HL Deb 09 July 1935 vol 98 cc95-104

Order of the Day for the Second Reading read.

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

My Lords, I think I shall be probably meeting the convenience of your Lordships if I reduce my remarks on the Second Reading of the Finance Bill to the shortest possible measure. Last year I stated that the Chancellor of the Exchequer had decided to use his surplus in a reduction of the standard rate of Income Tax, believing that in that way he would best stimulate trade. Has he been justified? I think your Lordships will all agree that railway traffics, bank clearings, and retail trade have all shown a steady rise, so that the Chancellor of the Exchequer was right in the action that he took.

My noble friend Lord Arnold, who always positively revels in becoming a Jeremiah on these occasions, read us a whole chapter of the Book of Lamentations on the effect of the Budget of last year, how it was going to benefit only the large taxpayer, and would not help the small taxpayer at all. I do not know what is the level above which Lord Arnold considers a man to be a rich taxpayer. I suppose that a man with an income of £500 is not rich, but there are only one million taxpayers with £500 income and upwards, and something like 90,000 taxpayers pay 60 per cent. of the direct taxes which are raised by the whole community. That being the case, I think Lord Arnold must be given some figures to digest. Eighty thousand tons more sugar were consumed in 1934 than in 1933—a very large consumption for 90,000 rich taxpayers; 6,500,000 lbs. more of tobacco was smoked, 270,000,000 more pints of beer were drunk, and 700,000,000 more cups of tea were consumed—a very large consumption for the rich taxpayer. In other directions, too, it is obvious that the prosperity of the country of all classes, and not of the rich taxpayers only, has been going up during the past twelve months.

This year, I suppose, my noble friend will complain that the small taxpayer alone has been selected for the benefits of the Chancellor of the Exchequer, because he will see when he looks at the Budget, as I know he has done, that the proposals of my right honourable friend bring relief principally to the small taxpayer. Once again the Chancellor of the Exchequer has been following the rule of restoring the cuts which were imposed in 1931, and so reliefs have gone to places where they did not go last year. These alterations, contained in Clauses 19 to 22, are four in number. First, there is a reduction from one-half to one-third in the standard rate of tax on taxable incomes below £135; and this relief affects some two and a quarter million taxpayers, or seventy per tent. of the whole body of Income Tax payers. Secondly, there is an increase in the personal allowance for married men. Thirdly, there is an increase in allowance for the second and additional children. Fourthly, there is an exemption limit of £125 for all incomes and not only a limit of £125 for earned income. The cost of these concessions is £4,500,000 this year and £10,000,000 in a full year. I do not suggest that these proposals put the taxpayer back into exactly the same position that he occupied prior to the second Budget in 1931. That Budget of 1931 increased the earned income allowance from one-sixth to one-fifth, and that concession is retained. While, therefore, perhaps my noble friend may attack me for the fact that the personal allowances for single and married men under these proposals are not as good as they were in 1930, he must also take into consideration that the earned income allowance is now higher than it was at that Gate, and that the charge on the first Mice of a taxpayer's income is now to be lower.

Another considerable benefit to a very large number of people occurs in the Budget, and that is the restoration of the remainder of the cuts imposed in 1931. That will affect no less than 1,200,000 persons. Then there is the removal of the Entertainment Tax on cheaper seats, which will also benefit perhaps the less prosperous individual. On the other side, there is an increased tax on heavy oils, and that was attacked in a good many directions in another place. The Chancellor of the Exchequer, however, pointed out that the efficiency of the Diesel engine is such that if he had intended to place an equal tax on Diesel engines to that which existed on petrol engines, the tax, instead of being 8d. to the gallon should have been 1s. 2d., so that the Diesel engine still gets a considerable benefit, and that will encourage inventors to go on improving the Diesel engines as they have been doing during the past few years. One other point was raised in criticism, and that was what was called the raid on the Road Fund, by which the Chancellor of the Exchequer takes over £4,470,000 from the Road Fund, and uses it for the purposes of general revenue. That, of course, was merely the balance of a payment of £7,210,000, which was advanced by the Treasury in the years 1931 and 1932.

I am not going to claim that the country has completely emerged from its difficulties. I can, however, claim that the Government have restored a feeling of security to this country which was sadly lacking four years ago, and which is still, indeed, the state in too many countries in the world. Until those other countries also succeed in balancing their Budgets, and in achieving stability, we cannot hope for a. full return of prosperity in the United Kingdom. But, at any rate, that we are on the right road is proved by the numerous signs of prosperity to which I referred a few moments ago. As trade increases—and the Chancellor of the Exchequer remarked last week that our exports for the first five months of this year are up by no less than £10,000,000 over the same period of last year—we may hope that more of our people may be restored to industry and the numbers of the unemployed be still further reduced. We only regret that we are not to-day just below the two million mark instead of just above it, and we hope, whatever Party we may belong to, that we may make a very big hole in that far too high figure. This Budget has been described as an Election Budget, I suppose because it is popular. It is not an Election Budget; but it is the fruits of sound finance and of good government, backed, as it has been, by the patience, the wisdom and the sound common sense of the people. That being so, I believe that your Lordships will welcome the Finance Bill, and I beg to move that it be given a Second Reading.

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

LORD ARNOLD

My Lords, the noble Earl in moving the Second Reading of the Finance Bill, has made, as he always does, a speech of commendable brevity, and I will endeavour to emulate his example, because I know your Lordships are wishful to proceed with the discussion on the Government of India Bill. And indeed, my task this afternoon is rendered comparatively easy in that direction, because I will say this to the noble Earl. Having had some experience of Budgets, I do not think I can recall one which, on the whole, was less controversial than the present one. I do not propose to go into the very interesting, though comparatively minute, points about remissions of Income Tax and so forth. The Budget, though it is not controversial, is not, however, as the noble Earl might seem to suggest, a perfect one. There are certain things that can be said about it. In the course of his con-chiding observations he referred to the fact that we, in this country, had balanced our Budget, and that many other countries had not balanced their Budgets. I feel obliged, in the interests of financial truth, to point out that, strictly speaking, this Budget is not balanced. The reason for that is that there is no Sinking Fund. The Sinking Fund has been suspended. I am not saying there ought to be a Sinking Fund; at this particular moment I think there is a great deal to be said for there being no Sinking Fund, but the fact remains that there is no Sinking Fund. When there is no Sinking Fund it is not in accordance with the most meticulous fiscal truth to regard the Budget as balanced. That is the first point I make. I do not say it is one of the most important, but I think attention should be called to it.

The noble Earl dealt with the question of remissions of taxation and suggested that last year I was full of woeful foreboding in regard to the reduction of the Income Tax. I do not remember that I indulged in any very lugubrious prognostications about that. Having looked at the Report of my speech while the noble Earl was making his observations I cannot see that I said anything of the kind. What I did say was that in their remissions the Government had given back to the wealthier classes—by those I mean people with incomes beginning at £800 and including all Super-Tax payers—more than they had given back to those with incomes below £800. As a matter of fact on incomes over that figure of £800 relief has been 38 per cent. of the burden, while in regard to incomes below £800 the relief has been somewhere about 16 per cent.

The Chancellor of the Exchequer, on the Third Reading of this Bill in another place, said he had very nearly accomplished his ambition and that he had very nearly removed the burdens which were imposed in 1931. I do not think that that statement will bear very close examination. The remissions of taxes made by the Government, to which the Prime Minister, Mr. Stanley Baldwin, quite naturally called attention, amount to £60,000,000, but in 1931 the taxes imposed amounted to £81,000,000 and next year they were brought up to £85,000,000. The Chancellor of the Exchequer and Mr. Baldwin did not, however, in any way refer to the fact that the Government had imposed tariff duties amounting to about £35,000,000, and they bring up the total to roughly £120,000,000. I am not going into the controversy about tariffs, although it is a very tempting theme, but I do not think it will be argued by any one that tariffs are not a burden on anybody. Taking the total at £120,000,000 it means that roughly half the taxation has been removed. I leave it there.

The next point to which I want to refer is that of the Death Duties. I have frequently called attention to the fact that the Death Duties are underestimated year by year, and the same thing happened last year. In the last Budget they were under-estimated by no less than £5,356,000. I have dealt with that before and I have given one reason why I think it happens, but unfortunately no change is made in the estimate. We are very proud of the way in which the Chancellor of the Exchequer and his advisers estimate the yield of the Income Tax but unfortunately they are not equally successful when they are dealing with the yield of the Death Duties.

Before I leave this subject I should like to refer to a. controversy which was waged in The Times newspaper about two months ago. This is not a matter in which I blame the Government. It is even conceivable that what I say may have some modest usefulness for the Government. If that is so, it will make me very happy because I always like to be of assistance. The Times raised the old idea that the country was living on its capital. I think an analysis of the position will show that that statement cannot be sustained. When people say that because of the Death Duties this country is living on capital and because of the Death Duties the capital of the country is on balance being reduced, that is not true. The fact is that the capital of the country is being increased almost every year because annual savings, after all taxes and Death Duties have been paid, amount to a considerable sum practically every year. Seven or eight years ago the Colwyn Committee estimated them, at between £400,000,000 and £500,000,000, and I should think that in 1928–29 the figure was more than that. Probably in 1932, in the middle of the economic crisis, there may have been no savings at all, but last year it was estimated that there were about £200,000,000. I dare say that really they were rather more. In any case they amount to something substantial after all Death Duties have been paid. Therefore it is not true to suggest that on account of the Death Duties this country is living on its capital, because year by year the capital of the country is increasing on balance.

There is one further point I should like to make in this connection, and that is to call attention to the fact that unfortunately in this country there is a great dearth of official statistics. I have said that it is believed that savings last year were about £200,000,000, but I do not know, and nobody knows, because there is no official estimate. Neither is there any official estimate of the national income, though we have sometimes got some help in that matter from the census of production. There is no official estimate either of the national capital. I should like to suggest to the noble Earl that he should take this matter into consideration and put before his colleagues the desirability of setting up a Committee to consider the whole question of official statistics. In most big countries they have official statistics—I do not say they are always reliable—and if we could have more statistics in this country they would be very useful.

When I was in office, I was asking for statistics from time to time and my requests were received with blank amazement. I might have been asking for information about the indivisibility of the atom or something like that. What happened was that I had to go to my old friend Sir Josiah Stamp and ask him what was the reply to my conundrum. The good nature of Sir Josiah Stamp and his statistical knowledge are almost unlimited, but I think the Government Departments ought to have statistics of their own and that if a Committee could be set up to look into the matter a great service would be rendered. I should have liked to deal with the question of expenditure now in relation to expenditure in pre-War years, because I think there is a large amount of misconception abroad when it is suggested that expenditure has increased three or four times. I feel sure that a true analysis of the position would show that no such statement as that can possibly be sustained. However, I do not wish to detain your Lordships longer, because, as I sense the House, your Lordships are anxious to get on with the Government of India Bill.

EARL STANHOPE

My Lords, I shall be very brief in answering the points raised by the noble Lord. I am grateful to him for saying that it is a much less controversial Budget than some which have preceded it. I thought that probably lie would find it difficult to criticise it severely. He did refer to one point with regard to the Sinking Fund. The Chancellor of the Exchequer justified making no express provision for the Sinking Fund on the ground that there was in fact a redemption of debt last year of £20,000,000 and if, as is in fact proving to be the case, interest an Treasury Bills remained at anything like its then level, there would be something available for dent redemption out of revenue this year. At the present moment the rate for Treasury Bills is in fact much the same as last year, so that there would seem to be ample ground for thinking that we shall be able to repay debt out of revenue without actually having a Sinking Fund. The noble Lord said again that we had underestimated Death Duties. I was prepared for that charge because he has made it before. I would point out to him that in 1931–32 there was a deficit in Death Duty revenue of £18,000,000. In 1932 there was a surplus of over £1,000,000; in 1933 a surplus, and in 1934–35 a surplus.

LORD ARNOLD

The noble Earl is always very courteous and perhaps he will allow me to make myself quite clear. Everyone knows that in 1932 there was a deficit, but in practically every year since the War, with that one exception, there has been an underestimate.

EARL STANHOPE

That is true, but I think it should be pointed out that this year there is an estimate of a further £4,000,000. The noble Lord will recognise, of course, that provision for Death Duties must inevitably be a gamble because, while it is comparatively easy to make an estimate of Income Tax, that is not so with Death Duties, which not only depend on mortality statistics but, on whether people who die are those with large estates instead of those with small ones. There is also this point to be borne in mind, that if there is an underestimate things turn out more satisfactorily for the revenue, while if there is an over estimate there might be a deficit which is so serious for the country as a whole. He remarked that Death Duties did not reduce the capital of the country. It is quite true that the capital of the country appears to be increasing, but I think he will agree that if Death Duties were not levied on the scale that they are savings would be thereby increased and the capital of the country would increase more rapidly than it does with Death Duties at their present level.

As to the cuts not having been entirely restored, it is true that the amount raised by direct taxation is higher than that raised prior to 1931, but that is being raised on Surtax payers and large estates by Death Duties. I was glad to hear that the noble Lord relies for statistics on Sir Josiah Stamp. It would appear that the capitalist is still of considerable value, and that, even when we come to the Socialistic State, we shall have to keep people like Sir Josiah Stamp, with all their knowledge, all their experience and all their value to the country, if we are to get the statistics that we want. I will certainly consider suggesting to my right honourable friend that he should set up a Committee to go into the question of statistics. Whether it would be a popular move is another matter, because most of us find that we fill in returns more often than we care to, and if we are going to be asked to send in returns on Heaven knows how many other questions, I think we shall feel that we are being overwhelmed with statistics and shall be glad to be without them.

On Question, Bill read 2a.

Moved, That the House do now resolve itself into Committee.—(Earl Stanhope.)

LORD HUTCHISON OF MONTROSE

My Lords, before the Lord Chancellor puts the Question, might I ask the Leader of the House one question? I should like to ask him what principle the Government follow in putting down business in your Lordships' House. We have before us a very important Indian Bill in the Committee stage, and it seems to some of us that it is difficult to follow the continuity of that Bill when contentious business is put down in the House in advance of it. I should like to ask the noble Marquess what principles have been followed in putting down business before the consideration of the India Bill in Committee, and what it is proposed to do in the future.

THE LORD PRIVY SEAL (THE MARQUESS OF LONDONDERRY)

My Lords, I think that the proper time for the noble Lord to ask me this question is on the adjournment of the House at some time, when I have the opportunity of informing your Lordships of the business of the House. We are now in process of negativing the Committee stage of the Finance Bill and I do not know, but I think that even within our wide terms of Order it may not be proper for me to reply to the noble Lord now. I shall be very happy to give him an answer to his question on some other occasion; probably on going into Committee on the India Bill, or on the adjournment of the House.

On Question, Committee negatived.