NATIONAL EXPENDITURE.

HL Deb 16 March 1927 vol 66 cc502-66

EARL BEAUCHAMP rose to move, That the need for drastic economies in the national expenditure and for reduction in taxation, with a view to improving trade and diminishing unemployment, is even more imperative than at the close of 1924; and this House therefore regrets that the promises of retrenchment then held out to the country by His Majesty's Government have not been kept, and deplores the continued growth of extravagance in armaments and in the other spending Departments.

The noble Earl said: My Lords, I hope that you will allow me to take as a text for what I have to say upon the importance of economy a sentence which appeared in His Majesty's Speech at the end of 1924. That sentence was as follows:— The present heavy burdens of the taxpayer are a hindrance to the revival of enterprise and employment. Economy in every sphere is imperative if we are to regain our industrial and commercial prosperity. I think there were very few members of your Lordships' House Who were not glad to read and hear that passage in His Majesty's Speech and who did not hope that something might result from it. The result, unfortunately, has been entirely different. The normal Budget, so to speak, of 1923–4 was for £788,000,000, the Civil Services accounting for £300,000,000 and armaments for £105,000,000. The Expenditure in 1926–7 rose from £788,000,000 to £831,000,000, armaments amounted to no less than £116,000,000 instead of £105,000,000, and the Civil Service to £311,000,000, and we find that the Expenditure for the year 1927–8 is likely to be in the region of £824,000,000.

In the debate that took place on the King's Speech I ventured to refer to this matter, and I am glad to recall that the noble Marquess, Lord Salisbury, the Leader of the House, realising the importance of the matter, used these words:— Of course it is most essential that we should economise and I yield to nobody, certainly not to the noble Earl, in the conviction that the utmost economy that is possible ought to be practised in every part of the Government. I feel obliged to ask the noble Marquess exactly what he meant when he spoke of economy. Economy is not the same thing as extravagance. Economy does not mean spending more money, but spending less money, and I feel obliged to refer to another sentence in a speech that the noble Marquess made about a fortnight ago in which, referring to another subject, he said:— I do not attribute any importance to their reply. Let them talk all the nonsense they please. That does not matter to us. It is a question of deeds, not of words as far as we are concerned. So it is with us when we ask for economy. It does not satisfy us that we should be rut off year by year with words on the subject of economy. We wish to see some deeds in that direction. The noble Marquess, indeed, reminds me of a character in "Martin Chuzzlewit":— He was like the girl in the fairy story, except that if they were not actual diamonds which fell from his lips, they were the very brightest paste, and shone prodigiously. He was a most exemplary man, fuller of virtuous precept than a copybook. Some people likened him to a direction-post, which is always telling the way to a place, and never goes there: but these were his enemies; the shadows cast by his brightness. It is quite obvious to your Lordships who have looked at the Order Paper that it would have been easy enough to get support for the Motion if we had said nothing in regard to armaments, but I think that the question of the reduction of armaments is of the very greatest importance and I believe that a very large reduction of expenditure in that direction is easily possible. I will do the Government the justice to acknowledge that they were not the first Government since the War that has increased expenditure upon armaments. It was a great disappointment to a great many people who wished well to the Labour Government that they failed to materialise the expectations that were held of them in this matter. Here is a quotation from a speech by Mr. Ramsay MacDonald at the annual Labour Conference on June 28, 1923. Mr. MacDonald is reported to have said:— Unless they and the people they represented were wise enough, not merely to say things, but wise enough to put a Government in power that would devise a policy that would stifle armaments, then the harvest of armaments would be reaped in spite of them, and the bugles of war would blow again. In the same year Mr. MacDonald moved a Resolution in the House of Commons deploring the enormous and growing expenditure on the naval and air forces and on other military preparations which is beginning once more a competition in armaments … and, supporting that Resolution, he said:— It must be a subject of the most profound regret to all parts of the House, that to-day, in 1923, the expenditure on preparations for the next war has amounted to such colossal figures. That, of course, was before the Labour Government took office.

Early in the following year they announced the laying down of five more cruisers, and an increased expenditure on armaments was to be found in the Budget of Mr. Snowden. In those days the spacious atmosphere of war finance hung over the Estimates and it was not necessary to estimate quite so closely as nowadays. When Mr. Snowden came to frame his Budget, he found that the actual expenditure on armaments in 1923–4 was £105,000,000, while the Estimate that he prepared for 1924–5 amounted to no less than £115,000,000, an increase of roughly nine and a half millions. I confess that I think the time has come when very little can really be done by cutting here, by snipping there, or by paring something off. We need a new standard with regard to these things and, if necessary, a new policy. Further economies which may not have been possible shortly after the War are quite possible and feasible today, and those economies which may be possible to-day will very likely not be possible a few years from now. The vested interests which grow up in regard to expenditure are generally recognised and make economy more difficult as time goes on.

The question to which I venture to draw your Lordships' attention is the fallacy of comparing the question to-day with that wench it was in the year 1913–14. One ought to compare like with like, and the situation is holly different to-day from what it was when the War broke out. In 1913–14 there was a German Navy and a very large German Army. The German Navy, which, as many people considered, had been specially directed against this country, has now entirely disappeared. Therefore it seems to me quite fallacious to suppose that it is as against the standard of 1913–14 that we ought to compare Expenditure to-day. We ought to go back to when the situation in the world was comparable to the world's situation as it is to-day, when we have no special enemy building against us every year and increasing his Fleet. The story of the increase of armaments goes back to 1896, when the Kaiser sent his telegram of congratulation to President Kruger after the failure of the Jameson Raid. Under cover of the Boer War the German Navy Bill was got through the Reichstag in 1900. The Navy Bill of 1905 amplified the Bill of 1900. Whether these happenings were the cause or the effect, the fact remains that the British expenditure on armaments rose from £52,000,000 in 1898–9 to £70,000,000 in 1905–6, £86,000,000 in 1913–14 and £116,000,000 to-day.

The increase from 1898–9 to 1913–14 was 66 per cent, and as this rise was due to the race in armaments can we not say that our armament Estimates should be no greater than those of 1898–9 plus the increase in prices? The Economist's index number of wholesale prices is 56 per cent. above the figures of 1914. In that case our armament Estimates ought not to exceed £52,000,000 plus 56 per cent., which equals £81,000,000, but last year they amounted to £116,000,000. Therefore your Lordships will see that if that standard were adopted by the Government there is room for considerable saving, of at least £35,000,000, and I will say of new expenditure, on tanks or the Air Force, it should be included in the total expenditure on armaments. The only way of arriving at a comparison of similar figures is to take it from the point of view of the proportion of national income spent on what is called the insurance premium against war. In 1924–5 the amount which we paid in this country was 3 per cent., in 1913 3½ per cent., and from 1870 to 1900 only 2 per cent. At this moment the Dominions spend ½ to ¾ per cent., Germany 1½ per cent. and the United States 1 per cent.

It is impossible for us to think of entering into rivalry with so wealthy a nation as the United States, but I will call attention to what happened in France. In France the 1925 Budget for Army, Navy and Air Force amounted to 5 milliards of francs, which at the average exchange then ruling came to £50,000,000. To-day the figure is 5½ milliards of francs, which at an exchange of 125 francs to the £ equals £44,000,000. Compare that with the £116,000,000 a year spent in this country.

I am afraid it is no use asking the Government if they see their way to publish the Report of Lord Bradbury's Committee on Expenditure and possible means of economy. I have asked for it before without success, but I wish I could persuade the Government to let us have it. There are one or two special directions in which I think some economy might be made. For instance, the staff of the War Office, Admiralty and Air Ministry. In 1918 and 1926 we find remarkable increases in the staffs, although there is a diminution in the strength of the Army, Navy and our total military forces. To give your Lordships the figures as shortly as possible, whereas in 1914 we only wanted one person at headquarters in order to look after forty men it now takes one man to look after twenty men, and we have the rather surprising result that if they had the same proportion in 1927 as in 1914 the staff would be 7,900 instead of 14,000. There may be reasons for some increase, but for such a large increase it is difficult to imagine any justification.

Then I take the Navy and pay allowances. The per capita cost of numbers borne in 1913–14 was £57.32. The comparable figure in last year's Estimates is £149.51, an increase of 160 per cent. Even after the deduction of the payments for "marriage services," which are items appearing only in the Estimates for 1925–6, the percentage increase in pay is still 131.08. The Anderson Committee, in their Report on Pay, etc., of State Servants, expressed the opinion that— All the evidence seems to us to show that the pay of the naval rating was not too low in 1914. The Committee also reported their conclusion that— Officers up to and including appointment to the rank of … Lieut.-Commander in the Navy are at present being paid more than is necessary, or even quite fair to the rest of the community. Adding 70 per cent. for the decreased purchasing power of money, a reduction of over £5,000,000 could be effected on this Vote alone without reduction of numbers. In these circumstances it is with some astonishment that one reads the complacency with which the First Lord speaks at times of economies.

The Government Return of the size of the Navy, dated March 4 of this year, shows that 14 cruisers are being built by this country against 10 which are being built by the other countries in Europe—France, Italy, Germany and Russia—and at this moment the big ships building and built are 82 in this country compared with only 83 in France, Italy, Russia and Germany put together. We are therefore in a stronger position as regards other European Naval Powers than ever before in our history, and we are entitled to ask whether the Government do not see some hope of a reduction in the burdens of this country in that direction. We are all glad to know that they have accepted the invitation from Washington and I hope that we may see some result from the Conference which is to take place. I am sure we all hope that the noble Viscount who represents this country at Geneva will do all he can to assist the work of disarmament when they meet later in the year. I think one ought also to remember the fact that a great deal of the naval expenditure which does not appear in this year's Estimates is not entirely cut off, but only postponed.

I turn now to the Civil Service. In 1913–14 the figure was £97,000,000. In the 1926–7 Budget it was £300,000,000, but the actual expenditure, owing to Supplementary Estimates, was £311,500,000. There is in the actual figures compared with the Estimates for the year—namely, £300,000,000 and £305,000,000—an apparent saving of £5,000,000, but if we allow 70 per cent. for the difference in the value of money and the difference in War Pensions the £305,000,000 is an actual increase of more than 80 per cent. on 1913–14. I want to know whether we get full value for that enormous increase.

The matter of the apparent decrease has been admirably put by the Parliamentary Correspondent of The Times. On February 26 last he wrote:— An examination of the Estimates will provide little comfort for those who were hoping that this year, at last, there might be a substantial reduction in the amount that the taxpayer is called upon to find. On the surface the Estimates appear to show a substantial reduction compared with the figures of the present financial year, but in fact this reduction is largely illusory. The White Paper states that the total for Civil Estimates and Estimates for Revenue Departments for next year is £305,374,678, compared with the total net Estimates for 1926–7 of £311,401,909. But to obtain a fair perspective it ought to be explained that the comparison is made, not with the figures included in the Budget, but with that figure and, in addition, all the Supplementary Estimates which have been voted during the year. The only way in which a close comparison can be made with the Estimates issued a year ago is obviously by a contrast of the figures shown in last year's White Paper. In this way all Supplementary Estimates are excluded from the calculation. It is obvious that if they take the reduction of £5,500,000 it is not comparing like with like, but the total Expenditure of one year with the Estimates of the next year, without the Supplementary Estimates which experience has told us are only too likely to appear.

As a matter of fact, the Civil Service Estimates are very much worse than they were last year, because there were last year a number of non-recurring items; for example, the Wembley guarantee, £275,000; Emergency Services, £433,000; the Duke of York's Tour, £7,000; and various Services in connection with coal which amount to over £7,000,000—a total from these four heads alone of over £8,000,000. Then last year the relief of unemployment took £5,000,000 against a sum of £1,500,000 which appears in this year's Estimates. Therefore there ought to have been a quite automatic saving in this year's Estimates of no less than £12,000,000; to which we ought to add the automatic decrease of War Pensions, which I put down at £2,000,000, and which is generally between £2,000,000 and £3,000,000. Further, we remember the famous promise made to us by the Chancellor of the Exchequer, who hoped to reduce by £10,000,000 annually the expenses on this head. If that promise had been kept that saving would have amounted to no less than £30,000,000. Then there is, further, the reduction, which ought to have been allowed for by His Majesty's Government, due to a fall in the index number of prices, amounting to something like 10 per cent., and although we do not expect to find that fully reflected in the Estimates it might have been reflected at any rate to the extent of one-half. These figures alone show that there would have been a very large reduction indeed—enough by itself to make a reduction of 1s. in the Income Tax.

On the other hand, there have been a number of increases. There have been increases in eight offices, amounting to £3,316,000, and I confess that I think there is great room for economy in a number of these various Departments. We have ourselves seen that the Under-Secretary for the Transport Department has resigned because there was not enough work for him to do. There is also the Mines Department, which certainly did not manage to distinguish itself either during the long period of the coal subsidy or during the coal strike last year. Again, there is the Overseas Department, which is said to have been recommended for destruction. These three Departments alone might, I believe, be reduced to the position in which they were before of being sub-Departments of other more important Departments of the State, and in that way considerable economy could be effected.

I think we can fairly say that no class of Government servant should receive more than 70 per cent. above what they were receiving in 1913–14. A number of them, with whom I have a great deal of sympathy, have not received any increase at all, and I think they ought to receive an increase—Judges, for example, and I think Cabinet Ministers, too. There would be a great possibility for economy if the increments were all stopped for a year. They might be made biennial until the reduced standard was reached, and I think that all recruiting for the Civil Service should be entirely suspended for two years, and no more should be taken into that Service. That, with the elimination of unnecessary Departments would, I think, go a very considerable way towards reducing this expense. In 1913–14 there were eight Departments which cost £8,000,000. Those Departments now cost no less than £27,000,000, a rise of £19,000,000, of which the Labour Ministry accounts for an increase of £10,000,000. That is an example of the way in which these increases have been taking place. Those Departments represent the Customs and Excise, the Inland Revenue, the Home Office, the Foreign Office, the Board of Trade, the Diplomatic and Consular Service, the Ministry of Agriculture and Fisheries, and the Ministry of Labour. Once more we may well ask whether we are really getting full value for our money in regard to that very large increase.

I turn naturally to the amount of money which we lose by the various Departments through the departures made from the system of Free Trade. In an answer given in another place, on February 17, it was stated that Preference is costing just over £4,500,000 a year, and, of course, the taxpayers do not get that, but have to make up the money lost by being taxed in some other direction. The subsidy on sugar is going to cost us £4,500,000 during the present year, and there is also a loss by the Preference given to home-grown sugar of £600,000. Altogether, including the increased cost of collection, it is evident that the loss which we incur by the adoption of Protection in various directions amounts to something like £10,000,000.

It is obvious that with anything like the economies which I have adumbrated there are very great possibilities open to the Government, if they see their way to adopt them. A complete abolition of the Tea and Sugar Duties, a large increase of the Sinking Fund, and a very large cut in the Income Tax would all be possible. There are really at the present moment only three sources from which we can get economy; they are the three chief sections into which our public accounts are divided: they are armaments, the Civil Service, and the Service of the Debt. Nothing can be done with regard to the Service of the Debt until we have economy in the other two Services. With economy on armaments and on the Civil Service it would be easy enough for the Chancellor of the Exchequer to make a very considerable reduction in the Service of the Debt. Instead of that, we find that the unfortunate tendency is in the opposite direction.

I believe that when the Government took office it was possible to borrow money at the rate of 4½ per cent. Now, when the Treasury wishes to borrow money in London, it has to pay, one quarter per cent. more than it did before. We are all hoping that when the time comes for the conversion of the War Debt large economies may be possible for the people of this country. But so long as this extravagance continues, it is hopeless to think that there will be anything like the saving to the people of this country which, I think, we have a right to expect. It is an unfortunate thing that the economic policy of His Majesty's Government should tend in the wrong direction.

Nobody knows better than His Majesty's Government how general is the demand for economy. It is being asked for from every quarter of this country to-day. Every chamber of commerce and important bodies like the Federation of British Industries lose no opportunity of enforcing upon His Majesty's Government the imperative need for economy. We all desire it. Many, if not most, of your Lordships desire to see economy. The point at issue, I suppose, between those who will support the Amendment of my noble friend Lord Midleton and myself is that they do not see their way to support any reduction upon armaments. I regret the fact, but I would ask them to remember that in war, as in peace, a long purse is of the highest value to a combatant nation, and that during the War it was our strong financial position which went far to help us to achieve victory. With this continued extravagance there is no reserve for the people of this country if unfortunately we found ourselves in a similar position to-day.

I am one of those who are sanguine enough to hope that there will be no more war during the next generation, and that the League of Nations has gone far to eliminate the risk of war altogether. But, whether that be so or no, I am still anxious for economy, and I think, in view of what I have said of the importance of finance in war-time we ought to begin to economise now. Then, if noble Lords opposite wish to keep something in reserve when once we have effected these economies, that is a matter for future controversy. For myself and I think for my noble friends we wish for economy, not only for its own sake, but, also because with economy we can do a great deal more in the direction of social reform for the more unfortunate classes in this country. I beg to move.

Moved, That the need for drastic economies in the national expenditure and for reduction in taxation, with a view to improving trade and diminishing unemployment, is even more imperative than at the close of 1924; and this House therefore regrets that the promises of retrenchment then held out to the country by His Majesty's Government have not been kept, and deplores the continued growth of extravagence in armaments and in the other spending Departments.—(Earl Beauchamp.)

THE EARL OF PLYMOUTH

My Lords, the subject upon which the noble Earl has initiated this debate is a vast one. It could be discussed on many days from many different aspects and many different points of view without being exhausted. Obviously, it is impossible for me to attempt to enter into all these different aspects, but, actually, the Resolution which the noble Earl has moved divides itself into two parts. The first part expresses the view that the need for economy and a reduction in taxation is as imperative as it ever was, and the second part condemns the Government for not having fulfilled their promises in this respect and deplores the continued growth of extravagance in armaments and in the spending Departments.

I do not think there will be anybody in your Lordships' House who will quarrel with the first part of the noble Earl's Resolution. The Government are fully aware, indeed everybody must be fully aware, of the urgent need and desirability of a reduction in taxation, which to all intents and purposes can only be brought about by an equivalent reduction in Expenditure. The Government fully realise that a reduction in taxation would give a greater impetus to industry than anything, that it would do as much as anything to enable our manufacturers and workers to compete on terms of greater equality with the manufacturers and workers of other countries and in that way reduce the number of unemployed. Obviously, therefore, nobody would quarrel with the first part of the noble Earl's Resolution.

That brings me to the second part in which the Government is condemned for not having achieved this very desirable end and is furthermore accused of extravagance. We absolutely repudiate that charge of extravagance, and I shall endeavour to prove in the course of what I am going to say that there is really no foundation for it whatsoever. The noble Earl has quoted a lot of figures to substantiate his arguments. I am not at all certain that figures are at any time altogether convincing. They can be juggled with and made to prove almost anything, and I venture to say that on this occasion, in particular, they require the most careful scrutiny and examination, because circumstances have arisen and events have occurred during the past two years which do to a very great extent modify what would appear to be the very simple story that figures tell and put upon them a very different aspect. Therefore, I shall have to follow the noble Earl into the country which he has traversed and if figures are dull, as I am afraid they certainly are, I hope your Lordships will forgive me.

First of all, I want to compare the Expenditure of the year 1924–5, when the Labour Government was in office, with 1925–6 and 1926–7, when the present Government were in office. In 1924–5 the Expenditure was £795.8 millions; in 1925–6, £826.1 millions; in 1926–7 the estimated Expenditure was £832.4 millions. I admit that the increase would appear to be a considerable one, but various factors affecting this very simple comparison must be taken into consideration before we reach a true appreciation of the position and the facts. In the year 1925–6 the actual Budget Estimate was only £3.7 millions in excess of the Expenditure of the previous year and more than that is accounted for by the increased provision of £5,000,000 for the new Sinking Fund. The subsequent £26.6 millions which had to be spent are due to very many causes, but it is hardly necessary for me to remind your Lordships that the most important was the coal subsidy, which amounted to £19,000,000. I do not know whether any of your Lordships would suggest that that money was wasted and badly spent. I do not think they would get very much support throughout the country, and I feel confident that in doing what they did, in spite of what occurred last year, the Government took a very wise course in insisting that the true facts of the situation should be brought to the notice of the public. Besides the coal subvention there were increases to the Road Fund of £2,000,000 and an increase in expenditure on the Defence Forces of £4,500,000, about which I shall naturally have a word or two to say later.

I now pass to the year 1926–7. The original Estimate for this year was £820.6 millions and that is in spite of, firstly, an addition of £10,000,000 to the Sinking Fund and of £19,000,000 due to various automatic increases and expenditure arising from decisions of policy on the part of the Government about which I shall have a word to say. There were for the Widows' and Orphans' and Old Age Pensions schemes, £5,750,000, an automatic increase in the Old Age Pensions of £1,250,000, the new cruiser programme, £3,750,000, beet sugar £1,000,000, and increased grants for education, health and housing of £2,000,000. The amount of £11.7 millions which had to be spent in addition to the original Estimate was due altogether, or almost entirely, to causes over which the Government had no control and mainly, of course, to the coal strike. There were £3,500,000 for emergency services and the importation of coal and £4.3 millions for loans to boards of guardians, while £1,000,000 had to be spent in connection with the disturbances in China.

I do not know whether any of your Lordships, or whether the noble Earl would challenge any of these special charges. There may be some of your Lordships who consider that the Widows' and Orphans' and Old Age Pensions scheme was a luxury, but I want to say emphatically that the Government consider that scheme to be an integral and essential part of their social programme. I do not know if there are any of your Lordships who would quarrel with the £1,000,000 that had to be spent in connection with China, at any rate, I do not think they would be the same, noble Lords as would quarrel with the scheme to which I have just referred. Anyhow, the Government maintain that these charges were absolutely essential for the national welfare and could not be avoided. To say the least, I think the figures that I have quoted do not bear out the charges of continued growth of extravagance, which, after all, is the way in which the noble Earl puts it, in the various Departments.

I want to say a word or two now about the distribution of Expenditure for the current financial year. First of all, there is £364,000,000 for Debt Service, which, as the noble Earl admits, as things stand is absolutely obligatory and cannot be avoided. We then have £128,000,000 for Pensions Services and I do not think that the noble Earl would object to that sum. That is already £492,000,000. Then we have £106,000,000 for Grant Services such as education, housing, health and police. All those Services are absolutely essential and widely beneficial, and I would like to say in that connection that the system governing them is engaging the very careful attention of the Government with a view to securing that no unjustifiable extension of grants shall take place in future. Then there is £70,000,000 for the self-supporting Services, the Road Fund and the Post Office, and I do not think that they would call for any comment. That accounts for £668,000,000 out of £832,000,000, leaving £164,000,000 out of which the Defence Services absorb £101,000,000—that is excluding Pensions.

Setting aside the expenditure on defence for a moment, for I shall have something to say on that in a minute or two, that leaves about £63,000,000 which the Executive Government can effectively control. Now I do not intend to enumerate in detail how this sum of £63,000,000 is exactly made up, but I would like to mention one particular item. All the Civil Estimates, including works, buildings and the machinery of Government, before the War cost £12,750,000. In 1921 they cost £31,000,000 and last year they cost £19,000,000. The increase, then, over pre-War is 50 per cent., although prices stand at between 70 per cent. and 75 per cent. above pre-War level. I can also add that this expenditure before the War was 6 per cent. of the total Budget and it is less than 2½ per cent. of the total Budget to-day. Therefore I suggest that the idea that there are huge economies to be effected in this branch of expenditure is obviously absurd.

Now I come to the Fighting Services, upon which the noble Earl had a great deal to say. I understood that the noble Earl was going to take the year 1900 for the purposes of comparison. As a matter of fact he mentioned several years. He mentioned 1898 and various other years in between. It is not very material what year we take. He was going to take the year 1898 or 1900 because, in his view, the outlook at that time was very similar to what it is now; that is, in so far as prospects of war are concerned, and consequently he maintained that any additional expenditure, after allowing for the rise in prices, was superfluous and unnecessary. I am not at all certain that I can entirely subscribe to the view that the position in the present year is analogous to what it was in 1900. I should have said that the position now is a great deal more uncertain and much less secure than it was then. However much the present Government, as undoubtedly they do, desire a perpetual world peace, and however hard they are prepared to strive for it, so long as there is no complete understanding between all the nations of the world and so long as the present spirit of unrest, which does obtain, continues, there can obviously be no absolute guarantee that this country will not be dragged or forced, however unwillingly, into a war. However, in spite of that, I am quite prepared to examine the figures which the noble Earl has quoted and to produce similar figures.

I shall deal with the Army first. The year 1900 was rather a difficult year, because a large sum of money had to be spent as the result of the South African War, but fortunately the Army Estimates of that year were divided so that one could differentiate between actual war expenditure and ordinary expenditure. In 1900 the cost, less special expenditure, was £27,250,000 and if you add 75 per cent. to that—that is the increase in prices—it comes to £47,750,000 or £3,000,000 more than in 1925, £5,000,000 more than in 1926 and £6,000,000 more than the Estimate for 1927. I would add that that is in spite of the enormous increase of the non-effective charges from £3,000,000 to £8,000,000. Furthermore, that is the case without taking into account the increased costliness and complexity of apparatus and matériel. I know the noble Earl said that that should not be taken into account, but I cannot agree with that view. Matériel has to be provided nowadays for which there was absolutely no counterpart in 1900. Again, the strength of the Army in 1900, excluding the strength necessary for the South African War, was 212,000, whereas in 1926 it was 159,000. Well, if the noble Earl argues that there are the same risks, or the same lack of risks, now as in 1900, all I can say is that the numbers of 1926 compare very favourably indeed with those of 1900. I really do not think that, so far as the Army is concerned, the noble Earl's criticisms of extravagance can hold water.

I pass from the Army to the Navy. In 1900 the Navy Estimates amounted to £30,000,000. The amount that was necessary for special war expenditure was very small, about £600,000. If you add to that 75 per cent. that gives you £52,500,000, compared with £58,000,000 this year. I admit that that leaves me with £5,500,000 to account for, but curiously enough almost that exact figure can be attributed to the necessity for providing in the 1927 Estimates for Services for which there was no counterpart in 1900. There is £3,500,000 for the Fleet Air Arm, including the aircraft carriers and everything in connection with it. There is nearly £1,250,000 for marriage allowances to naval ratings and there are various smaller items, but as a matter of fact between the expenditure in 1900 and that of 1927 there is a difference in actual cash of £26,500,000. I have already accounted for £5,500,000 provided for Services for which there was no actual counterpart in 1900. A further sum of £21,500,000 may be explained in this way. The increase in the rates of pay accounts for £12,500,000, the additional cost of victualling and clothing for £2,750,000, the increase in the non-effective Votes for £6,750,000. The figures which I have quoted more than account for the difference in the Estimates of 1900 and 1927, but they still leave out of account the general increase in the cost of all expenditure on stores, except food and clothing, and on all matériel, including contract shipbuilding, machinery and armaments, works and buildings and fuel, an increase due to the alteration in the value of money and to the greater complexity and size of ships, guns and equipments of all kinds. I think that is very striking indeed.

Now, the noble Earl said that the strength of our Fleet at the present moment as compared with what it was before the War in relation to other European nations, was greater now than it was then. I have the figures here comparing the strength of our Fleet with the other principal Powers. That, of course, includes the United States and I do not see why they should be left out of account. Those figures go to show that the very opposite is the truth. In capital ships our proportion has fallen from one-third to one-fourth, a relative decline of 25 per cent. In cruisers it has fallen from 35 to less than 30 per cent., and in destroyers and submarines the relative decline is about 50 per cent. Those are very striking figures indeed and when the noble Earl talks about other European countries he must really try to compare the responsibilities of our Empire with the responsibilities of those other countries. I do not think his comparison was at all a fair one. Then again, I refer to numbers. The strength of the Navy in 1900 was 115,000 and in 1926 it was 103,000. That goes to show that we have reduced the numbers in the Navy and that we have got down practically to rock-bottom as far as that is concerned.

Before I pass on I would like to draw your Lordships' attention to the fact that with the addition of the 75 per cent. increase in prices, the total of the Army and Navy Estimates of 1900 comes to almost exactly £100,000,000, which is just about the figure of the present day. The additional expenditure, even after providing for the increased costliness of all arms, is no more than the total of the Air Estimates. I do not think any of your Lordships would class the Air Estimates as an extravagance, and I do not think the noble Earl can argue that the Air Estimates ought to be included for the purposes of comparison. The Air Force cannot take the place of the Army or the Navy. It is supplementary to a very large extent. Therefore, I do not think it is fair to include it with the other two.

I have only a word or two more to say, but I would remind your Lordships before I sit down that the noble Earl in his Resolution emphasises the importance of a reduction in taxation. What is actually the record of the Government as far as this is concerned? As a result of the Budget of 1925–6 reliefs were granted in respect of Income Tax and Super-Tax which were estimated to cost £49,500,000 in a full year. This, I admit, was offset by the imposition of new Taxes in that year and the following year, but the net relief in a full year is still £22,000,000, which I suggest to your Lordships is not to be despised. I further venture to submit that the changes have had a much more important effect than these simple figures would appear to indicate. Almost the whole of the new taxation falls upon what may be described as luxury articles. It does not touch the necessaries of life. These changes have relieved direct taxation without imposing indirect taxes upon the food of the people.

The Government naturally do not suggest that there are no more economies to be made. Economies must be made and will be made. But I suggest that, far from the Government having been extravagant, the facts and figures which I have quoted and enumerated go to prove that, in spite of the utterly abnormal conditions and difficulties which they have had to encounter since they came into office, they have exercised a strict—a commendably strict—supervision over the national finances, a supervision which will naturally be continued and which, unless there are similar disasters such as the coal strike before us, will have the great results for which we are all very much hoping.

THE EARL OF MIDLETON

had given Notice to move as an Amendment to leave out all the words after the words "this House" and add "calls upon His Majesty's Government to adhere to their undertaking to take immediate steps to curtail national and local expenditure and also to reduce the staffs of the Public Departments." The noble Earl said: My Lords, I am sure nobody will quarrel with the spirit in which my noble friend below me has addressed himself to this very difficult question. I could have added another thing to the remarks which he made as to the difficulties with which the Government have had to contend. The greatest difficulty is not the circumstances of the time but the fact that the House of Commons has abandoned its old attitude towards finance. In the old days it was the habit of the taxpayer to force his Member of Parliament to press the Government towards economy. In these days the habit of the electors—whether they are direct taxpayers or not and whether they feel taxation or not we cannot tell—has changed. The whole pressure now is in the direction of expenditure.

I think that probably the greater portion of your Lordships here to-day have served in the House of Commons, many of you for many years. I doubt if any one who has done so will contradict me when I say that thirty or forty years ago the Government was continually under the review of members of the House of Commons for extravagance, and that in these days for one speech which is made in regard to extravagance one hundred speeches are made pressing for further expenditure. That is on one side. On the other side there are a certain number of members who agree with the noble Earl who introduced this Motion and who think we may make economies on armaments. I propose to say a few words as to what economy does seem to me to be practicable in regard to armaments. While it is quite true, as the noble Earl said, that we have not at this moment a great German Army nor even an equivalent German Fleet to deal with, I believe more of your Lordships will be impressed with the words used by the Earl of Plymouth when he said there was still "great unrest." I would add that whereas we had one Belgium which we were committed to defend before the War, we now have four or five Belgiums and a very great uncertainty as to whether those who are committed with ourselves will all be there to carry out their obligations when the time comes.

I wish we were back at the strength of 1900. My noble friend in talking of the Army Estimates talked as if there were only an Army. He forgot the Reserves. We are 214,000 men short of what we were in 1914. Although since I entered the House and the point was made by my noble friend opposite I have not been able to refer to the Estimates for 1900, I will say with confidence that we were at least 100,000 or 150,000 men stronger at that period. Therefore, there is no room in personnel for a reduction. I venture to say, however, that in administration there is infinite scope. From the way my noble friend who has just spoken left the matter, I think I am not unfair in saying that the Government see no prospect of any material reduction of Expenditure. We know that the local expenditure of this country has gone up by 120 per cent. in ten years and it was pointed out on the last occasion when we debated the state of trade in this House that the burdens on trade have gone up to 300 per cent. of what they were before the War. Lord Beauchamp said very truly that, while something can be done by a reduction of Services, we cannot reduce our enormous expenditure on the Debt unless we have a great improvement of trade. Those who know far more about trade than I do tell me that it is quite impossible for us in the present state of the world, with taxation at £15 per head as compared with £7 in France and with an increase of 200 per cent. on our burdens, to expect such a great increase and development of our trade as will really enable the Government to borrow money more cheaply and materially to reduce the Debt charge.

I would like your Lordships to bear with me for a few moments while I mention for the consideration of the Government a few of the branches of Expenditure that really might be cut down during the next twelve months. I propose to leave out of account altogether the enormous Social Services, amounting to something like £150,000,000, many of which have been necessitated by Statutes and which are all questions of policy. Any remarks or any Resolution regarding them in your Lordships' House would have no such direct effect in the next year or two as we desire. I would confine my attention to those offices which have not had a great increase of administrative work to do. On the contrary, some of them have had a great decrease of administrative work but have, as Lord Beauchamp showed, enormously increased the expense of carrying it out. If you must have economy, if you cannot meet your engagements, sound finance consists not merely in cutting down Services but in cutting down expense in carrying out those Services. The extraordinary change in the attitude of the House of Commons is that, whereas there might well be a difference of opinion as to the value or necessity of certain Services, there appears to be also a difference of opinion as to whether you should have these Services carried on by the least staff at a minimum cost. A large number of persons seem to think that the best thing is to have them carried out by the greatest amount of staff at the maximum cost.

My noble friend spoke of the Admiralty. I would ask your Lordships to listen to one figure. There are now 102,000 seamen and marines, while in 1914 there were 151,000—half as many again as we have now. What are the numbers of the Accountant-General's Department? I refer to numbers lather than cost, because I am not going to be dragged into the question of the 70 per cent. The numbers of the Accountant-General's Department are 80 per cent. higher, and the cost is 300 per cent. higher, though there are 50,000 less men to pay and far fewer ships in commission. I say that this is a scandal. It is an indication of what can be done without touching on armaments at all. I am sorry that my noble friend the Under-Secretary for War is not in the House, but I will give your Lordships some information which comes to me from very careful students of the Estimates, who know them far better than I do. With regard to the War Office, it happens that I served in that Department in three capacities for twelve years, and I am going to tell your Lordships in a few sentences of the sort of terrible overcharge that is to be found in the records of the War Department. I take them straight from their own record for 1924–5.

I say nothing about staff, though, as I have pointed out to your Lordships before, it has gone up from 1,300 to 2,000 and the expenditure has risen from £455,000 to £915,000, authough the reduction of men since 1914 is 238,000. There again the Accountant-General's Department is on a much larger scale, but I will take other instances. Let me refer first to warlike stores. The charge for the custody of warlike stores—not for examination or for movement, but for custody alone—is £2,250,000. The value of the stores administered, as compared with the charge for their custody and depreciation, is to be found in the official audit, and it will be seen that custody accounts for 10s. in the £ of the value of stores issued. My noble friend Lord Inchcape, who has done more than any noble Lord in this House, except possibly Lord Faringdon, to bring down the cost of some of these offices, would, I am sure, agree with me that any commercial firm that did business in that way would soon find itself in the Bankruptcy Court.

Let me take transport as another instance. Two years ago the War Office decided to have a real balance sheet drawn up regarding the cost of transport, and they found that, allowing freely for every possible charge that should be made, there was a loss of £200,000 a year compared with the cost if the work had been done by contract. Lorries of the largest description were used for the most trivial purposes over great distances. A stock case, of which I dare say your Lordships have heard—it was quoted, I believe, before the Parliamentary Committee—was that of a 75 h.p. hospital motor being sent about fifteen miles to get a dozen oranges. I mentioned this to a man who had served in the Transport Corps, and he said that it was not in the least unusual. He told me that when he was in the Transport Corps in Scotland he was sent sixteen miles there and back with a 4½-ton lorry to fetch the cap and coat of an airman who had left them behind. Here is another possiblity of economy from judicious management which could be made without affecting anybody.

As a third instance I will take the cost of hospital beds, which came before the Committee of the House of Commons, though I am told that nothing has been done. One of the best administrators the War Office has ever had—he was mentioned in our last debate on this subject by the noble Viscount opposite—is Sir Charles Harris. He went before the Committee and said that every hospital bed was costing the War Office 16s. a day, among the items of which 2s. 6d. was the cost of the patient and 7s. 6d. of the staff. Sir Charles Harris showed that it was worth while for any administrator to save £400,000 or £500,000 a year in that way alone. We are to have a debate on the Auxiliary Forces and Territorials tomorrow—we were to have had it last night—and, though I am not going to enter into that question now, I say that this sum alone, a mere administrative saving, would make it unnecessary to dock the Territorials at the very moment when their services are most needed, for there is nobody who stands between them and the Line.

I remember that when I was at the War Office a very good official brought before me another absurdity. We had 250,000 men in South Africa and 100,000 men training at home, and every week every man was paid his 1s. or 1s. 6d. a day by his Captain, and the Captain signed for the money. The Paymaster in South Africa, hundreds of miles off, revised the sheets and each week every one of the sheets for 350,000 men came to the War Office to be audited again. Within forty-eight hours of my taking office I was able to persuade the Treasury to have a test audit, and to save 350,000 sheets being re-examined. I ask your Lordships to remember that in other offices there are similar opportunities of saving. Let us take the Mint. Its staff has gone up by five officials, but the cost has increased from £46,000 to £100,000, or 112 per cent. The Registrar-General, although the population is no larger, has increased his staff from 202 officials to 308, and the cost has increased from £31,000 to £104,000. The Board of Trade has gone up enormously. The legal branch of the Board of Trade has gone up from £8,348 to £17,494, and the officials have increased from 2 to 27. The office of the Official Receiver in Bankruptcy has increased in cost from £6,500 to £25,000, and the officials have increased from 23 to 90.

THE EARL OF PLYMOUTH

What years are these?

THE EARL OF MIDLETON

1914 and 1926. The Mercantile Marine Branch of the Board of Trade has increased its officials from 808 to 952, and the cost from £156,000 to £354,000. The Clearing Office for Enemy Debts last year, nine years after the War, was still a body of 901 individuals, costing £245,000, and I am informed on good authority that it is almost impossible to find anything for those men to do. Then take the Land Valuation Office. Having completed its valuation of properties in this country, they were found, when I was sitting on a Commission some years ago, to be valuing churchyards in order to find something to do. I do not wish to say anything against the Stationery Office, but there cannot be any reason why it has more than trebled during this period. What I say is that we want an inquiry, not into one Department but into the administration of all. I was once very much struck by an observation made to me. I am always afraid of talking about, military staffs before the noble Viscount, because to him it is like the mystic word "Mesopotamia." He thinks that half an army with a good staff is worth more than a whole army with an indifferent staff. An Army officer came to me once and asked for three men. He gave good reasons for his demand, and I granted the three men, and he said: "Remember that if you give me three more men you will have to give the Finance Department three more men to answer their minutes." That is always the way. I can assure your Lordships that it is of no use reducing one office; you must have regard to all.

I have only one word more to say. I do appeal to this House to remember that we have rather a special record in this matter of Expenditure. In 1916, at the instance of your Lordships, and after a Motion accepted by the Government, a full investigation of the offices was made, with Mr. McKenna, Chancellor of the Exchequer, in the Chair. I also served on an Inquiry asked for in this House and appointed by Mr. Lloyd George in 1918. I regret to say that that Inquiry was held by three individuals, and after much evidence which came before us, which would have greatly enlightened the debate in this House if I had been allowed to allude to it, I was informed that the findings were private, for the consideration of the Cabinet, and I could not use them. There is this great difficulty in the House of Commons, that it is risky for a member of the House of Commons to come forward and say that this, that or the other great Department is too numerous, or too highly paid. I can recall a case in which one speech made at the expense of one great office cost a man 400 votes and his seat in Parliament. Your Lordships' House is not in that difficulty, and I trust that now, and here, the Government will give consideration to what fell from the noble Earl opposite, and to his suggestion that for two years from now the entries to the Civil Service must stop. I see the noble Viscount is laughing—

VISCOUNT PEEL

I laughed because Lord Banbury was apparently the only noble Lord who approved your statement.

THE EARL OF MIDLETON

If the Government stopped the whole of the entries even for one year they would have done a great deal. I would get another Lord Inchcape, if you cannot persuade that noble Lord again to take the burden upon his shoulders, to go into details not of the services to be performed, because that is a matter for Parliament, but of the economies which should be carried out. I ask for that because I honestly believe we cannot possibly continue to laugh at this question or to indulge in platitudes with regard to it. We cannot keep up this Expenditure of £15 per head of taxation for every man in this country without embarrassing trade and putting us back in a most difficult race. I hope therefore that His Majesty's Government will not consider this simply a Motion to be put aside. I move the Amendment which I have placed on the Paper only because many of my noble friends are unable to follow the noble Earl opposite in regard to armaments, though we are as anxious as he is to show that our utmost desire is that the Government should show prompt and speedy vindication of the pledges which they have given, both with regard to local and Imperial taxation.

Amendment moved— Leave out all the words after the words ("this House") and add ("calls upon His Majesty's Government to adhere to their undertaking to take immediate steps to curtail national and local expenditure and also to reduce the staffs of the Public Departments")—(The Earl of Midleton.)

LORD ARNOLD

My Lord, I think the House is indebted to the noble Earl, Lord Beauchamp, for having put this Motion on the Paper, and I trust that the debate will help, as I think it is doing, to a thorough discussion of the various issues. So far as the national Expenditure and the Government's record in that regard are concerned, the noble Earl had an easy task. The fact is that there is an almost inconceivable disparity in the Government's record which cannot be denied. The noble Earl who spoke for them was naturally careful to avoid saying anything about it, but there is an almost inconceivable disparity between the expectations and I scarcely think I am going too far when I say the promises that were made at the last General Election, and what has happened since. As regards that I am bound to say, with great respect to the noble Earl, Lord Plymouth, that I found his statements singularly unconvincing and unsatisfactory. He did not make the slightest attempt to prove that, though this Government promised economy, it has achieved economy. It has not achieved economy, and it has no claim whatever to be regarded as a Government of economy.

He was rather sensitive about the word "extravagant." It depends on the way in which you use that word. Surely, he cannot deny that this Government have spent money very freely. Almost immediately after they came into office they began increasing the national Expenditure, and they have gone on doing the same thing ever since. That is a simple statement of fact. In these circumstances it is not surprising that the noble Earl, Lord Midleton, put down on the Paper this Amendment, which is expressed in strong terms. It expresses his disappointment, and indeed I scarcely think it is going too far to say his indignation, at what has occurred. For the moment, though, I ask permission to leave the question of Expenditure and to devote myself to that part of the noble Earl's Motion which also urges a reduction in taxation with a view to improving trade and diminishing unemployment. The noble Earl said very little about this. As a matter of fact, he never mentioned that part of his Motion at all directly. Why not? It is a very important part of the Motion. The noble Earl did not make the slightest attempt to prove that the higher taxation of these post-War days has caused bad trade and unemployment. Rather he took it for granted, just as the Government take it for granted when they wish to justify their policy of reducing direct taxation. The argument appears to be something like this: Trade is bad; unemployment is rife; taxation is high; therefore, high taxation must be the cause of those evils. There is a great deal more to be said about it than that.

First, let me point out that the supporters of this theory which finds its place in the Motion of the noble Earl devote practically all their attention to the alleged injurious effects of high direct taxation. They hardly ever say anything, and the Government hardly ever say anything, about the effects of indirect taxation. Why not? If this were the occasion it would be easy to show that in so far as there is anything in this theory about the injurious effects of high taxation upon industry—as a matter of fact there is very little in it—looking at our present taxation, some of our present indirect taxes are more injurious to trade than direct taxation.

The controversy ever since this Government came into office and began reducing direct taxation has ranged almost entirely round the effects, or the alleged effects, of direct taxation on trade and unemployment. From this Bench we have put forward the opposing argument—I am not going into it to-day, because I want to get back to Expenditure—we have taken up the position that the alleged evil effects of the present rates of taxation are largely exaggerated. Just let me mention one point. In 1922 the Income Tax was reduced by 1s. in the £ in order to help trade and unemployment. In 1923 it was reduced by a further 6d. in the £. That was a reduction of 1s. 6d. in the £, a reduction of 25 per cent. The standard rate of Income Tax was brought down from 6s. to 4s. 6d. in the £, and it has since been brought down to 4s. Has trade improved? Did trade get any better? Not a bit; it got steadily worse. As a matter of economics, too, this theory about direct taxation is opposed to the accepted economic teaching in these matters. I have myself from this box several times challenged the Government to name a single economist of note—"of note," I wish to make that clear—who agrees with their views in this matter. They have never done so. They have never named any such economist. They cannot name any such economist, because there is no such economist.

Similarly, the various arguments which we have put forward combating this theory have never been replied to. Why have they never been replied to? Because there is no reply. And what has happened? In the last few weeks the Colwyn Report has been published after that Committee had been sitting for two years. Does that Report support the Government view in these matters? On the contrary, the Majority Report—I will not say the Minority Report, because that might perhaps be held to be in some sense a Party Report: it is largely signed by Labour Members of the Committee, I think all Labour Members—but the Majority Report, that is, the Report of great non-Party experts, did not support the Government in what they have been saying. That Report goes a long way to justify everything that has been said from this Bench in criticism of the Government's financial policy, and a long way towards condemning everything that has been said from that Bench in justification of that policy. It is no wonder that the Chancellor of the Exchequer says he does not accept that Report in its entirety. Of course he does not. If he did it would be to convict himself of unsound finance, and I suppose we cannot expect him to admit that he has been guilty of unsound finance, though, as a matter of fact, he has.

I want next to consider these matters from a different point of view. I want to consider the question of taxation and the whole problem of Expenditure from a point of view which is very germane to the Motion of the noble Earl. It has been arranged that the adjournment of this debate to-day shall be moved in the name of the noble Earl, Lord Oxford and Asquith and I need scarcely say that I always read with the greatest respect anything which Lord Oxford says on financial matters. I should like, if I may, to refer to a certain argument which the noble Earl advanced the last time he spoke in your Lordships' House on these subjects, because in my view the conclusions to which he came cannot be allowed to pass unchallenged. Lord Oxford took the current national Expenditure and added to that the current expenditure on local taxation, and then he put the combined total of the two against the estimated total of the national income of the country. Having done that up-to-date, he then made similar comparisons for the pre-War year, and he arrived at somewhat alarming results as between the two sets of figures.

Let me look at that, and I will bring the figures up-to-date. Here I am going to say something which might appear to be supporting the Government, and I need scarcely say that that is not in accordance with my desires. But I am trying to get at the facts and I take it that any attempt of that sort in your Lordships' House will not be misrepresented. Now for the current year the national Expenditure is £820,000,000 and the expenditure, on rates is probably not less than £170,000,000, it may even be slightly more, partly due—here I am not supporting the Government—to the fact that the Government, in order to relieve themselves from the embarrassments in which they are placed in their national finance, have again and again done things which have had the effect of increasing the rates. However, £820,000,000 of national Expenditure and £170,000,000 or £180,000,000 perhaps of local rates make a total in round figures of £1,000,000,000.

What about the total national income? We have had in the last few weeks a most remarkable book written by Sir Josiah Stamp and Professor Bowley dealing, as your Lordships are probably aware, with that matter and they arrive at the gratifying and somewhat astonishing conclusion that the national income in all may be taken to be as high as £4,200,000,000. They are, I need scarcely say, authorities who are entitled to the greatest respect. I should have thought that that was a figure a little on the high side, and for the purposes of my argument take it at £4,000,000,000. The combined national and local expenditure, amounting to £1,000,000,000 on the computation of the noble Earl, Lord Oxford, would be 25 per cent., or one quarter, of the total national income and that was the figure at which the noble Earl arrived.

Let me now take the pre-War year. In 1914 the Estimates were: national Expenditure, £205,000,000; rates, about £70,000,000. Adding the two together we arrive at £275,000,000. The noble Earl put that against the total national income, as he said it was then, of £2,500,000,000 and said: "That amounts to about one-ninth." As a matter of fact, the noble Earl—I always speak with great respect of anything he advances in fiscal matters—was, I think, slightly in error. The national income then was not as high as £2,500,000,000. I have never heard it put higher by any authority of note than £2,300,000,000 and many put it lower. I think £2,250,000,000 is probably quite high enough. Therefore the proportion should have been not one-ninth as the noble Earl said but about one eighth.

Lord Oxford's argument was that whereas we are now taking one-quarter of the total national income for these combined purposes, then we were taking one-ninth of the total national income. The argument put in that way is certainly one to arrest attention, to put it no stronger. But does that really represent the position? Is that really in accordance with facts? I submit that it is not and I think I can prove that it is not. To do that it is necessary to analyse a little—I will be brief on this point—the national Expenditure. The current Expenditure of £820,000,000 includes, as the noble Earl, Lord Plymouth, told your Lordships and as we all, unfortunately, know, £364,000,000 for interest and Sinking Fund payments on the National Debt and of that about £330,000,000 goes back again to the taxpayers of this country. It is really a redistribution of the national income and cannot be regarded as Expenditure in the ordinary sense of the term. I do not think that can be disputed.

Again, there is the cost of the Post Office, which also cannot be regarded as expenditure in the ordinary sense of that term, because the Post Office is a self-supporting Service and, indeed, there is a great deal to be said for not putting the gross figures of the Post Office Service through the national accounts at all, for it only tends to complicate matters. It is not expenditure in the ordinary sense, because it is met by receipts, the Department being self-supporting. The Treasury also in their White Paper put the Road Fund in the same category. They say it is a self-supporting Service. How do these two items affect the comparison? They affect it very materially. The Post Office this year costs no less than £52,000,000; the Road Fund costs £19,000,000; so there you get a total of £71,000,000. Let me make the adjustments. You have the combined expenditure on national and local account of £1,000,000,000. From that you have to deduct £330,000,000 for interest and Sinking Fund payments on the National Debt, which is redistributed to the taxpayers of this country, and £71,000,000 the cost of the Post Office and the Road Fund. Those two items of £330,000,000 and £71,000,000 come to £401,000,000, say £400,000,000 in round figures. If you deduct that £400,000,000 from the £1,000,000,000 you are left with a sum of £600,000,000 which, I submit, is really much nearer, if you go into the matter properly, the true national and local Expenditure of this country and £600,000,000 put against the total national income of £4,200,000,000—if you take it as high as that in accordance with the estimates of Sir Josiah Stamp and Professor Bowley—amounts to one-seventh of the national income.

Let me now make the comparisons in the pre-War year. The amount in the Budget of that year, your Lordships will remember, came to £205,000,000 in all. The amount for interest and Sinking Fund payments on National Debt was only £23,000,000—£23,000,000 against the present £364,000,000. The cost of the Post Office then was £25,000,000 against £52,000,000 now. There was no Road Fund at that time. Add together the £23,000,000 for interest and Sinking Fund payments on National Debt and £25,000,000 the cost of the Post Office and You reach a total of £48,000,000. Add the £205,000,000 for national purposes in the pre-War year and the £70,000,000 as expenditure on rates and you get a total of £275,000,000. Deduct this £48,000,000 from the £275,000,00 and you arrive at a total of £227,000,000. That really is the comparable figure of Expenditure and it amounts to about one-tenth of the then national income. Therefore we arrive at this result. If everything is analysed we are at present spending in true national and local Expenditure about one-seventh of the total national income as against about one-tenth in the pre-War year. I think your Lordships will agree that that is a very different result from the one at which the noble Earl, Lord Oxford, arrived, It is different from saying we are taking now a quarter and we were then taking a ninth, the true proportions being, I submit, one-seventh and one-tenth. Moreover, in these calculations I am leaving out of account altogether how far a good deal of the, increased Expenditure for various social purposes can properly be regarded as Expenditure in the ordinary sense of the word. Apart from that I think the calculations are in some measure reassuring.

What follows from all this? This follows, and it is very vital in considering all parts of the Motion of the noble Earl. The point is that it is not sufficient to say that Expenditure has increased. We must go further; we must be quite clear as to the way in which the Expenditure has increased, and what the increase is made up of. Similarly, it is not, sufficient to say, as has been said so often in your Lordships' House, that direct taxation has greatly increased, the more so in proportion than indirect taxation. These points want carrying further. We want to look at both sides of the national account together. If we do that it becomes clear that more than one-half of the increased Expenditure since pre-War days is, as I have indicated, due to redistribution of national income. Moreover, of the interest and Sinking Fund on the National Debt, which is internally redistributed in the country, about £300,000,000 goes to the direct taxpayers. It is probably more, but put it at £300,000,000

What does that mean? It means, in other words, that the wealthier classes are, as a whole, getting back again nearly all they pay in Income Tax and Super-Tax. It is true also that the poorer classes are getting more from the national Expenditure than in pre-War days. That is because of War and other Pensions, the increased cost of education, and so forth. Nevertheless, the increased share of the national Expenditure which is going to the poorer classes is much less than the increased share of the national Expenditure which is going to the richer classes. In point of fact, when everything is taken into account and all proper allowances and adjustments are made, it will be found that, although the direct taxpayers are paying a, larger proportion of the national Revenue than before the War, they are getting back so much from the Expenditure side of the account that, looking at the Budget as a whole, they are as a class, broadly speaking, in much the same position in relation to the poor classes as they were in the pre-War year. That fact is a very important one and I do not think it is sufficiently appreciated. It bears very directly, in my view, upon this discussion.

Before I sit down I wish to make some general observations about the problem of national Expenditure in general and the Government's record in relation to it. Let me give just one figure to prove how very vulnerable the Government is in this matter. The noble Earl referred naturally enough—and I expect it will come up again and again in the course of this debate—to the projected saving of £10,000,000 which the Chancellor of the Exchequer foreshadowed and virtually promised in 1925. There was to be a saving each year of £10,000,000 in the cost of the Supply Estimates.

VISCOUNT PEEL

He did not say there was to be.

LORD ARNOLD

He came very near it. I said "virtually." The Supply Estimates at that time were £407,000,000. Therefore in 1926 they ought to have come down to £397,000,000 and now they ought to be down to £387,000,000. That is what ought to have happened. Has it happened? Nothing of the sort. The figure this year in the new Estimates now out is £420,000,000. Therefore the Chancellor of the Exchequer on his own showing, on his own confession of what he ought to have done, is £33,000,000 to the bad. Now £33,000,000 is a lot of money and I am sure the noble Lord, Lord Banbury, would agree with me as to that.

LORD BANBURY OF SOUTHAM

I think so. I think it is a lot of money.

LORD ARNOLD

I thought he would agree with me about that. It is not often we are in agreement. It means about 6d. off the Income Tax, or on the other hand the Food Duties could have been abolished and also the penny post could have been restored. But of course that cannot be done, because the Estimates are not down, but are up to £420,000,000. The charge I bring against the Government, is that in their first year of office they never properly visualised this problem of national Expenditure, more particularly as they are not, and never have been, willing to make any substantial savings on armaments. Last year, Mr. Churchill went to Leeds and made a speech there in which he foreshadowed great things. There were to be great economies and every Department was to be affected. That is what he said; but is it so? Talk of that kind may be all very well at meetings, but it is really rhetoric and has no real relation to facts. The Chancellor of the Exchequer found out the difference when he went into things more closely. A few weeks afterwards he went to another place and made a speech of a very different character. He descended from rhetoric and emphasised the very points that the noble Earl has emphasised here to-day. He emphasised the fact that over three-quarters of the national Expenditure is of such a character that it is very difficult to make any substantial reduction in it at all and he also emphasised, when he looked into matters more closely, that one cannot as a matter of fact retrench in every sphere and every Department.

He said that this huge block of Expenditure, which amounts to over £650,000,000 and which consists of the charges for the National Debt, Pensions and so forth, offers very little opportunity for economy. Incidentally, that confirms what has been said from this Bench during the last year or two about the Debt. The noble Earl, Lord Beauchamp, referred to the Debt and to the possibility of savings by conversion schemes. We do not hear so much about them as we used to. The argument is put on these lines: "The National Debt amounts to £7,500,000,000. If we could get the interest down from 5 per cent. to only 4 per cent. we should save £75,000,000 a year." It would be impossible to do anything of the sort. The glib optimists who talk in this way have not looked into the figures. A large proportion of the Debt is so long-dated that it does not come within the ambit of conversion schemes. The Colwyn Committee by its Report blew these optimistic conversion schemes to smithereens and showed that the saving by conversion schemes, if one could get down to 4 per cent., would be only £26,000,000 a year. That of course is substantial, but it is not a lot of money like £75,000,000. Let us have it if we can, but we have not got it yet and there is very little probability of getting it. Moreover, £26,000,000 in relation to a Debt charge of over £350,000,000 leaves the problem largely unsolved. The Chancellor of the Exchequer is driven back by the pressure of facts to the figure given to us by the noble Earl—the figure of £160,000,000. That is the figure of national Expenditure which offers the greatest field for retrenchment. That consists mainly of two items—£160,000,000 for the general cost of administration or of the general Civil Service, including grants to health and other schemes, and the balance for cost of armaments, to which I will turn in a moment.

I now come to Lord Midleton. Let us get the facts right. The axe has already been applied to the Civil Service two or three times. If you are to apply the axe again and rigorously there is no real economy in that. In a previous debate I suggested that on this item the utmost saving hoped for was £10,000,000. I was told afterwards by one of the greatest living authorities in the country that I put it too high and that on balance a saving of £5,000,000 was problematical. This should be faced. My noble friend Lord Midleton made great play with regard to points which are rather small in relation to the total perspective of this matter. They were rather isolated cases which he brought up. Even if you did all he suggested—and you could not possibly do it without as a result injuring the efficiency of the Civil Service—your problem would to a large extent remain unsolved.

I hope very much that in the subsequent debate I shall be spared the usual gibe about Labour extravagance. That is not the point. I am trying to see things as they are, and in relation to total Expenditure I say that the problem would be largely unsolved even if we did all that the Earl of Midleton suggested. The most hopeful item in my view for retrenchment is the £100,000,000 which we are spending on the Army, the Navy and the Air Force. That is the cost of those three Services apart from Pensions, which are in a different category. Earl Beauchamp twitted the Labour Government—I should like to have his attention on this point if I may, because it is important—about this matter of expenditure on armaments. He said we had increased the expenditure on armaments. That is really not the position. What are the facts? The Labour Government did not come into office until January. Anybody who knows anything about the Treasury and anything about Budgets knows that that is already too late to do anything effective.

The Estimates that year were not really our Estimates. They were Estimates prepared by the previous Conservative Government. Even so, the statement of the noble Earl is not really correct. What did Mr. Philip Snowden do? When the Estimates were presented he made an over-head cut in the cost of the Navy of £3,000,000 and insisted on it. That was a big achievement so late in the day. The noble Earl twitted us, as he has done before and doubtless will do again, with the matter of the five cruisers. I have replied to that before and I say now, as I have said before, that almost any Government would have done the same thing. The five cruisers were laid down largely in order to help unemployment.

The noble Earl, Lord Plymouth, said that in 1924–5 the Expenditure of the country was £795,000,000 and that that was the Labour Budget. I would point out that that was not really so. We had to take things very much as they came to us. We were only in office eight months and our place was then taken by noble Lords opposite. What happened? They then began bringing in Supplementary Estimates. I think it will be found that the Supplementary Estimates that year came very much more from their Government than from ours. Therefore this total of £795,000,000 is not one which ought to be attributed to the Labour Government. It should have more careful scrutiny.

On the general question of armaments the noble Earl put the point that there is no German Navy now, that the League of Nations has come into existence, that the War has been won. To all that I assent. The Earl of Plymouth gave certain figures in trying to prove that the Government is doing well as compared with pre-War Expenditure apart from the rise of prices. Let me say something about that. For statistical purposes he said the index figure was 75 per cent. additional. That is really a very high figure to take. Even if we take the cost of living figure, which I do not think is strictly applicable to this matter, it is only 72 per cent., but if we take wholesale prices, as Earl Beauchamp pointed out, it is only 50 per cent. or 60 per cent. Therefore, the figures put forward by the noble Earl should be subject to scrutiny at any rate.

He did not deal with the challenge of Lord Beauchamp, which was that whereas we are now spending nearly 3 per cent. of the total national income on armaments we were only spending in the-year before the War just about 3½ per cent. Having regard to the changed position that is a very extraordinary state of things. Take the case of the Navy. We are to spend this year £58,000,000 on the Navy—and that is not really the total cost because there will be Supplementary Estimates, no doubt—as against £48,000,000 in 1913–14. I think £51,000,000 was the actual expenditure in the 1914 year. But what about battleships and the Washington Agreement in connection with which the noble Earl opposite had such success? We have now—I think these figures are right—eighteen battleships as against thirty in the pre-War year, and taking all big ships together, battleships and cruisers, we have twenty-two now against forty in the pre-War year. Look at the difference there, look at the economy there ought to be there, having regard to the cost of these vessels. If you want a concrete proposal I will give you one. In my opinion—and this is the view of a great many people acquainted with these matters—although it would not be easy it would not be impossible, if this country would take the lead, to secure before long the total abolition of battle ships by international agreement. A battleship costs £7,000,000 now against £2,000,000 in the pre-War year. Think what that means from the point of view of economy.

I want to say in my final words something about the Liberal Party and economy. The noble Earl comes here and makes a strong speech. Yes, but what is the position? What are his colleagues doing in another place? Do they support reductions? Why, within the last three weeks an Amendment was moved in another place, an official Amendment. Let me read it. It is very moderate. It is an Amendment urging that in the interests of economy His Majesty's Government should in the Preparatory Commission for the forthcoming Disarmament Conference initiate proposals to secure by international agreement a reduction in the land forces. Surely that is very moderate. But what happened? Only seven Liberals voted for it, four voted against it, and the great majority did not vote at all. I could bring forward instance after instance. Only on Monday it was moved in another place that the personnel of the Navy should be reduced by 100 men. Surely that is very moderate indeed. What did the Liberals do? Half-a-dozen voted for it, one or two voted against and the majority did not vote at all. Therefore I say that the claim of the noble Earl to come forward and take up this position is of doubtful validity, even if I do not put it higher. I question whether in view of what his colleagues are doing in another place he is entitled to put down a Motion in these terms.

The Earl of Oxford suggested in a previous debate rationing of the national Expenditure. That was commented upon by the noble Marquess opposite as being worthy of consideration. But is it worthy of consideration except as regards the Fighting Services? Does he really mean that there should be rationing all round? I think even in the case of the Fighting Services it probably could not be done pro rata, and in default of qualification rationing usually means pro rata. Does he mean that the Ministry of Education, the Ministry of Health and the Ministry of Labour should be rationed? Is that the suggestion? Earl Beauchamp not very long ago suggested that there should be economies in these ways. His Motion speaks of the spending Departments. What are the chief spending Departments, apart from armaments? They are the Ministry of Labour and the Ministry of Health. Are we to understand that the noble Earl objects to the expenditure on these Departments? He suggested not very long ago in your Lordships' House that the Ministry of Labour should be done away with and should be put back under the Board of Trade, that the Mines Department should be done away with and put back under the Home Office. Is that really the proposal of the Liberal Party?

What is it in the expenditure of these Departments that he objects to? Take the Ministry of Labour. Does he object to the work of conciliation that it does? Does he object to the trade boards? Does he object to the labour exchanges? What is it he objects to? We are entitled to something specific when we are told that these Departments ought to be done away with. Take the Mines Department. What does he object to in that? He says it is not as efficient as it might be. I agree with that, but it will not be made more efficient by reducing its personnel. We have had explosions lately in the mines. Does the noble Earl want to do away with inspectors or decrease their numbers?

THE EARL OF OXFORD AND ASQUITH

I said increase them.

LORD ARNOLD

The Earl of Oxford did, but Earl Beauchamp suggested that the Mines Department was doing very little good and should be put back under the Board of Trade which already is not too efficient a Department.

THE EARL OF OXFORD AND ASQUITH

Under the Home Office.

LORD ARNOLD

I should have said the Home Office. I say that points of this kind need very careful scrutiny. Even if you did these things, there would be no real economy. I think I have said enough to show that the Government's record is open to very grave criticism, and also that the terms of the noble Earl's Motion should be subjected to very close scrutiny.

LORD BANBURY OF SOUTHAM

My Lords, the noble Lord who has just sat down has said that a few days ago in the House of Commons a Motion to reduce the Navy by 100 men, which he said was a very small number, was not supported by the Liberal Party. The noble Lord knows perfectly well that a Motion to reduce the Navy by 100 men is not really a Motion to reduce the Navy by 100 men, but a Motion to reduce it largely, and that the 100 men are put in as a nominal figure. Accordingly, if the Liberal Party had voted for this Motion, they would have voted for a very considerable reduction in expenditure on the Navy. I happen to have read the speech that the noble Lord made in May, 1925, in answer to a speech that I made when I raised this subject. The noble Lord said then, as he says now, that the only proper method of economy was to reduce the naval and military expenditure, and he has again told us that he would like to do away with the whole of the battleships because there is going to be an international agreement. If we put our faith upon an international agreement we shall be putting our faith upon a very weak reed which, if it breaks, will pierce our hands. It is exactly the same as the Treaty that was made with Germany about entering Belgium. When she found that it was to her interest to tear it up, she tore it up, as any international agreement that is made will be torn up when it is to the interest, of any of the parties to tear it up.

The noble Lord does not seem to think that there are too many officials. On that point I should like to say that in years gone by I have sometimes had occasion to look into the Expenditure of some of the smaller foreign nations that have defaulted on their Debts, and I always found that the chief difficulty in obtaining economy was the enormous number of officials in existence. Economy meant the reduction of the number of officials and, naturally, a reduction in pay—I do not mean a reduction in the scale of pay but the total abolition of payments to a number of individuals. So long as we go on increasing the staffs of the various offices, we shall find that Expenditure will increase, because it is perfectly clear that, in order to keep themselves occupied, the officials will find Bills to introduce that will cost money. The noble Earl, Lord Plymouth, referred to the Expenditure of the last two or three years. I have here the figures that were given in The Times in April, 1926, and I think my figures correspond with those which the noble Earl gave. According to The Times, the Expenditure in 1925–6 was £826,000,000 odd, an increase of £30,322,000 over the previous year. In that year there was a coal subsidy of £19,000,000, but the Expenditure in 1924–5 was in excess by £7,000,000 over that of 1923–4, so that in those two years there was an increase of £37,000,000 or, if you deduct the coal subsidy, an increase of £18,000,000.

The noble Earl asked if any noble Lord in this House would say that the coal subsidy was a mistake. I say so. It was a very great mistake. The only thing that we did was to waste £23,000,000 and to encourage a strike. If we had taken a proper line at the time, had refused to have anything to do with the strike and had said that we should see that law and order were maintained, we should have saved £23,000,000 and should probably have had no strike. In 1925, when I raised this question of the Expenditure of the Government, the Chancellor of the Exchequer told us that he was going to reduce Expenditure by £10,000,000 a year. It was not very clear if he said that he was going to reduce it by £10,000,000 in one year or whether there would be a regular reduction of £10,000,000.

VISCOUNT PEEL

He did not say that he would. He expressed what I might call a pious hope that it might be possible.

LORD BANBURY OF SOUTHAM

I am getting on in years and I am afraid that I have never found pious hopes any use at all. I hope that we are not going to have any more pious hopes, but that we are going to have a little action. The Chancellor of the Exchequer said that he piously hoped to reduce Expenditure by £10,000,000 a year. He has done nothing of the sort. As a matter of fact, Expenditure has increased ever since. I have here the Estimates for the staff of the Ministry of Health. The total Estimates for that Ministry for this year are £75,277,000. I am sorry that the noble Lord, Lord Arnold, has left the House, because he alluded to this. If you take the Ministry of Labour you find that their wages and salaries alone come to £3,680,351, and, if you, take the salaries and wages of the Ministry of Health, you will find that they amount to rather more than £1,500,000, so that you actually have more than £5,000,000 spent in salaries and wages in the Ministry of Labour and the Ministry of Health. If you go back to 1913–14 and take the Local Government Board, which is the original of the Ministry, of Health, you will find that the total expenditure was £294,000, with salaries and wages accounting for £138,000. In those days neither Old Age Pensions nor Health Insurance were included, but if you add those two Services, which came to £21,000,000, you will find that the expenditure in those years was something like £22,000,000, as against £75,000,000 at present.

I observe with sorrow that this year Old Age Pensions alone cost £32,780,000. I am sorry that the noble Earl, Lord Oxford and Asquith, has left the House, but perhaps the noble Earl, Lord Beauchamp, will remind him of what I am going to say. I had the honour of listening to the noble Earl, Lord Oxford and Asquith, in 1906, when he assured us that the cost of Old Age Pensions would be £6,000,000. It has somewhat increased, as all these things do. When you enter upon a bad course, swift is the road to perdition. Take the Ministry of Labour, which costs £11,653,000, of which £3,800,000 was for salaries and wages. What on earth does it do? It provides trade union men who get into the House of Commons with a soft job and a good salary, and that is one of the results of having all these extravagant Departments. There is always somebody who wants to get in and have a good job. There is always a certain number of people who find that it is wise to make friends with the enemy, and consequently these people are put into jobs, and then something has got to be found for them to do.

The noble Earl, Lord Midleton, pointed out that the House of Commons at the present moment is not an economical House, and he gave an instance of a certain member, who, I suppose—I did not quite catch what he said—had advocated economy, with the result that he lost his seat. There is no doubt that at the present moment economy is the most unpopular thing that any man in the House of Commons, or in any other place, can advocate. What are we going to do? How is it possible that we can continue to exist as a country if we are going continually to spend over £800,000,000 a year? It may be perfectly right to spend so much on Old Age Pensions and other things, but I should like to point out that when I first entered the House of Commons our total national Expenditure was under £100,000,000. I do not remember the exact amount, but I think it was somewhere between £92,000,000 and £93,000,000, and I remember Mr. Gladstone holding up his hands in horror at the idea that there should be, at any time, an expenditure of £100,000,000.

Now, on one item alone, we are spending £75,000,000, and the more officials we have the more difficult it will be for the members of the House of Commons, in whom, after all, the power to reduce expenditure lies, to advocate and carry out economy. They will be content with the pious hope expressed by the Chancellor of the Exchequer two years ago, because they know that if they go to their constituents every single official and everybody connected with an official, will be opposed to them, if they ask for a reduction in Expenditure. I hope that this debate may have some result, but I am very much afraid that it will have nothing of the kind. Unless something is done, however, as I said before, we are on the road to ruin. We cannot spend £800,000,000 a year with a taxation of £15 per head, double what the majority of other countries pay, and expect that we can continue to maintain our trade and business. It is absolutely impossible. I agree with the noble Lord opposite, Lord Arnold, that it is not at all likely that we shall be able to borrow at 4 per cent. within anything like a reasonable time, but if we go on without making any reduction at all it will be very difficult for us to borrow at 5 per cent., or at a higher rate, even if we can borrow at all, or if there be anybody fortunate enough to have anything to lend.

VISCOUNT LEVERHULME

My Lords, in rising to address you for the first time, I hope I may receive that kindly indulgence which it has ever been your custom to extend to those who find themselves in the position which I now occupy. My reason for venturing to make a few observations to-day is that I desire, as one connected with industry, to emphasise the importance to industry of the Motion which the noble Earl, Lord Beauchamp, has introduced, and also to amplify what other noble Lords have said with regard to this aspect of the matter. In urging upon the Government the necessity for economy, any one engaged in industry at the present time, however inadequate his powers of language way be, has at any rate the satisfaction of feeling that he is not preaching a doctrine which he has not himself practised, for I am certain that all the members of this House who have been intimately concerned with the affairs of industry and commerce during the last few most difficult years, will agree with me when I say that the great bulk of the industries of this country could not have survived the critical periods of depression through which we have passed, had not the sternest measures of economy been practised.

With industry it has not been a question of economy being expedient or advisable, but a question of economy being vital and imperative. In times of prosperity it is easy to become careless in many things, both in the field of industry and in the realm of government. When trade is good, output becomes the first consideration, and the cost of production is apt to take the second place. In times like the present, when the purchasing power of the public is reduced, when every order has to be keenly fought for with our rivals in other countries, it has been necessary for industry to consider every internal economy which it is possible to make—by reducing stocks, by simplifying the processes of manufacture, by ruthlessly cutting out unnecessary statistics and other kinds of clerical work, and by going through the staffs with a fine comb and carefully reviewing the labours and duties of every man and woman engaged in the industry, so that every member of the crew in the industrial boat shall be pulling his or her full weight.

In spite of many good intentions, the same drastic measures of economy have not taken place in the sphere of government as have had to take place in the realm of industry. In fact it would appear, from what the noble Earl, Lord Midleton, said, that the word "economy" in the vocabulary of Whitehall has a totally different meaning from what it conveys either in the ordinary dictionary or in the vocabulary of the average mar in the street. My noble friend Lord Arnold has suggested that increased taxation does not necessarily hamper industry, and that a reduction in taxation does not necessarily help industry. I do not pose as a great economist, but it seems obvious that, in the case certainly of people with fixed incomes, if they have to pay more in taxes they must have less to spend on the commodities which industry produces. Many people in this country have at their back the machinery of trade unions which can and does negotiate for them increases in wages when the cost of living goes up; but to a vast section of the people there is no such machinery, and they are very hardly hit when taxation is increased, and they have obviously less to spend on the products which industry makes. But it is not only a question of what the public spend in buying commodities. Industries to expand also need capital, and that capital is furnished by the accumulated savings of the people, and I will venture to remind your Lordships in this connection of a dictum of perhaps the greatest Chancellor of the Exchequer we have ever had, Mr. Gladstone, to the effect that money fructifies more readily in the pockets of the people than it does in the coffers of the State.

I noticed the other day that the noble Viscount, Lord Inchcape, in an article contributed to the Press, called attention to the paternal interest—I am using a very much milder term than the one which the noble Viscount employed—which the Government continues to take in the affairs of industry. I think he said that there were eleven Government Departments which issued Regulations to the shipping industry, only one of which knew anything about shipping. Opinions such as these, coming from one so eminently qualified to speak on behalf of the industry in question, cannot but have a profound, not to say disturbing effect upon public opinion. The Government acquired the habit of controlling industry dining the War, and it has never been able to shake the habit off.

The position of trade and commerce to-day is rather like that of the man who in a time of great, danger submits to the ministrations of a physician, and then, when the crisis is over and convalescence is established, discovers that the physician is still living in his house and has all the appearances of a permanent guest—not a paying guest, but a guest who has to be paid for staying there. If I may press the analogy one degree further, may I say that industry is not at the present time a patient in need of the medicine of Government regulation and legislation. The industries of this country are constitutionally and physically sound, but what they are urgently in need of is plenty of freedom, food, fresh air, and exercise. The most beneficial measure of economy at the present time would be a real and definite curtailment of the operations and personnel of those Departments which are to-day attempting to regulate industry to a degree unheard of before.

I believe I am correct in saying that on the recommendation of the Estimates Committee of the House of Commons, a Co-ordination of Contracts Committee is shortly to be appointed to arrange for the bulk purchase of supplies for a number of Government Departments. This is a move in the right direction. I think the fullest credit should be given to His Majesty's Government for taking this step. Your Lordships will have noticed that there has recently been a marked movement in industry in the direction of "mergers." One of the prime causes which have called these "mergers" into being has been the need for working and administrative economy. One of the economies looked for is the great saving to be made by centralised buying. I. think His Majesty's Government might go further than they have done, and consider the creation of a central Department, rather than a Committee, for the purchase of those materials and supplies which are common to many Departments, and so effect a reduction in the large staffs of technical experts and their clerical assistants. Economies might also, I think, be effected by Government Departments purchasing, as far as possible, the standard articles made by manufacturers, rather than insisting, as is often the case, upon special articles made to Government specifications, which must of necessity be more costly to make. I think that, on the whole, we may congratulate ourselves on having public Departments which are keen buyers, and successful buyers. No programme of centralised buying would be fully effective unless it aimed not only at buying more cheaply, but at reducing the overhead expenses incidental to buying.

In conclusion, may I say this. In times of difficulty there are only two ways in which an organisation, whether it be a Government or an industry, can make ends meet, and those are either by increasing its revenue or reducing its expenditure. To say this may be merely to state a platitude, but, as the Prime Minister said the other day at Cambridge, a platitude is merely a truth that people have forgotten. In the case of industry it is not always possible to adopt the easy expedient of putting up prices, for the consuming public has in its hands the remedy either of buying what it wants elsewhere or even, in many branches of industry, of doing without it. But there is only one Government in office at any one time, and the public cannot pay their taxes elsewhere, or refuse to pay them. Their only remedy comes when they have the opportunity of choosing another Government, and I think noble Lords opposite should be very grateful to the noble Earl who has initiated this debate for giving them this kindly hint as to the most effective means of meriting the continuance of public confidence.

Economy is not a Party matter—it is a national matter. For too long we have been moving in a vicious circle. Industry cannot expand because the purchasing power of the public is reduced; the purchasing power of the public is reduced because of high taxation; taxation is high, among other reasons, because it is necessary to give State aid to so many unemployed; and the number of unemployed is high because industry cannot expand. So we go on round and round in this vicious circle from cause to effect without ever approaching any nearer to that revival of trade which is the true panacea of our national ills. At what point can this vicious circle be broken? I submit that industry has done its share and that the next move lies with the Government. I trust your Lordships' House, by supporting the main Motion which is before us to-day rather than the milder Amendment which the noble Earl opposite has moved, will prove to the public, to the long-suffering taxpayers of this country, that your Lordships' House at any rate is alive to the necessity for national economy on a far more substantial scale than has yet been attempted.

VISCOUNT HALDANE

My Lords, it is always interesting to listen to a first speech and the noble Viscount who has just, addressed us has shown not merely that he bears a name honoured in industry but that he carries with that name a hereditary interest in the subject matter upon which he has spoken. I will not discuss with him some of the points he raised which seem to me a little questionable, as, for instance, whether taxes add to the cost of production. It is only to a small extent if they do so. Rates, I admit, are in a very different position to taxes. But I pass that by and come to the speech with which the noble Earl, Lord Beauchamp, introduced the main Motion. I confess—and I make the confession frankly—that that speech filled me with gloom and this whole debate has filled me with gloom. I am filled with gloom on both sides—over the prospect of the Government in the matter of economy and over the demand and the ideal of the noble Earl. The noble Earl made a speech in which he proposed many points of economy, but they were all founded on arithmetic. It may seem a very attractive case to submit to the country, but there is nothing more fallacious than doing sums when you are working out a policy of economy. You have to look at a great deal besides.

It has been said that with statistics you can prove almost anything and it is certainly true when you are dealing with propositions for financial reform. Bring these things to the test. The question is never, or very rarely, merely whether there has been an addition to Expenditure. I take one case that comes into my mind at once. The noble Earl opposite is at the head of a Department which is incurring a great deal of new expenditure. I think it amounts from the Report that I have just read from the Department of Scientific and Industrial Research, to about £400,000 a year. That is a considerable sum of money, but does anybody suggest we should do without it? Does the noble Earl wish to out down that expenditure? If he does I can only tell him what would happen. The industries of this country live in a state of competition with the industries of other countries and we maintain our place only by making progress and we only make progress as we bring new knowledge and new methods to bear. But new methods depend progressively upon further science and to-day there is no Department, I think, which is more essential in the public interest than that very Department of Scientific and Industrial Research of which I speak. Without it we should not be able to keep up with the enlargement in ideas and the new methods that are essential in industry and, therefore, although this is a kind of expenditure which is quite new and comes under the flail of the noble Earl who introduced the Motion, it is the kind of expenditure which illustrates that what you have to do is constantly growing and constantly costing more money.

That is not the only case which the noble Earl referred to or which has been referred to in this debate. We were told that the staffs have grown enormously. So they have. And why have they grown? They have grown because there was the hope that with better staffs, with more searching direction, it would be possible to produce more for less money. I think that is true, but I do not believe that we have exhausted the possibilities of civilisation in getting staffs within a compass. They tend to grow a great deal and what the noble Earl has said of the tendency of staffs to extend and multiply themselves is true.

I remember very well that years ago when I was at the War Office it was necessary to effect a considerable reduction in the Estimates. I thought it ought to be effected. I brought up the Generals to the Army Council and was told: "It cannot be done; we have looked into it everywhere; we can get nothing down and we shall want £3,000,000 more." I then saw them one by one and said: "We shall never get the thing done in this way. You do not know whether there are possibilities of reduction, not even all the heads of Departments immediately under you know, but set to work, see your heads of Departments individually, take them into your confidence, do not bully them, do not order them about, reason with them and ask them to co-operate in a common policy; they will do the same with the people under them and you will get down at last to surprising economies; at least that is my strong suspicion.' They were doubtful at first. They went away and came back after an interval and said: "It has turned out exactly so, expenditure and extravagance are going on right deep down at places where we could not get to, the heads are now seeing that is so and those under them are working to effect economies and the money that is wanted to came off will come off."

The noble Earl, Lord Midleton, spoke of the number of the troops being reduced. The number of troops is reduced as compared with the year of which he spoke, but then he said that the staffs have gone up very much. Yes, they have and that is one reason why the number of the troops can be less to-day than it used to be. War, like industry, is a matter of thinking, of planning, of working out things in detail and, therefore, it is necessary to think and to employ skilled thinkers to an extent that was never the case in the old days. That being so, the matter is not disposed of by Lord Midleton's suggestion that the staffs have gone up very much. Of course the staffs have gone up very much. There is an enormous deal more of work that has to be done by the staffs than there was in the old days. The conduct of war depends on that, and if we had not had these staffs and had not had Generals trained in the highest degree in those methods—Generals like Lord French and Lord Haig—we should have been defeated in many of the battles that we had to fight in the late War. As it was our Generals, I think, were trained in the study of military science in a, way which showed them to be equal to those German Generals to whom they were opposed.

What is the moral of that? The moral is that if you are really keen about economy, if you want to bring about these things of which the noble Earl spoke, you cannot do it merely by doing sums, merely by arithmetical methods. What you have to do is to put your soul into the business of inquiry. You have to take people into confidence and work with them in confidence. I have had a good deal to do with the Civil Service. I was Chairman of their organisation for a good many years and I think I am still. I see their work and I see what they are doing just now. There is no body that is advancing more in its ideas and in its methods than the Civil Service. They meet, they read papers on this great question, their leaders come among them and talk to them. There is an intelligent spirit among the members of the Civil Service such as did not exist a few years ago. Why not apply the only method that is effective in getting economy to the Civil Service? Take their chiefs into consultation. Do not let the Chancellor of the Exchequer utter a ukase and say that the Expenditure of the country is to come down by so much, only to be defeated. The far better course for the Chancellor of the Exchequer and the other Ministers is to take the Civil Service, or rather its heads, much more closely into confidence and to ask them to take their own subordinates into confidence until there penetrates right through the body of the Civil Service a desire to carry out the common policy of which I spoke.

The noble Earl said: "You increased the number of cruisers and the Labour Government did it too." I will tell him one reason why the Labour Government carried out to a certain extent the policy of the, Government that went before and why the number of cruisers was increased. The noble Earl is a great Free Trader. So am I, though not so extreme a Free Trader as he is. In one thing I am entirely with him and that is that the food of the people should be free. We do not produce in these Islands sufficient food for the people. We have to bring it over the seas. If we ever were in such a state of peril as to the transport of food that the food ran short, we should be at an end as a nation. You could no doubt, by spending enormous sums of money and raising rates and taxes very much, increase the production of food in this country very much under a Protective system. It would be very unpopular and the proof of it is that the Conservative Government do not do it. They have pledged themselves against Duties on food. If there are no Duties on food you must protect the way of getting food into this country. How do you protect it? We had not thought of it during the old days. Even during, the War the Navy was rather slow in taking to the system of escorts and to the use of cruisers for bringing food and merchandise into this country. They learned it and they increased the escort system very much during the latter days of the War, with the result that it remains part of the naval tradition. You want cruisers for the protection of food and raw material. It may be there are too many cruisers or it may be there are too few. I do not know and I am quite certain the noble Earl does not know either.

There is only one way of getting at those things and that is by the closest inquiry. It is the duty of the Government to make that inquiry, and I do not know whether they make it or not. Sometimes I do not think they inquire into those things as minutely as they might. The Government have shown a perfectly sincere desire to improve the old methods by looking into those things more closely than they did in the old days. If that be so, then it is plain that that the arithmetical method of my friend Lord Beauchamp disappears and will not answer the question. That of course is even more conspicuously so when you are dealing with other things. Take Health, take Old Age Pensions. These are things which have added very much to the Expenditure in this country, but does anybody suppose you are going to go back on them? No, you are not, because they are making the people a better, a stronger and a healthier people than they were before. Of course they have to be paid for and are costly, but they are only part of what my noble friend Lord Arnold spoke of as the redistribution of wealth, which is going on, not only in this country but in every other country. Somebody—I think Lord Beauchamp—spoke of the difficulties which Judges and other people were under by the curtailment of their salaries. Judges are only bearing the burden like the rest of the community and, so far as I know, are not asking for any change, and I should be sorry if they did. Landowners, too, are bearing very heavy rates and taxes, but they complain wonderfully little.

What, is happening is that the money taken from these people is being distributed among the people at large so as to make them richer than before, consume more and be better people. That is the policy of to-day, the policy of which you are going to see more. That is what has given rise to the policy of the Labour Party in this country. We used not to put those ideas before us, but they are before us and, being handled temperately, they may avoid movements which are very disagreeable. I have not spoken very critically of the Government. There are directions in which, in connection with this problem of economy, they might well improve their ways, but I am sure they can only be got at by that method of which I spoke—namely, of putting your whole mind into searching into the ways by which economy can be produced in detail and, above all, by taking into counsel and getting the assistance of your staffs, of your Civil Servants and your advisers at every turn. When the community is permeated with the desire to avoid unnecessary extravagance then and not till then, will you be able to avoid that unnecessary extravagance.

THE FIRST COMMISSIONER OF WORKS (VISCOUNT PEEL)

My Lords, I think it was a little unkind of Lord Arnold to tell the noble Earl who introduced this Motion that he really had no business to introduce it—

LORD ARNOLD

I did not say that.

VISCOUNT PEEL

—because he thought his colleagues in another place had not shown that zeal for economy which they ought to have shown. Even if the colleagues of the noble Earl in another place are either negligent or have become castaways in that matter, all the more credit is due to the noble Earl for standing by the old Liberal principle of retrenchment. I certainly do not bring any charge against him on that ground. Indeed, one is glad to find some support for retrenchment in any quarter of the House. I listened to what the noble and learned Viscount said and did not gather he was pressing retrenchment of Expenditure upon the Government. I gathered that he was rather ready to suggest that we did not spend quite enough in certain directions. There is, therefore, no great pressure coming from him or from his friends for the reduction of Expenditure.

I did cordially agree in many ways with one expression that he used and that was when he said that it really was not possible to compare these Expenditures by means of arithmetic. I have heard a great deal of extremely fallacious comparisons during the course of this debate. There have been statements of what the world is now, of what the world was in 1914, and even of what it was in the 'nineties, for the noble Earl took us so far back in history. Really the world has so changed in so many respects that any standard of comparison that you choose to try to establish merely upon the basis of figures may be theoretically interesting but is certainly of very little value in the practical conduct of affairs to-day.

I should like, for one moment—and I will not keep the House long as it is so late—to deal with the general conditions under which this Government or any Government must conduct its affairs at the present day, because those conditions must govern, insensibly if you like, their general policy. First of all, we are still labouring—I am not talking now of the big Debt—in many ways under the results of the War. Take the case of housing. We all know the history of housing, the shortage of houses owing to their not having been built during the War, and possibly before the War in consequence of the Land Taxes and so on. We all know the enormous shortage that had to be made up in a few years after the War. It was impossible to leave that to private enterprise. The State had to step in. Some of the schemes were good and some, in this House at any rate, were thought to be rather indifferent. But what is clear is that a great deal of expenditure now in our Budget Estimates is the result of the action taken in those years and that will be the case for many years to come. That is one of the weights we are carrying which is just as much the result of the War as what I may call the general Expenditure of the War. That, of course, is applicable to such things as are now coming to an end, the training of ex-Service men and things of that kind.

On another point there has been great comparison between the state of unrest—or the state of rest if you like—now and the state twenty-five to thirty years ago. Our position as an Empire has become less defensible in one sense than it has been in the past. That is to say, we bring more into this country in food and raw materials. We have more use for our Navy to protect us. We have got even more vulnerable points than twenty years ago. The Empire is different, it has grown. Iraq and Palestine and other places of that kind have extended rather than diminished the Empire and possibly, short of international agreement, have made more demands upon our system of defence. But there is a thing which will perhaps apply to this Government and to the Governments that may succeed it for the next ten or twelve years, and that is that I think in some ways we are at the peak of Expenditure.

Take the whole question of Imperial Defence. The Dominions are beginning to take a larger share in defence. We still bear the great brunt of the burden, but as years go on probably there will be a reduction and the Dominions will take more of that charge on their shoulders. Take, again, questions like the Loans and guarantees for the Colonies: for instance, the overseas settlement schemes and the guarantees of big Loans to East Africa. We are spending the money, but in the years to come I hope we shall have some fruition from that money. There will be more people in Australia to buy our goods and consequently to give employment to our people here. There will be greater development of Colonies like East Africa and consequently an increase in trade and a diminution in unemployment. We have not yet reaped the benefit of it. We are still bearing the brunt of that expenditure.

There is another matter of which the Noble Viscount spoke, and I myself have great sympathy with what he said. Take the new class of grants, such as those for the development of the scientific side of agriculture and for research in agriculture. That is a class of expenditure from which we cannot reap results at once, but from which I hope we shall reap great results in future. He was quite right, if I may say so, in attributing to this Government a great desire and a great activity also in developing the scientific side of industry. By the establishment of the Committee of Civil Research we have notified to the world that that is one of the great objects which this Government are pursuing. But all that must mean expenditure in the present, even though we shall reap great results, I trust, in the future.

Again, take what are called the Social Services, which are rather absurdly grouped under the head of Civil Service Expenditure, giving people the totally wrong idea that the expenditure is merely on the salaries of an enormous number of civil servants, which, as I think, is a very unfortunate result of that grouping. They have been very little criticised during the course of this debate. All such matters as expenditure on health, education and employment, and so on, have been very little criticised. Here, surely, in the years to come, if they are to be of any value at all, we are going to reap a rich harvest in an increase in health, in education, in intelligence and in application to industry. Otherwise these sums may be said to be wasted and thrown away. But the burden is falling on us to-day and I suppose that people in the future are going to reap the results. No doubt there is some risk that too large a charge may be placed upon the taxpayers of this country. The noble Viscount told us, I think, that there was a growing principle in Europe to use taxation for the purposes of the redistribution of wealth. That may have a very dangerous reaction on industry, because it is obvious that if that goes rather far the strain on the creative side of national production may be so great as to break it down under the weight of taxation. The noble Lord, Lord Arnold, nods his head.

LORD ARNOLD

Shakes his head.

VISCOUNT PEEL

Shakes his head. I accept the correction, but even he, I think, admits that rates, on which he lays most stress, are a direct charge on industry. If they are going to be applied in that way—and we are asked to reduce local taxation as well as national taxation in the noble Earl's Motion—there is great danger that there we may suffer. This is a general consideration which must apply and mast be in the minds of those who are trying to consider whether we are spending too large a share of our national income to-day or not. I think I need say very little about the Social Services, or about the expenditure for Debt, or about the Post Office and other productive Departments of that kind, because really we have heard very little criticism of them at all. But I should like to say one word about one great economy that is being effected by the Government. They have undoubtedly increased the Sinking Fund, and the product of that Sinking Fund in reducing Debt and in meeting our maturing charges must be of the very greatest value.

LORD ARNOLD

May I ask by now ouch the noble Viscount suggests they have increased the Sinking Fund?

VISCOUNT PEEL

It was put up to £60,000,000.

LORD ARNOLD

That is only temporary.

VISCOUNT PEEL

The noble Lord must not be in too much of a hurry. The Government are only just at the beginning of their career.

LORD ARNOLD

You said they had done so.

VISCOUNT PEEL

£10,000,000 on £50,000,000 is a good sum.

LORD ARNOLD

But it is only temporary.

VISCOUNT PEEL

If the noble Lord will wait he will see whether it is temporary. I do not know whether the noble Lord has read the Report of the Colwyn Committee. That Report urges the Government to raise the Sinking Fund to £75,000,000 or even £100,000,000. With good management there is no height to which the Government might not rise. The noble Lord is a little premature. He took, I thought, rather a melancholy view of the amount that we were going to save by these conversions. He reduced it—and I think he will agree that he put it at the very lowest point—to about £26,000,000 a year, which seemed, in my humble idea, rather substantial.

LORD ARNOLD

That is the Colwyn Committee's figure.

VISCOUNT PEEL

It is rather a substantial amount.

LORD ARNOLD

I said so.

VISCOUNT PEEL

I beg the noble Lord's pardon. I thought he took rather a despondent view of so substantial a sum, but I am glad to hear that he thinks a saving of £26,000,000 really considerable. Let me call your Lordships' attention to a few figures which show how important it is that a sacrifice of this kind should be made by the taxpayers of this country, a sacrifice which goes to swell the apparent huge bulk of national Expenditure. In 1927–8 maturing liabilities are £300,000,000; in 1928–9, they amount to £470,000,000; in 1929–30, £540,000,000; and in 1930–31, £134,000,000. In view of the enormous importance of keeping up our credit and being able to carry through these conversions, I think that the Government, criticised as it is on so many grounds, has shown a considerable amount of courage in taking from the taxpayer so large an amount as £60,000,000 for the purpose of reaping in the future, as we hope, a very substantial help from their schemes.

My noble friend Lord Plymouth has gone fully into a number of points connected with the Expenditure of the years 1925–6 and 1926–7, but I should like to observe that I do not think that it was a fair criticism that was made by Lord Arnold—though he did not pursue the point—when he said that this Government had never taken a view looking to the future of what their schemes of Expenditure were going to be.

LORD ARNOLD

I am sorry to interrupt the noble Viscount. What I said was that they did not do so in their first year.

VISCOUNT PEEL

The noble Lord limited it to the first year, but if they did not do so in the first year they certainly did so in the second and third years. The Chancellor of the Exchequer has always stated in his Budget speeches that he was budgeting for the future and looking ahead several years, and accordingly I think that this criticism falls to the ground. I want to make one or two observations upon those years. We must always remember, in estimating the action of the Government, that these automatic rises in Expenditure are very largely due to previous decisions of policy. I will take one instance. There is a rise in the Old Age Pensions of this year. What is the cause of it? It is due to the fact that seventy years ago the population was largely expanding. The Government cannot be held responsible for that, and we have got to the peak of the huge expansion of population in the Victorian days. That is one difficulty. Then again you have the great increase in the pensions of teachers, police and so on, and the resettlement of those pensions was due to the recommendation of independent Committees which were set up and whose views were adopted by the Government. These, of course, are always rising and have not yet reached the peak. In this regard I think that full credit must be given for any reductions that can be made by the Government.

I do want to bear testimony, because it comes under my personal knowledge, to the tremendous efforts made in 1925–6 to reduce Expenditure as a set off to the large automatic increases. I happened to sit on the particular Committee that went through all the Government Departments' expenditure, and accordingly I know how closely and with what care the comb was applied to every branch of expenditure in those Departments and how large a sum was saved by the Government as a set-off to the increases. Everybody must admit that during the years 1925–6 and 1926–7 the schemes of the Government and their whole financial operations were terribly upset by the coal dispute, by the payment of £19,000,000 in one year and of £4,000,000 in another, by a long strike bringing with it all kinds of contributions to local authorities, and so on, by the Government, which have heavily swollen the Expenditure. There has not been very much criticism of the Government on that score.

I should like to say a word, however, regarding the Army, Navy and Air Force expenditure, because that has really borne the brunt of the attack delivered against the Government very vigorously by the noble Earl opposite. The noble Earl, Lord Midleton, also brought some criticism to bear, speaking from his great knowledge of the administrative side. I can only answer those points rather generally. As regards Army expenditure, I think that the record of the last two years in reductions has been a very remarkable one, because since 1923 there has been a reduction of no less than £10,000,000 in Army expenditure, which I think everybody will agree is really a very severe reduction. Again, looking at the growth of the Army expenditure between 1914 and 1927, non-effective charges have grown from just under £4,000,000 in 1914 to just under £8,000,000 in 1927. If you look at the effective provision per head in the Army, you will see that has risen from £130 in 1914 to £222 to-day. That, of course, is accounted for partly by the increases of pay and by the rise of prices in comparison with those of 1914. There has been, of course, a great reduction in the number of men, but Lord Midleton rather suggested that the reduction had been only in men. On the contrary, there has been throughout the Army a very extensive administrative reduction as well, and when you consider the tremendous changes going on in the Army, the mechanisation of the Army, the introduction of new methods, of tanks and so on, it becomes obvious that a change-over from one system to another must always bring expenditure. You have only to take the case of the Cavalry and the tanks. You have to carry on both at the same time. It has not yet been settled, and will have to be settled by long experiment, Whether you can do without the Cavalry or not. The matter is still in suspense, and while that is going on you are bound to have a rather high expenditure.

The noble Earl, Lord Midleton, also made some references to particular eases. I have not been able to deal with the case of the oranges, because I have not had time to look it up, but there is no question that there is a great deal to be said in reply to him in the matter of hospitals. You have to keep a hospital bed ready for any soldier who is entitled to it, and you may have all sorts of infectious diseases at various times, so that you cannot crowd all these people in the same ward. You have to make ready for a variety of diseases and also for the seasonal arrivals of men passing out and going to and from this country, which makes it absolutely essential to have at any one time a larger number of beds than are occupied at that time. Let me say one word about his attack on the number of people looking after stores. The noble Earl is no longer in the House, but I should like to say that I do not think he realises the tremendous change that has taken place since those twelve years when he was in the War Office. There are now, for example, a large number of very complicated stores connected with wireless and other matters of that kind, which need a man of considerable technical attainments to look after them. Really you can draw no comparison between the Army now and the Army twenty years ago. I am told also, as regards the suggestion that there were a large number of officials who had nothing to do, and who were trying to wind up these War Debts, that although the easier cases have been dealt with the more difficult ones remain. I am told that they are extremely complicated, and require close investigation, and so far from many of these men being unemployed, I think that many of your Lordships might be very sorry to be employed so severely as they are.

May I say that I think the Army is under a Minister who is very well versed in money matters and who is determined not to waste a penny. Let me run over the number of Committees which have examined into the Army in the last few years. There is first of all the Geddes Committee, of which Lord Inchcape was a member, and anybody who knows Lord Inchcape—I was able to persuade him to go out to India—knows what a terror he is when he gets into a public Department for the purpose of examination. Then there were the Churchill Committee, the Weir Committee, the Weir-Mond and the Colwyn Committees, and of course the Public Accounts Committee of the House of Commons. These Committees have gone into this business again and again, and effect has been given to nearly all their recommendations. I doubt very much if my noble friend Lord Midleton, with all his knowledge of the War Office, were to form a sixth Committee and go into this business again, he would find many scrapings left. I think he would have to come and say that he thought the previous five Committees had pretty well done their work and had swept up any excesses there might be.

I do not wish to delay your Lordships about the Navy, but I should like to call your attention to this fact, that here, again, a number of subjects have to be dealt with by the Navy, quite apart from general staff, which they had not to deal with before. Some are rather minor matters, but sail they are full of detail. The labour questions, for instance, cannot be swept aside nowadays, but must be dealt with not only with sympathy but with a minuteness which these questions did not receive before the War. Then take—because one can only give instances of these things—naval stores. In 1914 they comprised 33,000 different items, but in 1925 they comprised 76,000 items, or more than double. There are departments dealing with guns, ammunition, torpedoes and mines, and there is also additional work owing to the Fleet becoming oil-burning instead of coal-burning. Therefore, before figures are compared and deductions drawn, surely it is necessary to consider what new sections of departments have been formed, and must have been formed to deal with the tremendous scientific extension, which is the result of the application of science to the Fighting Services during the War and of investigations after the War.

Look, too, at what a battleship costs—£6,000,000 or £7,000,000 now as compared with about £2,000,000 before the War. And so on through the cruisers and destroyers. I will only give one comparative figure. In 1906 we had 119 cruisers costing £53,000,000. In 1913 we had 110 costing £54,000,000. That went down to 47, and yet the cost in 1927 was £40,000,000, or very nearly the same cost for double the number before the War. It was the same through the whole range of expenditure, due to causes with which we are very familiar. I think it is very unfair to compare the Navy and Army expenditure with the expenditure on armaments before the War, because the Air Force has come in. It has, as it were, butted in between those more ancient Departments, and no one can say yet whether it will be possible in any degree to diminish expenditure on the Army or the Navy, even although reductions may have been made in Iraq and other places because the Air Force has to some extent taken the place of the Army in those countries. Surely, it is rather remarkable that we have been able to develop so large an Air Force as we now have for only about £15,500,000. I may remind your Lordships that the Government have effected considerable economy on the Air Force, because the great scheme for the development of the Air Force was started in 1923 and was to be completed in 1928–9. That has been considerably slowed down by the Government.

Therefore, although you may of course effect small deductions in many parts of our Defence Forces, I doubt very much, considering the close investigations that have gone on throughout those Forces in the last three years, whether you really can make any substantial reduction, unless indeed you can get an international agreement. Your Lordships know perfectly well with what energy the present Government have thrown themselves into that task, what was done at Washington, how readily they have accepted the invitation of the United States to another Conference, and what efforts are being made by Lord Cecil and His Majesty's Government at Geneva with regard to a further limitation of armaments. I will only make this observation, if I may, that we must not, perhaps, expect too much from that, because, unfortunately, Russia, which is outside the League of Nations, is developing its forces very considerably. As we were told by the Secretary of State for War the other day, Russia has a standing Army of 650,000 men, or a million or so including the Militia and Volunteers, and 8,000,000 in the Reserve, and at the same time is developing on a larger scale than any other country her production of poison gas.

I cannot go through the different ways in which the Government have definitely reduced expenses in some of the Departments, but may I remind your Lordships of what has been done with regard to pay. Much has been said about this. Your Lordships remember the reduction in officers' pay, and the fact that the three Services have now been put on the new scale of pay, which cannot however mature for some years because we cannot break existing contracts. When that materialises, it will make a reduction of £2,200,000 a year in the Army Estimates alone. Let me take also the case of Pensions. There has been made a reduction in the expenses of administration from 15d. in the £ of money expended to 7d. in the £, so that out of every pound voted for Pensions only 7d. is deducted for administration. One of the results of that is the usual result, that my right hon, friend the Minister of Pensions tells me he has been persistently abused because in the administration, not in the Pensions, he has tried to effect a reduction. That is the usual reward, I suppose, that all Governments get for virtue in this particular respect.

As regards possible future reductions in Expenditure—apart, I mean, from great changes of policy—I do not say that administrative reductions cannot be made in certain respects, but to make any great reduction, a substantial splash as it were in the way of reduction—£20,000,000 or £30,000,000, or something like that—you can only do it by having a sort of general agreement through the whole of the Civil Service, by which all your employees, all your Post Office officials, policemen, teachers and so on, including, of course, members of the Government, would accept a reduction, which would have to be voluntarily arranged. I do not think there is the slightest chance of any such voluntary arrangement being made and I know quite well what would be the fate of any Government which tried to make a reduction of that kind. Its existence would be short, painful, and very disagreeable indeed.

I think there are only three directions in which a reduction of Expenditure may be hoped for. The first I have mentioned, and that is by the constant improvement of our credit and the conversion of large Debts as they fall in into a lower denomination. The second is that we might—and I hope we may—be able through international agreement to have a general reduction or limitation of armaments, always, of course, bearing in mind the special conditions of this country. The third opportunity one can see is that we might, by a large trade development, be able to bear more easily the heavy burdens which are upon us to-day. We might hope that 1d. in the pound of Income Tax would produce more than the £4,000,000 or £5,000,000 that it does now, that the unemployed would be absorbed, and that all the charges falling on the poor rate, the cost of unemployment, and other matters, might be reduced. But, in order to obtain that fortunate state of things, we must have peace at home and peace abroad, and I think this House will bear this testimony to the Government, that at least they are doing their best year after year to secure peace abroad and—what seems to be much more difficult in many respects—to ensure industrial peace at home. I understand that the debate is to be continued next week, but I cannot think that any charge of extravagance has been made out this evening.

LORD STANMORE

My Lords, on behalf of my noble friend Lord Oxford and Asquith, I beg to move that the debate be adjourned till Tuesday next.

Moved, That the debate be now adjourned till Tuesday next.—(Lord Stanmore.)

On Question, Motion agreed to, and debate adjourned accordingly till Tuesday next.