HL Deb 29 June 1932 vol 85 cc294-352

Debate resumed (according to Order) on the Motion of Lord Hunsdon of Hunsdon to resolve, That having regard to the present scale of national and local taxation and its effect in restricting industrial enterprise and the burden it imposes on individual taxpayers, this House, while welcoming the economies which His Majesty's Government have already made, is of opinion that it is incumbent upon them to secure a further reduction of public expenditure and a corresponding reduction of taxation.


My Lords, we listened last week to a very interesting debate conducted by noble Lords who are masters of the subject of finance and of its bearing upon public economy. I cannot pretend to be of that number, but I learned a great deal from listening to the debate, as, I may respectfully say, I am sure your Lordships did too. It was necessarily a one-sided debate. With one exception every noble Lord who addressed us agreed in the main contentions of his speech—the gravity of the crisis in which we stand and the necessity for economy. As to the gravity of the crisis, there was no more notable contribution last week than the speech of the noble and learned Marquess, Lord Reading. He, indeed, is qualified to speak on these subjects in a way I am not, and he made a careful analysis of the prospects of the revenue from the published statements of Ministers and other official papers, and he indicated his opinion—not perhaps a definite opinion but an opinion to which he was very much inclined—that there was no prospect of the Budget being balanced or the present figures. That was a most formidable statement. I believe that we are going to have the great advantage of a speech from a member of the Government in the course of the proceedings this evening. I hope he may be able to deal with those figures, and I am sure that if the Government agree in any measure with the figures indicated by the noble and learned Marquess they will be at least as anxious for economy as any member of your Lordships' House.

The situation is indeed grave, and we look to the Government for guidance. I am a little afraid—though I hope I am wrong—that they may say they have not had time and opportunity as yet to make up their minds as to what ought to be done. I should not be a bit surprised to hear that, and I should be the last to blame them for feeling how difficult it is, in the immense pressure of the circumstances of the time, to find an opportunity to consider policy as it ought to be considered. It is one of the great difficulties of our present situation that Ministers have no time. There is so much to do, so many questions of the first magnitude to tackle, that those who control our destinies really have not the opportunity to sit quietly in their studies and think out in all its full bearing the problem which they have to guide the country in solving. They have, of course, a great number of obligations, amongst others the obligation to attend Conferences in all parts of the world. I make no criticism except that I think perhaps it might not be necessary for so many Ministers to attend Conferences at the same time. I hope they will not think that disrespectful. It is not disrespectful. It is because I think their services are so valuable at home, and the necessity for giving them time to think out policy so important, that I wonder whether with a few less Ministers at a time they might not be able effectively to carry out the obligations of those Conferences, vital though I admit those Conferences to be.

All that your Lordships can do, and all that Parliament can do at this moment, is to make it as easy as we can for Ministers to guide the country aright in this economic crisis. We must facilitate their task in every way. Therefore I am grateful to my noble friend Lord Hunsdon for having brought this Motion before your Lordships, because I think that debates in this House, conducted as the debate was last week and as no doubt it will be to-night, with due regard to responsibility and with immense knowledge, go a long way towards forming that public opinion upon which the Government will ultimately have to act. The Government have a difficult task—a very difficult task—and unless they can carry public opinion with them their task may be even hopeless. Therefore the more we can do to bring home to the country, as the noble and learned Marquess did, the extreme gravity of the situation and the absolute necessity in consequence for economy, the more we shall be doing our duty as far as we can as members of Parliament.

I ought to say one further word. What makes the difficulty so acute is that we have been a little puzzled by the variety of advice which experts have given us on this subject. I hope I speak with proper respect of experts, but I do not remember any occasion on which experts have been so useless as in this present crisis. They have talked very learnedly by word and by pen, but they have all given different accounts of the crisis and advocated different, ways of meeting it. That makes it very difficult for laymen to guide their course aright.

I said just now that all your Lordships had spoken on one side with one exception. The exception was the noble Lord, Lord Marley. I want to speak with great respect of Lord Marley's speech because I sympathise with him in the difficulty in which he found himself placed, being so much alone in his views. If I may say so respectfully, I thought he did very well considering the difficulty he had before him in maintaining a rather unpopular position in your Lordships' House. I do not think one ought to be blind to the situation in which he found himself. The advice which he gave your Lordships was not, I think, generally welcome. His admiration for Russia and for the Russian system was evidently not shared by many noble Lords. I do not quite know how he regards it, but to us the Russian system is nothing but a dangerous tyranny. We cannot conceive anything more likely to estrange public opinion from the views of noble Lords who sit on the Bench opposite than their support, or apparent support, of the Russian system. For the rest the noble Lord, of course, according to the creed of the Party to which he belongs, believes in State management as a remedy for our economic difficulties. I can only say that so far as our experience goes State management is generally inefficient, often corrupt, and always extravagant. In those circumstances, being in great economic difficulties, it is not likely that your Lordships or the country will turn to State management as a remedy for those difficulties.

I want to speak with respect of the views of the noble Lord and the Party to which he belongs, because I think it is true up to a point that we must not rely in the economic difficulties of the country upon a system which depends for its success merely upon private enterprise inspired by the motive of private gain. I hope that the noble Lord and his friends do not think that we believe that private gain is the only motive which ought to guide either employers or workers in their conduct of their particular trade. We quite agree that private gain is not the only motive or the principal motive. Of course it should be public spirit. I am anxious that it should not be thought that, because we are in favour of private enterprise as the principal system on which the industry of the country ought to be worked, we think that those who are engaged in private enterprise ought to be motived by nothing but their own particular gain. Of course they ought to be motived by public spirit, and in so far as that is in agreement with the views of noble Lords opposite I am very glad to make that concession.

What we want, of course, in the present situation, is to get every man, whether he is in the Government or in industry, whether he is an employer or a worker, to use to the extremest point all his faculties, moral, mental and physical, in working for his country in order that we may get out of the economic difficulty in which we stand. That is the main object. That being so, although I think, as I have said, that we must rely largely on public spirit, yet we cannot leave out the old incentive which has been the motive always for countless generations of the private advantage which comes from successful work. I do not believe that noble Lords on that Bench go so far as to leave that out. By all means let us have public spirit, but at the same time, if we are to do the best for our people, whether employers or workers, let us take care that they get the full advantage of their work, get what profit they are entitled to and what profit is likely to make them work harder, whether they be employers or workmen.

It is for that reason that we are so anxious for economy. It is because you cannot get all you ought to get out of industry if you impose the heavy burden of taxation under which we now stand. That seems to be the true philosophy of it. I hope very much that employers will do their very best, without reference to their own profit, to perfect their works, bring everything up to date, make what consolidation of industry may be required, do everything indeed which is possible to make the best of their trade—just as I hope the workers on their side will. I have no desire whatever to lower the workers' wages if that can possibly be avoided, but I confess I am driven to a certain feeling of contempt when I hear preached a sort of gospel of leisure—that there is some advantage in leisure to people whose real object should be to help their country. This is nothing to do with class. I do not want the class to which we belong to go in for leisure when they ought to be working for their country. I do not want the workers to go in for leisure when they ought to be working for their country, and working for their trade is working for their country. Especially at such a moment as this let us get away from this very degenerate preaching of leisure and think much more of doing whatever we can, to whatever class we belong, to help the country.

I have said that we ought not to take away from employers by over-taxation this incentive to do their utmost which is infringed by the heavy weight of taxes under which industry at present stands. I was very much impressed by a speech by my noble friend the Marquess of Linlithgow last week in which he said that high taxation does unquestionably sap business initiative and destroy individual resilience. That is it. This heavy taxation is destroying business initiative and that necessary resilience. I am sure that noble Lords sitting on the Opposition side cannot desire that. I dare say I could have picked words from Lord Marley's speech, if I had taken the trouble, which seemed to show he did not mind very much how much expenditure was, and therefore I suppose how much taxation was; but I suppose that even he and those sitting with him, thinking it over in the light of the present situation, could never contend that the weight of taxation we have to bear, still more an increase of it, could do anything else but destroy initiative and resilience; and it seems to me quite vital, if the figures of the noble and learned Marquess are correct, that we should, if we can, by relieving taxation restore to its fullest extent the initiative and resilience which are essential.

Is there any means of lightening taxation and of preventing it from rising higher except by economy? Does any noble Lord opposite think there is any other method? I am not speaking of a great big policy in the future. No doubt noble Lords opposite would contend that if we get rid of private ownership and private property, and replace them with State management, a better system would ensue. But that will not do any good at this moment. What will they do now? How will they promote initiative and resilience now? It must be by economy. There is no other method and therefore I cannot conceive that any noble Lord, wherever he sits in your Lordships' House, can do anything else except vote for this Motion.

We must restore confidence. It is probable that many of your Lordships who are now doing me the honour to listen to me may be thinking—what is the good of all these general observations and how are we to carry out in particular these very wholesome maxims? How is economy to be produced? I hope that when the noble Viscount the Lord Privy Seal replies, he will be able to guide us. After all, it is the business of the Government to guide us. I hope they will not allow the time to go by and nothing to be done. Of all policies in the world there is none so bad as the policy of drift—drifting on with heavy expenditure and with heavy taxation from one disastrous moment to the next. That is what I am afraid of, with all the burden which rests upon the Government. They must face the issue. Your Lordships—may I say respectfully? —must face the issue. The country must face the issue.

Economy must be produced. Of course we must discriminate. I do not mean to say that economy can be properly achieved simply by striking off expenditure here and there without any reference to the objects for which that expenditure stands. In order that I may show, if possible, that I am not shirking the obligation that I venture to suggest of facing the issue, I will say at once that I would be sorry if there had to be any grave changes in the health services. They certainly stand first for expenditure. But when I think of education and transport I see there, as most of us see, two objects upon which economy could certainly be properly carried out. I do not mean to say that the expenditure on education is in a large measure wasted at this moment. I do not know. But I am afraid I think that some of it is absolutely wasted and I think a great deal is subject to the criticism that it is more expensive that we can afford at the present moment. I do not believe that very great economies on the education side would produce any very serious consequences in the country from the educational point of view, whereas from the economic point of view they would be very important. The same in respect of transport. My attention has been directed lately very particularly to the height of local expenditure, and, of course, both those two topics which I have mentioned, education and transport, apply most particularly to local expenditure. In both there ought to he economy.

I hope I have not seemed to insist too much, but I confess that I was a little shocked last autumn at the reception which in certain quarters the economic efforts of the Government received. I refer to the cut in the teachers' salaries and in respect of the Services and of the police. Your Lordships will remember that in respect of those three divisions of expenditure the original proposal of the Government was a cut of 15 per cent., but there was so much pressure from public opinion—public opinion emanating, of course, from the services themselves —that in respect, at any rate, of the police and the teachers the Government found themselves compelled to change the cut from 15 per cent. to 10 per cent. I am not saying that they might not have had to adjust the cut, so as to save some of the poorer classes, but I think the broad attitude of the police and the teachers was deplorable. That these teachers, whose business it is to bring up the youth of this country as faithful and loyal citizens, should be the authors of an agitation to save their own salaries, when they were called upon for a sacrifice in this very grave situation, seems to me to have been deplorable.

I say this because I very much hope that when the time comes, as it will most assuredly very soon, when the Government have to propose further economies, further cuts, then, if any such agitation as the teachers' agitation or the police agitation once more takes place, public opinion will be so solid against the agitation that it will have no chance of prevailing with the Government. I very much hope that that will be the case. After all, we have to co-operate, all of us, to whatever class, whatever profession, whatever industry we belong. Let us preach the doctrine not of private gain but of public spirit, and let us hope that if, and when, and as soon as, the Government propose their economic policy, they will have the whole-hearted support of the country. I beg to support the Motion of my noble friend.


My Lords, I have listened to a very eloquent speech, such as we often have from the noble Marquess, but in my opinion he has directed his attention mainly to general topics on which we may well agree with one another, and not analysed sufficiently the existing position and the existing difficulties. He said, and I dare say quite truly, that this has been a one-sided debate. I have been present on many occasions in this House when sound argument has been on one side and numbers on the other, and I suppose that that might be an instance where he would say that the debate was one-sided. No one, I imagine, although he emphasised it a good deal, doubts the gravity of the present position, but what I want to say a few words to your Lordships upon is this, that as far as I appreciate—I am sorry I was not here, but I read it very carefully—the speech of Lord Hunsdon, it is not on the gravity of the situation that the issue is now raised, but how to deal with our financial policy, our expenditure and economy, at what is ad- mittedly a very difficult time. It is not easy. I know that my noble friend, if I may still so call him, Lord Snowden, must feel the extreme intricacy and difficulty of financial conditions in this country—not only financial conditions in the narrower sense, but in the sense of how you can best allocate your taxation according to the ability to bear it, at the same time taking care not to impose unnecessary hardship on the poorer classes.

There is one other matter on which I must say a word to the noble Marquess. How often have I been told, and all of us in this House been told, that not only is the real motive of our industrial position private gain, but that if that motive is not followed there would be no sufficient force to keep our industry in the position at which it is at the present time. I would go further. Christianity and social service both combine to tell us that public interest ought to be the main interest in all our minds when dealing with social and industrial conditions. I do not imagine that the noble Marquess would differ from that but what I want to say to him is this: I say that at the present moment, as a matter of fact and practice, private interest has ben allowed to become almost the one dominant factor in our industrial and social life, and as against that— I should like to have his assistance— I desire to raise my voice now and at any future time when this topic is brought to the front.

There is another matter on which I entirely agree with the noble Marquess. He talked about leisure to work and think. It is absolutely essential that all classes in a great country like ours should have some leisure both for work and thought, if they are to take a worthy part in the government of our great country, both here and outside. How are you to get that under existing conditions? I hope I shall be able to point out with regard to what Lord Hunsdon suggested that, so far from giving that increased leisure and thought which the noble Marquess values so highly, the tendency is all in the other direction. Idleness does not give either leisure or thought. To have leisure and thought such as the noble Marquess suggests demands a large measure of education, and a large measure of such security as will drive away from the mind the terrible thought of insecurity which paralyses, and para- lyses fatally, both the thought and the leisure of a great number of the working classes in this country. After all, what is it? Nine-tenths of the population of this country are, roughly, what I may call working class. Only one-tenth can afford to be a leisured class and although a leisured class may of course develop various forms of vice, yet I agree with the noble Marquess that leisure is an essential factor to that higher method of thought on which in the long run the welfare of our country must depend.


I do not want the noble and learned Lord to misunderstand me. I do not want to look upon hard thought as leisure. It is very hard work.


No, I did not say that.


The kind of leisure that I was referring to was the leisure which was supposed to be necessary for people to enjoy themselves, which is only to be defended in so far as it makes them work better at other times.


That is what I quite understood, and that is what I tried to express. I think the noble Marquess is quite right: in order to give the opportunity of sustained thought some measure of leisure is necessary. It does not mean that every one who has leisure will afterwards give the sustained thought. What I want to say is just the contrary. There are too many leisured people in this country who do not care to give the sustained thought which is necessary for public service. I do not want to embark upon criticism, but I want to state the truth if I can, and I would to God that all classes had that form of leisure, or some part of it, to which the noble Marquess has referred, because it is the true basis of public thought and public action and of that patriotic feeling which undoubtedly animates so many people in this country.

May I now deviate from the general principles to the actual position raised by the noble Lord, Lord Hunsdon? And let me first of all say that mere shouting for economy provides no solution of our present grave difficulties. Economy in some directions is wasteful; economy in others is undoubtedly much and urgently needed. I should like to take two illustrations. I do not agree with what the noble Marquess said on the matter of education. I think it is wasteful and disastrous to cut down our public expenditure on education at the present time. I think everything should be done so that in the future we may have an educated and instructed democracy. You cannot have that unless in our public schools—I do not mean Eton and Winchester and Harrow, but the public schools to which all our citizens have access—you have trained teachers, trained thinkers, and all the training which the noble Marquess himself has enjoyed both at Eton and at University College, Oxford.

I take another case, in which I hope the noble Viscount opposite will agree with me. I regard the expenditure on war preparations and war equipment at the present scale as monstrously uneconomical—an expenditure which cannot be justified, an expenditure which, instead of giving the confidence which the noble Lord, Lord Hunsdon, said was at the bottom of our real industrial prosperity, creates distrust, friction, and trouble in all parts of the world, and will continue to do so until we at least take the leading part, not only in expressing our views, but in practical steps towards a real diminution in armament expenditure. Of course, armament expenditure is always uneconomical. It produces nothing: it destroys many things. But let us do all we can to give our authority to support the peace lovers at Geneva at the present time. That is the real direction in which we should look and, if we were to succeed, then there would be far greater economy under this one head—twenty times more almost under this one head—than the smaller economies which Lord Hunsdon has suggested.

But do not let us be led astray. Economy is not in itself good. Economy is necessary against waste and extravagant expenditure. But let us cut down those charges which are admittedly bad, and, on the other hand, encourage those on which the future of our democracy will really depend. The noble Lord, Lord Hunsdon, said that if this country would take the lead I believe it would do much for real and true economy, and more than anything to restore confidence in the world. Of course it would. What is the good of our talking here about the value of confidence, and saying that real and true economy comes from restoring confidence in the world, unless at the same time we take our part in pressing forward a scheme of disarmament, which would help the finances of all the nations of the world, and would restore peaceful communications, which are the root of confidence and the source of industrial prosperity?

There is another matter. It is a fundamental mistake to speak of rate charges and taxation charges as though they were of the same nature. They are not. It has constantly been pointed out how much risk there is in confusing the charges for rates and the charges for taxation. I do not want to quote from the Report of the Royal Commission of 1902, presided over by a noble Lord much trusted in this House, the late Lord Balfour of Burleigh, but I do say that you have to consider that the primary object of rates is to confer benefit upon the ratepayer. It is for that reason that the ratepayer has to contribute, and for that reason, as was pointed out before the Royal Commission, a rate is not really a tax but a payment for benefit received. That covers a large amount of what the noble Marquess called local expenditure.

But taxation is a different matter altogether. It is purely onerous. Supposing there had been no local expenditure in this country, what would be the position of our towns, what would be the condition of our industrial districts, what would be the condition of our general civilisation, which on the whole has been wonderful? I have known it now for almost too long a time, but those who can look back over a period of nearly eighty years and see what the conditions in the country were at the beginning and what they are at the present time will realise what I mean. I am no pessimist about this. Each year I become a greater optimist. I see the advantages of the services performed by local expenditure, and although, of course, every act cannot in itself be determined as quite the right thing to do—no one says that—I feel that with all that expenditure a very great part of the advance in our social life has been assisted and I hope will be assisted in the future. The noble Marquess referred to road traffic. I think road expenditure is not mainly extravagant so far as expenditure by localities is concerned. As has often been pointed out, the way you get extravagance is that instead of dissociating local and national demands you combine the two, and get a sort of competition in extravagance to the disadvantage of both.

I cannot help referring to one or two other matters. The noble Lord, Lord Hunsdon, referred to two special reasons why taxation is heavy and is likely still further to oppress us, and having read very carefully what the noble Lord, Lord Marley, said—and agreeing as I do with the whole basis of his argument—I hope your Lordships will consider those two matters. One is, as the noble Lord, Lord Hunsdon, pointed out, the great loss in our shipping industry. What is the chief cause of that? Tariffs. I want to go a step further upon this point. Although I am not in any sense a military man, as everyone knows, I think that our mercantile marine was at least as necessary as our naval power in maintaining our position during the War, particularly as regards our food supply. Let me say this to the noble Viscount opposite. I agree with him that as a policy it is criminal—that is his own word—to put forward a general system of tariffs having regard to the fact that experience shows they are a failure in every part of the world where they have been tried. The noble Lord, Lord Hunsdon, also spoke specially of armaments and of losses on income from the interest on investments abroad, and losses upon businesses started abroad. Is not that a strong argument of what has been put forward more than once in regard to the control of banking and of the financial houses of this country? Why should these people speculate and if their speculations fail cause misery and distress to hundreds and thousands of the working classes of this country? It is an enormous power that wealth has in this respect, and it is necessary that it should be carefully safeguarded and that the interest of the public should not be overlooked.

Another point that I can deal with very shortly arises out of a report on monetary policy by a Committee of the London Chamber of Commerce. We look to London and the Chamber of Commerce of London as a special authority. This report first of all says: That in the opinion of this Council— it is a unanimous report; Lord Leverhulme was Chairman— monetary reform is of outstanding importance. Is there anyone here who denies that? When we are talking about economies and scaling down expenditure on our schools, why do we not grapple with the real problem, the reform of our existing monetary system? I admit that I have never been what is called a gold standard man. I believe we suffered infinite loss by retaining the gold standard too long. Some of your Lordships may recollect what I have said in regard to that on many occasions. I have more than once expressed my entire approval of the views held on this question by Lord D'Abernon. These are the matters which have to be attended to. It is no good merely to shout about economy, and talk about saving on schools and social services. We have to go deeper than that. We have to seek out the root of the matter, and I think this House is one of the places where we may legitimately call attention to these questions which are of the utmost importance to the future of the industries of this country.

While I am upon this question of speculation, let me read a few words from the report of the specially appointed Committee to which I have already referred. It says this about the Bank of England and I thoroughly agree with it: That the Bank of England should cease to do business in competition with other banks and should become a Central Bank pure and simple. I want to know what the noble Viscount, Lord Snowden, who will be replying presently, has to say to that proposition. Is it not a fact that because the Bank of England has been allowed to do business as a private bank a great deal of our present loss and much of the trouble of our present taxation have arisen? I hope I shall have the attention of the noble Viscount to what I am now about to say. He said that in order to have a just measure of value, subject neither to inflation nor deflation—which of course we all desire—the currency should rise and fall automatically with business activities; it should not be managed. What does the noble Viscount say to that? That is of far greater importance than pegging away at small economies upon this or upon that. Here you are getting to the core of the matter. We are the great financial centre of the world, and to maintain that position we must have close regard to all these questions raised again and again in this unanimous report of the Committee appointed by the London Chamber of Commerce.

One other word and I will not trouble your Lordships any further. It is suggested in that report that we ought to remove the causes which are inducing nations to strangle world trade by tariffs, quotas, exchange restrictions, etc. I think that is wholly and absolutely true. The same report was made at Geneva, and everyone ought to study the letter attached to that report by M. Theunis, a well-known banker who during the War was Prime Minister of Belgium. Strangling world trade by tariffs ! If you strangle world trade by tariffs you in a very special manner injure the industries of this country. We cannot live without international trade. We cannot live without easy access, free of restriction for commercial and industrial purposes, from one country to another. It is utterly impossible. If you were to carry this theory of tariffs to its ultimate limit you would make each country of the world a self-supporting community without imports or exports, and what would happen to this country then? I have never heard an argument which convinced me on the tariff question.

But apart from the general argument look at our position. What are we to do in this country without a large volume of international trade? How can we support our huge population, of which a very large percentage indeed is poor and in present circumstances unfortunately thrown out of occupation? I ask the noble Marquess these three questions, which I have taken from the report on monetary policy by the Committee appointed by the London Chamber of Commerce. I do not do that, as I hope he will know, in any adverse spirit. I do not want to speak critically or in any adverse spirit. I admire what was said in that respect by the noble Marquess, but we must consider these questions and we must try to solve them. We shall never escape these difficulties by the mere tinkering at economies suggested by the noble Lord, Lord Hunsdon. What did all his suggestions come to? Only a few million a year. But what would these other suggestions come to? If these matters were put right there would be confidence in the world, the gross waste on armaments would be reduced, there would be inter- course between different countries without tariffs or other artificial means of strangling industrial communication. Agreeing as I do on many points with the noble Marquess, I hope he will agree with me that the questions I have mentioned must be tackled and must be solved before the era comes when all classes in this country may attain real and permanent security and prosperity.


My Lords, I do not think there is very much difference between the desire of the noble and learned Lord who has just addressed the House and that of many of us to secure the welfare of the masses, but I feel there is a great deal of difference of opinion in regard to the advantage of the expenditure and the policy pursued by the late Government. That seems to me to be based upon the fictitious idea aril there is an unlimited source of wealth out of which payments can be made by those who have some money in the country to those who are in difficulty or in need. That is how it appears to me, and I realise perhaps more than the noble and learned Lord that the policy which he and his friends advocate cannot be continued. It is only a cheap form of trying to secure popularity and votes at elections to advocate the expenditure of money out of public funds. It can only result in starvation, misery and ruin to the working classes of this country if that policy is pursued, and it can only mean absolute national disaster.

If I am guilty of uttering a few platitudes, and if I state a few home truths, and quote a few statistics and make a few suggestions, I can assure the noble Viscount the Lord Privy Seal that I am only anxious to help the Government and that I realise the difficulty in which they are placed. I believe recovery is only possible if we add to action by the Government action by all local authorities, all institutions, all associations and every individual in the country. We have to avoid waste and extravagance all round. What we have to do is to create a demand for commodities and to get rid of the idea that we can all sell goods and export goods without importing goods. What we want to do is to restore the purchasing power of the peoples of the world and exchange our commodities, our materials and our products freely with one another. The task of the Government in combing out will be a difficult one. It is always a difficult one. I had to do it during the War in some Government Departments, and since 1926 I have been combing out individuals in many industries. It is a heart-rending performance, very difficult and very unpleasant, but it has to be done on occasions like the present.

I blame the Government for not at once reducing the number of their Departments when they took office. I think they can do a great deal now in combing out superfluous staff— superfluous, not because it does not promote efficiency, but because we can do without it in time of crisis. May I point to three cases by way of illustration? I will repeat first the case mentioned by the noble Viscount, Lord Leverhulme, which I think has not been answered yet and which I hope the noble Viscount the Lord Privy Seal will be able to answer. The Defence Services are weaker now than they were at the time when we entered into war in 1914. I believe the personnel of the forces is fewer, but the administrative staff, which in 1914 numbered 11,000 individuals and cost £6,000,000, has increased to-day to 43,000 individuals and the cost to £22,000,000. Something has been said already about education. I was responsible for education at the beginning of the War. Our expenditure then was £40,000,000 and the cost per child In average attendance was £3 1s. The cost per child is now £8 12s. and the total cost is £106,000,000. Although I am a great advocate of money being well spent on the education of the people, I think the cost could be reduced without the members of the Government incurring a great deal of odium, but before I tell the noble Viscount how I think that could be done, I want to allude to my third illustration, which is expenditure on roads and bridges.

Government contributions to local authorities for that purpose amounted to £18,000,000 in 1914. It rose, I believe, to £65,000,000, and for the present year the estimate is £58,000,000. It will not be until March next year that it is brought down to £26,500,000. I think that that reduction ought to take place long before March. Our objective ought to be to try to secure a reduction of something like £88,000,000 in national expenditure almost at once. Our total taxation receipts in 1927, when trade was a good deal better than it is now, amounted to £664,000,000. The estimate for the present year is £752,000,000. Why should we not go back to the taxation of five years ago when trade was better than it is now, and reduce our expenditure to a figure commensurate with our capacity to pay? That would reduce it by £88,000,000.

If I had responsibility in connection with a Government Department I would not continue the present system of giving percentage grants to local authorities. I would give to every Department the money which I thought could be afforded and no more. I would say to local education authorities: "The Board of Education is not responsible for educational administration in the locality. You are responsible. What the State can give you at the present time is less than has been given you in the past. We will give you a block grant." That is the recommendation I understand of Sir Vivian Henderson's Estimates Committee because they recommend that aggregate sums should be paid. I prefer to use the expression block grants. We should give block grants in accordance with the capacity of the Government to meet the demands of the country and no more, and we should leave it to those who have the spending of the money to find out the best way of spending that money. Those of us who were in touch with the Army during the War all recognise, I think, that money probably could have been better spent by the officers than by the War Office. If you give a certain sum of money to people and it is not so much as they would like to have, they will see that it goes as far as they can possibly make it go. I am sure not only that Government staffs would be reduced by giving block grants instead of percentage grants, but that we should get more efficiency and less waste in our public expenditure.

The reason why reductions seem to me so essential at present is that I believe it is necessary to balance the Budget, and from all I hear and know the Budget this year is not going to balance. Revenue is decreasing, trade is declining, the prospects are receding of further money coming in, and the estimates of the Treasury are not going to be realised. We cannot afford more taxation, and if we are to balance the Budget and maintain the credit of the country it is essential that our expenditure be brought down to such a point that it is within the capacity of the people to meet the necessary taxes. Heavy taxation crushes industrial expansion and it diminishes employment. Sir Robert Horne in another place gave figures which I think indicate how difficult it is for industry to carry on when their profits are so heavily taxed. In the last twelve years £600,000,000 have gone into the Treasury on profits which have never been distributed to shareholders. In other words the money that would have gone into business for the expansion of industrial concerns has been denied to industry, which has had no means to expand or to bring its plant up to date; and a good deal of plant has become obsolete for want of this money that has gone into the Treasury.

May I take the case of the Durham coal trade? Great sacrifices have been made by everybody during the last five years. There has been a great deal of combing out in the staffs and great anxiety even to find wages, but in spite of the wages being maintained at the same level we have reduced our costs in the last five years from 16s. to 11s. 9½d. per ton. The condition of the industry there is more or less typical of what it is in other areas. Output is steadily going down. The normal output is about 760,000 tons weekly. In the first quarter of last year it was 660,000 tons; in the first quarter of this year, 600,000 tons; and since the end of March, 550,000 tons. Instead of employing 176,000 men, as we hoped to do in the County of Durham, only 105,000 are now being employed. This very week I have had to consent to notice being given to 1,300 men in a colliery within three miles of my house because we cannot sell the coal owing to tariffs abroad.

Not only has Germany not adhered to agreements in connection with tariff arrangements, but preference has been given to other countries by Belgium and France, and from June 18 fuel going into America has been subjected to a tax which will mean that our trade to the Pacific will be restricted because of a duty of 12s. 4d. per ton on coal going into the States of America. These are the things that are destroying our trade and compelling us to close down our collieries, and I want the Government to realise the importance of this tariff question. If they believe in reciprocity they ought to see to it that when other countries are putting on tariffs they should be met, as Conservatives think, by counter-tariffs or else, as I believe to be the better arrangement, induced to lower and get rid of tariffs altogether.

May I read to your Lordships information which I have received in regard to other industries? It is from reports to the Federation of British Industries: Cotton—Raw material prices have been undergoing a steady decline and have now reached the low levels of last summer. Wool —Reports from Bradford and districts show that unemployment is increasing, consumption is falling off, and short time is being worked in the mills of all the sections. Hosiery— Leicester reports immediate trade has rarely been so poor. Iron and steel— There has been little material improvement in the steel trade in Sheffield. Shipbuilders— On the Tyne the local shipbuilding industry is in a parlous condition and several firms are leaving their building berths empty for the first time on record. So I could go on. Trade is declining while expenditure is such that the country cannot bear its continuance. The high taxation has very far-reaching sinister results. It leads to the closing down of works; it reduces the value of property, whether a mansion or a cottage; it forces workers on the "dole" or the public assistance committees; it diverts capital to income and productive enterprise to unproductive labour; it forces firms into liquidation and, as I know from many sources from my position as chairman of the Confederation of Employers' Associations, tradesmen into bankruptcy.

What is the remedy? I do not believe that those who are not needy ought in the present state of affairs to receive public assistance from those who are at work. In 1923 on unemployment and old age pensions we spent £72,000,000; in 1932, the amount was £201,000,000. The system which is now going on is demoralising to the idle and discouraging to the efforts of the thrifty who are taxed to meet it. I said just now I believe we ought to make an effort. There is much too much waste in gambling and in certain lotteries. There is a good deal of excess drinking in some of our towns and boroughs. I read this morning an extract from the Sunday Times stating that there are working-class families which are spending on the average about 16s. to 18s. out of 40s. to 45s. weekly on drink. There is probably, too, a waste on excessive attendance at cinemas. There are various ways in which the whole country can economise, and I want every one to help the Government to adopt a system of economy with a view to enabling us to overcome this crisis.

If I may sum up, I believe in combing out and reducing administrative staffs; I believe in reducing the grants which are given to local authorities, by paying them block grants instead of on percentages; I believe that reductions should be made in the rates of interest on our Debts; I believe in a conversion scheme which ought, I think, to reduce our expenditure by about £25,000,000; I believe in the cancellation of Reparations and War Debts; I believe in a policy of international friendship, co-operation and amity; I believe in the reduction of armaments, and this, of course, can only be secured in collaboration with other countries. But I am not in despair. I read the other day an extract written by Macaulay to the Edinburgh Review, fourteen years after the war with the French. Here we are fourteen years after the Great War in Europe. He said: The present moment is one of great distress. … A war compared with which all other wars sink into insignificance; taxation, such as the most heavily taxed people of former times could not have conceived; a debt larger than all the public debts that ever existed in the world added together. Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property … and by observing strict economy in every department of the State. Every one of those words seems to be applicable to the present position.

It took a few years after the hungry 'forties before the country recovered. This country can recover if we all work together to secure economy and to help the Government through its difficulties. We can do it if we will. There are some good signs and the extension of electric energy is one of them. Last year we increased the number of units in electricity by 329,000,000 over the year before and the total was 9,219,000,000 units. We have since gone on increasing the production and I believe it will continue to increase. There are also advantages in the new inventions in connection with powdered fuel. We are also looking, according to Sir George May, to an improvement in the iron and steel trade. These things are possible but only if we reduce taxation. We have been going through a very difficult period and our total taxation from all sources has now reached the figure of £1,155,000,000. In former days we received about £170,000,000 from foreign investments. Last year we had a deficit of £100,000,000 in the balance of trade and we cannot much rely upon foreign investments to bring in anything to help us. We have been going through stormy seas, but I for one am quite prepared to trust the officers of the Government at the helm. I hope they will be able to steer the ship safely through the rocks of excessive extravagance and expenditure and that we may once again reach the haven of prosperity. I beg to support the Resolution.


My Lords, I am sure we are indebted to the noble Lord who spoke last for the rather cheery note on which he ended his speech. He gave us that very well known quotation from Lord Macaulay, written many years ago in reference to another great war. I am glad he did so, because Lord Marley said the speech of Lord Hunsdon had revealed the weakness of the present capitalist system, which was tottering throughout the world. Lord Parmoor agreed with him in condemning the capitalist system. I myself think that the quotation from Lord Macaulay shows that, though the present crisis has been more prolonged than any previous crisis has ever been, if we are of good hope in this country we shall pull through, and that we shall do so much more quickly under the capitalist system than under any other. Like other speakers in this debate I would wish to congratulate Lord Hunsdon on his able speech, and to thank him for having brought this Motion to the notice of the House. I am sure that the approval of this House will have the effect of encouraging the Government to take additional steps to secure a further reduction of public expenditure, even at the risk of a good deal of loss of popularity. I think we are lucky in this respect, that we have a National Government. I doubt if anybody, even the Opposition, will divide against the Motion, because, to paraphrase a phrase of the late Sir William Harcourt slightly, "We are all economists now." At any rate we are all economists in speech, and I hope we shall all be economists in deed.

I would like to remind your Lordships that there are three important Conferences, two now going on, and one in the future—namely, at Lausanne, Geneva and Ottawa. I venture to think that the outcome of these Conferences, even if successful, will take a considerable time to develop, and we all know that in the ordinary course the estimates for next year's Budget must come under consideration this autumn, and there is not too much time for the necessary action to be taken by the Government in accordance with the terms of the Motion. In those circumstances it is idle for me to discuss these very controversial questions of inflation and deflation, or the still more important methods of obtaining a rise in the level of prices. Lord Parmoor attacked my noble friend because, he said, the loss of investments was due to gambling and want of control over the Bank of England. Everyone knows that it is by investing abroad that we get trade from those countries to which we loan money. The trouble at the moment is that it is of no use for our manufacturers to send goods abroad because they are unable to receive money from their customers in foreign countries. We hope that the restrictions upon sending money to this country will soon be removed. No sensible manufacturer is going to send his goods abroad if he cannot see that he is going to get payment for them.

I was also interested in hearing Lord Parmoor say that it was due to tariffs that there was depression in the shipping industry in this country. I would like to remind the noble Lord that the depression in shipping occurred before the present Government took office and when the Labour Government was in power. As regards tariffs themselves, Lord Parmoor blames the Government, and Viscount Snowden in particular as the chief villain of the piece, for the introduction of these tariffs; but I do not know how Lord Parmoor expects that the harm done by tariffs is to be got rid of, unless we have some counter-weapon with which to fight the tariffs of foreign countries. Lord Gain-ford, whom I always thought a very strong Free Trader, indicated in his admirable speech just now the necessity of having tariffs to fight the tariffs of other countries. It seems to me that if we are to avoid what I am afraid may happen—an unbalanced Budget—it is most essential that taxation, both national and local, should be reduced. It is useless, to my mind, to waste time in idle recrimination over the delinquencies of past Governments—I think every Government in recent years has been to blame—or over the respective shares of Governments in increasing expenditure. Unfortunately, when the suffrages of the people are solicited, all sorts of promises are made, and the result is increasing expenditure.

I think most of your Lordships who are interested in this question, which is of paramount importance, will have taken the trouble to study the debate which took place in this House on March 22, 1927, on a rather similar Motion to this. Lord Oxford and Asquith, who, as we all know, was not only Prime Minister at one time but a former Chancellor of the Exchequer, gave very sound advice, which has been reiterated this afternoon by the noble Lord, Lord Gainford, and I venture to hope that this will be adopted by the Government as a practical measure. He suggested that all Departments should be rationed, and that the inflow of new entrants into the Civil Service should be retarded. In this manner you would get rid of the unpleasant job of dismissing men who are already in the Service, and you would economise by stopping the flow of new entrants. I am strongly of opinion that this view of Lord Oxford and Asquith is a practical one. I also agree with what has been said this afternoon, that certain of the Ministries should, as was recommended in the Geddes Report, be done away with. The late Lord Inchape, a great captain of industry, whose loss we all deplore, also spoke in that debate. He was a member of the Geddes Committee. He also went out to India to investigate Indian finances, and as a result of his investigations every Department there was rationed. He did not have any Committee, but he simply went to the heads of the Departments and asked them to make the necessary economies themselves, and that was done. Lord Inchcape, in quoting what he had done out there, said that Sir William Birdwood, who was then Commander-in-Chief in India, said that every recommendation made by Lord Inchcape had been carried out by his Department, and I have heard from other officials who were in India at the time that that took place in every Department of the State.

I am perfectly sure something of that sort could be done here. I have myself been connected with no fewer than three Government Departments. I remember very well that when I was at the War Office an outside Committee came round to make investigations. Of course, they did not learn very much. They learnt a certain amount, but we managed to do the job ourselves very much better when we were asked to do it. The Civil Service in this country is a most magnificent service, and I am sure it could be relied upon to do its job in the national interest, just in the same way as the armed forces of the Crown carry out their work whenever they are called upon.

I should like to say a word about the abolition of certain Departments. Take the Ministry of Transport. It has been said over and over again in this debate, and it has not been contradicted, that £500,000,000 of public money have been spent on the roads during the last few years. That we have the most splendid roads cannot be denied, but if this Ministry had been abolished, in accordance with the recommendations of the Geddes Committee, should we have had the sad spectacle of the present condition of the railways and the wailings of the local authorities—and they are going to be worse still in the future—over the expense of the upkeep of these roads?

A good deal has been said about the extravagance of local authorities, but can all the blame really be placed on them? Is it not in a way the fault of Parliament which, without reckoning the cost, throws burdens on local authorities which they are obliged to bear. In nearly every Bill you see the word "must" instead of "may," because these duties are for the most part obligatory on local authorities. What do we mean by Parliament? As regards finance, we mean the House of Commons. We have had frequent discussions here about Privilege, and we all know that in this House it is always conceded to the House of Commons that it is the sole arbiter as regards finance. But when we review the proceedings of Parliament for some years can it be said that the job has been particularly well done? Has the House of Commons been so wonderfully economical? It has, as a matter of fact, very little control of finance itself. There is only one Party which has carried out what it preached—the doctrine of economy with efficiency—and that is the Municipal Reform Party in London. We put that into practice. We have had the courage of our opinions, and the electors have backed us up every time during the last twenty-five years; yet I do not think anybody can say that the London services are bad, or that they do not compare very favourably with the services and amenities in any other capital city in the world. I am sorry to say that the noble Earl, Lord Munster, who is on the London County Council, cannot be present this afternoon to speak of the finances of that body, which he is more entitled to deal with than I am.

There has been a good deal of discussion lately, both outside and among certain members of this House, about House of Lords reform. I do not quite know what is going to happen, but it seems to me that, although that is a very important question, the reform of the House of Commons is more important still. It is quite true that it has a Public Accounts Committee and an Estimates Committee. The Estimates Committee presented a very useful Report the other day, but, after all, it is not current affairs with which they are dealing. It is past matter, and they can only criticise what has been done. I have always been of opinion —and my opinion is reinforced by what is going on in another place at this moment—that more members of the House of Commons should be enlisted in this system of assisting the Government. In the French Chamber they have a Budget Committee. I am not going into the composition of the Budget Committee in the French Chamber, because it would take up too much time and involve too much detail, but at all events in France there is the principle that the Minister is assisted by a Budget Committee. I am strongly of opinion that if some use could be made of the movement that is going on here, and if we had permanent committees, they would be a great help to the Ministers in the various Departments. As the noble Marquess, Lord Salisbury, told us just now, the Ministers have very little time, especially the more important Ministers, to consider these matters, and it would be of great benefit to have a Budget Committee for each service. They could look into the details of each Department, scrutinise expenditure, and give a great deal more time to that task than Ministers possibly can do.

Another suggestion I venture to make is that at the same time as the National Budget is brought up local government expenditure should be announced. That is quite easy to do, because local authorities make up their estimates early in October. The Chancellor of the Exchequer, therefore, would know what the total expenditure of the country was going to be, and Parliament would then be able to vote the money with the full knowledge of what the whole cost of government, both local and national, is going to be. It is not very long ago—I think it was 1927—that Mr. Winston Churchill complained of what was going on. He said he did not know how much money he would have to raise in the way of loans to local authorities. I agree with what another noble Lord said upon the question of grants. When fresh legislation is passed, Government Departments force local authorities to carry out schemes under the Acts, offering as an inducement the assurance that a portion of the expense will be borne by the State. There are a great many members of this House acquainted with local government, sitting as members of county councils, and they know very well of instances where Government inspectors compel new schools to be built, or extensive alterations to be made, in many cases which are absolutely unnecessary. I am not going to weary the House with details, because many noble Lords are acquainted with the facts. Take the case of the roads. The local authorities, in many cases knowing that a good deal of the cost comes out of the Road Fund, undertake alterations which would not be carried out if they had to pay for them without any assistance from State funds.

I also wish to add a word upon the questions of loans. There has been a tremendous increase in the Debt in recent years. In 1913–14 local debt was £562,000,000; by 1929–30 it had risen to £1,224,000,000. Omitting the debt for trade purposes, we find the debt is now £771,000,000, as compared with £231,000,000 in 1913–14. To-day the local debt charge falling on the rates is more than the National Debt charge before the War. Let us look at what happens in the case of a loan. I shall take a simple example, and hope I shall not weary your Lordships. These are the figures relating to a loan of £250,000 at 3 per cent. repayable in 60 years. The amount of interest paid at the end of the period is £291,994, or nearly £42,000 more than the loan raised. That shows how wrong it is to have these very long dates for borrowing and how very expensive loans are. I think the borrowing power of local authorities should be limited. Unfortunately the limitation on local authorities was removed by the Local Government Act of 1929. The Public Health Act of 1875—the old Act—enacted that the sum borrowed should not exceed the assessable value for two years of the locality. In view of the excessive sums borrowed, I think some limitation should be fixed for all classes of local authorities, and for all local loans.

Another thing, I think, is also of importance in order to curtail expenditure. I am of opinion that the Treasury should be the authority for sanctioning all loans and not the various Departments concerned. I hope the Lord Privy Seal will give us his idea upon the view I have expressed about Departments giving sanction to loans, whereas in my opinion the Treasury only ought to sanction loans. There is another reform which I think is very essential. The Local Government Act of 1888 made it imperative for a finance committee to be established for every county council. A similar provision was put into the London Government Act of 1900 for Metropolitan Boroughs. No estimate can be brought forward for an amount over £50 without the approval of the finance committee of those bodies. Every local authority should have a finance committee, and no expenditure of more than £50 should be incurred without first being brought before the finance committee. I am not at all sure whether, if local authorities go on spending as much as they are doing, their finance committees, like the Finance Committee of the Cabinet, should not be able to veto any unnecessary expenditure. That, I think, would make a great reform in local government.

I believe the few suggestions. I have made are practical proposals. They may take time and require legislation. The most important of them, of course, are the rationing of Government Departments and the suspension of recruiting the Civil Service staff for a fixed period. I would emphasise the point I made that the Chancellor of the Exchequer and Parliament should know what the proposed expenditure of local authorities is to be before the Budget is submitted. In conclusion, I think we must all agree that we are living in very tiresome times as regards the incidence both of rates and taxes. The noble Lord, Lord Parmoor, said just now that rates were for services rendered. I dare say that may be true. It is so to a great extent. At the same time we have been told over and over again in the course of this debate that one-third of the income of this country is paid in either rates or taxes, and we cannot go on doing that. I have made some suggestions which I trust may be of use to the Government. I hope the Government will pursue economy regardless of the unpopularity it may incur, because our only safety lies in having a balanced Budget. The Government, no doubt, is now considering the matter. I only hope something will be done speedily, and that we shall get some words of comfort from the noble Viscount the Lord Privy Seal when he replies on behalf of the Government.


My Lords, I should not have intervened in this debate although I have for many years preached economy—during which time no one has paid the slightest attention to me—if it had not been for the speech made last Wednesday by the noble Marquess, Lord Linlithgow, and the speech made by the noble and learned Marquess, Lord Reading. The Marquess of Linlithgow said, according to the OFFICIAL REPORT: I would say that upon broad grounds of policy and of human nature it would in my judgment be dangerous folly, having regard to the existing level of commodity values, to attempt to curtail the spending power, from whatever source derived, of the wage earner unless at the same time you curtail the interest to the rentier accruing to him as the result of his lending funds to the State. Then I omit a few words, and the report of the speech of the noble Marquess goes on: You cannot hope to correct the disharmony between revenue resources and national expenditure unless you also, and proportionately, scale down the income of the rentier and the nominal value of the Debt. That statement was alluded to in two newspapers, and it was also referred to in the City article of one of the leading daily newspapers. In one of those newspapers, after an allusion to the position which the noble Marquess, Lord Linlithgow, holds in this House, there followed these words: A short time ago it would have created a stir, but at the present moment it was received in silence. On that I think I may say that it was received in silence because we are net accustomed to interrupt each other in this House. Silence by no manner of means signifies consent.

I wish to make my remarks as short as possible, but I must turn now to what was said by the noble and learned Marquess, Lord Reading. The noble and learned Marquess is a great authority upon many matters, and he is certainly a great authority upon financial matters. Therefore, his remarks ought to receive very careful attention. This is what he said: Can the Government rest merely upon the conversion of that 5 per cent. War Loan which became redeemable in 1929? It may very well be that, as time proceeds, we shall find it necessary to take some other steps with regard to the remaining £4,300,000,000 of National War Debt in order that we may save more interest, and that this figure of £276,000,000 may be reduced not merely by £16,000,000, bringing it to £260,000,000 but by a still further amount. Everything must depend, of course, on what happens in the future. I can conceive circumstances in which we might find it necessary to take very strong measures. I hope they will not arise. But, if they did, I believe that in this country there would be response just as willing as there was to the demand for extra taxation last year. Let me point out to your Lordships the effect of that speech, and I feel sure that on reflection the noble and learned Marquess will agree with me. The noble and learned Marquess is as anxious as I am to reduce interest on War Loan. In order to do that by voluntary conversion you must have other Government stock, 4 per cent. stock standing at over par. I think the noble and learned Marquess will agree with that.

Does the noble and learned Marquess think that if anybody who is a holder of those other War stocks reads that speech it will induce him to convert his War Loan into a 4 per cent. stock? Will he not rather say:" If my capital is to be reduced, the best thing I can do is to sell my stock at once and get out." Does he suppose that the holders of the other £4,300,000,000 of Government stock, having been told that there is a possibility of their capital being reduced and being able now to sell at possibly what they gave for it, or at any rate without very much loss, will continue to hold their stock? Does he consider that his speech will restore confidence in the country? What will be the effect on foreigners? There are, as the noble and learned Marquess knows perfectly well, a large number of foreigners who invest money in English Government securities because they believe that the English people will maintain the sanctity of contract, and having borrowed money and entered into a bargain will not repudiate it. It seems to me that it is very necessary that the spokesman of the Government in his reply shall make it certain that they have no intention of repudiating their bargains. What we require at the present moment is reduction of expenditure and not repudiation of Debt.


My Lords, I had not intended to trouble the House and I will not detain you more than a few minutes, but I was deeply interested in what I heard from noble Lords last Wednesday, in what I read afterwards in the OFFICIAL REPORT, and in what has fallen from noble Lords to-day. I ventured therefore to look into the figures of various Departments with which I have been connected since the War in order to see what has been their expenditure during the last ten or eleven years. It so happens that the Departments with which I have been connected are typical, because there are two Service Departments (the Admiralty and the War Office) and two Departments of the Civil Services (the Board of Education and the Ministry of Health). When I went to the Admiralty as Civil Lord in 1921, the Naval Estimates amounted to £90,000,000. In 1931—I take last year because I think it affords a better comparison as this year's Estimates have been rather drastically cut—I find that the expenditure was £39,000,000, a reduction of £61,000,000 in those ten years. When I went to the War Office in 1925 the Estimates were £44,500,000. Last year they were £40,000,000, a reduction of £4,500,000. Those figures are interesting because they show that successive Governments—it does not matter whether a Government of this side of the House or of the other side—have all laboured, and laboured successfully, to reduce expenditure on armaments. They have brought down the cost of the Army and Navy to £74,000,000. I take the figure of £74,000;000 because that excludes the non-effective Votes, and I do not think it is fair to include the non-effective services.

I do not suppose that what I am saying is news to anybody, but I would like to emphasise it because many people—or certainly a number of people—are apt to say that economy can be effected by the curtailment of expenditure upon the Defence Services. The figures I have ventured to quote show that every Government has cut down the expenditure on the Defence Services most drastically, and so it is useless to expect that much more economy can be obtained in that way for the all-sufficient reason that there is no money there. You cannot get blood out of a stone, and you cannot get money out of Estimates that have been cut to the bone already. Recently we have heard of drastic reductions proposed at Geneva and the United States of America suggests, I believe, that Estimates on the Army, Navy and Air Forces should be cut by 33⅓ per cent. all round. If that were done by the Admiralty and War Office we should only save an aggregate of £24,500,000. That is a very respectable sum, but it is nowhere near the sum that must be obtained by economies if you are to reduce taxation to a proper level. If you can safely curtail expenditure on the Army and Navy by all means do so, but if the money is not there you will not be able to cut the expenditure to the extent required to meet such a reduction of taxation as is necessary.

Turning to the Departments contained in Classes IV and V of the Civil Estimates, there you have a very different story. In the last nine years from 1923 to 1931, there has been a rise of £10,000,000 in Class IV and there has been a rise of £74,000,000 in health and pension services. That is to say that altogether on education, health and pensions there has been an increase in nine years of £84,000,000. If you are to make the economies necessary to readjust taxation in the manner which has been suggested, the only way is to go to the place where the money is—namely, the increases in the social services.

It seems to me that we are therefore confronted with three alternatives. The first is to leave things as they are, which is the policy of drift denounced so ably by the Marquess of Salisbury. I do not think after all we have heard in this debate that your Lordships will favour that alternative. The next policy is a thoroughly drastic cut in the social services. I very much doubt whether that is a feasible policy—whether the Government can abandon the commitments of successive Governments sufficiently to enable you to reduce your expenditure to the extent which is necessary. I support the Motion very strongly, for I believe great economies can be carried out and I have every confidence in the Government, but I doubt whether sufficient economies can be initiated to permit taxation to be reduced to the level that we hope and desire to see. The noble Marquess, Lord Salisbury, said he would regret seeing the health services much reduced. The cost of old age pensions, widows' and orphans' pensions and so, forth has enormously swelled the cost of this class of the Civil Service Vote, and I very much doubt whether you could really cut into that expenditure so deeply as would be necessary if you are to find the money necessary to meet the reduction of taxation.

I hope the advice to the Government to make economy in education and transport will be followed, but if the difficulty cannot be overcome by economy alone, there remains another alternative—and I hope that when the Lord Privy Seal replies he will give us help in that direction —and that is a combination of three things. There should be every possible economy of course, but we also want general co-operation of all classes and people. In other words we want more hard work. I think we have suffered from too much devotion to amusement and too little hard work, and we want an abandonment of that pernicious doctrine of leisure for leisure's sake so eloquently denounced by the noble Marquess. Lastly there is the question of a general improvement in the economic and financial condition not only of this country, but throughout the world. When the Lord Privy Seal comes to speak to-night I hope he will be able to give us some good news from Lausanne because I think, if he could, it would be more helpful in solving the difficulties we are discussing than possibly anything else. I hope, too, that when Ministers return from Ottawa they will also bring good news from that country.


My Lords, the Motion of my noble friend represents exactly what is in the mind of the taxpayer. He was deeply grateful to the National Government for curtailing an expenditure of £79,000,000 projected by its predecessors. But the taxpayer was bitterly disappointed that the expected cutting down of Government expenditure and a drastic revision of so-called social policies were not carried much further at that opportune time. The taxpayer further knows that what remains of our diminishing capital is being steadily depleted through its continued use by Government as revenue; and he knows better than the Chancellor of the Exchequer that direct taxation has reached its limit. In fact he is certain that it has already so overpassed any safe limit as to render it impossible for the country to recover without great reductions in Income Tax, Super-Tax and Death Duties. And yet he is urged on the highest authority to spend courageously ! There are few pockets in which anything has been left to spend either courageously or timidly. No doubt, however, the Government sets a good example in this respect.

The fact is that our financial troubles have been shelved but remain unsolved, and they never will be solved until attention is paid to many warnings given by the most competent authorities and until action has been taken on the Geddes, May and other Reports, on which so far no Party or Coalition has taken adequate action. Political leaders have remained deaf to every kind of appeal although, at the last Election, the pledge that went home to the electors was their promise to insist on the most far-reaching economies. We are asked what can be saved after interest on Debt and expenditure on defence have been met. We know how hard it must be in present circumstances to convert any great block of Debt; that Defence is already below the margin of safety; that there is little hope from those Conferences which absorb the energies of our Ministers. We reply that a Conservative Government was pledged to suppress the Transport Ministry, which has spent £600,000,000 on roads and is still spending. It has ruined the railways and has given employment largely to Irish Free Staters at a fabulous rate per head of those employed. It is falling on the ratepayer to maintain those roads which become dilapidated as quickly as they are made owing to express heavy traffic diverted from the railways. There are the police and other costs of regulating road traffic, while deaths by the thousand and casualties by the hundred thousand seemed to be taken as a matter of course by all save a few members of your Lordships' House. The immediate abolition of this Ministry and the transfer of its responsibility with grants levied on motors to the local authorities would afford some real relief.

The recent education policy has produced very mixed results on the rising generation and on a community which gets less and less able to stand on its own feet. Were the main State responsibility restricted to the average child between seven and thirteen it would effect a most salutary economy. Hundreds of millions have been sunk in housing to the destruction of private enterprise, which, had it been left to itself, would have readily dealt with any normal deficiency in housing. This could at once be stopped unless in the slums where least has been done by this vast expenditure. Subsidies would end with the Rent Restrictions Acts. Huge sums have been spent on small holdings with the object of increasing rural population which is still decreasing along with production—a policy which saddled taxpayer, ratepayer and landlord with increasing burdens. This should stop. The Report of the Electricity Commissioners shows an expenditure of £38,000,000 with receipts nil.

There, are other State undertakings which should be left to the sphere of private enterprise. Broadcasting, telephones and other State activities which have proved costly failures, should be sold to private corporations. Many economies could be made at the Labour Ministry. The Empire Marketing Board might, now that we have tariffs and Imperial Preference, disappear. What we suffer from most is multiplication of boards, many competing in the bestowal of grants for the same purpose—all superabundantly staffed and many of them impediments to industrial recovery. There is that lavish expenditure at Geneva to which my noble friend Lord Lovat has so pointedly drawn attention. There are the inquisitions of the health Department which forces extravagance on local authorities ever since it unfortunately ceased to be the Local Government Board. Local government offers another great field for economy, more especially in Scotland, where the peculiar system of rating conduces to extravagance.

Few of us reached a certain age without realising that so-called reforms once hailed with enthusiasm bring disillusionment—that they have not only failed to achieve what was expected of them, but have been proved to have many more disadvantages than advantages. This has been so with the creation of the Scottish Office with its all-powerful Secretary of State and bureaucracy. This many of us hailed as a forward step, but it has resulted in the separation of our interests from those of the predominant partner, who, consequently, feels neither interest not responsibility for our affairs. So that it has some to pass, as in the days of Charles II when Lauderdale could hang, draw and quarter His Majesty's subjects without causing a ripple in the English Parliament, that to-day a milder but equally effective tyranny is exercised by the Scottish Office without exciting the least feeling of sympathy in the breasts of members of Parliament from other parts of the country. We see now that no one man can supervise all Departments, with their growing activities so unfortunately indulged in by the State, even if he had great administrative experience—unless he had the capacity of a Mussolini, of which no holder of the office has yet shown evidence.

Most unhappily the policy of the Scottish Office at present seems to be at variance with that of the National Government, despite the excellent advice given by its Under-Secretary, Mr. Skelton, by Sir Henry Betterton and by Sir Hilton Young. Mr. Skelton regards the increase of local indebtedness in Scot-and with grave anxiety "and admits that" Government was not without responsibility. The local debt was £67,000,000 in 1914. It is now £143,000,000 with a falling popula- tion !" On housing he is reported to have "agreed that though private enterprise could not tackle the slums it could relieve Government and local authorities of an immense burden if it could tackle ordinary housing." There could be no doubt it could, he said, and would, if given the chalice.

Then we have Sir Henry Betterton resisting all housing schemes which resulted in compelling local authorities to undertake large building schemes involving the increase of rates. And yet, my Lords, we have Sir Archibald Sinclair urging local authorities in conference to build and, in military language, to use to that end the arms they have in their hands. We are resigned to hearing the Government speak with two voices on tariffs, but a differentiation in financial policy between one Minister and another is more serious. The boards under the Scottish Office are active in support of the Secretary for Scotland's exhortations to spend. Pressure has been applied by the Scottish Education Department to the Ross-shire County Council to spend £50,000 on a new secondary school in the most heavily rated of Scottish counties, admirably administered under Sir Robert Brooke.

The County Council wrote to the Scottish Office taking this school merely as an example of the principle involved. The Government had called for economy. The County Council reduced expenditure by £70,000 but wished to ensure that the grants saved would revert to the Treasury. They added that if those grants went elsewhere they should distrust the Government's desire for economy. The Scottish Education Department—not the Scottish Office—replied that the Government did not want any more economies; that the saving on the school desired by the County Council would not affect the charge on the Exchequer and that if saved it would go to some more pliant authority. Then came the veiled threat that the grant in full was conditional on the Scottish Education Department being satisfied as to the educational provision in the County and that the new school did not conflict with Government policy. This is typical of all Departments towards any effort to save by the County, which is continuously pressed by the Board of Health to get on with housing schemes, although the health of Ross-shire, like its rates, is well above the average.

The bureaucracies are not to blame so long as the policy of the Government and of the Scottish Office is what it is. Any large retrenchment is impossible whilst statutory provisions are insisted upon and remain unrepealed. The same pressure is being applied in another Highland county to spend £20,000 on a new school instead of £3,000 upon adequately improving the old one. The Health Department demands surveys of every house in Ross-shire with a view to general reconstruction. And it can enforce immense expenditure by itself making use of the extraordinary powers by which it can brush the County Council aside and do the work at the cost of the local authority. In the small village by which I live it impelled a former County Council to erect two Addison houses at a cost of £2,600 the pair. These houses were occupied at half the economic rents by two pensioners from the public service from other counties.

In Fife the County Council, which has squandered huge grants on roads in the Dunfermline district, is now intent on building a quite unnecessary road bridge over the Forth at a cost of nearly half a million pounds, which would only serve a small district of the County, and that in competition with the North Eastern Railway, which provides an efficient service over a bridge which cost £3,000,000 to build. In Dundee there was a scheme for a £50,000 police palace, which, according to the excellent local Press, was favoured by the Scottish Office, and which, but for the Town Council and public dissatisfaction, would have been erected—although the convener of the Police Committee and the Chief Constable stated that any expenditure in excess of £9,000 was quite unnecessary. In my own county, Ross-shire, the county transport authorities are busy widening small bridges over little burns at costs running into four figures, under forms of construction which apparently require a dozen sets of a dozen different plans to be provided for contractors, foremen, and others.

These are only a few examples, which could be multiplied, of what is going on all over Scotland. What I would press for is that questionnaires be addressed to local authorities, asking for their sug- gestions for the reduction of local government expenditure, and indicating also that Orders in Council would be passed to enable them to reduce their budgets. Were they rationed, better still, in three years local authorities' expenditure could be cut by half. It is not till Governments cease trying to create a new Heaven with the very limited resources of the taxpayer—not till they perceive, as Mr. Pepys did, nearly three centuries ago, that "the King cannot be served so cheaply as other men," that waste and over-spending will come to an end. The State is no more competent to direct industrial enterprise than to regulate international trade. Its interference with private enterprise and individual initiative has produced industrial atrophy, and helped to bring about commercial collapse. It is not till the policy of State interference is reversed, until the individual is again permitted to stand on his own feet, and is relieved of the preposterous burdens laid on him through Governments trespassing on his provinces, that this country will recover its prosperity and its leading position in the world.


My Lords, this debate has been protracted over two days, and I suppose, like all things, it must at last come to an end. There is no reason at all why I should delay your Lordships for more than a few moments, because we are all of us very anxious to hear the concluding speech on behalf of the Government, which is to be delivered by the noble Viscount the Lord Privy Seal, whom I am very glad to see in his place here to-day. In the first place I am not an economist—thank goodness ! I have sometimes wished I had been brought up as a lawyer, and I have often wished that I had been brought up as a plumber; but I have never wished to be an economist, and for the reason given by the noble Marquess, Lord Salisbury, that that section of the community have this to distinguish them, that no two of them ever agree. So I am only going just to cover a few general considerations.

I think this discussion has been extremely interesting, and has been punctuated with speeches full of knowledge of the subject; but there is something rather depressing when the House has to turn its attention to cramping, rather than extending national efforts, to doing less rather than doing more, to restricting rather than to enlarging the field of national activity, to caution and avoidance of risk, instead of enterprise and boldness. But I must say I do not envy the Lord Privy Seal his task in picking up the threads of this debate, because it has indeed covered the most amazing field. We have had discussion of the economy cuts, of the Civil Service, of taxation and Debts, of tariffs, of local government, of education, of roads and railways, of the International Conferences, of the reform of the House of Lords and the reform of the House of Commons, and of the better housing in Ross-shire. And I have not alluded to a subject which inevitably was bound to conic up, which is Russia. In another place when Russia was mentioned there always was something of a commotion, but in your Lordships' House it always amounts to an explosion; and in that connection perhaps I may be allowed to comment on the violent outburst on the part of the noble and learned Marquess, Lord Reading, when he succeeded my noble friend Lord Marley on the first day of this debate.

He favoured us with one of what I may call his hectoring lectures, which he is rather found of giving, because in an attack on the small minority he gets great cheers from the big battalions. But I should like to assure him that we on this side of the House remain absolutely cold before these outbursts of simulated fury on his part. We on this side of the House have got a difficult task in what I may call keeping our end up in an Assembly that is naturally hostile to our opinions, and in which we are in a minority of something like fifty to one. But we endeavour to the best of our ability, in close observance of the rules and traditions of your Lordships' House, to express our opinions, and we are not going to be deflected from doing so by a hair's breadth, however unpopular those opinions may be, by a travesty of our arguments, or by any pontifical admonitions, even from so eminent a member of your Lordships' House as the noble and learned Marquess.

And what was all the sound and fury about? The noble Lord, Lord Hunsdon, who opened the debate, concluded his remarks by saying that what is wanted is a policy, is leadership, is plan. My noble friend Lord Marley, in the course of his remarks, as someone interrupted and said "What about Russia?" said in effect: "Well, anyhow, in Russia there is a plan which is giving hope and is giving improvement. It is a question of what may be called trial and error instead of, in our case, continued error without any trial." Hardly a theme to provoke a brawl, and I do beg the noble and learned Marquess, when he feels inclined to administer another of those lectures, anyhow to do it from some other corner of the House than my lap.

There was one remark that fell from the right rev. Prelate the Bishop of Durham, who, I am sorry, is not in this place, but. I feel that it has not been answered, and should be answered before this debate concludes. The right rev. Prelate said that extravagance in local expenditure came from the fact that the local bodies were in the hands of wage earners who had not sufficient experience, and therefore were extravagant and slovenly in their methods. It was in fact a condemnation of the democratic principle on which our local government is founded. I can only say that I have very close knowledge of an instance which gives a contradiction to that idea altogether. In the City of Sheffield, with which I was associated for many years, there is a council composed largely of wage earners who have administered a very large sum of money. Their expenditure reaches something like £3,500,000. By dint of very careful economies but also very judicious expenditure in housing, in schools, in setting up a municipal printing department, in having a land purchase fund and in several other directions, they have increased the prosperity of the City in very difficult times, and have certainly shown an example of a contradiction that wage earners are not capable of administering sums of money in towns. It is more important to my mind that you should have people in local government who have intimate and close knowledge of the very evils which they want to correct and amend, than you should have financial experts who may understand the intricacies of finance but have not a close enough knowledge of the problems with which they have to deal.

There was one part of the remarks made this afternoon by the noble Marquess, Lord Salisbury, which I feel I cannot leave without a word, and that was the way he regarded education as some- thing like making roads. He coupled it all the time with transport, and services of that sort upon which savings could be made. I notice in Conservative speeches on platforms and articles in the Conservative Press that economy is mentioned, but the very first object that is chosen for economy is education. In an article by a prominent Conservative journalist recently I saw this sentence: The present outrageous cost of primary education must be halved.'' Of course one can make economies, one can no longer build any schools, one need not repair the schools, one can cut down the salaries more than one half and have larger classes. By all this you can save a great deal of money, but to my mind it would be the very worst conceivable form that economy could take. To handicap the youth of this country and to pass them on to posterity ill equipped, very likely ill nourished and not educated up to what is required of citizenship of this country in these days, would be doing a very bad service to the country.

All along one finds in these economy suggestions a desire to save at the moment quite regardless of the extra expenditure that will be involved in the future. That is what is being done about roads. When the right rev. Prelate the Bishop of Durham said too much was being spent upon roads I was surprised to hear the suggestion loudly cheered by members on the Liberal Benches. I was surprised because it was really the policy put forward by Mr. Lloyd George in the book which I think was called "We Can Conquer Unemployment." I have had a good deal to do with roads, because I was in the Ministry of Transport for over a year, and the worst form of economy on roads is to start a road and not finish it, and that is being done up and down the country. That roads do not provide a great deal of employment is true. I think it was a great disappointment to find that so much money could be expended upon roads without employing very many men owing to the improvements in machinery. But however that may be, it is false economy to cut all expenditure to-day with the view to raising expenditure in the future.

Let me say in conclusion that I think a certain amount of definite harm has been done by this economy stunt. It has restricted the natural flow of money and has produced stagnation, and from stagnation there can be no fertility. A thousand shillings in the pockets of poor people being spent is greater riches for the country than a thousand pounds put aside in a bank. Saving, hoarding, stinting, cheese-paring—they have all been very much encouraged, and are not going to help trade or stimulate commercial enterprise. In the speech which we are about to hear we shall get the Government view from one who can speak with greater authority on this subject than any man in the country. He knows the secrets and the mysteries of the Treasury. He has been in close connection with that Department during the last two or three years. No one is better qualified than he to speak on the subject. That he will not commend or approve the ideal which we believe in on this side of the House and which was very powerfully and courageously set out by my noble friend, Lord Marley, I fear will be the case, although my belief is that corporate public control, service, the abolition of class distinctions of the money standard and the regulation of society, economic and social, on a Socialistic basis has largely been strengthened by the views, the utterances, the writings and the speeches of the noble Viscount who is going to succeed me. But we have reached the moment where your Lordships are impatient to hear the Government view. I hope the noble Viscount will hold out to us some hope, perhaps divulge to us some great plan on the part of the Government. If so I can assure him we shall one and all receive it with the greatest possible pleasure.


My Lords, I should be assured of the sympathy of at least one member of your Lordships' House in the very difficult task that lies before me of attempting to deal in a comparatively short time with the very many points which have been raised in the course of this two days debate. To deal with them all would be quite impassible. I shall do my best to make some observations upon those which have been raised most often in the course of the discussion, but if I omit to deal with others I hope that those who have advanced these points will not think that that is due to any lack of appreciation of the value of their contributions. It has been said this afternoon that this debate has been not merely an interesting but an important debate. It is quite true that this Chamber has no direct control over national expenditure or national taxation, but it still can exert some influence upon public opinion, and I think that many of the speeches which have been made, contributed by men of wide knowledge and experience in industry and finance, will help not merely to form opinion in the country but help the Government in the very formidable task they have before them.

There has been one feature in this debate common in my experience to all economy debates. It is the easiest thing in the world to talk economy in the abstract, but your difficulties begin, as the noble Earl, Lord Onslow, pointed out in his admirable analysis of the Estimates of certain Services, when you try to make economies. It was a very common experience of mine in another place that those who were loudest on certain occasions in demanding economy were equally loud upon other occasions in demanding an increase in national expenditure. There has been this afternoon perhaps to a greater extent than on the first day of this discussion a disposition to come down to details, and definite suggestions have been made of the way in which economies could possibly be effected. The Government, I may say, do not look upon this Motion as in any sense a hostile Motion. We need all the encouragement that we can get, and we believe that this Motion is intended to give the Government encouragement. For that reason we shall not oppose the Motion.

I will, as soon as possible, come to the practical proposals for effecting greater economy, but before that may I remark that the noble Lord, Lord Hunsdon, said that he would not enter into details of how economies could be effected, and Lord Plender, in a speech upon which I should like heartily to congratulate him if my congratulations are not too belated, remarked in much the same vein as Lord Hunsdon that he was glad that he was not to be called upon to carry these economies into effect. May I say to the noble Lord that he must not be too sure about that? The noble Lord has always been ready to place his great services at the disposal of the Government. There is no man in the country who has rendered a greater measure of voluntary and invaluable service to the Government during many years than has the noble Lord, Lord Plender. I am quite sure that if he be called upon to come to the help of the Government in trying to secure further economies, he will respond, as he always has done, to the call of duty. The noble Lord, Lord Plender, made one very wise remark which in other words has been repeated by other speakers this afternoon. The noble Earl, Lord Onslow, gave expression to remarks to the same effect. The noble Lord, Lord Plender, said that rash economy, ill-considered economy, might do a great deal more harm than good. It is not sufficient to look at an estimate and say: "Cut this estimate by ten per, cent or by twenty per cent," without taking into most serious consideration what would be the effect of the reduction that would be made.

I think that in the course of this debate the efforts which the Government have already made in the way of economy have hardly been sufficiently appreciated. The noble Marquess, Lord Salisbury, began his observations this afternoon by wanting to know what the Government were doing and suggesting that the Government had probably had no time to give consideration to this matter. On the contrary, the Government have had time and the Government have done a great deal. This Government have effected greater economies—I will show you something of the details later—in national expenditure during their short length of office than any other Government of the past. The noble Lord, Lord Plender, was a member of the May Committee and the May Committee recommended a reduction of expenditure amounting to something over £90,000,000 a year. I am quite sure that if they could have found further economies to suggest they would not have hesitated to do so, because they wielded the axe in a rather ruthless and, I think I may almost say without offence, in a rather brutal way. They did not even hesitate to encroach upon the territory of Government and social policy.

What have the Government done? Fifteen or eighteen months ago the House of Commons passed a Resolution calling upon the Chancellor of the Exchequer to appoint a Committee to see what economies could be effected in the Civil Votes. I appointed that Committee —the May Committee to which I have referred—and that Committee reported at the end of July. That Committee, as I have said, recommended economies to the extent of something over £90,000,000. The then Labour Government took that Report into consideration as soon as it was published. Although it was the holiday season we were in constant session for its consideration through a Cabinet Committee. Later the whole Labour Cabinet was called together to consider the suggestions of that Committee, and it is well known that, although the Labour Cabinet as a whole agreed upon a very large sum of economy, there came a difference of opinion which eventually led the Prime Minister to disband the Government.

Then the National Government followed and that National Government proposed economies amounting to £70,000,000. The noble and learned Marquess, Lord Reading, last week disclaimed responsibility for that admirable work of the Government on the ground that he might be regarded as blowing his own trumpet if he said too much about it. I am not precluded from saying that we had very valuable assistance from the noble and learned Marquess in considering these very difficult problems. We recommended economies amounting to £70,000,000, but as the noble Marquess, Lord Salisbury, pointed out, the economies first recommended to Parliament were pared down by a lowering of the percentage cuts in the teachers' salaries and in the pay of the police and the ratings in the Navy and the other Fighting Services. That reduced the amount of economies by about£3,500,000 and there was also increased expenditure of about£1,250,000 on the Revenue Votes, due to a considerable extent to increased costs arising from the imposition of tariffs. I mention that without wishing in the slightest degree to raise a controversial issue on the merits of tariffs. That brought the economies down to about£65,000,000, but the Government succeeded in finding other economies and in effecting a total economy on this year's Budget of no less than £79,000,000. That was made up by a saving of £50,000,000 on unemployment, £9,000,000 on education, £8,000,000 on defence, £7,000,000 on roads, with other smaller items amounting to about £5,000,000.

It was said this afternoon that we needed another Geddes Committee. Well, I do not think the results of the Geddes Committee were very much to boast of or to give much encouragement to an expectation that if another Geddes Committee were appointed it would help us very much in the difficulties in which we are placed. That Geddes Committee recommended economies to the extent of £86,500,000, and that was at a time when we had a Budget of £1,200,000,000 which was largely swollen by War-time expenditure. It was a unique opportunity for making drastic cuts in national expenditure and yet the Government of the day did not accept cuts of £86,500,000, but accepted only £54,000,000—that at such a time as I have just described—while the present Government have effected economies of £79,000,000.

References have been made by many speakers in the course of the debate to 1924. I do not know why 1924 should always be taken as a standard year unless it be the fact that that was the year in which I was responsible for the finances of the country. The year 1924 was a very different time from this. In 1924 trade was good and unemployment was so comparatively small that there was no drain upon the National Exchequer. In fact the Insurance Fund was paying back and had almost exhausted the paying back of loans incurred during the period of the previous depression. There was also a Budget surplus of £30,000,000. Now the year before last—and I want to impress on your Lordships how the cost of abnormal unemployment is the greatest factor in increased expenditure during the last few years—unemployment was costing the Exchequer £114,000,000. This year the cost to the Exchequer has been brought down to £65,000,000. Comparing 1924 with the present time there has been very considerable reductions in many directions, but these have been more than counter-balanced by increased expenditures in other directions.

To unemployment I have already referred, but we have had the Derating Act, which has placed on the National Exchequer a cost of about £33,000,000 a year; old age pensions, which automatically increase and have risen during that period from £26,000,000 to £40,000,000—I am afraid that for some years to come that increase will continue if the present rate of pensions is main- tained. Then we have had, although I am not complaining or disapproving of it —this was passed by a Conservative Government and therefore its initiation cannot be set down to the extravagance of a Socialist Government—the Widows' and Orphans' Pensions Act which has added £11,000,000 a year to the national expenditure. Therefore if you take de-rating, unemployment, widows and orphans and old age pensions, and a number of other smaller items, you get an increased expenditure since 1924 of about £126,000,000 a year.

What is the nature of national expenditure? National expenditure is largely a transfer of income from one section to another. The interest on the War Debt does not lessen the amount of income in the country. It is simply a transfer. Although the people who receive interest on the War Debt are not always the people who pay Income Tax, to a large extent they are the same, and the payments of interest on the War Debt are just about equal to the receipts from Income Tax. Then take social services. War pensions is an item of nearly £50,000,000 a year. Fortunately it is a decreasing item, and it is decreasing by something like £3,000,000 a year. We have old age pensions £40;000,000, widows' and orphans' pensions £11,000,000, health insurance a very considerable sum, and unemployment pay. When raised by taxation this is a transfer from, if you will, the spending power of one class of the community to another. I do not think that in the aggregate this transfer has a very great effect upon the volume of employment, but it certainly has an effect, and I think a good and desirable effect, upon the qualify of employment, because expenditure such as I have just mentioned transfers to the poorer sections of the community from, if you will, the taxation of the well-to-do, and is spent almost wholly in the encouragement of the staple industries of the country.

A reduction of taxation of the rich will enable them either to save more—a very desirable thing because in the past we have had to rely to a very considerable extent on the savings of the people who could afford to save—or to spend more, but not to spend more upon primary commodities, nor even upon reasonable and moderate comforts, but upon luxury. A reduction of the taxation of the rich, if it be secured by a reduction of the contributions to the social services, will certainly reduce the standard of living of a considerable part of our population. These are matters we have to take into consideration before rushing blindly into a mere reckless cutting down of the amount of an estimate.

With regard to the incidence of the Income Tax there is an opinion of the Colwyn Committee in which they had the support of economists; but I hardly dare to call to my assistance the support of economists after remarks made this afternoon—remarks with which, I may say, in a whisper, I do not altogether disagree—and I agree with the Marquess of Linlithgow and I disagree with Lord Leverhulme on this point concerning high Income Tax entering into the cost of production. But a high Income Tax has other results. It has undoubtedly a bad psychological effect. It has just the effect that the Marquess of Linlithgow mentioned. It discourages enterprise. It makes people, if I may so put it, lose their pluck. It makes them feel: "What is the use of going on?" and that is a psychological fact which cannot be ignored. Moreover, it reduces the sums available for saving, and when trade does recover, as trade will recover, we shall need to replenish our diminished capital reserves by all the savings those who can afford to save can make. It is particularly harmful in the case of taxation of company reserves. I have always held the view, and often expressed it in another place, that if the finances of the country permitted, something ought to be done to deal with the undoubted hardship which is inflicted upon companies by the taxation of the sums which they place to reserve. It would have to be protected by safeguards. There would have to be an assurance that the money put to reserve was not afterwards distributed in dividends, and that it was used for the purpose of capital development. We have done a little in this year's Finance Bill by increasing the amount of the allowance for wasting assets. I can only say, with regard to that, that I hope when the finances of the country will permit this reform to be carried out, something will be done to deal with what is undoubtedly a hardship and an injustice.

Take another effect of the Income Tax. The Income Tax on the lower ranges of income may be a real hardship, but be- fore the changes were made last year the smaller Income Tax payer, say, a married man with an income up to £500 a year, had nothing to complain of. A man could have a wife and three children, and £450 a year, and not pay one penny in Income Tax. There was no ground for complaint there. It was my painful duty last year to make changes in the Finance Bill which doubled the number of the smaller Income Tax payers. As I have said, it was a painful necessity, but I think much of the hardship was rather imaginary. The complaint came from those people to whom I have referred, who have been very generously treated in being exempted in the past from Income Tax, and of course seemed to think they had a grievance in being called upon to pay even a modest sum. I do not deny, and indeed I readily admit, that a heavy Income Tax upon the smaller incomes has the effect of reducing the standard of living of those people. Therefore, taking all those things into consideration, I think it is very desirable that as soon as possible the Income Tax should be brought down to a lower level.

Now take local rates, about which your Lordships have heard a good deal in the course of this debate. It is true that local rates have risen, but not during the last two years. The amount of local rates this year is £155,000,000, but in 1928–29 the amount was £188,000,000. I dare say that reduction is largely accounted for by the assistance which local authorities have received from the Derating Act. Lord Linlithgow quoted a remark of mine which met with criticism in another place when the Derating Bill was before the House of Commons. I then said that local rates as such were not a burden on industry. What I meant has been even better expressed by speakers in your Lordships' House, who said that local rates were a payment for services rendered. It was put so well by other noble Lords that I will not enlarge upon the subject.

With regard to the capital expenditure of local authorities, Lord Hunsdon said that the only difference between the capital debt of a nation and the capital debt of a local authority was that the first was on general assets and the second on particular assets. I think the noble Lord is mistaken. There is a far more fundamental difference, and it is this, that there is no asset for the National Debt. It has all gone, all been blown away, and there is nothing which remains, but in the case of local debt there is something to show for it. It is money borrowed for capital expenditure—for expenditure to a great extent of a remunerative character. The gross debt of the local authorities in England and Wales is £1,158,000,000, and £446,000,000 of that is for trading concerns which bring in a profit, and £382,000,000 is for housing, which brings in a return. Therefore two-thirds of the capital indebtedness of the local authorities is of a remunerative type. May I say this? Of course a great deal of it is invested in electrical undertakings, gas, and things like that. Why, when a public utility company borrows money for building, or the extension of electrical plant, is it called capital, and when a local authority does a similar thing it is called a debt? There is this difference in these two transactions to the advantage of the local authority, that in the case of a public utility authority, except in the case of debentures, that capital is not repaid; it is a standing charge upon the industry; but in the case of a local authority conditions are always laid down for the eventual redemption of the debt.

Lord Hunsdon asked why should we, this generation, bear all the burdens when posterity are going to enjoy the benefits. There might be many answers to that. One might be that posterity will very likely have plenty of its own burdens to bear, but why should not posterity bear the burden when it is going to reap the advantages of the enterprise and expenditure of a previous generation? With regard to local expenditure, I am in entire agreement with those who said that during the last two years there has been too much expenditure by local authorities of a luxury character. Under what I have always regarded as the mistaken idea of making work for the unemployed, local authorities have been encouraged to embark upon work which was not needed, and not likely to bring any return for a good many years. The Government have stopped that policy, and I think very wisely stopped it. I may shock your Lordships, and certainly I should shock those in another place if I made the statement there, but with regard to the maintenance of the unemployed, disregarding for a moment the physical and moral deterioration which results from prolonged unemployment, leaving that out of consideration for a moment, there is no doubt that it is a great deal cheaper for the State to maintain the unemployed by paying benefits than it is by trying to provide work. And indeed the local authorities themselves realise all this, and one reason why the Government are not encouraging expenditure of that sort is that the local authorities themselves have no schemes to put forward, and they are not prepared, even to a moderate extent, to increase local rates for this purpose.

In regard to roads, I dare say if anybody took the trouble to look up old speeches of mine they would find I have been as strong an advocate of good roads as anybody in this country, but I stopped that some years ago. I think it must be ten or twelve years since I said in the House of Commons that I thought we could spend £300,000,000 upon the improvement of our roads and the making of new roads. I believe that since that statement was made a larger sum than that has been spent. So there is no need for me to argue that point further.

Before passing on to deal more specifically with the possibilities of Debt redemption may I deal with just a few—I was going to say minor—points which have been raised in the course of this discussion. The speech of the noble and learned Marquess, Lord Reading, appears to have made a very great impression upon the noble Marquess, Lord Salisbury, for he referred to it at considerable length this evening. Lord Reading expressed some doubt as to whether the estimates in the present Budget would be realised. Well, it would be a very improper thing for me to speak upon a matter like that. That is a matter upon which the Chancellor of the Exchequer alone can express a view, but I may say this that I have every confidence that the very able and expert advisers who have advance knowledge of these things had the fullest justification for recommending the estimates they did in the early part of this year. I may perhaps read to you—and this ought to be a sufficient answer upon this point—what the Chancellor of the Exchequer said upon the Third Beading of the Finance Bill. Speaking of Income Tax and Surtax he said: The bulk of the collection of those taxes comes in in the beginning of the new year, and to base any calculations upon what is happening in April and May is only to deceive oneself. …I myself see no reason at the present time to expect that there will be any appreciable short fall in the yield of Inland Revenue, including, of course, Stamp and Death Duties, as well as Income Tax and Surtax. I would remind your Lordships that there was a very considerable reduction in the estimates of those taxes, except Estate Duty and Stamp Duty, in the present Budget.

Another point was raised in regard to lowering the value of sterling, and I find myself completely in agreement with what Lord Reading said on this subject. There may be advantages in a low exchange value of sterling, but there are undoubtedly great disadvantages too, and the less we deliberately try to regulate the rate of exchange the better it will be for the trade and industry of the country. Of course, the question of the Exchange Equalisation Fund was a different matter. That was only intended to deal with speculation in the exchanges, and speculation might at any time upset what one might call the normal flow of exchange. The rate of exchange can be left to find its own level, and the level will be determined by the volume of international trade. I apologise to the House for venturing to express an opinion upon an economic matter, but I think that is outside the realm of economics and comes within the region of common sense. The noble Marquess, Lord Salisbury, this afternoon said: "What are we to do?" Why, I suppose that he, like myself, is receiving by every post some economic treatises for setting our monetary system upon a sound foundation. Well, a time like this is always a happy hunting ground for the monetary cranks, and the monetary crank is a man who is showing signs of incipient insanity.

I perhaps have time, before passing on to the possibilities of tax reduction, to say a word or two about the speech of the noble Lord, Lord Marley, last week. Lord Marley on that occasion predicted the impending collapse of capitalism. Well, I was preaching Socialism throughout the length and breadth of Great Britain when the noble Lord was in swaddling clothes, and I never have based my idea and conception of a Socialist State upon the ruins of a de- stroyed capitalist system. I dare say that the noble Lord remembers a rather well known Socialist who died a few years ago, Mr. H. M. Hyndman. Mr. Hyndman was always preaching the coming collapse of capitalism, and he was not a wise prophet in that respect, because he committed himself to fixing a definite date when that was going to happen. However, when that date arrived and capitalism had not collapsed he put it on another ten years. Now, may I recommend my noble friend Lord Marley, if he has not already done it, to read a new edition of Mr. Hyndman's book on "Crises of the Nineteenth Century" which has just been issued, and there he will find that the crisis in which we are to-day is not a new thing at all. It only differs in this respect, that the world is a much bigger place to-day. International relations are so much more intricate and closely associated, and therefore, a crisis affects a great many more countries and people than a crisis did in previous years. At such times there have always been those who are proclaiming the collapse of the capitalist system.

Well, the system is not going to end just yet. Some of my Socialist friends have never realised the tremendous recuperative power of capitalism, and we shall see ourselves through this crisis, although, mark you, I am not in the least ignoring the importance of changes in—to use the phrase of noble Lords opposite —our plan of national organisation and national reconstruction. But I certainly cannot follow the noble Lord, Lord Marley, in going to Russia for an example. The noble Lord said that there are no unemployed in Russia. I do not think he would find many unemployed in Dartmoor gaol. Russia is under a system of industrial conscription. Russia has confiscated all the capital, repudiated all public debts, and yet, starting without any capital liability at all, Russia has ever since been coming to the capitalist countries of the world cap in hand, begging them for export credits and loans—to this country which has repudiated its liabilities ! No, no, Russia does not attract me. I shall never live to see the establishment of a Socialist State, but I believe that economic evolution is working in that direction. But may God save England from such a Socialism as they have in Russia to-day !

In regard to private economy, I was delighted to hear the noble Lord, Lord Gainford, raise this point so strongly this afternoon. May I say this plainly to your Lordships, all of whom I suppose would be regarded as belonging to the leisured, wealthy, and, as some people would put it, idle class: You are not going to get the working people quietly to accept a reduction in their standard of living when they see on every hand so much evidence of ostentatious display, extravagance and luxury.


Hear, hear !


There will have to be economy all round. Now as to the possibilities of national expenditure. The difficulty I have mentioned is not in the abstract, but in the practice. The London Chamber of Commerce sent a few days ago to the members of the Government a memorandum regarding national economy, and in that they said we ought to reduce national expenditure by £50,000,000. Then they set to work to show how it could be done. They first of all jotted down £16,000,000 from conversion; then housing, £3,000,000; for education, £10,000,000; and when they had got there they could not get any further. All the ingenuity, and all the resource of the Chamber of Commerce evidently could not suggest another £21,000,000.

However, ordinary expenditure this year is £734,000,000, and of that—and this is a very important figure, and shows the difficulty of the whole problem—there is £588,000,000 which is nationally administered, and £146,000,000 grants to local authorities. That £588,000,000 which is administered by the nation is made up as follows, and the items are most interesting:—The Debt, £276,000,000; Defence, £106,000,000; War Pensions, £47,000,000; Old Age and Widows' Pensions, Health and Unemployment Pay, £122,000,000. Therefore, excluding War Debt and the Defence Services there is £177,000,000 in the nationally-controlled social services. Cut down that? The noble Earl, Lord Onslow, expressed doubt about the possibility of making much economy on many of those services. Take War pensions: are we to attack those? Old age pensions: are we to attack those? Health? The noble Marquess would not attack health. Unemployment? There is a place for effecting economy, and that is by an improvement in trade. If we could get back trade to its position in 1924 then we could reduce that unemployment item by £50,000,000.

I am, like the noble Lord, Lord Gain-ford, hopeful. The noble Earl, Lord Onslow, wanted to know if I could give any encouraging word from Lausanne. They do not appear to have done very much there so far as practical results are concerned, judging from the newspapers, but I am not surprised at that. I have had a lot of experience at these International Conferences, and the delegates from most of the countries seem to think that it is incumbent upon them to spend at least a few weeks in talk before they come to deal with practical questions. I am hopeful that as the result of their deliberations at Lausanne we may get a settlement of the vexed question of War Debts and Reparations.

I come now to conversion. I am afraid I shall have to reject on behalf of the Government the very tantalising suggestion of Lord Marley that we should convert the huge block of 5 per cent. War Loan at 2 or 2½ per cent. interest. I am sure the Government would be only too happy to do that, but you must remember the conversion will have to be a voluntary conversion, and the terms will have to be such as to be, if not attractive at least acceptable to the present holders of the War stock. There has never been a moment when this question of converting the 5 per cent. War Loan has been out of the mind of the Chancellor of the Exchequer since 1929, the day when it first became possible to redeem it. We were told by the newspapers that we missed an opportunity last year of making a favourable conversion. I am betraying no secret—I believe I have mentioned this in another place—when I say that I was hoping about the latter part of the summer of last year to be able to carry through a big conversion scheme, but you must remember that a notice of three months has to be given, and when you are fixing the time for the issue of a notice of conversion you must not look merely at the next day or two, you have to look at least three months ahead, and be as certain as one humanly can be certain that nothing serious is going to happen during that three months which will altogether upset the success of your conversion operation. It was then within my knowledge what the financial outlook was about July of last year, and I therefore did not carry through the operation scheme at that time. It was in the circumstances the best course, for I am quite sure it would not have been successful. The Chancellor of the Exchequer, as I have said, has always got this in his mind, and he will miss no favourable opportunity of trying to effect this very substantial reduction in the volume of the interest upon the National Debt. As a matter of fact in the Finance Bill of last year I took all the powers that were necessary to carry through the conversion, so that the plan is all ready the moment the occasion is favourable for putting it into effect.

In regard to the further point that the noble Marquess, Lord Reading, raised, it was referred to, I think, under a misunderstanding by the noble Lord, Lord Banbury. The noble Marquess referred to other blocks of Debt and the possibility of redeeming them at a lower rate of interest. May I say to the noble Marquess that there is not very much in that at present, because I think a little over £2,000,000,000 of the total of £6,000,000,000 of the internal Debt is either upon a 4 per cent. basis now or below a 4 per cent. basis? I think there is no large block of loan which could be redeemed for a few years to come. Of course the effect of a successful conversion of the 5 per cent. War Loan would undoubtedly make the conversion of other blocks of Debt easier when their maturity arrives.

Many speakers in the course of the debate have advocated the common plan of rationing. As a matter of fact the Departments are rationed, but you could not go, say, to the Services to which the noble Earl, Lord Onslow, referred, the Defence Services, and say: "Your estimate for this year is £50,000,000. I want you to cut that down to £40,000,000." You must act within reason and you must not set Departments problems which they cannot possibly solve. But within reason the Chancellor of the Exchequer always rations the Departments, and the fact which I mentioned that economies amounting to £14,000,000 more than had been estimated were carried into effect on the estimates last year shows that that was done with considerable effect. Your Lordships can be sure that when the estimates for next year come to be considered near the latter end of this year, they will be gone through with the greatest care—combed, if you will, with a small tooth comb—and that no unnecessary expenditure will be sanctioned.

I cannot do better I think on this point than read to your Lordships in conclusion a very important statement made by the Chancellor of the Exchequer some days ago, because he speaks with a responsibility which I cannot claim. The Chancellor of the Exchequer said: I have had occasion before to say to the House that if you are to obtain substantial reductions in national expenditure you have to contemplate something more than a mere paring down. I expressed the view that before embarking upon serious changes in national policy it was desirable that some hard thinking should be done. I have been criticised for suggesting that any hard thinking was necessary. It has been suggested that all I had to do was to take my pen and write quickly how much I wanted the bill reduced, and that there was no reason why that should not be done at once. I have seen attempts at national economy made before now. I have seen economy undertaken in haste and repented of at leisure. One has to be careful, in the first place, that substantial changes of the kind that I have referred to are changes which can be permanent. When I say permanent. I mean that they will not be reversed, or will not be reversed within a short time because they have been insufficiently thought out. I want to express on behalf of the Government our indebtedness to the very useful contribution's which have been made in the course of this debate and to assure your Lordships that they will be taken into the fullest and most anxious consideration by the Government. There is no member of your Lordships. House who can be more anxious than the Chancellor of the Exchequer or more anxious than every member of the Government, to effect as large a reduction of national expenditure as is possible without impairing or seriously injuring the efficiency of the services. I can assure your Lordships that that will be done. This Motion has not been put forward in any spirit of hostility to the Government. I believe it was intended as an encouragement to the Government. We take it as such and therefore the Government are prepared to accept it.


My Lords, I do not rise to address your Lordships but I wish to put one question to the noble Viscount. I am sure I should fail in expressing the feeling of your Lordships if I did not say that the House was most grateful to him for the sympathetic tone of his speech and for the remarkable utterance to which we have listened. This Government has probably a larger amount of business to contend with at this moment than any Government has had since Governments were instituted in this country. Not only is there a withdrawal of some of the principal members of the Government for long periods, but there is an increasingly heavy demand made upon their time. The noble Viscount paid a genuine tribute to the work of the May Committee. The question I would ask the noble Viscount is whether the Government would consider calling together again either the May Committee or some members of the May Committee, in order that they may do what the Government cannot do at this moment, that is, consider the cutting down of individual offices, not on account of questions of policy but on account of the extraordinary growth of the cost of the Departments ever since the War? I believe there is a large sphere of economy in that direction, and I venture to ask the noble Viscount whether he would supplement the admirable statement he has made by giving an assurance that that question will be considered.


My Lords, of course that is not a matter for me to decide, but I shall have the greatest possible pleasure in conveying the suggestion to the Chancellor of the Exchequer.

On Question, Motion agreed to.