HL Deb 19 December 1945 vol 138 cc910-28

3.9 P.m.

Order of the Day for the Second Reading read.

THE SECRETARY OF STATE FOR INDIA AND BURMA (LORD PETHICKLAWRENCE)

My Lords, when a person has undergone an operation and borne it with great fortitude, he looks forward with joy to the time when he is first able to get out of bed and put his foot on the ground. He feels confident that he will speedily resume his full activities and that his troubles and trials are past. But when the moment actually comes for this action on his part, he finds his expectation far from fulfilled. For the first time he is conscious of the extent to which his strength has been sapped, and he may then fall into the equal error of a pessimist's outlook on the future. In fact, if he is patient and does not overtax his strength during his convalescence,' we have every reason to believe that before long he will regain his full vigour and perhaps achieve more vigour than he ever had before.

That seems to me to be very much the position of this country which, at the present time, is recovering from six gruelling years of war. There had been an expectation that, as soon as the actual fighting ceased, the sacrifices of the people would be over, that national expenditure would be rapidly reduced, that the time would be very short before we could return to a balanced Budget, and that there would be an opportunity for the public to purchase what they had been prevented from purchasing for so long. The reality, I am afraid, is very different from the expectation. Sacrifices are not yet over, and rationing continues. There is a very definite and proper reason for this. It is simply that the physical limits of production remain in the change-over from war to peace.

With regard to the question of Budget equilibrium, in the Spring Budget of this year, the then, Chancellor of the Exchequer, Sir John Anderson, budgeted for a probable reduction of £500,000,000 when it was quite uncertain when the Japanese war would come to an end. It has been suggested in certain quarters that this reduction ought to be very much greater in view of the fact that the Japanese war ended so early. Of course, it is true that very substantial cuts in expenditure have been able to be made. First of all, there is the demobilization, resulting in the reduction of pay to the Services and in the upkeep of the war. There is the cutting down, the cancelling, of the cost of the manufacture of the sinews of war; but there are certain things that must be remembered on the other side which have made the end of the war produce not only not such great reductions in costs hut, in some cases, greater costs than there were during the continuance of the war.

In the first place, there is the complete cessation of the Lend-Lease provi- sions which applied not only to munitions and therefore involves us in paying for a great number of articles for which, during the war, we did not have to pay. In the second place, there has been the period of holiday given to the Services which still continues for eight weeks after demobilization. Then there are the gratuities and lump sum benefits, and the balance of payments to manufacturers who did not cease producing the moment the guns ceased to fire. Also, there is the compensation for broken contracts and the necessity of holding the cost of living stable which is, I think your Lordships will agree, a most important thing to do and which, in view of the cessation of Lend-Lease, involves a considerably greater sum which is likely to total as much as £300,000,000 in the present financial year.

I am glad to say, as your Lordships are no doubt aware, that costs have already turned downwards and their reduction is likely, progressively, to increase. Even so, I do not think we can possibly expect that in the financial year after the present one we shall see a balanced Budget. I would remind your Lordships that, after the last war, several years elapsed before the Budget even balanced on paper, and that, even then, into the balance were taken the sale of a large number of war assets which really, in a sense, should have been credited to capital and not treated as current receipts. But the Chancellor of the Exchequer in another place has already promised that in the financial year 1946–47 we shall proceed to a return to the Estimates, and that we shall not pursue the line of credits practised during the war. We can be quite certain that the Treasury will keep a lynx eye on expenditure, and that every expense not required for the reconstruction of the country will be cut down.

Coming to taxation, if we were to do our very utmost to balance the Budget next year, there would be no case for any reduction of taxes in the year 1946–47. But, in accord with the view taken by the previous Chancellor of the Exchequer, Sir John Anderson, the present Chancellor of the Exchequer takes the view that there ought to be some relief of the burden after the severe years through which we have passed. That, of course, must be on the assumption that it does not encourage people to spend recklessly their purchasing power, which could only lead, so long as goods are in short supply, to the most dangerous matter of inflation. Therefore, such reductions in taxation as are promised must be most carefully watched, and every effort must be made to continue to secure savings, as has been done during the continuance of the war. I am happy to note that all over the country the yield of the Savings Weeks and the steady savings that are going or. is still of a considerable amount. If savings continue into the next year, I think the reduction in taxation will not result in the inflation which would be so very dangerous and which, after the last war, played such a serious part in leading to the difficulties and disasters with which were subsequently faced. It is no good providing more money except in so far as there are more goods to satisfy the purchasing potentialities of the public.

That, my Lords, is the background against which this interim Finance Bill—the last war-year Budget—has got to be considered. What are its provisions? I will first make reference to a very important proposal which is a carry-over from the Spring Budget and which is contained in Part V of the Bill, Clauses 51–56, relating to the relief from double taxation. Under its provisions a United Kingdom concern, trading in the United States, will bear the full United States tax, but will be given a credit for that tax against the United Kingdom tax, so that, in effect, it is left plying the higher of the two taxes only. Similarly, an American concern trading in this country will remain liable to the full amount of the United Kingdom tax, but will receive a credit against its American tax. I think your Lordships will agree that this is a very proper provision. It was originally devised during the Coalition Government, and I am quite sure it will be of reasonable value to the taxpayers of this country. There are somewhat similar provisions in the matter of Estate Duty which again will, I think, commend themselves to your Lordships. Other provisions of this character are in course of negotiation with other countries so that, in the end, it is hoped to make them of universal application.

I turn now to some of the proposals which originate in this particular Budget. In the sphere of indirect taxation there is only one substantial change, and that is in the matter of Purchase Tax. It has not been possible to make any wide reduction in the Purchase Tax. There has been a reduction on a range of articles of special importance in connexion with the housing programme. I explained to your Lordships a few moments ago that great care was being exercised in expenditure, but that those things that were required for reconstruction would be pushed forward. It is felt that the reconstruction of the inside of the houses should proceed with the reconstruction of the outside, and therefore this small reduction has been made towards that end. In addition to that, there has been a concession made which I think will appeal to your Lordships in omitting Purchase Tax from wireless sets for the blind, and there has been a further reduction in the matter of war memorials.

The largest changes brought forward in this Bill, however, are, of course, in the matter of direct taxation. The first change is the bringing to an end of the system of post-war credits. That is not to say, of course, that there is any repudiation of any kind—far from it—of the post-war credits that have already been created. They amount to the very substantial figure of some £800,000,000, and at the appropriate time those postwar credits will, of course, be honoured. What is proposed is that no future postwar credits should be added to those which are already in existence. In view of that, there is a very considerable relief of immediate taxation in the shape of the restoration of the personal allowances—the amounts people can deduct from their income before they are called upon to pay tax. There is a restoration of those, not merely to the figure they were at before they were reduced, but slightly above that figure.

VISCOUNT ELIBANK

May I ask if that £800,000,000 includes both commercial credits and individual credits—that is, those of individuals who have paid Income Tax and Surtax and are receiving certain credits back? Does it embrace the whole lot or is it only commercial credits?

LORD PETHICK-LAWRENCE

I am not quite sure what the noble Lord means in regard to commercial credits. I do not know if he is referring to E.P.T. These are what are called the post- war credits. They relate solely to certain forced loans, as it were, that were imposed upon Income Tax payers at some period in the war—I think it was 1940 or 1941—when two things were done. One was to lower the personal allowances in regard to the amount of the deductions before tax was levied, also the reliefs in various ways, including reductions in relation to earned income. It has nothing to do with commercial credits at all. These items amount to £800,000,000 and will remain at that figure until they are released, but they will not be further added to in future. I hope I have met the noble Lord's point.

VISCOUNT ELIBANK

Thank you.

LORD PETHICK-LAWRENCE

I should say that these alterations to direct taxatior do not come into effect during the current financial year. The reason why, for the first time, these things are mentioned before the spring is that owing to the institution of pay as you earn in the matter of income, it would be exceedingly difficult to introduce changes in the Income Tax after the financial year had begun and even at the beginning of the financial year. In order that the necessary books and tables can be prepared, it is essential that these changes shall be announced considerably in advance. That is why my right honourable friend the Chancellor of the Exchequer has made this announcement in this Autumn Interim Budget; but these changes will not take place until the financial year 1946–7.

Then there is the main fact of the reduction of the Income Tax which is foreshadowed, from 10s. to 9s. in the pound. For persons whose incomes slightly exceed the Income Tax figure to-day there is a reduction of the rate. While the Income Tax in the present year stands at l0s. in the pound, for the first range of incomes it is not levied at the rate of l0s. in the pound, but at the rate of only 6s. 6d. The new proposal is that tax on the first range where Income Tax begins to fall shall in future be at the rate of only 3s. on the first £50 and 6s. on the next £75 of taxable income.

VISCOUNT SIMON

Which clause is that?

LORD PETHICK-LAWRENCE

I think it is Clause 17 of the Bill. If the noble Viscount will look he will find it there. There is a slight increase in the rate of Surtax on the higher slices of income above £2,500. The effect of that is to take back from the higher ranges of income a small part of the benefit conferred by the reduction of the general level of tax. It is a small part at the earlier stages but it means in the higher slices that they pay the same as at the present time. All the items I have mentioned up to now come into effect with the next financial year.

I now come to the Excess Profits Tax which is changed from the 1st January next year so that the relief will apply to the accounting year of 1946. The Excess Profits Tax is reduced from too per cent. to 6o per cent. Of course, under the present law the post-war refunds of 20 per cent. on tax paid at the l00 per cent. rate, promised under the legislation of 1941, will begin to be made next year. The recipients of the refund will be required, as is already the law, to undertake that the refunds will be used for redeveloping and re-equipping trades or businesses and will not be distributed in any way for the benefit of the shareholders or proprietors. Observance of this undertaking will be watched by an advisory panel of business men appointed by the Treasury. That 20 per cent. is quite distinct from the 40 per cent. reduction in the tax which applies to the following year—the calendar year 1946. This reduction in direct taxation will cost £322,000,000 in a full year, but against that the Exchequer will no longer incur liabilities for Income Tax postwar credits amounting to £225,000,000 a year. The increase in Surtax will bring in about £7,000,000 a year.

I turn from those changes in direct taxation to motor taxation. This is a carry-over from the Spring Budget; the changes were already envisaged then. The proposal in the Bill is that as from a certain specified date all new motorcars will pay tax on a different basis from that existing at present. It is proposed that, instead of paying what is known as a horse-power tax, they will pay on the basis of the cubic capacity of the cylinder; there will be a series of steps for every l00 cubic centimetres of the cubic content of the cylinder. With regard to this taxation, I would like to say that it is, of course, impossible for the Exchequer to part with any revenue, certainly at the present time, from motor taxation. Many changes have been suggested. Some have asked that the whole of the present method should go, and that in its place should be substituted a method whereby all the burden would be thrown on a tax on the motor fuel, petrol or whatever it may be. The practical difficulties of that change are very considerable, and the Chancellor did not feel he could accept that proposal.

There have been suggestions that the taxation should proceed by larger steps instead of the small steps that the Chancellor has proposed. However, the debate in another place brought out the fact that on the whole the method which the Chancellor has adopted met with the least criticism. I should explain to your Lordships—although some of you probably know a great deal better than I do—that there is a considerable difference of opinion among the motor manufacturers, the motor trade and the public on this subject. Therefore, the Chancellor of the. Exchequer has to do his best, not to, satisfy everybody (which is quite impossible), but to find the least number of enemies to whatever proposal he finally adopts. It was decided in another place. —and I think it will commend itself to your Lordships—.that the method he has adopted is perhaps, in all the circumstances, the one that is going to create foe least difficulty.

Those are, broadly, the main features of the Bill which I am asking you to pass to-day. I would like to say this in conclusion. The main objects of the reduction in taxation are to encourage the enterprise of the people of this country and to give them heart to face the future. The effect of the changes in direct taxation is to release money for industry—the alteration in the Excess Profits Tax is an example of that—and to give hope and encouragement to a large number of people who have been weighed down by Income Tax. The reduction in the main rate of tax will do that: for a large body of people; as many as 2,000,000 people at the lower end of the scale will escape the tax altogether. I am confident that this relief to those small people will do a great deal to give them confidence to face the years to come.

As I said at the beginning, we are not yet out of our difficulties and we have still got considerable sacrifices to make; but I think that as we have gone through the six difficult years of war—what I have called, by analogy, our operation—we shall face the period of convalescence with equal confidence, knowing that if our difficulties are still considerable, there is a time coming, which is not so very far distant, when we shall be able to engage in the full activities of life with the full vigour of a great nation.

Moved, That the Bill be now read 2a(Lord Pethick-Lawrence.)

3.38 p.m.

VISCOUNT SIMON

My Lords, it is, I think, the custom in this House in recent years that the debate on the Finance Bill should not he regarded as one of the principal features of our Session. Ever since the Parliament Act of 1911, although your Lordships have the opportunity of passing the Bill, and will doubtless do so, your main privilege is not passing the-Bill, but paying the bill, or such part of it as happens to fall to your lot. I shall therefore not occupy very long, but I would like first sincerely to thank my noble friend opposite for the trouble he has taken in giving us this detailed exposition of the most important features of the finance of the year as reflected in this Bill and in the Budget which preceeded it.

I do not know that I should entirely agree that we have yet reached the point where the invalid was putting his foot on solid ground. I am myself of opinion that you do not reach solid ground in the matter of a Budget and a Finance Act until you have estimates of what you believe you will be required to spend, until you set that sum against the sum expected to be produced by existing taxation, and then determined whether in those circumstances it was necessary to add to or to reduce taxation so as to make the two things balance. I hope that the fact that we have been through a great war does not in the least alter the view, which ought to be maintained in this country, that as soon as possible we should get back to that position. I do not regard the invalid, or, as I would rather say, the wounded taxpayer as yet being in a position to feel that his feet are on solid ground, but I am very glad to know that it is the intention of the Chancellor of the Exchequer to get back to the method of Estimates, instead of lump votes, in 1946–7. The sooner, the better.

I think in its broad features we have to recognize the fact that we are still in a period of war finance; it is still a war period. Looking back, I think that the principles upon which our war finance was based, and which were laid down at the very beginning—my noble friend opposite and I had many opportunities of discussing them in another place—were perfectly sound. They were, in substance, four. There was first the principle that you must steel yourself at once to endure greatly increased direct taxation. I recall that even when the modest figure, as it seems to us to-day, of 7s. 6d. in the pound was proposed, there were some very authoritative critics who thought it might turn out to be too big a jump. I did not think so, and it did not turn out to be so. It was perfectly right to go on steeply to the terrible figure of rips. in the pound. I am very glad that the Chancellor of the Exchequer has found it possible to make some reduction at this stage. Nine shillings is better than ten, from the point of view of the man who has to pay it.

The second great principle—it is not involved in the Finance Bill, but it is a great principle—was that in time of war it ought to be possible to borrow money very cheaply indeed. That was in some quarters regarded at the beginning of the war as surprising, and it certainly was not our experience in the war of a quarter of a century ago, when we were borrowing at six and seven per cent. and not making a very good thing out of it either. Putting those two principles together, we have had this very satisfactory and, to many people, very surprising result, that we have actually been able, in spite of the enormously increased size of our burden, to raise more money annually by taxation than we have had to raise by borrowing. That is a very outstanding fact. It has gone on all through the war, and goes a long way to explain how it is that, while our difficulties are very great, they are nothing like what they might have been had we acted less prudently.

Thirdly, there is the proposition, which I regard as quite essential, which was also laid down at the beginning of the war— namely, that it is necessary in such circumstances to provide what are quite frankly subsidies for the purpose of keeping down the price of absolutely necessary commodities such as milk and bread. Although the figure has become a very big one, I am not disposed to quarrel with it as long as it is reached on perfectly sound principles. There is no justification, in my humble judgment, for making these enormous subsidies in order to keep at a low level the price of commodities if at the same time there is a great rise in costs of production. It is not a good reason for increasing wage rates if at the same time subsidies are being paid in order to keep the cost of prime commodities down. I think that those two things have to be regarded in relation to each other.

The last of the principles which applied right through the war is that we must throughout pursue a most determined crusade for national savings, not merely for the purpose of gathering very necessary money for the State to use, but also for the purpose of restraining in every possible way, as the noble Lord opposite has just indicated, the unwise spending of the income which must, in war-time, come in great abundance into very many homes. Those principles have been observed throughout, and I still regard ourselves as being for this purpose in the war period.

I wish very much that it had been possible for the noble Lord to tell us that there had been in fact a greater reduction in expenditure since the fighting stopped. It seems to me to be a very serious fact that that has not happened. Quicker demobilization would, as far as it goes, undoubtedly save an enormous outlay which is now represented by what is being paid to those who are waiting to come home, and not all of whom, I fancy, can be regarded as very usefully employed. In the same way, I confess to my own surprise—I have no private information —that it is not possible more quickly to cut down what really are war orders, and that it is felt necessary to go on spending money in ways which were perfectly justified when there was a war in front of us, but which seem to me not to he justified at all as soon as the expenditure is not directed to that purpose.

Those are some of the larger reflections which occur to me. I do not wish to go through this Finance Bill, but I note the two or three main provisions in it which affect people of different kinds. To my way of thinking, apart from everything else, there is a perfectly good financial object in reducing the Excess Profits Duty, as is done in Clause 29, to 60 per cent. I should not be justified, save in Secret Session, in saying what I myself had thought about making it too per cent.; but at any rate it seems to me plainly right on every ground that it should he:educed to 60 per cent., and I am very glad indeed to see that in this measure.

I ventured to ask my noble friend, as he was explaining the Budget, which clause is is which states how these various reliefs are increased, and he quite rightly referred me to Clause 17. I commend the study of Clause 17 to those who think that it is easy to put Income Tax law in a few simple and intelligible phrases. I defy any ordinary person to read Clause 17—I shall not occupy time in doing so—and to derive any sort of notion of what it is about. I do not blame the draftsmen, because I have had my hand in some of these things before. But those who think that half-a-dozen sensible, clear-headed business men could re-write the Income Tax Acts in the form of a series of simple and intelligible propositions are quite wrong. It is an enormous task, and it gets more complicated as time goes on.

That this Finance Bill contains much that may be of benefit to the public I do not dispute; but the fact remains that it consists of sixty-two clauses, with the elegant addition of ten schedules; and, though I dare say that confers in many directions much-needed relief, he would be a rash man who would say that it will not provide further problems of interpretation and construction. While I share to the full the feeling of everybody that we ought to make our laws intelligible to the I would warn any thrifty taxpayer against the idea that he will understand exactly where he stands in this matter if he spends 1s. 3d. on the Finance Bill which is now before us!

3.48 p.m.

LORD TEMPLEMORE

My Lords, I am afraid that your Lordships may think me somewhat presumptuous in joining in the discussion on the Finance Bill in this House, and I need not say that I do not pose in any way as a financial expert; but the truth is that for a good many years, while the late Mr. Neville Chamberlain and the noble and learned Viscount who has, just sat down were Chancellors of the Exchequer, I had charge of the Treasury in this House, and I introduced the Finance Bill for four or five years running. I remember that on those occasions the late Lord Arnold. who I wish was still with us, used to join in, and for two or three years running we had the trio Templemore-Arnold-Strabolgi; I think that it never varied.

I speak to-day as a mere member of the general public, as somebody who is a taxpayer and a ratepayer, and I wish to try to put forward the views of the people with whom I normally mix in my daily life. The Chancellor's Budget, with which he was very pleased, and with which the noble Lord seemed very pleased to-day, had a great Press and a great reception, and I suppose we cannot complain. But I am not very enthusiastic about it, because, with the exception of the reductions in Excess Profits Tax and Purchase Tax, which are very right and proper, nobody is going to get very much out of it until next April, and, although the Chancellor of the Exchequer made a vague promise of more possible reductions in taxation next spring, and the noble Lord who introduced the Bill also gave us a hint of that kind, that must surely depend on how things go between now and then, and whether trade is going to revive. I hope that it is, but I am not sure; and, to judge from the gloomy and depressing speeches of the President of the Board of Trade, I do not think that a great improvement is likely to happen, although we hope it will.

Moreover, as has been said by my noble and learned friend who spoke last, on account of the way in which the Budget is presented, which is inevitable, we do not know in the least what expenditure we are in for. I very much hope that that will be altered, and I think that it is going to be altered in the next Budget, which is to be brought forward in the spring. But we do not know. All we do know is that we are, at present, still spending at the rate of about £13,000,000 a day, which is about £5,000,000,000 a year. To that I will refer a little later on. But to take the Finance Bill as it stands, consider the reduction in the Purchase Tax. It has, as is right and proper, been taken off a variety of articles to be found in the First Schedule. They are all things to do with housing, such as stoves, grates, ranges, fireplaces, and so on. As I say, that is right and proper, and I am very glad to see that the tax is to be taken off those things. But I wish the Chancellor could have seen his way—and I almost think that he might have done—to take the tax off other items of household goods which are very badly wanted, just as badly, in fact, as many of the things mentioned in the Schedule. I refer to frying pans, kettles, brooms, knives, forks and spoons and things of that kind which are beginning to appear in larger numbers in the shops. I think that the tax might have been taken off them. If it were possible in this House I should like to move an Amendment in the Committee stage to omit the tax on some of those things. But the noble Lord need not be nervous; I know the customs and forms regarding the Finance Bill in your Lordships' House, and I can assure him that I shall not delay its passage into law any longer than I can help.

Now I wish to say a word about income Tax and Surtax. I am going to do what I know is a very dangerous and unpopular thing—that is, to say a word in defence of the Surtax payer. As your Lordships know, and as the noble Lord has explained, the Chancellor of the Exchequer recouped himself for his loss over the shilling reduction in the Income Tax by adding to the rate of Surtax, and it is done in the way that your Lordships know. On slices of income over £2,500 threepence out of the shilling is taken; over £5,000 sixpence is taken; over £6,000 ninepence; and out of the income over £12,000 the whole shilling is taken back. I could understand this being done if the Chancellor of the Exchequer had been working to a balanced Budget, because we have often seen it in the past. He takes off taxation here and puts it back there. But that is not so in this case, because we are given in the Budget no estimate of expenditure, and we do not know what amount the Chancellor of the Exchequer is budgeting for. As regards Income Tax and Surtax we have been told that in the Income Tax remissions he is giving away £322,000,000 and the amount that he is going to get back by the increased rates of Surtax is only £7,000,000. So that does not really make an argument of it at all.

No, to my mind this increase of Surtax is clone for a very different reason—a political reason, and not a financial reason at all. It is done to enforce, so far as possible, and so far as they can, that plan of making everybody and everything equal, which is so dear to the Socialist mind. It is done as part of the system of levelling everyone down to a dead level—which I believe is fatal to hard work and initiative. That this is so is evident from the various remarks on Surtax payers which fell from the lips of the Chancellor of the Exchequer during the debate on the Budget and the Finance Bill. It is almost as if he said—varying the remark of the countryman when he put his foot on a toad—"I'll larn you to be a Surtax payer." One of the remarks he made—I am not allowed to read his observations so I paraphrase them—was to the effect that a great number of Surtax payers did no work at all; they lived on inherited incomes derived from investments. And he made other remarks of a like nature. Well, assuming that they do so live there is no crime yet in being a Surtax payer and living on an inherited income. It may be that it will become so later on if this Government have their way, but at present there is nothing wrong in it.

There are, I believe, some 125,000 Surtax payers in this country and your Lordships will realize—though I think the Chancellor of the Exchequer must have forgotten it—that there are quite a number of respectable people among them. For instance, there are the right reverend Prelates who sit, or who sometimes sit, on the Benches opposite, Ministers of Cabinet rank in His Majesty's Government and the Chief Whip in another place. All these are Surtax payers and they work very hard indeed. But, apart from these, there are many thousands of others, who do a vast amount of work in politics, local government, industry, the professions, commerce, and so on. In my opinion the proportion of the 125,000 who do nothing at all for the common good is very small indeed. I say this: that the remarks of the Chancellor of the Exchequer about the general run of Surtax payers are very unfair and calculated to cause prejudice. To my mind they are fitting for the hustings, the political platform, but not for the House of Commons.

This system of penalizing this very small class—125,000 out of 45,000,000 inhabitants, among them 30,000,000 voters—will to my mind discourage enterprise, hard work and initiative. What is more, it will instil into the minds of the rising generation—and I am not at all sure that this is not what the Government mean to do—that it is wrong and immoral to do better than your neighbours or to rise out of the general rut of mediocrity. That is not the way in which this country became great, nor is it the way in which it will be able to carry on in the difficult years that are to come.

Next I would like to say a word about economy. To my mind the fact that we are still spending £13,000,000 a day is most disturbing. I do not know whether your Lordships realize that it means that we are spending the total amount which was budgeted for in Mr. Gladstone's great Budgets of the sixties of the last century, in five days, and the total amount budgeted far in Mr. Lloyd George's first Budget of 1909 in about a fortnight. I think a good deal of explanation is required of the fact that by next April we shall have knocked off only about £200,000,000 from the 5,000,000,000 provided last April, although by next April the war with Germany have been over eleven months, and the war with Japan eight months. Where is the money going? I know that Lord Pethick-Lawrence did give a certain explanation at that Table when introducing the Bill. But he did not really bring very much comfort to my mind.

There are various things I should like to know. Are the Government reducing as quickly as possible the redundant numbers of the Armed Forces, especially the very large Staffs of the Armies in the field and at home? I am rather relieved at the absence from this House to-day—although I would welcome their presence otherwise—of the noble and gallant Earl, Lord Cavan, and the noble and gallant Viscount, Lord Trenchard, because I might get into trouble with them afterwards for saying what I am about to say. In my opinion the Service Departments are every bit as bad as other Departments when it comes to reducing Staffs, can say that from personal experience, because I served in a very junior capacity in the War Office in the year 1920, just after the last war, and I remember very well the cry of horror which went up in the branch where I was when, about 1920, an order, or at least a mere suggestion, came round that the very swollen redundant staff might be reduced. There was a terrible to-do. The end of it was that they began at the wrong end, and they got rid of the Staff-Captain. I was all right. There were two of us, and the other fellow went. I saw some months ago that Field-Marshal Montgomery said that he had already reduced his Headquarters Staff in Germany by 16 per cent: and he hoped by Christmas to reduce it by 40 per cent. I am very glad to hear it. I hope it is, but I should like the Chancellor of the Exchequer and the Treasury to step in and say, "Reduce it by 50 per cent. or 60 per cent." That is the way these things should be done. I hope His Majesty's Government are watching these subjects very carefully.

All over the country there are what I call little pockets of men still under arms. I see many of them in the district I come from. What are they doing? So far as I can see, not very much. I hope they will be demobilized as soon as possible, because it means that all these little pockets, or a great many of them, entail the retention of houses which are badly wanted back by their owners to live in, and they are costing the country a great deal of money. I have in mind one or two particular houses in the area in Hampshire where I hail from, and I have given the noble Lord, the Under-Secretary of State for War, particulars of these. I spoke to him about them the other day, and he was going to be here to give me a reply, but he has gone away on official business to the Admiralty. Through the noble Lord, Lord Pethick-Lawrence, I should like to thank him for some information he has sent me privately about this. I bring up this question of the houses not to stress the hardship which it causes to the owners, which it undoubtedly does, but merely to show that these houses are, after all, in a very small part of England. I know four, five, six, perhaps seven of them. But that is happening all over the place, and it must entail an immense sum, probably running into millions, for rent, rates, and so forth, and then for compensation at the end, which of course must increase every day they are occupied.

Also, what about the other Government Departments? What is happening there? I think that about the only economy that is being made in that direction—and I believe it was invented, or thought of, by the Coalition Government, or the Conservative Government before this one—is that the Ministry of Supply is doubled up with the Board of Trade. I heard with great delight on the wireless two rights ago that the Ministry of Information was going to be done away with, and I threw my hat in the air. But a minute or two later I was not quite so certain, because I heard they were going to keep on something in its place. If it is going to be kept on, I hope it is not going to be just a duplicate of the present Ministry, and that it is really going to be cut down. The present Ministry has employed 5,000 people, and it is costing £5,000,000 a year. Let us get rid of it or cut it down.

I should feel easier in this matter if I saw any keenness on the part of the Chancellor of the Exchequer to effect any reduction. I could find very little indeed about that in his speech on the Budget, except a vague general statement about lopping all expenditure found to be unnecessary. Of course, he could hardly have said less. He objected to the idea of another committee like the Geddes Committee. I think he said he did not want "a crowd of that kind dancing around." I do not know what particular antics the Geddes Committee indulged in, but I am perfectly certain that they made certain limpets dance out of their appointments who would have otherwise got out in very slow time indeed. Then we had Mr. Glenvil Hall, the Financial Secretary to the Treasury, who, in the course of his reply on the Budget, said that although there was Treasury control, it was control with a difference, and any schemes for the betterment of the country or of its people which came to the Treasury and had anything in them, would get the support of the Treasury. I should like to see the words added, "Provided that we think the country can afford it." But there was nothing of that kind. That is what makes me so uneasy.

The Government and the country have got a good lot on their plate. What shall we think of them in the future? I have put down some items such as Defence Forces, pensions, subsidies for the cost of living, health, education, Colonial development, and so on. They are very desirable things in their way, and very necessary, I am sure, for a prosperous country. I look forward to very large Budgets indeed for the whole of the rest of my life, and we must not forget that in addition to the money in the Budget, there are the local rates. In the local authority of which I am a member, we have got to put our rates up very considerably on the next Budget day, when it comes in May, and I am sure that the rates of a good many local authorities will go up, which will very nearly cancel out the relief given by the Chancellor of the Exchequer.

This Government will be judged when they next appeal to the country on the success of their efforts to restore prosperity to this land. If they have failed to do so, they will meet with the fate they deserve, and that would not greatly trouble me. But Conservative though I am, I can assure His Majesty's Government that I do not want them to fail from any Party point of view. I want this country to be prosperous again, with taxes lowered and liberties restored—a really happy England. That is what I want to see. I do not think His Majesty's Government are going the right way to get that. But there it is. That is the way they have chosen. They will not be able to get any of these things unless they lop off this unnecessary expenditure. I entreat the Government to treat this matter of economies, large and small, seriously. If they do not do so now, the time will come when they will be forced to and then they will have to face an indignant country, loaded with debt, atrophied by control, and lulled into indifference and false security by the sight of this continued lavish expenditure.

On Question, Bill read 2a: Committee negatived.

Then, Standing Order No. XXXIX having been suspended (in pursuance of the Resolution of December 11), Bill read 3a, and passed.

Forward to