HL Deb 31 July 1928 vol 71 cc1492-522

Order of the Day for the Second Beading read.


My Lords, in asking your Lordships to give a Second Reading to the Finance Bill one has to realise that the interest of this House in this Bill may be described as one of critical detachment. In fact your Lordships in relation to the Bill are almost in the position of a jury who, having been sworn to try a case, find themselves directed by the Judge as to what their verdict shall be in law. But your Lordships are, of course, interested in the general financial condition of the country of which this Bill is an indication. From this general point of view, although, of course, taxation remains at a very crushing level, it may be said, I think, that the story as a whole is not one of absolutely unrelieved gloom. Your Lordships will remember that we are only now in the second year from the time of the General Strike and of a prolonged coal stoppage. Those events had, of course, a most serious influence upon the finance of the country, which still remains. There was a very large loss of revenue which, in the two years, I think, has been computed by the Chancellor of the Exchequer to reach the figure of £80,000,000. Those events also very largely added to the cost of administration, thus hitting the national balance sheet on both sides. They also gave a very serious and prolonged check to recovery of prosperity and injuriously affected over a prolonged period—it may be even permanently—the markets, especially abroad, upon which this country so largely depends for its revenue and its general prosperity.

I very well remember, having been myself at the Treasury at the time of the Strike, that the Chancellor of the Exchequer when those events were threatened, but had not yet materialised, issued a warning that if the disturbance which was threatened should prove a prolonged one in all probability it would involve considerable additions both to direct and indirect taxation. Therefore I think we may congratulate ourselves that neither last year nor in the present year has it in fact been necessary to make those heavy additions. It is very satisfactory, as I am sure your Lordships will recognise, that this comparatively favourable result has been reached without resort to the expedient of suspending the payment of Debt. On the contrary, so far from that being the case, during the last twelve months, not only was the statutory level of the new Sinking Fund maintained at a figure of £50,000,000 but it was raised to £65,000,000 during the year, and in addition to that, as the Chancellor of the Exchequer has pointed out, no less than £15,000,000 were paid during the year in respect of accrued interest on Savings Certificates, so that actually during the preceding twelve months no less than £80,000,000 have been devoted to the reduction of the National Debt.

That Debt operation has an extremely important and beneficial effect upon the credit of the country, an effect which is very necessary, especially at the present time. As your Lordships know, we are in a period of heavy maturities of Debt which have to be met, involving very large conversion operations, which would be almost impossible to carry out if it were not that the national credit stands high. Those operations which have been necessary during the last year have been carried out quite successfully. It was pointed out in the debates in the House of Commons that a further and welcome indication of the high level of the national credit, notwithstanding all our difficulties, was supplied by the spontaneous listing of some of our Government securities upon the Stock Exchange of New York.

During the coming year, as your Lordships will find in the Bill which is now before you, the Chancellor of the Exchequer in regard to Debt is making a new departure, or rather—it is not quite correct to call it a new departure—a reversion to an old precedent in regard to the provision for Debt. As long ago as 1875 Sir Stafford Northcote established a fixed Debt charge, and it is an indication of the financial road that we have travelled since that time that, whereas Sir Stafford Northcote's fixed charge amounted to what we should regard as the paltry sum of £28,000,000, the sum named in the present Bill is no less than £355,000,000. No doubt many of your Lordships will have noted the observation of the Chancellor of the Exchequer with regard to this figure. He pointed out that if that fixed charge were untampered with in the future it would succeed in extinguishing the whole of our National Debt in a period of fifty years. I do not suppose for a moment anyone expects that it will be untampered with. It would be almost impossible to expect anything of the sort, but we may hope that any tampering with it will at all events be reduced to a minimum. It is an encouraging consideration that in such a very limited period as fifty years the whole Debt should be extinguished if it were possible to maintain that fixed charge.

I am sure that your Lordships would agree that only second in importance, if second in importance, to provision for Debt comes the question of economy, and I would like to take this opportunity of giving my personal testimony to the continuous and strenuous efforts that were made by the Chancellor of the Exchequer, during the two years which I had the privilege of serving under him at the Treasury, in the direction of economy and those efforts were not always entirely unavailing. I do not know that he has got as much credit as he deserves for the economies effected. Economies are not always very apparent, and that is because, and very largely because, it often occurs that they have to be appropriated to the payment of unexpected expenditure and the full effect of them is, therefore, sometimes not altogether seen. Unexpected and unavoidable expenditure from time to time comes along. An example of it was the cost—the very necessary cost—of protecting life and property in China, which involved sending a force to Shanghai. But we must bear in mind, even when economies are balanced by expenditure of that sort, that at all events they are real economies, because but for them additional charges would have to be incurred.

One aspect of economy to which a great deal of public attention has been bestowed is the question of Government-paid officials. There has been a great deal of criticism of the number of officials, and a great deal of demand that their numbers should be reduced. From the time that the present Government became responsible for the finances of the country down to April of last year, although the difficulties of reducing the numbers of officials is greater than any of your Lordships perhaps would believe, no fewer than 7,000 officials were dispensed with, and the Chancellor of the Exchequer has announced a new scheme to operate for five years, starting from April, 1927, the effect of which will be to suppress 11,000 more. During last year an announcement was made, which is no doubt being acted upon, that there was to be a restriction placed upon the new entrants to the Civil Service, but, in considering this matter of reduction, your Lordships will not lose sight of the fact that every established civil servant is pensionable. It does not follow, therefore, that the moment you reduce the staff of a Government office you immediately produce as much economy as would be the case if these officers could be dismissed—which it would be very unjust to do, of course—without any pension having to be paid.

As regards taxation in this Bill there is really very little to be said. With one important exception, about which I shall have a word to say presently, there are really no changes this year in taxation of any great significance, though there are one or two minor modifications to which I will refer your Lordships, which affect both the Inland Revenue Taxes and the Customs Duties. The great staple Tax, the Income Tax, remains, so far as the standard rate is concerned, unaltered, but one modification has been made by largely increasing the allowances for children which will certainly give a most welcome relief to perhaps as deserving a class of taxpayer as any—namely, the small Income Tax payer who has the responsibility of bringing up a family. That alteration is one which, I think, will be very generally welcomed.

So far as the Customs Duties are concerned there is a small but by no means negligible remission given in the Sugar Duty. Any of your Lordships who have studied the Report of the Colwyn Committee will remember that that Committee, which reviewed all questions of taxation with very great care and learning, while saying that at present the taxes upon foodstuffs of any kind were very light, did say that they regarded the Sugar Duty as relatively high, and they made a recommendation—it was a very careful and cautious recommendation—that if during the next few years any remission of taxation was found possible it should be first applied in the case of the Sugar Duty. Clause 4 of the present Bill carries out that recommendation and reduces the Sugar Duty by 2s. 4d. per cwt., which works out at ¼d. a lb., which, although it does not sound a large sum, nevertheless in a poor household is by no means a negligible one.

Occasion is taken at the same time to do something to remedy a grievance which has been a very real one—namely, the grievance of the British sugar refiners. The sugar refining industry has been heavily hit of late years by importation of fully refined sugar from various sources, chiefly from continental beet sugar. Accordingly, in the present Bill an advantage is being given to sugar imported in a raw condition—I believe the definition is sugar of a lower polarisation than 98 degrees—as compared with the more fully refined article in order to give a turn of the market to the British refining industry. The result of doing so has been, I think, really remarkable in the very short time that we have had experience of it, for the Chancellor of the Exchequer, speaking in another place on June 26—that is to say, only two months after the announcement of this policy in his Budget speech—was able to show that the melt of British refiners in those two months had increased by 25 per cent. and the wages paid to workers in those refineries had also increased by 25 per cent. He went on to point out the indirect results which would follow. He said that in a full year that meant the use of 100,000 tons more coal, and the production and use of no fewer than 3,000,000 more jute bags which are used for the commodity, and a corresponding expansion, of course, in other allied trades, showing that this small operation even in two months had had very beneficial effects upon British industry.

One other slight change in the Customs Duties is in regard to British wines. Last year a tax of 1s. a gallon was placed upon British wine, but it was entirely tentative because there was not sufficient knowledge of the industry to form data upon which a tax could be imposed with any knowledge of its effect. It was purely tentative. It was not known what the effect of it might be upon production. But so far from this tax having had the effect of checking production in any way, during the last year since it was put on there has been a very large increase in production. The yield from the Duty largely exceeded the estimate that was formed of it. Consequently it is clear that the commodity is not injured by this taxation and the present Bill raises it from 1s. to 1s. 6d. a gallon. I do not know whether it is worth mentioning—except that some of your Lordships may be specially interested in it—a very small change in regard to the Duty on cinematograph films. It has been represented to the Treasury that this Duty weighed heavily on a certain class of film not intended for remunerative purposes but for scientific research, and in consequence complete exemption from the Duty is given in the case of films which are certified by the Royal Society to be solely concerned with scientific investigation.

I ought, perhaps, to say a word about the Betting Tax which is one that has interested the country very much. I regret that the noble Earl, Lord Russell, is not in his place because I noticed that in speaking on another Bill a day or two ago he said with most pontifical assurance that this Duty had been a failure. I should like to have had the opportunity of asking him what he meant by a failure. Of course if he meant that the original estimate of £6,000,000 as the proceeds of this Tax had not been realised then, of course, one would have to admit that the Duty was a failure. But that Duty, as I remember very well, was also a purely experimental one. There was no data whatever to go upon in forming an estimate and it was only because of the necessity of adhering to our strict financial methods that any estimate was made at all. It was necessary to name some figure, and the figure of £6,000,000 was named. That has not been realised, largely, as everyone knows, owing to an excessive evasion of the Tax. Your Lordships are now occupied with a Bill for establishing the totalisator, which we hope and believe will have the effect, not only of largely cleansing our racecourses but, from the Exchequer point of view, of ensuring the return of a very considerable revenue. The revenue last year, even with all the evasions, was over £2,500,000, a sum that cannot be absolutely thrown away in these days when it is so difficult to find money, and the revised Estimate for the coming year amounts to £2,000,000. Even if no larger sum than that were realised with the assistance of the totalisator, it would be a revenue which the Exchequer would certainly not lightly sacrifice.

With reference to this taxation I do not know whether there will be many of your Lordships to echo a criticism that has been common in another place—namely, the allegation that, while the present Government have been responsible for the finances of the country, there has been a large addition of indirect taxation as compared with direct taxation; and the inference has been drawn, or rather the assertion has been made and assumed to be true, that this means an increase of the taxation that bears heavily upon the poor as compared with that which is paid by the rich. That criticism can arise only from want of discrimination in the mind of the critic between the different sorts of indirect taxation, and I can show your Lordships that it is not by any means true that while the present Government have been in office there has been an increase of that form of indirect taxation which specially bears upon the homes of the poor. That criticism, to begin with, entirely ignores the fact that indirect taxation, or at all events most of it, is entirely optional. No one need pay it unless he likes. The only real necessaries that are subject to indirect taxation are tea and sugar. One may perhaps add—I should be personally inclined to add, at any rate as a quasi-necessity—the commodity of tobacco; but if you except tea, sugar and tobacco, then all indirect taxation is optional and rests upon non-necessaries. Of course no one could allege that wines, spirits, beer and alcoholic drinks are necessities, seeing that very large numbers and many of the best of our fellow countrymen do without them altogether and always tell us that they are very much better in consequence.

The indirect taxation for which the present Government are mainly responsible is distinguished in another way Not merely is it optional, not merely is it non-necessary, but it consists mainly of taxes upon articles of luxury, and may be and ought to be classed as sumptuary taxation. Such articles as motor-cars silk, musical instruments, watches, cinematograph films and such activities as betting—these, most of which are included in the group known as the McKenna Duties, cannot by any stretch of imagination be called necessaries of life. It is really an abuse of criticism to say that, if there has been an increase of that form of taxation, it means an increase of taxes specially affecting the poor. That consideration is very much strengthened when I point out to your Lordships that in regard to the Duties resting upon necessaries, such as tea, sugar, cocoa and matches, so far from there having been an increase there has during the last four years been a positive decrease of the amount of taxation from those sources. Accordingly I think it is only fair to point out that this criticism is one that really has no foundation in fact. The position that I am endeavouring to put before your Lordships is strengthened by the remission of the Sugar Duty to which I have already referred, so that by the end of the present year there will be a very considerable reduction in that class of taxation.

I said that there was one exception to the statement that there were no important changes of taxation. The Bill does contain in an early clause, I think in Clause 2, a new indirect tax of far-reaching importance—namely, the Duty of 4d. a gallon on imported oil fuel, which is estimated in a full year to produce a revenue of over £15,000,000. I want to lay stress upon the fact that the revenue from that source is not required for ordinary budgetry purposes at all. It is designed, as your Lordships know perfectly well, not for the purposes of the present Budget, not for the purposes of the cost of administration during this year, but as a prelude to a far-reaching constructive scheme of reform in local taxation and local government for which this revenue lays the foundation. Every penny that it raises will be used in order to grant relief from burdens of another kind, which, under existing conditions,—I do not think your Lordships are likely to deny this—are throttling the chief industries of the country and retarding, if not indeed destroying, all hope of the recovery of national prosperity.

I have not the slightest intention—I am sure that your Lordships will be relieved at this assurance—of inflicting upon the House any attempted exposition of the Government's scheme of rating reform, with the general outline of which everybody interested in public affairs is already fairly familiar and will have many opportunities during the next few months of studying in detail. Before I sit down, however, I should like in a very few words to emphasise the many-sidedness of this scheme, whatever your Lordships may think of it on its merits. It touches many of the most perplexing problems confronting the country to-day and it contributes something towards the solution of each of them. It emancipates productive industries, including agriculture, from an antiquated form of taxation, dating from a period long before present industry was either heard of or dreamed of. It cuts at the root of unemployment without resort to uneconomic methods which, in the long run, do more to aggravate than to cure the disease. It offers a prospect of economic restoration to those necessitous local areas which have been caught in a vicious circle whereby local industry is more and more crushed by the increasing burden of local rates, while in their turn local rates mount higher and higher in order to deal with the poverty caused by the decay of industry. It recognises, and it deals with the menace, and a very real menace it is, to our future that lies in the growing substitution of oil for coal as the main source of industrial power. It attempts to adjust the equilibrium between rail and road transport, which is very necessary in the interests of even and regular development of our resources, and it seeks to reform and to strengthen the whole system of local administration without which this great work of reconstruction could not be effected at all.

The present Bill goes no further than taking a first step in this policy. If I may use the illustration, it cuts the trenches for the foundations and runs in the concrete upon which the future fabric is to rest. In order to do so, and it is very well worth while, it does admittedly make a small departure from the usual stereotyped financial methods by forming a suspension fund to which the proceeds of this Oil Duty not required for present Budget purposes will be paid thus to provide the means for commencing to operate the scheme some fifteen months hence. I have no hesitation in saying that whatever opinion your Lordships may form ultimately, or the country may form, of this far-reaching constructive scheme, it will certainly be memorable in the administration of my right hon. friend the Chancellor of the Exchequer, and I have no hesitation in claiming that, whereas I admit the general features of this Finance Bill are of no great significance, this particular proposal redeems it from any charge of being a humdrum Budget, and will be remembered a very long time hence, and, as I have great confidence in believing, remembered with gratitude and appreciation by those who will, as years go on, gain the advantages for which it prepares the way. I beg to move.

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


My Lords, I will not detain you for more than one or two moments in speaking upon the Second Reading of this Bill. It has been my lot in the course of the last few days to deliver in this House two long speeches. It was my duty to make those speeches or else I should not have made them, because I can truly say that no other motive except that of duty would cause me to speak in your Lordships' House, particularly having regard to the diffl- culties which obtain for those who sit on this side of the House. I do not make any complaint of that, as regards your Lordships. These difficulties are inherent in the position. As regards this particular Bill it comes here at a very late hour, when the Order Paper is shockingly congested and when it is impossible to have any calm and useful discussion of these matters. If I were to attempt to deal with the speech of the noble Lord who has just sat down, with the Government's financial record, which is one of unredeemed and unredeemable failure, and with the sins of commission and of omission of the Chancellor of the Exchequer, and if I were to do this at all properly, I should have to make a speech considerably longer than those to which I have recently had to give expression in this House.

I have therefore come to the conclusion that it is really not worth while doing it and that I am not called upon to do it, more particularly as the experience of some years has proved that financial arguments advanced in this House have only on rare occasions received any adequate reply from the Government Bench. The recent debate on the Currency and Bank Notes Bill, for instance, was in my view a most unsatisfactory one. All I will say before I sit down—because two or three of the openings given by the noble Lord are too tempting to miss—is this. In the first place, I submit that the general impression which he has attempted to create with regard to the Debt position of the country is a caricature of the facts. Whatever may have happened in the twelve months ending March 31 last, taking the last three years, the Sinking Fund has been raided, and substantially raided, and it is not a very large Sinking Fund. Secondly, with regard to economy the noble Lord was conscious that he was on extremely thin ice. As regards economy, the policy of the Chancellor of the Exchequer has been a complete and lamentable failure. Every promise made, and every expectation put forward, has been ruthlessly broken. The Chancellor of the Exchequer gave us to understand that he would reduce the Estimates by £10,000,000 a year. Expenditure which was to be down to £750,000,000 was last year nearly £840,000,000, and it had therefore gone in precisely the contrary direction to that which we were led to expect and to about the same extent.

Then the noble Lord had the temerity to say that my noble friend Earl Russell had said that the Betting Tax was a failure. There has never been such a fiasco with regard to any Tax. Almost the first speech which I made in this House was when Lord Newton was pushing the Betting Tax. Basing myself upon the findings of the Select Committee which had gone carefully into the matter, I told your Lordships that it would not realise more than about £3,000,000 a year. The new Chancellor of the Exchequer comes in and he throws to the wind the Select Committee's Report, and the advice of his Customs officials, and he says: "Oh, what does it matter about the scale. Double the scale and we will get £6,000,000." It was pointed out that that would lead to very great evasions and that is what has happened. The Chancellor of the Exchequer has not even got £3,000,000 but only about £2,500,000, and I say that we were fully justified in what we have said. The Tax can be proved to be a complete failure. Then the noble Lord says that they are going on a different plan. That is so, but I should think no Minister has ever had to make more ignominious apologies than the Chancellor of the Exchequer has had to make with regard to this Betting Tax. I have nothing more to say on this Bill, and will now make way for others to speak upon it if they desire to do so.


My Lords, I confess that I feel myself on rather delicate ground in criticising the statement which has just been made by the noble Lord, Lord Arnold. If, on the one hand, I praise too highly the decision to which he has come, it may seem that I underrate the value of those massive orations which he is accustomed to deliver to your Lordships on various fiscal questions. I should very much dislike to seem wanting in proper appreciation of the orations themselves and of the industry which he has shown in compiling them. If, on the other hand, I were to deprecate the decision to which he has come, why then the noble Lord might even before the end of the present Session find some opportunity of delivering the oration of which he has been deprived to-night: and if he delays until next year the delivery of that oration I am almost afraid that we shall have a double dose because it was not given this year and a treble dose because it was not given last year. I feel that the best thing I can do is to leave to the noble Lord who moved the Second Reading of this Bill well accustomed as he is to diplomatic formulæ, the proper terms in which to characterise the decision to which the noble Lord, Lord Arnold, has come.

For my own part, I shall be content with raising a few points and using them as illustrations of what I conceive to be the present position of the finances of this country. This Bill, indeed, comes to your Lordships' House in a somewhat bedraggled condition. It has not the pristine refulgence with which it was illuminated in the Budget Speech of the Chancellor of the Exchequer. Many of the feathers have been torn out, and a great deal of the rest of the measure is tarnished. It seems to me that the Chancellor of the Exchequer must be a very disappointed man. I can imagine him in 1924, when he accepted office, looking forward to four Budgets, and imagining that at the end of that period at any rate he would be in the position of a general benevolent autocrat, scattering benefits upon the whole of the country. Instead of which, what do we find? That no Chancellor of the Exchequer in a time of peace has instituted more taxes than he has: and, instead of having effected some economy, the Expenditure has gone up. I can fancy the Chancellor of the Exchequer at that time looking four years ahead, and saying to himself that at the end of that time he would certainly have relieved the breakfast-table, he would probably have reduced Income Tax and Super-Tax, he would at the end of four years be able to do something for beer, and have scattered benefits all round.

But, if I mention the breakfast table and sugar, I cannot forbear to comment upon one or two remarks made by the noble Lord who moved the Second Reading. I think, when he talks of the amount of money which is saved to those who buy their sugar, he ought also to take into account the enormous subsidy in which sugar beet has involved this country. Something like £10,000,000 was spent last year upon it. That ought to be added to the cost of the sugar in this country to-day. I was amused at the way in which he skimmed over the difficulties in which the sugar refineries found themselves. If they found themselves in difficulties it has not been due to the importation of beet sugar, it has been due to the sugar subsidy being given to the factories in such a way that the refineries themselves were obliged to close down. And it is only the amendment made in the present Budget that has gone some way towards rectifying the original mistake made by the Chancellor of the Exchequer. We have even in this year more taxation, without a promise of considerable relief next year. Meanwhile, unemployment has gone up 200,000 since this time last year, depression in our greatest industries is far worse—it is even worse than it was when the Budget was introduced. Such is the effect of the Budget upon our great industries.

The Road Fund has been raided, anticipations have been made in various directions, and, if we take one single case, I find it in The Times this morning in a letter concerning the Sinking Fund. The noble Lord is, of course, aware that there is a good deal of controversy as to the exact amount of money which is put by in the Sinking Fund. But we find in The Times this morning this, which seems to me a very acid test of the success of the Chancellor of the Exchequer:— When the Chancellor of the Exchequer took office in November, 1924, Consols were at 58⅜, to-day they are down to 55½. That is a measure of the success, or rather of the want of success, of the Chancellor of the Exchequer, because the credit of the country has gone down, while the credit of almost every other country in the world has gone up in the last four years. How is it possible to speak of successful financial policy when we find that the credit of this country has gone down, and down, and down, since the present Government took office? In those circumstances I do not think it is an exaggeration to say that, in view of what we hope may take place before very long, the conversion of large sums of money at a lower rate, the financial policy of His Majesty's Government has proved to be a failure.

There are now two questions which I should like to put to the Government. The first one is this: Where are the economies which we were led to expect? There was that famous speech of Mr. Winston Churchill, in which he spoke of saving £10,000,000 a year, and he was asked, in order to remove all doubt, whether he meant only one set of £10,000,000, or £10,000,000 each year, and he explained that he meant £10,000,000 in each successive year. That would have meant, as the noble Lord, Lord Arnold, has said, no less than a total of £40,000,000. In 1925 the Budget was for £799,000,000, and in 1928 it is for £805,000,000. The Chancellor of the Exchequer is something like £40,000,000 out on the calculation which he then made. It is a serious mistake to have made. It would have been possible for the Chancellor of the Exchequer to have done the whole of his rating reform, without putting any more taxation upon the people of this country; there would have been no Petrol Tax at all and the rating reform could have been instituted at once without waiting till next year, with all the dangers of delay. The depressed industries would have been helped at once, and the medicine would have been administered to them without delay, and without waiting perhaps until they are too exhausted to benefit by it, when at last they may get it.

In these circumstances we may ask why the Chancellor of the Exchequer has not delivered the goods? It is all very well to speak, as his apologists do, of automatic increases, but there have been automatic decreases at the same time. Take one instance, the single matter of War Pensions: those naturally diminish year by year. Again, world prices are lower. The prices of a whole number of things which must come into the calculations of the Budget should surely have been affected by the decrease in world prices. As each year goes by since the end of the War the gulf between war expenditure and peace expenditure ought to have got broader and broader; instead of which, it tends to become more and more narrow. We need a movement in the opposite direction. There has been a failure to economise to any apparent extent in 1928, and the noble Lord must forgive us if we say that we are not grateful for those economies of which he has spoken, and which do not seem to fructify in any benefit to the people of this country, or in any reduc- tion of taxation. Are things going to be any better in 1929? Is there any hope that there will be economy during the present year? I wish His Majesty's Government could tell us what is being done to prevent a deficit next year, or to increase a surplus—such a surplus as We may hope to see.

If my first question deals with economy, my second question is this: How can this Bill, taken in connection with other Bills, be reconciled with the specific pledges of the Conservative Party and His Majesty's Government at the last Election that they would not introduce a fundamental change in our fiscal system? This Bill, it is perfectly true, contains but small measures. There are buttons—not that I would under-rate buttons: they are of immense importance to everybody, even to members of your Lordships' House. I dread to think of the appearance of this House if there were no buttons in this country. But while buttons were in the original Budget hollow earthenware goods were slipped in in the course of the Budget debate and they are now included. I say at once that by themselves these things are perfectly trivial. But, taken together, these things and others make a substantial instalment towards the institution of a General Tariff.

Let us take an afternoon in the life of one of those new women voters who will be courted by every political Party at the next General Election. Let us imagine one of these women voters going out to get for herself a new dress. She will have to buy some silk, either artificial or real, both of which will be taxed. She will buy some lace with which to decorate the dress and that will be taxed. She will buy some silk thread with which to sew it together and that will be taxed. If she makes the dress herself the scissors with which she cuts it out will be taxed. If she buys a pair of gloves or stockings to go with her dress they also will be taxed. If, after the exertion of buying these things from the neighbouring draper, she has a cup of tea, she will drink taxed tea out of a taxed cup on a taxed saucer, and from a taxed plate she may eat a currant bun in which the currants are taxed. If in addition she eats a piece of iced cake the sugar in the icing will also be taxed. Then, having re- freshed herself with the tea, she may go to a cinema. There from a taxed seat she will watch a taxed film and will probably smoke a taxed cigarette, lit with a taxed match or a taxed lighter, and she will listen to a band in which every single musical instrument is also taxed. She may finally end the day by going to bed with the help of a taxed gas mantle and awake next morning to take a draught of taxed morning salts.

That is not an alluring prospect, I think, to put before the new voters of this country. But it illustrates the fact that all these taxes put together, small though they may seem, must add very considerably to the cost of living not only of the woman voter but of every single individual in this country. They cannot help being taxed. I venture to think that these taxes go a great deal further than the noble Lord who introduced the Bill seemed to think. Every Budget which has been introduced by the present Government has been an instrument of Tariff, and we want to know where the matter is going to stop. When a dam bursts, first of all there are a few drops which come through. They become a trickle. The trickle becomes a rivulet. The rivulet becomes a stream. There is still more pressure and at last the dam bursts. Very much the same kind of thing is happening in regard to Tariffs. Each of these Budgets has contained some measure of Tariffs. Others have been introduced under the Safeguarding Duties.

The steady trickle which has been going on from 1924 is now being succeeded by a sudden pressure for the safeguarding of iron and steel, and there are deputations upon the doorstep in Downing Street constantly asking for the taxation or the safeguarding of iron and steel. There are 200 Members of Parliament pledged to demand the same thing, and the Home Secretary and the Secretary of State for Dominion Affairs, if we may judge from the speeches they have been making lately, are also likely to use all their influence to exert pressure in order that iron and steel may be safeguarded. In those circumstances, I think we are entitled to ask what are the intentions of His Majesty's Government. Do they propose to remain in the same condition as did Lord Balfour's Government from the year 1903 to the end of 1905, or will they tell us what exactly is in their minds? The iron and steel manufacturers are refusing at this moment to put their house in order in many cases because they have so great a hope that there may be assistance given to them by Protection and by a Tariff. That is a mischievous state of uncertainty for trade to-day, and I hope that His Majesty's Government will make perfectly clear what the intentions are which they have in their minds.

For the moment I am unable to share the optimism with which the noble Lord who introduced this Bill stated its contents to your Lordships' House. Unemployment in this country is not only very severe, but it shows signs of becoming worse and worse. The shadows are deepening over the great industries of this country. The position is very serious and I venture to say that there is little or nothing in this Bill to give us any hope of an immediate or even of an ultimate great improvement in the condition of industry in this country. I make full allowance for the promise of immediate help to such industries, for instance, as the railways; but one cannot blind oneself to the fact that the fall in the volume of their trade seems only too likely to swallow up the benefits which they are likely to receive from the rating relief. If that happens it will be difficult or impossible, of course, for them to give or to transfer any benefit to the traders or consumers of this country. In those circumstances, I say that His Majesty's Government have failed in this Budget to provide us with any real hope that they appreciate the seriousness of the position or that they propose measures which will relieve the present unfortunate position.


My Lords, I agree with what was stated by the noble Lord who moved the Second Reading of this Bill; but your Lordships have so little power to deal with it that I sometimes wonder whether it is worth while speaking upon the question at all. Taking the community as a whole your Lordships are probably amongst the largest payers of taxes in this country and yet we have not the slightest power in fixing a tax or in spending the money which results from taxation. I hope it will not be long before a change is made which will give us some measure of justice regarding the large expenditure which passes through our hands into the Treasury. I listened with very great interest to the speech of the noble Lord who introduced the Bill. He had a very difficult position to fill, but I think he did remarkably well. Although I agree with the speakers who have followed him that the promises regarding a reduction of taxation are not being fulfilled, I think the noble Lord made good his case, so far as it could be made good.

It is a remarkable thing that we cannot get some improvement in our various industries. The industries of other countries, France, Germany and Italy, are all thriving; but our industries seem to be unable to move towards better things and, so far as I am able to see, the prospect in the immediate future is very bad. The Government are certainly making an attempt to deal with the matter. They are taking off three-quarters of the rates; but, of rourse, that will have to be paid for in some other form. It is not a real reduction in taxation. It is simply moving the burden from one shoulder to another. It is, so to speak, taking the burden from one horse and putting it on another. The burden is still there and it will have to be borne by someone. The concession which the Chancellor of the Exchequer proposes to make to the railways will, I presume, be passed on to the traders. It is not a very large concession when you consider the vast sums which our industries are losing, but we are only too glad of the relief which the Government propose shall come into effect in October, 1929, though why that date has been fixed I fail to understand. While the grass is growing the horse is starving.

It is certainly the case that in my experience our industries have never been in such a condition as they are in at the present time, and I see little prospect of any immediate improvement. I think the effort which is now being made by the Government ought to have been made at once, and ought not to have been put off until October, 1929. I wonder if the industries will ever get this help in October, 1929? It is a pledge given by the present Government. Will the present Government be in office in October, 1929? If they are not in office I do not see how they are to compel another Government to carry out this pledge. It is an advantage which is so far ahead that one can- not say it will do very much good, even if it should be given. What will be the position of the large manufacturers and coal producers? They are expecting to get this relief, and in dealing with the various contracts which are put before them and with competition with other parts of the world, they will naturally take into consideration this relief which is promised to them, but what will be their position if they do not get the three-quarters reduction in rates? It will be a very serious matter indeed.

I know that at the present time in the North of England—and I suppose it is the same in other parts of the country—large industries are struggling to pay their way. They are all losing very heavily, and if we could get into the bank parlours and see the overdrafts that these large concerns have I think we would get a great shock. I feel quite sure that the bank directors who have made advances are looking with very anxious eyes indeed to the immediate future of these great industries. The Government, in my opinion, have no excuse for putting off the benefit until October, 1929. A very important number of manufacturers and producers waited on the Chancellor of the Exchequer. The meeting was held in private and I believe they made a very strong impression upon him. I think that is the reason for his giving the concession to railways on the condition that they pass it on to the producers in January next. I cannot help thinking that if the Chancellor of the Exchequer had made the payment at once it might have had a very important effect upon the various industries throughout the country. I know that many anticipate that if the concession is given it will lead to many more people being employed than are employed at the present time. I myself am not so sure of that, but one thing I know. That is that unless some concession is given at once a large number of factories and collieries will be obliged to shut down if the banks do not come to their rescue. At the present time there is very great difficulty in getting banks to do that.

There is one other matter to which I should like to call attention, and that is the Surtax which is proposed in the Budget. I cannot understand why the Chancellor of the Exchequer is putting on an additional tax in the shape of the Surtax. It is nothing more nor less in my judgment—and in the judgment of those who have studied the matter very closely—than an increase in the Death Duties. In principle, I have never objected to the Death Duties, but there is no tax that I know which is doing more harm at the present time than the Death Duties. Your Lordships know what is taking place throughout the country, how estates are being sold. All the small landowners, many of whose families have held estates for a century or two, have been obliged to sell those estates owing to the Death Duties, with the result that their employees have to find work elsewhere. These squires, these small landowners, have been among the most useful classes in the country. It is from them that we got our officers for the Army and the Navy and our civil servants. Until the county councils were established they managed all the county business and managed it in my opinion much better, more economically, and more for the welfare of the district than the county councils do at the present time. We are destroying that class wholesale. Surely a Conservative Government ought to make some effort to keep these landowners in their positions. The Death Duties are squeezing them all out. I do not see how in the course of twenty, thirty or forty years there will be any of them left. That is a very serious matter.

I must ask your Lordships to consider also how Death Duties affect the industries. A man starts a business, develops it, and puts all his capital into it. As it grows bigger and bigger he gives more and more employment. It is a great advantage to the country that he should do that. Probably he has no resources outside his business. He dies. Those who succeed him are obliged either to sell their shares in order to pay Death Duties or get the money from the bank. That has a bad effect upon employment in the country. If you are to have Death Duties, you have no right to put the proceeds of them into the ordinary Revenue for the year. They ought to go to reduce the National Debt. They are capital. It is a capital levy and you ought certainly to hand it over for reducing the National Debt. Parliament has no right to use that money year after year in order to lower the taxation of people who ought to pay the taxes required for present expenditure.

Another point that has not been alluded to in this debate is the extraordinary taxing of accruing interest. There is a clause enabling the Government to tax accruing interest. I was very much struck the other day by reading some remarks by Mr. Justice Rowlatt with regard to the powers which are being taken over by the Civil Service. I have also been much impressed by reading two articles by the Professor of International Law in the University of London, showing how the bureaucracy is practically controlling the whole of legislation in this country. I am glad to see that the Lord Chief Justice is writing a book on that question. I feel sure that when that book is issued it will be very much read, because this bureaucratic power is becoming so great that the public will be bound to concern themselves with it. You are passing legislation and the control of matters in this country over to the Civil Service and taking it out of the hands of Parliament.

What does Section 33 of the Finance Act of 1927 say? It says:— Any individual upon whom notice is served by the Special Commissioners requiring him to furnish a statement of and particulars relating to any assets in which, at any time during the period specified in the notice, he has had any beneficial interest, and in respect of which, within such period, either no income was received by him, or the income received by him was less than the sum to which the income would have amounted, if the income from such assets had accrued from day to day and been apportioned accordingly, shall, whether an assessment to Super-Tax in respect of his total income has or has not been made for the relevant year or years of assessment, furnish such a statement and such particulars in the form and within the time (not being less than twenty-eight days) required by the notice. What is the meaning of that? It means that the Treasury has the right to ask for anything over any length of time and insist upon every detail of the whole of your income being handed over to them. It is a most serious matter. There are undoubtedly some men who are not honest and who "do" the Chancellor of the Exchequer out of what he ought to have, but we are not all thieves. Such men must be very few indeed and yet, in order to help the Chancellor of the Exchequer, every Income Tax payer is called upon to render such an account as that. I feel quite sure that not one-third or one-fourth of the taxpayers could do that without employing very skilled accountants.

The Income Tax Acts have now got into such a condition that no ordinary layman can understand them. All who have any reasonable income are obliged to employ acountants to go into the matter and I think the Treasury and the civil servants who represent the Treasury do not object to that. I am inclined to think that was the object they had in view, to make things so difficult that the ordinary taxpayer is unable to know how he has to render his accounts. He is obliged to employ experts in these matters and that, of course, costs a good deal of money. If he does not feel inclined to do that then he has to pay practically what he is assessed at, and in many cases, though I do not say it is intentional, the assessment made is one which is not legally enforceable. If you wish to save yourself you are obliged to take action in order to get justice from a High Court Judge, and there have been attempts on the part of the Treasury to prevent that. I remember when I was in the House of Commons there were two attempts, I think, to prevent any appeal being made outside the Treasury and the Special Commissioners. The House of Commons of that day refused to give the Government any such power, because they realised it was absolutely necessary that the taxpayer should have justice and he was certainly not likely to get it from the Department.

I think it is very important indeed that we should have the Income Tax Acts in such a form that the ordinary taxpayer can understand them. The Income Tax Acts ought to be codified. That would be a great opportunity for a distinguished lawyer. I feel sure the Government would agree to that, even if the Treasury would not. I think that the man who has to pay taxes ought to be able to understand what he has to pay and why he has to pay it. The more I look into these matters the more I am satisfied that sooner or later, unless this matter is dealt with in that way, he will be compelled to pay what he is assessed at. For the taxpayer simply to be in the hands of the tax collector is, I think, most unfair and most unjust. I do wish that the Government would take this matter into consideration and make these Acts more simple than they are at the present time so that people can understand them.

Your Lordships have no power, as I say, in connection with this Bill. Your Lordships, who are probably amongst the largest taxpayers in the country, have no power whatever to deal with these matters, and I do wish that the Government would hasten with their Reform Bill so that we may be given some justice at all events and be able to vote upon those matters in which we have such large financial interests. I am afraid that probably we shall have to accept the position, and that in the words used by the noble and learned Earl, Lord Birkenhead, when discussing the Franchise Bill, we shall simply have to accept it with resolute resignation. I am very glad indeed to find that the Chancellor of the Exchequer is anxious, if possible, to deal with some of the questions which I have put before your Lordships. I do hope that with all his ability—because no one can hesitate for a moment to acknowledge the great ability of the Chancellor of the Exchequer; whether we approve of what he says and does is a different matter—he will use that great brain power which he has to deal with this question before he goes out of office, so that we may have some justice in connection with the money we supply for the administration and defence of the country.


My Lords, I very thoroughly agree, if I may say so, with the noble Lord who has just sat down with regard to the great desirability of having the Statutes which tax the subject more intelligible if that is possible. I am not in a position to say whether it is possible or not. I am just as well aware as the noble Lord that a good many clauses in a Finance Bill of the present day are extremely difficult to understand, but I think that largely arises from the fact that taxation, especially in matters of Income Tax, is itself now so complicated that, especially when it comes to all the exceptions, allowances and qualifications that it is necessary to make, it is extremely difficult for the most skilful draftsman to express the meaning of Parliament in more simple language. But I know that at the Treasury they are very well aware of the desirability of simplifica- tion, and I think my right hon. friend the Chancellor of the Exchequer has appointed a Committee to go into the matter with a view to simplifying, if it should be found possible, the language of the Statutes.

I do not think the noble Lord opposite gave me very much to reply to. He was commendably brief, if I may say so, but he made up for his brevity by his vehemence. He intended, I imagine, to convey to me that he did not agree with the finance of the present Government. That, I fancy, was the purport of his speech. He expressed that in unqualified language, and as there was no argument used in support of that—I do not complain; I can assure the noble Lord that I make no complaint at all, for he explained why he did not give any—it only remains for me to say that I am in the unfortunate position of having to reply that I do not agree with the noble Lord. He carries out the maxim that an Opposition should oppose. He says in very strong and violent language that everything that the present Government have done in the way of finance over the whole of four years has been a most hopeless failure from beginning to end. I do not think he accused us of knavery but only of folly. I must assure the noble Lord that my view of the finance of the present Government is very different from his own, and we must leave it at that.

As the noble Earl opposite [Earl Russell] is now back in his place, I should like to repeat that I entirely disagree with him, and with the noble Lord who repeated his view in still more vehement terms, that the Betting Duty has been a failure. Of course a great deal depends upon your definition. The noble Earl did not say when he spoke of failure what he meant by that word. If he only means that the revenue did not come up to the estimate, that, of course, is quite true. The noble Lord beside him [Lord Arnold] told us that some time ago, speaking in debate, he made a much more accurate forecast than the Chancellor of the Exchequer of the money to be derived from the Betting Duty. I congratulate the noble Lord. He is evidently much more familiar than the Chancellor of the Exchequer with the conditions and the mentality of the particular class that has to pay this particular taxation. All I can say is that the Chancellor of the Exchequer, not having had the advantage of consulting the noble Lord, has had to struggle along with this want of information.

As I said before, it was originally a pure guess as to what money was to be derived. I can assure the noble Lord of that, for I was at the Treasury at the time. The actual figures upon which the estimate was made were, in point of fact, supplied by the bookmakers. I was present at a deputation which the bookmakers sent to the Treasury, and it was upon figures that they supplied that the guess was made. It was avowedly a guess, because the officials of the Customs advised the Chancellor of the Exchequer that there were really no data to go upon, but that they must put some figure by way of an estimate, and, making the best shot they could upon the figures supplied by the bookmakers, they put it at £6,000,000. From that point of view, of course, it has been a failure, but it has not been a failure in the sense that it has supplied the Exchequer with very valuable revenue. Supposing that the original estimate had been put at £3,000,000 instead of £6,000,000, nobody could have said anything against it, except perhaps with regard to the evasion that has taken place, with which we are now familiar and with which the noble Lord opposite was evidently familiar beforehand because he was able to anticipate it. At any rate we are familiar with it now, and it is largely on that account that we are hoping to get round it with the machine known as the totalisator.

The noble Earl who sits opposite [Earl Beauchamp], using very much more measured terms, was hardly less critical of the finance of my right hon. friend the Chancellor of the Exchequer, but in some respects I am inclined to accept what he said. He said, for instance, that Mr. Churchill must be a very disappointed man. Well, my right hon. friend is one of the most buoyant people I know and no one suffers less, I think, from depression, but I imagine that most Chancellors of the Exchequer, certainly the more ardent and optimistic characters, when they first take office probably put their expectations too high of the benefits that their administration will be able to confer upon the country and, when they come down to the actual facts after some years, I imagine that most of them must suffer from a certain amount of disappointment. I have no doubt that it is quite true that my right hon. friend has not been able to do a great many things that he hoped to be able to do when he started. Again and again we have heard quoted that speech of his in which he spoke of an economy of £10,000,000 a year. It was never given in the form of a definite pledge; it was really the expression of a hope, and undoubtedly it proved to be too optimistic for performance.

But really I think the noble Earl and others would be more generous in their criticism if they paid a little more attention to the very peculiar circumstances with which the Chancellor of the Exchequer has had to struggle. You would never gather from the speech of the noble Earl that there had been a strike within the last two years; you would never gather that there had been a loss, as I have pointed out, of £80,000,000 of revenue, which would have gone a very long way towards enabling Mr. Churchill to realise his hopes; you would never gather from the noble Earl that there had been any additional charge, any check to prosperity, any loss of income in this country, or that my right hon. friend had had to struggle with any adverse conditions at all. I think that, if we give full weight to all the adverse circumstances with which the Chancellor of the Exchequer has had to contend in the last three years, the wonder is that the finances of the country are in such a favourable position as they are in to-day and that there has not had to be a very much larger addition to the taxation of the country.

The noble Earl referred to the national credit, and I think he quoted, by way of showing that the credit of the country has fallen in the last year or two,—a proposition which I do not for a moment accept—a fall in the value of Consols. There are many reasons for that. I think that the "sweet simplicity of the three per cents" that we used to hear about in bygone days has lost a good deal of the simplicity and a good deal of the sweetness. Owing to a number of circumstances, such as the great quantity of new Government securities, the popularity which once attached to Consols is a thing of the past. I can remember when Consols stood at 113—I do not know how many years ago, but it is a good many longer than I care to recollect—and there has been a continuous fall over a very long period.


They were three per cent. then.


During that time a great many different Governments have been in power, and I do not think that you can take some particular fall in the value of Consols within a narrow recent period as any real indication of the state of our credit. I speak under some disadvantage in this respect in replying for the Government. Not being now at the Treasury, I have not all these figures by way of reply at my fingers' ends, as I might have had if I were still at the Treasury, and I have not even the means in this House of looking into them. But let me give one illustration on the other side. I find that Treasury Bonds, 1933–5, have gone up as between September and the present time a premium of one quarter, and when I mention that this is a very short-term security, five-year Bonds, the fact that there has been a rise as between December and the present time, though I do not want to put it too high, is at least a fair set-off to the point made by the noble Earl.

The noble Earl then gave us a very amusing excursion into the indirect taxes by way of illustration. I recognise the illustration from an Abingdon Street leaflet and, as I am quite certain that the noble Earl would not quote an ordinary Party leaflet in your Lordships' House, I take it that he is the author of the leaflet, and a very clever and ingenious leaflet it is, if I may say so. But after all, if you are going to have indirect taxation at all, it is not very difficult to construct a little tale of that sort. You have only to catalogue the various articles subject to taxation, and then make a little story of the young lady friend of the noble Earl, who goes round from the tea-shop to the cinema, and to the cigarette shop, and so forth—I notice she did not touch whisky—and it is a very easy thing, for the sake of throwing prejudice upon a financial policy, to show how these things are taxed. There are, however, other sides to these matters, and I would like to say to the noble Earl how these things occur to me. I thought to myself, when he was telling us that story, that one might have followed the young lady into some of the other places where she might go, and imagine her walking down the street in front of one with those beautiful pink and yellow objects pattering along which are such conspicuous features of our landscape at the present time. One might say, rather, "there is a leg-up for the Treasury," and if you take it from that point of view you will find in all these matters of taxation matters rather for congratulation than otherwise. I have no doubt that the young lady of whom the noble Earl writes in the Abingdon Street leaflet is a patriotic young lady, and when she realises that her tea and cigarettes, and so forth, pay some infinite fraction towards the expenses of the country, she will not be disgruntled, as the noble Earl seems to think, but after the next Election will vote for the Conservative Government.

The noble Earl puts one specific question to me. He says: Can we hope for any economy in 1929? I do not know whether the noble Earl would believe in the economy if he saw it. We produce economies, but our political opponents do not believe in them. I have already stated a very large number of reductions of personnel in the Government Departments. If I had been prepared to deal with that particular point I could have produced evidence of far-reaching economies which have taken place during the last four or five years, but they do not impress the noble Earl's mind as they do my mind. I despair of being able to produce any effect, even by evidence, and therefore how much less by a promise, but if it is any satisfaction to the noble Earl I am quite ready to tell him, and am quite justified in saying, that the efforts of the Chancellor of the Exchequer are continuous and unrelenting. I do not like to say how much success will attend them, but I certainly can with all sincerity tell the noble Earl and your Lordships that the Chancellor of the Exchequer and the Government will, wherever it is possible, and in every possible direction, enforce all the economies they can enforce, consistently with the proper administration of the country.


My Lords, I do not propose to detain you for more than two minutes. I would not have intervened in this debate if it had not been for a certain statement made by my noble friend Earl Beauchamp in the course of his remarks. He was referring to the question of the safeguarding of iron and steel, and in doing so he suggested—I took down his words—that iron and steel manufacturers are refusing to put their houses in order. I do not think that that is an accurate statement, and I do not think it is a fair statement. I think the noble Earl was really answered in the speech of the noble Lord, Lord Joicey, a few minutes afterwards, when Lord Joicey informed your Lordships that these firms were almost entirely in the hands of the banks, and that many of them were in a very struggling position, and hardly knew how to stand up to the difficulties with which they have to contend to-day. I know something about this subject, and I know that the iron and steel manufacturing firms of this country have had the most terrible difficulties to contend with since the War, and that when they come, as they come to-day, and ask the Government to place a Safeguarding Duty upon their industry, it is not because they have not done everything they can to set their house in order, but because they have done everything they can and are not able to find their way out of their difficulties.

To-day we have in this country over 4,500,000 tons of steel imported into this country from foreign sources, and it is well known in the iron and steel trades that a small and reasonable duty upon imported iron and steel would enable this country at any rate to produce half of the iron and steel which is now imported. Not only that, but it would redound to the advantage of the coal industry as well. In fact we know that if we were to produce even another 2,000,000 tons of steel and iron in this country to-day, instead of importing that amount from overseas, it would mean the consumption of nearly 8,000,000 to 10,000,000 tons of coal. As I said just now, I would not have been led into intervening in this debate, but that I did not think it fair and right to the steel and iron manufacturers of this country that the statement made by the noble Earl, who holds a very responsible position in the country as a leader of the Liberal Party, should go entirely uncontroverted.

On Question, Bill read 2a: Committee negatived.

Then (Standing Order No. XXXIX having been suspended) Bill read 3a, and passed.