FINANCE BILL.

HL Deb 03 July 1934 vol 93 cc271-312

Order of the Day for the Second Reading read.

THE UNDER-SECEETARY OF STATE FOR FOREIGN AFFAIRS (EARL STANHOPE)

My Lords, in presenting the Finance Bill for Second Reading it is customary to give a very brief account of the financial position of the country. Last year when I had to undertake the same task I stated that if we excepted the payment of any part of our Debt to the United States and any net redemption of our own Debt, we had a surplus of £11,250,000. I was taken heavily to task by my noble friend Lord Arnold for making that statement. He objected strongly to my excluding both the payment of the Debt to the United States and the redemption of our own Debt, and said that if I had also included the bonuses which were paid on the Conversion Loan there would have been in fact, not a balance to the good, but a deficit of £31,000,000. He at any rate will rejoice to hear that, although power was taken last year to suspend the Sinking Fund (of which he complained), we have in fact paid the £7,750,000 of the statutory Sinking Fund out of Income, and we have paid £3,300,000 to the United States also out of Income, although we received no payment whatever, as he knows, from those who were debtors to this country. In spite of those payments out of Revenue we wound up at the end of the last financial year with a surplus balance of £31,148,000. The noble Lord, Lord Arnold, will, I am sure, approve of the proposal of the Chancellor of the Exchequer that this balance shall be devoted to paying off the £32,000,000 which he borrowed last year for the Sinking Fund and for those other payments to which he referred.

I have ventured to refresh my memory with regard to the debate which we had last year. Although the noble Lord sometimes takes me to task for saying that I know very little about finance, at any rate I do not know that he will claim to have been very accurate in the prophecies which he made last year, because I find that he made these statements: that the prospect of reduced Expenditure was very poor; that the prospect was discouraging for any increase of Revenue; that "the prospects of money being available for reduction of taxation in any degree that matters are bleak." He wound up with this: 'Without sound finance no sound government is possible.' … with this National Government we shall have neither sound finance nor sound government. Let us see how the Budget has worked out.

The total estimated Expenditure, as I stated to your Lordships last year, was £697,486,000. The actual Expenditure has been £693,419,000, or less than the estimate by £4,067,000. That reduction was, as he anticipated, largely the result of a reduction in the number of unemployed, and a saving on that particular Vote. As regards Revenue, the other side of the question as to which he said that any prospect of an increase was discouraging, this is what has happened. The ordinary Revenue is £25,000,000 above the estimate of last year. It amounted at the end of last year to £724,567,000. He prophesied—and there at any rate he was correct—that Death Duties would bring in more than was estimated, and in point of fact they did bring in £10,000,000 more. As your Lordships know, that was due to the fact that the largest estate which has yet been taxed for Death Duties fell in during the course of the last financial year. But apart from that, there was a surplus of £4,000,000 from Import Duties above the estimate, a surplus of £2,000,000 from the Ottawa Agreements Act, and during 1933 no less than £12,000,000 more was received from Customs than was received in 1932. In the course of the debate last year I stated that the reduction in the Beer Duty was not to help the brewers but to safeguard the Revenue. If your Lordships will turn to the Financial Statement you will see that that has in fact happened. Although Excise is down by £13,000,000 from 1932, it is none the less £5,800,000 higher than the estimate, and the Chancellor expects to receive some further increase this year both from Customs and Excise. He estimates £290,000,000 for the current year as against the estimate of £269,000,000 for last year. So much for "no prospect of increased revenue."

Turning to the 1934 estimates, as shown on page 10 of the White Paper, the expenditure on the Supply Services is estimated to amount to £461,924,000 and on the Consolidated Fund Services to £236,200,000, making a total of ordinary Expenditure of £698,124,000. If taxation were left at the same figure as it was last year and if no further expenditure were incurred that would mean a surplus of £29,100,000. How does my right honourable friend the Chancellor of the Exchequer propose to distribute it? He proposes lo distribute a very small portion of it by a reduction of the horse-power tax cm motor cars, which, as your Lordships, know, it is proposed to reduce from 20s. per horse-power to 15s. per horse-power. The only part of that decrease in taxation which will fall upon the Exchequer will be £200,000, the rest of it falling upon the Road Fund. Therefore the Chancellor of the Exchequer is left with a surplus of practically £29,000,000.

He held the same view as to how the distribution should be made as the noble Viscount, Lord Snowden (whom we are glad to see back in the House), who said that those who made the contributions in 1931 should have the first claim and that cuts should be restored roughly in the proportions in which they were made. His successor has made one exception to that rule, and that is one which I am sure your Lordships will all welcome; a full restoration of the cuts in unemployment benefit and in the benefits conferred upon those outside the unemployment scheme. As regards the remainder, those who suffered cuts in their salaries contributed £11,000,000 to the Economy Budget, of the noble Viscount, and therefore the present Chancellor proposes to give them back half their cuts as from the first of this month, which in a full year will cost £5,500,000 out of the £11,000,000 they contributed.

The direct taxpayer contributed under the second Budget of 1931 no less than £57,500,000, and in a full year, by a reduction of the Income Tax by 6d. in the pound, he will get back £24,000,000, which is considerably under half. Some controversy has arisen, as your Lordships know, as to how this surplus should be applied in regard to Income Tax—whether it should be devoted to the restoration of the family allowances or whether it should be devoted to a general reduction of Income Tax. I should like to point out to your Lordships that the present allowances free from Income Tax completely 4,500,000 of the 8,000,000 people whose incomes are above the exemption limit. Therefore, under the taxation as it existed last year only 3,500,000 people actually paid Income Tax and only a small proportion would benefit by a return of the cuts made in the family allowances. The Chancellor of the Exchequer therefore felt, and I think your Lordships will generally agree, that by far the greater psychological effect and the most vigorous stimulus to the expansion of trade would be made if we were able to effect a reduction in the standard rate of Income Tax rather than by increasing the family allowances once more.

Now, apart from this reduction of taxation which puts 6d. in the pound more into every taxpayer's pocket, the effect of the restoration of the unemployment cuts will enable 2,000,000 unemployed people to spend a further £200,000 a month in purchases from retail traders, and the restoration of half the cuts in salaries will enable 1,000,000 State employees to spend an additional £100,000 per week. Therefore the retail trade should prosper both from the reduction of Income Tax, the increase in the unemployment benefit and the reduction in the cuts on salaries. As, thanks to our Tariff policy, we have a much larger share in the home market than we had, this will enable our manufacturers to employ more men. We hope that will have a considerable effect on the number of those at present unemployed, whom, we hope to see once more earning their wages instead of being on the unemployment insurance benefit. The whole policy of the Chancellor of the Exchequer has been to endeavour to put men back into employment as being by far the most satisfactory way both from their point of view and also from the national point of view, and we have felt that this was the right way to increase employment. There have been efforts, and successful efforts, made in other countries, some by increasing indebtedness and others by experiments which in a country such as we are would at any rate be thought rash. The Chancellor of the Exchequer, however, has taken perhaps the less theatrical line, but one which in the end tells best by building up a sense of security without which neither private enterprise nor national well-being can be either achieved or attained.

I do not propose to go into details of the Finance Bill of this year. It is, I am told, one of the shortest which has been presented to Parliament. You will find in Clause 18 the amendments as to licences for motors to which I have referred and the reduction in Income Tax in Clause 19. There is one other clause to which I should refer and that relates to the repeal of the Land Value Tax. That was a tax provided for by the noble Viscount, Lord Snowden, in his Budget of 1931, and it was held up in the Finance Act, 1932, and suspended as from that date. It could not have come into force, therefore, in the lifetime, of the present Parliament. Further, those who are land taxers do not particularly like the noble Viscount's scheme and those who occupy the Benches opposite go in for land nationalisation and not for the taxation of land. The noble Lord, Lord Strabolgi, may object to my saying that he is not a land taxer, but obviously there will be no desire to impose land taxes if the whole of the land belongs to the State. Therefore I hope he will make it clear whether he is still a land taxer or a land nationaliser because it will make some difference to his Party and will be of interest to the House. There is nothing further which I can usefully say. I have, as your Lordships will observe, an enormous brief and out of it I will endeavour to reply to such questions as are raised.

Moved, That the Bill be now read 2^a.—(Earl Stanhope.)

LORD ARNOLD

My Lords, the noble Earl in the opening of his speech referred to certain observations that I made last year on the Finance Bill, and with your Lordships' permission I will employ one or two moments in some rejoinder to what he said. On one point, if I may say so with respect, he was definitely wrong. He conveyed the impression that I objected to the suspension of the Sinking Fund.

EARL STANHOPE

What I pointed out was that the noble Lord objected to my saying that there was a surplus in view of the Sinking Fund having been suspended.

LORD ARNOLD

It is perfectly clear, if anyone knows anything about finance at all, that if you suspend the Sinking Fund there is no surplus. That is elementary. I observed that I had no quarrel with the fact that the Sinking Fund had been suspended, but I pointed out, and I think I was right to point out, that it was somewhat singular that the people who posed as the guardians of strict and orthodox finance should do this, and should do it without apology. I said the noble Earl took it simply as a matter of course, and I did comment on the fact that even the money for the contractual obligations of the Sinking Fund—about £7,000,000—had not been found from current revenue. I thought that was open to objection, and I think so still.

Then the noble Earl suggested that I had been not very happy in my prophecies with regard to the future. There again, with respect, I must put my own point of view. I have taken the trouble to look up since he spoke exactly what I did say. I pointed out that you could not go on for ever having no Sinking Fund at all, and I said that if you made substantial economies they would, to a large extent, be more than swallowed up if you reimposed the Sinking Fund. He said I was not correct in suggesting that Revenue would not increase largely. It has been pointed out that as regards Death Duties, where there was considerable increase this year, it was due very largely to one estate. It is a point which comes very much into controversy. It is perfectly true, with regard to Death Duties, as I have pointed out again and again, that the Chancellor of the Exchequer and his advisers have been singularly infelicitous in under-estimating them for about ten years, and the noble Earl will find that with the possible exception of two years, the crisis years, Death Duties have been materially under-estimated. I have suggested the reason for that. Again this year it is clear that they have been under-estimated. I think it is a matter which requires a great deal more attention than it has received.

As I have pointed out before, thousands of fortunes were greatly increased during the War. In truth, increases totalling over £3,000,000,000 went into private hands, and it very largely went to men between the ages of forty and sixty, who were above military age. Their fortunes were enormously increased. They were in business, and making money fast during the whole of the War, and becoming rich men. Now they are dying off. I have suggested to the Treasury before that they ought to pay more attention to that fact, and I again make them a present of the idea, I think if they accepted it they would be more accurate in their estimates of the Death Duties than they have been during the last few years.

Now, my Lords, I come to the Finance Bill itself. I make no complaint against the noble Earl. I think he has been most considerate. He has not given us a very long detailed exposition of the Budget, which is not really necessary in your Lordships' House. The points I wish to make are these: that this Finance Bill is not the achievement which it is represented to be by the National Government; that it is a Finance Bill, or Budget, based upon principles which are not equitable as regards taxation and finance; and that it certainly is a clear breach, I submit, of the principles, or understanding, upon which the so-called National Government took office in 1931. We were then told that there were to be sacrifices all round—equality of sacrifice. I remember taking up that phrase with the noble Marquess, Lord Reading, who then was the Leader of the House, and he, with his great sense of fairness in controversy, and with his strong; statistical sense, at once admitted that there could not be anything like equality of sacrifice, and indeed there has not been. And there is not going to be equality of remission. In this Budget the Chancellor of the Exchequer had about £29,000,000 of taxation to remit. Of that, £20,500,000 went to the Income Taxpayers, and about £15,000,000 of that £20,500,000 went to the richer Income Taxpayers—to those with more than about £800 a year, whom I will, for the purposes of speaking, call the rich class.

Now let me draw a comparison between the treatment by the National Government of the rich and the poor—the well-to-do Income Taxpayers, those with over £800 a year, and the great mass of the workers, the manual workers—and let us see how it works out. The rich class, those with more than £800 a year, had imposed on them by the National Government, by increased Income Tax and increased Surtax, a burden of about £34,000,000 a year. They also had imposed upon them by increased indirect taxation—their share of the taxes on petrol, tea, and so on—about £10,000,000 a year; making a total burden on this, the rich, class of about £44,000,000. And what is happening in this Budget? They are getting back in Income Tax alone about £15,000,000 a year and they are getting back about £2,000,000 in the reduction of the motor car licence duty. It is true that most of that is coming out of the Road Fund. As a, matter of fact, the present Chancellor of the Exchequer is very good at being generous with other people's money. Of this reduction in the motor car licence duty very little is coming out of the Exchequer. In the same way the restoration of the cuts to the unemployed is not coming out of the Exchequer; it is coming out of the Unemployment Fund. However, I was saying that the richer class are getting a remission of £15,000,000 in Income Tax and £2,000,000 in motor car licence duty; that makes £17,000,000—£17,000,000 out of £44,000,000 which was imposed. That is to say, speaking broadly, they are getting back about 38 per cent, of that which was placed upon them.

Now come to the other end of the scale, come to the workers, including of course the unemployed. How do they fare? They had imposed upon them by this Government, by the means test to begin with, a burden of about £21,000,000 a year. They had imposed upon them by the cuts in the unemployed benefits in 1931 about £5,000,000 a year. They had imposed upon them again, the workers in work, about £5,000,000 a year in increased unemployment insurance contributions payable by the workers. That is £21,000,000 and £5,000,000 and £5,000,000, making a total of about £31,000,000. In addition to that, they had imposed upon them, after making allowance for the reduction of the beer duty last year, a net amount in indirect taxation of one kind and another of about £26,000,000. Therefore if you add that £26,000,000 to the £31,000,000 of which I have spoken you arrive at a figure of about £57,000,000—£56,000,000 or £57,000,000. And what are they getting back from this Budget? They are getting back the restoration of the cut in the unemployment benefit, about £5,000,000. That is coming out of the Unemployment Fund, not out of the finances of the country which the Chancellor controls. And they are getting back also somewhere about £5,000,000 in a full year for restoration of cuts in the means test. They are thus getting back about £10,000,000—or, say, £9,000,000, which I think is probably more accurate—out of a burden of £56,000,000 or £57,000,000. That is somewhere about 16 per cent.

Therefore, we find on analysis that the richest class in this country under this National Government are getting back about 38 per cent, of the burden that was imposed upon them, and the poorest class are getting back about 16 per cent, of the burden that was imposed upon them. There never was any equality of sacrifice to begin with. The unemployed were so poor, they had nothing to sacrifice at all under any proper computation of ability to pay. That should be the test. There cannot be any sacrifice unless you have got something which you can sacrifice without going below a decent level of subsistence. The cuts should never have been placed upon the unemployed at all. And, as regards the means test, £21,000,000 was taken away from the poorest of the poor, and now there is going to be restored to them perhaps in a full year £4,000,000 or, possibly, £5,000,000. There they will be some £16,000,000 to the bad on the means test alone. How different it is with the rich class, those above £800 a year.

And the richest of them all, the Super Tax payers—how does it stand with them? The latest figures show that there are still between 80,000 and 90,000 persons in this country with more than £2,000 a year. Their average income is about £5,000 a year each and that means that, after all taxes have been paid, they have left for themselves on the average about £60 a week each. And under this Budget these people are going to get back by the cut in Income Tax on the average about £75 a year each—almost as much as an unemployed man with a wife and two children now gets for the whole year. What justification is there for that? The Chancellor of the Exchequer, in introducing his Budget, said this was the justification—that when taxation, was imposed in 1931, out of £81,000,000 which was then imposed about £57,000,000 was imposed on the Income Tax payers, and therefore there was a strong case now for them to have the remission which is given.

The first thing to be said about that is that of that £57,000,000 or £56,000,000 which was imposed upon the Income Tax payers somewhere about half of it went in the reductions of the allowances, the allowances to the married and other allowances, and in the imposition of the Income Tax on those with incomes well below £800 a year—perhaps below £500 or £600 a year. Those people are getting back very little out of this Budget. If I were to trouble your Lordships with the figures I could show that they are often getting not much more than a sovereign, or £2 or £3. Therefore, I submit that that argument of the Chanceller of the Exchequer falls to the ground. He is not going to give the money back to the people from whom it was taken, because, remember, a large number are getting either nothing or very little indeed out of this Budget. Most of it is going to the wealthier Income Tax payers. Moreover, when the Chancellor of the Exchequer says that £81,000,000 in all was imposed he left out of account the fact that since then further indirect taxation has been put on by the Government of which he said nothing at all. The tea duty was increased in 1932. Tariffs have been put on to the extent of £30,000,000. In fact, taking everything into account, even making allowance for the reduction of the beer duty, the Chancellor's figure is very much under the mark and cannot be sustained if it is analysed. I know there are still Government supporters, as regards tariffs, who contend that they are paid by the foreigner. I am not going to argue that to-day. We have had numerous debates on that matter in your Lordships' House. I have given instance after instance of these new tariffs showing where prices have been raised, and these in- stances have never been controverted. We have said, and I say again, that there are abnormal circumstances where for a time part of a duty may be borne by the foreigner, but it cannot last and it does not last. That has been the experience of tariffs ever since there were tariffs. It is only under abnormal circumstances or unusual conditions, and it will not last anything like permanently. If the foreigner pays, why should the Chancellor of the Exchequer in this very Finance Bill that we are now discussing reduce the duty on insulin? Why did he do that? It is perfectly clear. He knows quite well that the foreigner does not pay. He reduced the duty because of the vital necessity of insulin to diabetics.

The other argument which is used to justify what has been done is the one the noble Earl put forward that the reduction of the Income Tax helps trade. We have had this claimed in your Lordships' House ad nauseam. We have pointed out that to regard the Income Tax as a burden on industry in the ordinary sense of the words is opposed to the views of the most noted economists. We have pointed out that it was not supported by the Report of the Colwyn Committee, and we have also pointed out that it has not been supported by experience. Mr. Winston Churchill, when he was Chancellor of the Exchequer in the Conservative Government, and other Conservatives, took a shilling off the Income Tax to help trade, and then took a sixpence off; but trade did not get better, it got worse. The fallacy of this argument is in regarding Income Tax as a charge against the profits instead of an appropriation of profits after they have been made.

I am quite prepared to admit, and we have admitted on these Benches, that if you have an Income Tax of 4s. 6d. or 5s. in the pound it may act as a psychological discouragement; but you are not really going to deal with that aspect of the matter in any way that amounts to anything by reducing the Income Tax by sixpence in the pound. If you could reduce the Income Tax from 5s. to 2s. 6d. or 2s. something might be done to deal with this psychological factor, but to suggest that a reduction of sixpence is going to make a tremendous difference, and give an impetus and stimulus to trade, is to suggest something which is going beyond that which can be sustained on sound grounds. No substantial case can be made out on those lines, nor can any case be made out on the ground that it is good to reduce the Income Tax because then Income Tax payers will have more money to spend. If you reduce indirect taxation the poor would have more money to spend, and that would be as good for trade, and better, because the benefit would be more widespread and steadier. Also it is no use—I do not know whether the noble Earl implied this— suggesting that a case can be made out for the remission of Income Tax on the plea that last year the Chancellor of the Exchequer reduced the beer duty. When he reduced the beer duty the noble Earl standing at that Box said the Chancellor felt it essential to increase the consumption of beer. That is the first time, I believe, in the history of this country that the Chancellor of the Exchequer has gone out of his way to attempt to get an increased consumption of beer in order to help revenue. And he has done it.

A NOBLE LORD

Hear, hear.

LORD ARNOLD

Drunkenness is going up. Is the noble Lord pleased with that? The slogan of this National Government is: "Drink more Beer." More beer is being drunk. The consumption of alcohol in 1933 went up by nearly 2,000,000 gallons. Convictions for drunkenness have certainly gone up by 17 per cent. Convictions in the Metropolitan Police district have gone up from 12,600 to 14,990; I think that is the precise figure. I do not know whether the National Government are very satisfied with that. Are they going to put that on their films which they are sending round the country—"Brewery shares going up. Drunkenness going up."? They have descended to advertising themselves on the hoardings, which I think is a very undignified thing for any Government to do, and now they are sending films round at great expense. Some of this £15,000,000 from the Income Tax will no doubt go to finance the films. I do not say, of course, that the Income Tax reduction was made for that. Conservatives can always get contributions.

This Budget and the remissions it makes are on approved Tory principles, and that is certainly true of the Land Taxes about which I should like to say a word. We always knew the Land Taxes would go if this Government stopped in. They were doomed from the start, and in nothing is the essential Toryism of the National Government more conspicuous than in this repeal. They are absolutely remorseless, relentless. They will have their pound of flesh. There is no limit to the humiliation to which they will subject their National Liberal and National Labour colleagues, and apparently there is no limit to the degree to which those colleagues will agree to be humiliated. It is very difficult in restrained Parliamentary language to deal with the situation which has arisen, so I am going to try another line of criticism and resort to something new for me in order to endeavour to represent the position as I see it in regard to this repeal of the Land Taxes. I have tried my hand at what I shall call a prose parody of one of the nursery rhymes of childhood, "Who Killed Cock Robin?" This is a prose parody, it does not attempt rhyme. It has only four verses, and they relate respectively to the Chancellor of the Exchequer, the Prime Minister, Lord Snowden, and Sir John Simon.

Here is this little effort of mine: Who killed the Land Taxes? Who killed the Land Taxes? 'I,' said the Chancellor. 'I always intended to do it and no nonsense about a National Government has stopped me. I killed the Land Taxes.' Who saw them die? 'I,' said the Prime Minister, 'though I was one of their parents, but I could not save their life without losing mine and so, of course, they had to go like so much else if I am to remain where I am. I saw them die.' Who'll be chief mourner? 'I,' said Lord Snowden, 'though I did more than anybody to put the National Government into office and thus helped to kill Free Trade and everything else I ever stood for, including now the Land Taxes. But, as usual, I continue to blame everybody else but myself, so I'll be chief mourner.' Who'll make the shroud? 'I,' said Sir John Simon. 'In the last two years I have buried all my past beliefs and have become an expert shroud maker. I'll make the shroud.' It would be possible to go on almost ad infinitum with members of this Government. It would be easy to make verses about Mr. Thomas, but he is not worth bothering about. Nobody takes him seriously. He has become a bad joke, so I do not trouble to put him in the list. I believe my noble friend Lord Strabolgi is going to deal in some detail with the question of Land Taxes, and in those circumstances I will not detain your Lordships longer on that matter.

There is only one other problem I wish to speak about for two or three minutes before I close, and that is the question of the surplus and what has been done with that surplus. The noble Earl said he was sure I should be pleased that the surplus had been applied to the reduction of internal debt. I am sorry to tell the noble Earl that I am not pleased about that. We have contended, and a great many Conservatives have contended, including even Sir Robert Home, that this surplus of £30,000,000 or £40,000,000, or whatever it is, should have been applied to the reduction of the Unemployment Fund debt. It has been stated that the Chancellor of the Exchequer was strongly pressed to do that, but would not do it. He has applied the surplus to the reduction of the internal debt, on which he will only get a saving under present conditions of well under 1 per cent. I think for a considerable portion of last year the actual rate of interest on parts of the unfunded debt was under three-quarters of 1 per cent. We say it would have been much better to have put this surplus to the reduction of the Unemployment Fund debt so as to relieve that which has to carry a very much higher rate of interest. This surplus would have done something to bring that Fund into more manageable proportions; but the Chancellor of the Exchequer would not do it.

Upon that the point which I wish to make to your Lordships is that it was singularly unfortunate to do what the Chancellor of the Exchequer did just at the time when we were negotiating about the American Debt. The position was very delicate. I would like to read to your Lordships one or two sentences from an interview or article by Mr. Raymond Swing, whose authority in these matters will not be questioned, which appeared in the Press in the first week of June. He said in regard to the debt issue between Great Britain and the United States: The debt issue is more acute than ever. The American attitude has changed, but it has not changed towards friendliness. Britain lost friends when she applied her handsome Budget surplus to the reduction of internal debt. Britain was recovering, and had a surplus. She was in a position to pay. Thereupon she turned her back on her foreign creditor. America, and paid oft her own lenders at home. Few would have murmured had the Chancellor of the Exchequer applied the surplus to something else; something Americans could respect as an urgent national need— Heaven knows we have enough of them! but at the use of it without apology to pay internal debt America gasped. I submit that the whole proceeding on the part of the Chancellor of the Exchequer was most maladroit. Many things could have been done with that surplus. The one which I have mentioned is what we should have preferred to see. The noble Earl then, if he will allow me to say so, is quite wide of the mark when he suggests that I should be pleased because the Chancellor of the Exchequer had used the surplus in the way he did.

There are other speakers and I must not detain your Lordships longer. The Finance Bill is a very big measure, and a great deal can be said about it from many points of view. The Government have had so many failures and disappointments that when they did come into the possession of a surplus they seemed to regard it as almost the greatest achievement of the century, and they have done their best to create the impression that the Budget is a thoroughly sound and good one. For the reasons I have given and for others which, if I had the time, I could give, we do not take that view. We regard this as a typically Tory Budget, and it will be our duty as time goes on to make that clear to the country.

VISCOUNT SNOWDEN

My Lords, I would like to congratulate the noble Earl who moved the Second Reading of this Bill upon the admirable clarity of his statement. He showed quite an unaccustomed familiarity with his subject for a Minister who is not connected with the Department which he is for the moment representing. There is a temptation to make some comments upon the general provisions of this Budget, but I do not wish to inflict a long speech upon your Lordships, so I shall confine my observations to that part of the Bill to which the noble Earl referred very cursorily. I do not know if he was ashamed of having to make even that brief reference to an act of deliberate Party deception—shall I say of deliberate sharp practice? This proposal is the latest of many acts which show the true character of this Government, and expose the hypocrisy of its claim to be a National Government. I do not deny that it is a united Government wholly composed of Tories who are united in pursuing a Tory policy.

May I just refer rather briefly to the history of this Land Tax clause. As soon as the General Election was over a campaign began among the Tory members of the House of Commons to demand the repeal of this clause. Questions appeared almost daily upon the Order Paper of the House demanding that the Government should take that step. They had just come back from a General Election at which definite pledges had been given that there would be no legislation of a Party character; that the Government would exist only so long as was necessary to get the country back into a sound financial position. But those members who supported this demand had no sense of honour. They bad got a Tory majority and they were determined to use it for Tory purposes. Within a month of the General Election Mr. Neville Chamberlain made up his mind to repeal these duties, not to suspend but to repeal them. He spoke to me about the matter, and I was really so disgusted with this intended breach of pledges that I declined to discuss the matter with him. I said: "You can do just what you like, and I shall take my own course." He said that he did not like to do this, but the pressure upon him by his Party in the House of Commons was so strong that he could not resist it. It would be necessary to submit a Vote on the Estimates for the expenses of the land valuation and he assured me that in view of the opposition of their Party it would not be possible to carry such a Vote.

Later Mr. Chamberlain modified his first proposal and decided, not upon immediate repeal, but upon suspension of the valuation. May I say that in resisting that proposal I received mo help whatever from my Labour colleagues in the Government, and least of all from the Prime Minister, who appealed to me with tears in his voice: "My dear Philip, we have been comrades for forty years. Do not desert me now. This is not an issue upon which it is worth resigning." Well, I thought the matter over. The Government had only just been formed and I felt that I had a special responsibility to see the specific purpose for which the Government had been formed carried through. So I did not then resign. A few days 'after that the Chancellor of the Exchequer announced in the House of Commons that he was proposing to suspend the valuation. The reason he gave was that this was being done purely as a measure of economy, and that it had nothing whatever to do with the merits of the question which had never been discussed. As a matter of fact, the suspension of these taxes was not an economy measure at all. The valuation was the preliminary—the necessary preliminary—to the imposition of the tax and that of course, was a revenue-producing instrument.

However, the Tories in the House of Commons were not satisfied with mere suspension and on the Finance Bill of that year, 1932, they moved a clause for the actual repeal of these taxes. Mr. Baldwin resisted this and he stated the reasons why the Government could not accept that Amendment. It is, I think, important in this connection that we should have the exact words used by Mr. Baldwin in resisting that Motion for repeal. This is what he said: Would any of you who had been a member of the National Government, who had gone through the fight we won last autumn with men who fought during that Election like Lord Snowden, do you think that I, going about the country as I do, and noting the force of Lord Snowden's speeches and broadcasts in helping to win seats which we never should have won, was going to say to them: 'Oh, no. We have now got a big Tory majority, bigger than I expected. Out you go'? Not much. That is why we stand for the clause as it is in the Bill. We can neither accept a repeal of the Act nor the insertion of the Amendments. Some of your Lordships may remember that about the same time this question was raised in your Lordships' House on a Motion regretting that the Land Clauses had not been repealed. Now the noble Viscount, Lord Hailsham, comes upon the scene, with a statement similar to, but even more definite than, the statement by Mr. Baldwin which I have just read. This is what Viscount Hailsham said. He asked whether it would be wise, with reference to those members of the Government who were originally responsible for this Land Valuation Tax, not merely to get them to assent to our postponing the operation of the tax … but to ask them to accept the humiliation, for it would be nothing less, of having this year solemnly to repeal what last year they had solemnly enacted? He went on to say—I commend these words specially to the attention of your Lordships—that the suspension of the tax is an easier way, a loss disagreeable way, and an equally effective way, and the only object of doing it in any other way would be that of imposing on them a public humiliation that it would be unreasonable to ask of them. I ask, could there be any more dishonest statement that that?

The suspension of the tax, or rather of the valuation, according to Viscount Hailsham, achieved all that they wanted. It was an effective way of killing the whole scheme of land valuation and of land taxation. It will be interesting to hear in the course of this debate the reason why he is supporting the action which is now proposed. Will he be good enough to tell us how what would have been a humiliation to the ex-Labour Ministers two years ago is no longer a humiliation? When the Finance Bill of last year came forward the Tories in the House of Commons were once more on the warpath and representations were made to the Prime Minister and to Mr. Baldwin, demanding that in that Bill the Clauses should be altogether repealed. The Cabinet, we were told, had not discussed the matter and they said they would neither accept the request for repeal nor would they allow a free vote of the House upon the question. Two days later there was a meeting of the Conservative members of the House of Commons which was addressed by Mr. Baldwin and Mr. Chamberlain. This is what Mr. Baldwin is reported to have said then, only twelve months ago: This was a National Government and he and his Conservative colleagues felt that the ungrudging loyalty with which their Labour colleagues had supported other features of the policy of the National Government did call for mutual consideration. What has happened since last year? These were the views on this question expressed two years ago and one year ago. It would be an act of disloyalty to repeal these taxes, it would be an act of humiliation of these ex-Labour Ministers if the taxes were repealed!

The only explanation that I can offer— or rather I can offer many, but the only explanation that I will offer now—is that the Cabinet have found the Prime Minister to be such an amenable instrument of Tory policy that they have come to the conclusion that there are no professions he ever made, no pledges he gave to the country, which he will not repudiate, no humiliation to which he will not submit, if they will only allow him still to be called the Prime Minister. Why, my Lords, in practically every speech which is made by the Cabinet colleagues of the Prime Minister he is attacked! Mr. Neville Chamberlain, speaking on Saturday, said that the Government of Mr. MacDonald had brought the country—or rather the employers—to the very door of the workhouse.

But it is not merely the honour of the ex-Labour Ministers which is involved, but the honour of the Tory members of the Government too. They have dishonoured all the conditions of the formation of the National Government; they have dishonoured every pledge that was given at the last General Election. The Government was formed—I am using the exact words—on the condition that no Party to it would be called upon to sacrifice its political principles. It was to be a National Government to deal with the national crisis on non-Party lines. Then we have the oft-quoted statement of the Prime Minister that if the Tories tried to put anything over him they would find that he was not their man. I think nobody, if I may modestly say so, is more entitled than I am to express this opinion. At the last Election millions of Labour, Liberal and Free Trade votes were given to the National candidates— mainly Tory candidates—because they believed Mr. Baldwin's statement that Free Trade and Protection were not an issue at that Election; and now they are boasting that they have killed Free Trade and established Tariffs for generations to come.

What is my own position in this matter? As I said a moment ago, I had some responsibility for the result of the last General Election. When the Labour Party declined to face up to what we all felt was a disagreeable necessity, I joined the National Government. I did so because of my own personal position in the office which I held. I felt that I perhaps as much as any man had a responsibility for helping to get the Government through the financial crisis. But before joining the National Government I demanded and received specific pledges that this National Government was being formed for one purpose and one purpose only, that when that purpose had been achieved the Parties would resolve themselves into their former positions, that during the lifetime of that administration there would be no Party legislation, and that at the General Election which was to follow there would be no Party arrangements. I joined the National Government on those conditions. I have been betrayed. That matters little. But the country has been betrayed, and millions of electors who trusted to the statements of the Party leaders have lost their confidence in the faith and the honesty of political leaders.

The Prime Minister has played a discreditable part in these discussions. When the members of the House of Commons were discussing this question and demanding that the Prime Minister should be present, he was spending his time in Downing Street listening to a concert. But he has been compelled to break his silence once. The United Committee for the Taxation of Land Values wrote to him, and he had to reply. I will read his letter to your Lordships, because it is an admirable example of the lucidity and definiteness of the Prime Minister's literary style. This is what he says:

"Dear Sir,

"I have received a letter which you are sending to the Press about the repeal of the Land Value Tax. I anticipated that this proposal would give an opportunity of raising the whole question of land taxation, although as a matter of fact it is not raised in the decision itself. The clauses have never been put into operation and were suspended as one of the first acts following upon the crisis which led to a change of Government.

"It may be argued that the step which has been taken indicates the power of certain interests, but it is not in accordance with truth to describe the effect of what is being done as ' staying a reform that has boon repeatedly endorsed by democratic majorities and insistently demanded by hundreds of municipalities.'

"A Government which was determined to 'take drastic and energetic steps to put into operation the taxation of land values' would have to proceed to legislation, as the clauses that have been in suspense for years, largely owing to amendments which the Chancellor (Mr. Snowden) had unwillingly to accept from both Liberals and Conservatives, were not sufficiently full to enable a great deal to be done."

That letter was described by a Liberal member of the other place as a piece of nauseating hypocrisy. I think that was a very apt description. I could not improve upon it, but I should be inclined to extend the application of that description to a good many other acts of the Prime Minister.

If the incoherent jumble of nonsense in this letter means anything at all, it means that the taxes are being repealed because they are not revolutionary enough. But where one can make some sense out of what the letter says, it is utterly and completely at variance with the facts. In the first place it states that "the clauses have never been put into operation." That is not true. When the suspension took effect the valuation was proceeding. That, as I have said, was a necessary preliminary step. It had made fairly considerable progress. If the valuation had been carried out according to the 1931 Act the valuation would now be complete and the taxes would have come into operation on the 1st of this month.

Now the last extraordinary statement in this letter is that in which he says that the clauses had been in suspension for years largely owing to Amendments which Mr. Snowden had unwillingly to accept from Liberals and Conservatives, because they were not sufficiently full to enable a great deal to be done. It means, as I have said, if the statement has any meaning at all, that they were not sufficiently drastic to satisfy the Prime Minister, and as to the remark that I had unwillingly to accept Amendments from Liberals and Conservatives, I say this, and I say it deliberately: I made those concessions under strong pressure from the Prime Minister, who appealed to me on many occasions not to resist them and by so doing bring about the defeat of the Labour Government. The Prime Minister never was in favour of these proposals. At the time they were before the House of Commons there were four by-elections. The Prime Minister sent the usual letter to Labour candidates, and in not one of those letters did he say a word about the land valuation scheme which was then being discussed in the House of Commons.

I now turn to the excuses offered by the Chancellor of the Exchequer. He made no reference whatever to this matter in his Budget speech. I do not complain about that because, as he said, the purpose of a Chancellor is to compress his financial statement into the smallest compass, but he spoke on the Second Reading of the Finance Bill. Not one word. There was much criticism during the Second Reading debate about the proposed repeal of these taxes, and the Chancellor put up the Financial Secretary at the end of the debate to make a few flippant observations. Late in the Committee stage in another place, however, the Chancellor was compelled to make a short statement. His statement at any rate is clear, but it is not less at variance with the facts than the letter of the Prime Minister. He dealt with a Liberal Amendment which was moved during the Committee stage of the Finance Act of 1931, and he said that this Amendment had destroyed the value of the tax for revenue purposes, and rendered it useless and futile.

Let us test the accuracy of that statement. I remember the occasion very well, and I remember the speech which the present Chancellor of the Exchequer made on that occasion. This is what he said in the House of Commons a month ago, and may I beg the favour of your Lordships to note carefully these words: The final result of the Liberal Amendment"— he is referring to the 1931 Amendment— is that the Liberals saved the face of the Government and preserved it for the time being, but at the cost of the whole value of the then Chancellor's proposals. The Amendment which the Liberal Party then forced upon the Government really completely destroyed the value of the tax for revenue purposes and rendered it useless and futile. It was destroyed, he said a month ago, because the tax was rendered futile and completely useless by that Liberal Amendment. This is what he said when that Liberal Amendment was under discussion: I do not think I ever heard a more merciless exposure of the Liberal Party than that to which they were subjected by the Chancellor of the Exchequer. They have bud ' their faces fairly rubbed in the mud.' He went on to quote a large number of oases where the effect of the change made by the Liberal Amendment would be infinitesimal upon the yield of the tax. Then he went on to say, not as he said a, month ago, that the value of the tax had been destroyed, but this: and the net result is that not only has the Chancellor of the Exchequer got away with the principle, but he has got the cash too. Now I ask your Lordships is not that an illustration of how facts can be perverted to serve the immediate purpose?

Let me pass on to some of the other defences of the repeal made by the Chancellor on this occasion. He went on to say, of course, that the valuation was useless, and that if it had been carried through at great expense it would have served no purpose. But, my Lords, we have no valuation of the land of this country or of the site value, and that was what the Valuation Clauses of the Finance Bill of 1931 sought to obtain. Such valuation is necessary, and it is essential to any reform of local rating, or to the purchase of land for public purposes by public authorities. My valuation scheme sought to obtain a site value: that is, the value of a site stripped of buildings, except in the case of agricultural land, where there is no site value; but where land, at present used for agricultural purposes, had a developing site value, then that site value would be taken into account.

There has been some pious sympathy expressed in the other place in favour of an increment tax, and the Chancellor of the Exchequer said that my valuation would have been useless for that purpose. That is not the fact. The valuation was to be a quinquennial valuation, and therefore at the end of five years, on the second valuation, the then value of the site would be taken into account and taxed upon any increment. And in that way, of course, you get a tax upon what is called the unearned increment. Of course, I do not blame the landlords for this iniquitous system which exists to-day. They are only taking advantage, of what the law permits them to do. But I do blame tie apathy of the public who permit themselves to be exploited by this iniquitous system. Now another extraordinary statement made by the Chancellor of the Exchequer was that so long as these taxes remained upon the Statute Book they were hindering the development of land.

THE EARL OF MIDLETON

Hear, hear.

VISCOUNT SNOWDEN

I do not know whether the noble Earl is a reader of the Financial Times, but I answer that "Hear, hear," by some quotations from the Financial Times of ten days ago. It had a two-page article on land development, and it was headed "Notable Expansion of Land Development." The article dealt with land development in 1933 and during the first six months of this year—before it was known that the Land Taxes were to be repealed. Now this article says that at the present time property investment "stands out as a steady and safe security." It goes on to mention the large number of land companies which are now being formed for the exploitation of land which is becoming ripe for building purposes. It says: A necessary corollary of the increasing work of the building societies is the supply of land on which to build houses, and in this respect the present year is already witnessing sales of many large areas around London and the principal towns. … Modern transport has been the means of opening up many new districts, and the invasion of the builder into the once peaceful rural atmosphere is apparent everywhere. Some of the areas which have changed hands, were once country estates"— so I suggest to the noble Earl that he should live in hopes— while in others farm labourers at their daily toil were the only people to be seen. In the right spot prices up to £2,500 an acre have been paid. Then it goes on to give a long list of sales of agricultural land now becoming ripe for building purposes, where anything from £1,000 to £2,000 an acre is being paid for land which a few years before had a purely agricultural value.

I never claimed that the Land Clauses of the Act of 1931 were a drastic method of dealing with the land evil, but at any rate they were a beginning, and they were a beginning on right lines. By taxing site value, undeveloped and partly developed land would be forced into the market—land which has been held back for enhanced prices. It would cheapen land and lessen the cost of land, as that article in the Financial Times points out. It would lessen the cost of land for housing purposes, for business purposes and for public improvements. And the landowner now, in the cases I have quoted from the Financial Times, is paying no rates upon the land. The maintenance of the amenities of the land is provided by the other taxpayers or ratepayers. He holds the land until the necessities of the public require it, and then he goes in, after sleeping, to grow fat on the spoils of exploitation. Now, the purpose of the Land Valuation Clauses of the Act was the beginning of a system by which rates as well as taxes would be levied upon socially created values. This land system—all this exploitation of public necessities—is responsible for the evil of the slums, and very largely for the unemployed problem. There was reported in the Manchester Guardian about a fortnight ago an inquiry which was held by the Ministry of Health into a slum-clearing scheme promoted by the Manchester Corporation, and it was given in evidence that the land on this site would cost £40,000 an acre, and that after the property had been cleared from it the cost would run to £70,000 an acre. And you talk about the slum problem! You complain of the tardiness with which this problem is being attacked. Here you have the greatest obstacle to the development of the housing of the people, and until this land problem is solved, anything else that may be done is mere tinkering with social evils.

Well now, we are told that the present Government are so satisfied with their great achievements and with their in-dispensability, that, as Mr. Chamberlain said on Saturday, they are presently going to the country to get another mandate. I think they will find the electors a little suspicious of mandates when the next appeal is made to them. I think it is about time that all this blather about a National Government should be stopped. The by-elections have shown that the people cannot be gulled by such a palpable fraud, and I hope therefore for the sake of common honesty that we shall not have the excuses which have been put forward elsewhere for the repeal of these clauses. Let the truth be said, which is that the Tories have now got the power, and they are determined to use it for Tory purposes. Well, we are told that this coming Election is going to be fought on the slogan of "National Government or Socialist Government." At that Election the Tories will have no use for the Prime Minister except as an exhibition, on Tory platforms in Tory chains, of the one-time Socialist who has seen the error of his ways and has found salvation— found his spiritual home in the Tory Party. He will be used for the same purpose as the reformed drunkard is used at temperance meetings. The Prime Minister told us in a recent speech that he stands by all that he has said and written as a Socialist. Let him act up to that and then he will see what use his Tory colleagues have for him. He told us in the same speech that what the country wants, what the country needs, is honest political leadership. Honest political leadership—I quite agree with him.

LORD STRABOLGI

My Lords, I think your Lordships have enjoyed the speech of the noble Viscount who has just resumed his seat, as I certainly have, except that I probably enjoyed it more because it has been a novelty to me and I do not gather it has been such a novelty to your Lordships. We have had a series of extraordinary events over the weekend in Germany, where the political gangsters have fallen out with each other. We have had an exhibition of a rift among the political gangsters in this country in the speech of the noble Viscount. Every other sentence of the noble Viscount was interspersed with the words "honour" and "honesty" and "keeping pledges." The noble Viscount broke every pledge he made to his colleagues in the Labour Party and had not the courage to look us in the eyes when he did it. He and his confederate the Prime Minister spoke of what their Cabinet would not do in the way of economies and cuts, but he never gave his Party the chance of deciding one way or the other.

When this National Government was formed, of which I am glad to see the noble Viscount is now ashamed, we of the rank and file of the Labour Party—I was then a member of the House of Commons—were never called together, we were never given a word of explanation, and the noble Viscount and his confederate would not even look us in the eyes. So much for "honesty" and "honour" and "betrayal of pledges." But the remarkable thing about this debate is this, that in your Lordships' House at the present time, with the exception of the noble and learned Viscount who has just recently withdrawn from the Woolsack, I fail to see any of the personal following of the Prime Minister here to defend him. I waited for the noble Lord the Paymaster-General. I waited for the noble Lord, Lord Amulree, to appear. Where are they? Where is the noble Lord, Lord Elton? Where is the noble Lord, Lord Allen of Hurtwood? They are conspicuous by their absence. There is no one here to defend the Prime Minister in your Lordships' House, and I am certainly not going to attempt the task.

I had intended to say a few words about the Land Taxes, and I took the opportunity of informing the noble Viscount I intended to make some remarks about himself. Out of courtesy I wrote to the noble Viscount, but I think I can leave that matter where it is. Your Lordships have heard the noble Viscount at his best. I congratulate him on his invective. I am glad it is being turned on the present Government, and I hope that what he has said will receive great attention in the country. It is a fact that these Land Taxes were a symbol of the National Government. They were a symbol of the power and influence of National Labour—the ex-Labour Ministers, as I am glad to hear the noble Viscount call them; I thank him for that expression. These Taxes were, I repeat, a symbol of their power and influence in the Government, and that symbol is gone. I cannot improve on the noble Viscount's description of this perfidy, nor will I attempt to copy his abusive expletives.

May I answer the courteous question put to me by the noble Earl in charge of this Bill in regard to our views on the question of the Land Taxes? Of course, we supported the Land Taxes when we were last in office as a Government. We do stand for the national ownership of land; we still maintain that the land has always belonged to the nation as a whole; and we look upon land taxation as a most useful weapon to use in the meantime, especially with regard to land around towns in the extraordinary circumstances quoted by the noble Viscount. There is no confusion at all with regard to our policy on this matter. The Labour Party has no difference on this question, whatever different shades of opinion we may have on other matters. I hope I have made that perfectly clear-to the noble Earl.

May I just refer to one or two questions of principle with regard to this Bill? My noble friend Lord Arnold complained, as I understood, of over-taxation and the very heavy surplus we are going to receive, and which once more we shall be told is a proof, a mark, of the success of the National Government. I agree. I suggest for your Lordships' consideration that the country is grossly over-taxed. It is not good budgeting to have a large surplus. I think there is a particular consideration with regard to the Death Duties, and here I do not pretend to speak for all my noble friends; but I would like to point out that the Estate Duty on death is a capital tax, especially when it is used for current expenditure. It is really living on capital. There may be some social justification, some political argument for it, but we cannot expect to continue to enjoy these large windfalls to the Treasury from the estates of men who made their fortunes in the Great War, as Lord Arnold pointed out. But I shall leave that.

When the noble Earl comes to reply I hope he will be able to tell us, from the very voluminous brief supplied to him by his faithful officials, what is our broad national plan of finance. What really are we attempting to do? The noble Viscount, Lord Snowden, did not say very much about Protection in his remarkable speech, but it is a fact that we and most other countries are doing our utmost to strangle and hinder international trade by tariffs and quotas. Now Mr. Neville Chamberlain, the present Chancellor of the Exchequer, on the Third Reading of this particular Bill in another place, remarked rather gloomily that we must look to the home market. Have the Government any particular plans for stimulating the home market, and for increasing its absorptive power? I pricked up my ears when the noble Earl said that one good result of the restoration of the cuts was to help the retail trade. I understood him to suggest that the restoration of the cuts in unemployment pay and the salaries of civil servants and so on went back over the counters of retail shopkeepers and that that helped trade generally—more orders to travellers, more employment in the factories, greater purchases of raw materials, etc., to supply the consumable goods needed by the public. I thank the noble Earl for that insight into the Government's policy.

Is it going to be carried any further? because I suggest something will have to be done about it. You have in this home market something of great potential value, which is already providing an immense amount of employment and revenue by the spending of a certain class of people. Your Lordships who go about in this great City of London will have observed evidence of a great deal of spending. We are towards the end of what has been called a brilliant season. The motor car trade is doing very well; hotels, restaurants, and theatres that have plays worth seeing are all doing extremely well. There is evidence of a great deal of money being spent, but that is because people have got tired of the crisis—it is a psychological fact—and they have begun to spend again, those who have the money, with the result that we have a slight revival or, if I may coin a word, a boomlet in trade. But side by side with that there is widespread and tremendous poverty.

I shall only trouble your Lordships with one example, and it is a very striking one. I choose it because it comes from the City that is so closely connected with the family of the present Chancellor of the Exchequer, Birmingham. Birmingham is one of the centres which is not a depressed area. Its multitudinous industries have done fairly well. The orders for armaments and munitions here and abroad have helped—I do not say that is the sole cause—and there has been a fairly steady improvement in trade in Birmingham for some months now. In Birmingham there is a free night shelter for homeless and destitute men, a private charitable institution. No beds are provided. The men are allowed to go into a great hall and sleep on the boards in warmth, and they get free meals. It is intended for the completely destitute. In the last twelve months 30,000 men were admitted and 60,000 free meals were given. That is in one city alone, and not in a depressed area; not in one of the stricken areas of unemployment; and this despite public assistance, and despite, also, the whole machinery of unemployment insurance. Thirty thousand utterly destitute men were glad to go to this free shelter and sleep on the boards in one city alone. The contrast is too great. I suggest that there is another great potential market, the spending power of the mass of the people. If that could be increased it would do very much to develop the home market which the Chancellor of the Exchequer gloomily and reluctantly has to turn to in the absence of any hope of getting over the trade barriers and seeing a revival of our export trade.

Furthermore, I notice that great credit is taken by various Ministers in the Government—not by the noble Earl on this occasion—for the provision of cheap money—cheap money for production. But, my Lords, together with the provision of cheap money for production, consumption has been cut down by the general economy policy, by the cuts, only now partially restored, and by the general attempt to reduce wages and salaries all round—in other words by the general deflationary policy. The two do not go together. That is why I ask the noble Earl what is the national plan. If you provide cheap money for production you stimulate production; on the other hand, you must not cut down consuming power at the same time. Therefore your deflationary policy, your whole policy of making economies by reducing wages and salaries and cutting down expenditure, must be wrong. The two cannot go together. Also, your policy, spoken of both by the noble Earl here and by the Chancellor of the Exchequer in another place, of stimulating the home market, must mean a reversal of this policy of continually cutting down wages and expenditure.

I am going so far as to say it may be right and necessary, perhaps, to carry public opinion further with us before we can act. I am not speaking now for my Party altogether. I believe that the time must come when we will have to stimulate consumption directly by some system of national dividend. I speak with a great sense of conviction here and with complete sincerity when I say I believe we shall have to alter our whole system of national book-keeping so that we increase consuming power, automatically if possible, to keep pace with the increase of productive power. In other words, I am going to suggest to your Lordships, that the time must come, whether under the present system or not, when we will have to issue a national dividend for the direct stimulation of consumption through some national organisation. If I may give one set of very brief figures to illustrate what I mean, I quote the figures as one example to show the tremendous increase in the productive power of the machine and the great decrease in the number of men employed. I will give only three figures. To make a motor car in the Austin motor works in 1922 required fifty-five men; in 1927 it required eleven men, and this year it required eight men. There has been a reduction, therefore, since 1922 from fifty-five men to eight men to make one motor car. Those figures were supplied by the Engineering Employers' Federation in answer to the demand of the engineering workmen's union for a reduction in hours of labour and therefore may be taken as accurate and authentic.

The Government in this House refused an inquiry into the monetary system, and I presume they are going to do so in another place to-morrow when a similar demand is made. Then they must have some policy of their own. What is their policy? What is their long-range national policy for dealing with the situation in which we find ourselves? As I have attempted to describe to your Lordships so far, there has only been one way found by the industrial nations of solving this pressing problem of over-production and under-consumption and that is by war. Is there any other plan? I do not say that the Government are heading for war—I would not make such an accusation against them for a moment—or planning war. I am sure they are not. But have they an alternative? The Government lead us to understand that they have taken us through a crisis. The noble Viscount, Lord Snowden, seems to think the present Government should end because they have taken us through a crisis. I think the present Government should end because it never should have begun. It was misbegotten, partly in his brain. I was one of his victims and I am glad to have the opportunity of facing him on this occasion if I could not on another.

I do not believe that we have come through the crisis because all the factors and causes of the so-called crisis remain. As I suggested earlier, some people have begun to spend money again in this country, but that is about all. You may have a collapse of the German economic system quite easily. There, indeed, I believe the origin of the recent struggle in Germany has been because of what I myself found a few months ago in Germany—namely, the absence of any economic plan amongst the Nazi leaders and intellectuals and the Nazi Government. They have no economic plan that I could ascertain or discover. I find myself in the same position here, face to face with the present Government in this country. You may have a failure of the recovery plan in America; you may have a breakdown of the Government in France; you may have a great war in the Far East. Any of these things quite probably, or at any rate possibly, may precipitate another crisis, so-called. What then is your plan? I apologise for dealing a little with the future instead of the past. I have done so only because I think the case for the future is more important. We in this House have to look to the future and let the past take care of itself. But what is the Government's plan for the future? If the noble Earl could enlighten us on that point I believe he would be doing a public service.

LORD GAINFORD

My Lords, I want to intervene only for a moment to ask a question of the noble Earl in charge of the Bill. I have not come down to the House with a prepared speech. I could say a good deal about tariffs, and the complications which I think the Tariff policy has caused. In my opinion we cannot live without a great increase in international trade, and I think the Tariff policy is interfering with that. What I want information about is in connection with the point that the noble Lord, Lord Arnold, made at the beginning of this debate. He alluded to the distribution of the balance in the Exchequer among different sections of the community, and he dwelt upon the amount being contributed by the rich and the poor. The purport of his remarks was that the relief in Income Tax did not affect materially the masses of the people. I want the noble Earl to tell me, if he can, how much of the Income Tax which is paid by what the noble Lord, Lord Arnold, calls the richer classes really comes out of the pockets of each individual, and how much comes out of the business concerns of this country. My belief is that an enormous portion of the Income Tax is derived directly, or indirectly, from the masses of the people who have invested their small savings to a large extent in the limited liability concerns of this country and whose incomes are, to a certain extent, affected by the Income Tax levied by the Government. If the noble Earl could tell us the portion which is directly obtained from individuals and the portion obtained from public companies, I think it would be interesting information to possess.

THE EARL OF MIDLETON

My Lords, I rise to utter one word of protest against the very personal speech made by the noble Viscount a few minutes ago. I do not think I have any right to speak for the Prime Minister—I have not oven the pleasure of his personal acquaintance—but I do protest that a member of this House, against the practice which is usual and contrary to the order of this House, should take up speeches made in another place and not only make elaborate replies to them, which is against the rules of procedure in this House—though those rules are sometimes violated—but in doing so should make very personal accusations against a great statesman. I do not wish to interfere between him and another noble Lord who has spoken—one thinks the National Government should never have been formed, and the other that the Government should not have diverged from some of their original opinions—but I want to say that I disagree in toto with the noble Viscount's view of what is fair and equal in this respect.

To take only one example of landed property, I should have thought that if Income Tax had been paid on £1,000 or £3,000 a year—it does not matter what figure you take—for the last five years, after the most careful examination had been made of all the accounts, that the Government would then accept their own valuation as the standard on which Death Duties ought to be paid. But nothing of the kind happens. Every man who carries on any commercial business knows that the profits in the past are taken for that valuation, and that that is the standard on which Death Duties are paid. That is not so with land. The noble Viscount wants to carry this extraordinary inequality still further. Instead of paying on whatever the profits have been, an exception is to be made—and it is the only exception—with regard to land. But he wants to go further. He made a distinction, which he must know perfectly well is not a distinction, when he said that the valuation would not be on agricultural property. How can anybody tell that agricultural land of to-day will not to-morrow appreciate in value owing to its nearness to a town? At this moment, when farmers cannot meet their liabilities, when a very large number of landed estates are being carried on at a loss, and when there are, I am not going to exaggerate, tens of thousands of acres in this country for which nobody can possibly find a market, the noble Viscount proposes as his contribution to the re-establishment of this country and the world, that you should tax the possible sale of this land twenty years hence, year by year, on its capital value, to increase the receipts of the Exchequer. It will obviously react on the whole of the unemployed by increasing their numbers when land goes out of cultivation.

I do not think there could be a more unreasonable proposal than that which he makes—namely, that a measure brought in before the great fall in prices, before the great slump which has taken place all over the world, should be insisted upon by this Government merely because it was a part of the proposals of the Government of which he was a member. Would not the whole world laugh if Mr. Roosevelt were at this moment to endeavour to impose fresh taxation on agricultural land in America? But what would be absurd for Mr. Roosevelt is regarded by the noble Viscount as justifying him in making a vitriolic attack on the character, the language and the intentions of a former colleague who is not here to defend himself. I do not believe that any of your Lordships have ever before listened to a speech of that character in this House, and I earnestly hope that we shall be spared it in the future. We are here to debate the subjects which are brought before us and not to attribute motives to others who, for reasons which may seem to them perfectly adequate, take a different view. In my humble judgment nothing is more obvious than that land in this country should be treated at this moment with the greatest consideration if the returns which it has made in the past are to be continued in the future. I think it is because the noble Viscount has been completely carried away by his own strong feelings that he made the attack which he has made, and has failed to recognise that which, in his better moments, he would have known was the natural and proper conduct of the Government under existing condition.

THE LORD CHANCELLOR (VISCOUNT-SANKEY)

My Lords, I greatly regret two speeches which have been made here this afternoon. One was the speech of the noble Viscount, Lord Snowden, and the other was the speech of the noble Lord, Lord Strabolgi. In his speech I believe the noble Lord, Lord Strabolgi, made reference to me. I had to be out of the House on important public business and I shall not condescend to say anything in reply to his speech.

LORD STRABOLGI

I am well within the recollection of your Lordships. I referred to the fact that the noble and learned Viscount had been on the Woolsack. I made no sort of attack on the noble and learned Viscount.

THE LORD CHANCELLOR

With regard to the noble Viscount, Lord Snowden, he was one of those who with me and some others sided with the Prime Minister a few years ago, when we thought the country was in danger and that all Parties ought, if possible, to pull together. The noble Viscount, Lord Snowden, had been the friend of a lifetime with the Prime Minister, and it is probable that to the noble Viscount, the Prime Minister and Mr. Henderson this country owes the existence of the Labour Party and their great success. The noble Viscount remained with us for some time and then he left the Government. I have no complaint to make against him. I never have said a word against any of my old colleagues; I never have said a word against the noble Viscount, Lord Snowden, and I still hope that I may reckon all of them among my personal friends. But it is possible for personal friends to differ politically without adding that element of bitterness and making those aspersions on motives which I regret we have hoard from the noble Viscount this afternoon. The noble Viscount is entirely entitled to his own opinion upon this subject. There may be others of us who agree with him. But what he is not entitled to do is to impute motives to a man who cannot defend himself in language which in my view was entirely indefensible. It is not the first time that the noble Viscount has thought fit to traduce his old friends. I pray it will be the last.

The Prime Minister, give me leave to say, faced with that alternative in the crisis by which this country was confronted, had to sacrifice the friends of a lifetime, and had to sacrifice many of his most cherished ambitions, as he thought for the good of the country. He may have been wrong. I do not think he was, but at any rate he does not deserve what has been said about him this afternoon any more than the old Labour Party deserved what the noble Viscount said about them at the General Election. But I make an appeal to the noble Viscount. He and I are at the end of our careers; the time is not far distant when the noble Viscount and many of his old friends and associates will go down into silence. I can only hope that whatever the political difficulties may be and whatever the political differences are, before that time the noble Viscount and many of the old members of the Labour Party and the Prime Minister will at any rate be once again personal friends, however much they may differ politically.

THE EARL OF LISTOWEL

My Lords, I do not intend to detain your Lordships for more than a moment at so late an hour, because my sentiments in regard to the Finance Bill have been perfectly expressed by the two noble Lords who spoke previously from these Benches, and I think the noble Viscount, Lord Snowden, in his powerful indictment of the repeal of the Land Taxes, certainly put the case as well as it could have been expressed, and relieved any of us on these Benches of the necessity of entering into the details on the matter. However, the noble Earl, Lord Stanhope, has been good enough to ask those who have any criticism to make of the financial policy of the Government or who wish to clarify their minds on the subject to put to him questions, and with great consideration for the requirements of your Lordships' House he has passed over much detail in order to be able to reply to such demands at the end of the discussion.

There are three questions which I should like to put to him. The first is this: Have the Government completely abandoned any idea of embarking on a programme of public works? At the present moment our country is perhaps the only important nation which has not thought fit to meet the existing economic situation by embarking to a greater or lesser extent upon a programme of public works financed by the Government. We could hardly deny that there are many operations which could fitly be undertaken, such as the provision of better housing accommodation for our people. The second question is this: The Government have imposed very drastic restrictions on the floating of foreign loans; do they intend to relax those restrictions in the future? Your Lordships are well aware of the necessity, if the present economic revival is to last, for a steady flow of international lending to begin again in order to sustain industry as it was accustomed to do before the recent depression began. It is in the opinion of many people a very great hindrance that remunerative undertakings which could at this time be begun in foreign parts should be held up because the Government make it, practically speaking, impossible to float any foreign loan at all.

The third question is this. It is the financial policy of the Government for our country to return sooner or later to the gold standard, and I do not wish on this occasion (because it would be out of place) to question that policy. We understand that this proposal must be consequent upon a rise in the general price level. Well, the price level is slowly rising and we are at least entitled to ask whether or not the moment is approaching when the Government intend quite definitely to restore the gold standard, from which we were forced in 1931. Those are the questions which, encouraged by his own suggestion, I ask the noble Earl to answer in the course of his reply.

EARL STANHOPE

My Lords, in reply to the noble Earl who has just sat down, who asked me three questions, I am afraid that I naturally cannot give very full answers to them, but I think I can give him a general outline of the policy of the Government. As regards a programme of public works, I thought that the Government had made it quite clear that where public works of a remunerative character could be undertaken, there they would endeavour to assist those public works being put in hand, but where there were public works of an un-remunerative character, there they were not inclined to set those works in motion, because obviously they would become a charge on the taxpayer and only increase the difficulties of the country. The noble Earl knows that that is not the policy of other countries. One other country, I believe, is doing a tremendous amount of public work, and at the same time it is increasing the debt of the country quite enormously. That is opposed to the policy of His Majesty's Government for this country. Therefore I hope I have made it clear that while we are prepared to incur remunerative capital expenditure, we are not prepared to do public works which in our opinion are unremunerative.

As to the second question, whether the Government intend to relax the embargo on foreign loans, I have no doubt that in course of time that embargo will be removed, but I am not in a position to say what the views of the Chancellor of the Exchequer in regard to that matter are at the moment, and I am sure that he himself would desire to make that announcement in due course and not to have it forecast by me. Then the noble Earl asked whether the moment was approaching for the return of this country to the gold standard. No, my Lords, not until the situation throughout the world is very much clearer and more stabilised than it is at this moment. It is not a question merely of a rise of prices in this country. Although there has been some rise in the prices of some commodities, it is still very far indeed from being satisfactory. Take meat prices as an example. But it does not depend only upon the actual prices within this country, it depends on the question of exchange, and not putting this country again in the dangerous position in which there might be a run on the exchange and we should be driven off the gold standard once more. Therefore until conditions are more stable it is definitely the policy of the Government to remain in the position in which we now are.

Several other questions have been asked by noble Lords. Lord Strabolgi asked as to the whole policy of the Government for the future. That opens up a wide question and at this hour I am afraid I cannot enlarge upon it. The policy of the Government is as shown in the Finance Bill before your Lordships, and that is a steady return to more stable conditions, a better sense of security in the country, the encouragement of private enterprise for the production of goods and encouraging people to purchase those goods. That can only be done by a feeling of stability, and, as I told the noble Lord the other day, when talking about the exchange question, the view of the Government is that there is no short-cut to a return to economic conditions which would put us again upon our feet. It is a question of hard work and patience, and paying our way. That is the policy which the Government have at heart, and which appears in this Finance Bill.

The noble Lord suggested that tariffs were strangling and hindering international trade. That is not our view. By means of tariffs we have been able to make arrangements with other countries, by having a bargaining factor for our trade, and we hope in that way to increase foreign trade once more, although the Chancellor of the Exchequer does not see any hope of our foreign trade returning to the figure at which it was a few years ago. On the whole, the spirit of the world at the present moment is one of economic nationalism, and it is no good disregarding the fact. If we were to take away the weapons of tariffs and quotas we should find ourselves in a defenceless position and not able to encourage, or indeed force, other countries to open their markets to our goods. That is not only the view of the Government, because I was reading only a few days ago a quotation which I thought might be useful in answering Lord Arnold. Professor de Man, of Belgium, wrote this: To try to combat the economic nationalism of the present day by the classical arguments of Smith, Bastiat or Cobden is like trying to attack a tank with a sabre belonging to one of Napoleon's hussars. I would commend that to Lord Arnold, and to the noble Viscount on the Cross Benches, as being worth while remembering.

Lord Strabolgi referred to Estate Duty as a capital tax. I entirely agree with him, and speaking from a personal point of view I have not the least hesitation in saying that the amount being taken out of private estates and used as income by the State is an evil which the sooner it is realised the better for the country and the prosperity of those who live in it. Lord Arnold made a great comparison between the taxation of the rich and of the poor, as he called thorn, but had he been here at the moment I should have been inclined to cross-examine him on the point and to ask how he thought a rich man spends his money. It is an elementary fact which I would like to put to him, that the rich man does not put his money into his pocket and leave it there. He either employs labour or purchases articles. In both cases it means employment of labour, and thus a reduction of 6d. in the Income Tax is of benefit not merely to the rich man but to the working man also. What the Government are anxious about above all other things is to increase employment in this country, and if by a reduction of 6d. in the Income Tax we can get further forward with that policy, and reduce the number of that vast army of men who are still looking for employment, and get them put back into permanent work, earning proper wages, we shall have fulfilled the main task set before our hands.

Lord Gainford asked a question as to whether there were any statistics as to the amount of Income Tax paid by individuals and public companies. I am afraid there are no statistics we can give to the House. I do not think they exist at all, and they would be extremely difficult to obtain, because, as the noble Lord knows, taking, for instance, a railway company, where the Income Tax on the dividend is deducted at the source, it would not get us much further forward if we discovered that it was paid to so many taxpayers. We do not know-how many reclaimed the tax if they came below the Income Tax limit. We should, I am afraid, get into all sorts of difficulties, and therefore I have no statistics that I can give the noble Lord.

Lord Arnold made a great deal of play in regard to the amount of indirect taxation in this country. I would point out that no less than £100,000,000 is paid in taxes on alcoholic liquors, and a great part of the noble Lord's speech last year was devoted to an attack upon the Chancellor of the Exchequer, and upon me as representing him in this House, because we had reduced the tax on beer. He cannot have it both ways. If he objected to the large amount of indirect taxation then he had no right to object to the reduction of the tax on beer. If, on the other hand, he objected to the reduction of the tax on beer, then he must not complain if it is the tax on alcoholic liquors which brings up the proportion of indirect taxation. I am one of those who see no reason whatever why the working man or the millionaire should not drink his glass of beer, if he does not drink too much. The figures are, however, of increasing sobriety. It is possible that there were more cases of drunkenness last year. I thought the noble Lord was going to accuse the Chancellor of the Exchequer of having caused the hot weather and drought in order to increase the yield from the tax on beer. It is not, however, the habit of the working man to indulge in excessive drinking and, as I said last year, I am not going to object to a reduction of taxes on beer or any alcoholic liquor, or tobacco, or anything which the working man feels is, although not absolutely necessary, conducive to his enjoyment and good work.

There appears to be some doubt in Lord Arnold's mind about the difference between trade and production. He seemed to think that because tariffs possibly interfered with trade they reduced the amount of labour. It is true that tariffs interfere with trade. They are meant to interfere with trade, and to prevent as many foreign manufactures being introduced into this country as before, because the whole policy of the Government is to endeavour to get more work for the working men in this country. If we can ensure that they shall have a greater share in the manufacture of goods consumed in this country, that is all to the good and reduces unemployment.

Some noble Lord referred to the surplus having been spent in the reduction of taxation instead of in the reduction of the debt on the Unemployment Fund. That was a matter which was debated at great length in another place. It is rather surprising as to what the effect would have been. If it had been employed as Lord Arnold suggested, it would have reduced the debt on the Insurance Fund from £106,000,000 to £76,000,000. That would have reduced the annuity from £5,000,000 a year to £3,500,000, and the only effect of that on contributions paid by the working man would have been a reduction of a farthing a week, paid by the employer, the employed, and the State. I think there have been no other questions in regard to the Budget, although a great deal of criticism. Lord Arnold raised the question of the amount allowed for Death Duties, but as he is not here now I will not weary your Lordships with the figures.

LORD PONSONBY OF SHULBREDE

May I apologise on behalf of my noble friend? He was unavoidably called away, otherwise he certainly would have been here to listen to the reply.

EARL STANHOPE

Lord Arnold was good enough to send me a note saying that he was compelled to leave the House, and I ought to have made it clear that I was aware of that. I knew that he was partly speaking on behalf of noble Lords opposite as well as on his own, but I think I have said enough in regard to this Bill and I ask your Lordships to give the Bill a Second Reading.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.