Sitting of 26 April 1938

Preamble
The Rouse met—after the Adjournment on 14th April for the Easter Recess—at a Quarter before Three of the Clock,Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.
Brixham Gas and Electricity Bill,
Romford Gas Bill,
Read the Third time, and passed.
Clacton Urban District Council Bill,
Irwell Valley Water Board Bill,
Swinton and Pendlebury Corporation Bill,
As amended, considered; to be read the Third time.
London County Council (General Powers) Bill [Lords],
Read a Second time, and committed.
Bradford Extension Bill (by Order) (King's Consent signified),
London Midland and Scottish Railway Bill (by Order) (King's Consent signified),
Read the Third time, and passed.

ORAL ANSWERS TO QUESTIONS.
  TRADE AND COMMERCE.

    BALANCE OF PAYMENTS.
    Sir George Mitchesonasked the President of the Board of Trade what
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    steps it is intended to take to deal with the growing adverse balance of payments?
    Mr. R. S. Hudson (Secretary, Department of Overseas Trade): I would refer my hon. Friend to the answer which was given on 8th February to the hon. and gallant Member for the Isle of Wight (Captain P. Macdonald).

    WAR MATERIAL (EXPORT LICENCES).
    Mr. Gallacherasked the President of the Board of Trade what was the value of aeroplanes and aeroplane parts for which export licences were given during the years 1936 and 1937 to Germany, Italy, and Japan, respectively; and what was the value of small arms and munitions for which export licences were given in 1936 and 1937 to the same countries?
    Mr. R. S. Hudson: I would refer the hon. Member to the answers given on 15th and 22nd February in reply to the hon. and gallant Member for Nuneaton (Lieut.-Commander Fletcher).

    MOTOR CARS (IMPORTS).
    Mr. Ellis Smithasked the President of the Board of Trade how many Opel motor cars were imported into this country during the years 1935 and 1937, respectively, and during the first three months in the years 1936, 1937, and 1938, respectively?
    The Parliamentary Secretary to the Board of Trade (Captain Euan Wallace): This information is not available from the trade returns of the United Kingdom, which do not distinguish the individual make of motor cars imported.
    Mr. Smith: In view of this increase in the importation of these cars, will the right hon. and gallant Gentleman take steps to get this information?
    Captain Wallace: That, I am afraid, is a very much wider question.
    Mr. Smithasked the President of the Board of Trade the total number of motor cars imported into Britain during the years 1934, 1935, and 1937, respectively?
    Captain Wallace: During the years 1934, 1935 and 1937, the total numbers of new private motor cars imported into the United Kingdom were 10,177, 12,331 and 18,005, respectively, while the numbers of new commercial vehicles were 65, 64 and 615, respectively.
    Mr. Smith: In view of the fact that many of these cars are being made under slave conditions, and that a particular country is adopting the policy of subsidising its export trade, will the right hon. and gallant Gentleman take steps to deal with this menace to British trade?

    Table showing the number and declared value of the imports into the United Kingdom of motor cars (private and commercial) consigned from Germany during each of the years 1934, 1935 and 1937.

    Description.

    Quantity.

    Declared Value.

    1934.

    1935.

    1937.

    1934.

    1935.

    1937.

    Number.

    Number.

    Number.

    £

    £

    £

    Motor cars, etc.—Private cars (including cabs),new

    28

    264

    5,174

    6,513

    79,855

    408,168

    Commercial vehicles(including motor omnibuses, motor fire engines and motor ambulances, but not including tractors), new.

    18

    5

    131

    5,677

    1,609

    8,308

    NOTE.—The 1937 figures are provisional.

    GREAT BRITAIN AND UNITED STATES (TRADE AGREEMENT NEGOTIATIONS).
    Mr. Roland Robinsonasked the President of the Board of Trade what progress has been made in the negotiation of a trade treaty with the United States of America?
    Mr. R. S. Hudson: I would refer my hon. Friend to the answer given to a similar question by the hon. Member for Burnley (Mr. Burke) on 5th April, to which I am unable at present to add anything.
    Captain Wallace: I have no information that the German Government is subsidising any particular trade. If the hon. Member has any information to prove this we should be glad to have it.
    Mr. H. G. Williams: Is it really the case that, through the system of exchange control, Germany is subsidising most of her competitive exports?
    Mr. Higgs: Is the hon. and gallant Gentleman aware that three years ago the German Government took off the whole of the direct taxation on motor cars, and much stimulated the production?
    Mr. E. Smithasked the President of the Board of Trade the number and value of motor cars imported from Germany into Britain during the years 1934, 1935, and 1937, respectively?
    Captain Wallace: As the answer involves a number of figures I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.
    Following is the answer:

    FILM INDUSTRY (DOMINIONS).
    Mr. Dayasked the Secretary of State for Dominion Affairs particulars of any communications that have passed between his office and the Dominions, in order to see whether they are prepared to introduce legislation corresponding to and including the quota and other important clauses contained in the Cinematograph Films Act, 1938?
    The Secretary of State for Dominion Affairs (Mr. Malcolm MacDonald): Copies of the Bill were communicated to the

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    Dominions, and they were kept informed of developments during its passage through Parliament. They have now received copies of the Act as passed. I understand that the Premier of New South Wales has stated that he is considering the question of introducing some amendment to the relevant law of that State, but I have no information as to the intentions of Governments in the Dominions elsewhere.
    Mr. Day: Will the Minister use his endeavours with the other Dominions to see that they bring in legislation in line with ours?
    Mr. MacDonald: If there is any way in which we can help, we shall not lose an opportunity.

    EXPORT CREDITS.
    Mr. Gallacherasked the Secretary to the Overseas Trade Department the total value of export credits guaranteed by the Export Credits Department to Germany, Italy, and Japan, respectively, during 1936 and 1937?
    Mr. R. S. Hudson: Guarantees were given during 1936 and 1937 in respect of the export of United Kingdom goods to every country in the world, including those mentioned in the question. It is not the practice, however, to state the amount of the Department's guarantees in respect of exports to any particular country.
    Mr. Gallacher: Can the Minister say whether it is any considerable proportion?
    Mr. Hudson: No, Sir.

    COMPANIES ACT.
    Mr. Bellengerasked the President of the Board of Trade whether the Bill to amend the Companies Act will be introduced this Session?
    Captain Wallace: I regret that I am not yet in a position to say when it will be possible to introduce the Bill to which I referred in the answer given to the hon. Member on 12th April.
    Mr. Bellenger: Does that mean that it will not be introduced this Session?
    Captain Wallace: No, not necessarily.

    TERRITORIAL ARMY (UNIFORM).
    Mr. De la Bèreasked the Secretary of State for War what steps the War
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    Office are taking to ensure that Territorial soldiers who have been enlisted for a period of over six months and who are going into annual summer training shall have supplied to them the necessary uniform?
    The Secretary of State for War (Mr. Hore-Belisha): Grants are made by the War Office to Territorial associations for this purpose, and I am not aware of any failure to use them as intended.
    Mr. De la Bère: Is the right hon. Gentleman aware that a number of units are still without uniforms; is he also aware that the nation has made up its mind that these men must be properly clothed; and will he do something about it?
    Mr. Hore-Belisha: If the hon. Member will supply me with the name of any unit that is not fully clothed, I will see that the deficiency is immediately remedied.

    BRITISH ARMY (COURTS- MARTIAL).
    Sir Arnold Wilsonasked the Secretary of State for War whether he is aware that the meetings of the Departmental Committee on Courts-Martial procedure are to be held in private and that possible witnesses are assured that none of the evidence given will be published; whether this decision was reached with his approval; and whether he will give further consideration thereto having regard to the public interest in this matter and the large number of individuals affected?
    Mr. Hore-Belisha: The committee has adopted, with my approval, the procedure best calculated to give confidence to witnesses and to obtain the material required for its report, and is following the course pursued by the Darling Committee in 1919.
    Sir A. Wilson: Will the right hon. Gentleman consider the advisability of suggesting to the chairman of the committee that non-service witnesses should be examined in public, so that their evidence may be made public in order to stimulate public interest?
    Mr. Hore-Belisha: I think that would be a course for the chairman himself to suggest, and, if he did so, it would be received with sympathy.

  SCOTLAND.

    EMPIRE EXHIBITION (JOINERS AND BRICKLAYERS).
    Mr. Robert Gibsonasked the Secretary of State for Scotland what was the average number of joiners and bricklayers, respectively, employed in the Empire Exhibition, Glasgow, during the week ending 23rd April; and how many of these are expected still to be employed there after the Exhibition is opened on 3rd May?
    The Secretary of State for Scotland (Mr. Elliot): I am informed by the Exhibition authorities that 1,375 joiners, with 27 apprentices, and 42 bricklayers, with eight apprentices, were employed in the Exhibition during the week ended 23rd April. The authorities do not anticipate that it will be necessary to retain any of these men after the opening of the Exhibition on 3rd May, other than a few who may possibly be required for maintenance work.
    Mr. Gibson: May I take it, then, that there will not be workmen available for the building of houses in Scotland?
    Mr. Elliot: They will all be available.
    Mr. Gibson: But there will be no surplus after the Exhibition has opened?
    Mr. Elliot: Yes, the whole of the men now employed will be surplus.

    DOCKYARD SITE, GREENOCK.
    Mr. R. Gibsonasked the Secretary of State for Scotland how many firms and what types of firms desirous of erecting new factories have had their attention directed by the Commissioner for the Special Areas in Scotland to the old Caird Shipyard in Greenock; and whether he has any suggestion to make regarding the utilisation of that site?
    Mr. Elliot: I am informed by the Commissioner that he has brought the old Caird Shipyard to the notice of three firms in search of a site requiring dockyard accommodation and that the attention of various Government Departments has also been drawn to the site. The Commissioner will continue, as opportunity arises, to bring it to the notice of firms for whom it is thought likely to be suitable.
    Mr. Gibson: Can the right hon. Gentleman say what are the prospects of this site being used in the near future?
    Mr. Elliot: I am afraid not.

    NEW FACTORIES (EXPENDITURE).
    Mr. R. Gibsonasked the Secretary of State for Scotland what expenditure has been incurred by the Government in providing and equipping industrial factories at Hillington and at other and what places in Scotland, respectively, up to 31st March, 1938, or other convenient date?
    Mr. Elliot: The provision and equipment of factories at Hillington is being undertaken by Scottish Industrial Estates, Limited, a company limited by guarantee and having no share capital, financed by loans from the Commissioner for the Special Areas in Scotland. The sums advanced to the company by the Commissioner at 31st March, 1938, amounted to £247,213 5s. A factory is also under construction at Barrhead which will be let on completion to an industrial undertaking. The amount spent as at 31st March, 1938, was £1,792 11s. No expenditure has been incurred by the Commissioner up to date on any other factory.
    Mr. Gibson: Instead of expending money on these new sites, would it not be better to make use of sites like that of the old Caird shipyard and so save this expenditure?
    Mr. Elliot: Enormous sums of Government money are already being spent in Greenock, and the hon. and learned Member must not be greedy.
    Mr. Gibson: Is the right hon. Gentleman aware that the hon. Member is not asking for further expenditure, but is very anxious to save public funds to the tune of over £250,000?

    DISTRICT COUNCILS (MEMBERS' EXPENSES).
    Mr. R. Gibson (forMr. Mathers)asked the Secretary of State for Scotland whether he is now in a position to make a statement regarding the payment of expenses allowances to members of district councils in Scotland?
    Mr. Elliot: No, Sir. The questions raised in the memorial which was recently submitted are under consideration, but I cannot give any undertaking as to legislation.

    PUBLIC ASSISTANCE.
    Mr. Gibson (forMr. Mathers)asked the Secretary of State for Scotland whether he is aware that a detailed statement of persons in receipt of poor relief in England and Wales, which includes an elaborate national analysis of poor relief and classified totals, etc., for each public assistance authority, is published quarterly; whether he is aware that there is no such publication, covering similar ground, for Scotland: whether he will state why Scotland is behind England and Wales in this matter; and whether he will give an undertaking that a similar quarterly statement for Scotland will be published?
    Mr. Elliot: I am aware that no quarterly statement relating to poor relief is published in Scotland. Each month, however, the Department of Health issue to the Press a statement of the numbers of poor persons chargeable in Scotland, and detailed figures relating to Scottish poor relief are published in the Department's Annual Report. I am unwilling to add without good cause to the statistical returns supplied by local authorities, but if the hon. Member, after considering the figures already published, will let me know in what respect he considers them as capable of improvement, I shall be glad to look into the matter further.
    Mr. Gibson: Is there any reason why there should be dissimilarity between England and Scotland in this matter?
    Mr. Elliot: I understood from recently published accounts that the hon. Member objected to exact similarity between England and Scotland.
    Mr. Gibson: Is not the right hon. Gentleman aware that these figures have gone up very materially since the last Labour Government went out of office?

    LOCAL TAXATION RETURNS.
    Mr. Gibson (forMr. Mathers)asked the Secretary of State for Scotland whether he is aware that the 1934–35 Local Government Financial Statistics for England and Wales were published during 1937, but that the much less elaborate Local Taxation Returns for Scotland published in 1937 related to 1933–34; whether he will state why Scotland is so far behind England and Wales in this matter; and whether he will give
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    an undertaking to expendite publication in future?
    Mr. Elliot: The delay in the publication of the 1934–35 returns has been caused by the difficulty of obtaining certified accounts for that year from certain local authorities. It is hoped to obtain the necessary accounts from these authorities at an early date, and this will enable the returns to be completed and published without further delay.

    ANTHRACITE COAL (EXPORT).
    Mr. James Griffithsasked the Secretary for Mines whether he is aware that the shipment of anthracite coal from this country to France declined from 693,030 tons in the six months ended in February, 1937, to 499,496 tons in the six months ended in February, 1938; that this decline is attributed to the changes in the exchange value of the franc; and that the exports of German coal to France are increasing on account of the fact that the currency fluctuations are offset by the subsidy available for German exports; and whether he proposes to take any steps to recover this market for this country?
    The Secretary for Mines (Captain Crookshank): I am aware of the decline in anthracite exports to France, which, as I explained to the hon. Member in reply to a question on 15th March, results from the currency situation. With regard to the increase of 68,000 tons in German exports to France in the six months ended February, 1938, as compared with the six months ended February, 1937, I would remind the hon. Member that, over the same periods, United Kingdom exports to France of coal other than anthracite have similarly increased by 61,000 tons. With reference to the last part of the question, I am at present in consultation with the Central Council of Colliery Owners and the British Coal Exporters' Federation regarding the position of United Kingdom coal exports under the French quota system.
    Mr. Griffiths: Is the hon. and gallant Gentleman not satisfied that the Germans are able to offset disadvantages of that kind by subsidising their coal?
    Captain Crookshank: That does not arise out of the question.
    Mr. Griffiths: But that is the question which I asked. Do not the Germans sidise their exports, and in that way have they not an advantage over exports from this country?
    Captain Crookshank: I think the general position is well known to the hon. Member and to the House.
    Mr. Griffiths: May I have a plain answer to a plain question? Is the hon. and gallant Gentleman now satisfied that the Germans do subsidise their exports?
    Captain Crookshank: It all depends on what is meant by subsidising, but there is no question about it that a certain form of assistance is given.
    Mr. J. Griffithsasked the Secretary for Mines whether he is taking any steps to secure an increase in the export of Welsh anthracite coal to Canada during this year?
    Captain Crookshank: I would remind the hon. Member that the sale of coal in overseas markets is not a function of the Government but of the coal trade. The function of the Government is, so far as possible, to secure that the United Kingdom coal trade enjoys fair treatment in such markets. This it is carrying out to the best of its ability.
    Mr. Griffiths: While I appreciate that it is no function of the Government to sell coal, am I to understand that it is no function of the Government to protect Dominion markets against German competition which means loss of work for British workpeople
    Captain Crookshank: I do not think I can go further than the statement which I have made, but, of course, the hon. Gentleman recognises the position of the Dominions in this matter.

    TIN MINES (CORNWALL).
    Mr. Kellyasked the Secretary for Mines the number of tin mines in operative working in December, 1936, and March, 1938?
    Captain Crookshank: At the end of December, 1936, seven mines were producing tin ore and development work was being carried on at three other mines. Comparable figures at the end of March, 1938, were nine and three respectively.
    Mr. Kelly: Has the hon. and gallant Gentleman any information as to the development of new mines in North Cornwall?
    Captain Crookshank: Not without notice.

    NEWFOUNDLAND.
    Mr. Lunnasked the Secretary of State for Dominion Affairs whether he has any information to give the House as to the position of affairs in Newfoundland?
    Mr. M. MacDonald: I have received the annual report of the Commission of Government for 1937 and will present it to Parliament as a Command Paper shortly. Generally speaking, substantial progress has been made in Newfoundland during the last year, and figures both of revenue and of employment conditions have shown a marked improvement. In the last few week, however, economic prospects for the immediate future have taken a less favourable turn, owing partly to trade difficulties in certain foreign countries which are normally among the largest importers of Newfoundland fish, and partly to the recent decline in industrial activity in the United States, as a result of which the paper mills in Newfoundland are now working on part time. So far, however, the revenue of the island has not been adversely affected, and employment as a whole still shows an improvement on recent years. A further stimulus will, it is hoped, be afforded by the Commission's reconstruction programme.
    Mr. Lunn: Can the right hon. Gentleman say that the foundation of permanent economic recovery has been laid in any industry in Newfoundland up till now by the Commission?
    Mr. MacDonald: I think I can certainly answer that question in the affirmative.
    Mr. Lunn: When may we have the report?
    Mr. MacDonald: I hope it will be in the hands of Members next week.

    UNITED KINGDOM AND EIRE (AGREEMENTS).
    Mr. Lunnasked the Secretary of State for Dominion Affairs whether he

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    has any statement to make as to the relations between this country and the Irish Free State; whether any decisions have been reached on outstanding questions; and whether it is proposed to make arrangements for further meetings?
    Sir Patrick Hannonasked the Secretary of State for Dominion Affairs whether he is now in a position to make a statement on the progress of the conversations with the representatives of Eire towards the completion of a trade agreement between Great Britain and the Government of that Dominion?
    Mr. M. MacDonald: I would ask the hon. Members to await the statement which my right hon. Friend the Prime Minister proposes to make at the end of questions to-day.
    Mr. Lunn: While thanking the right hon. Gentleman for the statement, before it is made, about this agreement, which is going to settle almost all the questions between this country and Ireland, may I ask whether the £1,000,000 means the settlement of all the land annuities, past and future, and whether or not the coal agreement will include free imports of coal into Ireland from the United Kingdom?
    Mr. Speaker: The hon. Member had better await the statement at the end of questions.
    Mr. Attlee (by Private Notice)asked the Prime Minister whether legislation will be required to implement the Agreements reached between the United Kingdom and Eire?
    The Prime Minister(Mr.Chamberlain): Yes, Sir. As the House is aware, as a result of discussions during the past weeks between the two countries, Agreements were signed yesterday by representatives of the two Governments. The texts of the Agreements, which have been presented to Parliament as Command Paper 5728, are already in the hands of hon. Members. The Agreements are subject to Parliamentary confirmation, both in this country and in Eire. Three Agreements have been signed, but it will be possible to deal with these in one comprehensive Bill, and notice of the presentation of this Bill to confirm and give effect to the Agreements will be given immediately. I feel sure that the House will welcome the accord which has been
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    reached. His Majesty's Government in the United Kingdom believe that it will lead to closer friendship and co-operation between the peoples and Governments of the two countries.
    Sir Ronald Ross: May I express the hope, in view of the extremely technical and somewhat complicated provisions of the Agreement, that the Bill will not be introduced until it has been possible to consider closely the very complicated and important matters contained in it?
    The Prime Minister: I can give no assurance to-day as to when the Bill will be discussed.
    Mr. Thorne: Is there any possibility of a similar satisfactory arrangement being come to with all the European countries?

    AUSTRALIA (RAILWAYS).
    Captain Alan Grahamasked the Secretary of State for Dominion Affairs whether he will cause suitable inquiries to be made whether, in view of its prime strategic importance both to local and to Imperial defence generally, the Federal Government of Australia are actively considering the immediate linking up by railway of Port Darwin with the nearest railhead in the interior of the Continent?
    Mr. M. MacDonald: I am causing inquiries to be made of His Majesty's Government in the Commonwealth of Australia, and I will let the hon. and gallant Member know the result.
    Mr. Macquisten: Would it not be far better to construct a great motor road or speedway than a railway?

    WOMEN JUSTICES OF THE PEACE.
    Mr. Manderasked the Attorney-General what steps are being taken to appoint women justices in the 36 county petty sessional divisions and the three borough divisions which are still without any women justices?
    The Solicitor-General (Sir Terence O'Connor): The attention of the advisory committees has been drawn to the desirability of ensuring the presence of women justices in all divisions, and before additional appointments are approved the question of the availability of suitable women for such appointment is carefully considered.
    Mr. Mander: Will the hon. and learned Gentleman say what is the reason for this long delay in making these appointments? Is it that there are no suitable women living in these areas at all?
    The Solicitor-General: The fact is that it rests in the hands of the advisory committees, and the pressure now indicated is being brought. The hon. Gentleman will be glad to know that since he asked a similar question on 10th February, the numbers have been reduced to 33 in the case of petty sessions and two in the case of boroughs.
    Mr. Mander: Is it not a fact that the Lord Chancellor can, if he likes, act without the advisory committees at all?
    Viscountess Astor: Are there any women on the advisory committees, and will my hon. and learned Friend bear in mind that there are over 30,000 men Justices of the Peace and only slightly over 3,000 women, and that it is certainly absurd?
    The Solicitor-General: In answer to my Noble Friend, it is, of course, the case that there are women on these advisory committees, and when the matter comes to my Noble Friend he invariably takes into account the representation of women on the local benches. With regard to the hon. Gentleman's question, no doubt my Noble Friend has certain powers in reserve, but for a precise definition of them I should like to have notice.
    Mr. De la Bère: Are not these advisory committees very unsatisfactory?

  DEFENCE.

    ENGINEERING INDUSTRY.
    Mr. Manderasked the Minister for the Co-ordination of Defence whether he has any statement to make with reference to his negotiations with the trade unions for increased production of munitions?
    The Minister for the Co-ordination of Defence (Sir Thomas Inskip): I made a full statement on this subject in reply to the hon. Member for Stoke-on-Trent (Mr. E. Smith) on 13th April, and I have at present nothing to add to that statement.
    Mr. Mander: Is it not a fact that the Amalgamated Engineering Union has
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    postponed any decision until the end of May?
    Sir T. Inskip: I have no information to that effect at all.

    SHADOW FACTORIES (EMPLOYÉS).
    Mr. Kellyasked the Minister for the Co-ordination of Defence the number of people employed in the shadow factories for which he is responsible in June, 1937, and March, 1938?
    The Chancellor of the Duchy of Lancaster (Earl Winterton): I have been asked to reply. During the period covered by the hon. Member's question, the number of persons employed in the shadow factories increased approximately fivefold. It would not be in the public interest to give particulars of the actual numbers employed.

    AUSTRIANS (PERMITS).
    Sir G. Mitchesonasked the Secretary of State for the Home Department how many Austrians have been given permits to reside in this country since the German occupation of Austria?
    The Secretary of State for the Home Department (Sir Samuel Hoare): From 13th March to 24th April, 1,671 persons holding Austrian passports were given leave to land for varying periods. A number of these have since left the country, and I cannot say how many of those who arrived since 13th March may wish to settle here.

    AIR-RAID PRECAUTIONS.
    Mr. T. Smithasked the Home Secretary whether he is aware that a committee has been considering for two years the question of the appropriate uniform for auxiliary fire services and have not yet reported; whether it is proposed that a committee should inquire into and decide upon the appropriate arm-band for air-raid wardens; whether he is aware that in at least one city the authority have refused to wait any longer and have designed their own uniform; and whether steps will be taken to end these delays which are holding back the air-raids precautions arrangements of local authorities?
    The Under-Secretary of State for the Home Department (Mr. Geoffrey Lloyd): The items of uniform to be provided were

    17
    specified in the Home Office Memorandum issued in February, 1937. One or two local authorities intimated, shortly afterwards, that uniforms were being provided for their auxiliary firemen. Standard specifications for auxiliary fire service uniforms have been under consideration and are about to be issued for the guidance of all local authorities. The design for a standard arm-band for air-raid wardens is already being considered and will be notified to local authorities as soon as possible.
    Colonel Nathanasked the Home Secretary what directions have been given, or are contemplated, for the information of the general and special hospitals in London, as to the measures they should take for dealing with patients and as to the functions they are desired to fulfil in the event of air raids?
    Mr. Lloyd: Instruction in the methods of dealing with gas casualties is being given to the medical and nursing staffs of London hospitals as part of the Home Office scheme of medical anti-gas instructions. A handbook on the structural protection that can be arranged in hospitals for the additional safety of staff and patients will shortly be issued. As regards the last part of this question this must await the completion of the survey which is being undertaken by my right hon. Friend the Minister of Health.
    Colonel Nathan: Is it seriously suggested that it is necessary that a survey should be completed of the hospital accommodation of the whole country before the London hospitals can be given any guidance or information?
    Mr. Lloyd: No; I was referring to the survey actually taking place in London which, I have informed the House, is shortly to be completed.
    Colonel Nathan: Is the hon. Gentleman aware that I have in my hand a letter from the Air-Raid Precautions Department of the Home Office stating that, pending the completion of the survey of hospital accommodation throughout the country, it is regretted that it is not possible definitely to allocate to individual hospitals the part they may be called upon to play; and that that letter is addressed to a hospital adjacent to this House? Is this in accord with the policy of the Home Office?
    Mr. Lloyd: I do not know the date of that letter—
    Colonel Nathan: 19th April.
    Mr. Lloyd: We must have a little further information, but I do not think it will be necessary for the survey to be completed all over the country before dealing with the London hospitals.
    Sir Francis Fremantle: Has my hon. Friend also given directions to the medical schools so that the doctors coming from those schools will be equipped to do their work?
    Mr. Gardnerasked the Home' Secretary whether, in view of the fact that, in the event of air-bombing attacks on towns, telephone wires above and below ground would be vulnerable to fracture along their whole length, he has considered requiring the provision of means of communication from call points to life defence units and fire brigade stations by the use of short range wireless telegraphy worked from storage batteries?
    Mr. Lloyd: The possibility of using wireless during air raids as a stand-by for normal means of communication is receiving full consideration. For a variety of technical reasons, however, it is doubtful whether its general use for such purposes, including that now suggested, would be practicable.
    Mr. Simmonds: Are actual tests being carried out, or is it only a matter of consideration?
    Mr. Lloyd: No, Sir; the Home Office have been carrying out a number of tests in a considerable number of towns with the police wireless systems.

    ROYAL AIR FORCE (AIRCRAFT SUPPLY, UNITED STATES AND CANADA).
    Mr. De la Bèreasked the Chancellor of the Duchy of Lancaster whether the Government will consider requesting the Canadian Government to build large aeroplane factories in Windsor, Ontario, with a view to ensuring a practical supply of aircraft for this country in the event of emergency; and whether the Government will be prepared to consider lending to the Canadian Government the money for the erection of these factories at a nominal rate of interest?
    Earl Winterton: The question of the possibilities of the supply of aircraft from Canada will be considered in all its aspects in connection with the inquiries which are being undertaken by the party of experts which left for America last week.
    Mr. De la Bère: Is the Noble Lord aware that the setting up of factories in Canada would be a valuable addition to the defensive strength of this country, and that they would not be so vulnerable as factories in this country?
    Earl Winterton: A rather more comprehensive question on the whole subject is being asked by private notice to-day, and I propose to make a full reply.
    Mr. Montague (by Private Notice)asked the Chancellor of the Duchy of Lancaster whether orders for military aeroplanes are to be placed with firms in Canada or the United States of America or whether any steps have been taken with that object in view, and, if so, can he state the numbers it is proposed to obtain from either or both of these countries?
    Earl Winterton: The party of experts who are now visiting the United States of America and Canada are concerned solely with exploratory inquiries. The party will investigate whether types of aircraft, which might be suitable for certain Royal Air Force purposes, are available for early delivery. They will also examine the capacity and potentialities for the production of aircraft in Canada. The investigations to be conducted by this mission are part of the review referred to by the Prime Minister in his speech on L.4th March, and are supplementary to arrangements for production in this country. As soon as the Government decided that circumstances had made it necessary to accelerate and extend the programme for air expansion, a comprehensive review was made of the maximum production that would be possible in this country with additional labour by all the firms capable of producing types of aircraft suitable for use in the Royal Air Force. Acceleration and the further expansion imply two requirements: firstly, an increased output of appropriate types now in production; and, secondly, the introduction at the earliest possible date of the latest improved types which are on order. It is the intention and the determination of the
    20
    Government that all British firms suitable for the production of aircraft to the requirements of the expanded programme, shall be in a position to give the maximum output possible during the next two years. The bulk of the orders for production on a large scale have been placed, and the further orders necessary to secure the maximum accelerated output will be given without delay. I should add that the scale on which factories have been planned and orders have been given make it possible to secure a greatly increased production if additional labour is available.
    Mr. Bellenger: Does this statement indicate a considerable extension of the plans laid before this House in respect of the Air Force, and, if so, do His Majesty's Government propose to lay any further information before the House as to what their programme for the future consists of?
    Earl Winterton: Yes, Sir, I have already made it clear that this is in pursuance of the statement made by the Prime Minister as to the acceleration and expansion of the programme.
    Mr. Montague: Does the reply of the Noble Lord mean that, in the opinion of the Government, the difficulties with regard to labour and skill and materials can be overcome by America, Canada and Germany, but that in this country the difficulties are insuperable?
    Earl Winterton: No, Sir; I do not think my reply indicates anything of the sort.
    Mr. David Grenfell: Has it been necessary for any communication with the United States Government to take place in regard to this matter; and has this been done with the consent of the Government of the United States?
    Earl Winterton: I should prefer a specific question to be put on the subject of communication. I think that this announcement and the previous announcement mentioned in the Press make the position clear.
    Mr. Boothby: When my Noble Friend refers to factories capable of constructing aircraft, does he mean existing aircraft factories, or does it include factories which could be converted?
    Earl Winterton: It includes all factories capable of producing aircraft.
    Captain Harold Balfour: Is Scheme F, on which we have been working hitherto, for 1,750 aircraft by March, 1939, now superseded by the new expanded Scheme G; and when can we know what is the objective, in first-line aircraft and reserves, of the new Scheme G, and how long that scheme is planned to take?
    Earl Winterton: I do not think I could, in answer to a supplementary question, make a statement on that point; obviously there will have to be a Debate.
    Mr. Attlee: In view of the light that the Noble Lord's statement throws on the programme of aircraft construction, I should like to give notice that I shall take an early opportunity of raising, on the appropriate Estimates, the whole question of aircraft production.

    OLLEY AIR SERVICE, LIMITED.
    Mr. H. G. Williamsasked the Under-Secretary of State for Air whether he is now in a position to state the source of his information that Olley Air Service, Limited, is under the control of British subjects in Eire?
    The Under-Secretary of State for Air (Lieut.-Colonel Muirhead): No, Sir, since I have no recollection of having made a statement to the effect suggested by my hon. Friend.

  UNEMPLOYMENT.

    ASSISTANCE.
    Mr. W. Joseph Stewartasked the Minister of Labour whether he will introduce legislation at an early date to amend Section 36 of the Unemployment Assistance Act, 1934, in order to include al/ able-bodied unemployed, whether coming within the conditions laid down by that Section of the Act or not, and the repeal of Section 45 of that Act, with the object of the Government assuming responsibility for the full 100 per cent. maintenance of all able-bodied unemployed?
    The Minister of Labour (Mr. Ernest Brown): No, Sir. I would refer the hon. Member to the replies I gave to the hon. Member for Stratford (Mr. Groves) on 17th June last and the hon. Member for Plaistow (Mr. Thorne) on 25th November last.
    Mr. Stewart: Is the right hon. Gentleman aware that the maintenance of the able-bodied unemployed in the administrative county of Durham cost about £30,000 this year, and will he not amend the Act so as to make the maintenance of these people a national and not a local charge?

    ENGINEERS.
    Mr. Manderasked the Minister of Labour whether, in view of the fact that the Great Western Railway Company is working short time at Wolverhampton and elsewhere and making discharges, he will arrange for the services of the skilled engineers displaced to be made use of in connection with the arms programme?
    Mr. E. Brown: I have no information that any substantial number of skilled engineering workers is being discharged from the workshops of the company. I would, however, point out that any skilled engineer who becomes unemployed can be put in touch at once through any Employment Exchange with aircraft work or other work on the Defence Programme, for which he is suitable.
    Mr. Mander: Will my right hon. Friend bear in mind that there are something like 1,200 first-class workmen involved, and will he, therefore, go into the matter further?
    Mr. Brown: The facilities of my Department will be available to each and all of the unemployed.

    EMPIRE EXHIBITION (TRANSPORT FACILITIES).
    Mr. Lunnasked the Minister of Transport whether he will consult with the railway and other transport companies with a view to providing facilities and cheap fares for schoolchildren from all parts of Great Britain to visit the Empire Exhibition in Glasgow, similar to what was provided for schoolchildren to visit the British Empire Exhibition at Wembley in 1924?
    The Parliamentary Secretary to the Ministry of Transport (Captain Austin Hudson): My right hon. Friend is informed by the railway companies that they are providing facilities and cheap fares for children visiting the Empire Exhibition at Glasgow which will be more

    23
    favourable than those which were available for the Exhibition at Wembley in 1924–25. I have no doubt that the operators of road transport will appreciate the desirability of facilitating the attendance of children at the Exhibition, but my right hon. Friend's position under the Road Traffic Act, 1930, precludes him from consulting with them on the question of facilities or fares.

    ANGLO-GERMAN NAVAL AGREEMENT.
    Mr. Thorneasked the First Lord of the Admiralty whether he is satisfied that the German Government are carrying out the Anglo-German Naval Agreement of 18th June, 1935; if the Government have made known their naval armaments programme for 1938–39 to the German Government; and what additional naval power that will give to the German Navy?
    The First Lord of the Admiralty (Mr. Duff Cooper): The answer to the first and second parts of the question is in the affirmative. As regards the last part of the question, I would remind the hon. Member that the tonnage allowed to the German Navy under the Anglo-German Agreement of 1935 depends on the total tonnage of the aggregate naval forces of the British Commonwealth of Nations, which is not necessarily dependent upon the annual building programme.
    Mr. Thorne: Do I understand from the First Lord that if the Government decide to build more battleships they inform the German Government, and vice versa?
    Mr. Cooper: Yes, that is the case; we keep the German Government informed of our naval programme.
    Mr. Thorne: Do they let us know what they are doing?
    Mr. Cooper: Yes, Sir.
    Mr. A. V. Alexander: Have the German Government notified any intention to build in ratio to the new battleship programme of the British programme?
    Mr. Cooper: The German Government have not yet laid down the battleships which they are entitled to lay down in accordance with the treaty.

    NON-PROVIDED SCHOOLS, LIVERPOOL.
    Mr. Loganasked the Parliamentary Secretary to the Board of Education whether he can now state what progress has been made in regard to the provision under the Education Act, 1936, in connection with non-provided schools in Liverpool?
    The Parliamentary Secretary to the Board of Education (Mr. Kenneth Lindsay): I regret that I am not yet able to add to the answer which I gave to the hon. Member on 14th April.
    Mr. Logan: Is the hon. Gentleman aware that the suggestions from the education authorities in Liverpool mean council schools to meet the situation; and in view of the national compromise which has been arrived at, will he be willing after 1st May, when Liverpool has deliberated, to answer in this House in regard to the preparations that Liverpool is about to undertake?
    Mr. Lindsay: Perhaps we had better wait until 1st May.
    Mr. Thurtle: Does the new Act leave it to the discretion of local authorities whether or not they will provide money for these non-provided schools?
    Mr. Lindsay: That is so.
    Mr. Logan: Is it not a fact that the national compromise made by the Minister of Education did not resolve any such thing, and that the position is that provision has to be made under the Act for the schools?
    Mr. Lindsay: I was asked whether it was in the hands of the local authorities, and that is so. The spirit of the Act is that they should work together.

  POST OFFICE.

    PENSIONER, EMPLOYMENT.
    Mr. Viantasked the Postmaster-General whether, in view of the recent appointment of a pensioned officer of the Criminal Investigation Department to the post of inspector of doorkeepers, this has been made necessary because of any increase in the number of offences committed within the departments of the Post Office?
    The Postmaster-General (Major Tryon): No, Sir. The appointment was made for the reasons given by my hon. Friend the Assistant Postmaster-General in reply to the hon. Member's question of 14th April.
    Mr. Viant: Is the Minister persuaded that there is no one other than this officer equally capable of performing this duty in view of his being in receipt of a pension of over £5 per week?
    Major Tryon: The question of pension does not affect his merits. It was decided that he was the most suitable man for the post.

    REGIONAL ORGANISATION.
    Mr. Viantasked the Postmaster-General whether he is in a position to state the results of the regional form of Post Office organisation which was set up experimentally in 1936 in Scotland and North-East England following the recommendations of the Bridgeman Committee; and whether he proposes to extend the regional organisation to the rest of the country?
    Major Tryon: The experiment to which the hon. Member refers has now been proceeding for upwards of two years. The results have been satisfactory in all respects, and I have now decided to adopt the regional organisation permanently in London, Scotland and North-East England and to extend it also to the rest of the country.

    VAN ZEELAND REPORT.
    Mr. Graham Whiteasked the Prime Minister whether he is now in a position to state the conclusions of His Majesty's Government with regard to the van Zeeland report?
    The Prime Minister: I would refer the hon. Member to the answer which I gave on 3rst March to the hon. Member for the Forest of Dean (Mr. Price).

  INCOME TAX.

    AVOIDANCE.
    Mr. Thurtleasked the Chancellor of the Exchequer whether he is aware that in Germany a citizen who successfully obtains exemption from given taxation on some point of law may yet be compelled to pay on the ground that it is equitable,
    26
    if not legal, that he should pay; and if, in view of the difficulty of creating completely effective legal safeguards against tax evasion, he will take steps to alter the law in this country in order that, in appropriate cases, the Inland Revenue authorities might have recourse to a plea of equity where the legal claim had failed?
    The Financial Secretary to the Treasury (Lieut.-Colonel Colville): I presume that the hon. Member is referring to the German Taxes Law of 1934 which provides in its first section that the taxation laws shall be interpreted in the light of National-Socialist views. My right hon. Friend does not think that any provision of the kind proposed by the hon. Member would be consistent with the principle of Parliamentary control of taxation, nor can he agree with the hon. Member's suggestion that the Legislature is not able effectively to deal with avoidance.
    Mr. Thurtle: Does not the right hon. and gallant Gentleman think that this is the only really effective way of stopping tax evasion?
    Mr. Macquisten: Is it not lamentable that a member of the Socialist party should ask that we should be guided by a totalitarian State?

    APPEALS.
    Colonel Nathanasked the Chancellor of the Exchequer the number of appeals during the past five fiscal years to the general or special commissioners against assessment to Income Tax or Surtax; and in how many of the same the taxpayer has succeeded?
    Lieut.-Colonel Colville: Information is not available in regard to the very large number of appeals heard annually by the General and Special Commissioners of Income Tax.
    Colonel Nathanasked the Chancellor of the Exchequer the number of appeals during the past five fiscal years from decisions of the general or special commissioners of Income Tax; and in how many of these the judgment of the court has been in favour of the taxpayer?
    Lieut.-Colonel Colville: The number of appeals to the courts from decisions of the general and special commissioners of

    27
    Income Tax during the five years 1933–34 to 1937–38 was 371. The taxpayer was successful in 141 of these cases.

    NATIONAL LOANS (INTEREST RATES).
    Mr. Liddallasked the Chancellor of the Exchequer (1) whether he will consider adjusting rates of interest on long-term national loans raised hereafter while alteration in currency management can inflict hardship on private investors who lend their savings at fixed rates of interest at a time when managed money is kept artificially cheap;
    (2) whether, in order that re-armament loans may be taken up more widely by small private investors rather than again by public departments, he will consider taking steps to ensure that future medium and long-term national loans shall have their rates of interest adjusted to meet each 10-point rise in the Board of Trade cost-of-living index?
    Lieut.-Colonel Colville: My right hon. Friend does not consider that either of these suggestions is practicable.

    CHINA AND JAPAN.
    Mr. David Adamsasked the Chancellor of the Exchequer whether he is aware that any maintenance or stabilisation of the yen above its economic level is calculated to have the effect of facilitating the import of warlike supplies by Japan; and whether he will assure the House that no guarantee, direct or indirect, has been, or will be, given by any Department of His Majesty's Government which might have the effect of thus maintaining the Japanese currency?
    Lieut.-Colonel Colville: No guarantee of the kind referred to has been asked for or is contemplated.
    Mr. Morgan Jonesasked the Prime Minister whether he has any statement to make with regard to the situation in China?
    Mr. Palingasked the Prime Minister whether he has any information to give the House as to the position of affairs in the Far East?
    The Prime Minister: The only major military operations which have taken place recently have been in South Shantung, but their significance is still in doubt. In many other districts guerilla warfare is in progress, and the Japanese lines of communications are being harassed by the Chinese even in the neighbourhood of Peking and Shanghai. A special congress of the Kuomintang was held at Hankow on 29th March and succeeding days, as a result of which General Chiang Kai-shek was given a vote of confidence and his policy of continuing resistance was approved. The situation as regards access to property at Shanghai and difficulties in the way of navigation on the Yangtze by British vessels have been made the subject of representations to the Japanese authorities.
    Mr. Morgan Jones: May we assume that the statement made by a Japanese statesman on returning to Japan recently that England was in sympathy with Japan was in no wise expressing the opinion of His Majesty's Government.
    The Prime Minister: I have not seen such a statement.

    OLD AGE PENSIONS.
    Mr. de Rothschildasked the Financial Secretary to the Treasury whether he is aware of the dissatisfaction among local authorities and old age pensioners with the present regulations whereby the value of maintenance of such pensioners whilst inmates of a hospital or local institution for reasons of ill-health is calculated as means, resulting in the discontinuance or reduction of such pension and the imposition of the cost of maintenance upon the local authority; and whether he proposes to take any steps to alter the present practice?
    Lieut.-Colonel Colville: I would refer the hon. Member to the full answer I gave on this subject on 29th April last to the hon. Member for Bradford, Central (Mr. Leach), of which I am sending the hon. Member a copy.

    INTERNATIONAL SITUATION.
    Mr. T. Smithasked the Prime Minister whether he has any information to give the House as to the position of affairs in Europe?
    Mr. Rhys Daviesasked the Prime Minister whether he has any statement to make on the international situation?
    The Prime Minister: A statement has just been made concerning the situation in the Far East. With regard to the situation in Spain, the results of the Anglo-Italian conversations, and British interests in Mexico, I would ask the hon. Members to be good enough to await the replies to questions on the Order Paper on those subjects. I am, however, happy to take this opportunity to state that the French Prime Minister and Minister for Foreign Affairs are arriving in London on a short visit on Wednesday evening, when my Noble Friend the Secretary of State for Foreign Affairs and I hope to discuss with them the principal international questions interesting our two countries.
    Mr. Mander: Can the Prime Minister say anything about the situation in Czechoslovakia arising out of Herr Henlein's speech on Sunday?
    The Prime Minister: No, I do not think I have anything to say about that.

    SPAIN.
    Mr. Grenfellasked the Prime Minister whether he has any statement to make on the situation in Spain?
    The Prime Minister: General Franco's forces have made a further advance on the Aragon front, which, as the House is aware, has resulted in the severance of land communication between Catalonia and the rest of Government Spain. The British Agent at Burgos has been promised particulars of such British members of the International Brigade as have been taken prisoners. A further meeting of the Chairman's Sub-Committee of the Non-Intervention Committee was held on 25th April to consider the financial position of the Committee. The Secretary explained that, as a result of the Soviet Government having stopped payments since September, 1937, other Governments had also ceased contributing, and that unless £80,000 were received by the end of the month it would be necessary for the Non-Intervention Board to wind up its whole organisation. The Soviet representative stated that his Government maintained their refusal to continue their contribution, at any rate
    30
    until the withdrawal of foreign volunteers had become a reality. The United Kingdom, Italian and German representatives, however, informed the Sub-Committee that their respective Governments were prepared to make the payments which were in arrears up to 8th December last. The subscription of the French Government has already been paid. I am glad to say that these undertakings enable the Non-Intervention Board and the observation scheme to remain in being. The representatives on the Sub-Committee further undertook to ask their respective Governments for instructions about the resumption of regular monthly payments. Finally, a further sum of £4,000 was authorised to be applied by the Board for the purpose of studying technical questions connected with the plan for the withdrawal of foreign volunteers from Spain.
    Mr. Grenfell: Will the right hon. Gentleman tell the House whether His Majesty's Government are effectively in contact with both sides in Spain, whether any steps are being taken to safeguard the lives of non-combatants—the civilian population—and whether in the event of a breakdown of the defence on the Government side this country will have any influence in safeguarding the lives of the people on that side?
    The Prime Minister: We have special representatives in touch with both sides in Spain. As the hon. Member knows, His Majesty's Government have done all they possibly could from the beginning of this conflict to assist in saving the lives of non-combatants.—
    Miss Wilkinson: Only on Franco's side.
    The Prime Minister: —on both sides, and have met with considerable success, and we shall continue to use our best endeavours to continue with that work, and I hope that we may be as successful in the future as we have been in the past.
    Mr. Gallacher: Is the Prime Minister aware that very great injury can be done to the international position of this country by allowing it to be trailed behind Germany and Italy—
    Viscountess Astor: And Russia.
    Mr. Gallacher:—in maintaining this unspeakable farce of non-intervention?

    CONSULATE-GENERAL, LENINGRAD.
    Mr. David Adamsasked the Prime Minister the reasons for the closing of the British consulate at Leningrad on the 10th ultimo; and whether this consulate has been transferred elsewhere in Russia?
    The Under-Secretary of State for Foreign Affairs (Mr. Butler): As regards the first part of the question, I would refer the hon. Member to the reply given to my hon. Friend the Member for South-West Norfolk (Mr. Christie) on 21st February. The answer to the second part of the question is in the negative.
    Mr. Adams: Is the Minister aware that a large number of shipowners in the North of England whose business is done largely with Russia regret the closing of this consulate, and are steps being taken to reopen it?
    Mr. Butler: The views of the Soviet Government make it difficult to re-open the consulate.

    ANGLO-ITALIAN AGREEMENT.
    Mr. G. Mitchesonasked the Prime Minister whether he has any statement to make in respect of the Anglo-Italian negotiations?
    Mr. Palingasked the Prime Minister whether he has any statement to make regarding the negotiations with Italy?
    Sir P. Hannonasked the Prime Minister whether he can make a statement on the result of the negotiations which have been in process between His Majesty's Government and the Government of Italy?
    The Prime Minister: The recent negotiations in Rome were brought to a successful conclusion on 16th April when the signatures of Lord Perth, on behalf of His Majesty's Government in the United Kingdom, and of Count Ciano, on behalf of Italy, were appended to a comprehensive Anglo-Italian Agreement. On the same day an agreement providing for neighbourly relations in East Africa was concluded between the United Kingdom, Egypt and Italy, the Egyptian Minister in Rome signing on behalf of his country. Exchanges of notes also took place between the Egyptian Minister on the one
    32
    hand and Lord Perth and Count Ciano on the other, under which Egypt was associated with two declarations which form part of the main Anglo-Italian Agreement. These agreements have now been laid before Parliament in a White Paper, and an early opportunity will be afforded to the House to discuss their terms.

    SERVICE ATTACHES.
    Mr. Dayasked the Prime Minister in which of the principal countries of Europe there have been no service attaches appointed?
    Mr. Butler: A service attaché has been appointed to the staff of His Majesty's Missions in all the principal countries of Europe.
    Mr. Day: Does that include attachés for all services?
    Mr. Butler: Not in every case.

    CONFERENCE OF AMBASSADORS.
    Mr. Dayasked the Prime Minister when was the last occasion on which the Conference of Ambassadors met; and to whom the minor questions which concerned the ex-Allied Powers are now referred?
    Mr. Butler: The last occasion on which the Conference of Ambassadors met was on 12th January, 1931. As regards the second part of the question, such minor questions as have arisen since that date have been handled by the Secretariat-General of the Conference in conjunction with the various Embassies concerned in Paris.
    Mr. Day: Can the Minister say whether any alteration is being considered at the present time?
    Mr. Butler: No, Sir.

    MEXICAN OILFIELDS (BRITISH INTERESTS).
    Mr. R. Robinsonasked the Prime Minister whether he can make a further statement with regard to the expropriation of British oil interests in Mexico?
    Mr. Butler: On 12th April the Mexican Government in a Note, the text of which

    33
    has been published, refused the request, conveyed on 8th April through the intermediary of His Majesty's Minister at Mexico City, that they should restore the properties of the Mexican Eagle Company on the grounds that the expropriation decree of 18th March was inherently unjustified. As this Note saw fit to challenge the locus standi of His Majesty's Government to intervene, His Majesty's Minister at Mexico City on 21st April communicated a Note to the Mexican Government, the text of which has been made public, to the effect that the important British interests involved give His Majesty's Government an undoubted right to make representations. In this Note the Mexican Government were once again requested to restore the expropriated properties as the only practical means of avoiding a serious injury to extensive British interests.
    Mr. Thorne: Is the Minister aware that the cause of all this trouble is that the oil company in question have refused to carry out the decision of the arbitration board and also of the court of appeal?
    Mr. Butler: I cannot accept the hon. Gentleman's version of the situation, and I would advise him to read the statements that have been made publicly.
    Mr. Gallacher: Can the Minister tell me why His Majesty's Government, who at the present time have just taken coal out of the hands of the royalty owners in this country, are complaining of the Mexicans taking oil from these companies?

    CANTON AND ENDERBURY ISLANDS.
    Mr. R. Robinsonasked the Prime Minister what progress has been made in the negotiations with the United States Government with regard to Canton and Enderbury Islands?
    Mr. Butler: The negotiations to which reference was made in reply to my hon. Friend's question of 23rd March are progressing favourably, and I hope that it will be possible to make an announcement on the subject in the near future.

    OLD AGE PENSIONS.
    Mr. Kellyasked the Minister of Health whether he has received an appeal
    34
    from the recently formed organisation of old age pensioners for an increase of pension to £1 per week; and what reply he has made to this appeal?
    Lieut.-Colonel Colville: I have been asked to reply. I am not clear to what organisation the hon. Member refers, but a number of appeals have been received from groups of old age pensioners. I indicated the Government's attitude on the question generally in the reply I gave on 24th March last to the right hon. Gentleman the Member for Kirkcaldy Burghs (Mr. Kennedy).
    Mr. Gallacher: You will know, when you get back to your constituency.

    PALESTINE (SITUATION).
    Mr. T. Williamsasked the Secretary of State for the Colonies whether he has any information to give the House as to the position of affairs in Palestine?
    The Secretary of State for the Colonies (Mr. Ormsby-Gore): The latest reports that I have received from the High Commissioner on the general situation cover the period from 11th to 25th April. During this period a number of murders and other violent outrages occurred. On 16th April, an armed Arab band was engaged by military and police forces near the Nablus-Tulkarn Road and 16 members of the band are believed to have been killed, excluding possible casualties inflicted by aircraft. Four prisoners and a number of rifles and ammunition were captured; one British soldier was slightly wounded.
    Mr. Williams: Is the right hon. Gentleman satisfied that every possible step has been taken to deal with the situation?
    Mr. Ormsby-Gore: Every effort has been made, but it is clear that armed bands are very active all over Palestine, and that the number of outrages is very large.
    Mr. Williams: Has the Minister any information that any outside person or body is subsidising those armed bands?
    Mr. Ormsby-Gore: No, but there certainly are infiltrations from other parts of the Arab world of people who join up with these bands.
    Mr. Dalton: Has the Minister no evidence of who is paying these bands?
    Mr. Ormsby-Gore: There are widespread collectings throughout the Moslem world, in India and the like, but I have no evidence that any individual is doing it.
    Miss Wilkinson: Has the Minister any evidence that a European Power is paying for it?
    Mr. Ormsby-Gore: None whatever.
    Miss Wilkinson: Why did the previous Foreign Secretary say that he had evidence that the Italian Government had done it?
    Mr. Ormsby-Gore: That was in regard to propaganda. The Italian Government were paying for active propaganda, but this is a question of providing arms and subsidising people who are doing violent acts against the British military authority?
    Captain Cazalet: Is my right hon. Friend satisfied that there is full cooperation between the police and the military now for the maintenance of order in Palestine?
    Mr. Ormsby-Gore: Oh, yes, absolutely.
    Mr. Gallacher: The Palestinians are fighting for their rights.
    Viscountess Astor: Who is subsidising the "Daily Worker "?
    Miss Wilkinson: Or the "Times," or the others?

BUSINESS OF THE HOUSE.
Ordered,
" That the Proceedings on Government Business be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[The Prune Minister.]

ORDERS OF THE DAY.

  WAYS AND MEANS.
  Considered in Committee.
  [Sir DENNIS HERBERT in the Chair.]

  FINANCIAL STATEMENT.
  3.45 p.m.
  The Chancellor of the Exchequer (Sir John Simon): Every Budget statement deals with three matters in turn; it is, so to say, our annual problem play presented in three acts. In the first act we have the review of the financial year which has just closed, and the comparison of the actual outturn, both of expenditure and of revenue, with the estimates which were made 12 months ago. This contrast between prophecy and performance brings out the first figure of definite interest in the drama, which is the balance—on the present occasion, as the Committee knows, a substantial surplus of £28,786,000. Such surplus ordinarily goes to the National Debt Commissioners for the reduction of past debt; but, as it would be absurd to pay off debt with one hand while you are borrowing with the other, the Defence Loans Act of last year provides that this surplus has to play a part in our future arrangements somewhat different from that which a surplus ordinarily takes.
  Then comes the second topic on which I have to enlarge, namely, the components of the total—the very formidable total—of our prospective expenditure in the present year, and the estimate of prospective revenue on the existing basis of taxation to set against it. On this occasion the Committee must prepare itself to find that this comparison leads to a balance which will show a deficit to be met. Then, the figure of the balance having been precisely ascertained after a necessarily rather elaborate statement, the stage is set for the curtain to rise on the third and decisive act, and the author presents to his critics in the stalls and to the public in the gallery his solution of the problem which he has thus laboriously developed. I shall follow the traditional course, and I shall endeavour to place the necessary figures before the Committee, as the seriousness of the times and the immensity of the totals require, without any elaboration and in as simple and plain a form as I can command.

  REVENUE, 1937–38.
  I begin, therefore, with the outturn of last year. The revenue has amounted to a total of £872,580,000, representing an increase over the Budget estimate of nearly £9,500,000, and an increase of nearly £48,000,000 over the yield of the previous year. I will, if I may, make one further comparison. This total of £872,580,000 of revenue receipts in a single year is five times greater than the comparative figure a quarter of a century ago.
  Taking the main heads of revenue, Customs and Excise produced £335,261,000, which is £2,250,000 above the estimate, and £14,500,000 more than the revenue of 1936£37. To some extent this yield of Customs and Excise was inflated by forestalments. But in general these figures bear witness to the improvement in trade and industry which characterised last year as a whole. The surplus was due principally to beer and tobacco, especially tobacco.
  Viscountess Astor: Oh, no.
  Sir J. Simon: Tobacco produced not far short of £83,000,000—£5, 500,000 more than the previous year. The duties on beef and veal and those levied under the Ottawa Agreements Act also yielded appreciably more than was expected. On the other hand, spirits drooped, and in fact yielded nearly £500,000 less than in 1936. Sugar also was disappointing. But, on the whole, the Customs and Excise revenue has more than justified the optimistic view of the prospects taken by my right hon. Friend a year ago. Inland Revenue duties yielded £471,346,000. That is almost £3,750,000 more than the Estimate. This £3,750,000 is the net result of a remarkable surplus on the yield of Income Tax of nearly £10,000,000 offset by short falls of £5,000,000 on Stamp Duties, £1,000,000 on Surtax and £500,000 on National Defence Contribution.
  I must call the Committee's special attention to the Income Tax yield. The Income Tax yield of just £298,000,000 is, of course, very satisfactory indeed. Half of the £10,000,000 surplus that it shows is due to the fact that the incomes and profits of 1936 which came under charge in 1937 were greater than were estimated. The other half is to be attributed to an unexpectedly high proportion of payments

  45
  made of tax due on 1st January before the end of the financial year. I made inquiries, and I am assured that this was not brought about by any exceptional pressure on the part of the collector. It is the general experience that the rate of collection of tax improves in times of good trade, and my advisers believe that this rapidity of collection in the early months of this year may also reflect the taxpayer's recognition that the present time is one in which it is of exceptional importance to the national finances that taxes should be promptly paid. The Committee will see that from my point of view there is another side to this; in so far as unusually prompt payments have brought the money in before 31st March that has increased the realised surplus, but has left over for collection in the present year a smaller amount of arrears. I have to allow for that.
  Now I come to Surtax. The Surtax yield of £57,000,000 was £1,000,000 short of the estimate. It represents, however, a growth of about £3,500,000 over the yield in 1936 and of course the Committee will not forget that the Surtax lags a year behind the Income Tax. Accordingly the expansion of profits and incomes that contributed to the unexpectedly high yield of Income Tax in 1937 would in general have had no effect on the yield of Surtax last year. The out-turn of Stamp Duties has been extremely disappointing. They yielded only £24,000,000, as against a Budget Estimate of £29,000,000 and as against an actual yield of £29,000,000 in 1936. The drop is almost entirely due to a falling off in those Stamp Duties that are associated with Stock Exchange transactions. With regard to motor vehicles the duties yielded £34,500,000, £500,000 over the Estimate.
  I come next to the Post Office. The Post Office net receipt was estimated at £11,800,000. On the expenditure side, the other side of the account, there was an estimated payment of £300,000 to be made to the Post Office Fund. That would have left an estimated net Budget receipt of £11,500,000. The actual net Budget receipt was £11,295,000, but it was arrived at in a different way, for that £11,295,000 included a transfer from the Post Office Fund to the Exchequer of £825,000. This is a complicated matter and the explanation of this result is that while the Post
  46
  Office revenue continued to show a substantial expansion (though it fell somewhat short of the Estimate) Post Office expenditure has appreciably exceeded what it was estimated to be, mainly, I believe, owing to the requirements of the long-term development of the telephone system. These variations do not affect the liability of the Post Office Fund to make good to the Treasury the statutory amount of the fixed Exchequer contribution. The Committee will see from the Blue Print that Crown Lands brought in £1,330,000. Sundry Loans brought in £5,250,000, and Miscellaneous Revenue £13,500,000. These show increases of £13000,000 and L2,500,000 respectively as compared with the Estimate.
  What is the general reflection, the general conclusion that should be drawn from this survey of last year's revenue? Good as the total revenue results for last year undoubtedly are, it would not be right to treat them as proving that the year was one of progressive and continuous improvement throughout. Income Tax and Surtax, of course, at the time they are received into the Exchequer reflect conditions of an earlier period. If one wants to get a better indication of the actual conditions one gets it from such items of revenue as Customs and Excise. Judging by this experience and especially in view of the knowledge of my advisers as to how the year has worked itself out it would appear that the first six months of the year were more prosperous than the second six months, though the latter were still good, and this is a trend which must be noted in forecasting the immediate future.

  EXPENDITURE, 1937–38.
  Now I turn to the expenditure actually incurred in 1937–38. The Fixed Debt Charge of £224,000,000 was sufficient last year to provide not only the cost of interest and management of the National Debt but also a substantial sum, namely, £7,767,000, towards the statutory Sinking Funds. The remaining charge for this fund, namely, £2,777,000, was also met from revenue, making a total charge for interest and management and Sinking Funds of £226,777,000. Payments to Northern Ireland came to £8,887,000 as against £8,000,000 in the Budget. Miscellaneous Consolidated Fund services at £3,115,000 were within £100,000 of the

  47
  Estimate; and, as I have already explained, it turned out that no payment was due to the Post Office Fund.
  Supply Services showed a very large saving, amounting to £22,333,000, as compared with the Budget estimates. The Committee will, of course, understand that when I say Supply Services this short-spending has nothing to do with Defence expenditure. The sums voted last year from revenue for the Defence Departments, amounting altogether to £198,000,000, were fully used. It is the loan money of £80,000,000 for Defence which was utilised only to the extent of £65,000,000 last year. These Supply Services to which I am referring are Civil Supply Services, and these savings arise on various Civil Votes. Of these the largest was a saving of £8,500,000 on unemployment assistance. Then last year's Estimates included a margin of £10,000,000 for Civil Supplementary Estimates. Of this £3,600,000 was in fact required. The other savings make up a substantial total, but they are not individually very large; in some cases indeed they represent underspending which will have to be made good this year. The total expenditure, therefore, met from revenue last year, came to £843,794,000, as against an estimate of £862,848,000. The final result, as the Committee will see, is that revenue exceeded expenditure by £28,786,000.
  If one asks oneself broadly how that balance has come about, the answer is, as my analysis shows, that it is really due to three causes, which have operated in about equal proportions. First, the revenue last year as a whole exceeded expectations. Secondly, demands for unemployment assistance were considerably less than had been forecast. Thirdly, supplementary demands for ordinary expenditure did not come forward to the extent anticipated. There you have three errors in calculation, and the Committee will see that they all three operated the same way, in the way favourable to the Chancellor of the Exchequer. It usually happens that the various divergencies between estimate and realisation cancel one another out, but last year, as it happens, these divergencies all operated in the one favourable direction; and I make the melancholy reflection as I pass that it would be imprudent to hope that any
  48
  mistakes I make now will all operate in the same favourable sense.

  NATIONAL DEBT.
  Now I must add, both because it is the tradition so to do and because it is very necessary, a few sentences on the subject of the National Debt. The low rate of interest on Treasury Bills continued throughout the year. The average rate indeed was only 11s. 2d. per cent. That constitutes a new low record. It is 6d. below the year before, and 4d. below the previous low record of 1935–36. In April of last year there was an issue of f100,000,000 of 2½ per cent. National Defence Bonds at 99½ 65,000,000 has been used for issues under the Defence Loans Act, and the balance for the time being is utilised for the reduction of the Floating Debt. Last July, the Committee will remember, Parliament authorised an addition to the debt of £200,000,000 for the purpose of increasing the resources of the Exchange Equalisation Account. But this increase in the nominal total of the debt is, of course, covered by assets. In addition some £3,000,000, for which we also hold security, has been issued out of borrowed moneys under the Tithe and Shipping Acts.
  How do we stand now as regards the National Debt as a whole? Allowing for the application of about £10,500,000 to the contractual Sinking Funds, the net increase in the Debt is £257,750,000 nominal, of which £203,000,000 is covered by assets. I had better add this. in the published accounts the increase at present is shown as £229,000,000, and the explanation lies in this: last year's surplus, though intended shortly to be used for Defence expenditure, appears for the time being in our books, on 31st March, as reducing the Floating Debt. Another observation I must make under this head. Last summer, in the course of the Debate on the Bill for increasing the assets of the Exchange Equalisation Account, I announced that as an experimental measure a public statement would be made every six months as to our gold holding, and that arrangements would be made with a view to a confidential examination of the state of the Account by the Public Accounts Committee. Steps to this end have been taken. The Account continues to show a profit. That concludes what it is my duty to say about last year.

  EXPENDITURE, 1938–39.
  Now I invite the Committee to turn to the estimated expenditure for the present year, 1938–39. I will take first the Fixed Debt Charge. This ha., stood at £224,000,000 for the last five years, and except for last year that amount of £224,000,000 has sufficed not only to pay the interest and management of the National Debt, including interest on savings certificates actually cashed during the year, but also to provide in full for the statutory Sinking Funds. Last year, however, the total expenditure in respect of interest, management and statutory Sinking Funds reached nearly £227,000,000. For the present year I think it prudent to put the Fixed Debt Charge at £230,000,000. I expect that once again this will provide a margin for the statutory Sinking Funds, but I propose to repeat the precaution of recent years and to obtain authority to borrow for that purpose.
  Before leaving this subject I should like to make a general remark. In reading the comments made by various authorities on the outturn of last year's Budget I see it frequently assumed that the payment of £10,500,000 out of revenue for the statutory Sinking Funds is the same thing as a net reduction of debt to that amount. That would be so if we were providing not only for interest payable during the year—we are doing that—but for interest accruing in the year but not yet demanded. Take the case of savings certificates. Interest is payable in cash only when a certificate is presented for payment. In the meantime it is mounting up without being paid. On the large number of certificates outstanding a charge for interest therefore remains unpaid, but of course it is accruing against us year by year. When the owner of the certificate comes forward with his certificate he will get, amongst other things, the interest accruing this year. If, therefore, in any year we made no payment to reduce debt we should find our capital liabilities increased by the accumulation of interest on unpresented certificates.
  Thus this provision of £230,000,000 which I think it right to make for the Debt Charge this year can be regarded in two lights. In form it will enable me to meet not only the interest and management expenses I have indicated, but will
  50
  also, I trust, enable me to meet the contractual Sinking Funds. In substance it is to be regarded as the best estimate I can make in round figures of the real burden in respect of interest and management which accrues against the State this year. This confirms me in the view that no smaller figure could rightly be adopted. I put the year's payment to the Government of Northern Ireland, including their share of reserved taxes, at £8,900,000; miscellaneous Consolidated Fund Services at £3,200,000. No payment is estimated to be due to the Post Office Fund in the year, and my estimate therefore of the total of Consolidated Fund services works out at £242,100,000, which is an increase of some £6,600,000 over last year's estimate.
  Now I come to the Supply Services. The Committee is already aware from the published Estimates that Supply Services (excluding the self-balancing items of Post Office and Broadcasting) amount to £692,298,000. They are made up of two big blocks, of £253,248,000 for the three Defence Services and £439,050,000 for the Civil Votes. These figures, the Committee may like to be reminded, are respectively £55,000,000 greater and £20,000,000 greater than the corresponding Budget estimates last year. Again, to avoid all possibility of misunderstanding, I had better perhaps remind the Committee that the £253,248,000 for Defence does not represent the total expenditure contemplated for Defence this year, for it excludes £90,000,000 of borrowed money already allocated to the purpose. The total Defence expenditure is, therefore, £343,248,000, of which the Supply Votes amount to £253,248,000. The Civil Estimates include an increase of £3,500,000 for Air-Raid Precautions.
  I come to the question whether there is need for me to add a margin for Civil Supplementary Estimates, and in this connection I must give the Committee some information on the subject of food storage. This information would have come more naturally from my right hon. Friend the Minister for the Co-ordination of Defence, but it was impossible for him to make the announcement before we adjourned, and I do so now only because it is very germane to the finance of the present year. The Committee will be aware that steps have been taken by the Defence Departments to build up reserves of certain raw

  51
  materials essential to the rearmament programme, and the Government have been asked from time to time what similar precautions they contemplated with regard to food supplies. The Food Defence Plans Department have for some time been in consultation with the trades concerned, and the Government decided early this year that at the right moment they would buy sufficient supplies of wheat, whale oil and sugar to ensure that the stocks in this country shall be maintained at a level sufficient for the needs of the civil population during the early months of an emergency. These purchases have now been made. The Committee will recognise that absolute secrecy was essential to prevent prices from being raised by the knowledge of the Government coming into the market. Had it been known, of course, the effect on prices would have been disadvantageous to consumers generally as well as to the Exchequer, and for this reason the Government took the very unusual course of acting without first applying for statutory authority, in the confidence that the House of Commons would understand our reasons and would in due course enable us to obtain the legislation conferring the necessary powers upon the Board of Trade. That legislation will shortly be introduced, and a Supplementary Estimate to cover the expenditure will also be required.
  Apart from these transactions, some additional provision is likely to be needed during the year for other purchases where secrecy is less essential, and also for Air-Raid Precautions. Weighing these facts, and remembering at the same time the possibility that there may be savings for me on the Civil Estimates as a whole, I reached the conclusion that I must provide the sum of £10,000,000 as a margin for Civil Supplementary Estimates. I, therefore, give the Committee the total expenditure which I estimate I shall have to face this year. Excluding the £90,000,000 already appropriated from borrowed money for Defence, the total to be met is £944,398,000—that is £81,500,000 more than last year's Budget estimate.
  Before working out how much, at present rates of taxation, will be forthcoming to meet this total of £944,000,000, I must make a slight diversion, and it will
  52
  be convenient to indicate certain alterations in the law relating to taxation which I have to propose. The most important of them are directed to securing that taxation at its existing level will yield its full fruit to the Exchequer. In the estimates which I shall be giving later on of the yield of taxation at the existing level, I shall include the effect of these proposed changes.
  First, I will deal with tax avoidance, which I should define as the adoption of ingenious methods for reducing liability which are within the law, but which none the less defeat the intentions upon which the tax is founded. Legislation of recent years, as for example the provisions in the Finance Acts of 1936 and 1937, in relation to one-man companies at home and abroad, and children's educational trusts, has done a great deal to counter certain forms of avoidance, but though I have seen some very exaggerated estimates of the extent of tax loss still involved, the evil persists in various novel forms, and I am going to make some important proposals to deal with them. The subject is very difficult, complex and technical and it would be better examined in detail at a later stage, but I must table a number of Resolutions this afternoon, and the Committee, I think, will wish to have a short description of the new proposals I have in mind.

  TAX AVOIDANCE.
  On the Third Reading of the Finance Bill last year I referred to one form of avoidance, namely, the misuse of revocable or accumulating trusts, and I gave warning that in this year's Finance Bill legislation would be introduced with retrospective effect to deal with it. This particular device makes use of the legal machinery of trusts and settlements in order to take income out of charge to Surtax, while the individual still preserves such a control or call over it as enables him to retain its ultimate enjoyment. If the individual can get back the benefit for himself merely by revoking the arrangement without the consent of anybody else, then the arrangement under the existing law is ineffective for the purpose of reducing his tax liability. So he is careful in these cases to provide that the revocation can take place only with the consent of some other person. But by nominating some accommodating friend who will be prepared to give his consent whenever he is asked, he can evade the

  53
  tax while getting back the benefit. This must be stopped.
  I propose, therefore, that in the case of all trusts and settlements the income arising should be treated as the income of the settlor for Income Tax purposes—and this includes Surtax—if the terms of the settlement provide any power of revocation whatever by the exercise of which the settlor might become entitled to the beneficial enjoyment of the income. I propose, secondly, that, if the terms of any settlement—there must be an exception in the case of settlements of the nature of a marriage settlement—are such that the funds of the settlement may revert to the settlor in the future on any contingency, the income of the settlement, in so far as it is accumulated by the trustees, shall be treated as the income of the settlor. These two proposals will apply to all settlements, existing and future, and as regards existing settlements they will take effect for Surtax purposes for the year 1937–38, thus having the retrospective effect of which I gave due warning last year. They are founded on the principle, which, I think, the whole Committee will agree is just and reasonable, that income which may be within the power of an individual to enjoy should be treated as his income for the purposes of Income Tax and Surtax as if he were actually in receipt of it.
  There are two more proposals on this topic to which I attach importance. One deals with the device under which the settlor is enabled to enjoy the income of a settlement, without paying tax upon it, by way of loans made to him by tile trustees. A loan is not income. It is, first, a debt, but if it is a debt that you never have to repay then it is more convenient than income, because it does not pay Income Tax. I propose to treat loans from the undistributed income of the settlement as the income of the settlor for tax purposes. This proposal will apply with respect to past and future settlements, but only with respect to loans after the beginning of the current year. Another proposal which will apply to future settlements is that in computing the individual's total income for Surtax purposes, no deduction shall be allowed in respect of any annual payment which he may make under the terms of the settlement, if the income represented by that annual payment is not paid out by the
  54
  trustees, but is accumulated in their hands.
  My next proposal in regard to the avoidance of tax is to strengthen the provisions of Section 18 of the Finance Act, 1936. That Section deals with the avoidance of tax by way of the formation abroad of one-man companies, and so forth. It provides that where an individual ordinarily resident in this country has transferred assets abroad, with the result that income is receivable by some person abroad, but the individual, that is, the man here, retains the power to enjoy that income, the income of the person abroad shall be treated for Income Tax purposes as the income of the individual at home. That is simple and clear, but there is a proviso in the Section. The Section does not apply if the individual can show that the transfer abroad was effected mainly for some purpose other than the purpose of avoiding liability to taxation. I am very much struck with some of the excuses that have been offered to prove that the avoidance of taxation is not the main purpose of such transfers. For example, there was a case not so long ago where a taxpayer escaped Surtax by forming a one-man American company, transferring a large sum to it and receiving from it shares which never paid any dividend. When he was challenged he explained that he had formed the company because he was afraid of what a Labour Government in this country might do with his property.
  Mr. Gallacher: One of your own supporters.
  Sir J. Simon: His main motive, so he explained, was not to avoid tax. I hope the Committee will agree with me that if that is the way the law works it needs strengthening. Where the circumstances are such that avoidance of taxation is the purpose of the arrangement, I do not consider that the transfer should be allowed to effect that purpose and reduce liability to taxation. These proposals, which are the result of much close examination by my expert advisers, will, I believe, contribute a great deal towards the stopping of tax avoidance. I regard the whole subject as a very important one, not only because there may be substantial amounts involved, but because the benefit which one man may get from escaping tax which

  55
  his income would normally have to pay, necessarily involves putting an additional burden on others.
  I must put in a word for the vast majority of those who come under direct taxation. It is not true that they resort to any such devices. These devices are resorted to by the few. The great majority accept the full and natural burden and discharge it without any effort to avoid it. We as a nation are entitled to take pride in the general standard of ethical performance of the taxpayer's duty which prevails in this country. The House of Commons should do its utmost to secure that the actual burden as between two individuals in the same position should be equally spread. I intend to continue to keep a close watch on this subject and I have taken measures to ensure that any developments will be kept closely under review, so that if methods of avoidance emerge which are not already sufficiently or effectively dealt with, further measures for their suppression may be promptly devised and put into execution. In view of the warning which I am now giving, the would-be avoider must reckon with the possibility that these measures may be so arranged as to operate with retrospective effect.

  INCOME TAX LAW.
  In addition to these proposals for dealing with the avoidance of tax I have to mention some amendments of Income Tax law which are necessary to complete the system in places where it has been found to be deficient. The full explanation will be given when the Finance Bill is introduced, but inasmuch as they necessitate Resolutions, I must give a brief statement about them now. First, as to income arising while an estate is being administered after the death of its former owner, that is, when the executors and the administrators are winding up the estate, I propose that the income arising to the executors during the course of the administration of the estate shall be treated for Income Tax purposes as the income of the life tenant or the residuary legatee, as the case may be, in so far as the income is in fact paid over to the life tenant or to the residuary legatee.
  In the case of the life tenant this only confirms a long-standing Income Tax
  56
  practice which, however, has been successfully challenged in the courts on the highly technical ground that the income remains the income of the executors even if it is being enjoyed by the life tenant. I think that if the life tenant enjoys the income he ought to pay tax upon it. In the case of the residuary legatee, where such payments have not been treated as containing any element of income, cases have arisen where the administration of an estate has been deliberately prolonged in order to avoid Surtax. The 'executors, it may be, can continue for some years on end to administer the estate, and no Surtax can be attached to the income earned during that time. I shall invite the Committee to deal with this matter by treating the income of an estate during administration, so far as it is paid to a residuary legatee, in one form or another, as his income.
  The law needs amending in regard to the cashing of coupons. In a recent decision the Court of Appeal has held that the practice followed for the last 50 years is not justified by the language of the existing Acts. I propose to redefine the law so as to make it clear that the realisation of all coupons is within the ambit of the foreign dividends provisions in relation to deduction of tax, and that the proceeds constitute income of the recipient. This is an important matter not only from the revenue point of view but because banks and similar collecting agencies have habitually acted upon the assumption that I now propose to validate. There will also be a provision that where interest is funded, the value of the funding bond will be treated as income.
  Other points in regard to which I propose to tighten the existing provisions of the law relate to the profit arising upon the sale of stock of trade, where a business has ceased—that is an Income Tax point—the avoidance of Stamp Duty by an abuse of the existing law in regard to company reorganisation, a matter to which the right hon. Member for Hillsborough (Mr. Alexander) was good enough to call my attention last year, and certain points relating to Death Duties, two of which involve an amendment of the legislation introduced in 1930 to check avoidance through the medium of companies. I have also to propose an amendment of Income Tax law relating

  57
  to the assessment of the sinking fund business of insurance companies. I am proposing as well certain amendments of last year's legislation dealing with National Defence Contribution, but I would ask the Committee to wait for further details in the provisions of the Finance Bill.
  There are two minor matters in a different field. The first has to do with cinematograph films. I propose to table a Resolution relating to the reimportation of cinematograph films which have been exported after being printed in this country from foreign negatives. It has recently been suggested to me that additional employment could be secured for this country if foreign film negatives and sound tracks were admitted duty free for the purpose of producing positives for exhibition in foreign countries. Every country wants the talkie part of a film to be in its own language, but I understand that the combination of, say, an American film with a fresh sound track in French is highly technical work which cannot be done everywhere. Facilities exist for doing that over here and they would be utilised if duty had not to be paid. I am proposing, therefore, to make arrangements by which the work may be done in bond, but it is necessary to provide that the positives so produced shall not be re-imported for exhibition over here unless the duty is paid either on the foreign negative or sound track, or on the positive; this is what my proposal secures.
  I propose to take power to extend the currency of Saving Certificates of the first issue, thus bringing them into line with the subsequent issues. I must also mention the Medicine Stamp Duties. A Committee of this House which considered this subject made a valuable report last year, but it has not yet been possible to arrive at conclusions on all the complex issues involved. It is my intention that a decision shall be reached before next year's Finance Bill.
  After this lengthy but inevitable excursion into the winding and secluded backwaters of the law, I return to the main stream of my discourse. I come now to my estimate of the revenue on the existing basis to set against the total of £944,398,000 for which I have to provide. I will start with Customs and Excise. I feel justified in counting on some further expansion in the Customs and Excise revenue as a whole, although not at the same rate as in the last few
  58
  years. The agreement just made with Eire, welcome as it is on the broadest grounds, means that I now lose over £4,000,000 a year previously produced by the Special Duties and the associated Import Duties Act duties on imports from that country. Were it not for that fact, I would put the increase in revenue from Customs and Excise at just under £5,000,000, as compared with the increase of £14,500,000 last year. I expect to get my main increases from beer, £1,250,000—
  Viscountess Astor: Shame.
  Sir J. Simon: —tobacco about £1,000,000 and oil about £2,000,000. In view of the fall last year in the consumption of spirits, I must anticipate a further decline in revenue under that head this year, and I put the reduction at about £750,000. I also estimate a small decline of £100,000 in the sugar revenue. This decline is expected to occur owing to a larger supply this year of home-grown sugar, on which I receive less duty per ton than on foreign sugar. As regards tariff items, I am expecting a slightly smaller yield from the imports under the Import Duties Act on account of the fall that has taken place in the general level of prices. Allowing for the loss of the Special Duties about £4,000,000 a year, my total estimate for Customs and Excise is £336,000,000.
  Now I come to Inland Revenue. I calculate that the yield of Income Tax in 1938 should reach £319,000,000, that is £21,000,000 more than the actual receipts in 1937. The rise last year of the profit level and the general level of incomes will considerably increase assessments under Schedules D and E. I should like here to express my acknowledgments to those trading concerns which have been good enough to furnish forecasts of their trading profits for my assistance in framing the Income Tax estimate. The yield of Surtax I expect to reach £62,000,000, that is £5,000,000 more than the actual yield in 1937. The full effect of the growth of profits and incomes in 1937 and of some of my proposals for preventing tax avoidance will not appear in the Surtax yield until 1939.
  Although Death Duties yielded £89,000,000 in 1937, I am afraid I cannot count upon a higher yield for 1938 than £88,000,000. The set-back in the price level of securities which took place last

  59
  year, and which still persists, must depress the yield of taxation levied on capital values, and even though a recovery takes place, the effect of the lower price levels of securities now obtaining must result in a lowering of the yield for part of the year. If there is no recovery during the year it may well prove the case that the figure of £88,000,000 will be found to be too optimistic. In the case of Stamp Duties, a more favourable estimate depends, of course, essentially upon a recovery in Stock Exchange activities. While there is every hope of it, I think it will be safer to relate the estimate to the actual yield of last year, and I accordingly put down for Stamp Duties a figure of £24,000,000. I expect the National Defence Contribution to yield £20,000,000 in the current year. This is £5,000,000 short of the estimate I gave twelve months ago of a full year's yield. The reason is that it will not be until the third year that the profits coming under charge will in all cases represent the profits of a full year.
  The Committee will remember that the charge for National Defence Contribution runs from 1st April of last year and that the assessment takes place after the conclusion of the accounting year of the business in question. More than half of the trading profits coming under charge belong to businesses which make up their accounts to the end of December, and, owing to the time lag that necessarily occurs between the end of the trading year and the actual collection, the yield in the December cases will generally, or frequently, fall into the following year. Of course, the smaller yield for 1938 will be made good later on, as even though the tax is to last only for five years it will continue to produce revenue which will come into the year following its termination. Other Inland Revenue Duties —Land Tax, Mineral Rights Duty, Excess Profits Duty, Corporation Profits tax—I expect to yield in the aggregate £1,250,000. Thus my total estimate for all Inland Revenue Duties is £514,250,000. Motor Vehicle Duties I put at £36,000,000. Post Office net receipt is £8,670,000, which with £2,400,000 from the Post Office Fund makes the Post Office net Budget receipt £11,070,000. I put Crown Lands at £1,330,000, receipts from Sundry Loans £5,250,000, and Miscellaneous Revenue £10,500,000. The total
  60
  estimated revenue is thus £914,400,000. This falls short of the estimated expenditure by just under £30,000,000—actually £29,998,000—let us be grateful for the £2,000.

  PROSPECTIVE DEFICIT.
  I now approach the pinch of the matter. The result is that there is a gap of nearly £30,000,000 which has to be filled before the account for the year balances. The all-important question to be decided is whether the gap is to be closed by resorting to fresh taxation or by resorting to further borrowing. The prospective deficit is due to rearmament expenditure, to the carrying out year by year of the five-year programme announced in February of last year, originally estimated to cost at least £1,500,000,000, but which in fact is going to cost a good deal more than that. It has from the beginning been said that this rearmament expenditure should not be financed entirely from taxes, and the Defence Loans Act of last year has already authorised the borrowing of £400,000,000 for Defence purposes during the five years. Under that authority we have already borrowed £100,000,000. The balance remains to be raised from time to time when circumstances are favourable for the purpose. So large a borrowing is an immense operation, and one that must be carefully timed and spread.
  What I have said will serve to remind the Committee that it would be a mistake to imagine that this deficit, if it were to be met out of borrowed money, would call for fresh borrowing powers. Unexhausted borrowing powers are there, and the question is whether we can wisely and properly use borrowed money to fill this particular gap of £30,000,000. In order to form a proper judgment on that question there are three things which must be borne in mind. The first is this. In the Defence Estimates for the current year we have already taken £90,000,000 from sources outside the revenue of this year. £28,000,000 will come from last year's surplus, which is thus diverted from the payment of debt. £62,000,000 is new loan money, and the whole amount, £90,000,000, counts against the total authorised by the Defence Loans Act. The point I am making is that if we were to confine ourselves to this year's revenue on the existing basis, the gap to be filled would really be £120,000,000,

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  and of that we have already decided that £90,000,000 shall not be got from additional taxation. Secondly, I must remind the Committee that we have announced our intention, and are already in course of carrying it out, to accelerate our rearmament and to increase the production of munitions. The whole country, I think, realises the necessity for that decision and approves of it. It means that we must expect to have Supplementary Estimates for Defence later on in this year of substantial amount, which are not included in the total expenditure against which I am now providing. When these Supplementary Estimates come along this year for further Defence expenditure I intend that they shall be met out of loan money, by further drawings on the fund provided under the Defence Loans Act; and this, therefore, will be a further amount which will not be provided from the revenue of the current year.
  I come to my third consideration. Those I have mentioned are serious, but the most important consideration of all remains to be stated. We have to look beyond the present year. It is the traditional and convenient course that we should hold these financial inquests in the month of April once every twelve months, but there is nothing in the nature of the case to justify our con-of twelve months, and refusing to look forward and see what is likely to happen later. This is what is going to happen later. The peak year of Defence expenditure will not be reached until next year or perhaps the year after. The Committee will have in mind, of course, the warning contained in the Defence White Paper last month, that the total expenditure for the five years will exceed the sum of £1,500,000,000. I cannot give the additional figure, but it may well be something substantial. And there is a further warning I must give to the Committee. In view of this huge outlay on war material, and of the character of the annual maintenance which it will subsequently require, the drop in estimates in future years may not be as rapid or as steep as we could desire. We may expect a sensible diminution of the annual burden before the end of the quinquennium, but though the fall in the curve should be considerable, future maintenance expenditure, replacement
  62
  and maintenance, must remain very substantially higher than in the past, when our armaments were so much smaller.
  I have stated these three considerations to the Committee as clearly as I could and with complete frankness, and I would only wish to add this before I announce my conclusion. Nothing would contribute so much to the ultimate reduction of the burden as the increase of international good will and the general reduction of armaments which should flow from it. The policy which we are pursuing—the actual achievement of the Anglo-Italian Agreement is a striking and encouraging example—is aimed at this end. But until the end is more fully achieved, we are bound to pursue the plan of rearmament which we announced and which the country has so generally approved. In these circumstances, I have had to meditate long and anxiously to decide whether I should be justified in taking what for the moment, but perhaps only for the moment, would be the easier course of covering this £30,000,000 by loan money. I have come to the conclusion that I should not be doing my duty if I followed that easier course. If this year stood alone, if the Estimates so far presented for Defence were the total of such Estimates for the year, if we did not foresee higher maintenance charges in the future, another view might be possible; but when fining ourselves rigidly to a period expenditure on Defence is mounting, and will mount further, bringing heavier maintenance in its train, we must take some portion of the increase on our own shoulders by additional taxation now. By so doing, hard as that may seem for the moment, we shall reduce our difficulties hereafter, we shall assist our further borrowings, and we shall show the world that this country does not quail when it faces the burden of its task.
  How is it to be done? In framing my plans for raising £30,000,000 by additional taxation, I have examined a large range of proposals, some of them suggested from outside sources, some of them the result of cogitation by myself and my advisers. The taxes selected must be such as to give an adequate yield, they must be capable of effective administration and, taken together, they ought to represent a contribution for the common needs of our defence from the country as a whole. Every citizen is vitally interested in defence, though the money

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  contribution will, necessarily and rightly, differ in amount. It follows that the extra sum in my judgment must be found partly by direct and partly by indirect taxation. I am proposing that the major contribution should come from direct taxation.

  INCOME TAX CHANGES.
  After a full examination of many suggested alternatives, I propose to rely upon an increase in three existing taxes, the Income Tax, the Oil Duty and the Tea Duty. When the standard rate of Income Tax is already at 5s. in the pound, it is especially necessary to take steps to help to secure that we do not lay a heavier burden upon productive industry, or, at the lower end of the scale, on the smaller income. My proposal has been framed with these two urgent considerations fully in mind. I propose to increase, subject to provisions I am going to mention, the standard rate of tax by 6d., making it, therefore, 5s. 6d. In assessing the profits or gains of trade under Schedule D, there is a deduction commonly called the wear and tear allowance, which is intended to represent the diminished value by reason of wear and tear during the year of any machinery or plant used for the purposes of the trade. After the second Budget in 1931, this allowance for wear and tear was increased by Lord Snowden by 10 per cent. as a set-off in favour of industry employing plant and machinery as against an increase in the standard rate of tax then imposed. I propose to adopt the same process and to make the additional allowance 20 per cent. instead of 10 per cent. The effect will be to increase in the case of such enterprises the figure which may be deducted before arriving at taxable profits and therefore, to reduce the total upon which the tax is charged. This increase which I am making in the wear and tear allowance is roughly equivalent to the incidence of the additional 6d. on the reserves of companies engaged in industries employing plant and machinery. This, therefore, will cover the very important basic trades which give a great deal of employment, and the purpose of the concession is to avoid impeding their development. I calculate that concession will lose me £2,500,000 in the current year and £3,000,000 in a full year. I would add that I am aware that this
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  adjustment cannot be a precise one in every case, but it is so important to avoid placing undue burdens on this class of enterprise, especially at the present time, that I feel abundantly justified in giving this measure of relief.
  At the lower end of the scale I shall make a modification the benefit of which will be directly felt by the smaller Income Taxpayer. As the Income Tax now stands, after passing the region which is free from tax owing to. allowances of different kinds, the next £135 of income is charged at one-third of the standard rate. With the standard rate at 5s., one-third is 1s. 8d., and, with the standard rate at 5s. 6d., one-third would be is. 10d. an increase of 6d. in the standard rate would, therefore, raise the charge seriously on the smaller income. I propose to keep the charge on the first £135 of taxable income at 1s. 8d. The Committee will see that that is a very valuable concession. The individual whose taxable income does not exceed £135—there are about 2,000,000 small Income Taxpayers in that position—will be unaffected by the increase in the standard rate. My other proposals will affect him. For those above that figure, there will be a modified proportion of relief which gradually diminishes as the total of taxable income rises.
  Although the usual White Paper will contain the complete scale setting out the effect, the Committee might like me to give one or two illustrative figures at once. It will work in this way. There will be no increase of tax on earned income in the case of a single person up to £290 a year, or in the case of a married man with one child, up to £460 a year, or with,two children, up to £540 a year. The reason I do it is this. I feel that so high a rate of Income Tax, notwithstanding existing allowances, bears hardly upon the smaller Income Tax payers, and especially those with families. They got no relief when the Income Tax was last raised; they will contribute to the indirect taxes which it remains for me to define; and indeed, many of them will probably feel in a greater degree than other taxpayers the effect of the increase in the oil duty, for oil includes petrol. With these considerations in mind, I feel justified in affording the relief which I have described.
  Mr. Lees-Smith: What will that cost?
  Sir J. Simon: I am afraid I cannot give the figure for the moment. There is one further modification of the Income Tax which must accompany a rise in the standard rate to 5s. 6d. Income Tax under Schedule A is payable on 1st January in each year, and in the case of rented property is paid by the hand of the tenant, who deducts what he has paid from the next quarter's rent. There will be cases where Schedule A is charged at the standard rate in respect of rented property with the result that if the tenant had to pay the whole tax on 1st January, this would be more than one quarter's rent. I propose to provide that in such cases the tenant may postpone the payment of this excess for another quarter, when he may make a further deduction from rent without being out of pocket. These Income Tax proposals taken together will provide me with £22,250,000 this year and in a full year they will provide me with £26,500,000.

  OIL AND POWER ALCOHOL.
  I now come to the contribution to be made by the indirect taxpayer. I propose to call for a moderate increase in the Petrol Duty, which has stood at 8d. per gallon since 1931. The duty on light hydrocarbon oils will be increased to 9d. as from 6 o'clock this evening. I made inquiries, Sir Dennis, and ascertained that if I did not make that statement before a quarter-past five o'clock nobody would be able to get anything out of it. There will be a similar increase in the duty on heavy oils used for road transport which my predecessor raised in 1935 to the same rate as that on petrol. I expect these increases to give me an additional revenue of £5,000,000 in the current year. To avoid any misunderstanding, I must make it clear that these increases apply only to light hydrocarbon oils, and to heavy oil used for road transport. The present duty of id. per gallon on heavy oils used for any purposes other than as road fuel remains unaffected.
  As a corollary to the Petrol Tax, I propose to apply an Excise Duty of 9d. per gallon, that is the same rate as the new petrol tax, to power alcohol. The practice of mixing a proportion of power alcohol, or power methylated spirits, as it is technically called, with petrol, has grown markedly in recent years and in my opinion the time has come to tax it equally with the petrol which it displaces.
  This duty will come into force from 2nd May and will, I expect, yield £350,000 in the current year. There is a further minor point relating to the Petrol Duty which I may mention. The existing statutory provision authorising repayment in respect of fishing boats which use petrol, has been found in practice not to cover all the cases which deserve relief and I propose to rectify the position in the Finance Bill. I wish to thank my hon. Friend the Member for the Bodmin division of Cornwall (Mr. Rathbone) for having drawn my special attention to the point.

  TEA DUTY.
  I still have nearly £3,000,000 to find and a small contribution drawn from practically every home in the land will produce what is needed. I propose to raise the duty on all tea, Empire and foreign, by 2d. per pound. This will maintain intact the existing margin of preference of 2d. per pound and it is estimated that the extra yield this year will be £2,750,000, and in a full year £3,250,000. I well understand that even an extra halfpenny per week is a material and appreciable addition to the expenses of those with the smallest incomes. [HON. MEMBERS: "Why do you do it? "] Why do I do it? I believe that there is a willingness and even a pride in the humblest homes to take a share in this rearmament outlay, for defending those homes from peril, just as much as in the homes of more comfortable and wealthy people.
  I am now able to set out my final figures. I put the revenue on the existing basis of taxation at £914,400,000. The additional taxation which I propose, I estimate at £30,350,000. The total estimated revenue is, therefore, £944,750,000 which will cover my estimated expenditure of £944,398,000 and leave me a small surplus of £352,000.
  I thank the Committee for its patience, and I would like to say this in conclusion. It is the ambition of every Chancellor of the Exchequer to be able to announce remissions of taxation and a lightening of the burdens which fall on the shoulders of the people. Such is not my happy lot to-day. The unprecedented total which I have to provide, is needed for three main purposes—first, for the financing of our multifarious social services which spread so much benefit and help where it is needed; secondly, for the

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  preservation of our financial strength which is absolutely vital to our Defence if trouble comes; and, thirdly, for the protection of our native land. We all realise —there is no difference on this matter between one part of the Committee and another—that the mere piling up of ever-greater armaments, by itself and in itself, is not a certain means of securing safety or ensuring peace. But this necessary outlay on rearmament is being accompanied by an active policy for promoting reconciliation and good will with other nations—a policy which is already beginning to show results. In pursuit of this double objective, the load which we have to bear will, assuredly, be carried with the dogged determination and dauntless courage of the British race.
  CUSTOMS AND EXCISE.

  INCREASE OF CUSTOMS DUTY ON HYDROCARBON OILS.
  Motion made, and Question proposed,
  " That as from six o'clock in the evening on the twenty-sixth day of April, nineteen hundred and thirty-eight, the customs duty on hydrocarbon oils shall be at the rate per gallon of ninepence instead of eightpence, and any rebate allowed on the delivery for home consumption of hydrocarbon oils, other than light oils, shall be at the rate per gallon of eightpence instead of sevenpence:
  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913. —[Sir J. Simon.]
  5.24 p.m.
  Mr. Attlee: The Chancellor of the Exchequer has explained to us, with the lucidity which we expected from him, the figures of this year's Budget, and has laid before us his proposals for meeting a part of the deficit on this unbalanced Budget. I thought that he struck a somewhat quiet note throughout his speech. There was an absence of excitement in the Committee right through his statement. Perhaps the truth is that this was due not to any particular defect on the part of the Chancellor himself, but to the fact that the sport has gone out of the game of Budget-making. Now, any one, by a little manipulation, can bring out his Budget, because what he cannot reach, he puts across to be met out of loans. When one recalls the performance formerly put up by the right hon. Gentleman the Member for Epping (Mr. Churchill) in the careful balancing of a pound here and a
  68
  pound there, one is struck by the difference. Now the Chancellor starts off with a huge sum of £90,000,000 to be met from loans, and it is merely a matter of choice on the part of the Chancellor, whether he puts on a little taxation or takes off a little taxation. There is no attempt to say that we must have a balanced Budget. It is right to call attention to that fact, because we are in for a series of unbalanced Budgets. What struck me most about the right hon. Gentleman's survey was how closely he kept to the mere consideration of figures, and how little he looked at the general position of trade or at world conditions. His mind was dominated by the question of armaments, and although he protested at the end that the piling up of armaments was not enough, it was obvious that his whole Budget was directed to that end.
  Let me call attention to one or two features of this year's accounts. We are borrowing £90,000,000. That is the amount of the entire debt on the Unemployment Fund from 1920 to 1932, which called down the animadversions of the May Committee. If the present Government were to be weighed in the scales of the May Committee, they would come out of it pretty badly. The Chancellor of the Exchequer never mentioned this terrible burden in this unbalanced Budget, though he ought to be sitting there in sackcloth and ashes, according to the May Committee. Then the May Committee made great.play with the question of the balance of payments. We have heard nothing about that to-day, but there is a heavy balance of payments against us, and it is to be increased by large purchases of aircraft from the United States. Yet the right hon. Gentleman says nothing about the balance of payments. That is all left out of the picture. All we have is this enormous increase in armaments expenditure, and we have the ominous words that the peak is not yet. The peak may be reached next year or the year after. The huge figures already given, apparently, were only illustrations. They are to be increased more and more.
  Then we get the surprising remark of the right hon. Gentleman that this does not stand alone, that it is linked with the wonderful foreign policy of the Government. We are getting the results to-day, in these Budgets, of the wonderful foreign

  69
  policy of the Chancellor of the Exchequer himself. The people of this country are now paying for the National Government, and paying for the Foreign Secretary of a previous time and, so far from embarking on a policy of peace, the right hon. Gentleman indicated that these things must go on. The Prime Minister when he was Chancellor of the Exchequer used to talk about a certain time at which, when we had rearmed, there would come a halt. But the halt has disappeared entirely from the Chancellor's speech, and the reason is very clear. It is because in the foreign policy upon which we have now embarked, there is no question of disarmament. There is no question of achieving security. We are entering upon a race in armaments in a world of armed anarchy and we are doing it with an enormous National Debt. The Income Tax is now to be 5s. 6d. in the £—and this is only about the second of these war Budgets. The Chancellor of the Exchequer is at present carrying on because there has been a trade boom, but we are now getting towards what is called a recession. I understand that we have passed from the boom, that there is every sign of a recession, and that the Budget will be still more unbalanced next year if the recession of trade should grow. But that will not matter, because the right hon. Gentleman will only need to borrow some more.
  I want to call attention to the serious position of this country as we face it today. I do not propose to argue on orthodox lines on the Budget and to consider all expenditure as an evil. A great many of the items in this Budget are merely different arrangements for redistributing the national wealth. It is not done in the way we would wish—it is a matter of mere redistribution—but we have the fact all this time that we are in the position, which we have never had before except in time of war, of huge borrowing with a tremendous Income Tax. The Chancellor has brought forward certain proposals. I do not know how far his attempt to stop what I should prefer to call tax dodging will really go—it seems to me that the tax dodgers are always a few moves ahead of any given Chancellor of the Exchequer—but I should like to have seen him looking after some of the rich people a great deal more. What he has actually done is that he has
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  raised the Income Tax. I can see no reason why there should be special benefits for the people already benefiting so specially from the money that is being expended, as I think wastefully, on rearmament. They have already received great benefits from the derating of machinery, and they will now receive more.
  You are going again to put an extra 2d. on tea. When it was put on before, I referred to the lyrical statement of the right hon. Member for Epping when he was taking it off. We know that it is going to hit unduly the people in the home. We say that this is expenditure which is in the main to follow a policy which is not the policy of the mass of the people of this country, but the policy of a privileged class. The Government are following out a policy which is not the policy on which they went to the country, but the policy of their own material interests. I think this Budget is a mark of the reckless finance, the reckless policy, of the National Government, but fundamentally it is just what one expected from 6½ years of a foreign policy that has been, in my view, both wicked and foolish. The man who is now going to make us pay the bill is the man who was mainly responsible for the circumstances which made the bill possible.
  5.33 p.m.
  Sir Archibald Sinclair: The Committee undoubtedly entertained, as it had a right to entertain, high expectations of the first Budget statement of the present Chancellor of the Exchequer, and it has not been disappointed. We have listened to the form of the statement with admiration, and when we read the statement over and ponder it at leisure, our admiration at the Chancellor's candour and the cogency of his arguments will, I think, tend to increase; but as we measure his proposals against the gravity of the financial and economic situation with which we are confronted, I am afraid that we are bound to feel serious anxiety. On the one hand, the international situation is imposing upon the taxpayers a burden of expenditure on armaments which is unprecedented in peace time. Indeed, the Chancellor himself made it clear that, as he said, nothing would contribute so much to the relief of this burden of expenditure as international good will. He went on from that to claim that the

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  policy which the Prime Minister is now pursuing was meeting with a substantial measure of success and held out the best hope of a reduction in this armament expenditure. But I cannot help observing that, enthusiastically as the Government plume themselves on the success of their foreign policy in preventing war, and fervently as the Prime Minister's so-called successes are extolled in the Government Press, nobody, and least of all the Chancellor of the Exchequer in his Budget statement to-day, suggests that these demonstrations of satisfaction with the Prime Minister's policy are to be taken so seriously as to be reflected in a reduction of our armament expenditure.
  On the other hand, the economic situation is now recognised as being extremely critical. When we on these benches warned the House last November of the approaching setback in trade, Ministers mounted their pedestals of complacency and denounced us as scaremongers. Now the existence of the trade recession is no longer denied. The Chancellor pointed out that the second six months of the last financial year were less prosperous than the previous six months, and he observed that this indicated a trend which was worthy of the serious attention of this Committee. The only question is how that trend is to be prevented from developing into a slump. So the Chancellor of the Exchequer seems to be confronted with the two secular enemies of the Treasury, mounting expenditure, and not perhaps this year, but next year, an inelastic revenue, and next year or the year after he will have to confront them both at the same time.
  I think it is clear from the statement which the right hon. Gentleman has made to-day, and from the figures which we see in the Estimates for the coming year, that expenditure is getting out of control. I am not satisfied that the machinery for controlling this vast expenditure upon armaments is proving effective, and it seems to me that this question of expenditure will need the most careful attention of this I rouse. The Leader of the Opposition reminded up that expenditure is now far ahead of the level at the May Committee was appointed in 1931, and the fear that is working in the minds of some of us is that we may once more get into the kind of situation in which, as a panic measure, a wholly unsuitable
  72
  kind of inquiry into expenditure is demanded, and an inquiry which wholly unsuitable kinds of individuals are appointed to conduct, who are incited not to prune carefully the various growths of expenditure which may be found in the annual budget, but to use ruthlessly the axe, cutting down the useful expenditure along with that which is wasteful. I hope the Government will consent, and that this Committee will insist, that a careful inquiry should be undertaken into this problem of expenditure before it is too late and that serious efforts should be made to check and control it.
  I was very glad that the Chancellor made the Committee face up to the real necessities of the Fixed Debt Charge. I think his predecessor for some time let us off too lightly in not taking into account, for example, the accrued interest on the Savings Certificates, and I am very glad that this Chancellor has had the courage to make the demand and to increase this Fixed Debt Charge and bring it up to the level of £230,000,000. This is not a suitable occasion on which to go into the question of food storage, but in view of the part which I have played in the Debates on food storage and in supporting the demands of the hon. Member for Oxford University (Sir A. Salter), I would like to express to the Chancellor and the Government my gratification that some effective measures seem to have been taken to deal with that problem; but on a suitable occasion we shall want to have further particulars about those purchases.
  I am sure we all welcome the outline which the Chancellor has given us of his measures for dealing with tax avoidance, and we regret that the measures taken by his predecessor have proved ineffective.
  Sir J. Simon: I really said exactly the opposite. The provisions of the Act of 1936–37 have been extremely effective, but it still remains the case that there are some loopholes.
  Sir A. Sinclair: I shall be able to maintain the proposition which I made, that the efforts made by the right hon. Gentleman's predecessor were ineffective. In 1936 he assured us that they would result in an increased yield from the Surtax of £2,000,000 in that year and £4,000,000 in the following year, and in spite of the

  73
  increased prosperity of the country and of the fact that larger incomes must have been coming under charge, the Surtax fell short by £3,500,000 of the Prime Minister's estimate when he was Chancellor of the Exchequer the year before last and £1,000,000 last year. Therefore, I think I may repeat my assertion that the Prime Minister's efforts when he was Chancellor of the Exchequer proved ineffective to fulfil the expectations which he held out to this Committee in 1936.
  I thought the Chancellor's arguments in favour of meeting by taxation the deficit which is arising this year were cogent and unanswerable, but they would have been equally strong last year. If the case for dealing with this deficit by taxation this year is strong, it was far stronger last year, and that was the time when it ought to have been done. The arguments which the Chancellor of the Exchequer used to-day justify the line which my hon. Friends and I took on the Defence Loan Act passed last year. As for the increase in the Tea Duty, that I very much regret. The fact is that when the Tea Duty is increased, the burden of the increase is alleviated to those who purchase the more expensive kinds of tea by the fact that the blend is altered and quantities of cheaper brands of tea are brought into the more expensive blends; but when you get to the cheapest qualities of tea, that cannot be done. Therefore, the effect of an increase in the Tea Duty is to increase disproportionately the burden on the poorest of the poor. To-morrow we shall come to closer grips with the Budget after an interval for study and reflection. In the meanwhile let me assure the Chancellor of the Exchequer that we realise to the full the difficulty and the delicacy of his task. I have already paid tribute to the courage with which he has faced it, and in my concluding sentence I would like to be allowed to congratulate him on the success of the speech which he has made.
  5.46 p.m.
  Lieut.-Colonel Moore-Brabazon: I know that it is customary to adjourn early after the Budget, but it is still extremely early and I hope that nobody will resent one or two of us getting up and saying a few words. I look upon it as a privilege to he able to congratulate my right hon. Friend on the way in which he has presented his case to-day. I have listenéd
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  to many Budgets, and I think that everybody will agree that practically always the first three-quarters of an hour is immensely dull and most incomprehensible, whereas my right hon. Friend, a lawyer of great reputation and a great opener of cases, interested us even in that dull three-quarters of an hour when nothing must be said because it might disturb the Stock Exchange. I am proud to be the first from this side of the Committee to congratulate him on the way in which he dealt with that dull and perhaps sombre picture. Nobody was really expecting him to have to find £30,000,000 at the end, and certainly not in the way in which he has found it.
  It seems to me that he has distributed that sum fairly evenly between direct and indirect taxation, but I want to point out to him that I think he will have trouble in one direction. He has taxed our income, he has taxed our food, and he has taxed our movement in the form of transport. I am sorry that he has fallen into what has always been the fetish of the Treasury, and that is to tax road transport as against rail transport. It will be resented up and down the country. If we move by omnibus or in other ways upon the roads we are to be taxed, whereas if we move upon the railways we shall go untaxed. If transport is to be taxed it should be done in the broader sense, and we should not fall into the Treasury trap of always penalising road transport as against rail transport. I am certain that now that road transport is getting organised along powerful lines, although not nearly as powerful as the railway companies, the Chancellor will find some trouble in passing the Budget.
  5.49 p.m.
  Mr. Ellis Smith: I listened to the Chancellor of the Exchequer's statement with great interest. After the last two Budget statements the Parliamentary Secretary to the Treasury moved the Adjournment about 6 o'clock and the House proceeded to consider foreign affairs. Then for two days we listened to orthodox analyses from both sides of the Committee of the nation's finances. I want to examine the nation's finances from the point of view of the working class in particular, and from the point of view of the people generally. The Chancellor rightly said that Budget day was the annual review of the nation's finances,

  75
  and it is significant that he devoted 20 minutes to proposals to prevent wealthy people avoiding their legal payments to the State. Then he pointed out, what I had already noticed in the Blue Paper, that there was to be a saving of £8,500,000 on unemployment assistance. Yet the mean means test is still in existence. He went on to propose an additional duty on tea which would bring approximately £3,000,000. This additional tax will be paid by the old age pensioners, the widows and the unemployed. It is from the point of view of those people in particular that I want to speak.
  I will not make an orthodox analysis of the State's finances, but will make an analysis from the point of view of the people to whom I belong. May I compliment the Civil Service on the clear picture of the State's finances which they yearly present to the House? I say that because I have had experience in big-scale industry and I realise that a tremendous amount takes place in all establishments which, if the board of directors or the managers knew about it, they would not allow to take place. What applies to industrial establishments applies equally to the nation, and if it were not for the fact that the House has presented to it a clear statement of this character, in addition to reports, such as the Inland Revenue report, which are presented from time to time, there is no knowing what would go on in the State. I have been thinking what must be the position in certain countries where they do not have clear statements prepared such as we have here year by year. I want to deal with the policy behind the Budget statement and to base my remarks upon an extract from the "Economist" of 10th April this year. I would like to ask the Chancellor or the Financial Secretary whether they are prepared to accept what the "Economist" says—
  " The concept of the national income is one which has attracted statisticians almost since the birth of their science. Nor is the national income merely a statistician's plaything. It is of great importance for the formulation of economic policy to know the approximate dimensions of the national income and to measure its fluctuations."
  I should like to ask the Chancellor whether he accepts the following:
  " It is also the criterion of the policy. The aim of all economic management "—
  76
  I address these remarks also to my own party—
  " should be to increase the aggregate incomes of the community's members."
  I accept that statement, and I would ask the Chancellor whether he also accepts it, because this is the financial position. The national income in 1911 was approximately £2,000,000,000; in 1924 it was £3,500,000,000; in 1931 it was £3,600,000,000; and in 1937 it was £4,400,000,000, or an increase since 1924 of £900,000,000. I take those figures from Lloyds Bank Review. I find that for each pound net profit made in 1932, industry is now making 35s. Where is this enormous increase in wealth going? Is it going to the workers, the old-age pensioners, and the widows? Is it going to the unemployed? Where has that increase come from? Has it come from the rich people and from those who are in the majority in this House. I have no hesitation in saying that it is no' coming from them, because they an spending more than ever and are living better than ever. Has it come from foreign investments? Pages 60 and 61 of the clear Inland Revenue Report prove that that is not the case.
  Where then has this increase in national wealth come from? It has come in the main from the increased mechanisation in the mines, from the application of electrification to coal-cutting. What applies to the mines applies to the steel industry and to nearly every other industry. The American Government have recently issued a report proving what I am saying. They say that for every thousand workers employed to produce a certain number of commodities in 1910, only 537 were required in 1936. That is where the increase in national wealth has come from, and the people who are mainly responsible for the increase are relatively speaking no better off than they were. Who is receiving this increase in the national wealth? Sixty per cent. of the people—those who work for their living—receive less than £122 a year, the total being only one-third of the national income. According to Table 57 in the Inland Revenue Report, 88,951 people received in 1936, after all the manipulation of their financial experts and of the legal profession about which we heard in the statement made by the Chancellor this afternoon, a total of £446,525,000. We find on pages 50 and 51 of the report

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  that, despite the enormous increase between 1928 and the present time in the gross incomes of these people of £399,000,000, the average effective rate of tax levied on each pound of actual income has decreased. In 1928 the average effective rate of tax was 22.67d.; in 1934, 20.88d.: and in 1936, 21.97d.
  Mr. H. G. Williams: Is the hon. Member aware that the reduction of the net effective rates is almost entirely due to the concessions allowed in respect of personal allowance to the small payers of tax?
  Mr. Smith: I had already armed myself against that interjection. Page 48 of the report is a reply to the hon. Gentleman. What I am saying is that having regard to the increase in national wealth which has been produced by the people who do not pay tax or Surtax, the relatively well-p laced people are better off than ever and they pay a smaller percentage in taxation. We find on page 67 that, despite the large numbers who have removed to the Channel Islands or to other countries, 88,951 persons received in the financial year 1935 £446,000,000. The time has arrived when there should be some plain speaking in Parliament. The party to which I belong was born out of the aspirations of the common people of this country. It has its roots in the struggles of the people. Some of us were born of the people who are responsible for the production of this enormous increase in wealth.
  Along with that increase we find there has been an enormous reduction in the payments for war pensions. In 1924 the expenditure on War pensions—a debt which we owe to the cream of this country —was £69,600,000, but in 1938 it had been reduced to £39,600,000, yet every hon. Member, irrespective of party, knows the indictment which is made against the Ministry of Pensions with regard to its administration of War pensions. Therefore, there is something sadly wrong if we are prepared to sit in this House and to acquiesce in a state of affairs under which an enormous economy is made at the expense of those, and of their dependants and children, who sacrificed themselves for the country during the years 1914–1918. During the recess I have been reading "Sybil, or the Two Nations." Disraeli said that the two nations were the rich and the poor
  78
  nations, and those words are as true today as when Disraeli wrote them. He said to Hyndman in the eve of his lifetime that he wanted the nation to have peace with comfort "but who will say that in our day the old age pensioners and the widows can have peace with comfort on a pension of 10s. a week? I have received three letters. The first one opens:
  " Sir, God bless you all. We are wondering if you could please give us old age pensioners a little more. When we have paid 5s. lodgings, when we have paid our insurance, and a bit of shoe leather, we have nothing much to live on. We cannot work at 65, or we would be glad to get it. God bless you! When we have paid our lodgings they nearly tell us to go. We can hardly go to the fire; we have to go to the Library in order to get warmth. That is the life in the potteries. God only knows."
  That is typical of the way in which the old age pensioners are living. Here is another letter:
  " Dear Sir,—Just a few lines to let you know that they are laving to rest to-day one more human being who has been brought to his grave earlier than he ought to have been through the means test. He was out in France with Major Attlee. Sixteen months ago his wife died and left him with grown up girls. They are like every person's children, they have not turned their money up as the Government says they should do and, Sir, they took his pay, of course, from him at the dole. Last Sunday night he almost severed his head from his body, and a smart end for any man to come to before they would find him a bit of work. Dear Sir, when you are fighting them M.Ps. remind them of what the ex-service men have done. Use this case of one among the batch I know you have got. His name is F. Cappe, South Terrace, Boothen, Stoke on Trent."
  To-day the Chancellor of the Exchequer has reminded us that the Exchequer receipts, amounting to £872,000,000, are five times greater than a quarter of a century ago, and yet the old age and widows' pensions are still 10s. a week. This is no party question but a humanitarian question. I have a copy of some proposals which are to be put before the Manchester City Council next week because local authorities are bubbling over with indignation at the way in which they are being treated. They have in many cases to increase the rates on account of the supplementary grants which have to be made to the poor people in their localities. In addition to that they are having to supplement the grants made to old age pensioners and widows. Therefore, I make no apology at all for having detained the House this evening in a most

  79
  unorthodox fashion. Probably I may be charged with breaking down tradition, but I think the time has arrived when a certain amount of tradition ought to be broken down in view of these facts.
  Then I would remind the House of a statement made by Lord Runciman's father. This is typical of those who have exploited our people for generations. In his will Lord Runciman, a Tyneside millionaire, made a bitter attack on the Death Duties and Super-tax and charged his heir, the present Lord Runciman, a former President of the Board of Trade, to crusade against them to the best of his ability; and then he left £2,250,000. That is a state of affairs in which we ought not to be prepared to acquiesce. Though the national income is going up in the way that I have shown, we seem to have reached stagnation in the development of the social services. Since 1931 there has been no concession whatever worth talking about to the people to whom we on this side belong. Therefore, on the occasion of this annual review of the nation's finances, we should have been lacking in our duty if we had not drawn attention to the present state of affairs, in order that our people may be represented in this House as they should be represented.
  6.8 p.m.
  Mr. H. G. Williams: The hon. Member for Stoke-on-Trent (Mr. Ellis Smith) said that it might be thought that he was breaking traditions. I have no objection to people breaking traditions, but when you break them you should break them fairly. The hon. Member has quoted a great many statistics from the Annual Report of the Commissioners of Inland Revenue, a document with which I am very familiar. If this were the appropriate occasion many of the statements he made would call for quite long comment, because some of his conclusions were quite erroneous. He has made statements with regard to the social services which are quite unwarranted. The suggestion that there has been no improvement in the last six years has not the faintest justification.
  Mr. E. Smith: I did not say that. What I said was that there had been no concessions. There have been relative improvements, but no concessions worth talking about.
  Mr. Williams: There have been enormous concessions; as a matter of fact, concessions greater than we can afford if we are to preserve the employment of our people. That the Debate should be prolonged on Budget night might break tradition—probably it would be a good break—but what is unfair is to introduce a line of arguments not appropriate to this occasion, because things will be said which ought to be replied to and to which there is a very considerable reply. The hon. Member contrasted the wealth of the nation now with what it was 25 years ago, and said that the old age pensioner was still getting only 10s. But the old age pension was originally 5s., and just prior to 25 years ago there was no old age pension at all. The hon. Member totally ignored that fact, and therefore I charge him with an unfair presentation of a case. It is very easy to produce letters explaining hard cases; we all know of them.
  He said the amount expended on pensions by the Ministry of Pensions has fallen by so many millions since a certain date. Why has the expenditure declined? The main reason is that children have grown beyond the pension age, that widows have died, that widows have remarried, and that some of the pensioners have died. All the economies or the harshness—if there has been any, which I deny—will not, even if the worst interpretation is placed upon the harshness, account for more than about r per cent. of the reduction. Therefore, it is not fair to introduce on this occasion considerations which are really out of place to-day. There are plenty of other opportunities. When we are reviewing the general expenditure of the nation, to bring in odd cases of complaint about the rate of old age pensioners is to take up an unfair position. The object of the debate on the Budget is that statements may be made in circumstances where, if there is a reply, the reply will probably be made. That is why I think the hon. Member's action has been unfair.
  Having said that, I should like to congratulate the Chancellor of the Exchequer on what was really a lucid statement. It is always customary to congratulate the Chancellor upon a lucid statement; sometimes that is a true description and sometimes it is not, but to-day it was true. In one sense this is going to be acclaimed as

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  a very good Budget. I will explain why. On the Third Reading of the Finance Bill last summer I took occasion, in common with one or two other Members, including, I think, the hon. and gallant Member for Thanet (Captain Balfour) to draw attention to the grave increase in public expenditure. I prophesied then that unless we were careful we should find ourselves heading for another disaster comparable to that of 1931. I have taken the view in recent months that this year's Budget would be all right but that next year's would be a disastrous one. In fact, we have got a very unpleasant Budget this year, and it is going to awaken people's minds to the grave realities of the financial situation. In that sense this Budget is a good one, although an unpleasant one.
  I am afraid that the increase in the standard rate of Income Tax, even with the important concessions in respect of wear and tear, will have some adverse effect upon trade. The greatest social service we can render is to put people into employment, and anything that hinders that is bad. High taxation is one of the decisive reasons why the number of the unemployed in this country since the end of the War has never fallen below a million, except for a few months immediately after the War. To-day we contemplate quite calmly a level of unemployment during periods of good trade which is four times that which prevailed in pre-war days. We have all got used to that situation, and none of us will face up to the reasons for it. One of the main reasons is the excessive burden of taxation. People think that all this increase is due to rearmament. I have made a comparison of this year with 10 years ago. I have put it on a comparable basis, because then we were receiving reparations and receiving and making payments in respect of War debts. To make a fair comparison that must be left out of account. We were then repaying debt to the tune of £55,000,000 a year. I have made an adjustment for that. I have brought in local expenditure borne out of rates because, on account of the close connection between the National Exchequer and the local authorities, we do not get a proper picture unless it is brought in.
  The total expenditure in 1928–29 was £874,000,000. This year it will be £1,234,000,000, including the part which
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  will be met out of loan, an increase in 10 years of £360,000,000 and a sum which, in pre-war value is equal to the total of our pre-war Budget—after making an adjustment for the change in the value of money in the meantime. If we leave out of account all Defence expenditure, the increase in the 10 years has been from £762,000,000 to £892,000,000, about £130,000,000. All parties in this country cheerfully vote for subsidies to this and that industry and this or that social service, and for this or that advantage, and we encourage local authorities to increase their expenditure. The expenditure of local authorities is now so high that people are paying excessive sums in rent. Speaking roughly, on the rent of an ordinary house to-day, taking everything into account, the landlord retains about one-third, where rates are compounded with the rents, and the rest goes as repairs, rates, taxes and the rest of it. Rents are so high that poor people cannot afford to feed themselves properly. We have pushed up local expenditure to a level at which rates become difficult to pay.
  Mr. Pearson: We need rating reform.
  Mr. Williams: It does not matter what reform we have. If our expenditure is excessive, compared with our income, something has to suffer. You cannot blew your money in one direction without going short in another. That is the real hard lesson that we have to learn. I have been going round the country in the last few months giving lectures upon economy in public expenditure. I have found my small audiences interested, the Press, if they reported a lecture, not particularly interested, and public opinion indifferent. I am to speak in Leeds shortly; perhaps I might get more attention, now that we have this Budget. I am urging the necessity of greater care in public expenditure, and I am certain that the warnings in which I have been indulging will receive much more notice in the next few months than has been the case recently.
  I rather regret that the Chancellor has not faced one grave economic problem. I would remind him that in 1931 we were faced with the twin problem of a Budget which we could not balance, and an adverse balance of external payments which ran up to £100,000,000, as far as it could be estimated. There was a

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  certain element of speculation. Unless there is a drastic change in the current year, the adverse balance of payments in the next few months will be worse than in 1931, and the reason for it will be obvious. Any system of public works, whether designed to relieve unemployment or as a form of rearmament, which stimulates internal consumption without doing anything to help the export trade, leads to a large increase of goods. That is what is happening. Germany's complaint that she does not get foreign exchange is self-inflicted upon her by her gigantic scheme of public works and rearmament.
  Our difficulties, which will grow, in financing our imports, are due to exactly the same cause. If you examine the trade figures you will find that we import a vast quantity of goods that could be made in this country. The hon. Member who asked at Question Time about German cars coming into this country unfortunately asked how many Opel cars were coming in, and was informed that the Board of Trade did not know. The Board of Trade were not too anxious to give him an answer. I offer him the suggestion that in framing his question next time he should work on different lines. He received a most disappointing answer from the President of the Board of Trade. We must do something to stimulate employment in this country and then our revenue will be more abundant and—
  Mr. E. Smith: I gladly accept the advice of the hon. Member, but if he will look at Question 7 he will find that I asked the President of the Board of Trade to state the value of the motor cars that had been imported.
  Mr. Williams: Unfortunately, the hon. Member asked for information only for 1937. If he had asked for figures for the first three months of this year and for the comparative figures of the first three months of last year he would have received some really interesting information.
  We are up against a great problem. I shall not have the slightest hesitation in saying to my constituents that it is only right and just that even the poorest of them should make some contribution to the national emergency. I am rather ashamed of the Labour party to-day. We should regard it as improper, at a
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  time of national emergency, that every person who believes in freedom and democracy should not pay some contribution towards it. It is typical of British people. They are willing to bear their share of the burden, but they require to be satisfied that it is not an unfair share of the total. I do not think any decent and reputable persons, of either small or moderate means, will object in principle to being asked to pay 2d. per pound extra on tea. They will not like it, but they will bear it far more cheerfully than the Labour party seemed to think when the Chancellor announced it to-day.
  I am a little distressed, however, that the gentleman who has really imposed the increased Tea Duty is not a Member of this House. The President of the Council of Ministers in the Irish Free State—I think they call it Eire now—is taking the whole of the Tea Duty and one quarter of the Petrol Duty. Perhaps this is not the time to discuss the Irish Agreements, but he is getting away with £4,000,000 a year. It is, financially, the rottenest agreement I have ever seen. They are getting away with two years' payments, and the boodle looks like £130,000,000. I should never congratulate myself on negotiating on those lines. After all, we were getting on quite comfortably without the Agreements. We were much too anxious to negotiate. There is a great mistake which Members of the Government seem only too anxious to make. They do not seem ever to have got married. After all, if you rush at the lady you generally get a rebuff. When they go out after these people, Members of the Government are much too inclined to rush at them, and they have not got away too cleverly. I must not abuse my position by attempting to discuss the Agreements with the Irish Free State, but I would say that it represents nearly £5,000,000 of the deficit that we have to bear, and a substantial part of the new burden cast upon our people. I hope, when the time comes, that we shall have a much more satisfactory explanation than we have had of why these very large concessions have been given—concessions which represent a serious inroad into our financial resources.
  I hope that my prediction which this Budget will have an adverse effect upon trade will not be realised, but I am satisfied that from now on all parties will have to agree to abstain from attempting to

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  mass-bribe the electors by promising great concessions which our Budget can no longer afford to pay. The real enemies of Democracy are those who try to bribe the electors. Democracy crashes from mass bribery. The real enemy of the Democracies is the elected person who has not enough courage to tell his constituents the plain truth, even though it is unpleasant. That is the lesson which this Budget teaches us, and I hope that the lesson will be learnt on the side opposite as it has already been learnt on this side of the House.
  6.24 p.m.
  Mr. Gallacher: We have been told that in the presentation of his Budget the Chancellor of the Exchequer has been very lucid. There is no doubt that his figures were presented as well as it was possible for anyone to read out a series of figures, to this or to any other audience, but when the Chancellor moved away from the presentation of figures and made a slight incursion into the realm of policy it could not be said then that there was evidence of lucidity; rather was there very considerable confusion. He told us that we should have to face and to bear a very heavy burden, and he specially emphasised that a considerable portion of it was due to increased armaments and to the maintenance associated with them. He informed us that pacification in Europe would bring about a situation in which armaments could be reduced and we could be relieved of the burden. Pacification in Europe was the path towards reduction of armaments.
  We are all very concerned to get a reduction in armaments, to take off this heavy burden, and we are therefore all concerned in pacification in Europe. The Chancellor of the Exchequer went on to say that armaments in themselves were not sufficient, and that there must also be an active policy such as he said the Government were pursuing with very good results. So, the Government are pursuing a policy of pacification in Europe, with very good results. What is the first result? According to the Chancellor, the first result is the British-Italian pact. Is that a measure of pacification in Europe? [An HON. MEMBER: Yes."]
  The Prime Minister has said that if he is fooled he will eat his hat. There is a test. The Chancellor has told us what everybody can understand, that pacification in Europe means a reduction in
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  armaments. We have had the British-Italian pact: are we proposing to reduce armaments? No. The Chancellor told us that £1,500,000,000 was the estimate, but that much more than that sum would be required. So, instead of the British-Italian Pact bringing about a reduction in armaments we are actually faced with an increase in the expenditure. Is that not the clearest possible proof that the pact has nothing to do with peace or with pacification in Europe? I am afraid, if we take the test of armaments, that the Prime Minister will have to absorb a chunk of very indigestible felt. The one thing that we should get out of any measure of pacification should be a reduction in armaments, but we are not to get anywhere near that result. We are to have an increase instead of a decrease.
  When it comes to the question of who is to bear the burden of armaments, I would ask who gets the profits out of armaments. The big financiers in the City of London and the big armament makers get all the profit. It is no use telling me or telling the people of this country that the big financiers and armament makers are to pay for armaments. Every day they are lining their pockets, making profits upon profits. The armament makers and financiers are profiting by this rearmament, and they should pay. Who is going to get the defence that the armaments provide? It is the great property owners, the wealthy people like the Cliveden gang, who are going to get all the defence, and therefore they should pay.
  I may be told that some arrangements are being made for the protection of the people. We have heard of air-raid precautions, but the proposals that are made for the protection of the people of this country are the most utter rubbish. The talk that we hear about gummed paper round window sashes and the lintels of the doors, so that people may hermetically seal themselves up and be suffocated, is a measure of the air-raid precautions that are proposed. If an explosive bomb drops half a mile or a mile away, the gummed paper may be there, but there will be no windows there. It is those who get the profits and who get the defence that should pay. When we raise such questions, hon. Members opposite are inclined to think that we are talking rashly, that we are making propaganda with no

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  basis in fact. There are traitors to the country and the community; the Chancellor has proved it this afternoon. How is it possible that we can tolerate them in our midst? The Chancellor has had to tell the House that food storage, on which the very life of the country will depend, has had to be arranged in secret, because, if what we were doing were allowed to be known, this gang that is only. concerned with piling up fortune at the expense of the people and of the country would have been enabled to take the fullest advantage of the urgent need of the people as a whole. There should be no compunction in dealing with these people. It is their burden, and it should not be laid on the masses of the people. If the responsibility were placed on them for maintaining armaments, there would be none of this holding up of social services.
  It is true that a little over 25 years ago there were no old age pensions. At first they were 5s. a week; then they were increased to 10s. Are they never to be increased beyond that? Are they to stop there? We are told that it is not possible to advance because of this heavy burden of armaments. But for that, no Member of the House would have any excuse to raise against an increase of old age pensions for the people of this country. No section of the people have given greater service to the country as a whole than these old people. Some of them have served over 50 years in industry and in the home, building up the cities, the towns and the villages. But we cannot advance this social service which so urgently needs to be advanced. When the hon. Member for Rochdale (Mr. Kelly) put a question about the Association of Old Age Pensioners, the Financial Secretary to the Treasury asked what association he meant? The hon. Member meant the Scottish Old Age Pensioners' Association which has a branch in the constituency of the Financial Secretary, and I hope he will hear from them before very long. There is no demand for any social reform that meets with so much acceptance in every part of the country as this demand for increased old age pensions, but it cannot be met; everything must go to armaments. And yet the people who are profiting by armaments, and who will be protected by armaments, are not being
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  forced to pay for them, as we say they should be, so as to leave the general finances of the country free for advances in social services.
  Let me say just a word about tea. The hon. Member for South Croydon (Mr. H. G. Williams) who is always wrong no matter what he talks about, is wrong on this question of tea. He does not seem to understand the objection to taxation on tea. He said that in his constituency every home, even the poorest of the poor, has a responsibility for contributing towards the defence of the country, and that, while it is not a pleasure, they will all face up to it provided that the tax is fair. He gives that as a justification for an extra tax of 2d. per lb. on tea. I do not know how the Chancellor could allow himself to be persuaded to impose such an unjust tax. He is meticulously careful that the extra 6d. on the Income Tax should not weigh on industry, that it should not weigh on the small man. How does he square his careful consideration in that regard with the simple, blatant presentation of 2d. per lb. on tea?
  As my hon. Friend the Member for Stoke-on-Trent (Mr. E. Smith) says, the old age pensioners will pay out of their 10s. a week. The only luxury they have is a cup of tea. I can understand those who spend a night swimming in champagne superciliously sneering at the elderly man or woman having a cup of tea, but this tax applies to a large number of poor families, because there are so many poorly paid workers in this country. The Unemployment Insurance Statutory Committee reported that they could not give a shilling a week for children of unemployed people because wages in some categories were so low that it would bring the unemployed above their level. These people have to buy the cheapest tea they can get—tea at is. a pound. Will any hon. Member opposite tell us what he pays for tea? Probably 5s. a pound would be the cheapest, if they use good tea. A pound of tea at 5s. will go more than five times as far as a pound of tea at Is. The cheap tea is just dust. The old age pensioner or poor working-class family, buying tea at 1s. a pound, is paying 3s. 4d. in the£in taxation, while the better-off family is paying 8d. in the£Is that a just tax? Would anyone here try to justify it? This

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  is something that should not be tolerated, and I appeal to hon. Members opposite to force its withdrawal. It is the very people who cannot afford to pay that have to pay the tax, and the poorer they are, the more they pay. Can anyone justify that?
  It is true that the burden of armaments is holding everything back, and the solution for the burden of armaments is the pacification of Europe. But the pacification of Europe will never be attained by making deals with the aggressors. That is the path of war. The only way to bring about the pacification of Europe is to get rid of the Government which the Chancellor of the Exchequer represents, and to substitute a Government that will pursue a real policy of pacification based on collective security. When you get the peace forces of Europe united, you can afford to remove the burden of armaments, so that no more will the resources of this or any nation be wasted in building up the forces of destruction. When true pacification in Europe comes about based on collective security, and we have overcome the destructive course we are now pursuing, then all our millions can be used in a good cause—to advance and expand all the much desired and very necessary social services.
  6.44 p.m.
  Mr. Macquisten: This Debate has ranged over a very wide field. Whenever I hear about pacification and collective security, I wonder what happens if you are not able to put something handsome and strong in the collection. It is no use thinking that the other fellow is going to do it. No number of unarmed people will give you security. The wolf never cares how many sheep there are. The hon. Member for West Fife (Mr. Gallacher) would like us all to be sheep. That is what he would like to do, to let the wolves get at us. I thought the Chancellor, when he spoke of the three necessities and brought in Defence as last, erred. All that a man has he will give for his life. That is the first duty of government, and is what Governments and organised nations exist for, to defend the people. The hon. Member for West Fife and the right hon. Member for Caithness and Sutherland (Sir A. Sinclair) are singularly ignorant on the question of tea. The poorer classes do not drink cheap and dirty tea. It is in the West End that you will find that. You
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  will find the best tea drunk by the peasants of Connaught. You will find the cheap tea drunk in the West End. It may be because they have maids, and do not like to give them good tea. I happen to live in a. district where there is a row of small shops supplying poor people, and I get better meat there than in the big shops, and get it cheaper. I was able to buy beautiful fresh English kidneys there for threepence. It is a good thing to have a tax on tea; you get a better quality tea. When the Tea Duty was taken off you could hardly buy decent tea in London. All the poor stuff was poured in from Java; but when the tax was restored this cheap Javanese stuff could not stand the tax. Tea is simply a drug that comes from the East.
  Mr. Gallacher: Better than whiskey, anyway.
  Mr. Macquisten: I do not think it is. It is a scandalous thing that that peculiar Scottish beverage should be so highly taxed. There is a diminishing revenue from whiskey, because the tax is too high. It is a good medicine.
  Mr. Gallacher: What, whiskey?
  Mr. Macquisten: For those who take it regularly. I think it is a shocking thing that this particular Scottish industry should be selected for this peculiar tax; and it is not yielding the revenue it would yield if the tax was lowered.
  Mr. Montague: The hon. and learned Member said that by increasing the tax on tea you get into consumption a better quality tea. Does the same principle apply to whiskey? If not, why not?
  Mr. Macquisten: The tax on tea represents probably less than a quarter of its value.
  Mr. Gallacher: No.
  Mr. Macquisten: Yes. Tea would come into the market at about 4d. a lb. from abroad—that is the cheapest tea; what you call shilling tea; whereas the value of whiskey is about 4d. per bottle and the tax 8s. 5d., or 25 times its value. It has killed the barley industry. I admit that the Southern Scot should be careful in the use of the Highlander's drink. He cannot stand up to it. The Highlander distilled his own, but the English Parliament forbade this. That was one of the evils that followed the conquest of the Highlands after Culloden. They also

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  took away his chief and gave him a landlord and deprived him of his clothing and his language. Another tax that might be desirable is a tax on advertisements, especially newspaper advertisements. The newspapers have had the benefit of all the money that has been spent on education. It has given them millions of readers. Why should we not get some of it back? It would be the simplest and most easily collected of all taxes, and all the big newspaper proprietors would willingly pay. You could easily get a 5 per cent. turnover tax. Let them take it out of their advertisers. They might have a few less advertisements, but the papers would be all the better if they had less advertisements. They would be much easier to read.
  Mr. Gallacher: Read the "Daily Worker."
  Mr. Macquisten: Then there is the question of road transport. Here is a way in which we might relieve this country from its present state and make it better. I admit that it is infinitely better than when I was a boy, for I remember that in 1879 it was almost as bad as in the seventeenth century, when one-fifth of the population of Midlothian died of sheer hunger. There is an enormous improvement.
  Mr. Gallacher: There is malnutrition.
  Mr. Macquisten: There was not malnutrition then; there was no nutrition at all. The railways have congregated the people into towns where they mostly live in tenements, crowded together under most unhealthy conditions. What is called slum clearance is really setting up gaols for people. If you release road transport, build the necessary roads and devote them entirely to motors, you will see the population disperse over the countryside very quickly. I cannot understand why some of the country landowners do not support it. They would get the new ground rents. It would break the land monopoly in the big towns at once. I have said before that this House is rotten with railway directors, and we do not have a Minister of transport at all; we have a Minister for preventing transport. Look at the taxes on motors. I wonder how the railways would like a tax on their
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  motive power, say a tax of 5s. a ton on coal. Good roads and free transport on them would cheapen road transport, and the people would be living in the country, with gardens in which they could grow fresh vegetables. What is the use of having a "Keep Fit" campaign when you are going to drive people together to the cities, to live in these conditions? I wish the Labour party would take up this matter. Let them go in for a policy—I do not know whether it is German or not, but the Germans are building roads, and so are the Americans, and the result is that the population is being dispersed, and happiness is being created, and the working man can have a house of his own and a little ground attached to it. It makes all the difference between creating good citizens and bad citizens. There is three or four times more capital sunk in roads than in railways, and far more men employed, and they will yet unite and compel both parties to restore to the people the freedom of the roads, which they have taken from them.
  6.55 p.m.
  Mr. Tinker: Probably we shall give the hon. and learned Member for Argyll (Mr. Macquisten) an opportunity to help us in resisting the tax on motor vehicles. We find that many hon. Members on that side criticise the Government, and when the time comes to face up to it they are absent, either by being paired or in some other way; but I trust that the hon. and learned Member will express his indignation by recording his vote on the Amendment, which we shall certainly move when the time comes, in respect of taxation of motor vehicles. The hon. Member for South Croydon (Mr. H. G. Williams) criticised hon. Members on this side for bringing in matters which cannot be replied to in a Debate of this kind. It is really remarkable how the hon. Member gets away with it. He then wandered all round himself, and I wonder who is to reply to his remarks. He spoke of taxation of local authorities. We all know the position of local authorities. Many of them are trying to meet the needs of the unemployed by giving them relief, and of old age pensioners by granting them further relief. Those things could be met by national taxation; but the hon. Member will not suggest that. He says that he goes out lecturing, and that he has not had such well-attended audiences. One can quite understand that.

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  The Chancellor's statement was clear and lucid, and he explained very well the things which he wanted to explain. Some of the other things, he said, would have to be explained later on. We agree with that. What I did not like was when he patted himself on the back in regard to the Italian Agreement. It was unfair for him to take credit for that, before the matter comes up for debate. Many of us on this side are entirely opposed to it. We think that the Government have gone in the wrong direction in treating with a man who has broken all agreements up to the present. But I will leave that matter until a time when it can be gone into properly. The Chancellor dealt with the need for increases in taxation. As his speech developed, one could see that there had to be an increase in Income Tax. I do not quarrel with that. When necessity calls, the people who have the money ought to pay. The returns show that there is plenty of money in the pockets of the Income Tax payers, in comparison with other sources. But I am sorry that the Chancellor has levied this tax on tea. Last year I advocated another method of finding additional money. I advocated reducing the limit for Supertax from £2,000 to £500. I am satisfied that, if that were done, the Chancellor would be able to get the additional money that he expects to get from the Tea Duty.
  I wish he would get away from the argument that everybody has to contribute a little for national Defence. People believe in national Defence, but they do not see that it ought to come out of a commodity like tea, where the poorest of the poor have to bear an unfair burden.
  The question of the old age pensioner ought to have been attended to a long time ago. Year after year we haw advocated the need for something more being done. I admit that things have improved as the years have gone on and the pension has been raised to 10s., but would any one say that that is enough on which to exist? I may be old that the 10s was never meant as a subsistence level. It was meant in addition to something else that is in reserve. With the increased mechanisation that there is, people are put out of work at an earlier age than they ever were before. We have public authorities telling us the feelings of men of 45 who are out of work. imagine the expectation of their having some reserve to fall pack upon when they
  94
  reach the age of 65. All the reserves that a working man likes to build up are dissipated and, when he reaches 65, there is no reserve to fall back upon at all. I have given notice of a Motion on the subject but we have never had an opportunity of discussing it. My hon. Friend the Member for Rochdale (Mr. Kelly) was informed on the day before the Adjournment that the number of old age pensioners was 2,589,984. To give them 5s. a week extra, which is little enough in present circumstances, would call for £35,669,000 from the Treasury. It might involve 6d. or 9d. on the Income Tax but it would not be altogether lost. The money would be spent week by week, and that would create employment. I am satisfied that it would be for the benefit of trade, and it would provide a better standard of life for these aged people. I have a letter from Kent which says that half a crown a week would go a long way. The writer, one of two sisters living together, aged 65 and 70, gives their budget. They spend on rent 8s. 6d., coal 2s. 7d., gas 2s., life insurance 4d.—total, 13s 5d. There is 6s. 7d. left for these two people to live on.
  That is typical of a large number of letters that we receive. When we know that the resources of these people, who have proved themselvs decent citizens, are exhausted, the country ought to recognise that something more should be given. We are told that it cannot be done because of the enormous expenditure on armaments, but the Chancellor is defending people who have much more to lose than these aged people, the very rich and the moderately rich. It is unfair to keep these people in poverty when we have vast sums of wealth at our disposal. I have another letter from a colleague with whom I worked in the mines He is turned 65 and he has spent 53 years in the mine and has no resources at all behind him. These are the men who have built up the country. We have never had any help from the other side in this direction. They will have to face the country well before five years are up. At the time of the Fulham by-election I heard a Member opposite say it was won not on foreign affairs but on what he called the administration of the country. We won the election on social reform. I believe there is a lot in it. When the next election comes round the payment of old age pensioners will play a very

  95
  prominent part. The feeling is growing throughout the country that these aged people are not getting fair treatment. I do not know whether the Chancellor can do anything before this Budget is completed but, if the Government cannot do it this time, I appeal to them to do something in the next Budget for this deserving class of people. We have a scheme in our programme which is better than what I am advocating now, but at the moment I am only making the reasonable demand that the Government should advance the pension by 5s. a week.
  7.10 p.m.
  Sir Robert Tasker: I agree with a good deal of what the hon. Member has said, but I rather regret the tone of his speech, implying that sympathy with the old age pensioner is confined to the benches opposite. That is quite wrong. I was chairman of the London Old Age Pension Committee from 1922 to 1937 and I know something about the conditions. I do not dispute his figure that 5s. a week is equivalent to a charge of £33,000,000 a year, but when he drew a picture of what 15s. would do, he might have said that £1 would be better than 15s., 25s. better than a £1, 30s. better than 25s. and so on. We have to consider the finances of the country and there is a limit to the amount of taxation that can be extracted from the people. I feel sorry that the Tea Duty is to be increased. I suppose it would cause a good deal of confusion if the Chancellor were to reconsider that and see whether, instead, he could not commence the Surtax at £1,500. I wonder whether, in connection with the storage of food, the Chancellor, instead of encouraging the collection of food in large quantities, would encourage people to store food which will keep in their homes. If that were done in a million homes it would save distribution in time of peril and it would not be so liable to damage as a large collection of produce in one given place. I wonder whether some encouragement could be given by making an allowance on an undertaking being given that the food will not be used except in case of emergency.
  I should like to call attention to the method adopted by the Treasury in the control of the finances of municipal and other authorities and private individuals. The methods adopted by the Treasury
  96
  resemble those which must have existed at the time of Palmerston. If a municipal authority or a Government Department wishes to spend even a very small sum of money, it has to obtain authority, and that authority is the Treasury. The matter passes from one Department to another, and if it is decided to permit the expenditure, the auditor has to be satisfied that the money has been satisfactorily expended. This entails an enormous amount of labour. On one occasion I asked the Controller of the Board of Trade to be good enough to find out how many times a ball of string had to be entered in the books of the Board of Trade. It took many months to find out, and he was as astonished as I was myself, for it was reported to him that that ball of string was entered in no fewer than 20 different books. What that cost goodness knows. Government Departments and municipal authorities are at the mercy of the Treasury. If we were to be given a reduction in taxation, it would encourage those who produce wealth rather than those who indulge in administration, where you may find one man doing a job and three or four other men engaged in seeing that he does not make a mistake.
  I will not take advantage of the opportunity of addressing the House to range over many of the subjects which other hon. Members have mentioned, but there is one thing I should like to mention in connection with road transport. The extraction of the enormous sum of money from the motor industry is a gross betrayal of that industry and of those who use motor cars, though the present Chancellor of the Exchequer is free from blame, as he is only following precedent. I believe that the right hon. Gentleman the Member for Epping (Mr. Churchill) was the first to take action in this direction. It was originally intended that the money collected from the motor industry should be devoted to the formation of roads and the like, and now we find that it is all being absorbed in other directions and nothing is being done, except a bit of widening and straightening out here and there. I suggest that the Minister of Transport should make representations to the Chancellor of the Exchequer as to what a proper system of road construction would mean in this country. It would do much towards the development of industries which at the present time are almost dormant.

  97
  The right hon. Gentleman the Leader of the Liberal party seemed to derive great satisfaction from the fact that he had predicted a slump. I hope that for the sake of our country we shall encourage commerce and industry, upon which we live, rather than that we should be pessimistic and talk like a lot of old women and Jeremiahs.
  7.20 p.m.
  Mr. McEntee: I should like to add a word or two to what has already been said by my hon. Friend the Member for Leigh (Mr. Tinker) and to extend his remarks a little. All of us on this side, and, I think, many hon. Members opposite, will regret that the Chancellor of the Exchequer has thought it necessary to put any additional tax on tea. I can remember the time when the Chancellor of the Exchequer himself was one of those people who were very much opposed to any tax on what used to be called by the Liberals of that time the breakfast table. I have heard him make many speeches in which he has said that any form of taxation on the breakfast table, including a tax on tea, was to be regretted and deplored. The Chancellor of the Exchequer, like many other Members who sit on the Government Front Bench, has changed his mind.
  The point to which I would like the Chancellor of the Exchequer and the Government to give some attention is the fact that the increased production of armaments is causing a rise in prices and that the prices of food generally are going up. People with fixed incomes particularly are suffering in consequence of the rise in the price of food. Many hundreds of thousands of the working class have their wages fixed on a cost-of-living basis, but people who draw the old age or widow's pension or Civil Service, police or military pension, and many others with small incomes, are feeling very seriously the increased cost of the commodities that they have to purchase. I suppose that there is no Member in this House who has not received letters similar to the letter read to-day by my hon. Friend the Member for Leigh. I have received many, including one within the last few days in which the writer abuses me for not doing more than I have been doing to obtain an increase in his pension. The effect of the increases in prices means that people with
  98
  fixed incomes, particularly old age pensioners, cannot buy the amount of commodities that they were able to purchase a year or two ago. I had a list of figures a few months ago referring to 1934, which showed an increase in the cost of living of 17½ per cent. An old age pensioner who could purchase 10s. worth of goods at that time would now be reduced to purchasing 8s. 3d. worth of goods. That is very serious to old age pensioners or those who are living on small fixed incomes.
  There is another serious aspect of this matter. These people have to purchase fewer goods and therefore fewer men and women are employed in the production of goods. That is a sort of vicious circle which ought to be seriously considered by the Government. There have been a great many discussions as to what the Government propose to do. All that we seem to be able to ascertain is, that they are trying to increase overseas trade, which nobody disputes, though they are not meeting with any marked success in that direction. It appears that we have settled down to the belief that it is the normal thing and the thing to be expected, that there shall be roughly 1,500,000 men and women permanently unemployed. That is a very serious state of affairs, and I hope that it is one that the electors of this country will not allow to continue under this or any other Government. I do not know that it is even necessary that this matter should be considered in the Budget at all. My impression is that it is not necessary, and that if the Chancellor of the Exchequer and the Government were in earnest and desired to increase the old age pension, it could be done very easily. The Chancellor of the Exchequer could easily find a way. Old age pensioners are feeling the pinch of poverty at the present time, and I do not think that we are asking anything that is unreasonable when we ask the Government to consider the effect of their own policy. It increases prices and reduces the purchasing power of the people, and we have a right to ask and to expect the Government to give serious consideration to the position of old age and other pensioners, and to do something to enable them to get back to something like the standard which existed three or four years ago.
  Question put, and agreed to
  EXCISE DUTY ON SPIRITS USED FOR MAKING POWER METHYLATED SPIRITS.
  Resolved,
  " That—

  (1) on and after the second day of May, nineteen hundred and thirty-eight, there shall be charged on all spirits used for making power methylated spirits a duty of Excise of ninepence for every gallon of the spirits so used;

  (2) in this Resolution the expression ' power methylated spirits ' means spirits methylated in the manner prescribed for making power methylated spirits by regulations for the time being in force under Section thirteen of the Finance Act, 1924."

  INCREASE OF CUSTOMS DUTY ON TEA.
  Resolved,
  " That as from the twenty-seventh day of April, nineteen hundred and thirty-eight, the Customs Duty on tea not being an Empire product shall be at the rate per pound of eightpence instead of sixpence, and the Customs Duty on tea being an Empire product shall be at the rate per pound of sixpence instead of fourpence:
  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
  CUSTOMS DUTY ON REIMPORTED FILMS.
  Resolved,
  " That—

  (1) no film printed, or produced by any other process, in the United Kingdom and exported therefrom shall be exempt from Customs Duty by virtue of any enactment relating to the exemption of reimported goods, unless the Commissioners of Customs and Excise are satisfied either that no imported film was used in the printing or production of the film as aforesaid, or that the duty chargeable on all imported films so used has been duly paid;

  (2) in this Resolution the expression ' film ' means a positive or negative cinematograph film within the meaning of Section three of the Finance Act, 1925, or a positive or negative sound track, whether developed or not."

  INCOME TAX
  CHARGE OF TAX.
  Resolved,"
  "That—

  (1) Income Tax for the year 1938–39 shall be charged at the standard rate of five shillings and sixpence in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine;

  (2) all such enactments as had effect with respect to the Income Tax charged for the year 1937–38 shall have effect with respect
  100
  to the Income Tax charged for the year 1938–39:

  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
  HIGHER RATES OF INCOME TAX FOR 1937–38
  Resolved,
  " That Income Tax for the year 1937–38 in respect of the excess of the total income of an individual over two thousand pounds shall be charged at rates in the pound which respectively exceed the standard rate by amounts equal to the amounts by which the rates at which Income Tax was charged in respect of the said excess for the year 1936–37 respectively exceeded the standard rate for that year:
  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
  AMENDMENT AS TO RELIEF IN RESPECT OF LIFE INSURANCE PREMIUMS.
  Resolved,
  " That, in cases where the allowance to be given in respect of life insurance premiums and other payments under section thirty-two of the Income Tax Act, 1918, is restricted by paragraph (f) of sub-section (3) of that section as amended by section twenty-three of the Finance Act, 5935, the rate of tax by reference to which the allowance is so restricted shall be ten thirty-thirds of the standard rate instead of one-third of the standard rate:
  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
  AMENDMENTS OF SCHEDULE C AND CONSEQUENTIAL AMENDMENTS OF SCHEDULE D.
  Resolved,
  " That—
  (1) for all the purposes of Income Tax under Schedule C and Rule r of the rules applicable to Case III of Schedule D, the expression ' public revenue ' shall, except where the context otherwise requires, include the public revenue of any Government whatsoever and the revenue of any public authority or institution in any country outside the United Kingdom;
  (2) where a banker or any other person in the United Kingdom, by means of coupons received from any other person or otherwise on his behalf, obtains payment of any foreign dividends elsewhere than in the United Kingdom, the tax under Schedule C shall extend to the dividends and the person obtaining payment shall be treated for the purpose of the paying agents rules as if he were intrusted with the payment thereof;
  (3) where a banker in the United Kingdom sells or otherwise realises coupons for any dividends, being foreign dividends, and pays over the proceeds to any person or carries them to his account, or where a dealer in coupons in the United Kingdom purchases any such coupons as aforesaid otherwise than from a banker or another dealer in coupons, the tax under Schedule C shall extend to the proceeds of the sale or other realisation, and the paying agents rules shall apply to those proceeds as if they were dividends, and shall apply to the banker or dealer as if he had been intrusted with the payment thereof;
  (4) the provisions of the last two foregoing paragraphs shall apply for the purpose of Rule 7 of the miscellaneous rules applicable to Schedule D (which relates to interest, etc., from colonial and foreign companies) subject to any necessary modifications;
  (5) for the purpose of this Resolution—

  (a) the expression ' banker ' includes a person acting as a banker and, notwithstanding anything in the paying agents rules, includes the Bank of England and the Bank of Ireland;

  (b) the expressions ' dividends,' coupons ' and ' coupons for any dividends ' have the same meanings as in the paying agents rules and the expression ' foreign dividends ' means dividends payable elsewhere than in the United Kingdom, whether they are also payable in the United Kingdom or not;

  (c) the expression ' paying agents rules ' means the rules applicable to Schedule C as to interest, etc., with the payment of which persons other than the Bank of England, the Bank of Ireland and the National Debt Commissioners are intrusted;

  (6) the provisions of Schedule C and Schedule D shall be deemed always to have had effect subject to the foregoing provisions of this Resolution:
  Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven and before the twenty-seventh day of April, nineteen hundred and thirty-eight, tax could have been charged on or deducted from any profits under Schedule C or the said Rule 7 if the provisions of this Resolution had been enacted at that time, but has not been so charged or deducted, those profits shall be chargeable under Case VI of Schedule D for the year of assessment in which the profits arose:
  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."
  TRANSFERS OF INCOME ARISING FROM SECURITIES.
  Resolved,
  " That—

  (1) where, in any year of assessment, the owner of any securities (in this Resolution
  102
  referred to as ' the owner ') has sold or transferred or hereafter sells or transfers the right to receive any interest payable, whether before or after the sale or transfer, in respect of the securities without selling or transferring the securities, the following provisions shall have effect and shall be deemed always to have had effect:—

  (a) that interest, whether it would or would not be chargeable to tax apart from the provisions of this Resolution, shall, for all the purposes of the Income Tax Acts, be deemed to be the income of the owner or, where a beneficiary is entitled to the income arising from the securities, the income of the beneficiary, and not the income of any other person, and be deemed to be income for that year;

  (b) in the case of a sale or other realisation the proceeds whereof are chargeable to tax under Schedule C or Rule 7 of the miscellaneous rules applicable to Schedule D. the amount of the interest deemed to be the income of the owner or beneficiary shall be an amount equal to those proceeds;

  (c) in any other case, tax at the standard rate in respect of the interest shall be chargeable on the owner or beneficiary under Schedule D;

  (2) nothing in the foregoing provisions shall affect any provision of the Income Tax Acts authorising or requiring the deduction of tax from the interest, or from the proceeds of any subsequent sale or realisation of the right to receive the interest;

  (3) for the purpose of this Resolution, the expression ' interest ' includes dividends, annuities and shares of annuities, and the expression securities ' includes stocks and shares."

  FUNDING BONDS ISSUED IN RESPECT OF INTEREST ON CERTAIN DEBTS.
  Resolved,
  " That—

  (1) where any funding bonds are issued to a creditor in respect of any liability to pay interest on any debt to which this Resolution applies, the issue of the bonds shall be treated for all the purposes of the Income Tax Acts as if it were the payment of an amount of that interest equal to the value of the bonds at the time of the issue thereof;

  (2) where any person by or through whom any such bonds are issued in any year of assessment would be required under the said Acts to deduct tax from the said amount of interest if it had been actually paid by or through him, he shall retain bonds the value whereof at the time of issue is equal to tax at the standard rate for that year on the said amount of interest, and shall be acquitted in respect of the retention in like manner as if he had deducted such tax from the interest, and shall be chargeable with such tax accordingly:

  103
  Provided that the Commissioners of Inland Revenue, if satisfied that it is impracticable to retain bonds as aforesaid, may relieve any such person from the foregoing provisions of this paragraph on such conditions as they think fit, and thereupon tax in respect of the amount of interest treated as having been paid by the issue of the bonds shall be chargeable for that year under Case VI of Schedule D on the persons receiving or entitled to the bonds;

  (3) the debts to which this Resolution applies are any debts incurred, whether in respect of moneys borrowed or otherwise, by any Government, public authority or public institution whatsoever, or by any body corporate whatsoever, and for the purpose of this Resolution the expression ' funding bonds ' includes any bonds, stocks, shares, securities or certificates of indebtedness;

  (4) the foregoing provisions of this Resolution shall be deemed always to have had effect:

  Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven, and before the twenty-seventh day of April, nineteen hundred and thirty-eight, any bonds could have been retained under this Resolution if its provisions had been enacted at that time but have not been so retained, an amount equal to the value of the bonds at the time of the issue thereof shall be chargeable under Case VI of Schedule D for the year of assessment in which the bonds were issued:
  And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1953."
  PROVISIONS AS RESPECTS SETTLEMENTS.
  Resolved,
  "That—

  (1) there may he included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to—

  (a) settlements which are wholly or partly revocable or otherwise determinable in any circumstances whatsoever (including settlements whereunder the settlor's liability might cease on payment of a penalty);

  (b) settlements whereunder any income or property of any description is, or will or may become, payable to or applicable for the benefit of the settlor in any circumstances whatsoever;

  (c) the disallowance, in computing total income for purposes of Surtax, of the deduction of sums paid by a settlor to the trustees of the settlement or persons connected with the settlement:

  (d) sums paid directly or indirectly, whether by way of loan or repayment of loan or otherwise, by the trustees of a settlement or persons connected with a settlement to the settlor;

  (2) subject to such qualifications and exceptions as Parliament may determine, the
  104
  said provisions shall apply to any settlement wherever or whenever made or entered into, and shall apply for the purposes of assessment to Income Tax for the year 5937-38 and subsequent years;

  (3) for the purpose of this Resolution the expression ' settlement ' includes any disposition, trust, covenant, agreement or arrangement, and the expression ' settlor' includes any person by whom a settlement was made or entered into directly or indirectly and, in particular, includes any person who has provided or undertaken to provide funds directly or indirectly for the purpose of a settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into a settlement and references to a settlor include references to the wife or husband of a settlor."

  AMENDMENTS AS TO AVOIDANCE OF INCOME TAX BY TRANSFER OF INCOME ABROAD.
  Resolved,
  " That there may be included in any Act of the present Session relating to finance such amendments of Section eighteen of the Finance Act, 1936 (which contains provisions for preventing avoidance of Income Tax by transactions resulting in the transfer of income to persons abroad) as Parliament may determine, and any such Act may provide that the said amendments shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years, and shall apply in relation to transfers of assets and associated operations whether carried out befor or after the date of this Resolution "
  ADMINISTRATION OF ESTATES.
  Resolved,
  " That—

  (1) there may be included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to the estate of a deceased person and the income arising therefrom before the completion of the administration of the estate, in relation to persons having an interest in the residue of an estate before, on and after the ascertainment thereof and persons to whom legacies are bequeathed by a will, and otherwise in relation to the administration of estates;

  (2) any such Act may provide that the said provisions shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years and shall apply in relation to the estate of a deceased person whether he died before or after the commencement of that year."

  VALUATION OF TRADING STOCK ON DISCONTINUANCE OF TRADES.
  Resolved,
  " That—
  (1) when any trade is discontinued or treated for the purposes of Income Tax as if it had been discontinued, any trading

  105
  stock then belonging to the trade shall be valued, in computing for the purposes of Income Tax the profits or gains of the trade, as follows:—

  (a) in the case of any such trading stock which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade in the United Kingdom and may deduct the cost of the trading stock as an expense in computing the profits or gains of that trade, the value thereof shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer;

  (b) in the case of any other such trading stock, the value thereof shall be taken to be the price which it would have realised if sold in the open market at the discontinuance;

  (2) provision shall be made for determining any questions arising under sub-paragraph (a) of the last foregoing paragraph for the purpose of computing the profits or gains of both the trades concerned;
  (3) for the purpose of this Resolution, the expression "trading stock" includes property of any description, whether real or personal."
  LOSSES OF CAPITAL REDEMPTION BUSINESS.
  Resolved,
  " That—
  (1) where any person carries on capital redemption business—

  (a) the capital redemption business, if carried on in conjunction with business of any other class, shall be treated for the purposes of Income Tax as a separate business; and

  (b) in ascertaining whether and to what extent he has sustained a loss in the carrying on of the capital redemption business for the purpose of setting off or giving relief in respect of the loss, any of his income derived from investments held in connection with the capital redemption business shall be treated as part of the profits arising from that business;

  (2) in this Resolution the expression ' capital redemption business ' means the business (not being life assurance business or industrial assurance business) of effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or series of sums will become payable to the insured in the future."
  ESTATE DUTY.
  ESTATE DUTY IN RESPECT OF RESIDUARY ESTATES.
  Resolved,
  " That—

  (1) there may be included in any Act of the present Session relating to finance such pro-
  106
  visions as to Estate Duty as Parliament may determine in relation to the residue of the estate of a deceased person and to the inclusion of property representing such residue in the property that passes or is deemed to pass on the death of a person dying before the completion of the administration of the estate;

  (2) any such Act may provide that the said provisions shall have effect and be deemed always to have had effect in relation to a person so dying whether before or after the commencement of the said Act."

  ESTATE DUTY IN RESPECT OF PROPERTY TRANSFERRED TO, AND SHARES IN, CERTAIN COMPANIES.
  Resolved,
  " That—

  (1) for the purpose of determining the rate of Estate Duty, property which is deemed to pass on the death of any person by virtue of Section thirty-four or Section thirty-five of the Finance Act, 1930, shall not be an estate by itself but shall be aggregated with other property passing on the death;

  (2) for the purpose of the definition of ' the value of the total assets of the company ' contained in Section thirty-eight of the said Act, the deduction to be made under paragraph (i) in respect of any debentures, debenture stock or preference shares of the company shall, instead of being the par or redemption value thereof whichever is the greater, be the principal value thereof."

  ESTATE DUTY IN RESPECT OF SETTLED PROPERTY.
  Resolved,
  " That the exemption conferred by Subsection (3) of Section five of the Finance Act, 1894, in the case of settled property where the interest of any person under the settlement fails or determines by reason of his death before it becomes an interest in possession and subsequent limitations under the settlement continue to subsist, shall cease in cases where the property would, if that Sub-section had not been enacted, have been deemed to pass on the death otherwise than by reason of the failure or determination of the interest."
  MISCELLANEOUS.
  NATIONAL DEFENCE CONTRIBUTION.
  Resolved,
  " That Part III of the Finance Act, 1937 (which relates to the National Defence Contribution) shall be amended—

  (a) so as to re-define the circumstances in which a body corporate is to be deemed to be a subsidiary of another body corporate for the purpose of Section twenty-two of the said Act (which provides for the amalgamation of the profits and losses of subsidiary and principal companies) and of any provision made in pursuance of this Resolution;

  107

  (b) so as to alter the provisions of the said Section twenty-two relating to the giving of a notice thereunder by a principal company as respects a subsidiary;

  (c) so as to disallow, in computing profits, any deduction in respect of any interest, annuity or other annual payment, or any royalty or rent, paid by one body corporate to another, where one of them is a subsidiary of the other or both are subsidiaries of a third;

  (d) so as to disallow the carrying forward of any loss under sub-paragraph (2) of paragraph 2 of the Fourth Schedule to the said Act, if and to the extent that the loss has been deducted from or set off against the profits arising from a trade or business, whether under the said Section twenty-two or otherwise;

  and that the said amendments shall be deemed to have had effect as from the date on which the said Part III came into operation."
  RESTRICTION OF RELIEF FROM TRANSFER STAMP DUTY ON CERTAIN INSTRUMENTS.
  Resolved,
  " That any Act of the present Session relating to finance may restrict, in such manner as Parliament may determine, the relief from Stamp Duty given by Section forty-two of the Finance Act, 1930 (which relates to instruments the effect whereof is to convey or transfer a beneficial interest in property from one associated company to another)."
  AMENDMENT OF LAW.
  Motion made, and Question proposed,
  " That it is expedient to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise) and to make further provision in connection with finance."
  Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Captain Dugdale.]
  Resolutions to be reported To-morrow.
  Committee also report Progress; to sit again To-morrow.
  The remaining Orders were read, and postponed.

  ROYAL AIR FORCE (AIRCRAFT SUPPLY, UNITED STATES AND CANADA).
  Motion made, and Question proposed, "That this House do now adjourn."—[Captain Dugdale.]
  7.48 p.m.
  Mr. Mender: I desire to call attention to the despatch to the United States of America of the Air Ministry's mission, a matter which has created great interest throughout the country and, indeed, I should imagine, throughout the whole world. I do not want it to be thought that I am opposed to the sending of this mission. I do not think the country has sufficient information on which to make up its mind. It may be a very wise move from a military point of view and a political point of view, but I think it is a matter on which we should have information which will satisfy this House. I desire to see every possible step taken so that the defences of this country shall be up to the necessary standard, but it cannot be denied that there is in the country a great deal of misgiving, doubt and mystification about this mission. There are many people who hold the view, possibly quite wrongly, that it is the result of gross mismanagement at the Air Ministry, and that the present state of affairs is one which ought not to be tolerated any further. As an evidence of this may I quote from a moderate journal, the "Spectator "? Under the heading "Aircraft from Abroad" the "Spectator" says:
  " The Air Ministry's decision to buy, if it can and as soon as it can, very many hundreds of aeroplanes across the Atlantic invites two comments. First, it throws an appaling light on the Ministry's failure during the past three years to organise British aeroplane production on an adequate scale. Remember that by Mr. Baldwin's confession the policy of expansion started two years too late, so that lost time had to be made up. Instead, owing to the Government's refusal to take the tasks of supply away from the fighting departments and its silly self-restriction to the Inskip makeshift, more time has been lost, and Germany's superiority over Great Britain in the air not only has not been removed, but is probably greater now than it ever was."
  The official statements made on behalf of the Government in 1934 were these. Lord Baldwin said:
  " The National Government would see to it that in air strength and air power this country shall no longer be in a position of inferiority to any country within striking distance of our shores."
  At a later stage he said:
  " His Majesty's Government are determined in no conditions to accept any position of inferiority with regard to what air force may be raised in Germany in the future."
  I do not think anyone will pretend that these pledges have as yet been carried

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  out, or that there is anything like parity Let me read some words in the "Empire Review," a paper which is friendly to the Government:
  " The fact stands out that with all our efforts at expansion we are getting into a worse position than when we started."
  When you get statements of that kind no wonder there is anxiety at the situation and with the apparently desperate efforts which are now being made to cope with it. And this is happening at a time when the foreign policy of the Government, which certainly impinges on our air defences, is decreasing the support which we can get from foreign governments. I am not going into that question, except to point out that their Spanish policy is going to halve, or at any rate enormously reduce, the value of support from France, and that their policy towards Germany is going to
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  strengthen enormously Germany in her extensions in the East, made even more pointed by the events of the week-end and the speech of Herr Henlein in regard to Czechoslovakia, which makes it clear that Germany at all costs is going to drive through and take what she wants. I should have thought that there was an alternative to seeking aircraft in America, and that was to seek the assistance of the loyal Powers in the League of Nations. There are plenty available, but the policy of the Government is set against any assistance of that kind.
  Notice taken that 40 Members were not present; House counted, and 40 Members not being present—
  The House was adjourned at Four Minutes before Eight of the Clock till To-morrow.

  HOUSING, DUNFERMLINE.
  HOUSING, DUNFERMLINE.
TRADE AND COMMERCE.
  INTERNATIONAL BEEF CONFERENCE.
  INTERNATIONAL BEEF CONFERENCE.
  COTTON INDUSTRY.
  COTTON INDUSTRY.
  WAR MATERIAL (EXPORT).
  WAR MATERIAL (EXPORT).
UNEMPLOYMENT.
  SOUTHWARK.
  SOUTHWARK.
  LEICESTER.
  LEICESTER.
BRITISH ARMY.
  MEDITERRANEAN (UNIFIED COMMAND).
  MEDITERRANEAN (UNIFIED COMMAND).
  TERRITORIAL FORCE RECRUITMENT, LIVERPOOL.
  TERRITORIAL FORCE RECRUITMENT, LIVERPOOL.
  LAND PURCHASE, HOLLINWOOD.
  LAND PURCHASE, HOLLINWOOD.
  VOLUNTARY CONTRIBUTORY PENSIONS.
  VOLUNTARY CONTRIBUTORY PENSIONS.
  RATING (THIRD QUINQUENNIAL VALUATION).
  RATING (THIRD QUINQUENNIAL VALUATION).
  COINAGE (DESIGN).
  COINAGE (DESIGN).
  MOTOR-CARS (THEFTS, LONDON).
  MOTOR-CARS (THEFTS, LONDON).
  INLAND REVENUE DEPARTMENT (STAFF).
  INLAND REVENUE DEPARTMENT (STAFF).
  BROADCASTING (SPANISH AND PORTUGUESE TRANSMISSIONS).
  BROADCASTING (SPANISH AND PORTUGUESE TRANSMISSIONS).