HL Deb 26 July 1926 vol 65 cc167-86

THE LORD CHANCELLOR acquainted the House that the Bill had been endorsed with a certificate from the Speaker that it is a Money Bill within the meaning of the Parliament Act, 1911.

Order of the Day for the Second Reading read.


My Lords, I beg to move that this Bill be now read a second time.

Moved, That the Bill be now read 2ª.—(The Earl of Balfour.)


My Lords, the Second Reading of this Bill gives an occasion for a discussion of the financial situation of the country in all its aspects and for the consideration of cognate subjects. I do not propose to say much this afternoon about the question of expenditure or of retrenchment, although a great deal could be said. I had an opportunity upon the Second Reading of the Economy (Miscellaneous Provisions) Bill to call attention to the lamentable failure of the Government in the matter of retrenchment. It was very easy to prove how much they were at fault. I simply had to remind your Lordships of the projected saving of £10,000,000 a year of which we heard so much last summer, not a penny piece of which has materialised. As a matter of fact, the Government have not retrenched at all. On the contrary, the Estimates for this year show an increase of about £9,000,000 over the Estimates of last year. In those circumstances I shall say again what I have said before—and this is simply stating the fact—that, having regard to the increases of expenditure which it has made, this Government is the most extravagant Government since the War. I called attention to some of these matters upon the Second Reading of the Economy (Miscellaneous Provisions) Bill, but there was no real reply from the Government Bench. We were then told that perhaps another occasion would be more suitable. There was not the smallest reason for evading the question then. The noble Earl on my right also dealt with the matter then, but no reply was given to him. Nothing could be more in order than to discuss economy on an Economy Bill and, as a matter of fact, the Chancellor of the Exchequer spent nearly two hours in another place on the Second Reading of this Bill in an apologia for the Government's failure to retrench. However, I leave that question there.

First of all I would say one or two words about the specific Duties imposed in this Finance Bill and I come to the Betting Duty. I have had an opportunity, on three separate occasions, I think, of putting my views fully before your Lordships on this matter and therefore I can be very brief. My views remain unchanged. The Tax as imposed by this Bill is in such an illogical and indefensible form that it is highly probable that it will be extended before long. The Tax as imposed in this Bill by the Chancellor of the Exchequer is going counter to some very weighty views expressed before the Select Committee which considered this matter. I think that everybody acquainted with the problem recognises that there is the strongest probability that the Tax will be extended before long and that licensed betting offices will be set up all over the country. It is for that reason that we say that the beginning of this taxation on betting is almost certain to lead to an increase in betting, particularly in the smaller towns and the rural areas, where, generally speaking, betting is not so rife as it is in the bigger towns and in the manufacturing centres. I must say a word about a letter which appeared in The Times a few months ago, signed by certain members of your Lordships' House who have been Dominion Governors. That letter, as it seems to me, failed to recognise that in the Dominions the conditions of betting and for taxing betting are very different from the conditions in this country. Therefore the signatories of the letter were not comparing like with like.

I come now to the further instalment of Safeguarding Duties which appears in this Bill; that is, the Duty on wrapping paper. I had an opportunity only a few months ago of discussing this safeguarding policy in all its aspects very fully and I need only take a moment or two upon the matter to-day. I should like to remind your Lordships that the President of the Board of Trade has told us that this policy of Safeguarding Duties is for the purpose of helping unemployment. But the Duties have not helped unemployment as a whole and it is impossible for them to do so. You cannot by Tariffs increase the total amount of employment in this country or in any country. You may, perhaps, help an individual trade, you may, perhaps, by this Duty help this wrapping paper trade, you may, perhaps, help the manufacturers of wrapping paper by reducing the imports of wrapping paper, but that result can only be achieved by injuring some other trade which would have exported something to pay for the higher imports of wrapping paper if they had not been reduced.

The Bill extends, as your Lordships are no doubt aware, the period for what are known as the Key Industries' Duties. Here, again, I think, the decision of the Government is open to grave criticism. Your Lordships will be aware that the theory is that there are certain articles necessary for defence which must be produced in this country so that we may not be dependent for foreign supplies in those respects and, therefore, Duties are put on to give protection here at home. We have now had some experience of those Duties. They have been in operation five years and it is perfectly clear that there is no guarantee at all that they are going to do what they are imposed to do and that they are going to ensure a supply of those key articles. Let me take one example—the are lamp carbons. They are protected for the purposes for which I have named. I believe, despite that fact, that there is now only one firm in this country which is producing are lamp carbons and I understand that part of its plant is being closed down. It is clear, therefore, that the Duties are not fulfilling the object for which they were imposed. It is all very well for the Government to claim—though they have not proved it—that these Duties have helped small industries. There is a good deal of dispute as to whether that is really so, but, even if it is, the result is only achieved at the cost of loss to some other industry.

I want to leave these specific Duties and come to a consideration of what I deem to be the general financial policy of the country regarding taxation. The Government have now been in office nearly two years and we can get a pretty clear indication, I think, of what it is at which they are aiming. This year's Budget is largely in the nature of an interim Budget. Nevertheless it is part of a general policy, and the chief feature of that policy is, I think, a desire to reduce direct taxation, or at any rate a desire to reduce the proportion which direct taxation bears to indirect taxation. Thus we have the Silk Duty of last year and we have the Betting Duty of this year, and the Chancellor of the Exchequer has told us that he is looking out for other indirect taxes of the same kind. He is on the hunt for them if he can find them, and he has already considered several others.

The fact is the Government do not seem to mind levying indirect taxation, but they are greatly concerned about direct taxation and they want to reduce it. Last year the Government, as your Lordships will remember very well, gave away to the Income Taxpayers and to the Super-Taxpayers £42,000,000 per annum and, as a matter of fact, the financial embarrassments of the country subsequently are very largely due to that wholly unjustifiable proceeding. Ostensibly these remissions were made to benefit industry. I put forward several reasons last year to show that very little, if any, benefit to industry would result from them. I do not intend to repeat what I said then, although no real reply was made from the Government Bench to the arguments that were advanced. However, to-day, I will content myself in regard to this matter with pointing out that there is nothing in recent experience to support the Government in this policy of reducing direct taxation to help industry. It is not a new policy. We have had reductions of the Income Tax in the last two or three years, and we were told that the specific object was to benefit industry. One shilling was taken off the Income Tax in 1922 and 6d. in 1923 to help industry. Did it help industry? Did trade improve? Not at all. Trade got steadily worse and last year (long before the coal strike) was in some respects one of the most unsatisfactory years for trade which we have had in this country in modern times.

I should like, with your Lordships' permission, to devote a little more consideration to this question of the proportions of Revenue raised by direct and indirect taxation, because here we are really getting at the heart and kernel of the Government's financial policy. I think I can demonstrate that there is not a little misunderstanding about this subject, and it is surely most desirable to get, if we can, at the real perspective of the matter. It is not sufficient to contend that direct taxation has increased owing to the War—has increased more than indirect taxation—and that, therefore, direct taxation must be reduced. There is a great deal more to be said than that. The Budget does not only comprise taxation; it also comprises Expenditure, and, if we look at the Expenditure side of the matter, we shall see that the richer classes as a whole are receiving much more from the national Expenditure than they did before the War. That is due to the very large payments on account of the War Debt, in one way or another amounting now to some £360,000,000, and of that vast sum probably nearly £300,000,000 goes to the richer classes of this country. On the other hand, it is true that the poorer classes are also receiving more from the Expenditure side of the Budget than they did before the War. I want to be perfectly fair and put the matter in its true bearing. I say the poorer classes are getting decidedly more. Old Age Pensions are higher, the cost of education is higher, there is a much bigger charge for housing, there are some new social services, the cost of War Pensions is very great, though a proportion of that cost goes to the wealthier classes in respect of officers' casualties.

Nevertheless, when all items are taken into account, it will readily be seen that the increased share of the national Expenditure which is going to the poorer classes is much smaller than the increased share of the national Expenditure which is going to the richer classes. That is caused by the very large payment for War Debt interest and Sinking Fund, of which I have already spoken. The truth is that when everything is taken into account it will be found that, although the wealthier classes as a whole are paying a decidedly higher proportion of national Revenue than in pre-War days, they are, on the other hand, receiving back as a whole so much larger a proportion from the Expenditure side of the Budget that, looking at the Budget as a whole—and that is, of course, what we ought to do—it is true to say, broadly speaking, that the richer classes are in much the same position in comparison with the poorer classes as they were in pre-War days. As a matter of fact, the position is that the richer classes as a whole are getting back out of the national Expenditure not far short of the total amount which they pay in direct taxation. Therefore I submit—and I do not think this can be denied—that what is called the great burden of direct taxation is largely fictitious.

The Government are basing their case, in my opinion, on false premises. I say again that the present alleged burden of direct taxation is largely fictitious, and even if that were not so, the Government are not able to prove, either by sound economic argument or by the result of experience, that the remissions which they have made of direct taxation and which apparently they intend to make again as soon as they can, have helped or will help industry. Still less can they prove—and as far as I know they have never made the smallest attempt to prove—that the reduction of direct taxation is better for industry than the reduction of indirect taxation. That is a very tempting theme, but I will not pursue it now. I will just sum up this part of my argument by saying that in my opinion the Government are in an untenable position in their present policy, which will not stand the test of close analysis and investigation, and that, whereas the Chancellor of the Exchequer and the Government say their policy is to help industry, the Government are, as a matter of fact, in very many ways inflicting serious injury upon industry by their policy, by adding to the burdens of industry and increasing the cost of production.

Let me look for a moment at the way in which this Government in their short term of office—they have only been in office rather over eighteen months—have added in numerous ways to the burden of industry and the cost of production. I will begin by mentioning one or two of the minor items—not of great importance, but all having a place in the indictment. Some of the Taxes in this Bill constitute a burden. The new Import Duty on commercial motors is one; it will increase the cost of commercial motors. There is also the increased taxation of heavy motors. Again, you are to have—it is only a small item—a higher cost for wrapping paper.

Now I turn to more serious items. The Pensions Bill last year put upon industry a burden which has been estimated at about £10,000,000 per annum. Then the Unemployment Insurance Act of last year has put upon the rates, it is estimated, about 100,000 persons. That increases the rates. In various other ways the trend of the Government policy is to increase the rates. What do we find? Rates, as everybody knows, are a very heavy burden upon manufacturing and industrial areas. They are a direct charge against production. We find rates in certain manufacturing centres going up by 1s. to 2s. in the £. That is partly due, at any rate, to the policy of the Government.

Think of what that means for industrial concerns whose rates are already, in many cases, almost an intolerable burden upon them. Think of what that means to those firms—unhappily, not a few in these days—who are not making any profit at all, but are making losses. What does it mean for them? The Government claim—as I have argued, without justification—that the policy of reducing the Income Tax will help industry. But what about firms making losses? How are they helped? They do not pay Income Tax. The Government are doing nothing for them except adding to their burden by increased cost of production. As those who follow these matters are well aware the industries which at the present time are suffering most, where unemployment is heaviest, where the industrial difficulties are the greatest, are those which are largely dependent upon export markets. What are the Government in their financial policy doing for these industries? Nothing whatever, except, as I say, adding to their cost of production and making it more difficult for them to compete in neutral markets.

And this is not all, because these trades, at any rate as far as they depend on export, have been adversely affected by the Government's precipitate return—as I hold—to the gold standard in April last year. Before I sit down I should like to say a few words about that matter. It was discussed in another place in the debate upon this Bill. The Chancellor of the Exchequer spoke about it there, and I think the Second Reading of the Finance Bill here is an appropriate occasion for us to discuss it, more particularly as there will not be another opportunity in your Lordships' House for some considerable time. As I say, the Chancellor of the Exchequer referred to this matter in the debate upon this Bill. I will not discuss it in detail, but I wish emphatically to affirm that the Government's contention that the return to the gold standard has been almost wholly attended by benefit to this country is not true. It is a contention which is disputed by some of the ablest economists of the day.

I read a speech not very long ago made by the noble and learned Earl, Lord Birkenhead, dealing with this matter. Let me give you his precise words. He said: The reversion to the gold standard has produced consequences which, on the whole, must be pronounced almost entirely admirable. When I read those words I was amazed. The Chancellor of the Exchequer has told us that he is not a currency expert, and he has implied that he does not really know a very great deal about the matter of the gold standard—I am not blaming him for that—and I think it is clear that the Earl of Birkenhead is also not a currency expert. It is very easy to make assertions that the reversion to the gold standard has produced consequences almost entirely admirable, but surely on subjects like this difficult and technical question we are entitled to have from highly placed members of the Government a little more argument and a little less assertion.

The point with regard to the gold standard and the return to the gold standard which I wish to stress is that the moment for that return was a most unfortunate one, having regard to the adverse effect which the step was bound to have upon our export trade. I have pointed out that it is our export trades which are in the most parlous condition, and it should have been the policy of the Government to try to help those trades, not to depress them still further. Look, for instance, at the coal trade. There is only too much reason to believe that the crisis in the coal trade last summer, which has led to the terrible state of things which now confronts us, was at any rate accelerated by the return to the gold standard, mainly owing to the effect of that step upon the coal export trade.

That is not merely my own opinion. Your Lordships probably will remember that arguments of this nature were used by Sir Josiah Stamp in the Report which he made last July after being appointed a member of a small Committee to inquire into the causes and circumstances which had led to the dispute in the coal trade. I think it is perfectly clear that nobody who reads what Sir Josiah Stamp has said about this matter, nobody who reads his considered statements, would venture to claim him as supporting the statement about the gold standard which the noble and learned Earl, Lord Birkenhead, made. Nor does the Earl of Birkenhead's view find corroboration in the opinion of the Federation of British Industries. I am not, of course, saying that the whole, of the trouble in the coal trade has been due to the return to the gold standard. I am trying to balance the matter, and if it were possible to estimate all the causes which are responsible for the crisis in the coal trade it would be found that the precipitate return—as I hold it—to the gold standard at that time was a factor of great importance.

There has been an article published dealing with this matter within the last few weeks in The Nation by Mr. J. M. Keynes. I need scarcely remind your Lordships that he is easily the foremost economist in this country. What does he say? He points out that the return to the gold standard has been injurious to the coal trade and, in addition to that, he piles up a formidable indictment against the Government, setting forth some of the other harmful consequences which have followed from the gold standard policy of last summer. I might go on, but I am content to say this: that in view of the evidence to the contrary it simply will not do for the Government, or for the noble and learned Earl, to say that the Government's action of last year has been attended by consequences almost entirely admirable.

On the other hand, I am not contending for a moment that no good results have followed from that which was done. Undoubtedly some benefits have accrued. Nobody denied, so far as I know, that there would be some benefits. The Government, in defending their policy, naturally enough stress the good side, and they plead that those of us who opposed the return to the gold standard in April of last year have not been right in all that we then said. Let me look at that point. I have looked from time to time through the speeches made by my colleagues in another place dealing with this matter, and through the speech that I made in your Lordships' House, and it is astonishing, on the whole, to find how right we were in what we said. What did we say? We indicated that certain things might happen as a result of what the Government were going to do. We never said that all of them would happen, but that some of them might happen. Some of them have happened, some of the most serious things which we forecasted have happened, and in one or two vital respects matters have turned out decidedly worse than we suggested.

The Government, however, in seeking to justify this policy, practically plead that they had no alternative—that, as the embargo on the export of gold was coming to an end in December last, they had no alternative but the return to the gold standard. I am not entering into that matter but, as a matter of fact, there were other courses open to the Government. Then the Government seek to shelter themselves behind the report of the Currency Committee, and they also indicate that they acted in accordance with the views of Treasury officials and of the Bank of England. With great respect I submit that this is not sufficient. Treasury officials and the Bank of England are sometimes mistaken. There is, for instance, a large body of expert opinion that holds that the post-War deflation policy pursued by the Bank of England and the Treasury was too rapid and was carried too far. Indeed, I scarcely think that it can be denied that this deflation policy has been one of the chief causes of the vast amount of unemployment which we have in this country and of our very grave trade depression.

Accordingly I say that these opinions, although they come from very eminent personages, are not necessarily infallible and that, as a matter of fact, past history has several times shown that the views of the Bank of England and even of Treasury officials have been wrong. As regards the Bank of England, it naturally and inevitably looks at matters largely from the bankers' and the financial point of view rather than with a wider and all embracing survey, including full consideration from the industrial standpoint. It should be the duty of the Chancellor of the Exchequer to hold the balance between all the various interests in the country, but how can he do so if he relies, as he very often does, largely upon the advice of the Bank of England and of one or two persons in the City? I do suggest that he ought to have other opinions as well—that is the point that I wish to make, in conclusion—when he is about to take a very serious step in policy. For instance, before deciding to return to the gold standard in April last year, did the Chancellor of the Exchequer himself consult any of the great industrialists or any of the great exporters? Did he consult any of the great export magnates in the North? After all, it is in the North that most of the industries of the country are situated. London is not the industrial centre of the country at all, and it is some of these men in the North who are suffering severely to-day owing to the policy of the Government.

Let me take a final point covering another set of decisions which the Chancellor of the Exchequer has to take from time to time. In my view he ought not simply to content himself with the advice of Treasury officials and of the City when he is issuing a Loan or projecting a conversion scheme. I wish that I had time to pursue that matter, because I think I could demonstrate to your Lordships that, owing to mistaken advice, tens of millions of pounds over a series of years will be lost to the taxpayers of this country. Some of the Loans issued during the War were put upon the market in a form open to criticism and the conversion scheme of 1921, which marked the beginning of the Conversion Loan, was not only a great failure but was based on terms exceedingly expensive for the taxpayers. Then again, subsequent conversion operations that have been attempted in the last few years have not, broadly speaking, been really successful—one of them far from it—chiefly because they were not framed on the most skilful lines. Surely more regard ought to be paid to the fact that most of the money for Government Loans and so forth comes from persons outside London.

No doubt it will be said that the Chancellor of the Exchequer has to proceed warily and that he cannot take too many people into his confidence. That is true, but I believe that difficulties of that sort can be adjusted and that, on balance, great advantage to the Exchequer and to the country as a whole would result if the Chancellor of the Exchequer could have more representative advice before taking momentous decisions. I am not now speaking of minor decisions, but of very important decisions. In fact, I feel that there is a great deal to be said for the creation of a permanent Advisory Council for the Chancellor of the Exchequer—a Council representative of views much wider than those of the Bank of England and of the financiers in the City of London. That is the suggestion that I would make. I make it as my own personal opinion, but I believe that it is one which, in the interests of the country, is well worth consideration.


My Lords, no one will for a moment suggest that this is not a fitting moment for any of your Lordships to address this House and the public outside this House upon questions of finance. It is perfectly true that your Lordships' House has no control over the finances of the country, but I should certainly be sorry to think that any opinions uttered in this House by high authorities would not carry weight outside its walls, and, though we cannot amend or deal with Money Bills, I think that suggestions coming from any quarter of the House will not merely be considered within these walls but will have due weight with the general public outside. Accordingly I am very far from quarrelling with the action taken by the noble Lord opposite.

He began his speech by referring briefly to national economy, to the taxation of betting, to wrapping paper and to key industries, as they are called, concerning which there has been special legislation. His remarks on those subjects—I think he will agree with me—really did not go further than to refer your Lordships to speeches that he had already made in this House, in which he had dwelt fully and at great length upon the subjects and in which he had given his views to your Lordships. He really did not, so far as I understood him, either repeat or intend to repeat the general scope of his previous arguments. He did not add to them and he did not repeat them, but he referred, as he was quite entitled to do, to the fact that he had already spoken to your Lordships at length upon the subjects, without repeating the arguments which he then laid before this House. In these circumstances I hardly think it necessary for me to say anything at length upon the subject, although there was one remark which he made upon the Betting Tax which I think deserves a moment's comment.

He has criticised that Tax upon larger lines, but, so far as I understood him, this afternoon his complaint was not against the policy of the Government as it is embodied in that Tax, but against the policy of the Government which would result ultimately from the present Bill and what in his opinion, when all the consequences of that Bill were understood, would increase betting in this country. His argument, if I understood it aright, was this Your Bill at present has nothing to do with the illegal aspects, of betting, but you cannot stop there; the present position is an illogical position, and ultimately the result will be that you will have in all the country towns of England offices set up, in which betting will take place in the future where it does not take place at present; that would be a great disaster. He has, I think, many other reasons which he did not tell us to-day, although he has told us in the past, but that additional reason was the only objection which I understood him to give on this occasion to the policy pursued by the Government.


May I interrupt? Let there be no misunderstanding. I am against the Tax altogether, whatever the Government are doing now, or may do.


That the noble Lord is against the Tax altogether I am well aware. I do not agree. I have always been a strong advocate of the Tax, for reasons that I will not trouble your Lordships with. The noble Lord who preceded me did not trouble your Lordships by recapitulating his general arguments against the Tax, and I, therefore, will not trouble your Lordships by recapitulating my general arguments in favour of the Tax. I will confine my observations to the single argument of the noble Lord, that if you pass this Bill you enter upon a path which will compel you to modify the law, because you will establish, where they do not at present exist, betting organisations, the existence of which will tend to augment the practice of betting. I think that is a hypothetical criticism and really of very little value. I do not see why the Betting Tax should be altered or developed in the future, but, if proposals for its alteration or development are made in the future, and brought before either House of Parliament, they will no doubt be criticised upon their merits; but until that contingency occurs it seems to me that we need not trouble ourselves with dangers which, as I understood, by the admission of the noble Lord himself, are hypothetical dangers.

My own view is that betting is not a necessity of life; that those who indulge in it regard it as a luxury; that they need not do it unless they like, and that if they do it they may well be asked to contribute to relieve the general financial burdens of the country. It is a paradox too violent to be reasonably sustained by anybody, that you encourage a luxury by taxation. We do not deal in that way with any other luxury, and I do not see why in betting alone it should be supposed that putting a burden upon it will increase the appetite of the community for indulging in the taxable luxury. I do not wish to engage the attention of your Lordships in that debate, because the noble Lord himself did not pretend, or desire the House to understand, that he had given any wide survey of his own objections to a Tax of which we all know he highly disapproves.

The same sort of argument applies to what he said about the measures which are intended to protect commodities which are improperly and unfairly competed with by special circumstances, or to protect those commodities which, in the opinion of those most competent to speak, are of prime necessity in times of war-like emergency. The noble Lord, I think, really carried paradox rather far when he suggested that the support we had given, for example, to the optical industry, or other industries, absolutely necessary to us when war breaks out, had no good effect in saving us from the humiliation and difficulty and cost of attempting to deal, when it is too late or almost too late, with a necessity in time of war which should have been safeguarded in time of peace. I take it that the real motive of the noble Lord's speech was not the subsidiary elements in the Budget, but what he called the general financial policy of the Government, and he laid it down that the Government were working towards a general scheme of finance which would throw the whole weight of taxation, or a much greater proportion of taxation, upon indirect rather than upon direct taxation.

The noble Lord was guilty, I think, of a very common error in the criticisms which he advanced upon this branch of the financial policy. He tacitly, and I am not sure that it was not explicitly and overtly, assumed that indirect taxation is taxation of the poor and direct taxation is taxation of the rich. I think that is a profound fallacy; nor do I believe it is possible to lay it down with regard to a large number of most important Taxes. I do not think it is possible to state with precision the class upon which a particular impost would ultimately throw the greatest burden. I think that that whole method of looking at taxation is full of fallacies. I cannot believe that it leads to a clear vision of the effect of taxation, or the principles which ought to guide taxation, to say: This is a direct Tax, direct Taxes are paid by the rich, add to it or refuse to take it off; this other Tax is an indirect Tax, indirect Taxes fall upon the poor, this Tax therefore falls upon the poor, and this Tax is one which is specially obnoxious to those who desire (as I believe we all desire) to see the general level of living raised in this country. I think that is a very crude method of dealing with finance, and I am not sure that even the noble Lord carried it out consistently.

I thought one of the strange applications of the doctrine was that so much of our taxation goes to deal with our Debts, and our creditors have been so often among the wealthier classes in the country that you may say that the payment of Debt is really a form of boon to the rich. I do not think that that is a form of argument which the Chancellor of the Exchequer is in the habit of using when he turns to the public, in moments of necessity, and says: "Please lend your money to the nation for the nation's purposes and Necessities." Then, the lender of the money is regarded as a great benefactor. You send round apostles to all parts of the country to induce people to lend money to the Government. But apparently, when the money has been lent and you look at the method of repaying it, then you say that the payment of Taxes, in order to enable you to pay interest on Debts, is obviously a benefit to the rich, and should be counted as such when you are attempting to carry out what I believe to be an impossible task—namely, that of deciding on whose shoulders ultimately the burden falls.

I wonder whether the noble Lord really reflects upon the full consequences of his doctrine. Supposing you were to raise taxation in the form of Income Tax and Death Duties, so as to leave no margin for the owners of property or for those whom the noble Lord describes as the rich: Does he think that the poor would escape from the results of that mode of taxation? I cannot imagine how your industry would be supported, where you would get the necessary capital, how you would be able to supply the necessary loans for your own internal industries, or for the industry of those countries with whom you trade. We should undoubtedly cease to be a lending country, and I am sure that on reflection the noble Lord would be the last person to suggest that any disaster could be much more serious to our world position than that we should altogether lose the status that we once had, that, namely, of being a great lending and creditor country. That is an infinite advantage not merely to the rich, not merely to those who lend, it is of advantage to the whole commercial position of this country. It affects the cost of living in the country, it affects the prosperity of every class, and the idea that one class, and one class alone, is benefited by the remission of direct taxation, especially when that direct taxation has reached the high point which it has reached in this country, appears to me to be a profound fallacy.

And, if you turn from direct taxation to indirect taxation, can anything in the world be more absurd than to say that a Tax on betting is a tax on the poor? It comes under the fire of the criticism of the noble lord, and it is one of the things which he appears to think is a burden on the poor which really ought to be borne by the rich. But is that a tolerable doctrine? Is it consistent with common sense? Does any human being believe it? Does the noble Lord himself regard that as one of the forms of taxation which throws upon the shoulders of those least able to bear it some part of the burden of meeting the public needs of this country? It is a paradox which, I am sure, he has carried to a degree which is perilous for any balanced view of the method of raising the necessary money, and I hardly think that he will be prepared to sustain it.

The last part of the noble Lord's speech was entirely devoted to the gold standard. I admit that directly you come to currency you find that great authorities differ. I have watched currency controversies for two generations, and I do not believe that at any period have great authorities been found to agree upon that economic problem, and it would be very surprising if this general rule had been found to fail in the one case of the gold standard. The question is fraught with difficulties, and I am quite ready to admit that, in the world as it is made, it is hardly possible to make so great a change as the reversion to the gold standard, fraught, as I think, with so many benefits, without finding on careful examination that the great benefits are to a certain small extent counterbalanced by corresponding evils. That is too frequent an event in the experience of us all to cause any surprise, or to involve any belief that we have necessarily gone on the wrong track.

Indeed, I am surprised that the noble Lord should take this particular moment for advancing his arguments against the gold standard. We look round the world and we cannot help seeing in what perplexing financial difficulties every nation has found itself which has not maintained or, if it has failed to maintain, has not restored as soon as possible the position of its currency. You have only to look round the great commercial communities of the world to see that, difficult as our position may be, it is not so difficult as that of nations who have not undertaken all the heavy responsibilities of a reversion to the gold standard as we have done, who have not paid the inevitable price that had to be paid, who have put off from day to day the inevitable difficulties, which only augmented at compound interest by being deferred. And I should have thought that, making that survey which I suggest to the noble Lord, he would have hesitated to come down to this House and tell us that we have been wrong in the steps that we took.

The noble Lord appears to think that in this case the Government allowed themselves to be unduly swayed by the financial authorities of the Bank of England and of the City of London. I think it quite possible that there may be cases in which the banking and the manufacturing interests are at variance. But I think the noble Lord is entirely wrong in supposing that all knowledge of finance is confined to the City of London, or that the financiers elsewhere in the country do not take the views of financiers in London. The great banking interests which—let me remind the noble Lord, who, indeed, knows it better than I do—are in touch with industry in every part of the country, which have no permanent interests except those which are intimately bound up with the prosperity of manufactures, which cannot exist without them—those are not advisers confined to Threadneedle Street; they are to be found in every great commercial centre in England, and, let me say as a Scotsman, not less in Scotland. And, though occasionally and in certain cases there may be differences of opinion between those concerned in the main with the manufacturing side of our national industries and those who are concerned with the not less necessary financial side of those same transactions, I doubt whether any body of men less deserve the criticism levelled against them by the noble Lord of taking a narrow view of our national needs and our national difficulties than the great financial authorities who may live in London but are intimately connected with the whole network of our financial resources, our financial difficulties and our financial responsibilities.

I cannot argue on this occasion with the noble Lord about the details of the gold standard. Indeed, it is evident from his speech that he did not think this was a fitting occasion to go into those complicated details and he did not attempt to do so. But when he says, as he said towards the end of his speech, that all our troubles about the coal industry, which have already cost us I will not venture to say how many millions and which are not at an end, are due to the rash and unfortunate moment at which the Government chose to alter their standard from the previous system of inflation to the present system of parity, and when he says that we chose that moment unfortunately, every moment that you choose for doing a very difficult and disagreeable operation is always the wrong one. The evils, or the imaginary evils, are at once appealed to, and everything that goes wrong is put down to the step that has been taken. I can assure the noble Lord that with his objection to the gold standard, it matters not whether we made the return in 1923, 1924, 1925, 1926, 1927 or 1928, what year you will, he would always have found that the special commercial and financial conditions of the world at that moment showed it to be the worst possible moment for carrying out a change to which he has an inherent and rooted objection and which he would always have looked at in a spirit of hostile criticism, no matter what care and caution had been taken by the Government responsible for the operation.

It surely is an extravagant draft upon your Lordships' credulity to ask you to believe that in the complicated question of the price of coal, in which the occupation of the Ruhr, the work thrown into the French coal mines, the enormously augmented use of oil, the great growth of such industries as the brown coal industry of Germany (I mention only some of the conditions)—in which all those conditions were present, the main cause of our troubles is that singled out by the noble Lord, the currency change, to which he has this rooted and, as I think, most unreasonable objection. I do not know that there is any other point raised by the noble Lord upon which he would like me to touch. I think I have surveyed the main outline of his speech, and I can only conclude by saying that so far as my judgment goes, at a very difficult period, under conditions of unusual difficulty, our finances have been directed by the Chancellor of the Exchequer with singular courage, great caution, great invention and, as I think, great success.

On Question, Bill read 2ª: Committee negatived.