year is one of extraordinary and unusual importance. The general condition of the country has been the subject of debate in your Lordships' House on more than one occasion. We have been told that it is partly due to the extravagance of His Majesty's Government, and it is now when the Bill is presented that we shall gradually get some idea how great that extravagance fans been. We hardly have a discussion without some Member on the Government bench telling us how dismal is the outlook of this country, and how bad are its financial and general prospects. They do it with a kind of bland innocence as if they were in no way responsible for the condition of the country. I think if the condition was very different, and we were more prosperous, they would be among the very first to claim the credit for that prosperity; and it is impossible for them to entirely absolve themselves front some portion of the blame for the condition in which we are to-day.

I shall venture to deal particularly with a new subject which is introduced into this Finance Bill—and that is the question of Colonial Preference. It is interesting to me to find that these benches are empty of Tariff Reformers who, I should have thought, would have been anxious to acclaim the victory of their cause. I should have thought we might have had some expression of thanks from them to the Government for having at last put into practice some part of the great principles of Mr. Joseph Chamberlain. I confess I am filled with despair when I find that those who support this policy of Colonial Preference have learnt nothing from the lessons of the war. They tell us exactly the same things as they used to tell us from the very beginning in 1903, and it seems that even now, after all that has happened, they use the very same arguments as they did before.

One of the first suggestions which Mr. Joseph Chamberlain made was that the Dominions should reserve certain trades and allow us to import those goods into their country. From that day to this there has not been the slightest inclination on the part of any one of our Dominions to fall in with that suggestion. There was also the suggestion, very familiar to us in phrase and catchword "Cash nexus." We were told that unless we introduced something of this kind the Dominions would cut the painter. There is an example of that in what was said by Mr. Garvin. It is a thoroughly typical quotation, and, he was speaking at that time on the question of preference being given to Australian foodstuffs over foodstuffs from the Argentine.


What was the date of that?


About 1904, I think, and he used this phrase. He asked, otherwise and unless we gave this preference— Upon what intelligible principle do we expect that Australia shall make special sacrifice to help us? For sentiment? Were the Colonies prepared to tax themselves for Imperial purposes, to fight under the Imperial flag for reasons no more urgent than those of sentiment, they would not be patriotic but insane. My Lords, those of us who lived through those awful days, and renumber them clearly, of five years ago, I venture to think saw the first ray of hope come to us when those messages came from our Dominions, that they would help us and were with us in the struggle to the last penny and to the last man. On a hundred battlefields they have proved that they have kept their word, and have done it without that cash nexus which we were told it was so necessary they should have. I hope we shall find that that lesson has been learnt but there is this to be said on this question of taxes as introduced into this Budget, that they have a double aspect. On the one hand it is possible for those who support them to go to one section of their supporters and to say "See what an infinitely small matter this is. You may reserve your liberty of action for the future. It is true that we introduce a small measure of Preference, but there is nothing about which you need to be disturbed." On the other hand it is possible for them to go to another section of their supporters and say" It is true they mar seem a small matter, but this is the beginning of what will turn out to be a full measure of Imperial Preference and Protection." In that way they will secure support for the Bill front two totally different sections of opinion.

We may divide these special duties to which I venture to take exception into two classes. Firstly, into those duties on goods which were subject to a duty when Mr. McKenna introduced his Budget, and secondly, the preferential duties upon foodstuffs. With regard to the first lot it is interesting to realise that these Dominions and Colonies are given a preference upon a number of articles which they do not make and have no intention of making, but there is this curious point that embargoes exist upon a very large number of articles upon which preference is given—for instance motor cycles—and therefore a preference given in those matters upon which an embargo has been laid is not likely to be of any very real advantage. We were told at the time that these were only to be im- posed for the period of the war. That was clearly stated more than once by those who are still Members of the Government, and I think we may regret the fact that those embargoes are being extended after the war period.

Then with reference to preference on food. Let us take first of all the duty on tea. Very nearly all the tea used in this country comes from within the Empire. Before the war I think 87 per cent. came from within the Empire, and now something like 97 per cent, conies from within the Empire, and on this there is to be a preferential duty. May I make a suggestion to the Government? At a time when there is so much unrest in the country and the cost of living is universally acknowledged to be the chief cause of that unrest, why not reduce the duty on tea to the extent of the preference? The Chancellor of the Exchequer estimated that the duty which he will lose by this preference will amount to £2,000,000 in the year. If he were to allow another£ 400,000 it would be, possible to sweep away 2d. of the duty upon tea, and to that extent he would be able to reduce the duty upon that important article of food.

Surely it would be well worth while for the Government to consider that point. After all who suffers in this matter? The people who suffer are the merchants in China. Generally the China tea trade is in the hands of young adventurous merchants who have gone out from this country and made a successful business in China. Very largely the people who will suffer are our kith and kin, and those who will gain are likely to be not the coolies or those who produce the tea, but the shareholders in the tea companies who live in this country. That seems to be an unsatisfactory result of the preferential duty on tea.

Then with regard to sugar. I suppose that in regard to sugar His Majesty's Government have been very largely influenced by the hopes of Mr. Hughes that he would be able to produce from Australia large quantities of sugar, but it is to be regretted that while over here in this country he did not warn us that in 1912 a Royal Commission on the sugar industry of Australia reported that— No substantial export trade of Australian sugar can be anticipated, at any rate for a long time to come. Such an export trade, in competition with colour-grown, sugar in Java elsewhere, could only be maintained by the payment of an export bonus so large as to prove an intolerable burden. And although it is possible we may get some sugar front the West Indies, if one may judge front items of information which appear in the newspapers that is likely to cause consternation in Canada.

The other matter to which I wish to allude is that of wines. It has to be remembered that where we give one set of people preference we do harm to another, and here we are proposing at this moment that our gallant Allies in France, who are suffering so much front the results of the war, shall be penalised to the extent of a preferential duty, in, order that we may give an advantage to our friends in Australia, who, it is true, deserve it as much as our French A[...]lies. I venture to say that it is only in connection with this duty and its effect in Australia that I see any realisation of that spiritual recognition of spiritual unity spoken of by Mr. Bonar Law.

In this matter of Colonial Preference where we make considerable sacrifices we are entitled to know what the people in this country are to get. The noble Marquess referred to the India cotton duties, and I wish we could feel certain that in response to any preference which we are giving to India we could have some assurance that the cotton duties will be reduced in favour of our own cotton operatives in Lancashire. In other parts of the Empire we find a different state of things existing. So far from any sign appearing of our Dominions doing more to help us, I am afraid it looks as if the trend of their legislation would rather be in the opposite direction. It was only at the end of May that Lieutenant-Colonel Amery in another place spoke of sheep dip. I understand that the Australian Government have placed an embargo on that article, so as to prevent the manufacturers in this country front exporting into Australia any of their goods, and I think your Lordships should be made aware that there is an Australian Commission sitting with a view to the revision of the tariff in the autumn, that the starting of a number of new industries has already been recommended, and that the way proposed is by instituting a large measure of protection for various articles which they are anxious to make in Australia. That does not look as if the Colonial preference proposals of His Majesty's Government have met with any great measure of gratitude on the part of the Australians.

I do not think it is far from the point to refer in this connection to the fact that Mr. Hughes, who was here so long and talked so much on the subject of British trade, is the one Prime Minister in the whole of the British Empire who has raised the duties upon British goods since the beginning of war. At the beginning of the war he raised the tariff in Australia upon British goods going into that country, and by an average of something like 2½ per cent. Mr. Hughes, who came and talked to as on the subject of how we should carry on our trade, has penalised British industry. I confess that when it comes to a matter connected with Mr. Hughes it is difficult to talk seriously. On matters of tariff policy he made two speeches just a year ago. One was in Glasgow on the Wednesday, and one was in Aberdeen the day after. Speaking in Glasgow on the Wednesday be said— In Britain before the war conditions were sordid and depressing. Millions were on the verge of starvation, living on the brink of a dreadful abyss. Everything was not as we should like to see it, but I did not know it was as bad as that. At Aberdeen the next day he said— In Britain before the war the spark of divine fire had been clicked by the ashes of prosperity. It really does not very much matter which state of things Mr. Hughes chooses to have to exist in this country, but it must have been one or the other, and it cannot have been both, and before we can pretend to argue with him he really must make up his mind as to what were the facts of the case.

Just one word on Canada. I will not detain your Lordships with a quotation from what Sir Robert Borden has said, but those of your Lordships who keep yourselves informed of what Sir Robert Borden has will know that he seems to look not so much to a preference on goods as to some preference in shipping rates and railway rates—a dangerous policy, because it is a game at which more than one person can play, and in which it is more than likely the United States of America might heat us when we begin to play. But in these matters we realise that we are not the large body of free traders that we were before the war. Some people who were opposed to Colonial preference have now seen their way to support the measures proposed in the Finance Bill. Amongst others one of my own colleagues—my colleague in the treasurership of the Free Trade Union—has left us, and has found his way to support by speech and by vote in another place the proposals of the Finance Bill. It is a matter of very deep regret to me; so deep, my Lords, that my feelings can only find expression in the words, perhaps familiar to some of your Lordships, in a poem of Browning— We that had loved him so, followed hint, honoured him, Lived in his mild and magnificent eye, Learned his great language, caught his clear accents, Made him our pattern to live and to die. Shakespeare was of us, Milton was for us, Burns, Shelley were with us—they watch from their graves. He alone breaks from the van and the freemen, He alone sinks to time rear and the slaves! The loss of old leaders and old colleagues is naturally a matter of deep regret, and I wish that it had been possible to have retained his services in the cause of free trade.

Let me venture to call your attention to the possibilities of what may follow front the initiation of this policy by His Majesty's Government. It is the very serious possibility of retaliation from the United States of America. It was only the other day that President. Wilson, addressing Congress, seemed to indicate that the United States did not mean to take the policy of His Majesty's Government lying down. Your Lordships know that our embargo policy has already aroused very strong feeling in that country. It is quite true that those who have been in favour of protection have always said that no country would or could object to our doing what we liked within our own Empire, and that there was no great danger of retaliation from the States, no, matter what sort of fiscal arrangement we might niche. This is what President Wilson said— Our tariff laws as they now stand provide no weapon of retaliation in case other Governments should enact legislation unequal in its bearing on our products as compared with the products of other countries. We must frankly face the fact that hostile legislation by other countries is not beyond the range of possibility, and that it may have to be met by counter legislation. I recommend that this please of the tariff question receive the early attention of the Congress. I think with that in our minds it would be well if His Majesty's Government had walked somewhat more warily in this matter of Imperial preference.

The cognate matter of its effect upon the League of Nations has already been the subject of some little discussion in your Lordships' House, and I will therefore confine myself to saying on this occasion that it seems to me quite evident that the less we have of preference of this kind the more likely the League of Nations is to be successful in future. There is this point, too. We are always told that one of the advantages of adopting a protective system is our power of bargaining with other countries. That may or may not be so, but the more you grant preference the more difficult you make it to have an effective power of bargaining, because you are limited by the amount of preference which you are giving to your own Colonies or Dominions. At this time, when the cost of living is so large a part of the cause of the unrest which exists in this country, it seems to me that the really important steps which His Majesty's Government should take should rather be in the direction of reducing prices, and of doing all that they can to help the consumer. After all the nation is the consumer, and his is the first interest that we ought to consider. Tariffs are very little better in this connection than legalised profiteering. You must have profiteering the moment you begin to have this kind of 50 per cent. embargo upon imports coming into this country, and it is much more difficult to stop profiteering when you have protection and tariffs. His Majesty's Government with its tariffs and its preferences and its embargoes will, in the opinion of all free traders, raise the cost of living. There again is a lesson which one might have hoped the tariff reformers would have learned during the war. They used to tell us that cheapness was not everything; that cheapness was not a good thing; that there were great advantages in having high prices. We have had a lesson as to what high prices mean in this country, and I venture to say that, having had experience of it, the people of this country are less likely to wish for more of it in the future than they have had in the past. We object to the existence of these preferential proposals in the present Finance Bill not only on account of the proposals themselves, but also because in our opinion they must inevitably lead to protection in the future—the protection of greed masking as patriotism, which will only have the result of allowing a few selfish people, as always in case of protection, to advantage themselves at the expense of the interests of the many.


My Lords, the noble Earl who has just sat down made some rather ironical reference to the fact that there were so few Tariff Reformers in the House to express their gratitude for the first Budget which has contained an affirmation of at least some of their principles. May I return the compliment, and condole with him upon the fact that his eloquent and impassioned re-statement of the most pure and unadulterated doctrine of free imports has had so few Free Traders to listen to and admire it?

The noble Earl rather surprised me by the statement that the most doleful pictures of the financial future of the country were always being presented from this side of the House, or, at any rate, from the Ministerial Bench. My recollection is quite the contrary. The last time I remember taking part in any financial discussion of importance in this House it was I and other speakers on the Ministerial side who, so far from being too doleful for the House, were reproached with levity for not taking a sufficiently doleful view of the situation. I have continually heard reproaches of the Government, either openly pronounced or hinted at, for not being sufficiently depressed, and for not taking a sufficiently gloomy view of the situation before us.

Honestly, my experience is that it is from the other side of the House that these gloomy vaticinations always come. And I think the debate to-night bears out that hitherto unbroken experience, because the noble Marquess who initiated it, though he certainly did not draw as black a picture of our possible future as I have often heard from some of his political associates, was, I think we may say, anything but cheerful as to our industrial and financial prospects.

May I say a few words, in the first instance, with regard to the speech of the noble Marquess? First of all, let me say that I am glad (though perhaps the hour was rather unfavourable for it) that he has revived and maintained the good practice by which the Finance Bill of the year, although no doubt your Lordships cannot affect its fate in any way by your action, is nevertheless made the subject of a serious discussion in this House. Though we have no such great financial authorities in this House as some of those whom the noble Marquess and I both remember, yet the subject is one of such profound interest to the whole community that I think it would be regrettable from every point of view if the passing of the Finance Bill did not give rise to some discussion in this House.

And I must say that, late as the hour is, and unfavourable as the moment is for such discussion, I have followed with very great interest many of the noble Marquess's remarks, and I do not think it would be respectful to him, nor would it be consistent with my own feeling, if, even at this hour of the night, I did not make a few comments upon them. First of all just one word about this estimate of an expenditure of £800,000,000.


I was taking the figure of my noble friend Lord Buckmaster.


Yes, I know the history of that £800,000,000, and I want the House to be clear about this. An elaborate argument was addressed to the House by the noble and learned Lord, Lord Buckmaster, who is not present, to the effect that our future expenditure would amount to at least £800,000,000, and he drew some inferences from that as to the future amount of Income-tax. At a later stage of the debate it was claimed that, inasmuch as no Government speaker had risen to disprove his calculation of £800,000,000, it must be accepted as what you might call an authoritative figure; and I think the noble Marquess opposite rather started from that basis in his remarks to-night. I really must put in a caveat to this. I am not prepared to dispute the figure myself at this moment. I should not feel justified in attempting to do it without a great deal more study and close examination of the details than I have the time to give, or that anybody else is in a position to give, except the Chancellor of the Exchequer; but as long as that Member of the Government, or any Member of the Government who is specially responsible in a matter of this kind, does not endorse that calculation, I cannot allow it to be treated here as accepted by the Government, simply because no noble Lord on this Bench is prepared to get up and dispute it.

Personally, I am very much inclined to doubt whether the figure is correct. All I can say is that it would be most undesirable, and I think it would be most unfair, that, whenever a statement of that kind is seriously made by a speaker of authority, and supported by serious arguments, he is entitled to claim that a calculation of that kind is accepted by the Government unless it has been disproved in the same debate by a speaker on the other side. I have not had time to examine this figure myself. I do not know that there is any other Member of the Government in this House who has had the opportunity of examining it, and all I can say about it is this, that I enter a most formal protest against the assumption that the Government has admitted that an expenditure of £800,000,000 is the expenditure which we ought to look forward to in future years. It may or may not be right—I am not discussing the matter now—but I want to make it perfectly clear that it is an open question, and that no financial authority on the part of the Government has admitted it.


May I interrupt? I think it is, perhaps, hardly fair to say that Lord Buckmaster, or anybody else on this Bench, maintained that the Government accepted that particular figure, at which he arrived by a series of additions of sums needed for the public Services, which he considered he had framed on a fairly conservative basis. Nobody supposed that His Majesty's Government accepted the actual figure of £800,000,000, but what, I think, my noble friend did claim was that, at any rate, nobody had at once jumped up, or taken the opportunity in the course of the debate of accusing him of exaggeration in the matter, and that therefore, without in any sense supposing that His Majesty's Government adopted the figure, yet at any rate it is not one which could be regarded as preposterous.


No, I never said it could be regarded as preposterous; it is not in any sense authoritative. As regards the general outlook of our national industry, to which the noble Marquess addressed some of his remarks, I may say that I agree with him to the extent that I think the result of the war has been to bring about more rapidly a position which in any case was bound to be brought about in the course of a certain number of decades by the force of circumstances—namely, that of the industrial pre-eminence of the United States of America among all the nations of the world. It was bound to come; but it has come rather quicker than it would otherwise have done in consequence of the events of the last few years. But I think the remarks of the noble Marquess went further than that. He seemed to think that our position as an industrial country, in comparison with that of other great industrial countries, had been weakened by the war.

If take a different view. I am aware of the heavy burdens which the war has thrown upon our industry. If we were the only great industrial country with a heavy debt, the only great industrial country which had to look forward to an immensely increased burden of taxation, I should say that certainly our position in the competition of the world had been considerably worsened. But surely, heavy as our hardens are and serious as our financial position is, there is no other country except the United States which has anything like the same chance of a carrying its burdens successfully, without absolutely crushing taxation, as the United Kingdom has. Therefore one reason why I am guilty, I hope not of levity in this matter but of being rather more optimistic than some noble Lords with regard to the industrial future, especially from the point of view of competition with other nations, is the fact that, while they look at the matter simply from the point of view of our own country, I am rather more disposed to take the comparative view, to look at our position side by side with that of others who have fought and suffered in the war. I cannot help feeling that, looked at from that point of view, the prospect is far more favourable than it is commonly represented to be.

I should have liked, if I had had more time, to have followed the noble Marquess more particularly with regard to some of those great staple industries of which he spoke. I will mention only two—coal and cotton. As regards coal, we are undoubtedly looking forward to a decrease of output. I am sure that there is only one way out of the difficult position in which this country is going to find itself in regard to coal—that is the way along which I am hopeful we may travel; I believe we shall be forced to travel along the road by the difficulties of our position—and that is the better use of the coal we produce. I call only repeat once more that, unless all the experts tell me on this subject and that I am able to read on it is absolutely misleading, the waste of coal in this country at present and the failure to get anything like the maximum energy out of the coal we produce is something phenomenal, and that under the pressure of necessity we are going to get much greater value out of the coal we produce. With regard to cotton, a somewhat similar reason for hopefulness exists. Again, I am not speaking of my own knowledge; I do not pretend, of course, to be an expert in the matter. Rut from what I was able to gather—I was specially anxious to make inquiries on this subject—from a visit I lately paid to Manchester, where I met all the leading business men, the position with regard to cotton is that we have got, and are likely to retain, the market in all the finer kinds; and undoubtedly, with the general progress of the world, the demand for the superior kinds of cotton is greatly on the increase. Therefore what I found in Manchester was that the best opinion there was rather favourable as regards the future prospects of the cotton trade.

I will not pursue these detailed subjects very much further, but I would like once more to repeat my profound conviction that, serious as the financial and industrial position of this country is, it is not a dangerous. position—provided that we, in the first place, remain a constitutionally-governed, progressive nation, and do not go down the terrible road which some of the countries of Continental Europe are at present treading; and, in the second place, that we make the maximum use of the great advantages we possess—and inadequately use—by the wonderful skill of our workpeople and the great and progressive scientific achievements of our chemists. I am convinced that the dangers. which threaten us are social and moral rather than material, and that given industry, given a reasonable degree of social peace—a certain amount of social disturbance is inevitable at all times in a democratic country—and the progressive use of all the resources of science in the improvement of our industrial machinery, we may hope to attain a yet higher degree of prosperity in the future than we have known in the past. We shall not attain, perhaps any comparatively higher degree of prosperity, because I do not suppose we shall ever be the first Indus- trial nation in the world; but we shall attain to something positively higher than anything we have ever known.

In this connection I attach immense importance to the development of our Empire, not only to the growth which is going to be, I think, in the next twenty or thirty years something that will astonish you—the growth of our great self-governing Dominions and the development of our trade with them—but also the growth and greater prosperity of what. I may call the Dependent Empire. I have always been convinced, and I am convinced more than ever now that I have been a few months at the Colonial Office, that what a great predecessor of mine (Mr. Chamberlain) called a great undeveloped estate, really is a group of countries possessing an immense economic future. No doubt they are of great importance as sources of raw materials which will become more and more indispensable to the great industrial countries of the world, and especially, I may say, to America. When we ask ourselves how we are going to pay the United States for all that we may have to draw from them, I think a not unimportant element in the future economic situation will be the fact that the United States themselves will require to draw increasing supplies of raw materials from parts of the British Empire. We may thus indirectly through our possessions repay America for a great deal that we shall have to draw from her.

I have left myself very little time to deal with the attack which has been made, very moderately by the noble Marquess opposite, with more vigour by the noble Earl, against the policy of Preference to which expression has been given in the Budget before us. The noble Earl astonished me rather by the remark that Tariff Reformers seemed to have learned nothing from the war. It was carrying the war into the enemy's country. I have certainly been very strongly under the impression during the last few years that some of the extreme Free Traders have learned nothing from the events of the past few years. There is one particular point in the noble Earl's criticisms to which I should specially like to refer, and on which, if he will forgive my saying so, I should like to put him right—that is, about the position of the Tariff Reformers and what I may call the fundamental basis of their doctrine in this matter of Preference. The noble Earl says that we have dwelt too much upon time cash nexus between ourselves and the Dominions, and that the splendid way in which the Dominions rallied to our support during the recent war disproves the contention that it was necessary or important to attach them to us by bonds of financial or commercial interest. I will admit at once that I think the argument in favour of Colonial Preference has sometimes been stated in a crude and misleading form. It is not in the least to buy the loyalty of the great Dominions of the Empire that I and many others have advocated for many years so strongly, almost passionately, the concession of these commercial advantages to them.

I have made many speeches on this subject. I am quite certain that I have never used the argument that it was necessary to offer them commercial or financial advantages of any kind to ensure their standing by us as they have stood by us in a great crisis and in the face of great danger. What I have said, and do say, is that inasmuch as these are our only sure and certain friends and that on them alone of all the nations can we absolutely count upon at all times to stand by us, their development is of such vital interest to us. It is for that reason also I want to use all our resources to help them to grow. I remember once before asking the question, "Has Argentina offered you a battleship?" That was at the time when the first battleship was given to us by the Dominions. Inasmuch as these are the nations upon whom we can alone rely with certainty and in every danger and in every trouble, it is of vital importance to us to give them everything we can in order to further their growth and their development. That is the real basis of Colonial Preference.

Let me say that I am a firm believer in the advantage of a tariff preference, but I do not regard that as anything more than a single application of a principle of far greater and wider import. As between this country and our great Dominions and other parts of the Empire I understand the principle of preference to be that while we have no hostility to. any nation —while we hold the doctrine that every nation is of advantage to every other nation—there is a special interest to us in the development of those great States of our own race and blood and traditions and ideas, upon which, as I have said, we alone can rely in the great struggles of the world. Therefore, we should in all our dealings give them an advantage wherever we can; because their growth is our benefit and our advantage in a sense in which the growth of other countries never can be, little as we wish to prejudice those other countries.

For instance, take the question of emigration. We do not wish people to emigrate from this country, but if they have got to emigrate let them carry their brains and sinews to other countries of the Empire rather than to foreign countries. If we have got capital to invest—we have only got a limited amount for overseas development—let it go in the first instance and by preference, even if it goes for a slightly lower rate of interest or return, to build up some other part of the British Empire rather than to build up foreign countries. There is no hostility to foreign countries implied in that: it is only a preference to our own kith and kin. That really is the root idea of this policy of Imperial Preference. I beg most strongly to deprecate the idea, speaking for myself and I believe for the great body of Tariff Reformers and for the Government, that in pursuing this policy we have any other motive than that of doing everything which lies in our power to help the commercial and industrial development of those other parts of the British Empire to which we owe so much and whose growth in the future appears to us to be of such vital importance to this country itself.

I do not know whether at this late hour it would be right to develop in more detail the argument as regards Preference I would only like to say in conclusion that, though I may be regarded by some members of your Lordships' House and perhaps am regarded outside, as a very extreme Protectionist, I do not admit that the policy of Preference necessarily involves any departure from Free Trade, or rather free exchange, as it was stated by the noble Marquess opposite. Re said that he was a believer in free exchange subject only to such exceptions as might be shown to be necessary and advantageous. I accept, certainly for the Government and I think for myself, that principle. I do not think that Preference in itself, in the form in which it has been accorded by the Government, is any departure from the principle of tree exchange, but, if it is, I contend that it is a departure which is justified by those high considerations of national policy which I have attempted, however inadequately, to put before your Lordships.

I am not aware that there is at present in existence in this country any infraction of the principle of free exchange which cannot be justified on the merits of the case or which is accounted for by any desire to impose restriction upon trade or to adopt Protection for the sake of Protection. Speaking for my own part I should be quite satisfied to deal with all these questions of tariff or no tariff absolutely on the merits of each particular case, apart entirely from any general or theoretical principle, and certainly apart from any bias in favour of tariff, or any other, restrictions on trade.

I am not very fond of labels. I do not know whether I am properly labelled a Protectionist or a Tariff Reformer or not, but if I am a Tariff Reformer, my conception of Tariff Reform has not been the desirability of imposing a tariff for the sake of a tariff, or trying to expand a tariff for its own sake. All that I have ever contended for—and I believe it is all that reasonable Tariff Reformers do contend for—is that they should not be barred from imposing duties unless they can prove in every case that they were purely revenue duties, and that no other considerations should be allowed to enter into the tariff. What I should like to see established is the principle that in all these discussions we should get away from generalities and sweeping doctrines and try to deal with the merits of each particular case. Looked at from the point of view of its merits, I am prepared most strongly to defend that modest measure of Preference which has been accorded to the other portions of the Empire in the Budget which is at present under your Lordships' consideration.


My Lords, although it is late I feel that I cannot pass over the important speech which has just been made on behalf of the Government without taking up some points in it. In the latter part of his speech the noble Lord said—and I think we shall all agree—that what we must look for in order to restore our prosperity and industrial activity is, above all things, a healthy spirit of justice and of industry among the working men, a recognition of constitutional progress, and an avoidance of revolution. While I think we shall all agree with that, it does not exhaust the demands of our economic position. It is necessary also that there should be a far larger activity in production. The noble Lord then went on to say—I am not quoting his words, but I am expressing his meaning—that, in viewing the possibilities of the future, he was not so gloomy as some, because he looked to two sources of great industrial and commercial activity—first, to our great Dominions, of which he said (and I think most people who have seen their growth will agree with him) that their present growth is nothing to what we hope their future growth will be; and, secondly, to our Dependencies which are to be the source of such a large amount of valuable raw material.

I think we should probably agree with him, but where I should challenge hint is in this respect. Hitherto, our policy has been to trade with the world. One of the reasons why the United States are so prosperous is that, though they have a Protectionist policy to the world outside, with varied production and vast area, ranging almost from the Tropics to the Arctic regions, and with their great material resources and Free Trade throughout that great area, they have had many of the advantages which countries in Europe have not got, even though those countries had Free Trade with a comparatively small area of countries beyond Europe. Therefore I say, for the activity and prosperity of the country, I do not want to exchange the trade of the world for trade with any section of the world, no matter how large. That is to my mind the true economic policy, especially for a country like England with a dense population and not an immense amount of material resources on the land. Our interest is to trade with as wide a field as possible.

I come next to our Dependencies. The noble Viscount indicated that we must look to our Dependencies to meet the balance of trade or adverse trade in America.


Not entirely, but it is an important element.


I do not say it would exhaust it. I was sorry to hear the noble Viscount say so, because I believe his past record is one of great sympathy with the less forward races, and when he took the post of the Colonies I felt that we should have a man who would recognise, what is now recognised by the League of Nations, that those who have to do with the less developed nations held them as trustees and not as people who were to be exploited. The noble Viscount knows quite well that there is a group of Tariff Reformers who rather advocate that we should use these great Dependencies of ours, not in the first place for the interest and welfare of the people themselves, but for the purpose of swelling our profits and trade. I do not say the noble Viscount holds that view, but I am not misrepresenting the views of that section.

There is at this moment a Question on the Paper regarding the import of nuts. During the war we have been interfering with the free export of their produce from the West African Colonies, and forcing them to send their produce to England. I do not say, as a war measure, that it was unnecessary, because some of these imports were going to Holland, and by the help of German capital were treated there. There was something to be said in not allowing these resources to go directly or indirectly to the enemy. I am not questioning that policy during the war, but it is high time that these countries should be restored to the utmost freedom of trade, and allowed to deliver their goods without our trying to limit their industries for our own profit.

Take the question of cocoa. There is no trade which has grown more rapidly in our West African Colony than the production of cocoa; I think they have taken the lead in world production in cocoa. But the moment you consider it is tolerable or advisable for this country to use its power of legislation over these countries to limit their freedom of exportation, even though it would help your balance of trade with America, it is a vicious and immoral policy. The Official section of the Gold Coast tried to force a duty upon the Colony, and were beaten by the non-official votes of the white people and native representatives; but I do not know that this policy is dropped. While I agree with the noble Viscount in looking to great developments in these tropical Dependencies, as well as in our Dominions, if we are going to use it as a source of advantage to us, as distinct from the advantage which we and all the rest of the world reap from the growth of these places, I say that we are embarking on a vicious policy.

The noble Viscount deals with the question of coal and cotton. We are all agreed that a better use of coal would be economical; but that is not the problem we are up against in our national production. What we are up against is the increased cost as the result of the action in raising wages and shortening the hours of the miners. We might meet that in the Budget, as we did last year by a subsidy of £46,000,000 from the nation, but whether we meet it by raising the price to the consumer or by a subsidy you equally strike a deadly blow at our international trade. I will not labour that point. We cannot but consider the position of the coal trade as very serious for the whole commercial and industrial prosperity of the country.

As to cotton. We all know that for the last thirty or forty years it has been in the finer counts, producing a finer quality, rather than in producing a large quantity of raw material that the English cotton supremacy has been maintained. The United States might use a greater number of pounds of cotton than Lancashire, but in Lancashire our spindles are much more numerous than in the United States, and if only people will work and not raise the cost of production so as to exclude us from foreign markets, our cotton trade has a great future before it. But it is a trade which is cut very fine. We have to pay in the world market for our raw cotton, and we have to sell in the world market, and we should be sanguine if we thought that our cotton trade was going to pull us through our great industrial difficulties.

I agree with the noble Viscount that as an industrial country, barring the United States, we are even now in as good a position as any other great producing country. And why? The great producing countries are Germany, which is knocked out of time altogether; Belgium, which has been devastated and will therefore take a long time to recuperate; and France, which with the exception of a few specialities is hampered by her protectionist policy and does not come into world competition much. America will be the great competitor. I agree that it is not at all essential for us to be the paramount producing power. What is essential is, that we should be able to keep our people in a state of profitable activity by producing. If America, with twice the population and with three times our national resources, produces twice as much as we do it does not hurt us so long as we can produce.

I agree with the noble Viscount—and it was a pity he limited his liberal and large ideas by harking back to Colonial Preference—that the prosperity of every country in the world adds to the prosperity of all the others. We cannot be richer because other countries are poorer, and an illustration of that is to be found in the great volume of our trade with the United States, which is still highly Protectionist. Really the important thing is that we should look at the world as our market, as our customer, and as our supplier. The moment you take a narrow view you fall away from that world view of commerce and industry to which this country requires to hold.

The noble Viscount hesitated and did not want to be committed to recognising a possible expenditure of £800,000,000. I should be very glad if I thought that our expenditure next year would be kept within that figure. When you consider the large commitments in which we are involved, and of which there has been no estimate, the great housing question, the question of transport, the Army and Navy with increased pay and allowances—Mr. Winston Churchill said that he intended the future Army to be about the same in numbers as it was before the war, but it will cost, with increased pay, double the amount—the Navy and the Air Force, no one can imagine that you are going to keep your Budgets within the amount of the pre-war Budgets. Then education has gone up very much. There are also pensions, the administration of health, and the bread subsidy. All these items are most; enormous, and you have to face the situation.

You must recollect that your Budget this year is a £1,600,000,000 Budget, of which you have to borrow £250,000,000, and you also get £200,000,000 which is really out of capital, because you are selling stores which ought to be carried to capital account. Even if next year you make your Budget an £800,000,000 Budget, which I do not believe, you will still have to face a very heavy expenditure. Whether we are gloomy or not, or whether like the noble Lord we are cheerful or not, I think every one must agree that the situation is most serious. It is no use day by day embarking upon fresh items of expenditure, without caring where the money is to come from to pay for them. It is no good putting off by a sort of flabby conciliation the real issues, but we should impress upon the working man the necessity of producing more.

On Question, Bill read 2a. Committee negatived.

[The sitting was suspended at a quarter to nine and resumed at half-past nine o'clock.]