§ Order of the Day for the Second Reading read.
§ THE SECRETARY OF STATE FOR AIR (THE MARQUESS OF LONDONDERRY)
My Lords, it devolves upon me this afternoon to move the Second Reading of the Finance Bill in this House. It is not for me to remind your Lordships of the limitations of the powers of this House in relation to Bills of this character. Your Lordships are well aware that we in this House can only reject such measures. We have no power of amendment. However, I need not assure your Lordships that I am not relying upon the fact that your Lordships' powers are limited, to secure the consent of your Lordships to the Second Reading of this Finance Bill. Whatever criticism of detail we may be desirous of making, I am sure that the House will take no serious objection to the Bill and its principles as a whole.
May I remind your Lordships briefly of the circumstances under which the present Government took office? I shall not trouble your Lordships by any reference to the financial policy or financial measures anterior to the date when my noble friend the Lord Privy Seal, as Chancellor of the Exchequer, framed a 843 Budget which demanded immense sacrifices from every member of the community, but at the same time sacrifices no less serious than the circumstances warranted and demanded. All I will venture to say on the present occasion is that those sacrifices, the sacrificial Budget, if I may use the expression, to which I have alluded, were the result of financial circumstances for which the Socialist Government as a whole must assume a certain responsibility. We can congratulate ourselves and the country upon the courage with which the Lord Privy Seal, the Prime Minister and the Secretary of State for Dominion Affairs faced the situation; and in spite of their former colleagues, who were urging them to desert what they believed to be a sinking ship, joined with the other two Parties in the country and formed a Government of a national and non-party character. The vindication of that decision, if vindication is required, is found in the high esteem in which this country is now held throughout the world, a position which it appeared momentarily to have lost, and in the outspoken admiration of other countries for the manner in which Great Britain is mastering her difficulties and giving an example to the rest of the world.
Your Lordships are familiar with, in fact I think most of you have painful recollections of, my noble friend's second Budget last year; and I need not remind the House of the appeal made to the country by the Prime Minister, which followed those financial proposals—an appeal for support of the National Government in its immense task of reconstruction. I think we can say that the result certainly justified the appeal. The strength of this country is truly immeasurable. No one can place any limit on the courage and determination of its people. The more desperate the challenge, the higher and the more valiant the response. When the history of this dramatic period through which we are passing comes to be written, I believe there will be every reason to be proud both of the achievements of the people of Great Britain and Northern Ireland, and of the policies of the National Government which guided them through the crisis.
May I draw your Lordships' attention for a moment to the magnitude of the task and to the grandeur of the national 844 achievement? The present Finance Bill gives me a suitable opportunity for making a very brief review. I can assure you that while I venture to trouble your Lordships with a few figures, they will be as few as possible. I may remind your Lordships that when my noble friend made his second Budget statement in September last, he had to provide for meeting a then prospective deficit on the year's accounts of no less than £74,000,000. At the close of the financial year 1931–32, there was, as the result of the stupendous efforts of the country in carrying out the financial policy advocated by my noble friend in September last, a small apparent surplus of £364,000. The magnitude of the achievement as thus shown is amazing enough, though as a matter of fact, as I shall endeavour to prove to your Lordships, it is even greater than appears at first sight. I spoke of an apparent surplus of £364,000, but the real surplus is greater than that, because this result, this balancing of the national account with a small revealed surplus, has been achieved after taking into the revenue of the year from the assets of the Exchange Account £12,000,000, which is £10,250,000 less than the amount which had been provided for by my right hon. friend in the Estimates which he put forward, and in spite of the losses of revenue, resulting from the world-wide industrial depression, which amounted to some £21,500,000, from the receipts of Estate Duties, Stamps, and the Post Office.
I have mentioned deficits in revenue under certain heads. Let me call your Lordships' particular attention to the manner in which these deficiencies of revenue were made up. They were counterbalanced to the extent of no less than £19,000,000 by Income Tax and Surtax receipts in excess of the Estimates and to the extent of £13,000,000 by un-anticipated savings in estimated expenditure. Your Lordships there have a proof of two outstanding facts. First, the British taxpayer has answered the appeal of the Chancellor of the Exchequer to his patriotism to the full. This country, even in the stress and strain of the Great War, has in my opinion never shown itself to the world in a more favourable light. We are all of us taxpayers and, therefore, it is hardly fitting that I should indulge in too many raptures upon the 845 fine spirit and other virtues exhibited by the taxpayer, but I cannot help drawing your Lordships' attention to the fact that the second Budget of last year not only increased the burdens of the Income Tax to the existing Income Tax payers, but also brought into the ranks of the payers of this heavy tax a large number of men and women who had never been called upon to contribute before. I think I can best sum up the situation if I say that no part, no class, of our population has failed to do its duty and to make its full contribution to the common stock.
Secondly, the National Government has achieved very considerable economies, but as I shall return to the subject of economy before I sit down, I will say no more on that head at present, though many who are now crying out for economies speak as if we had not already made considerable steps in that direction. Let me turn now to the finances of the current year, 1932–33, in connection with which the present Finance Bill is drawn up. On the basis of existing taxation and including the estimated yield of the various new Import Duties, and after making allowance for heavy reductions in the yield of the Income Tax and Surtax, there is a prospective deficit of £1,700,000 which is increased to £2,800,000 by the proposed changes in the Sugar Duties. This prospective deficit, is to be met and a surplus of some £800,000 provided for by the reimposition of a Customs Duty on tea, giving a 50 per cent. preference to Empire tea. It will be observed that provision is made in the present Bill for the reduction of the permanent annual charge for the National Debt by £13,500,000, which is the amount of the half-yearly instalment of interest on the American debt. All receipts and outgoings on account of Reparations or War Debts are being treated as being in suspense at present in order to avoid prejudicing the results of the Lausanne Conference.
Upon this Conference I do not propose to say anything to-day, and I am sure your Lordships will not expect it. The world is in a sad state of financial chaos to-day. The present dislocation of international finance is undoubtedly the aftermath of the War, complicated and enormously increased by regrettable shocks such as those concerned with failures of great magnitude. This state of 846 financial chaos gives every pessimist his cherished opportunity of painting a dark picture and indulging his fancy for gloomy forebodings. At the same time, he should realise that he may do enormous damage by the spread of the dangerous psychology of defeatism. Nothing ever was so bad as it is painted by the pessimist and nothing ever will be. On the other hand, it would be foolish to indulge in an unreasoning optimism and to proceed as though there was nothing to worry about. There is of course plainly much that requires remedy. We know that numberless remedies are being propounded daily by numberless prophets in the newspapers and reviews and in monographs upon the subject. In my view, my very humble view, there are two prerequisites for the cure; first, that the nations should pull together and adopt the same financial policy; and, second, that the nations should look up again and take confidence. The secret of financial success lies in the restoration of confidence and in the general recognition of the increasing interdependence of the nations in financial matters. We in this country at any rate have no reason to lack confidence or to hang our heads. When I was at Geneva recently nothing impressed me more than the manner in which the nations look to us to give them a lead. A confident, enterprising Britain is still, thank goodness, a necessity to the world at large.
Your Lordships will quite justifiably expect me to say something on the subject of the Exchange Equalisation Account, for which powers are taken under Part IV of this Finance Bill. I think that my right hon. friend, the Chancellor of the Exchequer, speaking in another place on the Report stage of this Bill, on Thursday last, made the position perfectly clear. The object of the fund and the purpose for which it will be operated is to secure the stability of the pound in the exchange markets of the world. It is not for me to attempt to teach your Lordships an elementary lesson in international commerce and finance. In your Lordships' House there are many who are far better qualified than I am to speak upon these matters and at whose feet I am always glad to sit. But it as a self-evident proposition that the merchant cannot trade with any facility, and often cannot trade at all, unless he is able within narrow limits to 847 estimate the position of the national currency in the exchange markets of the world with some certainty and for some time ahead. He wants to be able to quote and to accept "firm" offers at "firm" rates, and we hope that the Exchange Equalisation Account may assist in establishing this very desirable state of things. We are not unaware of the risks involved and the position will be most carefully watched.
I will only make one further remark of a general character and briefly refer to economy in which the whole country is vitally interested. Let me begin by saying that the Government is determined upon a policy of economy and retrenchment. So far as we are concerned we shall not spend a penny extravagantly. We stand for wise spending, not for waste. We know that this country cannot stand taxation on the present scale indefinitely, taxation which bears the more hardly with the falling prices in the wholesale markets, and places us at a disadvantage in the competitive markets of the world. But, as my right hon. friend the Chancellor of the Exchequer said in another place on Friday last, we do not want to be rushed into taking rash decisions without adequate investigations. I agree with him. Hard thinking is necessary, and there is a great deal more to be done than simply take up the pen and strike out or reduce certain items of expenditure. We must see where it will all lead us to. We are all apostles of economy, particularly, perhaps, when it effects other Departments than our own. As a House of Commons man, I have often reflected with a certain melancholy upon how many were the questions from private members which were directed towards objects that would result in increased public expenditure, and how very few tended in the other direction. That is, I am sorry to say, many years ago now, and for all I know there may have been a subtle change of spirit since the time when I sat in another place; but I doubt very much whether things have altered much, or, if they have, I regret to say evidence of the change has not yet reached me.
However, be this as it may, let me assure your Lordships that the Government have exercised, are exercising, and will continue to exercise the closest supervision over public expenditure. But we 848 must remember that true economy means wise spending rather than a reduction in expenditure where the spending is productive. We have a certain standard of living for our people which we are determined to maintain. We must aim at raising the lower standards of other countries rather than allow them to pull ours down. Thrift, I am glad to say, exists in abundance. Notwithstanding unnecessary expenditure here and there —and it is true we do see some examples of extravagance perhaps—the records of our savings banks, building societies, and other co-operative organisations to-day give us real cause for confidence and satisfaction. They give one reason to believe that the truly vast sums which are expended in what are known as social services are not altogether lost, for it is obvious that a substantial part of them finds its way back to the nation's resources in the shape of more or less permanent investment.
It cannot be urged with any justice against this Government that they have no care for economy when in the face of an increase in expenditure upon armaments, which is nearly general amongst other nations, we have pared our Defence Services to the bone. Some of your Lordships, I know, think we have gone too far in this direction. The fact remains that we have made these economies in the Defence Services, and the determination of the Government thus to give a lead to the world in the reduction of the burden of armaments is a great example which I sincerely hope we shall find the world willing to follow and adopt before the close of the present Disarmament Conference. I do not know whether there are other matters in the Finance Bill to which your Lordships would like me to make reference, but I can assure your Lordships that in the course of the debate I shall be prepared to answer any questions noble Lords may like to put to me. I beg to move.
§ Moved, That the Bill be now read 2a.—(The Marquess of Londonderry.)
§ LORD PONSONBY OF SHULBREDE
My Lords, this Bill is not capable of any amendment in your Lordships' House, and very rightly so. The noble Marquess who has moved the Second Reading of the Bill can be trusted to make a very effective and telling speech out of very 849 poor material. If I may say so, I think, in his own words, he perhaps a little over-indulged in his raptures over the present so-called National Government. The news we heard this afternoon from the noble and learned Viscount (Viscount Hailsham) that this Government is to all intents and purposes eternal, will fill the country with dismay, but I may be excused if I cannot quite see the glowing picture that the noble Marquess has painted for your Lordships. I see a different picture, one that I think is perhaps rather more accurate and one that appeals perhaps to a larger number than the picture painted by the noble Marquess.
The trouble that is in store for the Government arises from the very fact that they have rather overblown their own trumpet, that they have raised people's expectations too high, that they have held out such magnificent hopes, and that as in the course of time it is perfectly clear those hopes cannot be realised, the disappointment is going to be very deep. The noble Marquess made a few passing remarks with regard to the advent of this Government to power, and stated once more that a great deal of blame was to be placed on the late Labour Government for having brought the country to the pass that it was in. We have heard that so often. The reply is that the Labour Government having brought the country into such a pass, the National Government chose the leaders who were responsible for the policy of the Labour Government to be their leaders, and that has always seemed to me something that required further explanation.
What strikes one about this Finance Bill is its absence of any constructive plan with real conviction behind it. It is clear that it is the outcome of plans conceived by men who are shackled by compromise with one another. I have said that very often in your Lordships' House, because I feel it so very important that a. Government should be in power with men united by common conviction, which this Government is not. However, the Conservative majority in the Government have gained the upper hand, and they have been able to bring forward their policy of Protection, which they have advocated for many years past. Perhaps the most outstanding feature in 850 this Finance Bill is the introduction of the Import Duty Advisory Committee, a body outside Parliamentary control, which is going to have a free hand in the imposition of indirect taxes. That is an innovation to which insufficient attention has been drawn in the country. A great deal has been said about the impartiality of the three individuals who compose the Committee, but if they were archangels it would be perfectly impossible for them not to get entangled in the pressure, and very often worse than pressure, that a system of Protection, once it starts down the slippery slope, is bound to involve. The Liberals in the National Government have protested, and one is always waiting to see when the breaking point is coming for them to come out. The ex-Labour Ministers are prepared to swallow everything, and remain merely as a decorative appendage to the Government.
As the noble Marquess said, the situation to-day is a very serious one. He described the world as being in a sad state of financial chaos. Perhaps I may be forgiven if I quote an utterance with regard to the present situation in the world from a man who is in a key position in the financial world, and who is also a member of your Lordships' House. It has been quoted in another place, it has been quoted at meetings and I make no apology for quoting it again in your Lordships' House. Lord Revelstoke, speaking just two months ago, on April 13, said:What do we see when we look abroad to-day? We see a world writhing, as it were, in a purgatory of its own making. We see the stream of international commerce which is said to require, for its normal flow, some £400,000,000 of fresh credit every year, reduced to a trickle and losing its way 'in bogs and sands,' the price of goods having fallen below the cost of production. We see these goods losing value daily, because they have ceased, or nearly ceased, to change hands. We see the burden of debts and of taxation intensified to breaking point, solvent debtors in default, banking facilities at a standstill. We see the delicate mechanism of exchange crippled by arbitrary control, barter between Governments supplanting the efforts of individual traders, foodstuffs being destroyed in despair, warehouses glutted with a surplus that is only redundant because the consuming power of millions of people has been either frustrated or paralysed. Worse than all, we see standards of honour debased, and good will, the leaven which ought to permeate humanity, slowly perishing while distrust, 851 that fear of our neighbours which it is the mission of Christianity to dispel, spreads like a pestilence from day to day.No more eloquent description of the world to-day could have been given.
When one comes to the effort of the National Government which is embodied in this Finance Bill in such a situation as that, it must strike everybody that it is entirely inadequate and in no way meets any of the evils from which we are suffering. In spite of the rapturous language of the noble Marquess I would remind him that trade is not reviving. I would remind him that in the last two months 173,000 have been added to the list of unemployed. I cannot see that we have any reason for congratulating ourselves to-day. But we are ready to look forward to a series of Conferences that are going to meet. We are hoping that a new direction will be given to the Conference at Geneva which has arrived at a deadlock. I was rather condemned and laughed at a few weeks ago when I criticised the proceedings at Geneva, but everything I said then has proved to be absolutely correct. Let us hope that a change will come there. Although disarmament may not seem relevant it is fundamentally so because until the burden of armaments is lifted from off the backs of the taxpayers in all nations, and until greater confidence is restored between nations, the economic situation is very unlikely to improve.
We have the Lausanne Conference coming, and nobody can quite foresee what will be the outcome of that, but the delay has already made the European situation more difficult to cope with than if the Lausanne Conference had taken place in January. After that we have the Ottawa Conference. I for one cannot see what benefit is going to come to this country from the deliberations at Ottawa. I do not know how the raising of barriers around the Empire in order to promote trade within the Empire is going to help the world problem with which we are confronted to-day. Beyond that there is to be a World Conference in which America is to take part to consider methods of stabilising world commodity prices. Let us hope something will come from that. We are waiting and I do believe that by international action there may be some hope. I remember that when the Labour Government were in 852 power, and when the Labour Government at that time said that this was not just a national crisis but that it was a world crisis, we were often jeered at and were told that we were shirking our responsibility. Now everybody has clearly come to the conclusion that that was true, and that by these international Conferences, and by these Conferences alone, are we likely to get any improvement.
But, my Lords, this contribution to the difficulty is really pitiable. The burden of taxation is placed still more heavily on the poorer classes of the community—as if they had not enough to bear already, what with unemployment and the various cuts in pay. There is no doubt that the burden of taxation is being felt by, and is almost intolerable to, the middle classes of moderate means and also the large masses of the workers. At the same time we do not see that it is intolerable to the really well-to-do. I do not suppose that those of your Lordships who go this week to Ascot—where I see accommodation for 20,000 motor cars will be provided within a mile of the grand stand—will see any noticeable signs of poverty on the part of the rich. I think we can all notice that the life of luxury is extending rather than retrenching. At the same time, hidden from the public eye, there is an intensity of suffering going on which is being still further aggravated by the present Government's method of putting further burdens on to the backs of the workers.
I do not want to detain your Lordships as others are going to take part in this debate, but I must say that I regard procrastination and delay as fatal. What is wanted is to grasp this great problem with far more initiative than the Government are prepared to show. The noble Marquess said in the course of his remarks that when he was at Geneva—I was very much struck by what he said on this point—he found people were looking to Great Britain for a lead. I believe that is absolutely true. I believe that other nations are waiting. When is that lead coming? We have been hoping for it. Is there going to be a lead at Geneva? Is there going to be a lead at Lausanne? Is there going to be a lead at any of these Conferences? Or is there to be just a tentative advance, the cautious finding of fresh expedients to make further delay before any drastic 853 step can be taken? No, my Lords, this Finance Bill is insufficient. Mrs. Partington's mop was a far greater barrier against the waves of the Atlantic than this Bill is a defence against the very severe economic forces which are shaking the nations to-day.
§ LORD RHAYADER
My Lords, rising to speak for the first time in your Lordships' House I venture to crave indulgence for the few remarks I propose to make on the general financial policy of the present Government. The Budget which is embodied in this Bill is the second Budget of the National Government. The first Budget was introduced in September last by my noble friend the Lord Privy Seal, and he will not be surprised if I tell him that I much prefer the first Budget of the National Government to the second. The Budget of the Lord Privy Seal in September was designed to bridge a vast gap between the public expenditure and the national income. He succeeded in that Budget in accomplishing an almost unparalleled feat by arriving at a surplus in the beginning of this financial year. The second Budget, which we are discussing to-day, also, I am prepared to believe, will leave us with a surplus at the end of the financial year, although the prospects are not very encouraging. Both these Budgets aimed at being balanced at the end of the year, and I hope the second one may achieve it, but in one respect they come before the country with very different credentials.
The first Budget had behind it the backing of a united Cabinet and the support of every member of the Conservative and Liberal Parties in the House of Commons; and, although it asked for great sacrifices from all classes in the community, the country acquiesced and approved of what the Government did. The present Budget comes to us from a divided Cabinet. Many of the most important clauses, upon which the noble Marquess who introduced the Bill preserved a complete silence, are opposed by some members of the Cabinet. That is a unique position in which the country finds itself in considering the financial proposals of the present Government. I doubt if it has happened 854 before in the history of Parliament—at any rate in recent years—that a Budget, the financial scheme for the year, has been presented to the country with the admission that the strongest difference of opinion exists in the Cabinet in regard to certain parts of it. The Bill, therefore, lacks the authority with which Finance Bills have hitherto arrived in your Lordships' House. I submit that this makes it all the more necessary that your Lordships should devote a certain amount of time to the examination of the Bill.
I have a few observations to make ranging over rather a wide area. I shall not attempt to deal with them in great detail, but there are so many matters in the Budget to which I wish to refer that I would appeal to your Lordships for patience. The first thing I wish to say is this. I think—and this opinion will be shared by many people here and in the country—that the Government are spending too much money. The gross expenditure covered by the Estimates this year is no less a sum than £894,000,000. That is a figure which very seldom occurs in any of the publications which go out to the world, but the total figure is £894,000,000, nearly £90,000,000 more than the corresponding figure eight years ago. From that the appropriations in aid of some £47,000,000 are deducted —and may I suggest to the Government that an examination of those appropriations in aid is a possible means of economy?—leaving a net total of about £848,000,000. Further to ease the minds of the public, the Government always present the total without the self-balancing services and so reduce it to somewhere about £767,000,000. But the gross amount to be spent by the Government this year is £894,000,000.
That is far too much for the nation to spend on government. It is one-third of the national income. There is one point on which there is no difference between the Government Benches and the Opposition in this House and in another place—that that is too large a proportion and presses too heavily upon all classes in this country. It may be urged that this expenditure is sanctioned by the House of Commons and that therefore the Government are exonerated. I want to put, it to representatives of the 855 Government here, in the hope that they may pass it on to another place, that it is for them to lead and for the House of Commons to follow. I have had a great deal of experience in this matter and my conviction is that the House of Commons can never really effectively exercise economy unless the Government keep a very strict hold. The demands made upon members from their constituencies, the schemes put forward, the suggestions made always involve expenditure. What ought to be done is that, like any prudent individual, the Government should estimate beforehand what expenditure we can afford to make in the next twelve months. Then let them apportion that money among the Departments; in short, ration the Departments.
That is of course a reversal of the present procedure. What is done at the present time is that every Department furnishes its estimates to the Government, beginning some time before the end of the financial year. The estimates received from the Departments are added together and the total is the amount which the Chancellor of the Exchequer sets himself to raise for the national expenditure. I want that process to be reversed, and I suggest that if that were done it would be possible for the Government to make a great economy. In order that I may put a figure upon it, I urge them next year to look for a reduction of ten per cent. on the average in the present total expenditure. I do not see why, if they exercise real economy, they should not get the Estimates down to a gross £800,000,000 instead of the £894,000,000 at which they stand to-day. At the same time I hope there is going to be no delay in putting through the conversion scheme for War Loan. There is between £15,000,000 and £20,000,000 to be saved annually by a conversion scheme. The Lord Privy Seal smiles, but I do not know whether it is a smile of welcome or of a sarcastic nature. I am sure he wishes to see that scheme carried through at the earliest possible moment.
The second point to which I wish to draw attention is the Exchange Equalisation Account, which is Part IV of the Finance Bill. In spite of the words of the noble Marquess, I view those clauses with misgiving. £150,000,000 are to be 856 set aside for the purpose of stabilising the exchange. The Treasury, if I may quote Clause 24, are to cause the funds in the Accountto be invested in securities or in the purchase of gold in such manner as they think best adapted for checking undue fluctuations in the exchange value of sterling.Those words have a very fair appearance, but, in effect, they mean that the Treasury are going to speculate in sterling, that they are going to buy or sell sterling according as they think the market is going. Usually they will be operating against the tendency of the market. Is not that a very certain way of incurring loss? Already in the Finance Bill there is £8,000,000 of loss. There is a good deal to be said for a very careful watching of the position of sterling, but I think this is a new and dangerous power the Government have taken and I hope they intend to keep the most careful watch over it. They are going to stabilise the pound, if they can. Have they made up their minds at what figure, at what final figure, they would wish it to be stabilised? They will be surrounded by people desiring to profit by the opportunities their operations will give, and therefore it is most essential in the interest of economy, and if we are not to lose millions of money, that this should be most carefully watched all the time, not only by the Treasury, but by all the financial representatives of the Government.
I hope the Government will be prudent, and if I am doubtful about the prudence of the Government. I think they have themselves to blame. They have shaken my confidence by the precipitate way in which they have plunged this country from Free Trade into Protection. I speak as a lifelong and unrepentant Free Trader. I supported the National Government last August at its formation by every means at my command, as the Lord Privy Seal well knows. I stood as a supporter of the Government at the General Election and met the fate of most Free Traders supporting the Government who were not actually members of the Government because, though I had zealously supported the policy of the National Government, I did not support the fiscal policy of the Conservative Party. It is to that defeat in some 857 degree that your Lordships owe the infliction that is falling upon you to-day. But I gave the Government full support and I speak to-day with some sense of grievance. We were promised a full inquiry before the fiscal system of this country was changed. We have not had that inquiry. We have had ill-considered temporary measures, and finally the House of Commons and the Government have handed over the whole problem of tariffs to a body described as the Import Duties Advisory Committee, a new and strange body outside Parliament.
The financial position of the House of Commons in this country is based upon the Parliament Act in which the House of Commons was made supreme in matters of finance. The country has delegated to the House of Commons the power of dealing with finance. I am no lawyer, but a lawyer's tag comes to my mind: a delegated power should not be delegated. I really would like to draw the attention of the Government to the constitutional position in which the House of Commons places itself when it relinquishes the taxing power entrusted to it by the Parliament Act and puts that power into the hands of Commissioners or Committees outside Parliament. I have not seen much reference to that matter in the debates that have taken place, but it is an aspect of the question that has always interested me and I did not believe, until I read the debates in the House of Commons and saw the Finance Bill and the Import Duties Act that the House of Commons would give up this trust placed in their hands and put it into the hands of a Committee outside Parliament.
With regard to the proposals of the Finance Bill—and I apologise for having detained your Lordships so long—why is there this change-over to Protection? There are many objections to it. Commerce has asked for stability. There is nothing more unstable than tariffs. At this moment what do the industries of the country know as to the duties that are to be put on in the near future—to-morrow, in a fortnight, in a month? There is no possibility of foreseeing the future. I think a great part of our success in the nineteenth century, the Victorian age, which has already become a kind of Golden Age, was due to the fact of an established fiscal system, and I do not think we could have done a worse 858 thing at this moment than to make this change. We are given many reasons for the change. The reasons given by different members of the Government are frequently inconsistent with one another. The Chancellor of the Exchequer triumphantly asks how we could have raised the £27,000,000 or whatever the amount is—he warned us not to rely too much upon the estimates, but where else could we have got this sum of £27,000,000? I have already told your Lordships that I think it might be met by economy, by the Conversion Loan, and in other ways; but it was certainly unnecessary to change the fiscal system of this country for the sake of £27,000,000.
Then I am told that the tariff is going to be a great cementing influence in the British Empire. The cementing of the British Empire by means of a tariff is a mysterious process which I confess I do not understand. My observation through life has been that there is nothing that members of families fall out about so much as questions of property and the equal division of benefits. If the tariff is to be used for bargaining purposes inside the Empire I think you are going to do a very dangerous thing. I do hope that however you may deal with foreign countries, you are not going to bargain with the Dominions with regard to what their fiscal system is to be. I think it would be a fatal thing to say to one Dominion: "You will have ten per cent. here or twenty there," and you give to another different figures on condition that they make concessions to you. I implore the Government if they have any such idea not to pursue it. Let them tell the Dominions that here in this country there is a free market for their products, that they may send here whatever good things they have to send, and that we shall be glad to receive them all on an equality. I would go further. I would say to every foreign country at the same time that if they are prepared to treat us on equal terms we shall be ready to make agreements to that effect. Therefore I do beseech the Government not to try cementing all the Empire by making bargains about tariffs, and to keep the door open for favourable arrangement with other nations.
Then there is a peculiar thing called the balance of trade, about which I think more nonsense has been talked in the last twelve months than about any other 859 publicly discussed subject. I never hear of the balance of trade without thinking of the persistence of human error. If ever there was an economic fallacy thoroughly exposed it was this balance of trade theory which ruled the world down to about the middle of the eighteenth century. Two Scotsmen, Hume and Adam Smith, blew the doctrine sky high, and that it should be revived now seems to me most strange. Hume said of it:The apprehension of the wrong balance of trade discovers itself whenever one is out of humour with the Ministry, or in low spirits.Adam Smith showed successfully that you cannot arrive at what this balance of trade is, that if you could it would be of very little value, and, lastly, that the worst way of dealing with it is by putting on duties to keep out imports.
The members of the Government have dwelt largely upon the balance of trade, and it has produced the worst effects throughout the world and among the British people at home. There is growing up an attitude of hostility towards foreigners and foreign goods which I deprecate in the highest degree. I have just come back from a Mediterranean journey to Constantinople. I came back by the Orient Express, in seventy-two hours from Constantinople to London. It was a wonderful journey. A well-laid track, crossing great rivers, over magnificent bridges and through long tunnels under mighty mountain ranges. All natural obstacles to the movement of goods and men have been abolished, and in that journey I passed the frontiers of Turkey, Bulgaria, YugoSlavia, Italy, Switzerland, France, and our own country. Everywhere, in place of the natural obstacles which had been overcome, instead of mountains and rivers dividing nations, I found Customs barriers set up. I protest that, to-day, it is more difficult for goods to travel from Constantinople to London, overland, than it was in the days of the founder of the Eastern Empire.
That is the work which modern tariff-makers have done for us. The Government have joined them, and there has been a campaign against the buying of foreign goods or the taking of journeys abroad. There has been agitation about the building of the new Cunarder. If we are not to have goods from abroad, and 860 are not to travel abroad, why should we build ships? I went out by sea, and we touched at port after port. In every harbour we went into there were ten, fifteen, or twenty ships laid up, rusting in the docks, and likely never to go to sea again. That is the condition of Europe and the world to-day, and it is largely due to the restrictions placed upon ships and men by Governments. It is a matter of infinite regret to me that His Majesty's Government have followed that course instead of heeding the wise words of the Lord Privy Seal, and opening our doors to commerce.
We have in the Government Protectionists who regard tariffs as a gospel of salvation, and on the other hand Free Traders who believe in the real gospel of peace among men. Between them there are those who are not sure about it all and who think that at any rate there is a tariff and they may use it to bring foreign countries to reason. The Secretary of State for the Dominions and my old friend the President of the Board of Trade are very keen on using tariffs in order to make foreign Governments more reasonable. History is against them. The plagues hardened Pharaoh's heart, and the tariffs which we use against foreign countries almost invariably harden the hearts of foreign Governments. I want to ask the representatives of the Government whether they have yet got any benefit from their bargaining with foreign Governments. I have seen wrangles in the newspapers with Germany about our new taxes, and wrangles with France; and poor little Denmark, which has grown to depend upon our markets, is complaining. Have the Government had any success in their bargaining?
This is really not an economic but a political matter. As Adam Smith said, it belongs not to the economist but "to that crafty and insidious animal vulgarly called a politician." I suggest to the Government that the tariff wars on which they have now embarked are working out according to plan, and that in truth they have no prospect of inducing foreign Governments to be more reasonable because of our tariff. I do not say one word in defence of the action of foreign Governments in this matter. I think we Free Traders have every reason to complain that they have 861 resisted our arguments for nearly 100 years. I raise no word therefore in defence of the action of foreign Governments in refusing to be influenced, but I suggest that the history of tariff wars is almost invariably this. Two nations fall out, they put up tariffs against one another, each in turn increases its tariffs, and while those two nations are fighting some third nation comes in and snaps up the trade about which the two are fighting. That has been the past history of tariffs.
I am afraid that I have wearied your Lordships, but I was unable to be present when this subject was debated at an earlier date. My heart is hot within me about those matters and it was necessary that I should speak. In this matter of Protection I think the Government have made a grave mistake. They have, by a majority only—not with the unanimity which would have carried great authority —decided to follow the path of restriction at a time when all the world is crying out for the freer movement of men and goods. I do not think they have helped this country, and they have made the world position worse. Economic nationalism is the curse of the world at the present time. Hence all these Conferences about to take place. My last word is an appeal to the Government. I want to ask the Government when they go to Ottawa, when they go to Lausanne, when they go to Geneva and to that further Conference that is to be held, to have one aim only before their eyes. Let this be their guiding principle: Considering all the circumstances, what would be best for the world as a whole? Let them look at the problems from the point of view of all the nations, as well as their own. If they do that they will not only help this bewildered, groping, and most unhappy world, but they will also hest serve the interests of our own country and of the Empire.
My Lords, I could only wish that the noble Lord, upon the next occasion when he takes a long journey, will not travel through Europe, from Turkey to Yugo-Slavia, or from Italy to France, or to Gibraltar, or to any of those other places that he has mentioned, but will make a tour through the British Empire and visit Australia and Africa.
Well, perhaps the noble Lord has not been there since he was at school and perhaps he will return there and see what the conditions are to-day. Let him see the conditions also in Canada and South Africa. He will then perhaps once more realise that there are there vast expanses of country waiting for settlement and development, and that by this measure which is before your Lordships to-day there is a possibility of developing those lands and of creating a fresh era for this country and for the British Empire.
I listened to what the noble Lord, Lord Ponsonby, said in regard to the Bill. As usual, he poured cold water upon the actions of the Government, and he was very lugubrious about the future. But I cannot see the conditions in the same light as he does. I believe that this Government have done extraordinarily well in the very short time that they have had at their disposal. I do not agree that they have produced no effect, as was stated by the noble Lord who has just sat down, upon the balance of trade. We have had figures disclosed this morning in the official publications showing that the balance of trade has considerably improved during the last two or three months. I do not think there is any doubt, whatever that that, is due to the Import Duties Bill, which was passed by this House only a few months ago. And now to-day in this Bill we have an extension of the preferential system, especially in the matter of tea and sugar, and we have the basis upon which we may be able to extend those Preferences at Ottawa.
I quite agree with the noble Lord that we must not go to Ottawa in a haggling spirit, but I do not see eye to eye with him in his view that the only way that we shall develop our Empire is by allowing the products of all the world, including our Empire, to come into this country upon equal terms. That is why we are going to the Conference at Ottawa and why I believe, with the good will which there is going to be on all sides to make that Conference a success, that we shall certainly attain a great measure of agreement from it. I am not one of those who think that the whole of the world is going 863 to be changed by that Conference. But at least if we start and get a basis for greater co-operation in the future we shall have made a start which will lead on to better things. I also think that it is not accurate when the noble Lord the Leader of the Opposition states that we have given no lead to the world. We have given a lead to the world in that we were the first to cut down expenditure on a large scale. We were the first to form a Government on a national basis and if the noble Lord—as I know he does sometimes—were to visit Paris or the United States or any capital centre in Europe or any part of the world, I think he would find that this country is held in great admiration for the way in which it grappled with the difficult conditions in which it found itself and the difficult problems with which it was confronted.
I agree with the noble Lord who says that we must have economy. We have a Budget of some £894,000,000. That Budget is produced only by the exaction of the highest degree of direct taxation that the country is able to bear. If another straw were placed on the back of the unfortunate taxpayer the taxpayer would collapse. If that is so, I am inclined to believe that, with conditions as they are in the world, and the uncertainty that exists as to whether those conditions will be ameliorated within any reasonable time, it is quite possible when the autumn comes that the Government will find that, however carefully their estimate was prepared, they have not been able to obtain sufficient revenue to meet the Budget which they have drawn up.
The noble Marquess who moved the Second Reading said that this question was giving the Government very great concern. He said the Government were doing a great deal of hard thinking about it. I am very glad to hear that, but I should like to see the Government take a sharp and ruthless knife and cut through a great deal of the expenditure which we have to-day. I believe that it is only in that way that they are going to economise—only by saying: "To-day our expenditure is £894,000,000; tomorrow it is not going to be more than £700,000,000 or £750,000,000." Then, having done that, let them tell the heads of Departments that they have to make those reductions in some way. I believe 864 that is the only way in which we shall get real economies. Ten years ago we had the Geddes "Axe" Committee, and economies were obtained through that Committee. I am not suggesting that the Government should set up another such Committee, but I do say that if the Government take a strong and definite line on this matter they will have the whole country, or at any rate the best part of it, behind them.
§ THE MARQUESS OF LONDONDERRY
My Lords, owing to the limitations to which I ventured to make allusion, the Finance Bill does not occupy in your Lordships' House so long a time as it does in another place, but I feel that there are one or two matters to which I should make a reply. The noble Lord, Lord Ponsonby, in his speech painted a very gloomy picture. I made an endeavour in advance to remove the gloom from his mind, because I felt that when he came to speak he would relapse into the depths of gloom. To create an atmosphere of gloom in the country is a most dangerous thing. It. may be described as creating a feeling of defeatism, which is very dangerous from every point of view.
The noble Lord drew particular attention to the creation of the Import Duties Advisory Committee, and led your Lordships to believe that that Committee was outside the control of Parliament. That is not quite correct, because any arrangement made by the Import Duties Committee can be annulled by Resolution of the House of Commons. What I think the noble Lord had in mind when he alluded to that subject was that the Import Duties Committee have the power of removing articles from the Free List, and in that respect it may be said that the control of Parliament has been impaired compared with what it was previously. But I would suggest to the noble Lord that there could be no better body for the control of these matters than this particular Committee. I think he must agree that from their intensive and expert knowledge they are a far better body to deal with such a matter than Parliament as a Whole. Beyond the respect to which I have made reference the authority of Parliament is not impaired.
The noble Lord who followed in the debate made a long and very interesting 865 speech, and drew attention to the actual Estimates. He suggested that there was some method of what I might almost call sleight of hand in the publication of Estimates by the Government. I think the noble Lord is as fully aware of the manner in which Estimates are controlled as I am myself, and I can assure him that there is as much supervision of the full Estimates as of the net Estimates. Speaking as one who has been in the perhaps unenviable position of a Minister I can assure him that we have a particular amount of expenditure in mind in relation to our own. Department, and that we have the greatest possible difficulty in getting our expenditure sanctioned by the Treasury.
§ LORD RHAYADER
May I interrupt the noble Marquess to state what my suggestion really was? I do not doubt the carefulness with which Estimates are at present prepared, but at this moment the question is put to the Department: "What are your Estimates for the year?" Those are collected and the total arrived at. What I want done is to send for the head of each Department and tell him what you have to spend in that Department in the year, and then set him to work to prepare his Estimates accordingly.
§ THE MARQUESS OF LONDONDERRY
The noble Lord advocates a policy of rationing, which, possibly, would be an excellent one to adopt, and I have no doubt, with his great influence, he can get that policy approved in the House of Commons, or at all events he can get the subject raise there and discussed by that House. I am not altogether out of sympathy with that policy myself, but at this moment I am not sure that we can make further headway with it. The noble Lord also entered, as I thought he would, into a disquisition upon the relative merits of Free Trade and Protection. I may say that I am willing to go with him a long way. I should like to see tariffs reduced all over the world. I agree that the heightening of tariffs renders the community of nations, and the coming together of nations, a very difficult problem. The noble Lord may not have been in his place some time ago when I moved the Second Reading of the Import Duties Bill in your Lordships' House. I then based my advocacy of that Bill on the necessity of Great 866 Britain using her influence to get tariffs lowered and not increased. I have always felt that by standing out of the whole controversy we have allowed other nations to continue the raising of their tariffs, and I think that the best chance we now have of lowering tariffs is to place ourselves in a position in which we can bargain with other countries. The noble Lord asked me whether I could point to any improvement in the position —whether we had been successful in bargaining with other countries. At this moment I am not prepared to answer that question, but I am quite sure that if we are going to get tariffs down we shall have a better chance of doing so now that we are able to speak to foreign countries in their own language.
The noble Viscount who followed countered the noble Lord, as I expected he would do, with the arguments on the other side, and I do not think there is any need for me to enter into this controversy at the present moment. The noble Viscount had the usual cut at the Government in relation to extravagance in expenditure. I can assure him, as I ventured to say in my opening remarks—
I had no cut at the Government in regard to extravagance. I said I thought the Government had done extraordinarily well, but that we wanted more. I thought it might do something in a certain way. I do not think the noble Marquess would wish to misrepresent me.
§ THE MARQUESS OF LONDONDERRY
I entirely withdraw and apologise to my noble friend if any expression I used has wounded his feelings. We are much too old friends to have any differences of opinion. The point I wanted to make—perhaps I put it too strongly—was that he was urging upon the Government that they should reduce expenditure. I agree with him that expenditure should be reduced, and I can assure him that the Government are doing everything in their power to reduce it; but, as an old member of the House of Commons, I am quite sure that he cannot place his hand on his heart and say he has not urged the Government to increase their expenditure upon various things in which he was himself interested. That is the danger to all Members of Parliament. They will preach economy as an abstract 867 subject, but when it comes to their own constituencies there is no expenditure which satisfies them. I do not know that there is any further question raised in the debate to which I need reply. We have had a most interesting debate, and I should like to take this opportunity of congratulating the noble Lord, Lord Rhayader, on his maiden speech in this House. I never thought at one time that it would be my privilege to congratulate my noble friend upon making a maiden speech in this House, and I am very happy to do so now. I hope we shall often hear him making contributions to our debates.
§ On Question, Bill read 2a: Committee negatived.