Sitting of 23 May 1944

PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  PEOPLE'S DISPENSARY FOR SICK ANIMALS OF THE POOR BILL [Lords]
  Read a Second time, and committed.
PROVISIONAL ORDER BILLS

  STANDING ORDERS APPLICABLE THERETO COMPLIED WITH
  Mr. SPEAKER laid upon the Table, Report from one of the Examiners of Petitions for Private Bills, That in the case of the following Bill referred on the First Reading thereof, the Standing Orders which are applicable thereto have been complied with, namely:
  Ministry of Health Provisional Order (Warrington) Bill.
  Bill to be read a Second time Tomorrow.

  No STANDING ORDERS APPLICABLE
  Mr. SPEAKER laid upon the Table, Report from one of the Examiners of Petitions for Private Bills, That in the case of the following Bills referred on the First Reading thereof, no Standing Orders are applicable, namely:
  North West Midlands Joint Electricity Authority Provisional Order Bill.
  Ministry of Health Provisional Order (North Lindsey Water Board) Bill.
  Bills to be read a Second time Tomorrow.

ORAL ANSWERS TO QUESTIONS
  BRITISH ARMY

    R.A.O.C. (Command Pay)
    Mr. Hyndasked the Secretary of State for War on what grounds the Executive Committee of the Army Council have decided that command pay shall not be
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    payable to officers of the R.A.O.C., but that the question should be held in abeyance for the duration of the war in view of the fact that this Corps was granted combatant status by Army Order 179 of 21st October, 1941, and that command pay is already applicable to officers in the R.A.S.C. and R.E.M.E. under the terms of the Royal Warrant of 1940, and that the differentiation is causing dissatisfaction amongst R.A.O.C. officers.
    The Secretary of State for War (Sir James Grigg): R.E. and R.A.S.C. are paid at combatant rates of pay. R.E.M.E. and R.A.O.C. although combatant are paid at Departmental rates. Command pay is not normally issuable to officers paid at Departmental rates. R.E.M.E. was formed from officers of the R.E., R.A.S.C. and R.A.O.C. Of these the R.E. and R.A.S.C. were previously eligible for command pay and it was decided that all officers of the new Corps should be eligible for command pay. No reason was seen to change the conditions of service in the R.A.O.C.
    Mr. Hynd: Would the right hon. gentleman explain what is meant by the decision to postpone this until after the close of hostilities? Does it mean that payments will he made retrospectively?
    Sir J. Grigg: Certainly not. When the status of the R.A.O.C. was altered it was decided that the conditions of service should not be changed until there was a general review of conditions of service for the post-war period.
    Mr. Bellenger: Is the Minister aware that there is some dissatisfaction among officers of the R.A.O.C. at the differentiation made between their Corps and the R.E.M.E. and the R.A.S.C.? These officers think that they should be in a position comparable with that of officers of the other two Corps.
    Sir J. Grigg: That is a matter on which a difference of opinion is possible. The view which prevails is the other one.

    Water Economy
    Squadron-Leader Donnerasked the Secretary of State for War whether any estimate has been made regarding the amount of water abstracted from underground supplies by military installations in a district of which he has been informed; and in view of the shortage of

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    water there, what instructions as to the strictest economy of water usage have been issued.
    Sir J. Grigg: The answer to the first part of the Question is, "Yes, Sir." A general instruction to units to economize in the use of water was issued in January, and, as the rainfall continued to be below the average, a further instruction was issued on 13th May.

    N.A.A.F.I. Canteens
    Mr. Loverseedasked the Secretary of State for War whether he will inquire into prices charged and stocks carried by N.A.A.F.I. canteens as compared with those serving American troops, in this country.
    Sir J. Grigg: The stocks available to Service personnel in N.A.A.F.I. canteens represent a wide range of commodities. They are sold at normal retail prices. This applies also to supplies from this country available in canteens for the American Forces. These canteens, however, receive in addition considerable supplies from America and they are sold at prices which are often lower than those prevailing in this country.
    Mr. Loverseed: Could the Minister say whether British manufactured goods supplied to American canteens are subsidised in any way? Will he investigate cases which I will bring to his attention where, for instance, combs are sold in American canteens for 2d. and in the N.A.A.F.I. for 9½.,and fountain pens are sold in American canteens for 2s. 9d.?
    Sir J. Grigg: I understand that goods purchased in this country and sold in American canteens are sold at normal British retail prices, but if the hon. Member has any evidence to the contrary I shall be glad to see it.
    Mr. Loverseedasked the Secretary of State for War whether he will inquire into the quantities and varieties of confectionery, cigarettes, etc., stocked by N.A.A.F.I., with a view to ensuring that serving personnel are not placed in a less favourable position for the purchase of these commodities than civilians.
    Sir J. Grigg: I understand that the supplies of confectionery and cigarettes stocked by N.A.A.F.I. in general do not compare unfavourably with supplies avail-
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    able to the general public. If the hon. Member will send me particulars of specific complaints they will be investigated.
    Mr. Loverseed: Will the Minister consider issuing to Service personnel ration cards to enable them to obtain confectionery where adequate stocks are kept?
    Sir J. Grigg: I rather suspect that that would require a good deal of discussion with my right hon. and gallant Friend the Minister of Food, and I am not sure that he would receive that suggestion with any great enthusiasm.

    Forces Forum (Cairo)
    Mr. Gallacherasked the Secretary of State for War if he is aware that the majority of the members of the Cairo Parliament have decided to take no part in the new Army Education Corps controlled "Forces Forum" on the ground that they would have no right of choice in the subjects of discussion; and, in view of this, will he reconsider the whole question of a Forces Parliament.
    Sir J. Grigg: I have no knowledge of the details of the instructions issued by the local commander. The answer to the last part of the Question is, "No, Sir."
    Mr. Gallacher: Is the Minister aware that there is no resemblance whatever between the Forces forum and the parliament that existed and that at a meeting of the forum, following the suppression of the parliament, there were one member of the A.T.S. and three other ranks? Further, is he aware that the Forces' general opinion, with which I cordially agree, is that the Minister is being "kidded" by the officer commanding, who is responsible for the suppression of this parliament?
    Mr. Shinwell: Could the Minister say why it was necessary to interfere with these Forces' parliaments in Cairo or elsewhere and the political aspirations of men in the Forces? Can we be assured that the right hon. Gentleman is not allowing Ministerial impartiality to be influenced by personal political prejudice?
    Sir J. Grigg: I do not know what the last part of the hon. Member's supplementary question means. To the best of my belief there is no political prejudice in the Commander-in-Chief in Cairo, who is

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    concerned with the administration and the discipline of the Forces. As regards the first part of the hon. Member's supplementary, I gave a very long answer, I think last week, showing why it was necessary to make this alteration. As regards the supplementary question of the hon. Member for West Fife (Mr. Gallacher), I have not the slightest doubt that the new conditions have removed some of the undesirable factors which prevailed in a previous institution.
    Commander Sir Archibald Southby: Is it not a fact that these troubles and difficulties only occur in places like Cairo, and that where troops are actively employed there is no trouble of any kind or sort?
    Mr. Loverseed: Would not the Minister agree that a parliament such as this, attended by such large numbers, provides a healthy training ground?
    Mr. Speaker: The hon. Member is expressing an opinion, and not asking for information.
    Mr. Edgar GranvillelIs the Minister aware that one of his predecessors was removed from office for attempting to democratise the Army; and does it not appear that there is still someone at the War Office who is afraid of democracy?
    Sir Herbert Williams: Will my right hon. Friend grant this privilege to this parliament at Cairo: that it should be permitted to meet as frequently as the supreme Soviet, and have the same choice of subjects as members of the supreme Soviet?
    Mr. Gallacher: Can the right hon. Gentleman give us the numbers who are attending?
    Sir J. Grigg: I do not know the numbers.
    Mr. Shinwell: Do we understand that the right hon. Gentleman agrees with the proposal which has just been made by the hon. Member for South Croydon (Sir H. Williams), because he seemed to approve? Will he get up and say what he thinks about it? What is he afraid of?
    Mr. Loverseed: Owing to the unsatisfactory nature of the reply, I will raise the matter on the Adjournment at the first opportunity.

    Discharged Personnel (Civilian Clothing)
    General Sir George Jeffreysasked the Secretary of State for War (1) why neither shoes nor shirts are provided for soldiers discharged from hospital as unfit for further service, so that men have to start civilian life with Army boots and khaki shirts; and whether he will consider making an improvement in the scale of clothing issued to men on discharge;
    (2) why a soldier discharged as medically unfit for further service between 1st March and 1st October receives no overcoat nor cash allowance in lieu, despite the certainty that he will need an overcoat within six months at the most from the date of his discharge; and whether he will see in future greatcoats are invariably issued to men on discharge;
    (3) whether he is aware that the alternative cash allowance for clothing, made to a soldier on discharge, of £4 19s. 9d. in winter and £2 13s. in slimmer has no relation whatever to present prices of clothing; and whether he will investigate this matter with a view to more adequate allowances being made in the future.
    Viscount Suirdaleasked the Secretary of State for War what clothing is issued to other ranks on their discharge from the Army, and, in the event of cash being paid to a discharged man in lieu of clothing, what amount is paid, and whether this amount is adequate to obtain clothing equivalent to that issued in kind.
    Sir J. Grigg: I would refer to the answer I gave my hon. Friend the Member for West Willesden (Mr. Viant) on 9th November. A man discharged from the Army is given the clothing for his immediate needs. Between 31st March and 31st October this does not include a greatcoat. The cash allowance, which in summer is £2 15s. 9d., represents the cost to the Army of the Army issue and is not intended to represent the retail cost of the clothing. But, as I said to my hon. and gallant Friend on 9th May, the present arrangements will be changed as soon as supplies of the clothing which will be issued on demobilisation become available.
    Sir G. Jeffreys: Is my right hon. Friend aware that it pays the country to treat

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    these men well, and that it does not conduce to a good frame of mind to send them away in this manner?
    Sir Irving Albery: Is my right hon. Friend aware that men in a bad state of health have been discharged from the Army in the cold months without greatcoats? Is any difference made between the clothing allowance to professional soldiers and those who are returning to civil life?
    Sir J. Grigg: I do not think so, but perhaps my hon. Friend will put the second question down. As regards the first, if there are cases where the rules as I have described them have not been carried out, I should be glad to investigate them, but in any case, whatever anomalies there are, I hope they will all be removed by August.
    Mr. Evelyn Walkden: What is holding up the excellent scheme which was announced some three months ago. Are the Ministry of Supply doing all they can to make possible the issue of the wonderful rig-out that they offered to the soldiers?
    Sir J. Grigg: Consistently with preparing for future operations which are now imminent, certainly.
    Mr. Quintin Hogg: In regard to overcoats, will my right hon. Friend consider adopting the excellent maxim of not casting a clout till May is out?

    E.N.S.A. Concerts (Charges)
    Mr. John Dugdaleasked the Secretary of State for War whether he will consider allowing soldiers to attend E.N.S.A. concerts without payment as munition workers are allowed to attend similar concerts held in the factories in which they work.
    Sir J. Grigg: Most E.N.S.A. concerts given to munition workers are of a type which, when routed to His Majesty's Forces, is given free. When a type of show in respect of which charges are made to the Forces is given to munition workers, the munition workers are also charged. There is thus no appreciable difference in treatment between munition workers and the Forces.
    Mr. Dugdale: Will the right hon. Gentleman not consider using some of the profits of N.A.A.F.I. to finance E.N.S.A. concerts?
    Sir J. Grigg: Very large sums indeed, something very much in seven figures, are being used.

  SERVICE PAY AND ALLOWANCES
  Miss Wardasked the Secretary of State for War whether, under the new proposals for allowances to officers, Schemes A and B are to be discontinued; and to what extent it is estimated that under Scheme C in total all ranks will be better off than under Scheme A.
  Sir J. Grigg: The answer to the first part of the Question is, "No, Sir." Any officer who wishes to continue to draw family lodging allowance under Schemes A and B may do so, and I assume that only those officers who will benefit by the change will exercise their option to transfer to Scheme C.
  Miss Ward: Can my right hon. Friend say if officers who previously opted for Scheme A will now have the right to transfer?
  Sir J. Grigg: I think they have a new option now.
  Mr. Bellengerasked the Secretary of State for War whether a married woman drawing marriage and child allowance will be treated for purpose of marriage allowance as a childless wife as soon as her child's allowance ceases consequent on the child taking paid employment.
  Sir J. Grigg: When the only or last child leaves school the wife's allowance is reduced to the rate for a childless wife.
  Mr. Bellenger: Does the Minister realise that he will create a considerable amount of dissatisfaction among mothers when they find that because their children leave school the marriage allowance drops by 3s. a week?
  Sir J. Grigg: I think that is covered by the general consideration which was announced in the White Paper, namely, that when that drop involves hardship there is always open the possibility of a war service grant
  Miss Ward: Are any restrictions placed on the application for war service grant in these cases, or are any regulations laid down for the War Service Grants Committee?
  Sir J. Grigg: I know of none, and I imagine that cases would be treated exactly in accordance with normal procedure.
  Miss Ward: But does not my right hon. Friend realise that there are regulations governing the issue of war service grants? In these cases will the Committee have a clear field?
  Sir J. Grigg: I am perfectly aware that there are regulations, and I see no reason why the ordinary regulations should not apply.
  Squadron-Leader Sir Gifford Foxasked the Prime Minister whether it has been decided to make any changes in the recently announced variations of pay and allowances affecting the Fighting Services to meet the grievances felt by the rank and file.
  Sir J. Grigg: I have been asked to reply. The changes announced in the White Paper represent the considered decisions of the Government. I am not aware that there is any general dissatisfaction among the rank and file.
  Sir G. Fox: Is the right hon. Gentleman aware that certain married airmen are getting less total family income by way of pay and allowances than before the new arrangements came into operation?
  Sir J. Grigg: If the question relates specifically to the Air Force, perhaps the hon. and gallant Gentleman will put it down to the Secretary of State for Air.
  Sir A. Southby: Will the right hon. Gentleman bear in mind that there is considerable feeling in the Forces regarding the fact that when a man is killed, his wife and children have their allowances reduced? Will he reconsider that question?
  Sir J. Grigg: That is not the Question on the Paper.

  ITALIAN PRISONERS OF WAR
  Mr. G. Straussasked the Secretary of State for War whether any comprehensive code has been issued governing the conduct of Italian prisoners of war who have volunteered to serve in the Allied Forces; and will he reconsider the order which prohibits these men from entering a shop, cinema or public houses.
  Sir J. Grigg: Administrative instructions have been issued to the Commandants of Italian Labour Battalions. Such restrictions as are in force were imposed in order that the Italians should not compete with the general public for goods and amenities in short supply. But the operation of the restrictions is being watched to see whether any relaxation can properly be made.
  Mr. Strauss: The right hon. Gentleman's remarks surely cannot apply to cinemas, because cinema seats are in short supply. Why should not Italian soldiers who have volunteered to fight with the Allied Nations have the same privileges as Germans?
  Sir J. Grigg: I should have thought, judging from the crowds one sees outside any cinema, that there was a shortage of accommodation. But in any case these men are given cinema shows in their own camps.
  Mr. Strauss: Will the right hon. Gentleman answer the last part of my Question?
  Sir J. Grigg: The answer to that is contained in the last sentence of my answer. The restrictions are being watched to see if any relaxation can properly be made.
  Sir A. Southby: Will my right hon. Friend bear in mind that before we clasp these co-belligerent Italians quite so fondly to our bosoms we should remember it is not so long ago since they were actually engaged in shooting our own sons and brothers?
  Mr. Bellenger: Is it not a fact that at present these prisoners cannot go into any of the places named in the Question because they are not issued with any money except token money, which they can only spend in their own camps? Does not the right hon. Gentleman visualise improving that situation?
  Sir J. Grigg: Perhaps the hon. Member would put that question down.
  Mr. Strauss: Is the right hon. Gentleman aware that many of these men are as anti-Fascist as anyone here, and came to this country in the hope that they might be able to take part in the war?
  Sir J. Grigg: That is as may be. I understand that they came here as prisoners of war.

  FRENCH WAR CORRESPONDENTS (ACCREDITING)
  Mr. Vernon Bartlettasked the Secretary of State for War whether applications for accreditation as war correspondents by French broadcasters and journalists have been granted.
  Sir J. Grigg: Representatives of the Agence Francaise Independente have been accredited as war correspondents to British Forces in North Africa and the Middle East. I understand that applications have been received for other theatres and are being considered.
  Mr. Bartlett: Is it a fact that applications which have been received for French correspondents to go to their own country when the invading armies go there have not yet been accepted?
  Sir J. Grigg: That is a matter for the supreme Commander and not for the War Office.
  Mr. Bartlett: Will the right hon. Gentleman try to bring pressure on the supreme Commander?
  Mr. Shinwell: In view of the active participation of the French Forces in the war, can we be assured that no restriction will be imposed on any of these journalists?
  Sir J. Grigg: I am not in a position to give an assurance one way or the other.

  SCOTLAND

    Hydro-Electric Undertakings (Valuation and Rating)
    Lieut.-Commander Hutchisonasked the Secretary of State for Scotland whether he can indicate when the report of the Committee on Rating will be completed; and whether it will be published as a White Paper.
    The Secretary of State for Scotland (Mr. T. Johnston): I have received a First Report from the Committee dealing with the Valuation and Rating of Hydro-Electric Undertakings in Scotland. It is being presented to Parliament and will, I hope, be published as a Command Paper at an early date.

    Sub-Tenancies, Aberdeen (Rent)
    Mr. Leslieasked the Secretary of State for Scotland whether he can make
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    any statement upon the threatened eviction of six sub-tenants of furnished lets in the city of Aberdeen because they had applied for relief against extortionate charges to the tribunal set up by Act of Parliament to consider these matters.
    Mr. T. Johnston: In this case the local authority took the view that the rents were excessive, and they, on behalf of the sub-tenants, submitted applications for the fixation of reasonable rent to the rents tribunal. Before the case was called the principal tenant intimated to the tribunal that he had given 40 days' notice to the proprietor of his intention to vacate the premises at the May term, and at the same time stated that he intended to sell the furniture. The subtenants were given only seven days' notice to vacate the premises and find other accommodation. The local authority have taken over the premises and on the circumstances of the case being brought to my notice and in order to avoid any possible hardship to the occupants, who include a number of young children, I authorised in terms of Defence Regulation 53 the local authority to requisition the furniture in the premises.
    Mr. Leslie: I thank my right hon. Friend for his prompt action and I hope it will have a salutary effect.

    Education (Legislation)
    Mr. Boothbyasked the Secretary of State for Scotland when he will be in a position to announce the proposals of the Government for the reform of Scottish education; and whether he will do so in the form of a White Paper.
    Mr. T. Johnston: I hope to be in a position to introduce towards the close of the present Session a Bill amending the law relating to education in Scotland. I should propose that this Bill will be given a First Reading only, so that before it is re-introduced next Session there will be an opportunity for full consideration and discussion of the Government's proposals by all parties interested. This will allow of any adjustment that is necessary being made in the terms of the Bill and will obviate the need for a White Paper which would inevitably go over much of the ground that has already been covered in the course of the progress of the English Education Bill.
    Mr. Boothby: Will the right hon. Gentleman bear in mind, as he is not going to issue a White Pager, the desirability of issuing a comprehensive explanatory memorandum?
    Mr. Johnston: That appears to be about the same thing.

    Aircraft and Accessories {Manufacture)
    Mr. Boothbyasked the Secretary of State for Scotland whether he is taking any steps to ensure that the manufacture of aircraft and aircraft accessories is continued in Scotland after the war.
    Mr. T. Johnston: Yes, Sir. I am very concerned that Scotland should share in the post-war manufacture of aircraft and aircraft accessories, and representations in particular instances have been made to my right hon. Friends the Secretary of State for Air and the Minister of Aircraft Production.
    Mr. Gallacher: In order to make sure that Scotland obtains a certain measure of this industry, will the Minister see that he uses his very great influence with the Government to retain control of the industry when the war is over? If it gets into private hands, Scotland is finished, and the Minister knows that.
    Mr. Johnston: That is another question, which I should like to see on the Order Paper.

    Herring Industry
    Mr. Boothbyasked the Secretary of State for Scotland whether the Government has now considered the Report on the Herring Fishing Industry; and whether he proposes to introduce legislation to deal with this industry during the present Session.
    Mr. T. Johnston: The Report of the Herring Industry Committee is presently under consideration by the Government, and I hope to be able to make a statement on the subject at an early date.

  COAL SUPPLIES (ALLOCATION)
  Mr. Ellis Smithasked the Minister of Fuel and Power why his Ministry state publicly that the allocation of coal for the months of May and June was 15 cwts. and issue private circulars to coal deliverers and merchants stating that 15 cwts.
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  is not a ration; and will he institute a coal-rationing scheme so that there can be a fair distribution of coal.
  The Minister of Fuel and Power (Major Lloyd George): The statement that 15 cwts. is not a ration forms part of the public announcements issued by my Department, and is not a private instruction to merchants. The answer to the second part of the Question is "No, Sir."
  Mr. Smith: Does the Minister desire to bring about fair distribution of coal? If so, is he in a position to guarantee it throughout the country?
  Major Lloyd George: I think that, at the present time, distribution is as fair as can be devised.

  TRADE AND COMMERCE

    Government Factories {Post-War Use)
    Mr. Wakefieldasked the President of the Board of Trade if he is now in a position to state what plans have been made for the utilisation of factories owned by the State in a town and district of which he has been informed when hostilities cease.
    The President of the Board of Trade (Mr. Dalton): As I have previously stated, it is not possible at present to say whether, or when, any of these factories will be available for transfer from war to peace-time production, but any firm desiring to apply for the use of any of them after the war should communicate with the Board of Trade.
    Mr. Wakefield: While thanking my right hon. Friend for his reply, may I ask whether he is aware that indecision and lack of policy statements are not helpful to the local authority and prevent planning, because it is felt in the locality that lack of decision can only result in chaos, confusion and unemployment when peace returns?
    Mr. Dalton: No, Sir, there is no lack of decision. What there is, is some doubt as to the length of the war and the future progress of military events. As my hon. Friend, with his knowledge of the Royal Air Force, must appreciate—I do not want to labour the fact here, although I shall be glad to speak to him about it—it is exceedingly likely that the factories he has in mind will continue to be required for war purposes for a considerable time.

    Rationed Goods (Theft)
    Mr. De la Bèreasked the President of the Board of Trade the number of clothing coupons issued to traders in respect of goods lost in transit for the six months ended 31st March, 1944; and, having regard to the fact that such losses must seriously imperil the clothes rationing scheme, what steps the Government propose to take to minimise the volume of the theft of consumer rationing goods.
    Mr. Dalton: The number is about two and three quarter million. Though this number is regrettably large, it represents less than a quarter of I per cent. of the total quantity of rationed goods supplied to the home market in this period. The various authorities concerned are doing their best to minimise such thefts.
    Mr. De la Bère: Is not my right hon. Friend aware that, although it may be a small percentage, it is really a very large number, running into millions? Does he not think that something should be done by his Department, other than the few words which he has given us to-day?
    Mr. Dalton: No, Sir. My Department will give all the assistance they can to the Departments primarily concerned—my noble Friend the Minister of War Transport, my hight hon. and gallant Friend the Postmaster-General, and my right hon. Friend the Home Secretary, who is responsible for the police. It is a matter of the railways, Post Office and the police taking action.
    Mr. Vernon Bartlett: Has the Minister worked out the number of suits of clothes which he or I could buy with two and three quarter million coupons?
    Mr. De la Bère: I want to see the Board of Trade do something.

    Safety Boots
    Captain Stricklandasked the President of the Board of Trade, in view of the number of foot accidents in engineering and other works caused by non-provision of properly constructed safety boots, if he can indicate the result of the steps taken to secure a better supply of this necessary production.
    Mr. Dalton: The production of safety boots of the ordinary type has been substantially increased, but miners must have
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    priority in the allocation of supplies since they are exposed to exceptional risk of foot accidents. I have, however, been able to arrange, in addition, for the production of a considerable quantity of safety boots of a lighter type for use by other industrial workers. Factory inspectors will issue certificates for these, in the light of their knowledge of local conditions and needs.
    Captain Strickland: Is my right hon. Friend aware that the boot which is issued to heavy industries is not constructed so as to prevent accidents happening? Is not the foot of a worker in the heavy industries, as valuable as the foot of a miner?
    Mr. Dalton: It is not a question of the value of a foot, but of feet being dropped upon by heavy objects. The foot accident rate for miners is ten times as great as that for the general body of industrial workers.
    Captain Stricklandasked the Minister of Labour whether he has any figures showing the number of foot accidents due to the non-availability of adequate safety boots to the workers in the heavy trades not connected with coalmining; and what steps he is taking to meet this danger.
    The Joint Parliamentary Secretary to the Ministry of Labour (Mr. McCorquodale): Figures showing the number of foot accidents due to the non-availability of safety boots to workers in heavy trades are not available. My right hon. Friend is anxious that all possible steps should be taken to increase the supply of safety boots for these and other workers and is in consultation on this matter with the President of the Board of Trade.
    Captain Strickland: Is my hon. Friend aware of the inadequacy of the safety boots at present being issued in these trades?
    Mr. McCorquodale: They are the best that can be obtained.

    Ladies' Dresses
    Mrs. Adamsonasked the President of the Board of Trade if he is aware of the acute shortage of ladies' WX size wearing apparel; and what steps he will take to secure equitable production and distribution.
    Mr. Dalton: Dresses in this size are in rather shorter supply than the smaller sizes. In order to encourage manufacturers, who specialise in such dresses, to increase their output, I have decided to offer them a subsidy of one coupon per dress towards the extra material needed. My area distribution officers have been instructed to watch supplies and to report any special difficulties.
    Hon. Members: What does "W.X." mean?
    Mr. Dalton: "W.X," means women's small outsize.
    Mrs. Adamson: While thanking my right hon. Friend for that reply, might I ask him to keep his eye on the problem, because it is rather difficult for W.X. women to get suitable clothing at all?
    Mr. Dalton: I know, and I hope that the subsidy of one coupon per dress will help them.
    Mr. Bowles: What is the formula for a large in-size?
    Mr. Dalton: I should like notice of that question.

  ECONOMIC WARFARE

    Germany (Metal Stocks)
    Mr. A. Edwardsasked the Parliamentary Secretary to the Ministry of Economic Warfare whether he can give an estimate of Germany's stocks of wolfram, tin and chrome, respectively.
    The Parliamentary Secretary to the Ministry of Economic Warfare (Mr. Dingle Foot): Germany's stocks both of wolfram anti of chrome ore are believed to be small. There is evidence that the shortage of wolfram is now particularly acute. Stocks of tin are thought to be relatively rather larger. Germany has also, of course, a certain supply of all these metals in the form of scrap and secondary metal recoverable in various forms. My intelligence officers naturally attempt to make more exact estimates than these, but it would not be in the public interest to reveal their conclusions.
    Mr. G. Strauss: Are our Portuguese Allies still continuing to supply Germany with the bulk of her wolfram ore?

    Enemy Occupied Countries (Vitamins)
    Mr. Edmund Harveyasked the Parliamentary Secretary to the Ministry of Economic Warfare what representations have recently been made to the Government as to the desirability of permitting capsules of a number of other vitamins in addition to, or in partial substitution for vitamin D to be sent into the countries occupied by Germany; and whether the Allied Governments concerned have been consulted about this.
    Mr. Foot: The only representations recently made to His Majesty's Government an this subject were by a deputation from the Manchester and Salford Famine Relief Committee, which was received by my Noble Friend the Minister of Economic Warfare on 1st May. The answer to the second part of the Question is in the negative.
    Mr. Harvey: Has my hon. Friend's attention been called to the Lebanon Conference, under the Hellenic Prime Minister, which emphasised the need for further medical and food supplies for Greece?
    Mr. Foot: I have not yet seen the report to which my hon. Friend refers, but I would remind him that we have quite recently made a substantial increase in the relief shipments to Greece.
    Mr. Sorensenasked the Parliamentary Secretary to the Ministry of Economic Warfare if he has any further statement to make respecting the supplies of vitamin capsules and medical supplies to occupied countries; and whether impending military operations will mean the temporary suspension of these.
    Mr. Foot: As regards the first part of the Question, I have nothing to add to the answer which I gave on 9th May to my hon. Friend the Member for the English Universities (Mr. E. Harvey). As regards the second part of the Question, I should be reluctant to speculate in public as to how far impending military operations may mean the temporary cessation of these supplies.
    Mr. Sorensen: Can we be assured by the hon. Gentleman that every endeavour will be made to see that these urgently necessary supplies continue?
    Mr. Foot: In the near future, operational considerations must come first, and

    567
    I do not think I could possibly give the assurance for which my hon. Friend asks.
    Mr. Sorensen: May I point out that all I was asking was that the hon. Gentleman should endeavour to see that those supplies continue?
    Sir Alfred Beit: What is inside a vitamin capsule?
    Mr. Foot: A vitamin.

    Black List Committee (Swedish Firms)
    Mr. Vernon Bartlettasked the Parliamentary Secretary to the Ministry of Economic Warfare whether he will make a statement on the additions to the number of Swedish firms on the black list which His Majesty's Government proposes to make.
    Mr. Foot: The Black List Committee has recently decided to add the names of 38 firms and persons in Sweden to the Statutory List. These names, which I am circulating in the OFFICIAL REPORT, will be published in the next Order, which is due to appear early next month. Other names are under consideration. I understand that the same 38 names will appear in the United States Proclaimed List.
    Mr. Neil Maclean: Are any Swedish shipping firms included in that list?
    Mr. Foot: Speaking from recollection, I believe that two such Swedish firms are included in the list.
    Following acre the names:

    Filip Anderson, Gothenburg.

    Filip Anderson & Co., A/B., Gothenburg.

    Anderson Line Ltd., A/B., Gothenburg.

    A. R. Appelquist Forvaltnings A/B., Stockholm.

    A/B. Ragnar Appelquist, Stockholm.

    Avimat A/B., Stockholm.

    A/B. Ara, Stockholm.

    Battjanst A/B., Stockholm.

    B. E. Berg, Stockholm.

    Forsakringsbolaget Bores Forlags A/B., Stockholm.

    A/B. Transportbransle, Stockholm.

    D. O. Dufva, Stockholm.

    A/B. Eltron, Stockholm.

    Guldvaruhuset A/B., Stockholm.

    J. C. Hempel, Halsingborg.

    Hallbergs Guldemedaktiebolag, Stockholm.

    Hofjuvelerare K. Anderson A/B., Stockholm.

    A/B. International Shipping Service, Halsingborg.

    T. L. Janssen, Stockholm.

    A/B. Kinofa, Stockholm.

    A/B. Kol & Transport, Stockholm.

    568

    Lindstrom & Wadall, Gothenburg.

    Guernio de Luca, Stockholm.

    Metallkontor A/B., Stockholm.

    Nordiskt Filmotck, Stockholm.

    A/B. Pallasfilm, Stockholm.

    W. A. Paullig, Stockholm.

    A/B. Planeten, Stockholm.

    Superfon P. Richter, Stockholm.

    Rosenthals Specialaffar A/B., Stockholm.

    E. Schlabach, Stockholm.

    Skandinaviska Berkefeld Filter, Stockholm.

    Ungerska Exportkontoret A/B., Stockholm.

    Swedish Yachts A/B., Stockholm.

    Sydproduktor A/B., Stockholm.

    Tessalia A/B., Stockholm.

    F. N. H. Trulsson, Stockholm.

    Tyska Skolan, Stockholm.

  CLUB RAID, FINCHLEY ROAD, LONDON
  Mr. Evelyn Walkdenasked the Secretary of State for the Home Department what were the results of the raid made by the police on Tuesday, 16th May, at the Lyndhurst Club, Finchley Road, London; whether he proposes to announce the names of the persons who were at the time frequenting the club; and whether he can indicate the course of action to he taken against the officers and the members or visitors concerned.
  Mr. Thorneasked the Secretary of State for the Home Department if he can give any information about the 42 arrests at Lyndhurst Club, Finchley Road, St. John's Wood, which was being used as a gaming club; and what action he intends taking about the matter.
  The Under-Secretary of State for the Home Department (Mr. Peake): This club was entered by the police under the Gaming Act, 1845, on 16th May, when six principals and 36 other persons frequenting the premises were arrested. At Marylebone police court the following day the principals were remanded until 31st May and the frequenters until 31st August. As the case is still before the court it would not be proper for me to make any further statement.
  Mr. E. Walkden: Can the right hon. Gentleman give an assurance that there will be no attempt made to suppress the names of certain persons who figure prominently in big business circles in the City? [HON. MEMBERS: "Oh."] Quite frankly, there are fears and misgivings that that might happen.
  Mr. Peake: I can only say that the names of the defendants in this case, as in all other cases, are available to the Press by access to the charge sheet at the police court in the usual way.

  SOLDIERS (REINSTATEMENT IN CIVIL EMPLOYMENT)
  Sir Douglas Hackingasked the Minister of Labour whether, in view of the fact that provision for civilian employment is already made by Act of Parliament for militia, embodied, called-up and disabled soldiers, he will consider a guarantee of employment for time-serving soldiers requiring employment on completion of their service or on the cessation of hostilities.
  Mr. McCorquodale: The Reinstatement in Civil Employment Act applies to all soldiers who started whole-time service since 25th May, 1939, and who apply for reinstatement within six months after the end of the present emergency, including any time serving Regulars whose service falls within this period. The case of time serving Regular soldiers in general, however, is in our opinion best dealt with by arrangements to put them into touch with employments suited to their capacities rather than by attempting to fix an obligation on particular employers to take them back into their former occupation.
  Sir D. Hacking: Will my hon. Friend see that these time serving soldiers are not treated in respect of employment in any way worse than the temporary soldiers?
  Mr. McCorquodale: Certainly, Sir.
  Mr. Gallacher: Is it not the case that the Government cannot give a guarantee to the soldiers to place them in employment when they come back unless the Government control the means of providing employment?

  PENSIONS FOR PARENTS
  Mr. Tinkerasked the Prime Minister if he will consider giving Parliamentary time to discuss the Motion standing on the Order Paper in the name of the hon. Member for Leigh and 40 other Members asking for pensions for parents who have lost sons or daughters in the
  570
  war to be granted irrespective of their means.
  [That this House would welcome the grant of Pensions for Parents who have had the misfortune to lose sons or daughters in this terrible war, in the form of a flat rate pension irrespective of their means.]
  The Secretary of State for Foreign Affairs (Mr. Eden): In view of the state of public Business I can hold out no hope of special time being found for the discussion of the Motion standing in the name of my hon. Friend.
  Mr. Tinker: Is the right hon. Gentleman aware that there is considerable public opinion behind this Motion, and that it would be well, when that is so, to allow it to be discussed on the Floor of the House?
  Mr. Eden: What I said was that there was no special time available for that purpose, but I thought perhaps that some opportunity might be found in the course of normal Business for the matter to be raised.
  Mr. Austin Hopkinson: Can the right hon. Gentleman tell us the exact sum of money that would compensate parents for the loss of a child?

  FORESTRY COMMISSION (WELSH REPRESENTATION)
  Mr. Mainwaringasked the Prime Minister whether, having regard to the extent and widespread location of forestry in Wales and Monmouthshire together with the possible acquirement of further acreage for development purposes, he will consider appointing a specific Welsh representative to the Forestry Commission.
  The Deputy Prime Minister (Mr. Attlee): The term of office of the present Commissioners expires in a few months. My hon. Friend's point will be borne in mind in considering future arrangements.
  Mr. Mainwaring: Will my right hon. Friend bear in mind, when the time comes, that after the last war Wales suffered to a considerable degree from the after effects? It is because we fear so much a recurrence that we are anxious to put every pressure behind the Forestry Commission.
  Mr. Attlee: Yes, I am very conscious of that.

  BRITISH COMMONWEALTH AND EMPIRE (CONSULTATION)
  Mr. Edgar Granvilleasked the Prime Minister whether, as a result of the decisions taken at the Conference of Dominion Prime Ministers, it is now intended to set up machinery for closer consultation between the members of the Commonwealth of British Nations.
  Mr. Attlee: The existing system of consultation between the Governments of the British Commonwealth and Empire was reviewed at- the Prime Minister's meeting. General satisfaction was expressed as to the degree of consultation achieved by the existing means. The Dominion Prime Ministers agreed to consider the position further with their colleagues on their return to their respective countries.
  Mr. Granville: In view of the fact that public opinion has had an opportunity of hearing the Canadian Prime Minister's point of view, will the right hon. Gentleman consider making available a report for the public of the speech which was made by the Australian Prime Minister upstairs in this House, in which he referred to this matter?
  Mr. Attlee: That is a matter for the Prime Minister.
  Mr. Shinwell: Are we to understand from the reply, that specific proposals were placed before the Dominion Prime Ministers on which they are to consult their colleagues in their respective countries, and will these specific proposals be made available to hon. Members at any time?
  Mr. Attlee: That is another question.
  Mr. Shinwell: If it is another question, at what appropriate stage will my right hon. Friend be able to answer it? Is it so difficult?
  Mr. Attlee: My hon. Friend did not give me any notice of that question.
  Sir A. Beit: Are we to assume that no experiments could be made in this direction so long as there were any opponents of the proposals?
  Mr. Granville: In view of the fact that there is a precedent in the case of the speech by Field Marshal Smuts, will the right hon. Gentleman, to dispel any
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  notion that the Government only want to hear one point of view, reconsider whether the speech of the Australian Prime Minister can be made public—the speech which was made upstairs at this House?

  POST-WAR MILITARY SERVICE (COMPULSION)
  Mr. Sorensenasked the Prime Minister if it is the intention of His Majesty's Government to bring forward proposals for the compulsory military service of young people in post-war years.
  Mr. Attlee: I would refer my hon. Friend to the answer which I gave to my hon. Friend the Member for Bassetlaw (Mr. Bellenger) on 23rd February last, to which I have nothing to add.
  Mr. Sorensen: Can we take it that the speech made by the Minister without Portfolio does not represent either the intention or the desire of the Cabinet, particularly the Labour Members?
  Mr. Attlee: I am afraid I have not heard of that speech.
  Mr. Sorensen: Is my right hon. Friend not aware that one of his own colleagues said recently that he desired young people to have military service?
  Mr. Attlee: I am quite unaware of that speech.

  ALBANIA (GUERILLA ACTIVITIES)
  Wing-Commander Hulbertasked the Prime Minister if he can now make any statement in regard to the activities of Albanian guerillas; and if His Majesty's Government have any information in regard to the political situation in that country.
  Mr. Attlee: Guerilla activity is fairly widespread throughout Albania and, with the exception of a few Quisling politicians who have formed a Government in collaboration with the Germans, the Albanian people as a whole are resolutely opposed to the Axis invaders of their country. The guerillas are best organised in the centre and the South.
  There are three main organisations. The National Liberation Movement is the most active. It is predominantly Left Wing and its operations are mostly confined to

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  Southern Albania. In the centre there is the Legality Movement of supporters of King Zog, led by Major Abas Kupi. The third organisation is the Balli Kombetar or National Front, a more loosely knit body of Albanian Nationalists. All these groups hold strong political opinions which have sometimes led to clashes between them. His Majesty's Government through their liaison officers in the country are, however, trying to bring them together and to establish a united front of resistance to the enemy.
  Mr. James Griffiths: Does it not become clear that both in Albania and elsewhere the real resistance is coming from the workers and peasants?
  Mr. Attlee: I should think so. Albania is a country of workers and peasants.
  Mr. Riley: Is the Allied Commander sending supplies to the guerillas in Albania?
  Mr. Attlee: Yes, we are sending arms and ammunition to various guerilla bands.

  RUSSIA, WAR LOAN (LOTTERY ISSUE)
  Sir H. Williamsasked the Chancellor of the Exchequer if he will obtain and publish in HANSARD the details of the lottery issue of the Third War Loan of the U.S.S.R. which is now being issued.
  The Chancellor of the Exchequer (Sir John Anderson): Yes, Sir.
  Sir H. Williams: Does not my right hon. Friend rejoice at this example of the revival of the profit motive?
  Mr. Shinwell: Does the right hon. Gentleman appreciate that he is now being asked by the hon. Member for South Croydon (Sir H. Williams) to adopt a practice which is in vogue in Russia?

  NATIONAL FINANCE

    Civil Servants (Armed Forces, Pay)
    Lieut.-Commander Gurney Braithwaiteasked the Chancellor of the Exchequer whether the various allowances are ignored and only basic pay taken into account when computing the supplementation paid to civil servants serving in His Majesty's Forces.
    Sir J. Anderson: Most of the allowances payable to members of the Services are taken into account for this purpose, but there are certain exceptions. I am sending my hon. and gallant Friend a copy of the Treasury Circular explaining the arrangements.

    Trade Facilities Act (Investments)
    Wing-Commander Hulbertasked the Chancellor of the Exchequer if he will circulate a statement showing the outstanding investments made by the Treasury under the Trade Facilities Act and the date of the last investment.
    Sir J. Anderson: Yes, Sir. I am circulating a statement in the OFFICIAL REPORT.
    Following is the statement:
    I assume that my hon. Friend is referring to guarantees given by the Treasury under the Trade Facilities Acts, 1921–26. The total sum guaranteed under those Acts was £72,093,767. Some of the loans so guaranteed were converted and guaranteed under Section 25 of the Finance Act, 1934. The present Exchequer liability is £8,298,449 in respect of loans still guaranteed under the Acts of 1921–26, and £17,965,841 in respect of conversions under the Act of 1934. The total amount issued from the Consolidated Fund in fulfilment of the above guarantees is £10,524,117, and of that amount £4,859,340 has so far been recovered. Apart from the powers in respect of conversions referred to above, the power of the Treasury to give guarantees under the Trade Facilities Acts expired in 1927. In certain cases the loan operations arising from commitments made before that date were not completed for several years afterwards.

  ROYAL AIR FORCE (WATER ECONOMY)
  Squadron-Leader Donnerasked the Secretary of State for Air whether, in view of the shortage of water in a district of which he has been informed, any instructions have been issued to R.A.F. personnel regarding the need for the strictest economy of water usage.
  Captain McEwen (Lord of the Treasury): I have been asked to reply. Yes, Sir. Water supply to a number of R.A.F. stations in the district has

  575
  been strictly rationed. Instructions in regard to economy in the use of water have been issued to all R.A.F. stations.
  Squadron-Leader Donner: Is my hon. and gallant Friend aware that his reply will cause great satisfaction to the people affected, particularly farmers, as the position has now become acute?

  HOUSING (LAND ACQUISITION)
  Mr. Kendallasked the Minister of Town and Country Planning in view of the Government's assurance that land will be forthcoming when and where it is needed for all the houses required and that local authorities will have power to acquire land for building purposes, based upon values existing at 3rst March, 1939, what steps are envisaged to ensure that private citizens, who are negotiating for the purchase of land to build their own homes, cannot be charged more than the standard of values of 31st March, 1939.
  The Parliamentary Secretary to the Ministry of Town and Country Planning (Mr. Henry Strauss): I would ask the hon. Member to await the terms of the forthcoming Bill and White Paper.

  CHEMICALS (EXTRACTION FROM SEA)
  Mr. Ellis Smithasked the Minister of Production if he can make a statement on the experience gained in practice and research in the extraction of material and chemicals from the sea; what results have been obtained; if it is intended to speed this up as a contribution to the development of our post-war economy; and if he will give an assurance that no person or groups will be allowed to impede development and output in any form.
  The Parliamentary Secretary to the Ministry of Production (Mr. Garro Jones): Even if considerations of security permitted, I fear it would not be possible to give the information for which my hon. Friend asks, within the limits of an answer at Question Time. Though the valuable developments which have taken place are primarily directed to war purposes, I can assure him that the post-war aspects, including the point to which he refers in the last part of his Question, are not being overlooked.
  Mr. James Griffiths: Has my hon. Friend seen a pamphlet by Mr. Devereaux suggesting post-war development and is his Department interested in that matter?
  Mr. Garro Jones: Yes, Sir, I read that pamphlet word for word; but I could not say whether the matter has reached the stage of final consideration.

  HEPPLEWHITE CHAIRS, CHATHAM (SALE)
  Mr. Keelingasked the hon. Member for West Swansea, as representing the Charity Commissioners, why they did not stop, pending inquiry, the sale by auction on 19th May, of the Hepplewhite armchairs belonging to a Chatham almshouse; and whether he will give an assurance that in future cases of this sort every endeavour will be made to retain historic works of art in public ownership.
  Mr. Lewis Jones (Charity Commissioner): The duty of the Commissioners is to safeguard the interests of charities, and they are not justified in withholding their consent to a sale if satisfied that the sale is in the interests of the charity concerned. They endeavour to secure that no sale of historic works of art is made until the proposal to sell has been made known so that public bodies interested in such works of art may have an opportunity of purchasing them. In the case of the armchairs in question, the Commissioners were satisfied that the proposed sale was in the interests of the almshouse; it had been generally known for nearly 15 years that the chairs were for sale. Tile Commissioners had consented to the sale by an Order dated 16th May, 1944, and they could not afterwards withdraw their consent.
  Mr. Keelings: May we take it that the reply to the second part of the Question is in the affirmative?
  Mr. Jones: I do not know whether I should be so definite as that. One has to bear in mind that the main interest of the Charity Commissioners is to safeguard the funds of the charities, but I am sure that the Commissioners will take note of the views of the House of Commons on this matter.
  Viscount Hinchingbrooke: Who was the purchaser of these chairs?
  Mr. Jones: I have not the remotest idea.
  Commander Locker-Lampson: Can we be told the price that was paid?
  Mr. Jones: I have seen some reference in the Press to a figure of £650.
  Mr. E. P. Smith: Does not charity begin at home?

  PRISONERS OF WAR AND CIVILIANS (REPATRIATION)
  Mr. J. J. Lawsonasked the Secretary of State for Foreign Affairs if he has any statement to make on the repatriation of the 800 prisoners of war recently released from enemy internment camps.
  Mr. Eden: Yes, Sir. The exchange, which was completed at Barcelona on nth May, comprised seriously ill and wounded prisoners of war, medical troops, and civilians. In all, over 900 British Commonwealth, together with a certain number of American, prisoners were taken on board the "Gripsholm," and about 700 German prisoners were delivered to the hospital ship provided by the German authorities. About 90 German civilians were exchanged for an equal number of civilians of the United Nations, including 21 British. The British Commonwealth and American repatriates, less those who have been disembarked at Algiers, are due to reach this country towards the end of this week. The agreement covering this repatriation was negotiated through the Swiss Government, to whom, for their assistance on this and many other occasions, His Majesty's Government are deeply indebted.

  CHINA (BRITISH AID)
  Mr. A. Edwardsasked the Secretary of State for Foreign Affairs whether he can give figures showing the contributions made by public subscriptions towards aiding China's war effort and, in particular, the sums spent through charitable organisations on medical supplies of every description.
  Mr. Eden: Public subscriptions in this country have not been devoted directly to aiding China's war effort, but to relieving the distress there arising out of the war. The principal relief organisations operating in China to-day are the United Aid to China Fund, and the War Organisation
  578
  of the British Red Cross and Order of St. John. Subscriptions to the United Aid to China Fund at present total £1,122,000, of which £930,000 has been remitted to China for distribution by Madame Chiang Kai-shek. This includes medical supplies to the value of over £6,500. As regard the War Organisation, their total expenditure to date, including commitments, amounts to £524,100, including an allocation of £100,000 for the purchase of medical supplies and drugs. Under this head, some £25,000 have already been supplied, and the balance is in the course of supply and transport. Over £200,000 was raised by the former British Fund for the Relief of Distress in China, and distributed there on relief work and the purchase of medical and hospital supplies.
  Mr. Edwards: Can my right hon. Friend give an assurance that supplies to China of these essential commodities will not be in any way dependent on the raising of funds by charitable organisations?
  Mr. Eden: I was asked for particulars of what the charitable organisations do. These are the particulars. They are, of course, over and above what the Government do.
  Mr. Edwards: Can the right hon. Gentleman give an assurance that, in the absence of funds, these things will still go to China?
  Mr. Eden: I would like to see that question on the Paper. I am confident that I can answer "Yes," but I would like notice.
  Mr. J. J. Lawson: Is the right hon. Gentleman aware that there is very grave concern about this matter and a feeling that we are not doing what we might do to help the Chinese in regard to hospital and first-aid supplies?
  Mr. Eden: I am sorry if there is that feeling, because very great efforts have been made to meet what is admittedly a difficult situation.

  OFFICER PRISONERS OF WAR, GERMANY '(SHOOTING)
  Mr. Edgar Granvilleasked the Secretary of State for Foreign Affairs if he has received any further information from the Protecting Power on the killing of 47 R.A.F. officers whilst attempting

  579
  to escape from a German prison camp; and why the Protecting Power was not informed of this until several weeks after it had taken place.
  Mr. Eden: No, Sir, I regret that I am unable at present to add anything to the statement which I made on 19th May. But I might perhaps add that I have seen a report, which appears in the Press this morning, and I have asked His Majesty's Minister at Stockholm for an immediate report on the matter.
  Mr. Granville: While thanking my right hon. Friend for his reply, might I ask whether he will take an opportunity of seeing that the Press Department of the Foreign Office make available to the public of this country any information of an authentic character which the Foreign Office receive during the Parliamentary Recess?
  Mr. Eden: Yes, Sir. As soon as we receive anything in which we have absolute confidence, we will make a statement.
  Major Sir Jocelyn Lucas: Have the names of prisoners who are still at large been given to the next of kin?
  Mr. Eden: I shall be glad if my hon. and gallant Friend will put that question down.

  NIGERIA (WOUNDED SOLDIER'S PENSION)
  Mr. Sorensenasked the Secretary of State for the Colonies if he has considered the case of the Nigerian soldier, about whom particulars have been sent to him, who is to receive only 5s. per week pension for the loss of two hands and an eye; and what action he proposes to take to secure that the amount of pension is adequate.
  The Secretary of State for the Colonies (Colonel Oliver Stanley): The rates of disability pensions for members of West African Forces were fixed in 1942, after full consideration by the local Governments, having regard to the standard and cost of living in West Africa. Particulars were sent to the hon. Member and placed in the Library of the House, in August, 1943. In addition to the rates fixed by local legislation, Governors have the power to increase the amount by 50 per cent. if, in any particular case, the
  580
  amount of pension appears to be inadequate. Cash gratuities are also payable—in this case, £20. As soon as this case was brought to my notice, I inquired of the Resident Minister, West Africa, whether he considered that the rates fixed in 1942 were still adequate, and I am awaiting his reply.
  I am circulating in the OFFICIAL REPORT a full statement describing the treatment which has been accorded to Private Maye since his arrival in this country.
  Mr. Sorensen: While thanking the right hon. and gallant Gentleman for the reply, might I ask whether he has himself sent any recommendations to the Governor, to propose that there should be some substantial increase in view of the increased cost of living in West Africa?
  Colonel Stanley: I want to find out from him whether, if the cost of living has gone up, the rates of pension fixed 1942 are adequate.
  Mr. Shinwell: Surely, quite apart from the cost of living, this award, for a man who has suffered serious disability, cannot be regarded as adequate. Cannot the right hon. and gallant Gentleman make representations to secure an increased pension?
  Colonel Stanley: The House will realise that the rates must be fixed in accordance with the standard of life in the country concerned. In the Cameroons the average income of a farmer is £8. In addition, the man is being set up in a trade, in which there is every prospect that he will be able to earn a decent living.
  Mr. Riley: Has the right hon. and gallant Gentleman looked into the corresponding scheme of payments for British soldiers?
  Colonel Stanley: There is no relation. Those British subjects have to live in Great Britain, with the British cost of living.
  Following is the statement:
  Private Maye is a member of the African Auxiliary Pioneer Corps (West Africa), who was severely wounded in the Mediterranean theatre in September, 1943. He was brought to this country, and admitted to a famous military hospital. The military authorities drew the attention of the Colonial Office to this

  581
  casualty, and immediate arrangements were made for him to be visited by an officer of the Welfare Department of the Colonial Office, who had first-hand experience of Nigeria and was able to take down suitable West African foodstuffs and advise the military authorities on diet and other matters of general welfare. Since that date, members of the Colonial Office have paid him several other visits. Private Maye was later transferred to Roehampton, and has been fitted with artificial hands and an artificial eye. He has received the same scale of treatment as would be accorded to a British soldier from the United Kingdom.
  2. Since African Colonial rates of pay would be insufficient to meet his needs while in England, the War Office have agreed, at the request of the Colonial Office, that all Colonial troops will receive United Kingdom rates of pay when posted to England, either on duty or as casualties.
  3. I felt that it was most important that this man should, while in England, receive the best possible rehabilitation treatment and occupational training which can be provided in the United Kingdom, which, it is recognised, leads the world in this sphere. It would be most regrettable if a man returned to his country, after suffering such severe injuries, without being afforded every possible opportunity to take his place as an independent citizen in the life of his own community. He will, therefore, be trained at a Ministry of Labour centre, free of charge, in the trade of tailor, which he himself has expressed a strong desire to learn, and for which there is a large demand in his own country. During his training he will receive free board, lodging, attendance and travelling, at Government expense, and, in addition, will receive the usual Ministry of Labour training allowance of 24s. a week. This, with his disability pension, will give him approximately 30s. a week pocket money, clear of expense of maintenance, and he will, in the normal way, be provided with one complete suit of civilian clothing. The special treadle sewing machine which he will take back with him to Nigeria is, of course, to be provided at Government expense.
  4. Private Maye is grounded in English, but has expressed a keen desire to improve his education; and he has been supplied with English readers, of the same
  582
  kind as those in use by the Nigerian Education Department. He has also received a number of small gifts and comforts from Welfare Funds and from members of my staff, including kola nuts obtained specially for him from Nigeria.
  5. It will be seen that every effort has been made by the responsible authorities for Private Maye's welfare, while in this country.

BUSINESS OF THE HOUSE
Mr. Edgar Granville: On Business today, may I ask the Leader of the House whether it is the intention of the Government to suspend the Rule to-morrow; and will the right hon. Gentleman bear in mind that, on the first day of a Foreign Affairs Debate, there is likely to be a queue of elder statesmen who have just discovered the British Empire, and of ordinary back bench Members who have been prospecting in this subject for a long time, and who may not get an opportunity to take part in the Debate unless the right hon. Gentleman decides to extend the Sitting for one or two hours?
Mr. Eden: I do not know whether my hon. Friend includes himself among the elder statesmen, but we have had the good fortune to hear speeches from him once or twice on this subject. I certainly considered this matter, and I thought it might be convenient to the House if we had a limited extension.
Mr. Gallacher: The Leader of the House is aware of the fact, that, after the Prime Minister makes a speech, the House empties. Would it not be desirable to arrange, even at this late hour, that, when the Prime Minister makes his speech to-morrow, someone on this side who is likely to speak on matters concerning King George of the Hellenes and King Peter, and who is likely to be critical of the Prime Minister, should follow the Prime Minister, so as to give us some of the realities of the situation?

BUSINESS OF THE HOUSE

  MESSAGE FROM THE LORDS
  That they have agreed to,—
  Edinburgh Merchant Company Endowments (Amendment) Order Confirmation Bill, without Amendment.

PUBLIC PETITIONS (KING'S RECOMMENDATION)
Mr. Speaker: I wish to inform the House of a change which, if it commends itself to the general sense of the House, I propose to make in the Rules of Order governing Public Petitions. I propose to re-interpret Standing Order No. 63—which requires proposals for expenditure to be recommended by the Crown—so as to permit the reception of Public Petitions which pray for legislation involving expenditure, without requiring them to have been recommended by the Crown. I think there are good reasons for this change, but as they are somewhat technical, I do not propose to state them now but to circulate a statement in HANSARD. If any hon. Member has any observations, I will be glad if he will send them to me before the House reassembles after Whitsuntide, and I will take them into consideration before giving a final Ruling.
Following is the statement referred to:
Standing Order No. 63 has hitherto been interpreted so as to rule out of order, unless it has received the King's recommendation, any Petition which involves a charge on public funds, whether that charge is prayed for directly or whether legislation would be required to authorise it. This was one of the grounds on which a recent Petition, praying for legislation to increase Old Age Pensions, was rejected. The relevant words of this Standing Order are:
"This House will receive no petition for any sum relating to public service … unless recommended from the Crown."
This Standing Order dates from 1713, and first adopted, applied only to Petitions. Later it was extended to Motions. Since then the procedure on Bills involving expenditure has become much more strictly defined, and it would not be possible now for a Bill implementing a Petition to become law without a Financial Resolution recommended by the Crown, if the Petition asked for money. As this is the case, it seems unnecessary to require the King's recommendation twice for the same charge—once for the Petition and once for the Bill. Accordingly, if the House agrees, I propose to re-interpret the Standing Order in its application to Petitions so as to exempt Petitions praying for the grant of money by Bill from the need to secure the
584
King's recommendation. If, however, a Petition prays for money directly, it will still require to obtain the King's recommendation on presentation, since it might conceivably be implemented without a Bill.
It seems to me that this is a commonsense arrangement. The constitutional rule is that the King alone can initiate expenditure. But the recommendation, by which His Majesty exercises this right, should be reserved for the effective stage, and not be required unnecessarily at a preliminary stage—which, as in the case of a Petition praying for legislation, is not only not in itself effective, but cannot lead directly to effective action. It is a further advantage that this arrangement will save the Crown from being faced with the dilemma of either refusing to recommend a Petition which may, however ineffective, have wide support, or else of granting the King's recommendation to a Petition and thus appearing to incur some moral responsibility for implementing it by legislation.

PRIVILEGE (LETTER TO MEMBER)
Sir Herbert Williams: I desire to raise again with you, Mr. Speaker, the question of Privilege raised already on Friday, 19th May, affecting the hon. Member for St. Helens (Mr. W. A. Robinson), who is now in his place.
Mr. Speaker: Mr. Robinson.
Mr. W. A. Robinson: This matter has not been raised by me in the Press. I can only inform you, Mr. Speaker, and the House, that I was in receipt of a registered letter from my organisation which I have got here, which I can show you, and which I propose to read. The letter, which is dated 15th May, reads as follows:
"Dear Mr. Robinson,
Your letter of the 10th May intimating that it is not your intention to resign as Member of Parliament for St. Helens, was noted by the Executive Council at their meeting held this last week-end.
I am directed to inform you that the Executive Council adopted the following minute unanimously:
That the retaining allowance of £200 per annum payable to Mr. W. A. Robinson, as authorised by minute 944 (3) of Executive Council held 12th and 13th December, 1942, and the postage allowance and secretarial assistance authorised by minute 757

585
(3) of Executive meeting held 10th and 11th October, 1942, be discontinued after the 30th June, 1944.'"
That letter I received with regret. I have shown it to nobody and, from whomsoever the Press received the information, it was not from me. I have not raised the matter, and, whatever pang I felt myself, I did not inform anybody of it.
Mr. Speaker: The House will appreciate that the hon. Member did not raise the matter himself. The matter has been raised, and I think the House will appreciate that it involves a rather serious issue. I decide therefore that a prima facie case has been made out.
Sir H. Williams: I beg to move,
"That the Matter of the Complaint be referred to the Committee of Privileges."
Question put, and agreed to.

ORDERS OF THE DAY

  FINANCE BILL
  Order for Second Reading read.
  Mr. Stokes: On a point of Order. Could you, Mr. Speaker, give us some indication of what Amendments you are going to call, and, particularly, whether you will call the Amendment standing in my name and the names of other hon. Members?
  Mr. Speaker: As far as I know, that is the only Amendment down, and I did not propose to call it.
  The Financial Secretary to the Treasury (Mr. Assheton): I beg to move, "That the Bill be now read a Second time."
  Four weeks ago, my right hon. Friend introduced into this House a Budget which, I think, will make history. In the last 50 or 60 years, there have been probably half a dozen Budgets which have made no changes in taxation. The last one was introduced by my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) in 1913. This year's Budget will make history because, in the fifth year of the greatest war the world has ever seen, the existing high rates of taxation already cover such a proportion of our expenditure that no further increase has been considered necessary. I suggest it is no mean achievement that as the war has increased in intensity, necessitating an ever-growing annual rate of expenditure, the proportion covered by taxation has increased. It has increased from 35 per cent. to 41 per cent., 44 per cent., 51 per cent. and 52 per cent., as the years of war have gone by. Those are the progressively increasing proportions of our expenditure which have, in fact, been covered by taxation.
  The benefits of our physical efforts in the war are not difficult to recognise, and never have been. The benefits of a sound financial policy, on the other hand, are very much more difficult to recognise, and I suggest that perhaps to most hon. Members these benefits were less obvious. Did it really matter, for example, that we should raise a half, rather than a third, of our expenditure out of taxation? Was it really necessary, or important, that we should have to save so hard and lend so freely to the Government? Surely, it is
  596
  one of the most heartening aspects of the war effort that our people should have recognised the vital consequences of the financial policy we have been asked to support. I suggest that, now, the benefits of this policy are plain for all to see. Coupled, of course, with the various economic policies which have been adopted, the rigorous financial discipline which the country has imposed upon itself has been responsible for the fact that the war effort has been able to progress smoothly, unhampered by that instability, unsettlement and anxiety which are quite inseparable from the evils of inflation. To realise this, does not mean that we can rest upon our laurels in the financial sphere, any more than we can in the military sphere.
  If, by great sacrifices, the benefits of a sound financial policy have been hardly won, they might, by some slight relaxation, be very easily lost; and in refraining from imposing any increases in the compulsory burdens of taxation the Chancellor, of course, assumes that there will be no falling off in the magnificent voluntary effort which the country has made in response to the war savings campaign. In connection with that, I see my hon. Friend the Member for Ipswich (Mr. Stokes) just moving away from his seat, but I think it only right that I should take this opportunity of saying something to him in respect of what he said the other day in this House. He is continually laughing at the War Savings Campaign and ridiculing those who take part in it, and he made a statement the other day which excelled all the others which he had previously made in this House, and I must say that the House was not pleased to hear it. In addition to that, he made a statement which was entirely incorrect. He suggested that one great insurance company had put £2,000,000 as a subscription into some provincial War Savings Week. I have taken the opportunity of examining the facts and I find that the statement of my hon. Friend is wholly incorrect, and I suggest to him that he should be careful in what he says. I am reminded of some words of a predecessor of mine in the office that I hold—Mr. Sheridan, who was Secretary to the Treasury some time ago.
  Sir Herbert Williams: The playwright?
  Mr. Assheton: Yes, and he observed to an hon. Member that
  "The hon. Gentleman is indebted to his memory for his jests, and to his imagination for his facts."
  I suggest that that might well have been applied to my hon. Friend the Member for Ipswich.
  Mr. A. Edwards: Is the right hon. Gentleman suggesting that there is something uncomplimentary in that remark? Is it not flattering?
  Mr. Assheton: I will leave the hon. Gentleman to form his own conclusions. To come to the main body of the Bill, the first five Clauses provide for a number of adjustments in the customs and excise. My right hon. Friend referred in his Budget Speech to the proposals in regard to the Beer Duty and the Sugar Preferences, and I will deal with some of the other changes. Clause 3—Entertainments Duty on season tickets, &c.—is to ensure that the duty chargeable on season tickets shall not be greater than that chargeable on separate payments for admission to the same entertainments, and it arises out of an anomaly to which my hon. and gallant Friend the Member for Wycombe (Sir A. Knox) was good enough to draw my attention in a Parliamentary Question. Clause 4 provides that vintage port may be bottled for home consumption in a bonded warehouse.
  Sir H. Williams: Where is it?
  Mr. Assheton: We are hoping that more will come in after the War. At present it is not permissible to bottle wine in bond for home consumption, but vintage port has a very special claim for consideration because of the very high rate of duty and of the fact that it requires to be matured in bottle for many years. Clause 5 also deals with alcoholic beverages. I note that the noble Lady the Member for the Sutton Division of Plymouth (Viscountess Astor) is not in her place. This Clause is to meet the possibility of a new export trade development. It is thought that there are possibilities of an export trade in cocktails made by mixing gin with British made vermouth, and for this purpose, cocktails will be made up at the bonded warehouse. Whereas the gin is already relieved from duty under the existing law, it appears
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  that this is not the case with what are technically called the "sweets"—that is to say, wines made in this country—when they are mixed with the gin.
  Clause 6 deals with armorial bearings and carriage duties, and that has already been referred to by my right hon. Friend the Chancellor of the Exchequer in opening his Budget. Clause 7 does away with the requirement for the posting of certain public notices on church doors with regard to the issue of licences for dogs, armorial bearings and carriages—a practice which it is now thought no longer serves a useful purpose.
  Sir Alfred Beit: Does this also mean that in future there will be no notices regarding Income Tax assessment posted on church doors?
  Mr. Assheton: This does not affect Income Tax at all, but I have informed my hon. Friend already about that. There have been some modifications with regard to that question recently. I hope that this Clause will not have any adverse effect on attendances at church; I do not think it will. Clauses 8 and 9 raise no question of principle but they cure certain minor defects in the provisions of the Finance Act, 1942, with regard to the suspension of justices' liquor licences in cases where the licensee's business has been discontinued owing to the War.
  In Part II, Clauses 10 to 18 deal with amendments to the Purchase Tax law, which four years' experience has shown to be desirable. Some of these Clauses—10, II and 14—are needed to block loopholes whereby tax is being evaded. Clause 13 enables the Treasury not merely to alter the limit below which registration is required for Purchase Tax purposes, as they can at present, but to abolish it altogether. The exemption limit has, I am sorry to say, been used by certain ingenious persons as a means of evading tax, but if the Treasury make an order under this Clause, it is subject to an affirmative Resolution of the House of Commons. Clause 15 gives justifiable relief to registered traders against the double charge of tax which may arise in certain exceptional circumstances, and it is a Clause entirely favourable to the subject. None of these Clauses dealing with the Purchase Tax extends the tax to any new classes of goods.

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  Parts III and IV deal with Income Tax. Clause 22 was explained by my right hon. and learned Friend, the Attorney General, on the Report stage of the Resolution. The effect of it is that where a British subject abroad claims relief in respect of personal allowances, he will be given the proportion of the personal allowances which his income liable to British Income Tax bears to his total income. Clause 23 deals with the sale of copyright for a lump sum, and that was mentioned by my right hon. Friend the Chancellor in his Budget speech. If the work took more than one year, but less than two years to produce, the lump sum payment will be spread over the year of receipt and the preceding year; and if it took over two years to produce it will be spread over three years, namely, the year of receipt and the two preceding years. The purpose of this spread is to avoid the hardship that would arise in the charge to tax if the lump sum payment were deemed to be income of the year of receipt although, in fact, it represented the work of a number of years.
  Mr. Colegate: Will my right hon. Friend give some indication of how the position is to be met? A work of this kind may have been produced in a year or two years, but the subject may have been thought over for years before the author finally started to put his thoughts on paper. Has my right hon. Friend thought out any regulation on that subject?
  Mr. Assheton: Some consideration has been given to that aspect of the subject, but it would be more appropriate to discuss it on the Committee stage.
  Sir H. Williams: Has my right hon. Friend read Sheridan's Biography on the matter, because he would find himself better informed if he had done so?
  Mr. Assheton: On the law of copyright?
  Sir H. Williams: Yes.
  Mr. Assheton: There is one point I want to make. Attention has been called to the practice of publishers in making to authors an advance payment in respect of royalties, which payment is not returnable in any event, but is taken into account towards payment of royalties if the issue of the book exceeds the figure correspond-
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  ing to the advance payment. It is felt that any such advance payment, which is not returnable in any event, should be treated as a lump sum within the Clause, and my right hon. Friend the Chancellor is prepared to accept an Amendment on the Committee stage to make that clear.
  Clause 24 deals with maintenance orders, and provides that small weekly payments made under orders of court in separation and divorce and affiliation cases shall be payable in full and not be subject, as they are at present, to deduction of tax, any liability to tax being recovered by direct assessment on the recipient. This, I think, will be a convenience, and it certainly removes some administrative difficulties in connection with the issue of warrants by magistrates for the payment of arrears. There has been some complication in the past, because it has not been easy to decide for what sum the warrant should be issued. This Clause will clear up that difficulty.
  Clause 25 ought to be very popular with the House, and particularly with my hon. Friend the Member for Chesterfield (Mr. Benson), who, I am sorry to see, is not in his place. It deals with the simplification of procedure. In order to explain this proposal adequately I should first have to explain how very complicated the present procedure is, and that would take a long time, and I think, therefore, that it would be more appropriate if I, or someone else, were to do this on the Committee stage. The Clause concerns the machinery for carrying out assessments under Schedule B and Schedule D, and lest any hon. Member should have any anxiety on the point, I may say that it does not involve any interference at all with the jurisdiction of the Commissioners of Taxes either in the making of the assesments or in the hearing of appeals. The assessments will continue to be made by the local Commissioners, but the Notices of Assessment will in future issue from the office of the inspector of taxes, where the clerical work in connection with the scheme will be carried out. The new system has been tried out experimentally in certain districts and has proved a great success.
  Clauses 26 to 30 deal with the allowances for expenditure upon scientific research, a matter to which my right hon. Friend the Chancellor referred at some length in his Budget speech and on which he proposes to make some further ob-

  601
  servations when we come to the Committee stage. I know how warmly the House welcomes this part of the Bill, and it has been received with enthusiasm in the country as a whole, not only for itself but because it is a sign of the very great interest which my right hon. Friend takes in everything which will contribute to helping industry to be in the very forefront of technical proficiency after the war.
  Clause 31 deals with Excess Profits Tax and carries out the proposal to increase Excess Profits Tax standards other than the profits standard by the sum of £1,000. This, I think, has been generally welcomed, because it relieves the incidence of the burden on the small man. As my right hon. Friend indicated in his Budget speech, the increases in the standard which may result from this addition of £1,000 will operate forwards and not backwards for the purposes of determinating "deficiencies."
  Mr. Hammersley: Could the right hon. Gentleman elucidate that point? The words are:
  "Otherwise than by reference to the profits of the standard period."
  Does that mean that not only a capital standard but a substituted capital standard would be eligible for the extra £1,000?
  Mr. Assheton: Yes, I think there is no doubt about that, but when we come to the Clause in Committee we shall have an opportunity of exploring it more fully. If my hon. Friend wants a further description of the operation of the forwards and backwards provision I should be very glad to give it to him. Where the profits of any year fall below the standard, any Excess Profits Tax paid by the concern in previous years on the profits exceeding the standard falls to be repaid by reference to the amount by which the profits have fallen short of the standard. The addition of £1,000 to the standard may result in a deficiency or in the increase of a deficiency that would otherwise exist, and in any such cases the deficiency will be broken up into two parts: that part which would have existed if there had been no increase in the standard and that part which is attributable to the £1,000 increase. Of course, only the former part will rank for repayment of Excess Profits Tax paid in the
  602
  past. The deficiency due to the £1,000 itself will rank for relief against any Excess Profits Tax that may become payable in the future.
  Mr. A. Edwards: When the Chancellor spoke he said that it would be £1,000 increase for each standard. In a newspaper the following day it was stated that it was clear in the case of director concerns that it would be £1,000 per director.
  Mr. Assheton: No, it is not £1,000 per director, but £1,000 on the standard.
  Sir H. Williams: Can the right hon. Gentleman say why Clause 31 starts now and Clause 32 is retrospective?
  Mr. Assheton: Clause 32 deals with tax avoidance. Like all Clauses on that subject, it is very complicated. The House must not blame the Government for that, and much less the Parliamentary draftsman, who is often accused of being obscure. The complexity of Clauses dealing with tax avoidance is due to the complicated methods engaged in by people to avoid tax, and we must put the blame for it on the ingenious minds of those people. I only wish they would use their ingenuity for some much better purpose.
  Sir John Wardlaw-Milne: Surely the right hon. Gentleman is not going to pass over Clause 32 as lightly as that. I think he will admit that the Clause changes entirely the phraseology of the Finance Act, and it is a change to which the House strongly objected on a previous occasion.
  Mr. Colegate: Will the right hon. Gentleman also deal with the point made in "The Times" to-day, because the very serious interpretation which is there put upon this Clause would mean that a great many hon. Members might oppose it? We should have a full explanation.
  Mr. Assheton: I did take the opportunity of reading that in "The Times" to-day. I have not had very much time to think about it since, but the short answer to the sort of criticism which is made and which may be made by certain hon. Members must be that Sub-section (3), which is the Sub-section which troubles hon. Members, does not empower the Commissioners to presume tax avoidance as a main purpose except where the main benefit of the transaction

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  is a reduction in the tax. The taxpayer can still point to other important motives which may have operated. What the new Sub-section does is to throw upon the taxpayer the onus of showing that he had some other main purpose, whereas under Section 35 of the Finance Act, 1941, as it stands, the Commissioners of Inland Revenue have to establish that the avoidance was the main purpose. While the effect of the new Clause will be to strengthen Section 35 of that Act, the Commissioners of course have the power to make this determination. The Clause does not operate automatically, but operates when the Commissioners bring it into operation.
  Sir J. Wardlaw-Milne: The right hon. Gentleman has not touched the main point. The phraseology allows the Commissioners to operate when it is one of the main causes instead of "the" main cause, which is a tremendous change in itself; and, further, this Clause is retrospective and means that all past settlements may be re-opened.
  Sir H. Williams: If a man delays publication of his book by one day and he is liable to Excess Profits Tax then is the relief given on the earlier Clause avoided?
  Mr. A. Edwards: The introduction of a single word, which was secured under great pressure from this House, made a vast difference to many businesses, and I think it is up to the Chancellor of the Exchequer to show that his purpose is not to reverse that concession. As I read the new Clause it does reverse it. It would seem that there is a determination not to allow us to get away with the concession.
  Mr. Assheton: Of course, we cannot go into too much detail now, but I would say that when my right hon. Friend the late Chancellor accepted the Amendment of the Clause in 1941 he did point out most clearly that if circumstances led him to change his mind, on account of the way in which members of the public continued to take advantage of the law in order to avoid tax which ought to be paid, he would be obliged to come back to this House. My right hon. Friend the present Chancellor feels that he is in that position now. I have no doubt that when we come to the Clause in Com-
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  mittee a considerable amount of debate will arise, but I do not think it is possible on Second Reading to go very closely into the details.
  Part VI deals with Estate Duty, and in particular the basis of charge in respect of a deceased person's benefits from certain companies. The changes proposed are the result of representations made by the Law Society showing that in certain cases the existing law operates somewhat harshly and produces results which are really out of accord with the intention of the Statute. Clauses 33 and 37 correct certain technical defects in the existing rules for the computation of the proportion of assets to be charged and of the net income which is a factor in arriving at that proportion. The corrections will chiefly be in favour of the taxpayer, though not always so. Clause 40 deals with certain tax difficulties which arise from the operation of the trading with the enemy legislation. It will enable the Board of Inland Revenue to proceed now with the assessment and collection and also the repayment of tax, as cases arise. Up to now, since the enemy's beneficial ownership is temporarily in suspense, there has been no power to charge or collect tax on income accruing to an enemy's account. It will be remembered, of course, that for this purpose enemies are, broadly, persons of every nationality who are so unfortunate as to be at present resident in enemy countries or countries occupied by the enemy.
  The object of Clause 41 is to encourage the conversion of bearer securities into registered form. Clause 44, which is the only other Clause I will mention, increases the fixed debt charge from £355,000,000 as fixed by Statute to £420,000,000, and gives power to borrow, if necessary, for the contractual sinking funds. I was asked earlier by my hon. Friend the Member for Leigh (Mr. Tinker) what was the reason for this alteration, and I then made it clear that the increase in our national debt is the reason for the alteration, and not any increase in the rate of interest paid upon it. I think I have now covered the main Clauses of the Bill.
  Sir A. Beit: Before my right hon. Friend concludes, can he deal with the promise that there should be greater depreciation allowances for factories and the like?
  Mr. Assheton: My right hon. Friend the Chancellor made it clear that those provisions would not be included in this Bill. The only provisions he promised in this Bill were those dealing particularly with the expenses of research.
  Mr. Pethick-Lawrence: When the right hon. Gentleman rose to move the Second Reading of the Finance Bill, he pointed out that it was some considerable time since we had had a Finance Bill in which there was no substantial change in taxation and that, although such a thing was not without precedent, at any rate it was unusual. I think the same statement applies in regard to the Financial Secretary to the Treasury moving a Second Reading of a Finance Bill. That, also, is not without precedent, but it does not very often happen, and I should like to congratulate the right hon. Gentleman upon the lucidity and incision of the speech which he has just made. We have got a very good idea of the Bill as a whole, from his description, and both now, on the Second Reading, and later, on the Committee stage, we shall be able to consider its provisions in detail, and I gather that, with the probable exception of one Clause, the Bill will have a comparatively easy passage.
  The House has already expressed its views with regard to the major line which the Chancellor of the Exchequer has taken on his Budget and I think it is no disrespect to his proposals, or to the excellent speech of the Financial Secretary, if I do not go into any details to-day, because it seems to me, as I think it seems to the rest of the House, that, in the main, those are matters for the Committee stage. I will refer only to the one detail which, undoubtedly, is going to raise a good deal of discussion, namely, the retrospective Clause—Clause 32—and to say that, so far as I and those for whom I speak are concerned, we are very anxious that there shall be no avoidance of tax where it really should be paid. Avoidance means that honourable taxpayers, who are not prepared to descend to discreditable means for getting out of their liability, have to bear a larger share of the taxation burden, and while, therefore, we shall watch with care to see that no provisions are introduced which will have a deleterious, injurious or improper effect, we shall be willing to support the Chancellor in any reasonable proposals for
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  dealing with tax avoidance. Further, where that tax avoidance has taken place since the legislation was introduced, in view of the, warning specifically given, we are not averse from retrospective application of the present provision.
  Having made those remarks upon the actual proposals within the four corners of the Finance Bill, I propose to devote my speech to a somewhat wider outlook. I propose to turn to the future prospects of the financial position of this country, of the budgetary position of the State, and the prospect of the reduction of taxation in the years to come. I am encouraged in that by the fact that the Chancellor, himself, in his Budget speech, really devoted a considerable part of his remarks to the future. He did not attempt to form too exact a figure for the expenditure of the current year, and he was looking to the future in the provisions that he was making for businesses and their taxation. It is, of course, for too early to forecast the date of the ending of hostilities, and it is even too early to lay down, publicly, any post-war injunctions for the people of this country in the matter of finance. But coining events in the financial world must cast their shadows before, and it is not too early, therefore, for the Treasury to have in its pigeon-holes, ready for bringing out at the appropriate time, a good deal of matter concerned with what is likely to take place when hostilities cease.
  I remember, and I think other Members of this House will share the recollection, that when war was declared in September, 1939, there was at once introduced to us a spate of legislation and Orders which we carried through with the greatest rapidity. These had undoubtedly been prepared for some considerable time in advance in Government offices and had been thrown upon us in a few hours when the appropriate time arrived. In that matter, therefore, I only want to ask the Chancellor whether he will give the assurance—as I have no doubt he will—that in the Treasury there has been compiled for immediate use when hostilities cease a number of reports, of injunctions, of recommendations which he and the Treasury will put out for public propaganda when that auspicious moment arrives. When I go back in thought—as we all must—to the year 1918, when the previous war came to an end, I realise

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  that there were in this House, and still more in the country as a whole, a considerable number of pathetic illusions. People thought that the official end of the war would follow within a short interval, after the actual termination of hostilities. They thought that prices would cease to go up, and would almost immediately begin to go down, and that goods would cease to be in short supply. They thought that the expenditure of the State would shrink rapidly to what it had been before the war, and they believed that taxation could, and would, be reduced very speedily—if not completely, at least very largely—to its pre-war level.
  I remember a business-man, in particular, talking to me in the middle of the last war, who said: "Well, of course, I do not suppose we shall get quite down to the level of Income Tax at 1s. 3d. in the£ which we paid before this war began; I think we may have to face Income Tax at 2S. 6d. in the £ for a very long time." In point of fact his expectation was lamentably unfulfilled because all those, what I have called, pathetic illusions were very different from reality. It was very many months after the termination of hostilities before the official end of the war took place. So far from prices falling, they continued to rise and rose to a considerable extent for a long time after the war came to an end. Goods, instead of being immediately available, became scarcer, and it was a long time before they came into abundance again. Though the State did contract its expenditure, and even though the capital assets of the State were sold and credited to revenue, the fall in the total amount was gradual and, of course, expenditure never came back to anything like what it was before the war. With regard to taxes, they were reduced, at first, but it was found that they had been reduced far too soon and had to be put up again, I think, in the following year.
  Large numbers of those Members of Parliament who are present here to-day and a large proportion of the public have memories long enough to recollect those things. As I have already said, I think the Treasury should have in readiness propaganda about them, which should be used at the right time, possibly through the Treasury, or through the Ministry of Information, in order that the public may be in no uncertainty as to what is likely
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  to arise. There are reasons why the situation may be even worse on this occasion than it was in 1918. I have been visualising in my own mind the ending of the European war, but we must not forget that even when that comes about there will still, in all probability, be the war against Japan however long that may last. There will be the need for policing Europe which will be a much more serious proposition than it was on the last occasion. There will be need for feeding, clothing and providing other things for the liberated countries, whose plight has been much worse physically than our own. There is the fact that this has been much more a total war than was the war of 1914–18. There will, therefore, be a greater pent-up demand for manufactured goods.
  Finally,—and I think this is a factor which the Chancellor will have to bear in mind with very great care—there is, so far as I can see, an immense amount of hoarded money, in hard cash. It is quite true that throughout the country many people have come forward with their Treasury notes and bought savings certificates, but the figures of the circulation are certainly alarming in their possible effect upon post-war events. I think it is not over the mark to say that the actual currency in the possession of people throughout the country is in the nature of £20 to £25 per head of men, women and children in this country. Though some of it may be in the banks, a great deal of it, I am sure, is put away in odd places and may be called out when the end of the German war comes. That is without taking account of the post-war credits, which the Chancellor of the Exchequer will be obliged to hold up for some little time in case they cause an inflation in the transitionary period.
  I hope that the Cabinet have thought out and come to a decision upon post-war priorities. I am not going to enlarge on that, because that would quite clearly take us outside the scope of this Debate but in so far as priorities involve their opposites—which can only be called, I think, "posteriorities"—the Chancellor of the Exchequer will have to be very careful with regard to them. They are the things that will not begin to be manufactured in abundance when the European war ends. Therefore, the quantity of them, so far from increasing, will probably decrease. They will become still

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  more scarce, and the Chancellor and the President of the Board of Trade will have to put their heads together to make sure that the demand for those things, reasonable in some way, of people who have wanted those things all through the war years, and who will imagine that they can buy them with great ease when the European war is over, shall not cause the prices of these goods to leap up, to the great detriment of the people who need them most seriously. All that I have been envisaging relates to the interim period while the dams that have held up production are being removed, and until the head of water ultimately let loose has reached the consumption area. That may be, in some cases, one or two years; in others it may be three, four, or even more years. I do not propose to look further ahead into what I may call the later period. I am confining my attention solely to the transition period when the danger will be inflation—the later period will be the opposite, a plethora of goods and a deflation which we shall have most carefully to avoid, but I do not propose to look as far as that.
  What are going to be the effects on the expenditure of the State when the European war is ended, with the Japanese war perhaps continuing for a little time? Some of those effects will be downwards, reducing expenditure, some of them will be more or less stationary, while in other cases there will inevitably be further increases of expenditure. The first main head under which there will be a reduction of expenditure is in the cost of the manufacture of munitions for, though the Japanese war will involve the use of considerable munitions—assuming it is still continuing—undoubtedly there can be some substantial reduction. It must be remembered, however, that even on that point something will have to be said on the other side. The workers who have put their backs into it for all these years are tired and exhausted. They will be entitled to some reduction of hours without a very great reduction in pay, they will be entitled to have holidays, of which they are greatly in need, for their health and it will be some time, therefore, before the reduction in the output of munitions reflects itself in any very great saving to the Treasury. There is the saving of transport costs. There again however the transport of an increased
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  amount of material to the Far East, the Pacific, will mean that that reduction will not be as great as some may expect.
  There will be the reduction of the capital outlay on factories, aerodromes, and buildings of that kind, but of course we are not spending even at the present time on the capital production on factories what we were in the earlier stages of the war. So that is a change which, to a certain extent, has already taken place. Then there is the release of individuals from anti-invasion or anti-aircraft services, fire services and the various other services of that kind which will involve a reduction, but I do not think it will be a very large figure. Then there are our supplies to Russia. If Russia is not by that time engaged in war with Japan, there will be no need to send supplies to Russia and that will mean a considerable saving. Finally, there will be the stoppage of Lend-Lease in reverse, so far as the United States is concerned. The House will recollect that a large part of the cost of the American Forces now here has been borne by this country. With the ending of the war in Europe, no doubt a considerable saving may be made in those directions. All these are to the good but I am not sure that they will bulk very large in the whole picture.
  Then there are the stationary items. There will be the pay and allowances for the Services which will continue at the present level until there is any substantial demobilisation, and I do not see any substantial demobilisation for a good many months after the hostilities of the European war have come to an end. There are also the subsidies which the Chancellor of the Exchequer has had to pay on the necessities of life. I do not see those being reduced until the situation has substantially improved, and that may be some little time after hostilities come to an end. Those two items, and others, will amount to a very considerable figure.
  Next we come to the items which, unfortunately, will be going up. We must bear in mind that the later stages of the war may, unhappily, involve considerable casualties, and the sums which the Chancellor of the Exchequer will have to find, ultimately, for the Ministry of Pensions, so far from going down, will undoubtedly rise. There is the service of the debt which, in this year, has risen by no less

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  than £65,000,000. The debt will continue to rise, and we must therefore face a considerable increase in that item. Then there are the housing subsidies. The country is absolutely determined that there must be houses built at the very earliest possible moment, and no one supposes that those houses will be built without some subsidy from the State. That will involve a quite substantial sum. I do not know how it will be with regard to Canadian gifts that have been made during these years. It may be that when the hostilities in Europe come to an end, having gratefully received all that from Canada in the past, we cannot look to a continuation of assistance on that scale indefinitely. Then there may be a further item in regard to the service of what is now our debt to India, which is taking the place of the debt that India used to owe us in the days gone by. Then there will be gratuities and bonuses on demobilisation. There will be the social services which this country is absolutely determined to have. There will be the additional cost of education. There will be, if the Royal Commission reports favourably, the increase due to equal pay.
  Quite obviously I am not in a position to undertake the addition and subtraction sum involved by all those items. There are many other points, too, which I have omitted but which other hon. Members will doubtless have in mind. However, my broad conclusion is that for a period certainly running to 12 months after the close of hostilities, possibly longer, we cannot look for any appreciable fall in the expenditure of the State. Even if the war against Japan ends before the further year is out, after the end of the European War, many of the considerations which I have expressed will continue to operate. Therefore, I have come to the conclusion that the first peace Budget, will still be of the order of £5,000,000,000 to £6,000,000,000, and that will still leave an immense gap between tax revenue and expenditure. This will be aggravated if there is any drop in the total income of the country as a whole, which would result in a lower yield from existing taxation. Therefore, I do not look forward with any confidence to a very early prospect of a reduction in taxation.
  We have to remember that the Chancellor has already made one promise
  612
  directly and one promise, I think I may say, inferentially. He promised 20 per cent. refund of the Excess Profits Tax which has already been paid, quite apart from any question of a reduction in the amount of Excess Profits Tax in the current or future years. The refund to which I am referring, of course, is for the promotion of business and it will only be paid in so far as that is actually the case. The other promise, which I think he made inferentially, relates to that part of our present taxation which is in the nature of a forced saving—what is known as the Keynes' principle, adopted during the war to be repaid after the war. Leaving out of account for the moment any repayment of what is known as postwar credit, the Chancellor of the Exchequer obviously will not be able to retain these taxes, which are in the nature of forced loans for very long after the war comes to an end. Therefore, both those items—20 per cent. on Excess Profits Tax and the discontinuance of the forced loans—will use up quite a considerable amount of money before any question of actual reduction in taxation comes into view at all. Therefore, I am forced to the conclusion, as I have already said, that for reduction of taxation proper, the House and the country will have to wait for some time.
  I am exceedingly sorry to have to paint such a gloomy picture. I would like to be able to enlarge upon the great financial progress we shall make when the war is over in the matter of taxes, but I think I know the British public. While they would like to have a rosy picture painted for them, it must be a real picture and not an imaginary and false one. The one thing we must never do with the British public is to "lead them up the garden," and tell them that wonderful things are going to happen, knowing that when the time comes, those things will fail to happen altogether. I think we in this House, who perhaps are nearer to the financial facts than the public outside, ought not to fail in our duty in the matter. We ought to be sure that the British public know the truth, and the truth is that we cannot hold out any great hope that the expenditure of the State will fall very rapidly, that we shall be able to do without considerable loans in the early stages of the post-war or transitional period, or that there can be any substantial reduction if, indeed, any at all in

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  taxation for the first year or two after the end of the European war.
  I do not want to end on this pessimistic note. Though I take the view I have just expressed about tax reduction, my views of the situation as a whole and with regard to the financial position of this country are optimistic. I do not subscribe, and I have never subscribed, to the view that we shall be a poor nation after the war. I have never taken the view, and I do not take it, that we have to go back to a lower standard of life. I refuse to accept the view that we cannot have decent housing for our people or that the social services have to be cabined and confined by a narrow financial machine. I refuse to limit educational advance and I would think it very improper to refuse equal pay on the ground that the country could not afford to provide it. These things that we must have are part of the essential capital building of the future of this land. We may have to meet them for a time by borrowing, just as we have met part of the cost of the war by borrowing.
  To take an analogy, it is not the companies which are doing badly that expand their capital most. It is the companies which are prosperous. A prosperous, enlarging company is constantly calling upon the public to subscribe further to its assets, either by lending on debentures or by subscribing for new ordinary shares. In my view, it is precisely the same, though differently adjusted, in the matter of the nation as a whole. So long as the productive power of this nation is capable of producing the things that the people want, it is not the duty of the head of the finances of the country to prevent that taking place. Among the most important national assets are not merely material well-being, but human well-being and the mental and spiritual development of the human material. The precise method of book-keeping that is necessary towards this end is not of importance, whether we pay for it in taxation or whether we pay part for a time through borrowing. In the old days the highwayman was alleged to meet the travelling merchant with the words,"Your money or your life." The antithesis to-day is different. The nation says, "Give me life and I will find the money when the proper time comes."
  Mr. Robertson: I am sure that the House is grateful to my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) for the thoughtful and instructive speech which he has just made. I share his views entirely with regard to the future of the world. If our people are prepared to work, as I am sure they are, I have complete confidence in the future. I think that the majority of hon. Members will agree that the Finance Bill is our most important annual Bill. It provides for the public revenue of the State, and its provisions affect every citizen. Parliament rightly devotes a great deal of time to it, from the Budget stage right through to its final stages, until it becomes the law of the land.
  My belief has always been that taxation is levied on the people by the Finance Bill expressing the decisions of Parliament, but I have discovered that that is not always so. At least one Government Department has used delegated legislation as a means of imposing private taxation on industry. I refer to the Ministry of Food, which took over from the Board of Trade the control of the cold storage industry on the outbreak of war. The control operated smoothly for a long time and still does, subject to what I have to say. On 2nd September, 1939, the President of the Board of Trade, through the Food Defence Plans Department, which later became the Ministry of Food, inaugurated this control, which put every cold store in Great Britain under the supervision of area officers with a department at the headquarters of the Ministry. These stores were carried on in the usual fashion by the managements and their staffs, but they took their directions in regard to the reception and clearance of produce from the Ministry's officials. In 1941, this system of private taxation was inaugurated under a Statutory Rule and Order, No. 268, known as the Cold Storage (Control of Undertakings) (Charges) (No. 2) Order, 1941. That Order was never debated in the House and it was never agreed to with the trade. The trade, like so many other trades in this country, was a conglomeration of individual units owned by firms, individuals and companies.
  Mr. Speaker: I feel bound to ask the hon. Member what this has to do with

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  the Finance Bill. It is not something which can be put in the Finance Bill, or something which is in it already.
  Mr. Robertson: I am speaking of a tax imposed on a cold storage proprietor and his employees, and I can find nothing in this Bill, or in any other Finance Bill, which gives a Government Department the power to levy private taxation. If you will permit me, Mr. Speaker, I will endeavour to keep within the bounds of Order in explaining this important matter. It is a question of vital principle as to whether this House is solely to levy taxation on the people, or whether a Government Department, using delegated legislation which is not subject to discussion in this House, is to be allowed to impose taxation.
  Mr. Speaker: I am afraid that that discussion will go far too wide, and I am bound to rule that it is outside the scope of this legislation.
  Mr. Robertson: In view of your Ruling, Mr. Speaker, I am bound to bring my remarks on this matter to a close. I do so by stating that this system has the effect that firms, individuals and companies who would have the privilege and responsibility of paying Excess Profits Tax under this Bill and its predecessors, are not allowed to pay that tax because money which should have gone for that purpose is diverted to other uses within the ambit of the Ministry of Food. Taxation, instead of going to the Exchequer, remains within a Government Department and is used to subsidise certain stores. That expenditure is concealed from this House. I submit that, like all other expenditure, it should be discussed and debated in the House. I cannot in view of your Ruling, Sir, carry that important matter any further but I hope that I have the interest of my right hon. Friend the Chancellor of the Exchequer so that he will protect the rights of the citizens and of Members of this House to decide what taxation should be levied. We go through this Bill with a fine tooth comb, every Clause is debated before the Bill is approved, yet concerns within my own knowledge have been deprived of very large sums in the return of the 20 per cent. of E.P.T. Bringing my remarks on this vital matter to a premature end, I will come to another matter of importance.
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  My right hon. Friend the Member for East Edinburgh, in his excellent speech, spoke of expanding companies and the need for new capital. He suggested that if the Chancellor gave these companies encouragement they would expand greatly for the benefit of themselves, their employees and the country. I believe that we have in the horse-power tax a striking example of how a great potential export trade has been strangled and almost destroyed. In winding up the Budget Debate, the Chancellor gave some reasons for maintaining the horse-power tax. One was that the small traders got benefits. As a small trader, I would like to submit to him that they are perfectly prepared to pay the legitimate expenses of running motor vehicles and all other expenses, so long as their competitors have to pay the same. It is wrong to suggest that because small traders get some advantage we should maintain a horse-power tax which is strangling our export trade. Anyone who has travelled can see the poverty of the export trade in British cars. I remember landing 16 years ago in Newfoundland, which is one of our most loyal Dominions and our oldest Colony. My friends there apologetically referred to the one British car on the island, which was owned and used by the Governor-General. He had to use it because he was a British official. That was not pleasing to hear. One can go the length and breadth of Canada and fail to see a British car. One sees all kinds of cars, mainly American and German, but never a British car.
  The Chancellor said in his Budget speech that if the trade representatives would go and talk to him he would be prepared to give the matter further consideration. I submit that he should not wait for people to go to him. The facts I have related can be confirmed all over the world. Everywhere you go you see the car that the American turns out for the world and his wife, roomy and of a moderate price. The car which is turned out in Detroit and Windsor for use in the United States and North America is seen also in India, North Africa and in all other countries. It sells because it is mass produced on great production lines. It is the old story of the cheap penny newspaper and the penny post; if you turn out enough you can turn them out cheaply. In our country the horse-power tax compels the manufacturers to make

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  a small car, a very excellent car. We have to make that type of car because the people cannot afford the high taxation on the bigger car. The rest of the world is not compelled to use this smaller car, however, and they will not use it. They have shown that clearly during the last 25 years. I hope that my right hon. Friend will not wait for the trade to come to him, but that he will give inspiration to the trade and take the matter into his own hands, and say, "This piece of domestic revenue which is produced by the horse-power tax is a matter of small moment compared with the enormous importance of work and wages for our people after the war."
  We will only get the kind of world to which my right hon. Friend referred by exporting our goods; we cannot get it by taking in one another's washing. The United States sell over £50,000,000 worth of cars per annum, and we did not sell £7,000,000 worth. We are both father and mother of all engineering countries, and the best cars in America are made by engineers from this country. In their factories you hear the accents of the counties of England and Scotland. When this war ends we will have a great force of men and women highly skilled in engineering. There have been many factories built in this war which will be capable of being equipped for the manufacture of motor cars, and which should be used for that purpose. The cause of 3,000,000 unemployed took me into this House, to help, not to criticise, and I cannot conceive a better opportunity than that which lies before my right hon. Friend in getting rid of this inquitious horse-power tax and so encouraging our great export trade to take a share of the world market.
  I now want to say something about this horse-power tax in relation to the individual. This is the proper place to air grievances, and this grievance is a very real one. At the present time the only cars which have the right to be on the road are those which are engaged on essential work for the war effort. We can forget those. There are other cars which are being used for essential business purposes, and those for whom I have the greatest sympathy are those which are being run for essential domestic purposes, that is to say, families which live some distance away from shops and stations, where there is no public transport service, get an allowance for petrol with which to
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  obtain the necessities of life. Do hon. Members realise that many of these private car users receive less than five gallons or less of petrol per quarter? That is all they are entitled to; they do not want any more. There is no pleasure motoring in this country. They realise that these restrictions are rightfully imposed but the effect of this 25s. per unit horse-power tax on the user of a ten horse-power car, who is getting five gallons of petrol per quarter, means that he is paying a tax of 13s. 3d. per gallon on his petrol. This House did not pass legislation in 1939 with the idea of inflicting on any citizen a tax of 13s. 3d. per gallon on petrol for essential needs. I want, again, to stress the fact that the only cars which have the right to be on the road are those being used for essential needs.
  This is not a question of luxury motoring, or of rich men; it concerns those who are compelled to use a car and are authorised to use it. This tax which was increased just before the war—I think it was in July, 1939—has become a savage tax to those users of motor cycles and motor cars. Many of these people are retired people, some have been injured, many have small incomes and because they could not afford to live near shops and stations went out into the country where they could buy land cheaply and bring up a family in good fresh air and conditions. Now they are being taxed unmercifully. If these men and women had been organised, as the great trade unions are organised, this wrong would not have been allowed to continue. I raised this point once before with the right hon. Gentleman's predecessor and was told that this tax was the equivalent to a wireless tax. That is not so. There can be no relationship at all between this tax and a wireless tax. You can get a wireless programme at any hour of the day or night but you have to pay the horse-power tax on a car with drastically reduced use. There are many people who cannot afford this tax who simply have to find the money if they are to get their daily bread.
  I hope the Chancellor can do something for these people and that he will bear in mind that when noble speeches are made from the Front Bench we applaud them only because we believe in the justness of our cause, its idealism, and we cannot subscribe to anything that is wrong. A young infantry officer, a member of my old regiment in the 51st Division, came

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  to see me some days ago at the time soldiers' pay and allowances were being debated in this House. He told me that it is only idealism that can keep an infantry officer going in the face of mortar, machine-gun and artillery fire and all the other hideous things of modern warfare. It is not discipline that causes a young lieutenant or captain to lead his men into the jaws of death. He knows full well the risks. It is his belief in our cause. I say that this tax is wrong. I was never the intention of Parliament that any individual should pay 13s. 3d. a gallon on petrol and I strongly urge my right hon. Friend to put this matter right. The people concerned pay their full share of all other taxes, and it is wrong that they should be victimised in this manner.
  Sir George Schuster: My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) painted a broad, fairly gloomy—but I think true—picture of the things to which we have to look forward, and I agree with him that we have to look forward to a long period of very high taxation. That makes it all the more important that taxation should be levied in a way which will not restrict the proper development of the country. Last year a few of us from all parties put down a Motion for the rejection of the Finance Bill on the broad ground that the existing system for taxing industrial profits might weaken the financial structure of British industry and discourage its healthy development. Personally, I should like to repeat all the arguments I used on that occasion for there is nothing in the present Finance Bill, as regards the taxation of industrial profits, which meets the points which I then raised. But of course, since then, we have had the very memorable speech from my right hon. Friend, on the introduction of his Budget, and that we must take into account. I think I may claim that my right hon. Friend, in much better language than I could find, did, in fact, confirm all the grounds on which I have based my own arguments last year. His proposals fell, broadly, into two parts—first, those affecting scientific research and, secondly, his wider plan for the rearrangement of industrial taxation.
  My right hon. Friend has included in this Bill specific provisions affecting expenditure on research, and I welcome
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  them very much. I only wish he had not found it necessary to say that they would not become operative until after the appointed day. I would like to urge very strongly that they should become immediately operative because although I know that with the present restrictions on resources there is not a great deal which can be done, I think it would be advisable that such research work as is possible should be undertaken at once, and that those who can undertake it should not be influenced by the consideration that if they wait until after the appointed day they may be more favourably treated.
  However, I want to concentrate today, mainly on the question of the taxation of industrial operations, and most earnestly to beg my right hon. Friend to go back over his own arguments, to examine searchingly the objective which he has set before himself and to consider whether the proposals which he has outlined are really adequate to attain that objective. In fact, my speech will be a sort of Litany to my right hon. Friend, and I put it in that way because, as I said in a Budget Debate, I feel he has the right conception of the objective and I have confidence that if he can be convinced that any steps are necessary to attain that objective he will have the courage to take them. I understand that there are now to be discussions between the Board of Inland Revenue and representatives of industrial organisations and accountants' institutions. I want to ask my right hon. Friend to allow the very widest latitude in those discussions, and not to keep them restricted to arguing about mere mechanical details, within the limits of a rigid plan.
  Beyond this I want to start with a general plea that my right hon. Friend should take a wide view of this matter. Looking at the position merely from the point of view of his interest as a tax-gatherer, the Chancellor, even in that narrow capacity, is a partner to the extent of something much more than 5o per cent. in the profits of industry. It must, therefore, be good policy for him to see that industry is helped to operate profitably. But of course, his interest is much wider than that. He is interested not merely in tax revenue but in the general prosperity of the country, I hope that his appreciation of that will dominate all his thoughts on taxation policy.

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  Turning to specific points, the question of over-riding importance is whether, before striking the figure of what are to be regarded as profits liable for taxation, industry is to be allowed to set aside from its gross earnings an amount sufficient to keep its capital equipment up-to-date and progressive. I have deliberately stated the question in a broad way—the way in which it ought to be asked. But really two quite separate questions are involved. The first looks at the position from an accounting and cash value point of view. It is a simple question of amortisation, a question whether the deductions allowed are adequate to provide, in the Chancellor's own words, "for the amortisation of money expended on assets used in the making of profits." The second goes beyond this and asks whether, if British industry is to keep its place, it is enough merely to maintain the cash value of its capital assets, and whether it should not be allowed to set aside from its gross receipts enough to do more than that. We have to consider this Bill and the Chancellor's proposals in relation to both those questions.
  Take the first question. What is wanted is that if I, as an industrialist, have a capital asset which cost, say, £10,000, I shall find that when that asset has become useless, either because it is worn out or has became obsolete, I have been allowed, as part of my working expenses, to accumulate £10,000 available to replace it. The Chancellor's new proposals make it quite clear that, so far as concerns plant and machinery, that need is to be met, and that there is to be no doubt about it. The new initial allowance, the ordinary annual depreciation allowances and the final obsolescence allowance, which is now to be given unconditionally, make it sure that there is the right to accumulate 100 per cent. of the original cost.
  All that, with this extra clarification, is very much to the good. But it does not cover the whole matter. An important practical aspect is that a business will only have the money required for this purpose if it has the profits from which to set it aside. Thus, if I take my £10,000 asset, if obsolescence has come quickly, perhaps £5,000 will have been written off and the remaining £5,000 has to be found in one lump as obsolescence allowance. The profits for that year, however, may
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  not be high enough to make such a sum available. In such a case I shall be told that the new proposal for the 20 per cent. initial allowance will have greatly helped. Taking that into account, it may be said, it is not likely that the residual value to be covered by the final obsolescence allowance will be unduly high. I admit that there is great force in that point, and I certainly am not one of those who belittle the proposal for the initial 20 per cent. allowance. It is extremely useful and very wisely conceived, though I look at it as covering a rather different kind of need, which I shall mention later. In any case the point I want to make now is that, in considering these allowances, it is not enough merely to establish that they cover 100 per cent, of the cost. The timing of the various instalments is also a most important factor. Those instalments should be allowed to fit in with the times when profits are available to cover them.
  I want therefore to urge that the law and practice should be simplified and that firms should be allowed to set aside what they think right in any year, subject of course always to the proviso that, so far as concerns these simple amortisation provisions, the total of the annual amounts set aside should never exceed the full original cost of the asset. That, I believe, is substantially the practice in the United States. It is a practice which must save an endless amount of argument and all the complication of separate capital accounts kept for each asset by the Revenue authorities, which do not agree with the accounts that the business keeps for its own purposes. Further, provided that the total amount to be set aside is limited, my suggestion cannot in the long run affect the Revenue collected. There is only one possible way in which it might conceivably do that, and that is if the rate of taxation varies greatly and if undue sums are set aside when the rate of tax is very high. I suggest that, if there is any fear of that, it would not be difficult to devise safeguards against it. So I want to urge strongly more elastic procedure in that matter.
  Turning from that, there is another very great defect, as I see it, in what I have described as the simple amortisation side of the proposals, namely, that buildings are still to be treated as something different from industrial plant. The Chancellor has broken through the old absurd position.

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  He has admitted that buildings, even those that do not contain vibrating machinery, do depreciate, but he still wants to draw a distinction, which I believe to be untenable, between buildings employed in productive industry and other business premises. Also he still calculates on a full 50 years life in all cases, even for the former class, and there is to be no final obsolescence allowance for any kind of building [Interruption.] My right hon. Friend now tells me there is to be a final obsolescence allowance for buildings. I am delighted to hear it. It is extremely good news. I do not think it has been generally understood. I have discussed it in the City and it has not been generally understood that there is to be a final obsolescence allowance on buildings. In spite of this welcome assurance, I still want to urge him to look into the question of buildings again and allow it to be explored. He has said that, in the case of buildings such as factories, he includes "buildings associated therewith, say for the welfare of the staff or the storage of raw materials or goods produced."
  What then is to be the position? If a large manufacturing concern provides storage for its own raw materials which are awaiting treatment it can write off its warehouses at the rate of 2 per cent. per annum; but an independent warehouse company providing warehouse accommodation for a number of smaller manufacturers or for exporting merchants would not be allowed to do so. That would be most unfair. Further, the whole distinction rests on a fallacious conception of productive industry. Storage, transport and distribution, right down to retail distribution, are essential processes in effective production. If we start making that kind of distinction we run the risk of treating the ancillary processes as of no account, and that may be a very dangerous illusion. Beyond that, I submit that to take 5o years life for industrial buildings is too long. One of the greatest defects of British industry compared with United States industry is that in this country buildings have not been renewed sufficiently. In America, if the process or flow of production has changed they put up suitable buildings. This has been one of our great failings in the past. If a final obsolescence allowance will be available, that will help to get over one of the
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  difficulties and we may hope to get away from the old position, which has encouraged the continuance of both industrial and domestic slums. That position has really been very short sighted even from the Revenue point of view, because maintenance charges on old buildings continued too long in existence has involved excessively high deductions from taxable profits.
  I now turn to the second main aspect of the matter. All that I have said up to this point has covered no more than the amortisation of the money originally expended on capital assets. But is that enough, if British industry is to have, in the Chancellor's own words, "a fair chance to meet the challenge which the future holds for all of us?" Is it enough that, when a piece of plant which costs £10,000 has to be scrapped, a sum of £10,000 should be available within the assets of the business? There are two points to consider. First, there is the obvious point that, owing to a rise in prices, the provision of a new plant to perform exactly the same purpose as the old may cost more than £10,000. That, without a shadow of doubt, will be the position with which British industry will be faced after the war. Firms which have not built up substantial reserves over and above the proper provision for depreciation on the cost price of their plant will find that they cannot get new plant to do the same work as the old without increasing their capital account. That may create very serious problems for large sections of British industry.
  It is in that connection that I thought the Chancellor's proposal for a 20 per cent. initial depreciation allowance would be so valuable. If I have a piece of plant which originally cost £10,000, and if to replace it is going to cost £12,500, I shall be allowed to treat that additional £2,500 as expenditure to be charged against profit and I should not have to raise new money and write up the asset in my balance sheet. That would be immensely helpful, but I am still left with two questions. Will a 20 per cent. margin be large enough; and shall I have the profits against which to charge the money?
  I want to ask the Chancellor to consider both these questions. As to the first, 20 per cent. will not be enough. Replacement costs will be up by at least 50 per cent. As to the second, I want to urge, looking beyond the mere post-war replacements, that this initial allowance will be

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  much more valuable to business concerns if they are allowed to build up the permitted margin, whatever it may be, out of profits in anticipation of replacement during the life of the original asset. This brings me back to the whole question that I have spoken of as the timing of these allowable deductions. I ask my right hon. Friend not to dismiss the point hastily. Incidentally, I should like to throw out another suggestion and ask him to consider whether the E.P.T. refunds could be allowed to be set against this what I may call "the over-price element" in postwar replacements, at least to the extent of the permitted initial depreciation allowance. That, of course, would mean that to that extent you would get the 20 per cent. in full, and not 20 per cent. less one-half for Income Tax. I put that forward as quite a fair and sensible suggestion. I hope my right hon. Friend will consider it.
  But there is a much wider aspect to consider than the mere question of the higher cost of identical replacements. If British industry is to keep its place in the march of human progress, it will require not merely to replace existing equipment but to improve it. There will, in fact, be a need to make mechanical equipment play an ever-increasing part in the process of manufacture. Unless this can be done we shall find no sure basis for competitive power in export markets nor for improving standards of wages and working conditions, nor for reducing costs to consumers, nor, finally, for releasing human energy to other more valuable activities, such as education and cultural pursuits. That is a vital consideration and it is vital that it should be properly understood. This progressive improvement can only be achieved by allocating to capital equipment year by year part of the current production of British industry. Unless we are going to rely on foreign loans to provide us with resources—which of course we cannot—that is obvious, indisputable, and generally admitted. But what needs to be appreciated is that, with taxation of personal incomes at the levels which we have now to anticipate, we cannot rely on getting the allocation of an adequate share of current production through the medium of private savings from the income classes which have hitherto provided the main flow of investment.
  What then is to happen? Are we to rely upon savings over the whole range
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  of incomes down to the lowest, perhaps put into Government securities and then allocated by the Government for industrial equipment and development? Or are we to make it possible for those who are conducting industrial enterprises, great or small, to set aside year by year, from the gross receipts of industry the resources necessary for live industrial growth and development? I try to take a balanced view of these matters. I certainly do not exclude the former alternative. I think there are some things which will never be done on the scale which the national interests require unless the whole credit of the community is mobilised behind them. But what I do feel, with absolute and unqualified conviction, is that in the conditions of this country, with its complex industry and trade, it will be utterly disastrous to rely upon this method alone. Therefore, we need the second method. The question then is, how far it can be made possible by taxation policy.
  That brings us to the old familiar proposal that profits which are ploughed back into an undertaking for further development should be relieved partially or wholly from Income Tax. That proposal has apparently been rejected by the Chancellor. I say "apparently" because what he rejected was the idea of relief to "industrial profits that are not expended, but are placed to reserve for the future development and extension of the business." He did not commit himself to any absolute refusal to treat as expenditure, money actually spent on keeping an industrial enterprise in line with contemporary progress. What I want to ask him to-day is that he should not say that he has said his last word on this subject. I ask him to let it be examined with the widest latitude. It really touches the heart of our problems. Past experience is no guide at all to what will happen with Income Tax at from 8s. to l0s. in the£ which we must expect. And this is the kind of thing on which it will be almost impossible to get the exact evidence required by the admirable and precise mathematical minds at Somerset House.
  The effects of these influences may be intangible, but none the less such influences will be at work and they must be taken into account. What I have in mind may not affect powerful large concerns which have been able to build up

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  great reserves in the days when taxation was lower. But it may be at work over a very wide range of medium-sized or new business and thus affect some very vital parts of British industry. I raised this matter many times with the late Chancellor of the Exchequer. I asked him again and again to have a fundamental review undertaken and to appoint for this purpose a small committee of experienced men with an independent chairman—such a man as Mr. Justice Uthwatt, whom I actually suggested. The right hon. Gentleman seemed to be frightened of getting landed into political controversy. I always thought he was wrong. I am absolutely certain that the objective which I have in mind, if the problem were fully ventilated would receive the full support of the Labour benches. It must be in accord with all that they want, because there cannot be any improvement of standards unless progress in industrial equipment is encouraged and maintained. Therefore, I renew that request to my right hon. Friend that he should have this matter reviewed in the most fundamental way.
  I must bring my remarks to a close, though there are many other matters to which I should have liked to refer. I will refer very briefly to two of them. One is the treatment of wasting assets. That is vitally important. The Chancellor has recognised the importance of dealing with capital costs of acquiring and developing mining properties. But his proposals refer only to new expenditure. If the change which he proposes is justified, why should it not be introduced to cover existing assets as well? He may, of course, reply that all he wants to do is to encourage new business, but I beg him to consider the position of some of the larger mining undertakings in overseas territories which are, at present, worked by British companies, many of them with very large American capital invested in them. I beg him to consider the danger that these companies may find themselves forced to change their domicile, and to reflect what that will mean in loss, not only to tax revenue but to future business in the supply of mining machinery from this country.
  Lastly, I want to mention the question of double taxation and its effect on our export business. I have not time to go
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  into the whole of the matter. I will only say that I have been into it with people who are closely concerned and that I believe there is a strong prima facie case for examination. I hope that the Chancellor will give the matter his attention. All the matters which I have mentioned are of vital importance to the future of this country. I have brought them forward, not as an advocate for rich men but because I want to see this country working fruitfully with results that can be shared by the whole community. Tax personal incomes as much as you like. I shall not complain. But do allow industry to build itself up progressively, remembering that standing still means stagnation and that it is only by moving forward that we shall keep our place.
  Mr. Tinker: I have always listened to the hon. Member with interest, but the speech which he has just made leaves the impression on my mind that he is the defender of big business and private enterprise. I may be wrong.
  Sir G. Schuster: We have to use them.
  Mr. Tinker: Yes, and that is where I differ from the hon. Member. If we spend our time talking about big business and private enterprise, we shall remain in the position which we are in at present. If private enterprise cannot get on, it comes to the State and asks for help. The suggestions made by the hon. Member went in that direction, because he said: "Provide us with money with which to carry on." He also used the specious argument to the Chancellor, that the State was in business, and that therefore for the State to work properly it had to be a co-partner with private enterprise. The hon. Member and I differ. I say that private enterprise must be controlled by the State. I do not object to the hon. Member's speech. I speak for the beliefs that I feel are right, and the hon. Member is right in speaking for his side, but he is open to criticism when he does that kind of thing. I feel that he is speaking on those lines every time he gets up.
  In regard to the speech made by the Financial Secretary, I heard the statement that the Chancellor is facing heavy weather. In this financial Measure he is not. It seems to have had one of the easiest passages that a Finance Bill has ever had. The Financial Secretary was able to make reference in the course of his remarks to vintage, port.
  Mr. Assheton: I did not say that my right hon. Friend was making heavy weather.
  Mr. Stokes: He would be, after a couple of bottles.
  Mr. Tinker: My purpose in speaking is to draw attention to tax evasion. Some time ago, I drew attention, in the course of a Budget Debate, to certain people who were evading Pay-as-you-earn. The small man in business, I saw it stated in a newspaper, was not making returns about his employees, so I asked the Chancellor of the Exchequer to watch the matter more closely. Since then, I have come across a more glaring instance which ought to be dealt with. I refer to a rather shocking statement in the "Financial Times" of Tuesday, 9th May. It is to the effect that directors, who have been getting salary previously, are being paid off with a lump sum. Had the money been paid yearly, it would have been subject to Income Tax, but the lump sum is not subject to Income Tax. The paper's financial expert says—and when we get it in the "Financial Times" it is well to pay attention to it:
  "A lump sum payment to an employee, including a director, as compensation for loss of office, is not taxable. The reason is that the payment is in return for the giving up of the right to receive further annual profits, and is therefore capital. Where, however, the terms of a person's employment give him the right to a lump sum payment on termination, whether by resignation, death or any other cause, such payment is regarded as deferred remuneration and is taxable."
  Here is the way in which it was dealt with in -the House of Lords. I want this Finance Bill to put the matter right:
  "The subject of lump sum payments to directors was considered by the House of Lords, in February, 1943, in the case of Wales v. Tilley. A limited company agreed in 1937 to pay its managing director a salary of £6,000 per annum, and undertook, in the event of his ceasing to hold that appointment, to pay him a pension of £4,000 per annum for ten years, following such cessation. In 1938 a new agreement wag concluded whereby the managing director agreed to release the company from its obligation to pay the pension and to continue to serve as managing director at a reduced salary; in consideration therefor, the company agreed to pay him £40,000."
  It was ruled by the House of Lords that that was not subject to Income Tax.
  When we see a loophole of that character, it is for us to amend the law and
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  strengthen it so that people cannot evade it. I have had personal experience of this matter. During the last Budget period I drew attention to a case in the Lancashire coal industry, in which employers were paying certain of their people by lump sum payments which were not subject to Income Tax. The Financial Secretary said that he would examine the matter. How can we expect a body of wage earners who are being called upon to pay weekly, and who have no alternative as the money is taken from them, to be content when they hear and see statements like these, in which huge sums of money are paid to directors, which sums would have been taxable if they had been paid as salary?
  Major Procter: Is not the hon. Gentleman confusing one thing with another? These payments are treated as a capital sum received. The company pay out that amount, as the capital sum, which they are not allowed to set off against their profits.
  Mr. Tinker: I see the evasion when it is put like that.
  Major Procter: It is not evasion.
  Mr. Tinker: Perhaps the hon. and gallant Member will follow my argument. If this was paid by wages or salary year by year he would have to pay Income Tax upon it. It is said to this man, "We will settle with you. We want to re-form the company again, to sell our shares at a higher value." So they say, "Instead of you getting £4,000 a year for five years we will pay you £20,000." That is not subject to Income Tax because it is paid as a lump sum.
  Major Procter: If the company paid, as the hon. Member suggests, £4,000 per annum then that £4,000 would be used as a set-off against the company's annual profits; therefore the company would not be making a capital payment.
  Mr. Benson: Does the hon. and gallant Member really suggest that this £150,000 is to be paid out of the earnings of the company? Obviously it is paid out of the capital assets produced by the sale and is not liable to tax.
  Major Procter: That is the point I am making.
  Mr. Benson: No, the very reverse.
  Mr. Tinker: The whole matter is a complicated one. I am drawing the attention of the Financial Secretary to the ruling in the High Court from the point of view that it is for us to strengthen this Bill so that there cannot be evasion in that way. When we find an obvious loophole our duty is to see what we can do to patch it up.
  Mr. Hammersley: Did I understand that my hon. Friend was saying that he is against compensation for loss of earnings being free of Income Tax? A wholesale condemnation of that kind goes very much further than the particular case of loss of profit in respect of directors, and would have application in a much wider field.
  Mr. Tinker: In this matter of high finance I am not an expert, but when my attention is drawn by the "Financial Times" to what is obviously wrong, it is my duty to draw the attention of the Financial Secretary and the Chancellor to it to see if it can be remedied. When we are telling our people that Pay-as-youearn is a sound thing, they say, "Why are you allowing these people to get away with big sums of money by being paid in another way?" All that I am asking for, seeing that we have in the Bill a Clause to strengthen the hands of the Treasury in preventing tax evasion, is that the Financial Secretary and the Chancellor should examine this point closely and see if there is any way by which it cam be prevented. Why the whole amount should go free of Income Tax I do not know. The ingenuity in higher circles in avoiding Income Tax is far greater than at the bottom. They do not respect the law as we do. Therefore, it is our duty to draw the Chancellor's attention to matters of this kind.
  We have tried to deal with the taxation of land values by way of Amendment times without number, and it has been ruled out of Order. I want the Chancellor to examine this point because I have a statement here from a paper which I obtained from the Labour Press Service. It states:
  "A 'ramp' in house building prices in Scotland was revealed in the Commons on 9th May, following questions put by Labour Members to Mr. Tom Johnston, Secretary for Scotland. Mr. Hector McNeil (Greenock) asked how many of the 1,000 houses authorised 12 months ago had been completed, and if there were any upon which actual construction had not begun?"
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  Here is the statement:
  "Mr. Johnston said that 4 houses had been completed and 87o were under construction, including 220 which had been roofed over. The slow rate of building was due to the high tenders for building. One series came in for £1,815 a house! Obviously that is a ramp, and I do not propose to lend my assistance to it, Mr. Johnston said."
  The point I am making is this: Are these high prices for the houses due to an increase in the price of land? If that is the case obviously something should be done on that particular point. There will be tremendous building after the war is over, and every building that goes up increases the land value. If the community creates value by building, if that land increases in value due to no effort of the landowner but due to the needs of the State, is it right that the increased value should go to the landowner? We say the only way out is through the State owning all the land. I trust this is a point to which the Chancellor will address himself, and try to put it right.
  There is one matter I wish to ask about which comes under the Financial Statement. There have been a lot of references to "sterling" and "sterling areas." I asked several of my friends what they meant by the term "sterling." None of them knew what was meant by it. Will the Financial Secretary enlighten us as to exactly what it means? Let us have a few words of instruction to Members of the House, so that we shall know where we are. If I were to ask a half-dozen hon. Members what they mean by "sterling" I fancy I should put them in a difficulty. What is meant by the term "sterling area" and the changeover to what is called the Gold Standard? Let us have some knowledge, so that we can go to our constituents and not be tied up when we are asked questions on this particular point. These are interesting points, and I hope that the Financial Secretary will be able to deal with them.
  Major Procter: I wish to intervene for a few moments to request the Chancellor to consider, or shall I say reconsider, the extension of Pay-as-you-earn so that small shopkeepers and other small men of business may be brought under this beneficent scheme. We know that it has been of great advantage to workpeople to pay as they earn, although I fear it will not be long before Income Tax will be disregarded psychologically,

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  and the workman will feel that the amount he gets is his wages, and that Income Tax is something that is paid for by the boss. Nevertheless, it has been of great value. Whoever thought out the Pay-as-you-earn scheme is deserving of high commendation. My local Chamber of Trade, a very wide awake body, have thought that it is not beyond the wisdom of the Chancellor to widen the ambit, to round off the scheme so that there are no rough corners about it, and bring in the small men who are running businesses, in the same way as the small man who has only his labour to sell. They are not critics who simply criticise. They have come forward with a constructive suggestion. If the House will bear with me I will read four short paragraphs dealing with these suggestions. They suggest that, if the Chancellor accepts this for small shopkeepers,
  "a coding notice should be issued in the same form and on the same basis as is done on Schedule E, that is, that the personal allowance should be modified to take into account other sources of income, including Schedule A charges. Should these exceed the total personal allowance the excess should be carried forward and added to the amount arrived at…"
  under the suggestions as set out in the next paragraph. This next paragraph proposes that the small shopkeeper taxpayer
  "should prepare an estimate of his income for the ensuing year. This would normally be done in consultation with his accountant, and would take into account the results of the last year of trading, and the probable trend of business in the year to be assessed. This estimate could, if the Chancellor deems it necessary, be filed with the Inspector of Taxes, but this procedure is not essential to the working of the proposals.
  If some change of circumstances during the year arose, that is the prospect of considerably increased earnings or the contracting of a bad debt of serious proportions, the estimate could be adjusted, and payments adjusted accordingly.
  The estimated income would then be divided by 52, or 12, if it were preferable to deal with it monthly…s or in the case of a business subject to seasonal fluctuations, in some other appropriate fashion. These amounts would be dealt with week by week, the totals accumulating as under P.A.Y.E. and tax on the cumulative amounts calculated from the existing tables.
  The sums thus 'deducted' from the assumed profits would be paid to the Collector of Taxes along with those deducted from employees wages, but shown as a separate item as under Schedule D.
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  At the end of the year, or when the accounts for the trading period were available, a final balance would be struck between the amount paid and the actual liability, a procedure which is provided for in the existing scheme of P.A.Y.E. An adjusting payment either way would then be made."
  They have also worked out how this applies in various concrete cases. I understand that this system, which would be called "the self-assessment system for small business men," is already in operation in the United States. It means that the small business man would assess his probable earnings for the ensuing year, taking into account what he has earned in the past, and any adjustments or alterations could be made week by week. I do not profess that my local Chamber of Trade are experts in these matters, but they are good citizens. They are working this out in their democratic way and bringing their influence to bear in a democratic way. That is the glory of democracy, that institutions of this sort find an expression in the highest legislative Assembly in this country. The small shopkeeper may have difficulties in the future; he may be living in a false prosperity; he may think that his profits which he is making now are going to last for ever; and then, in a slump, he will have a huge tax payment to make. Therefore, I ask the Chancellor to try to work out some scheme so that men who are selling other commodities than labour may be brought under the beneficent provisions of this legislation.
  Mr. Leslie: The hon. and gallant Member for Accrington (Major Procter) has dealt with proposals put forward by his local chamber of commerce for overcoming difficulties that confront small shopkeepers in estimating income for taxation purposes. I hope that the Chancellor will take those proposals into consideration. I want to deal with a subject that will bring revenue to the State and, at the same time, mean a saving to local authorities. So long as land monopoly exists, how are we to undertake great and much-needed housing schemes and new industries? Industry enhances the value of land, and the landlord does nothing; but when a local authority desires to purchase land for public purposes, a ransom price is asked. One local authority wanted to purchase land for a fire station. That land as rated at 45s. an acre, but the landowner asked £1,500 an acre. If the land was worth £1,500

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  per acre, why should it not be rated at that value? In Wandsworth, land, rated at £14 per acre, cost £9,450 per acre—equivalent to 675 years' purchase. Take the case of a store in Piccadilly. It pays 20S. a square foot in ground rent—that is, over £1,000,000 an acre. In Brentford, land was wanted for housing. The owner wanted £4,500. The district valuer valued it at £750. It went to arbitration and the local authority had to pay £3,230.
  Happily, the British Dominions are free from land monopoly. In Queensland, 95 per cent, of the land is State-owned. That is an object lesson to the Mother Country. It demonstrates why the Dominions are so far in advance of us in social legislation. Land was meant for use, and not for abuse. In the vicinity of the towns, before the war, land could be seen lying idle, non-rated or rated only on agricultural value. The same thing will be seen when the war is over. Allotment-holders will be displaced, and the local authorities will be prevented from using the land for housing, unless Parliament takes steps to control the selfish greed of the landlord class. One glaring case happened in the Highlands, where 50,000 acres were purchased in Inverness-shire by a London investment company, which hitherto had been interested in theatres. This land includes crofters' holdings. Undoubtedly, the investment company had in view the passing of the Bill authorising a hydro-electric scheme for the Highlands. That would mean that industry would be established, and they would get a profit. The same sort of thing is likely to happen in the towns if some restriction is not put upon this land speculation. Here is what Lord Astor, the Lord Mayor of Plymouth, had to say recently. The Lord Mayor of Plymouth, who is rightly concerned about the future of blitzed Plymouth, said:
  "Public ownership of land in a city is vital to its replanning. Hitler has given blitzed towns an unexpected chance, which the Government must not spoil by a lack of vision and courage. Parliament should demand immediate legislation; otherwise, vested interests will soon diminish our prospects of the best results."
  I think these are very wise words from the Lord Mayor of Plymouth, who knows what it would mean if, when they replan Plymouth, they have to pay heavy compensation to the landowners. Land for which the owner demands a ransom price
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  ought to be taxed at the value which the landowner asks when he sells it. This would bring additional revenue to the State, or it would make landowners more chary of seeking unreasonable prices for land which was required for public purposes; and, also, it would stimulate the use of land for the needs of the community.
  Mr. Erskine-Hill: I think if one were asked what type of Finance Bill would go down best with this House and the country, the answer would be a Bill which, both in substance and words, brought this most important type of legislation into line with modern ideas. The right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) adverted to the Act of 1918, which was supposed to make a great change in fiscal law. Unfortunately, it only consolidated the old law, which really meant that the law from which the Chancellor was operating the proper taxation of the people of this country was a law, roughly speaking, 150 years old, which had only been consolidated since then. The Macmillan Commission, whose Report is very familiar to the House, went into that, and explained their difficulties. I will advert only to two very short passages, to remind the House what that Commission's findings were. Paragraph 6 of the Report says:
  "As regards our method of procedure, we recognised from the outset that our terms of reference, while exhorting us to aim at intelligibility, uniformity, and simplicity, nevertheless imposed such limits upon our powers of suggesting alterations in the existing law as made it difficult to achieve that aim, even were it otherwise possible for us to do so."
  Paragraph II says:
  "While the Act of 1918 rendered the service of bringing together and rearranging in a single Statute the material contained in 52 previous Acts, it did little to eliminate overlapping or inconsistent provisions…"
  And again:
  "This Statute, therefore, which at the present time is the principal Income Tax Act, is mainly a body of law enacted more than a century and a quarter ago, and adapted to the economic, social, and commercial conditions of that time."
  The Chancellor has himself to thank for my intervention, as it is made largely because I see in this Bill, for the first time, signs of a real attempt to sweep away anachronisms and to keep our system as far as possible in line with the

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  progress we have made in other branches of national life. The Bill itself provides for the removal of two anomalies. First, there is the old Armorial Bearings Duty, which ought to have been abolished a long time ago, I think; if only because, for many years, its collection must have cost a great deal more than it brought in to the Exchequer. The time is long past when officials of the Inland Revenue should be searching about to see whether forks or spoons have crests upon them. Similarly, in the case of notices at the church door. I was not exactly clear what the position was. No doubt, the Chancellor will explain it. I think that the present Bill relates to dog licences and nothing else; but I understand that two years ago important alterations were made to stop the old-fashioned habit of the citizen receiving a notice of the tax which was due by having the fact posted at the church door. In future, I hope, it will be possible, in all cases, for the Board of Inland Revenue to make use of His Majesty's mails to inform people exactly what tax is due from them.
  There is another important feature of this Bill for which I am grateful. That is the allowance for scientific research, which is a definite step forward in bringing the taxation system into line with modern methods. I think that this changed attitude gives great cause for hope. It has been said that it does not apply, for instance, to market research. I hope that it does. It is of vital importance that an opportunity should be given for the scientific exploitation of markets for our industry. If the measures of social reform which are wanted in most quarters of this House are ever to come to fruition, they must be based on sound trade. I believe that greater certainty in matters of taxation would be of the greatest possible assistance to trade. I would like to congratulate the Chancellor on the publication, yesterday morning, by the Board of Inland Revenue, at his request, of the very important memorandum which the principal Associations of Chartered Accountants presented to the Departmental Committee which is considering post-war fiscal reform. I agree very much with what is contained in that memorandum, and particularly with the view that any tax should bear a relation to the ordinary idea of commercial and industrial accounting, and not be based on technicalities, which the
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  ordinary man of business does not understand, and which are not related to what is the best accountancy practice. I think, with those who put forward the report, that the maintenance and development of industry after the war would be encouraged by more closely relating taxation assessments to commercial profits.
  I believe the Chancellor has a great chance. He has taken bold steps in the short time which he has been in office. He has brought forward the Pay-as-you-earn scheme, which, although not working with complete success, is working remarkably well. It has been a great act of courage, both for him and also for the Inland Revenue Department, but I would ask them further to take their courage in both hands and try to achieve that much wider relation of taxation to modern conditions in trade and industry which I believe he and they are perfectly well able to perform themselves. For that reason, and because of my confidence, I am not asking the Chancellor to set up a Royal Commission before he can go into the question. I would much prefer that the Board of Inland Revenue, with the Chancellor's help and assistance, would put before this House something which would represent large and definite progress, so that modern conditions can apply and so that we may forget about that large number of Acts of Parliament which are all built up into a patchwork quilt not intelligible to the ordinary citizen.
  I will say only a ward about the particular form of words used in these Acts. I was most interested and amused to hear my right hon. Friend to-day, in dealing with Clause 25, the sub-title to which I think reads "Simplification of Procedure," explain to the House that the matter was so complicated that he hoped to be able to explain it at a later stage. I know it is difficult in these matters not to use terms of art. I know that there is very much litigation when you have antiquated Acts which have been the subject of hundreds or thousands of court decisions. Dog does not eat dog, and I shall not complain if my profession gets the benefit of a continuation of complicated development, but I do say that, in the interests of trade, simplification is absolutely essential, and I know that the Chancellor will have the support of every right thinking hon. Member of this House if he takes a bold line and tries to improve

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  things in a way in which no Chancellor has ever faced this particular problem since the Department of Inland Revenue was first created.
  Sir Herbert Williams: I have listened to my hon. and learned Friend's advocacy, with which I entirely agree, of the simplification of Income Tax law, but what is the real trouble is the difficulty of defining what is an income. I find that all sorts of people have quite strange ideas on that subject. I have met all sorts of friends—I am not going to reveal their names to the Chancellor—who have said, "I have never returned that; they were casual earnings." A vast number of people think that casual earnings are not income. If I go to a horse race, which I have not done during the war, and back a horse which comes in first, that is capital appreciation, so far as the Chancellor is concerned; but, if I do it every day of the week and I am successful, it becomes income. All our complications of Income Tax law arise from the difficulty of defining what is income. We must bear that in mind. I would like to tell the Chancellor that, while he was away, opening the Second Front or whatever it is that Chancellors do when they are not in the Chamber, the Financial Secretary made a very good speech, but he said something which rather distressed me. He said that, under this Bill, the notices on church doors with regard to the tax on dogs are to be removed, but that the notices with regard to Income Tax will be retained. I would like to tell him that I love my dog but not my Income Tax collector, and, if I go to church, I would much prefer that he should leave the dog notice on the board, and not the Income Tax one.
  Mr. Assheton: I did not say that.
  Sir H. Williams: Well, the right hon. Gentleman said something about taking one away and not the other. Why does he not copy the Postmaster-General, because he only collects 7s. 6d. per dog? The Postmaster-General collects 10S. per wireless set. The Postmaster-General is much more polite, because he sends a postcard once a year to remind us. Unless I am reminded by the dog itself, I sometimes forget to go into the post office and pay my 7s. 6d. A postcard would be much better than a notice posted on a church door. If I had my way, I would
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  abolish the 7s. 6d. licence altogether, because a great many people have their dogs put away because they cannot afford the tax. It is a very inefficient tax, and I think that, if the Chancellor of the Exchequer inquires, he will find that it costs him is. to collect 7s. 6d. I know that, in the case of wireless, before the war the cost was also Is. to collect 10s., and it may have gone up again. Income Tax is so good a tax because so little—no more than one per cent.—is wasted in collection.
  I had prepared for to-day a brief and powerful speech, but a correspondent wrote me a letter in which he said "I see that you, unlike other Members of Parliament, talk a certain amount of sense in the gas-house "—that is what he calls it, but I do not agree with what he said. He gave me a list of several things—a list of new financial liabilities that are being increased or are already proposed in Parliament. I do not like the order, but I have not had time to rearrange the list. The first item is war pensions after the war. Up to now, thank goodness, the liability in that respect has been small as compared with the last war, because our casualties have only been one-fifth. Next comes the interest on the new National Debt—already a large item, which would be a very much larger item except that, for the moment, the Chancellor has succeeded in extracting large sums of money from various institutions on what are, in fact, nominal rates of interest. When, in due course, that money is put on a permanent basis instead of a temporary one—I am not asking the Chancellor what he is paying, but it is probably one half or one per cent.—the investors will want three per cent., and that means a vast new burden. The fixed debt charge was fixed at £355,000,000 per annum in 1925. At that time we were making repayments to the United States, which in 1931 they asked us not to do, and there were all sorts of other items, but it is perfectly clear that the permanent debt charge, when this war is over, will be £300,000,000 more at least. But when the country really settles down, and when interest starts to be paid on National Savings Certificates, on which the Chancellor is paying virtually nothing at the moment, because people are buying them freely and not cashing them, and interest is only paid when a certificate is cashed an enormous liability will have to be met.

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  The next thing on the List is payment for war damage to property and chattels. There is a contingent liability there, but I will not say much about that. Now we come to compulsory savings, this business of post-war credits, I think, a most stupid scheme. I have got a couple of these certificates worth £65 each. I regard them as an asset, but they are actually a liability. What is going to happen if there is any serious demand for the money? The Chancellor will not be able to meet that demand, and can only pay out by borrowing more money. We are accumulating tremendous liabilities with these things.
  Next comes the 20 per cent. business under E.P.T.—a colossal liability. It is true that the Act says "as Parliament may hereafter determine," which means that we can make such conditions that not many people will get it. Not one public company has included in its balance sheet this 20 per cent. E.P.T. I read a speech the other day in which it was stated that all the shelves will be empty when the war is over, but that we shall have plenty of savings with which to buy things. National savings are not savings; they are money already spent. They are an asset to the individual but a liability to the community at large, and if there is an attempt to cash large numbers of certificates the Government can only meet it by borrowing new money from other people. The State has not got a bob. People think the State is a wealthy institution. It is not. All the State has got is power to bring along a Bill and collect money from the general body of the community. Everybody praises the President of the Board of Education because he has got his Bill through. I do not attach much importance to the Education Bill, because nothing is going to happen for four or five years, and nothing can happen until we have trained masses of teachers. Therefore, I am very glad that no early financial obligation is going to be incurred —£80,000,000 a year for the purpose of keeping people at school until they reach the old-age pension age.
  There is another body called U.N.R.R.A., through which we are going to feed and clothe a great part of the population of Europe. Who are to do it? [An HON. MEMBER: "You and I."] No, we shall not be in a position to do it. We are entering into these unlimited commitments, and nobody is adding them up. I
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  asked the Chancellor if he would produce a document similar to that produced by Sir Austen Chamberlain. I agree that the latter was produced when the last war was ended. I do not see how the War Cabinet have the courage to approve anything involving war expenditure unless they have some idea of the resources they possess.
  The next item on the list is the extra cost of the Diplomatic Service, which is what my friend calls "chicken feed." Next comes extra financial help for the Colonies, which is a good investment, but, again, the money has to be found. Then there is the new health scheme. I am a little embarrassed about this, because the author is the joint Member for Croydon with me. Quite frankly, I do not like it very much, or any scheme whereby you turn doctors into clerks and whereby, already, responsible people have decided not to have their sons brought up as doctors. [An HON. MEMBER: "Shame."] Nobody with any sense would go into this profession if it is to be a salaried civil service, because people with enterprise believe in earning a decent living and not being State slaves. The health of the country will diminish very much if we have only mediocre people, instead of first-class people, becoming doctors.
  Then there is the Beveridge social security scheme. I am glad to observe that the Social Security League has closed its offices and been transferred to the private residence of Sir William Beveridge. I saw a notice in the Press to that effect yesterday. I presume that the enthusiasm has somewhat diminished and that those who have been paying the rent have vanished. That is rather helpful. There are a lot of other items. There is the new Water Bill dealing with rural areas. This is a very good idea, but it is going to cost a lot of money. There are the new prefabricated houses to be put in hand by the Government. I am all in favour of every effort being made to provide housing accommodation. I understand that the reason that the State are to own these houses is that, if anybody else owned them, there would be a risk that they would be kept going too long. They are to be temporary, and are to be demolished at a comparatively early date. As they will cost as much as permanent houses but will have a life of only 10 years, obviously it is very bad business. The Chancellor of the Exchequer shakes his

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  head. Then obviously they are going to last longer than 10 years, and that will cause a little annoyance. Everybody is committed to agriculture, which must be made prosperous. If food is to be cheap, somebody has to fill the gap. At a cost of how many million pounds a year? The people whom I have consulted do not know. They are all agreed about the policy, but nobody is agreed who is to pay these millions. I have not the slightest doubt that, when they awake from their dream, which will be about three months after the termination of hostilities, three-quarters of this stuff we are all talking about so loosely will go overboard. We cannot finance it, and the Chancellor of the Exchequer knows it.
  The right hon. Gentleman realises that the greatest problem with which we shall be faced when the war ends will be the cost of the switch-over from war production to peace production. In some factories it will mean no difference at all, because what they are producing in war time is the same as they produce in peace time; but many other factories will have to clear out old plant and put in new plant, and the good provision in this Bill is the generosity that is being applied to those who will have to carry out the switch-over. The other day the Chancellor of the Exchequer made a speech—I want to use the phrase which is customarily used on public platforms—on the policy of full employment. That just means nothing whatever; there is no policy of full employment. There is only an objective. [An HON. MEMBER: "There is in Russia."] We can have full employment if we degrade the standard of living to that of slaves. Let me be a slave-master, and I will give full employment under the most degraded conditions. [Interruption.] I am talking about the phrase that is used by leaders of all political parties. It is a phrase of undiluted nonsense. There is no policy of full employment. There has been no economic discovery made since that period, when, almost week after week, we used to have a Debate in this House about solving the unemployment problem. Did we succeed?
  Mr. Kirkwood: No.
  Sir H. Williams: The hon. Member who has just said "No" the loudest, spoke more frequently than anybody else.
  Mr. Stokes: Did they take his advice?
  Sir H. Williams: No, because his advice was not worth taking, and they could not understand it, anyway. What is the use of pretending that there is a policy of full employment? I know of no such policy. We shall probably avoid the mistake that we made in 1919, when the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) said, "We will make the pound look the dollar in the face." That followed on the Report of the Cunliffe Committee. That was a very interesting document describing the Gold Standard in all its brutal realities. The fundamental mistake was made of going back to the old Gold Standard at the old parity of 4.86 to the £. That terrible deflation which began in the summer of 192o continued steadily until the Gold Standard was restored on 27th April, 1925. I remember something very interesting happening. It happened so long ago that in referring to it one can speak about a meeting in Committee Room 14 upstairs. I received a notice that Mr. Reginald McKenna was to address Members of all parties on the future economic financial policy. The room was packed. Mr. McKenna made a speech clearly advocating a return to the Gold Standard. As I was an innocent Member at the time I did not realise that all this was part of the propaganda preparatory to an announcement being made by the Chancellor of the Exchequer, now the Prime Minister of this country. Though I almost favoured the restoration of the Gold Standard at some sort of parity, I was dubious about being too much in a hurry. When Mr. McKenna sat down I asked, "What are you going to do about the consequent unemployment?" That rather wrecked the meeting. The older people there took me on one side and said, "You are a stupid young man; when there is an arranged meeting like this, you should not ask stupid questions."
  Mr. Kirkwood: Was this a Tory meeting?
  Sir H. Williams: No, it was an all-party meeting. These people were all in the front row, and they wanted to get the approval of Philip Snowden. Though at that time I was dubious about it, it turned out rather better than expected. Between 1925 and 1929 industrial production in this country increased by 10 per cent.

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  [Interruption.] Hon. Members should listen to it; it is worth listening to. The number of people hi employment four years afterwards was 750,000 more, despite the incredible mistake of the long period of deflation. Now it is alleged that the coal dispute of 1926 was due to what happened on 27th April, 1925. That is incorrect. People will forget past history. I go back to the occupation of the Ruhr Valley in 1923, by the French, which completely destroyed, for the time being, the bulk of German coal production. Ultimately, there was a settlement of that case. It was not until late in 1925 that, first of all, the development of coal production in Poland, which was to some extent a new feature, and the restoration of coal production in the Ruhr Valley brought about the circumstances in which there was a heavy fall in the export prices of British coal. The crisis of 1926 may have been influenced, as I believe it was, to some small extent by it. There was, roughly, something rather less than a 10 per cent. change in the wholesale price level when the Gold Standard was restored.
  Mr. Speaker: The hon. Member must not continue to discuss the coal strike.
  Sir H. Williams: I would not have said this, but for interruptions. I think I can keep within the bounds of Order by saying that there was a general change in the wholesale price level. The price level of coal was different from the rest. At the present time the situation is different. We ought not to commit ourselves to a policy until we know where we are. We do not know what we shall be faced with as regards invisible exports after the war and how we can restore our export trade. All these things have to be considered before we can come to any conclusion on some kind of stable exchange rate. I am satisfied that we should have a stable exchange rate in due course. If I got into the train at London with 2s. and when I got to Manchester they gave me is. 8d. in coppers for it, everybody would say that it was quite mad, yet they are perfectly willing to say that that sort of thing is quite sane, if I travel from Dover to Calais. We went to have some kind of stability.
  I have spoken a long time but this has been partly due to interruptions—although I always enjoy interruptions. I interrupted the Financial Secretary on
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  Clause 31, which contains some very important concessions to small companies. The other day I saw the accounts of a small company, which, by new methods, is selling an article of popular consumption at the same price as everybody else, but because it is very efficient, it makes a very large profit in relation to its turnover. The net effect in the case of that company is that out of every 72 parts, 71 parts go to the Chancellor, and one part is retained by the proprietor of the business. I only mention that fact—and I am willing privately to tell the right hon. Gentleman the name—in order to show the extent to which the State is a sleeping partner in every business—in some new businesses to an overwhelming extent. Some of these small new businesses will be helped by concessions in Clause 31, and they are grateful.
  I come to Clause 32. When the original Section 35 of the Finance Act, 1931, was introduced, I took some part in making representations to Sir Kingsley Wood on the ground that they would be very repressive and that all sorts of proper transactions in the interests of traders and the community might be regarded as transactions for the avoidance of taxation. Sir Kingsley Wood on that occasion was convinced by the arguments some of us produced and as a result the words "the main purposes" were introduced. I forget whether the Government proposed then or whether the Chancellor accepted them as a result of my representations. We are now going back on that. The result is that a great many transactions already settled are liable to be reopened. At some stage one ought to know the rules of the game. I do not think that the Chancellor ought to be like the captain of the cricket team who, when be has lost three wickets, alters the rules and says, "Those three fellows have not been bowled out." That is, in effect, what he is doing. The Treasury apparently think that if they pass an Act of Parliament it must be moral. That is carrying the doctrine of the State really further than I like. Two or three years ago the Chancellor made the declaration that if people tried to be funny, he would legislate retrospectively. Unless there is a very strong case, which the Chancellor can produce, he ought not to expose the great mass of decent and honest traders to the inquisition represented by Clause 32 in its present form.

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  I have taken up more of the time of the House than I intended, but I hope that the Chancellor will look very carefully into Clause 32.
  Mr. Owen Evans: We have heard in the course of this Debate some extraordinary speeches, among them those of my hon. Friend who has just sat down and the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence), but it seems to me that we can comfort ourselves by saying that the Chancellor of the Exchequer has laid down certain plans with regard to industry and we have some confidence that they can be put into operation. The Chancellor has as much right to assume, as the hon. Member for south Croydon (Sir H. Williams) has to assume, that we cannot do any of these things. I think we might choose to back the Chancellor in this respect.
  I do not propose to detain the House for more than a few minutes, but there is one observation should like to make at the outset. My hon. Friend the Member for Walsall (Sir G. Schuster) spoke with considerable authority on questions regarding taxation of industry, of which he has obviously made a close study. He based his speech on the fact that we have had in this country, so far, a system of complete private enterprise. He was attacked by my hone Friend the Member for Leigh (Mr. Tinker), who said that the hon. Member for Walsall always defended private enterprise, and spoke on the assumption that private enterprise was to continue. I think that it is time we faced realities in this House on the question of industrial organisation. The fact is that all the industries of this country are, for good or evil, conducted under what is called a system of private enterprise. The whole of the industry of the United States of America, which is comparable with ours and with which we shall have to be in competition after the war, is also conducted according to a system of private enterprise. So is every industry in our Dominions, and I venture to suggest that it is not a question to-day of whether private enterprise or Socialism is the right method of organising industry. We must accept the fact that there is private enterprise in this country. I submit that even those who believe that we shall eventually have an organisation
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  based on Socialism, will agree that it is far better for the future of this country, whatever system we are going to have, that industry should be in a good state, and that, whoever takes it over, it will be more valuable in a good state than it would be otherwise.
  The Chancellor said in his Budget speech that he "offered the mixture as before." That meant, I take it, that he thought the patient was doing pretty well on the old mixture, and that he was not going to offer him any other mixture at all. There has been very little change, and I assume, therefore, that the Chancellor is satisfied that the treatment of the patient is sound and beneficial. But he has issued some warnings on how the patient is to behave in the future. He is not to be allowed to over-eat, over-drink or over-dress. Austerity is to continue, and I think that no one in this House will quarrel with that. It has been pointed out that there will be a shortage of supplies of all sorts of things and huge demands, not confined to this country, for products made in this country. Prices and wages must not be allowed to chase each other, but the Chancellor has, in his Budget and in the Finance Bill, indicated some very important changes. Some ingredients will be taken out of the mixture, and, no doubt, some others will be put in.
  May I refer to one part of the Finance Bill which everybody welcomes wholeheartedly, that referring to scientific research? It is a great step forward, and I think it will have the effect of focusing the attention of industrialists, who do not now spend enough money on industrial research, on the paramount need of such research if industry is to be maintained on the highest possible standard. May I call the attention of the Chancellor to one or two points in the Clauses with regard to industrial research? If I understand the provision in the Finance Bill correctly, I am sorry to find that there is some degree of discouragement—that the contributions of universities for fundamental research are not regarded as expenses for taxation purposes, and that the only research so regarded is that related to the trade or business carried on by the contributor. I think I am right in that, and I should like to say how sorry I am that a distinction has been drawn between scientific research in relation to the industry carried on by the

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  owner of the business, or by the company, and the scientific research of a fundamental character, carried out in university laboratories. If I am wrong, perhaps the Chancellor of the Exchequer will correct me when he replies. This is very disappointing, because all those who are engaged in industry are familiar today with appeals from universities for contributions, for providing better equipment in their laboratories, and increasing the scope of scientific research of a fundamental character. Those contributions are not now allowed as deductions from taxation and I understand, if I read the Clauses correctly, that they will not be allowed under the Clauses in this Bill because, in order to qualify for relief from taxation, the research carried out must be of a character related to the industry carried on by the contributor.
  I think it a pity too that this proposal is postponed to a future date. The appointed day depends upon Parliament. I submit that, even to-day, the Chancellor of the Exchequer must know of some very important researches carried out by industry, and not directly connected with the business of a particular company, but concerned with important projects in connection with the war. I heard only recently that in order to provide research in relation to a very important product in connection with the war, substantial equipment had to be purchased in laboratories for carrying out the tests which were required by the Government, or by those interested in the product in the Government service. I do not know whether an estimate has been made of what the cost would be if this proposal were introduced now, but the effect of the provision postponing the appointed day will be to influence those in charge of research laboratories to postpone expenditure for such research until after the appointed day. May I appeal to the Chancellor of the Exchequer to reconsider this matter and ask him, where possible, in matters relating to the war or to the industry concerned, to expedite the appointed day as much as possible, and, if possible, change the provision of the Bill in that respect.
  I want to refer to one other matter. I agree entirely with the remarks of my hon. Friend the Member for Walsall regarding the provisions for better allowances for depreciation, and the initial allowance particularly. But I do venture to add my support to his view that something more
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  is required in respect of distribution of profits—money which is not distributed wildly in extravagant dividends or anything of that kind, but carefully kept in the business and carefully applied to the tools of that business. After all, equipment, machinery and plant are the tools necessary to earn the profits in the business, and to earn the taxation which eventually finds its way into the Treasury. I venture to say that it is a fallacy for the Chancellor to argue that that would be exempting savings from taxation. That is the argument, I think, which I understood him to use. Such moneys, I submit, are not savings of the same character as personal savings. They are set aside for the purpose of securing the development of a business, and I ask the Chancellor to give further consideration to that point. The wish has been expressed by the hon. Member for Chesterfield (Mr. Benson) in various speeches which I have heard or which I have read that we should have a Socialist-controlled industry. But we must face reality in this matter, and I feel that, so long as we have private enterprise in this country, we must create conditions under which industry can flourish to the advantage of the community.
  Mr. Hely-Hutchinson: I am very glad, Mr. Speaker, that you have allowed this Debate to range over so wide a field, because it has given the House an opportunity of hearing such views as those put forward by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) on the subject of post-war Budgets and post-war Government finance. I should like to touch on that subject myself and later, hope to acquire merit with you, Sir, by mentioning one or two matters in this Bill.
  In the last war there was a trio at the Palace Theatre who used to sing a song which went "Après la guerre, we'll have a good time everywhere," which I heard many times; and I think my right hon. Friend has done us a service in reminding us that, if we go out for a good time immediately this war is over, we are likely to be disappointed. I think we have to face not only a, continuation of a high rate of taxation but also, to my very great regret, a continuation for some time of what are known as controls—rationing, licensing, the restriction of imports and the fostering of exports. If we do not, we are going to have a catastrophic rise, not only in prices but also in money rates.

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  I thought my right hon. Friend rather overstressed the dangers existing from the present amount of currency. Currency naturally expands as the incomes of people expand, and I do not think that currency has expanded, in amount, very much more than the aggregate of incomes has expanded. It has a little; but I should imagine that the amount in the form of hoarded currency is more of the order of £100,000,000 or £200,000,000, whereas we may turn to an equally spendable form of money—bank deposits, which stand more nearly at the figure of £4,000,000,000 at present. I thought possibly my right hon. Friend was straining at the gnat a little, after having swallowed the camel, when he mentioned his fears about currency. But there are other things we have to consider—not only the enormous volume of spendable bank deposits, but such things as the release of money for War Damage Payments, the 20 per cent. refund of Excess Profits Tax to which the right hon. Gentleman made reference, the Income Tax credits to which he also made reference. Also, there are many industries which have managed to save cash albeit they have held back on replacement and depreciation. They have invested that cash in Government securities, and there is a very large volume of Government securities coming on the market when the war is over, when those industries will want to use that money for rehabilitation.
  When we add all these together, we realise that one of the greatest difficulties with which my right hon. Friend and his successors will be faced will be the control of the Government bond market after the war. The whole problem will find its reflection there, and one rather feels that the sum of the problem is going to be that the Treasury policy will have to be designed towards synchronising the release of purchasing power with the production of goods. That involves an enormous task because one of the noticeable things in the war has been, that in order to produce a financial effect, measured in the money rate or in the exchange rate, or in the price level, the measures we take are not purely financial. They are more in the category of what we might call physical measures—rationing, licensing, and so on. It is those controls which I am afraid will have to continue for a time. I share the right hon. Gentleman's optimism for
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  many reasons, but for one in particular. I think there is abundant evidence in the papers which have been issued from the Treasury in the last three or four years, that my right hon. Friend's advisers in the Treasury know exactly what they are about. I think one of the most reassuring features of Government finance during this war is the abundant evidence that the Chancellor has been well-advised by his technical advisers.
  One difficult problem with which we shall have to deal will be the new psychology which will follow the warless willingness to make sacrifices, less willingness to accept controls and restrictions. That is going to create a far harder problem, when we are trying to induce people to pay taxes and to save money, than the purely mechanical problems with which the Treasury is faced now. I hope that in making a nice balance between the release of restrictions and controls, and the keeping of purchasing power in line with the goods available, my right hon. Friend will always keep in mind what has been stressed many times before, namely, the importance of exports. Our standard of living depends on exports. Our exports depend, in the main, on the enterprise of Englishmen, on the enterprise of our merchant adventurers, and during the last four or five years our merchant adventurers have been very much cooped up by this restriction and that, by this control and that. They want to get out again all over the world. They want to get to the wide open spaces in Canada and America. They want to trade with India and the Far East. They want to go to Africa. They want to go rolling down to Rio again on their lawful occasions and to "bring home the bacon" in more senses than one. And then they want to come home again to this lovely island in which and for which we live. I hope that will be one of the principal and cardinal points in the policy of the Government after the war—the fostering of exports.
  Now, Sir, perhaps I might address myself to the Bill. I apologise for having wandered a little over the face of the globe. The interesting thing about this Bill is the fact implicit in it. It leaves the rate of taxation alone and it deals largely with administrative matters. Thus, it reflects the great change which war time finance has wrought upon Income Tax. Income Tax is now a people's tax. It is

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  no longer a question, as I said once before, only of big game hunting against the rich. It is now a people's tax and the problem facing our taxing authorities now, evidenced first in the introduction of deduction at source and then, more recently, in the introduction of Pay-as-you-earn. The great problem facing them now is amending the Income Tax law, and reframing its administration so as to make it effective as a people's tax, which is what it is going to be in the future. Further simplification is undoubtedly ahead of us and I hope that the first sign of that simplification will come in the course of this year in the modification and improvement of the provisions for Pay-as-you-earn.
  The other item in the Bill to which I would like to make reference, as has already been done by other speakers, is Clause 32. I will not go over the ground again, by reminding the Chancellor how strongly many of us have insisted on the limitations which were put in the 1941 Act, but I would remind him of what really frightens us about the present proposal. We want to help him in every way to catch those people who are tax-dodging. We all know what that means. But we are a little afraid that the officials are taking what is, to them, the easiest course. They are asking us for more powers than we would normally give them, because they would find it so terribly difficult to catch tax-dodgers if we did not give them powers far greater than we ought to give them. We are all on the look-out in this House for what we call bureaucracy, and there is a little danger sometimes, I think, that a civil servant whose business is that of a tax gatherer, is a little apt to regard tax gathering as an end in itself.
  Sir H. Williams: They were called "publicans" in the old days.
  Mr. Hely-Hutchinson: Yes, they were. We are going to ask my right hon. Friend for very specific assurances as to the application of this Clause and to give us assurances as to the right of appeal there may be to the courts. What is now necessary is, of course, brought about by the high rate of taxation. In Excess Profits Tax, in Income Tax, in Surtax and in Excise there is, owing to the high rate of tax, a tremendous incentive to evasion or avoidance. Consequently it
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  pays some of these very clever people to exercise their ingenuity. Here is another case where, if the full advice of the Treasury had been followed some two or three years ago; we should not be in the present mess. When the late Chancellor of the Exchequer, Sir Kingsley Wood, decided he must, for political reasons, bring in an Excess Profits Tax and make it 100 per cent. he was advised, I am informed, by his advisers at the Treasury first, that a differential tax was a bad tax and, secondly, that a too per cent. tax was always difficult to work in practice. Our present dilemma is merely an example of the fact that if you do one foolish thing, you very soon find yourself up against the necessity for doing more foolish things.
  Mr. MacLaren: That is the whole basis of taxation.
  Mr. Hely-Hutchinson: If I were to give up drinking whisky and drank water alone, three quarters of the economy would be in tax. Can it be said that in drinking water, I am a tax dodger? I can quite understand that anyone who comes from North of the Tweed might say that so unnatural an action as drinking water deserves its own punishment. But I hope that my right hon. Friend will go very carefully before he places these tremendous powers in the hands of the tax gatherers.
  Mr. MacLaren: Why not tax water?
  Mr. Hely-Hutchinson: With that single exception I have mentioned, I congratulate my right hon. Friend on the Bill and wish it a speedy passage.
  Mr. Stokes: When I heard the hon. Member for Hastings (Mr. Hely-Hutchinson) refer to the importance of the continuation of certain controls when the war ended, I could not have agreed with him more. I was particularly glad when I heard him say that he thought it important for the release of purchasing power to go step by step with the return to normal production. I was disappointed, however, that he did not say that the artificial absence of purchasing power at a later stage, should not be allowed to interfere with increased production—in other words, he did not enunciate that there must always be enough money in circulation to enable the people to purchase all the goods they are capable of

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  producing. If he had said that, I should have felt much happier.
  Mr. Hely-Hutchinson: Is it not the case that money does not circulate, but is circulated by the people?
  Mr. Stokes: I allow that. The hon. Member went on to say that our standard of living depended on exports. If he means that we cannot grow bananas and oranges here and therefore, if we want them, we have to send goods away to get them back in exchange, I agree; but if he means a return to what was, before the war, known as a favourable balance of trade, then I entirely disagree with him. A favourable balance of trade was regarded by our pundits as a state of things in which you send more wealth out of your country than you bring in. Obviously that is completely "phoney"—if that is a Parliamentary word. I would agree with the hon. Member if he were to say that exports are important to us, but they are important only in so far as they enable us to bring in the equivalent value of goods in exchange; they are not to be used for the purpose of buying up the capital assets of other nations overseas.
  I would not really wish to return to the business of "Salute the Soldier" had not the Financial Secretary in his opening remarks to-day referred to it. I happened to come into the House the other day when a discussion was going on and, without having prepared myself for the fray, made an impromptu speech quoting as an example a rather ridiculous affair which had taken place in a borough the name of which I did not mention. To-day, the Financial Secretary said that the Prudential had never subscribed £2,000,000 to any borough, and that therefore my figures were all wrong. I accept the rebuke that my figures were out of proportion—the right hon. Gentleman did not warn me that he was going to raise this or I would have obtained the referenve—but I was only illustrating. I apologise to the Prudential for misrepresenting them over this particular case, but I know for certain that they have subscribed a good deal more than £2,000,000 elsewhere to these loans. They have £400,000,000 available, and they have subscribed millions more elsewhere. What I was trying to illustrate was the nonsense of
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  the whole business. When the Financial Secretary said that the House did not think very well of my speech, that was a parody of the truth. The House roared with laughter and, when I went out, I was asked what the laughter was about, and had to explain that the House realised the humbug of the whole thing. The Chancellor himself knows it. If he does not, let me quote what was advertised in my constituency the other day:
  "Our savings…are the insurance that, in the last great battles, our men will have the arms and equipment they need in full measure and overwhelming superiority over the Axis."
  If I were advertising goods in that way I should expect to be run in for making false statements. If it is true it implies that if people do not subscribe our men will be without weapons when they go to the Second Front. Of course it is not true. If it is necessary for this money to be made available in order to win the war, why does not the Chancellor take it? I have all along realised the importance of savings and of not spending money when goods are in short supply, but I have always advocated that the important thing is to put money on deposit at the bank and leave it there. If the House wants authority for that I will quote Lord Kindersley. He said, in reply to a letter I wrote to him:
  "I do not disagree with your expressed belief that it does not make a pennyworth of difference whether anybody subscribed to these Savings Groups or not, provided they bank their money and do not spend it. The governing factor is embodied in the last few words."
  I see that the Chancellor nods and that he agrees to that. That is what I have been beseeching him to do for years. Why does he not start a campaign of truth among the people and tell them what is involved instead of all this ridiculous nonsense, which the people themselves are beginning to realise it to be? May I quote another case which was given to me just before I came into the House? In the "Salute the Soldier" week a case of whisky was put up for auction and the highest bidder got it for £1,000. The result is that the community will have to pay 2½ per cent. on £1,000 for ever, and the purchaser gets the case of whisky as well as interest on his investment. The whole thing is utter nonsense. The more he pays for the whisky the more the people will have to pay him.

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  I would like to reply to the speech of the hon. Member for South Croydon (Sir H. Williams), whose attitude of mind in these matters I have long ceased to expect to coincide with my own. To-day, however, he did appear to be about to stumble on a great truth when he said that the interest on the National Debt was mounting steadily and was, indeed, mounting so high that we would have to borrow money in order to pay the interest on it. We have known that for years. It has been going on for generations. He made a mistake when he said that the service of the Debt was £200,000,000. The Chancellor has said that it was over £1,000,000 a day, and I believe that if the war went on till the end of this year it would be at the rate of £600,000,000 a year. That is equivalent to something like 2,000,000 men working for a year and handing over all their wages in order to pay it. The sooner the humbug of this money business is exploded the better. The hon. Member for South Croydon said that all the Chancellor could do to get money was to bring in a Bill like this and collect it all from the people. While that is true it is only half true. He will still have the gap which he cannot collect. What does he do then? He allows new money to he created. What happens when he is asked about it? He says that he does not know how much new money is created. In answer to my questions he says that he does not agree with my figures and that he does not keep the kind of record which would give him the answer which would enable him to answer my question. As a pure business proposition, the Chancellor ought to be able to say how much new money is created.
  I got up to speak on the Amendment in my name, and other names, on the Order Paper dealing with the land question. I regret, Mr. Speaker, that you did not see fit to call it. I look forward to the day when you will see fit to enable me to divide the House on this issue because we are talking in the air until we deal with this fundamental problem. The fact is that this land issue, the whole question of what is to be done with the land and land values, has been completely sidestepped by the Government. They have had all sorts of Reports like the Uthwatt, Scott and Barlow Reports, but nothing has been done. I would not be very satis-
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  fled if the Uthwatt Report was implemented, because I do not think it goes nearly far enough, and merely suggests buying out the robbers for having robbed the people in years past. The Committee could not do what it set out to do because its terms of reference were wrong. One of the things it was asked to do was to stabilise the value of land, and that is the one thing you cannot do. Therefore, the terms of reference made the whole work of this Committee abortive.
  We have heard a great deal about full employment. My hon. Friend the Member for South Croydon said that that was nonsense and did not make sense to him. I look at it in a different way. What I want is not full employment, because that conjures up in my mind conditions of slavery and everybody being dragooned to do things. What I want is full opportunity. The difference between full opportunity and full employment is the difference between freedom and slavery. I want to deal with the obstructions to full opportunity. I will not discuss the, monetary system. That is a minor obstruction, but it is far from being accepted as it is by the common man. To me the great obstruction to full opportunity is the land monopoly whereby the landowners are allowed to control and own the sources of wealth and the raw materials of the world free and unmolested, and to collect their full value of it for themselves. We have appealed again and again to successive Chancellors to do something about this. I have asked the present Chancellor and his predecessor on numerous occasions to do something about it and to remove what I call the obstruction to the flow of the life-blood of the body politic. Money can only make that blood flow more freely when it is in motion, but the land monopoly stops the flow altogether. The Chancellor will be well aware of that from representations that have been made to him in the past 12 months by no less people than the Lord Mayors and Mayors of the blitzed cities. They have complained to him that they cannot even begin to rebuild their cities and get hold of the necessary sites because the Government will not come to a decision.
  What is to be done about the land question? It is the same old story. Enslave the men, shove them into the Fighting Forces, but leave property alone, and

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  particularly land property. Touch everything else but that. The land question always has to be shut out. I want to give some examples, and for fear of being twitted by the Chancellor about what I have said on the "Salute the Soldier" week, I would tell him that all my figures are authentic. I quote them from a book, "Why Rents and Rates are high," published by the United Committee for the Taxation of Land Values. We are going to spend vast sums of money on housing, but what do we find? Always the same obstruction with regard to the land. When the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot) was Minister of Health in 1938, he spoke of the purchase of land for the five years ending 31st March, 1938, and said that local authorities under the Housing Acts had spent no less than £8,00,000 to buy 35,000 acres of agricultural land for housing schemes. It was derated land and was paying no contribution of any kind to the community, yet before it could be got hold of for housing, the people had to pay no less than £200 an acre for it. I could quote innumerable examples of that kind. On slum clearance here is a glaring case from the London County Council. In four years the Council bought land at Bellingham, Roehampton, Becontree and St. Helier, which had a rateable value of £7,305, and they purchased it for £835,826. At five per cent. that land should have been paying taxes of £40,000 a year, but it was purchased for Ito times its rateable value. If that is not obstruction of slum clearance I do not know what is.
  Then comes the question of green belts for the recreation and health of the people. An example is to be found at Bush Hill, Middlesex. The county council bought 107 acres of Bush Hill Park Golf Club for £70,000, which is equal to 700 an acre. That was not even to build on it, but in order to prevent anybody building on it. Then we come to education. In the four years 1935–7 290 acres for 105 sites were purchased for £218,000, which is again £700 an acre for land which was idle and derated. Whenever one challenges the Chancellor to say whether the purchase money for this land was subject to taxation he will not tell you. Ninety-nine times out of a hundred it is not because it is all regarded as capital apprecia-
  660
  tion, but land is not capital and the appreciation in value results from the work of the people and not the work of the landlord, but the landlord gets it. We hear great talk about those tin shanties, the Portal houses, but where are they going to be put? They have to stand on land, and you cannot say they are cheap until you know where they are going. Have any arrangements been made for the land for them?
  With regard to the whole question of speculation in land, the Chancellor may say that it is not going on so much now because the Government have fixed a 1939 ceiling. In fact, however, it is still going on. I was amused on Sunday to read an article in that great newspaper, the "Sunday Express," by a correspondent named Michael Stuart, called, "Why do we allow the dons to grab the land?" He went into an examination of what Oxford and Cambridge had been doing in the past. I am a great believer in the universities and do not blame them for what they are doing, for they are acting within the law, but here are some interesting facts. Oxford is the proud possessor of 179,000 acres, not around Oxford, but in 47 different counties. Cambridge owns 115,000 acres in 39 counties. They never pay any Estate Duty because they never die. The revenue that comes in is staggering. The revenue from the land which Oxford alone owns amounts to £470,000 a year, all tax free because the university is a benevolent institution. It has so much revenue now that it goes on buying land and increasing its stranglehold—sells a bit at high value, and reinvests in more at low. I want to quote an authority on this question of land, the present Prime Minister, with whom I very rarely agree, although I feel that 30 years ago he and I would probably have been in the same party. He said then—I believe it was in 1907:
  "Land monopoly is a perpetual monopoly, and it is the mother of all forms of monopoly."
  That is true. It is all very well for people to smile and say, "What is the difference between land and everything else?" The great difference is this: Motorcars, houses, armchairs and the like are all products of wealth. They are all brought about by the effort of man on raw materials. But who creates land value? Not the owner of the land, from his ownership. In so

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  far as he is a worker he does contribute, but the value which attaches to land is created by the community as a whole, and nobody else. Why should not this value be collected for the people? It might be said that it is not much, but if the land of Great Britain were used properly it would bring to the landlords in economic rent £500,000,000 per annum. That is what could be collected and the extent to which it is not collected is the measure of the hardship landlords are inflicting on the community by not allowing the land to be used for the best purpose.
  It is argued that we must not introduce this tax because it is so expensive to collect. That is an absolute lie. I do not say that anybody intentionally lied, but it is so. The Chancellor knows that he has Treasury officials willing and ready to put it into operation, officials who believe that it ought to be put into operation. The cost of collection would be about £2,000,000 per annum, a negligible figure. I agree that in the first year you would not get a vast margin over that but in the end you would collect £500,000,000 a year simply for this cost of collection, amounting to £2,000,000. Compare that with the ridiculous army of officials which the Chancellor has going round the country now, collecting money from the people's efforts. Think of the financial pundits, armies of them, who would be set free if we were to have a simplification of procedure along the lines which I have just described.
  I want to quote the Prime Minister again, on this question of landlords:
  "He the landlord, renders no service to the community, he contributes nothing to the general welfare, he contributes nothing even to the process from which his own enrichment is derived. It is monopoly which is the key note and, where monopoly prevails, the greater the injury to society the greater the reward of the monopoly will be. See how all this evil process strikes at every form of industrial activities. The municipality wishing for broader streets, better houses, more healthy, decent, scientifically planned towns is made to pay, and is made to pay in exact proportion, or to a very great extent in proportion, as it has exerted itself in the past to make improvements. The more it has improved the town the more it has increased the land value and the more it will have to pay for any land it may wish to acquire. It is not the individual I attack. It is the system. It is not the man who is bad, it is the law that is bad."
  Mr. Kirkwood: The Prime Minister, at that time, was speaking as a Liberal.
  Mr. Stokes: Weil, he was speaking the truth. I put this to the Chancellor. I do not know whether it was his ambition, as a young man, to be a Chancellor of the Exchequer; probably he stumbled into it by mistake. But if he had given his thoughts in the past to this problem of taxation he would have stumbled upon certain truths. First, that taxation should bear as lightly as possible upon production. Every one of the Chancellor's taxes in this Bill bears heavily on production, some more than others. Every one of the taxes we are discussing tends to prevent production. To illustrate what I mean I would like to tell the House a story about a Sultan of the East, who was a rich man and who had a large area of fairly fertile soil. He wanted money with which to pay his armies to attack somebody else. He put a tax on fig trees; the result was that the farmers did not like it and cut down the fig trees except those necessary to feed themselves, so that the income from the tax fell and his army starved. His Grand Vizier said, "You have done this the wrong way round. You have discouraged these people from producing wealth. Why do you not tell them that the land will grow many fig trees and then put a tax on the land according to its value?" He did, and what happened? The farmers planted more and more trees, everybody had plenty in abundance and, the army grew fat and went away to conquer the enemy.
  Secondly, a tax should be easily and cheaply collected. This is. Thirdly, a tax should be incapable of evasion. We have heard much about tax evasion today. You cannot evade this tax. It is quite impossible. You need no detectives to get it. Finally, a tax ought to be a fair tax. What is more fair than to collect for the benefit of the people the value which they themselves have created—land value? I quite understand that the Tory Party do not like it, and I suppose they will not bring it into being until they are forced to do so. As I have said, I do not want what is called "full employment"; I want full opportunity to employ myself, and for each other man to have the right to do likewise in the way he chooses. The only way to put this matter right is to tackle the fundamental cause of unemployment, as I have suggested; otherwise we shall achieve nothing. Just another story and then I will sit down. It con-

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  cerns the test employed in a lunatic asylum to make sure that new inmates are really "cracked." The test is that a new inmate was led into a bathroom where the taps are pouring forth water into the bath—pouring wealth into the landlords' pockets. He is then given a bucket and told to empty the bath. If he turns the taps off before he starts, he is considered curable.
  Major Peto: I find myself out of agreement with most of what has been said by the hon. Member for Ipswich (Mr. Stokes), but very much in agreement with nearly all of what was said a little earlier by my hon. Friend the Member for South Croydon (Sir H. Williams). On that account, I am even more diffident in rising than usual because what I propose to do is not to nag the Chancellor about what is in the Bill but to point out something which is not in it. Unlike my hon. Friend the Member for South Croydon, I do not seek to get more money for the country but, like so many others, to take a little bit away. Perhaps because I am a back bencher I have more opportunity for contact with the people in my constituency than my right hon. Friend has for contact with his constituents.
  I am very much perturbed by the very bitter feeling in the country amongst old age pensioners and widows. No doubt in common with many other Members, I receive letters not only from my own constituency but from other places too on the subject. There is a feeling amongst these pensioners that they are paying Income Tax on their pensions. I know that is a fallacy. I have been told so by no less a person than my right hon. Friend the Financial Secretary to the Treasury, but the fact remains that they think they are. I know that we all pay Income Tax above a certain income level, but these people are living fairly near the margin.
  Would it not be worth considering, either now or at some future date when the finances of the country are under a less tremendous strain, deducting the amount of their pensions from the assessable income of pensioners? They suffer more than the rest of us, especially in war. They find it sometimes prohibitive even to buy tobacco at 2s. 6d. an ounce. Widows, including war widows, to whom
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  our hearts must go out more than to any other class, except mothers who have lost their only sons, suffer more than is necessary. They have to go through life without a companion and without the support of someone they have been accustomed to lean upon. They have to earn their living and, if they are patriotic, they go out to war work. Again, old age pensioners have subscribed for their pensions for long periods and if their pensions are brought into assessable income, whether they are wrong-headed or not, they feel it most keenly. If I were in my right hon. Friend's shoes, which thank God I am not, I should feel very seriously about this, and this feeling of bitterness is throwing sand into the works, and no one wants that to happen if it could be stopped. They feel that they have earned their pension, and so they have.
  I urge my right hon. Friend, if he possibly can, to give some measure of hope, even at some distant date, to this vast class of people that he will help them in this direction by deducting their pitiful pensions from their total earnings before they come up for taxation. He will thus be doing something which will not only render him more popular but will do a great deal to remove the bitterness that exists. As old age comes on, frailty and loss of earning power become increasingly evident. My right hon. Friend has not reached that stage yet, but it will come to him and to me and to all of us at some time or other. Widows have a lonely furrow to plough, and it is difficult for them to hold their own world, small though it may be, on their own shoulders without help from others. These troubles are not compensated for by a small State pension. I urge my right hon. Friend to ease the burden of old age if he possibly can, and to hold out some small modicum of hope that the way of the widow, rough and stony as it is, may be made a little more smooth.
  Mr. Hammersley: Since the war the Budget Statement, and the Finance Bill which implements it by legislation, have come to be looked upon as an index and a guide to the economic policy of the Government. The general future economic position of the country is really becoming very plain. There are certain high lights which are now admitted by practically everyone who studies the likely economic

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  position in the post-war years. There is going to be a material decline in our external resources, with a loss of about £1,000,000,000 in foreign investments, and an increase of £2,000,000,000 in our external liabilities. This material decline in out external resources is one of the high lights of our post-war position. An associated factor is the need for a greater volume of exports. That situation leads to two deductions, one affecting our internal policy and the other our external policy. One is that we have to have the highest possible standard of industrial efficiency, and the other is that there should be an international currency arrangement to maintain the stability of prices. In other words, first we have to produce goods at the right price or, to use more modern terminology, at the lowest expenditure of man-hours, and secondly, we have to transfer those goods to their markets.
  Mr. MaeLaren: The hon. Member says "the lowest cost of man-hours." Does not taxation enter into price?
  Mr. Hammersley: The point I am making is that you have to produce goods with the maximum efficiency, and maximum efficiency must involve the least use of labour to the production of any particular quantity of goods. I put those two points in that order, production first and transport second. It is unfortunate, though it may be inevitable, that the Government have tackled the second problem first. I have only one criticism to make of the Bill, which I consider a most excellent Bill, and that is in connection with the matter of priority or, more accurately, the question of timing.
  The Chancellor of the Exchequer has realised the potency of high taxation. Taxation is being used in a restrictive sense. It is being used to control inflation and to limit purchasing power, but it could also be used—my right hon. Friend recognised this—as a very powerful incentive by any material reduction of taxation, in directions which are considered to be nationally desirable. In the restrictive sense, we have the consequences of high taxation now, and in the second sense, that is to say as an incentive to improved industrial efficiency, all these proposals are postponed until some indefinite time. The incentive to improve efficiency is most important, in
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  connection with the necessity to have improved plant and equipment after the war. Many industries are old-fashioned. The industry with which I have some close acquaintance, the British cotton industry, in comparison with a modern industrial country, is probably the most old-fashioned in the world. It is necessary that there should be a modernisation of plant. The Chancellor of the Exchequer realises that, and he proposes a 20 per cent. depreciation allowance on new plant and 10 per cent. on new buildings. These depreciation allowances, which are a reduction from assessable profits, are only to become available some time when the war is over. I submit that there must be cases in which some new plant can be put in now. Those cases are probably few, and limited by the fact that most of our resources are directed to the war effort. In spite of that, there is no doubt that we can gradually build up now, and improve our equipment and our plant. I submit that there is a case for making depreciation allowances on new plant available to the industrial community now. It cannot be in the best interests of the State that all this expenditure should be postponed and that industries should be queueing up in a long line, waiting for the words: "Now you go."
  There is another consideration to which I would draw the attention of the Chancellor of the Exchequer. It has to do with the depreciation of old plant—not with the depreciation of old plant that is to be scrapped. I realise that when you scrap old plant you get obsolescence allowance. I refer to old plant which is to be replaced by new plant costing three or four times as much as the original. There is a very notable case. Take the case of the cotton spinning trade. I have in mind the case of a company owning two mills. It is desirable that one of those mills should be brought up to date. I have had an approximate quotation for bringing that plant up to date: it is £500,000, for one of the two mills. The capital of that company is £160,000. I would like the Chancellor of the Exchequer to bear that point in mind, because it is a typical case for Lancashire. The company has a capital of £160,000, and in order to bring up half its plant to complete modernity it would have to spend half a million. Where is the money to come

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  from? I suggest that there should be a special ear-marking during the war years of a depreciation allowance, based not on the written-down value of the plant as it exists to-day, but on the replacement value of that plant. Of course, that increased depreciation would not be made available to the company or the industry unless the replacement took place. I am suggesting, in other words, that, during the war, if machinery is to be replaced by improved machinery, costing three or four times as much, there should be a depreciation allowance on the value of the machinery for replacement purposes. That figure is easily ascertainable, because most companies insure their machinery on its replacement value.
  There are several arguments that could be brought forward in justification of this submission. First, with E.P.T. at 100 per cent. during the war years, the building up of a fund to make those replacements is practically impossible. Secondly, it is not necessarily the industries which have a good E.P.T. position, and therefore can keep their profits, which will find it necessary to replace their plant at very much higher values than pre-war. For instance, there are many mills in the Lancashire cotton industry which are compulsorily stopped under the concentration of production. Mills and factories of that kind have no means of collecting a reserve from which it would be possible for them to buy new machinery to keep their equipment up to date. Thirdly, and this is a point of importance, a manufacturer is forced to rely on his fixed assets to produce his profits. Those fixed assets remain in the organisation at the price which he paid for them, whereas, a retailer is using his fixed assets, which are continually changing in value. The values are constantly being brought into touch with the market price of replacement. It seems fair that there should be some relationship between the treatment of manufacturing firms and that of retail firms. It is clear that the assets which the retailer uses are constantly being brought into touch with modern replacement costs. What is beyond dispute is that, without the modernisation of its equipment, British industry will gradually decline.
  In his Budget speech, the Chancellor of the Exchequer made an observation which particularly struck me. He said that the Government could not make the export
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  trade. He indicated that it was the business of manufacturers, merchants and workpeople to make the export trade. There is a good deal of truth in that, but that statement is a long way from being the whole truth. You cannot have a good export trade without planning, and you cannot plan in a vacuum. What trades are expected to do this great amount of export after the war? In what quantities and in what markets are they to sell their goods? What is the general over-all picture of the export trade? Only the Government can have that knowledge and can inform us. Are they in actual touch with the trades which will be called upon, in the future, to do the export? Take as an example again the cotton industry, about which I know most. The pre-war consumption of cotton goods throughout the world worked out at about 6 lbs. per head per annum. Against that over-all consumption, the figure for the United States and Great Britain was 21 lbs. per head per annum. If we are to have, as we all hope, an expansionist policy, a full employment policy, it is conceivable that world consumption of cotton goods would go up from 6 lbs. to 9 lbs. per head per annum. In that case it would not be possible to supply the requirements of the world in cotton goods, with all the present existing machinery working normal full time.
  This is a rather astonishing state of affairs, but it is just a statement of fact. If you built up quite a reasonable general increase of consumption in cotton goods, the spindleage of the world would not be able to supply the requirements, and that is not making any allowance for spindles which may be damaged during the war. It is desirable, if the Government have a view on this expansion policy, for them to consult the trade and make arrangements with the trade, and it may be, if necessary; to consider working two shifts in the future against the present entirely different picture where production is less than 40 per cent. of the productive capacity.
  I have mentioned two ways in which the export trade can be helped, through taxation and through planning—giving the industry a target. The second point which concerns me is the facilitating of exports through international currency arrangements. There has been a certain amount of discussion in the newspapers recently as to whether the proposals put

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  forward by the experts mean a return to the Gold Standard. What is quite clear is that what is intended is not a return to the old Gold Standard system. What is anticipated is something quite different. Giving my own personal view I would say that the old Gold Standard system required a country on the Gold Standard to stick to the rules regardless of economic conditions, whereas the new proposal is one which says in effect that if the conditions change then the rules are changed.
  I would remind the House that the slump of 1929 was caused not merely because we were on the Gold Standard. It was caused by a combination of two factors. There was a world shortage of dollars. That combined with our being on the Gold Standard, caused the slump. That is a simplification, perhaps an oversimplification; it does not contain the whole picture. I do not pretend it does but I do not want to detain the House. I am making this particular point that there were two factors, the Gold Standard and the shortage of dollars, and it may well be argued that the unemployment in those days was the by-product of a struggle to earn the means of exchange to conduct the essential quantity of international trade. In the present plan, as I understand it, if there is proved to be a shortage of a particular currency, then it is possible for other countries, whose currencies are not short, to depreciate their currencies. Moreover, it is not only possible but it may be obligatory on such countries to limit imports from the country, the currency of which is scarce. In fact it is clear that what would be necessary, and what is envisaged in the plan, is something very different from the old Gold Standard, something which would prevent competitive currency depreciation, something which would enable the country whose currency was in short supply to be in effect differentiated against.
  It is beyond dispute that when hostilities come to an end the United States will have achieved the greatest concentration of power and wealth that mankind has ever known. Her production has already doubled, and she is supplying Lend-Lease at the rate of £2,000,000,000 per annum. Although her war output is taking some 55 per cent. of her total output, she has found it possible, although she is supplying these tremendous quantities of
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  goods on Lend-Lease, to increase her own internal consumption by some 22 per cent. Machine power has gone up some four times; there are already signs of overproduction of steel, of magnesium and of copper. In other words, she has built up a most mighty engine of production. On the other hand, the rest of the world, particularly Europe, is starving. We in this country, although we have increased our production by 25 per cent., have done so at a cost of decreasing our internal consumption by over 20 per cent. So it is clear there is going to be a Europe and a world in general, starving for food, goods and machines, and only one country which will be in a position to supply them when the war is over. That is the United States. If, therefore, no arrangements are made after this war, the disequilibrium which exists at present will be greatly accentuated by the natural process of everybody taking exports from America, without having means to pay for them. If this currency plan for freeing exchanges and for stabilising currency were to come into force immediately after the war on the assumption that there was an equality between the nations, where in fact no equality exists, then this disequilibrium would get out of hand and countries would have to go bankrupt. I believe that this fact is recognised in the plan. I believe that the plan is not intended to come in—
  Earl Winterton: May I ask the hon. Member, before he leaves that question—I think it is desirable to bring this out in this House—whether he suggests that this condition of affairs in America will be permanent? Does he take the view that America is the only big factor in the world? In 10 or 15 years' time Russia, with her population and inventive genius, might be ahead of the United States.
  Mr. Hammersley: I appreciate that. I am pointing out what will happen immediately after the war. I am dealing only with the transitional period. I am pointing out that the plan does not come into force in what is described as the transitional period, and it could not do so. In fact, the plan most definitely says that it does not come into force in respect of any country unless that country is satisfied that it has means at its disposal to maintain an equilibrium in its balance of payments. The plan to my mind is of

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  great value, in that it brings home to America the essential truth that during this transitional period the rest of the world will have to take measures of discrimination against her in order that these other countries can build up their exports in order to earn dollars.
  Mr. Stokes: Does the hon. Member, in his vision of what the future holds, preclude the possibility of a continuance of a form of Lend-Lease?
  Mr. Hammersley: I should imagine that after the war Lend-Lease will come to an end; that is my assumption. I am suggesting that in this interim period America itself will appreciate the necessity to encourage reciprocal trade arrangements arrived at with a view to getting the maximum amount of international trade whose finance does not require dollars. It seems to me, therefore, that this currency plan although it is put first by the Government really comes second, and that the possibility of its practical application depends upon whether, during the transitional period, this country can build up its export trade. That is why I urge that the Government should not merely envisage making plans in future to use taxation to help, but should gradually bring those plans into operation now. I hope that the Chancellor will think most carefully about the argument which I have put forward.
  Mr. A. Edwards: I listened carefully to the speech of the hon. Member for East Willesden (Mr. Hammersley). I wonder whether I understood him aright: that, on this question of depreciation, he proposed that the cotton industry should be allowed to place that increased replacement price as a charge against profits?
  Mr. Hammersley: I suggested that, during the war years, the depreciation, which is now on the basis of the written-down value, should be on the basis of replacement value, but that the difference between the written-down value and the replacement value should not be given to the companies until, in fact, the companies have brought their plant up to date.
  Mr. Edwards: In other words, the capital expenditure is to be at the public expense.
  Mr. Hammersley: There is no relation between the two figures. Put it this way: it would be a help.
  Mr. Edwards: I am very much concerned about this. Some of us on this side have difficulty in addressing the House because we feel that we have a system which ultimately will succeed the other one, and which will be more efficient, but we realise that in the meantime we have to make the best of the present system. I agree that, at present, we have to keep our equipment at the highest possible level of efficiency. Recently I talked to a gentleman who controls one of the big combines, and we discussed the difference between the attitude of some of us, at any rate, in my party and that of this gentleman and his friends. I said that I was not much concerned about our big combines: I felt that they were doing most of our work for us, and, when the majority of the people Thought that we should take control, it would be easy to take over their shares. Until the majority of the people were intelligent enough to do that, it was necessary to keep them running efficiently. I hope that it will not be thought that we are against spending money on capital equipment, but I think that the Chancellor should reintroduce a Bill, which we once had, for limiting dividends. With the limitation of dividends, I think no harm will come to us. But—and this is a subject which the hon. Member for East Willesden understand—if you increased your capital value, which at some time would be sold, at Government expense, it would be very unfair. There was a period in the industrial history of this country which was positively disgraceful. To write up the value of equipment ten times, and receive public money, and then write off old p ant at Government expense, is a very serious matter.
  Mr. Hammersley: I think the hon. Member has got his facts wrong. The over-capitalisation of the Lancashire cotton trade—with which I am very familiar—was not done by taking public money, in the sense of money belonging to the Government; it was, in fact, a question of taking money which was the property of the private investor. The whole of that loss has been borne by the private investor, and the capital values have since been very much reduced.
  Mr. Edwards: I understand; it was taken from innocent people, and not from

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  people with their eyes open. I will take another industry, which was accused not long ago, by Sir William Beveridge, of charging 7s. 6d. for 6d. worth of value. They came out with a brochure, protesting very vehemently that Sir William Beveridge had exaggerated, and that, as a matter of fact, they had charged only 10 times the value, and not 15 times. That industry was over-capitalised, and it will remain a scandal for a long time in our industrial history. I wonder if I understood my hon. Friend the Member for Ipswich (Mr. Stokes) aright. He read a letter from Lord Kindersley. I will not dwell for long on this subject. Lord Kindersley in this letter said that this matter of war savings would not affect the conduct of the war in the slightest degree; and the Chancellor of the Exchequer agreed with that.
  Mr. Stokes: He said that that was so, provided that the people put their money on deposit in the banks, and Ieft it there.
  Mr. Edwards: In which case the Government would get the money for 1⅛ per cent. instead of 2 per cent. That is a serious admission. Those of us who have objected to this method of raising money have been very sincere. We feel that it would be much better to tell the people of this country the honest truth, instead of exaggerated stories, which are an insult to their intelligence. We are told that, while big investors are responsible for most of the savings, working people are encouraged to put in their few pounds. If there was an honest savings effort, we should, perhaps, get only 12 per cent. of the present figure, but it would be an honest figure. These figures are not an honest statement. Recently a young man, who was riding on top of a tank in my constituency, said: "The men in Burma are being handicapped because they have not sufficient tanks: give your money freely." That young man honestly believed that the more money he collected from my constituents the more tanks our men would get. If you tell people things that are not true, the time will come when you have to tell the truth, and people will not believe you. That is all I have to say on that point; I think that we are pretty nearly all agreed.
  Hon. Members, particularly the hon. Member for South Croydon (Sir H. Williams), have been talking about what we can afford, and so forth. It would help
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  if they would try to think of what we can afford, and what we cannot afford, in rather different terms. I am connected with a little business in my constituency, on which, I believe, the first bomb to be dropped in England fell—bombs fell in Scotland before that, but I think this was the first in England. This place was demolished, and all the records, all the accounts, bank' books, and everything of that sort, were destroyed. We carried on very well, with little inconvenience. If all the documents concerned with finance in this country were lost, and we retained our labour and our industrial equipment, we should have lost absolutely nothing. I remember reading a silly statement during the war, when a ship coming to this country, bringing British currency, was sunk. It was said that £2,000,000 worth of British currency had been sunk, and that that was a serious loss. We had not lost 2d. worth of paper; yet people lave so got into the habit of thinking in terms of currency, that they cannot bring themselves to think in terms of real wealth, which is labour and materials. I think it must be agreed that the total value of any commodity is nothing but labour. The cost of every commodity, whether it be a tank, a pair of stockings or a pair of shoes, is 100 per cent. labour and rent. Rent and rackets I know there are, but, generally speaking, there is no other value than labour. Raw materials are not worth anything at all until labour is applied to them. There is much foolishness being talked about what we can and what we cannot afford.
  Exports were touched upon by the last speaker. He talked about our merchantmen going abroad and fighting for markets again. Last year, I met a gentleman who has just come back from South America, where he had gone to fight for new markets. In the midst of his negotiations in South America, when things were going well, his permit expired and the Foreign Office demanded that he should pack up and come straight home. He was not allowed an extension. What is the use of telling us that we shall have to go out and fight for new markets if the Foreign Office compel such men to come home?
  I do not agree, however, that we have to fight for markets at all. There is a lot of stupid talk about that. I do not believe that it pays us to export any more than the total value of our imports.

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  Perhaps the sensible thing to do would be to advocate Lend-Lease after the war. That would be a splendid thing. If you had universal Lend-Lease for 10 years, you would be practising something very important, that we were taught 2,000 years ago, that is was more blessed to give than to receive. In many ways this is proving to be the case to-day. America found, after the last war, when she lent abroad, that, when she could not collect, she had to give. She might as well have given in the first case. I predict that Lend-Lease will continue for a long time to come. We are now learning how much better off we are. When we were supposed to be building up the great fortunes of this Empire, we lost more than 50 per cent, of the money we invested. Over a period, we expended £12,000,000,000 abroad, and lost £6,000,000,000 of that. You do not have to be very clever to lose £6,000,000,000.
  Mr. Spearman: I think I agree with most of what my hon. Friend says, but does he not agree that, before America came into the war, her assistance was very valuable to us?
  Mr. Edwards: Oh, yes, but I am saying that the lesson of the war is that you must give the people things which you can afford. It would be certainly the best thing towards securing full employment. The hon. Member for South Croydon does not believe in full employment. What does he mean? The hon. Member said: "If I were a slave master, I could provide full employment." Seriously, it is open to question whether the slave masters did not keep their people in better condition than we keep ours under this system. We so neglected and starved our people before the first war that, when they were called up to fight for the country, five out of six were rejected. Many of the Members here to-day, because they could not provide jobs for them, starved them. When our greatest experts said that it took 52s. to provide the bare necessities of life, they paid the miners 49s. When these men were rejected for the Forces, it was recorded on their papers that the cause of rejection was mal-nutrition. That just means starvation. The hon. Member need not sneer at the people on this side, because it is under his system that these
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  abominable things happen. I am very doubtful if the slave masters behaved worse to their slaves than we have behaved to our fellow men in certain periods of our recent history.
  The hon. Member went on to sneer at the idea of a national health service. He said that doctors must be paid what they are worth, and that only in that way should we have perfect health in the country. He also suggested that people should make all they can out of their professions. I suggest that the hon. Member should advocate the same thing in the Church. We might then have early salvation. Then he had another sneer at people who want to provide plenty of water, as if that was not a reasonable thing. We do not spend as much money on providing water as we spend on providing beer. There may be a difference: One may be more important than the other. I have never tested it myself, and I am probably biased.
  The Financial Secretary spoke in glowing terms of great sacrifices—I think he was referring to industrialists and wealthy people—being made in the conduct of the war. I believe the soldier may come back to this country, after having won these battles, and ask the Chancellor of the Exchequer a simple question. He may say, "The Prime Minister was honest with us; he promised us nothing during the war but blood, sweat, toil and tears, and they have been given in abundance." The soldiers may come back to find people like the hon. Member for South Croydon saying that the reward for that is that they must tighten their belts, because the people at home, as the Financial Secretary said, had made sacrifices. They may ask you how it is, if they made sacrifices while the soldiers had been away, that we owe them more money at the end of the war than at the beginning—something like £20,000,000,000 instead of £8,000,000,000. They will be curious to know how it is that we are still owing very much more though pretending that these people made sacrifices, and why the men who fought the battles will have to tighten their belts to pay the interest, which, the Chancellor of the Exchequer tells us, is the first charge on the community. I am never going to advocate repudiation of the National Debt. The hon. Member for South Croydon talks about the difficulties, but I say that the Chancellor will have to find the money to

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  pay this interest. When a conjuror produces rabbits out of a hat, he must have a tangible asset round about somewhere, in the shape of a rabbit. It is nonsense to talk of not being able, after the war, to pay for all these things.
  There is a question which I would like to ask the Chancellor, and I think it is one in which many people will be interested. We welcome his proposals to allow money to be charged for scientific research. If a company, as a result of that, was able to develop a valuable patent or process, it would mean that the Chancellor would have a 50 per cent. interest. If at a later date they sell the process or patent is the Chancellor going to tax that? It will be a very serious omission if he does not provide for that. Under another Clause he is providing that when a copyright is sold literary people are to be taxed on income, and I should have thought that the same Clause could have been applied to patents also.
  The Chancellor of the Exchequer (Sir John Anderson): The hon. Member has overlooked the fact that I dealt in my Budget speech separately with expenditure on research and with patents. Patents, I stated, are a wasting asset, quite outside the scope of research.
  Mr. Edwards: But someone is spending a lot of money on research work and will ultimately patent the process as a result. That is bound to happen. Am I to understand that, if a company develops a process and the patent is sold for £100,000, the Chancellor of the Exchequer gets no part of it? He should at least be entitled to take 50 per cent., and he should give a second thought to the matter. My hon. Friend the Member for Leigh (Mr. Tinker) referred to compensation for loss of office, a question which is causing a good deal of trouble. It was rightly argued that it does not affect the Chancellor, but that does not alter the fact that the individual is receiving a considerable sum of money which could never possibly accrue to him otherwise, and the Chancellor draws nothing. It may lead to very serious malpractices. There is the case of Napiers, in which several directors received sums of money for loss of office. It was worked out that the chairman of the company should receive £10,000—
  Mr. Henry Brooke: The Government did not take over the concern. Did not the English Electric Company take it over?
  Mr. Edwards: That is correct; I am sorry. The Ministry of Aircraft Production made the arrangement, but I was only dealing with payments for loss of office. This is a matter to which the Chancellor should give his attention. That chairman drew £10,000 a year, and received a sum of money. Had he received that sum as salary he would have had to go on drawing £10,000 a year until he had reached the age of 103. There will be a lot of elderly gentlemen in the future retiring from office with capital sums in order, I think, to avoid tax. It is a capital charge in the long run, but it is a very serious matter if the Chancellor is to ignore cases where people can draw capital sums and avoid taxation.
  I remember discussions in the House in which it was said the inspectors had to prove that it was a main purpose before they could use their discretion with regard to tax avoidance. Very many people were being victimised and the putting in of "may" relieved many hard cases. That was a concession dearly bought under great pressure in this House. It will be a serious matter if the House allows it to be taken from it so easily. The provision in Clause 32 is a complete reversal of that concession. It is as though the Inland Revenue have said, "They have taken it from us now, but we will get it back directly." The Minister of Supply once took a case to the Law Courts and the Law Courts decided against him. He said, "All right, I will get another law passed to-morrow," which he did. I have a very high regard for the people in the Treasury, and it is all the more important that they should not try to reverse the decisions of this House when they have been thoroughly threshed out and discussed here, and I hope that the Chancellor will give further consideration to that matter.
  Sir Peter Bennett: I only wish to raise two points which have been referred to during the course of the Debate. The first is that which was mentioned by the hon. Member for Walsall (Sir G. Schuster) and developed by the hon. Member for Cardigan (Mr. O. Evans)—the question of the

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  words "after the appointed day" with regard to the writing-off of capital spent on scientific research. We understood when the Chancellor introduced his Budget that the general concessions with regard to depreciation of capital and buildings were for post-war development, but we did hope that the concession with regard to this capital allowance for scientific research would come into operation straight away. I am aware that the argument of the Chancellor might be, "You cannot spend any money now and, therefore, we are not holding anything back." If that is the case and there is nothing to be gained, I suggest that these words might be left out with advantage. The war will come to an end, and there will be a time when labour will be available, and when laboratory extensions and the preparation of special plant can be put in hand. It would be to the advantage of the country that this should be done without any delay whatever when the opportunity comes.
  Concerns with which I am in touch are at present laying out their plans in view of the interest taken in the drive to improve our scientific and research work, and are making definite plans for considerable expenditure and are waiting for the moment when they can put them into operation. I feel with the hon. Member for Cardigan that nothing should be done to prevent these schemes being put into operation. There will be, the type of mind which will say, "We had better not start now as it will not be allowed, but if we wait until after the next Finance Act or the appointed day it will come under the concession when this will be allowed as a charge." I suggest, if there is no reason against it, that this concession might be made straight away so that there may be no delay whatever in carrying out the work necessary to catch up the leeway.
  The second point with which I wish to deal is that mentioned by the hon. Member for Streatham (Mr. Robertson)—the question of motor car taxation. I have been wrestling with this problem now for a great many years, and I would remind the Chancellor and the House that, when we talk about the difficulties of the British motor industry and competing overseas, we often concentrate on the incidence of the tax and overlook the amount. The reason our motor industry has been so
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  handicapped in competing overseas has largely been due to the heavy amount of the tax. As long as I have been connected with the industry, the rate of tax has been going up. When I first started motoring, we had to take out a carriage licence and that was all we paid, but since that day taxation has been steadily growing until there has been inflicted upon the motor trade, for the benefit of the nation at large, increased registration charges growing higher and higher, and increased petrol tax. The result to-day is that we have driven the British motor manufacturer to design a small car because he must keep down the cost to those who use it.
  The best way in which the motor industry could be helped to compete overseas would be by reducing the amount of the taxation. Whether that can be done or not, I do not know. I am only saying that if we have this heavy taxation on the British motor car, it will affect its design, keep it small and. make it difficult for us to compete overseas. There is no mystery about it. I heard a very famous man from one of the Dominions talking about it the other day. He said that he had urged one of the leading British manufacturers to make a car to suit the market of his particular country. He said, "You never did, you let the Americans make a motor car to suit our market." It is quite false. The Americans never made a motor car to suit the Dominions market; it was made to suit America, and it was the surplus which sold overseas. With an output of between three and four million cars this surplus was more than the total volume of production of this country. Consequently, it is the motor car which we make for home which settles what we can make for export.
  In his Budget speech the Chancellor said he would like interested parties to come along and present a concrete solution which he would consider. I am afraid it will be a very long time before we shall have complete agreement on this subject, because there are differing points of view. The people who purchase and drive private vehicles have a different point of view from those who run commercial vehicles and from those who run public service vehicles. The people who make the car itself have a different point of view probably from those who use them. So I would urge the Chancellor not to

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  expect unanimity on this, any more than he will on any of the subjects which we have discussed in this House. I would suggest that when the proper points are put before him he should take the proposals, look at them, and, when he can see that a reasonable scheme has been put forward which will dovetail into the general arrangements, that he does not wait for unanimity but uses his own judgment and that, whatever he does he reduces the overall taxation and then puts into operation a scheme which will be submitted to him to enable designers to make a vehicle larger in size and more readily sold overseas.
  Sir Arnold Gridley: I would like first to reinforce in a word or two the plea made by the hon. Member for Edgbaston (Sir Peter Bennett) for greater elasticity in the way the Chancellor intends to apply the help he proposes to render to industry in the matter of research. We all welcome the fact that we may subscribe to research Organisations. That is a step forward but, during the war, a great many entirely novel developments have taken place. Many machines with devices which are almost Heath Robinson in character, shape and form, have been developed, and we have learned a great many new things which have proceeded to certain stages. By carrying that work forward another stage or two we may be able to create after the war new industries of some importance, just as after the last war what is now a very great industry in this country—wireless—was born. It may be necessary to spend a certain amount of money, perhaps on small building extensions and on additional plant, but we cannot proceed to do that unless we can justify to the Government Departments concerned an application for a licence. Therefore, if we can prove that a licence is necessary for the capital expenditure, why should we not be allowed to have the writing down now instead of having to wait till the appointed day?
  I would like to refer to one statement made by the hon. Member for East Middlesbrough (Mr. A. Edwards)—who I see is not in his place—about real wealth, which he put down as 100 per cent. labour. I would agree with that definition if, "labour" is used in a wide term. In the term "labour," I assume he would include the inventor who makes dis-
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  coveries, the man who invents new machine tools, the salesman who goes out overseas and sells those machine tools and provides work for labour in this country, the management in our factories over here—which is very often hard labour—and, of course, the operatives in the factories who work the machines. If by that he means labour, then I think few will be found to disagree with him.
  There is one other point, not dealt with in the Finance Bill, to which I beg the Chancellor to turn his mind in the course of the current financial year. He has often said—and I am sure he says it most sincerely—that he is anxious to do everything he can to help industry to get back into its post-war condition as speedily as possible, and he has done much in his Budget to help those of us who are responsible for industrial employment. If, however, we are to compete with some other countries, I think the time has arrived—especially when taxation is at as high a figure as it is now, and high as it must remain for many years to come—when the question of double taxation requires serious attention. There are many reasons I could submit to the House in support of this request, but I intend only to take two or three minutes on my theme of employment and the importance of finding full employment, or full opportunity after the war, in accordance with the definition of the hon. Member for Ipswich (Mr. Stokes). If we are to compete with the countries where the conditions so far as double taxation is concerned do not exist or are easier than ours, then we have a formidable hurdle to get over, and we ought to remove that difficulty for the industrialists in this country.
  I would only refer to one other point made by the hon. Member for East Middlesbrough, with which, no doubt, the Chancellor will deal, the question whether the Government are to have any advantage out of patents which may be the results of discoveries during the war and which may be sold. My experience is that the discoveries during the war have been very largely the result of the work done in the workshops of the country. Where they are likely to be helpful in creating new or modern machinery or other devices for the help of mankind after the war, I cannot conceive that the undertaking in whose works these discoveries have been

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  made would contemplate selling them. They will want to go on working them and making the device or machine in order to provide work for their workpeople. May I ask the Chancellor, who has done much to give "the mixture as before" and to put into it some tonic which will help us greatly to face the future with some confidence, to go one step further and see whether in research he can help us now, and as regards double taxation to consider what can be done between this Budget and the next?
  Mr. Wakefield: The Chancellor in his Budget speech made a reference to important proposals of a helpful kind for research, and in the Finance Bill some of those proposals have been implemented. This assistance to research in order to help industry, to help our export trade and to provide employment, will not be fully implemented unless the help is carried right through to invention. The fruits of research are inventions, and they are produced by individuals. Inventions are the products of individual minds. I would like to draw the Chancellor's attention to the fact that inventors are not as favourably helped as they might be. I asked him a Question the other day in which I drew attention to the fact that an inventor was not allowed for Income Tax purposes to deduct from the royalties he receives any expenses incurred in the invention. The Chancellor gave a helpful and sympathetic reply, saying that he would look into it. I have studied the Finance Bill, and I do not see there anything which will overcome this difficulty. I am raising it now because I hope the Chancellor may find an opportunity of looking at it before the Committee stage, and, if necessary, bring in an Amendment which will provide this relief. Otherwise, the principle of full help and encouragement to research will not be implemented.
  In another Question which I asked recently I drew attention to the fact that if an inventor made an invention which was used by the Government for national purposes, he did not receive a royalty. I did not feel that the answer which the Chancellor gave met the point I was trying to make. If an inventor at the beginning of the war made a valuable invention which has been used in the war, he receives nothing for it. When the war is over he may put his claim before a
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  commission, and if he is lucky and gets good counsel to state his case, he may get something. I suggest that he ought to be given a royalty while the invention is being used. If a doctor gives his brains and the country employs him he is paid. If a member of the legal profession gives his advice, he is paid for it. They do not have to wait until after the war until some commission examines their work. A coalminer is paid money for hewing coal. He does not have to wait until after the war to see whether he ought to be paid for it. I suggest, therefore, that an inventor ought to be given payment now for the use of his inventions during the war. Otherwise, how can he live? If a manufacturer in this country is working an enemy-owned patent, the Comptroller makes an order granting a royalty of 5 per cent. I suggest that at least the same assistance ought to be given to our own inventors.
  I hope the Chancellor will reconsider the position of an individual who gets a lump sum payment for his invention. That sum is spread over three or four years and is considered as income and not as a capital payment. Surely, the inventor has provided a capital asset, and if he sells it why should it not be treated as capital? If he sells it to a firm to work it out, the firm depreciates it as it would an ordinary piece of machinery, working off the capital value over a period of years. Therefore, an inventor who sells a patent ought to be allowed to treat it as a capital asset. If he receives a royalty, then he should be charged Income Tax for it, but he should be given an allowance for expenses. I know that the Chancellor is sympathetic to research, and I suggest that every possible encouragement should be given to our inventors and their inventions. One of the important ways in which this country will be able to exist after the war is through its export trade, and particularly the export trade we can do in giving to the rest of the world the benefit of our brains. Every possible aid, therefore, should be given to those men who make inventions. Only in that way will the full fruits of the proposals which the Chancellor has suggested for the benefit of research be implemented.
  Mr. Benson: There is one small point with which I would like to deal. It has been mentioned a num-

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  ber of times by the hon. Member for Cardigan (Mr. O. Evans) and others. It relates to the postponement of the concession with regard to scientific research. It is postponed until some future appointed day. It is quite obvious that this concession, as now drafted, makes it impossible for it to come into operation while E.P.T. is at the rate of 100 per cent. If the concession were given now any expenditure by a firm on the subscriptions to scientific societies, or on capital investment for scientific experimental purposes, would be borne Too per cent. by the Exchequer. Quite obviously, the Chancellor is not prepared to allow that. Therefore, it is quite impossible for him, as the Clause is now drafted, to introduce this concession so long as E.P.T. is zoo per cent. I suggest that some modification has to be made because E.P.T. may last a considerable time. I cannot conceive that it will be withdrawn, or seriously modified in its percentage, until the war is finally wound up in all its phases. But it may well be that the defeat of Germany will come a considerable time before the final end of the war, and with that defeat there will be an opportunity of loosening the very strict and rigid control on all forms of activity and expenditure which are not directed towards the production of munitions. Already, in the United States, they are releasing their new war metals for private purposes. The defeat of Germany should lead in this country to loosening of controls and a greater opportunity for scientific experiment, which will be vital and essential when the change-over to civilian industry takes place.
  If I have read the Chancellor's mind aright, when E.P.T. goes and Income Tax will still be 10s. in the pound any capital expenditure on scientific research or any subscription to scientific societies will be borne half by the firm and half by the Exchequer. I suggest that the right hon. Gentleman modifies his Clause so that we get the concession immediately, and that instead of it being 20 per cent., as it is in the case of amortization of capital expenditure, he should reduce it to 10 per cent. I suggest that money which has been spent on scientific research which is not capital should not be allowed to be set against E.P.T., but it should be set against Income Tax. I think the House would welcome that concession. I do not think Members would demand that the whole cost of capital expenditure on
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  research or scientific buildings or subscriptions to scientific bodies should be borne 100 per cent. by the Chancellor, but they would be perfectly agreeable if the concession applied to Income Tax only.
  Sir G. Schuster: The hon. Member talks as if every business in this country was paying E.P.T. Does he realise that there are large sections of industry not paying it at all, the iron and steel industry, for instance?
  Mr. Benson: I am perfectly well aware of that, but if the Chancellor makes a concession it applies to those companies which are paying E.P.T., whereas if he modified it, cut it by half of what it is at the present time, he would be able to apply it generally. It really would not affect the companies that are not paying because they would pay half and the Exchequer would pay the other half. All we ask is that this concession should not be delayed, that it should be made available for the peace-time change-over and not held up merely because there is the possibility that it might fall too heavily upon the Exchequer. If any protection could be introduced I am sure the House would welcome it.
  The Chancellor of the Exchequer (Sir John Anderson): We have had an interesting Debate, in the course of which some interesting speeches have been made, constituting a valuable contribution to knowledge and giving, here and there, important warnings as to what may lie ahead in the still uncertain future. I would like to deal first with the observations of my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), who sketched out, in a way which I, personally, found most interesting and—if I may say so—valuable, a general picture of the position in which we are likely to find ourselves when the war with Germany comes to an end. He truly said that it is too early to attempt a complete, detailed estimate of our financial position on both sides of the account, but he expressed the hope that I should be able to give him certain assurances. He wished to be assured that the Treasury were getting ready for the situation which is likely to arise at the end of the war with Germany, and during the transitional period. I can very readily give him that assurance. There are many questions affecting the

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  future of controls, and the steps which it will be necessary to take in order to maintain, so far as possible, a steady level of prices, to guard against inflation, of which, as I have said more than once, the risk will be greater when the automatic restraints imposed by the war are relaxed. These, and other matters, we are constantly studying and preparing.
  I think I have previously mentioned that the whole code of emergency legislation which, of course, includes many important provisions affecting our financial and economic arrangements, has for some time been under close scrutiny, close technical examination, with a view to seeing what provision can be dropped, what provisions might be continued with modification and what must be substantially continued as they are now in order to maintain stable conditions after the end of the war with Germany. I hope that just as we profited by the mistakes and lessons of the last war in the arrangements that we have made for this war, so we shall profit by the mistakes and the lessons learned after the last war and at the beginning of the peace in the arrangements we make for the immediate postwar period.
  My right hon. Friend referred to what he called some pathetic illusions that are widely prevalent among people as to what may happen after the war. It is, I agree with him, most important that we shall all collaborate in destroying such illusions, because people must approach the difficult conditions after the war with a sense of reality. I fully agree with the right hon. Gentleman that, while the public would like to have a rosy picture painted, they do not want it unless it is a real picture, and the real picture cannot be very rosy. On the other hand, as he said, there is no reason for taking a pessimistic view of our future. I agree with him that we shall not be a poor country after the war, if we use our resources as they ought to be used. The effects of the war on our economy will be apparent much more in the region of distribution than of production. Productive efficiency should not be very seriously affected over a long period of time, and actual technical efficiency is the most important single factor in the productive capacity of the country. Priorities, high and low, will, of course, have to be part of the Government's
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  policy and administration after the war to almost the same extent as during the war.
  I do not know that there is in fact very much in the picture that the right hon. Gentleman sketched with which I should wish to disagree. He wound up his summary by saying that, quite obviously, the public must look forward to a period of heavy taxation. I have myself, more than once, said very much the same thing. On the other hand, I think the public, who have borne great hardships without complaint, are entitled to some little hope of relief. We have to realise that there will be a period of heavy expense after the war. There will be a period during which the gap between taxation revenue and expenditure will still be considerable. It must be our aim to narrow that gap as speedily as possible. We must maintain a high level of tax revenue. We can only do that by maintaining the balance between direct and indirect taxation. We can only maintain the productivity of direct taxation by keeping the wide sweep which it now has.
  Every citizen is interested in direct taxation, as well as indirect, and everyone will heave a sigh of relief when it is possible to make some mitigation of the present burden. I do not quite agree with my hon. Friend the Member for Walsall (Sir G. Schuster) when he says he does not care how high the rate of taxation is on the individual. We have to maintain a healthy and happy community, and I think it would not perhaps be rash of me to express the opinion that a material reduction in taxation within a reasonable period of time would be universally regarded as a desirable objective of policy. [Interruption.] The House is in agreement with me and does not think that I have been rash in my presentation of the position as I see it.
  Before I deal with the matters which have been under discussion affecting the proposals foreshadowed in the Budget, with regard to the burden of taxation on industry, there are several matters of detail on which I should like to comment. My hon. Friends the Members for Streatham (Mr. Robertson) and Edgbaston (Sir P. Bennett) referred in particular to motor taxation and the horse-power tax. I think they were disposed to criticise to some extent what I said in my Budget speech when I pointed out that

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  I had sought for a substantial measure of agreement as to the policy which should be pursued in regard to the taxation of the motor industry and had found a rather disappointing divergence of view. I made it perfectly clear that in present circumstances I cannot possibly forgo any substantial amount of tax revenue from whatever source, but I indicated—and I adhere to my position—that I should be glad to consider any plan for an adjustment of the incidence of motor taxation which did not involve any considerable sacrifice of revenue if I could be satisfied that the effect would be likely to encourage our export trade in motor cars. My hon. Friend the Member for Edgbaston seemed to me to some extent to beg the question, but I think he recognised that what determines our capacity to export is the form which the demands of our home market for a particular product, such as motor cars, may take, and I thought he assumed—this is where I think he begged the question—that motor taxation in the form in which it exists in this country was the most potent factor operating in that regard.
  On the other hand, it has been represented to me that home conditions—the state of our roads, our gradients, public taste and so on—are just as potent. I have been given to understand that in the view of certain people who have studied these matters in their technical aspects a reduction in the rate of, taxation on higher horse power cars might not necessarily have any effect at all in increasing the export market for those cars. [An HON. MEMBER: "The left hand drive."] That is a point, too. It has been represented to me that such a change would simply mean that the demand for foreign manufactured cars of those horse powers, on which the tax had been reduced, would be stimulated and that, as far as the export trade is concerned, we should be no better off. I am in a difficulty when I find a sharp divergence of opinion amongst those who may be entitled to be regarded as experts. I do not look, as my hon. Friend suggested, for unanimity of opinion in the matter and, if I can find a substantial body of opinion in favour of any particular change, I shall be very glad indeed to consider it.
  I am well aware of the hardship to which my hon. Friend the Member for Streatham referred, in the case of people who maintain motor cars for some par-
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  ticular domestic purpose and are allowed only a very small quantity of petrol each month or each quarter. I have considered very carefully whether there was anything that I could do to lighten the burden of taxation which, as my hon. Friend pointed out, is certainly very heavy in those cases; but I fear that any change which would not be administratively most difficult to give effect to would involve too great a loss of revenue for me to be able to consider it in present circumstances.
  Mr. Woodburn: There is the reduction in insurance.
  Sir J. Anderson: That is so, there is reduction in insurance. There is also the fact that, even though the use actually made of the car may be small and the weight of the taxation converted into shillings per gallon may be very heavy, nevertheless, in many cases, the possession of a car constantly ready for use in any emergency is a very great boon, as many of us must be very well aware.
  Clause 32 of the Bill was commented upon by a number of speakers. I gather that that is the only part of the Bill which might be regarded as, to any considerable extent, controversial. I do not think it would be profitable for me to take up time to discuss the matter in any detail, particularly as an opportunity will occur later. I would only say that the Clause has not been framed, as one hon. Member suggested, merely to save officers of the Revenue a certain amount of trouble in. separating the sheep from the goats. It has been framed for the purpose which my right hon. Friend the Member for East Edinburgh defined, in order to catch people who resort to practices which we would all regard as discreditable. That is the purpose of the Clause, and if it can be improved in any way in Committee I shall certainly be ready to consider any suggestions.
  Now I would say a word about the question of patents to which the hon. Members for East Middlesbrough (Mr. A. Edwards), Stockport (Sir A. Gridley) and Swindon (Mr. Wakefield) and others referred. As a matter of fact, I dealt with the question in my Budget speech. I said that it was proposed—there is nothing in the Finance Bill on the subject—in later legislation to deal with patents, in

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  common with other wasting assets, and inasmuch as it was proposed to make an allowance for taxation purposes in respect of the gradual depreciation of the value of patents, the money received where a patent was sold would be treated as income and spread over a reasonable period. That is inevitable, I think, and this must be my answer to the hon. Member for Swindon. We must look at the thing as a whole. If certain treatment is given to patents for Income Tax purposes in one respect, corresponding treatment must be given in other respects.
  My hon. Friend the Member for Swindon spoke of the reward to inventors. I am not aware of anything in present arrangements to prevent payment of a royalty to any inventor though, as a matter of fact, it is a conspicuous feature of research work and inventions during the war, that in a very large number of cases the discovery which is of value is found to be the result of the collaboration of a considerable number of workers, some working outside, some working for the Government, and so on. It is, probably, inevitable that the question of a suitable reward for important inventions should be reserved to be adjudicated upon at leisure, when everyone concerned is less fully occupied with the actual conduct of the war.
  Now one word about double taxation, to which my hon. Friend the Member for Walsall and my hon. Friend the Member for Stockport referred. As between the Dominions and this country, as hon. Members are aware, there have been in force for a very long time arrangements for double taxation relief, but, as between foreign countries and this country, there have not been, with certain exceptions, any proper arrangements. I fully realise the great importance of this matter and the importance it will have after the war. Hon. Members who may not be aware of the fact may like to know that discussions have for some little time been proceeding between technical representatives of the United States and our own people at Somerset House, and I believe that an arrangement will result, possibly an arrangement on somewhat different lines from those obtaining in the case of Dominions Income Tax relief.
  Perhaps I may now pass to say a few words on a topic which was raised in the
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  speech by my hon. Friend the Member for Ipswich (Mr. Stokes), which he has raised with me more than once and in regard to which, I think, he has hitherto considered my remarks somewhat inadequate. I refer to the question of new money. The hon. Gentleman has not been able to understand why the Treasury has found it difficult, if not impossible, to give any estimate of what might properly be regarded as new money. The fact is that no accurate estimate can be made. New money takes different forms. We have the increase in the fiduciary note issue, which, over the course of the war, has amounted to a substantial sum. Only the other day, £50,000,000 were added to it, and, as I informed the House, that is, undoubtedly, a form of new money.
  Then there is all the new bank money; but I cannot tell, and nobody can tell, to what extent bank money that appears to be new is, in fact, new. I do not know what other transactions may have taken place in the conversion of existing assets, and I could not therefore, as I have told the hon. Gentleman more than once—without, I am afraid, completely convincing him—give a figure. The point I want to make is that if I could give a figure it would have, in my view, no practical significance whatsoever. The purpose of new money is merely to keep the wheels of our expanding economy running smoothly. We have to ensure that no new money is created to an extent greater than is necessary for that purpose. We have to keep two objects quite clearly in view. One is that excessive purchasing power is not allowed to exercise an impact on limited goods and services, and we must ensure, using to the full the technique that has been developed in Budget White Papers, that purchasing power, which is created in the course of the war for expanding production, is mopped up, so far as it is not required to finance the necessary services, in taxation and in saving. That is one important purpose we have to keep in view. The other is obviously that we ought not to pay to the banks for the accommodation they provide more than a reasonable remuneration. That purpose also I believe is secured under the arrangements which are in force.
  Mr. Stokes: Will the Chancellor tell me what happens when the banks convert

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  Treasury deposit receipts into long-term loans?
  Sir J. Anderson: I was going to deal with the position of the banks because that is a matter to which the hon. Member for East Stirling (Mr. Woodburn) devoted some attention in a speech he made the other day on, I think, the Second Reading of the National Loans Bill. My hon. Friend spoke at some length on the cost to the Treasury of borrowing from the banks. He suggested, I think, that we were paying about £53,000,000 more each year than we were before the war.
  Mr. Woodburn: The simple matter was the payment of one per cent. additional to what we were paying before the war.
  Sir J. Anderson: The hon. Member brought it up and suggested it was enabling the banks to pile up excess profits in the form of big reserves which, somehow or other, escaped the vigilance of the Board of Inland Revenue. I hope to assure him on that. I speak on the matter now, because I think the Financial Secretary gave some undertaking that either he or I would take an early opportunity to deal with it. I have dealt briefly with the argument about new money, but perhaps my hon. Friend will allow me to come now to his suggestions as to the build-up of the payments to the banks to which he referred. First, he suggested—I hope that I am not misrepresenting him at all—that as the total of Treasury bills and Ways and Means advances had increased during the war, by some 2,000,000,000—that was the figure he gave; the actual figure is rather more, about £2,460,000,000—and as the banks had one per cent. on that figure, that accounted for £20,000,000 a year. But actually the additional bills and advances are not held by the banks at all. The clearing banks held £50,000,000 less of Treasury bills last month than they did before the war, and, instead of increasing their income from that source by £20,000,000, their income is about £500,000 down. The Treasury estimate is that the additional gross earnings of the banks on those assets, which are represented by loans to the Treasury, are something like half the figure suggested by my hon. Friend.
  But that is not the whole story. There is another side to the picture, because
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  while other assets of the banks have been increasing, bank advances have declined, and on those advances which they still make, the average rate of interest is lower than it was before the war. Moreover, the great increase in deposit liabilities means that larger outgoings in interest are paid by the banks to depositors. What happens is that State expenditure has to be financed. Money issues from the Exchequer. It finds its way quickly through the accounts of contractors and others back into the hands of the banks again, in the forms of deposits in respect of which advances take place. Interest may have to be paid. The banks have to be remunerated for their services. They lend the money back to the Government, and it is only reasonable and proper that a fair rate of interest should be paid, for example, when lending takes the form of what are called Treasury deposit receipts. The result of the whole transaction is that the banks' profits have not, in fact, increased during the war to such an extent as would render them liable to pay any Excess Profits Tax. I believe that to be the position over the whole field. That is certainly not due to any failure on the part of the Board of Inland Revenue to detect profits that ought to be brought into account.
  Mr. Stokes: May I ask the Chancellor whether he thinks it right that the banks should have the power to convert these Treasury deposit receipts into long-term loans? They are creating new money by these receipts, and then converting them into long-term loans. Why should they be entitled to do that?
  Sir J. Anderson: It is a matter which the Treasury have to keep constantly in view, that the banks should not receive any unreasonable remuneration in respect of the loans which they make to the Government. The point of my argument is that, so far at any rate, the banks have not been remunerated excessively for the services they have, in fact, rendered.
  Mr. A. Edwards: Is it possible for the Chancellor to give us the figures? He says it is not enough for them to pay Excess Profits Tax. Could he not give us the figures of the earnings? Surely he has them? Is it a fact that, by this conversion process, the interest charges are increased from 1⅛ per cent, to 2½ per cent.? What is the reason for that?
  Mr. Loftus: Is it not a fact that the late Mr. McKenna said that the cost to the banks of servicing the new deposits, to which the Chancellor has referred, was 1⅛ per cent.? Why pay 2½ or 3 per cent.?
  Sir J. Anderson: I do not think that the rate which is paid on these new deposits is more than 1⅛ per cent.
  Mr. Stokes: They convert them.
  Sir J. Anderson: I am not in a position to say to what extent these deposits may, eventually, be converted into long-term loans. I was dealing with the short-term loans, and I was concerned to make it clear that the Treasury have a vigilant eye always directed on these transactions, in order to make sure that excessive remuneration is not paid. I have not the total figures asked for before me at the moment, but they can be got from the balance sheets of the banks. The fact that the banks have not paid Excess Profits Tax when, in fact, they are liable to the same 100 per cent. duty as other concerns, is itself evidence that they have not been making excess profits
  Hon. Members: No.
  Mr. Woodburn: In dealing with Treasury bills, the Chancellor pointed out that, so far as the clearing banks were concerned, they had £50, 000,000 less than before the war. He is not disputing that, so far as the Treasury is concerned, the total was £1,000,000,000 before the war, and is £3,000,000,000, an increase of £2,000,000,000, and therefore the cost is £2,000,000 extra, compared with prewar. While he says that the clearing banks do not receive that, can he tell us to which sources Treasury bill income is paid?
  Sir J. Anderson: I was dealing with the position of the clearing banks. If the hon. Member desires further information, perhaps he will put a Question down, and I will try to give him an answer. I am concerned with the methods employed in financing the war, and in giving him an answer to the points he raised in Debate the other day, and I think that I have succeeded in doing so.
  Mr. Stokes: Let us have this point clear. I have asked again and again. The Chancellor says that he does not know what the banks have done with these Treasury deposits. Surely he has told me at
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  Question time that, by a certain date, which I forget at the moment, the banks have converted something of the order of £750,000,000 into long-term loans?
  Sir Herbert Holdsworth: Is it not in the public interest that there should be longer term loans; and is it not because of that that the higher rate is being paid?
  Sir J. Anderson: I was dealing with the general mechanism of war finance, and it is not always easy to bring out all the points clearly in the course of a necessarily short speech.
  Mr. Stokes: There is plenty of time.
  Sir J. Anderson: I do not want to take up the time of the House unduly. My hon. Friend has urged that shorter-term borrowings should be converted into longer-term borrowings; and, whatever rate of interest is paid, there should not be discrimination as between one lender and another. We should get into great confusion if we did that. Hon. Members must agree that, as compared with any previous experience, the financing of this war has been conducted on very economical lines—one might say, conservative lines. [Interruption.]
  Mr. Deputy-Speaker (Mr. Charles Williams): It would be better, I think, if the Chancellor were allowed to continue, without being interrupted by hon. Members who have already spoken.
  Mr. Stokes: The Chancellor answered the point raised by the hon. Member for South Bradford (Sir H. Holdsworth), which was put as a red herring across my track.
  Mr. Deputy-Speaker: I think the, hon. Member for Ipswich (Mr. Stokes) is an expert on red herrings.
  Mr. Silverman: Surely, when a matter which is exempted Business is before the House, and when we are not tied for time in any way, it is desirable, if a point has been raised in Debate, that it should be cleared up.
  Mr. Deputy-Speaker: Exactly. That is why I suggested that the Chancellor should be allowed to speak.
  Mr. Stokes: Can I put my point to the Chancellor? It is quite short. The Chancellor has admitted to me, at Question Time, that the Treasury have borrowed

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  from the banks on Treasury deposit receipts, and that they have converted £750,000,000 of those Treasury deposit receipts into long-term loan. What he has said, virtually, is that they have created £750,000,000 of new money, which he has borrowed, and then he has allowed them to convert that into long-term loan. Who benefits?
  Sir J. Anderson: What my hon. Friend has failed to take into account is that the banks, like everybody else, have only a certain amount of resources which they can put at the disposal of the Government on long-term. When the Government borrow, they must pay a reasonable rate, and they are not entitled to discriminate between one lender and another. I really think that I have given the House a fair explanation. I cannot understand why my hon. Friend should be at all annoyed, because one thing seems to me to be perfectly evident, that is, that what I have said will provide him with a rich mine, in which he can operate for quite a long time to come, putting further Questions on the Paper. My desire is to give information and enlightenment, so far as I can, but we must proceed by stages.
  May I pause for one moment, to give my hon. Friend the Member for Leigh (Mr. Tinker) an answer to a question which he put, about the sterling area? He was a little doubtful, I think, what exactly was meant by the sterling area.
  Mr. Tinker: And the term "sterling," also.
  Sir J. Anderson: Sterling is the currency in use in this country. That is all that sterling means. It is the currency of this country—pounds, shillings and pence.
  Mr. Tinker: Will the right hon. Gentleman just give the definition ? He says "pounds sterling," but what does it actually mean? I do not know.
  Sir J. Anderson: I believe there is some controversy as to the actual origin of the word "sterling." When I was young and studied economic history, as I did at one period of my life, I was told that there were people who came from somewhere in the East and were called Easterlings, and the currency in which they dealt came to be called sterling. "Sterling" came into use, both as an adjective and as a noun, to represent something on which everyone could place full reliance. That
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  is the best description I can give of sterling. Regarding the sterling area, if my hon. Friend will look at Statutory Rules and Orders No. 129 of this year, the Order dated 8th February, 1944, of which I shall be glad to send him a copy, he will find there a definition of the sterling area. He will see exactly what national units are included in the sterling area.
  Now I pass on to a very important matter of debate concerning research and the provision that we propose to make, though not in this Bill, for dealing with the impact of taxation upon industry. Let me first make this general observation—that my Budget speech was not designed merely to put forward certain concrete suggestions for dealing with taxation. It was designed to express an attitude of mind towards the taxation of industry, and that attitude of mind will persist in our further examination of these proposals.
  As to research, on which a large number of hon. Members have expressed regret that the provision contained in the Bill on the subject of taxation and research is, what I might call a delayed-action provision, I do not think that full account has been taken of the effect of the proposals in the Bill as they will work out in practice, and I propose to offer the House a word of explanation on that point. But may I say this first? I do not think I could agree to any provisions which enabled firms to claim relief merely in respect of funds set aside or reserved, either for research or for industrial development. It is a vital part of my proposals that the relief to be given should apply when the money is actually used, either for research or for replacement of equipment, or new buildings, or whatever it may be. I fear that, if I were to propose to put these provisions into force immediately, I should at once have demands, perfectly reasonable in the circumstances, that money immediately set aside for expenditure later on, should attract the relief which this Clause is intended to give. But, when I have said that, I have not told the whole story. I do not contemplate that firms that have the opportunity of incurring expenditure on research now, rather than waiting until the appointed day, should be denied all benefits from these provisions.
  The Federation of British Industries have been to the Board of Inland Revenue

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  discussing these matters, and this is the claim they have made: first, that it would be an injustice that taxpayers incurring research expenditure now should be treated less favourably than those incurring the expenditure after the war, that is, actually incurring the expenditure; and, secondly, they have represented that because of the treatment which it is proposed to give to research in this Bill there might be an inducement to taxpayers to postpone expenditure on research which can be incurred now until a later date. The Board of Inland Revenue and I felt that there was weight in their representations made on those points, and we contemplate that, as from the appointed day, the expenditure already incurred should qualify for relief. It may have been written off under existing provisions, and I will say a word in a moment about the existing provision, with particular reference to Excess Profits Tax. But when the appointed day comes, the outstanding part of that expenditure will qualify to be written off, as if it was expenditure incurred after the appointed day. If it is capital expenditure, it will be written off within a period of five years and we shall take steps to make that point clear.
  My hon. Friend the Member for Chesterfield (Mr. Benson) raised a very important point in regard to Excess Profits Tax and the effect of Excess Profits Tax on expenditure on research, and a similar point will arise later in regard to the expenditure on re-equipment. I think that my hon. Friend overlooked certain important facts. The position is that under the existing law, for purposes both of Income Tax and of Excess Profits Tax, expenditure on buildings incurred for purposes of the war is entitled to be written down by a special allowance for depreciation to the residual value at the end of the war. These provisions will apply, as I have said, for purposes of the Income Tax and of Excess Profits Tax to capital expenditure on buildings in general, and, of course, will apply to capital expenditure on buildings and equipment intended for research. Then, at the appointed day, when the new provision for relief in respect of expenditure on research comes into operation, any residual expenditure will, as I have just explained, be treated as if it were expenditure incurred for the first time after the appointed day. This
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  is a very complete answer to the point that has been made and should give reassurance to those contemplating incurring expenditure on research in the immediate future. That can only occur to a limited extent, except in so far as the Government are directly concerned with research and give special facilities and special priorities for it. Now let me come to the important question of—
  Mr. Stokes: Land values.
  Sir J. Anderson: On land values, I have only this to say, that despite all the gibes that have been directed at the Government, a great deal of work has been done on the whole problem. A very difficult problem, indeed, it has proved to be, and the Government will put their views before the House of Commons at the earliest practicable date. Then there will be the fullest opportunity, and I have no doubt a very general desire, to debate the whole matter at considerable length. That is all I can say on that.
  Let me come to the question on which my hon. friend the Member for Walsall spoke at considerable length early in today's Debate. He made a strong plea, with which I personally have very great sympathy, that in the discussions which are already taking place for the purpose of implementing the proposals included in my Budget Statement, although they found no place in the Finance Bill, the widest possible latitude should be allowed. I have already said—and what I said applies to both what I am now discussing and to research—that I could not agree to any plan which exempted from taxation money which is set aside, which is merely earmarked, for research or development, but which at the time when relief is claimed has not actually been applied in beneficial expenditure. I use the term to cover everything that we now have under consideration. Subject to that, however, I will certainly give the fullest consideration to any practical suggestion that may be made to the Board of Inland Revenue or to me.
  The question of timing has been stressed by more than one speaker. I thought that in the plans which I outlined, with the provision for an initial payment, then for a depreciation allowance of varying rates and, finally, for a payment in respect of obsolescence when the plant or the building have to be

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  scrapped, I had put forward a plan which reasonably met the requirements of timing. However, it may be that there are other ways of achieving the purpose we had in view; it may be that there is something to be said about the rate of depreciation proposed in the case of buildings. I am perfectly prepared to look at all that, because, as I made clear in my Budget Statement, there is a great deal of work still to be done, before these novel proposals can be passed in a form entirely suitable for embodiment in legislation. I have not provided—as I made clear in my Budget Speech—for these matters in this Bill; on the other hand, I hope to be able to introduce legislation on this subject before the next ordinary Finance Bill, later in the year. I cannot make a definite promise, because I do not know how Parliamentary time will become available or, indeed, what the circumstances may be, but certainly that will be my aim—to have the whole of this important matter incorporated in a special Finance Bill to be introduced, as a suitable opportunity, before the next Budget Debate. I really do not know that there is anything more I need say, over and above the assurance that I have given to my hon. Friend.
  The point about obsolescence of buildings is a matter about which there should be no doubt. Although I recognise that I did not refer to the point specifically in my Budget Speech, I rather left it to be understood when I said that there would be, for the first time, a depreciation allowance on buildings, that if the buildings were scrapped before they had been entirely written off, the outstanding balance would be allowed as a set-off against profits. I am glad that my hon. Friend has given me the opportunity, by calling attention to the point, to remove the matter entirely from all possibility of doubt.
  I have referred incidentally to the question of Excess Profits Tax. This is a matter to which, apart from what my hon. Friend the Member for Chesterfield said in connection with research, no reference has been made, either in the discussions on the Budget Resolutions or in the Debate to-day. There is a close connection between assessment for Income Tax, and assessment for Excess Profits Tax, and we shall have to decide at the time for implementing these arrangements, exactly how such expenditure we
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  have in mind should be treated for Excess Profits Tax. I shall be ready with proposals under that head when the time comes.
  Major Procter: Could the right hon. Gentleman deal with the point I raised, whether his Department will go forward in trying to bring small businesses into the Pay-as-you-earn scheme?
  Sir J. Anderson: I made it clear when we were debating Pay-as-you-earn that, in principle, I was in favour of arranging our taxation system, as far as practicable, so as to ensure payment being made on current earnings and up to date. There is, however, a substantial difference between income under Schedule D and income under Schedule E. In the case of Schedule E income, we are concerned with employment. The rate of remuneration is normally known in advance. There are normally no expenses to be set against it. In the case of Schedule D, there is normally no employer and no single paymaster. There is normally a large number of paymasters. The amount of income is normally uncertain until after the event, and there are normally expenses, also uncertain in amount, to be set against the income. There are thus substantial differences for this purpose, between Schedule E Income Tax and Schedule D Income Tax. While it might be suggested that there is a limited field of Schedule D taxation to which the principle of Pay-as-you-earn could be applied, I am very doubtful whether we shall succeed, at any early date, in solving the practical difficulties that stand in the way of the application of the principle to Schedule D.
  Major Procter: Will the right hon. Gentleman keep on considering it?
  Sir J. Anderson: I am always considering all sorts of things. I have indicated that if I could find a practical solution to this question, no one would be better pleased than me.
  Mr. Colegate: I shall not inflict on the House the speech I tried to make in the Budget Debate and which I have been trying to make to-day. I will confine myself to three short points which I think are rather important. I should like to refer to the currency agreement and to bring home to the Chancellor of the Exchequer that there is a great

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  body of opinion which does not agree with the idea that the currency agreement should come late in the Government's plans for post-war economic restoration. I cannot think that some of the views we heard in the Debate the other day would seriously commend themselves to any who have knowledge of foreign exchange or foreign trade. The idea that this Empire can exist on one or two bilateral agreements, on one or two bulk purchase agreements and other things dear to the heart of Dr. Schacht, is most dangerous. If we are to re-establish and improve our great international trade—and it is suggested by the Government that we need to increase it by at least 50 per cent.—then we must have, as a firm foundation on which to build, an agreement, first, with America on exchange matters, and then we must see that as many countries as we can persuade come into that agreement. Only in that way shall we get that great volume of international trade which is within our grasp, if sound economic principles are adopted by the Government.
  If I understand the position correctly, I believe there is to be another Bill later, with regard to the new advantages to be given in connection with depreciation in industry, and especially in agriculture. I would like to put in a plea for reconsideration of the position as regards allowances to agriculture. May I remind the Financial Secretary that the new capital expenditure which agriculture is being asked to make dates from April, 1943? That is the date of the commencement of the Minister of Agriculture's four year plan. Farmers and owners have been pressed, and are being pressed now, to incur new capital expenditure without waiting for this new legislation. As you transfer from grazing to other forms of agriculture new buildings and so forth are required and special licences are now being given by war agricultural committees. A large part of the value of the concession offered to agriculture would be completely invalid, if it were offered only after three or four years' capital expenditure, which had been incurred at the request of the Government from April, 1943.
  Mr. Assheton: Expenditure which has been incurred in this period will certainly
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  come into these depreciation allowances, so far as I understand the position.
  Mr. Colegate: I thank the Financial Secretary; that is very helpful. I presume that there will be a Clause to that effect in the new legislation which we have been promised. I hope that the officials of the Ministry of Agriculture will co-ordinate their remarks with the policy outlined by the Chancellor of the Exchequer. They are constantly referring to the advantages and inducements which are to be given to get new capital expenditure into the agricultural industry and I am not certain that that is fully understood by the Chancellor of the Exchequer.
  Let me give the case of Death Duties on agricultural property. Here you have the extraordinary spectacle of the Ministry wanting you to put more money into agricultural property, if you are the owner. They want greatly improved buildings and capital equipment. But unless you are a young man, and have a long expectation of life, this will not be advantageous to your heirs. This matter should be reconsidered. I do not ask for a public inquiry or Select Committee but if a Departmental Committee could be set up I think it would be of great advantage. The Financial Secretary knows that we have had a Departmental Committee on Depreciation, before which some of us gave evidence. It has been very helpful, and I believe we could overcome a number of these anomalies with regard to Death Duties if the matter was considered by such a Committee.
  I would like to give the case of one of the most striking and ridiculous anomalies I have seen, namely, that which arises in connection with Death Duties on the estates of those killed in action. There is, apparently, a very reasonable arrangement that, in the case of people killed in action, for the first £5,000 no Death Duty at all is levied, and after that the amount levied is substantially reduced, in accordance with a formula which depends on the expectation of life of the person killed. For example, if a young man of 30 is killed in action, with an estate worth £100,000, the duty would be approximately £25,000. There is a very substantial reduction owing to his comparatively long expectation of life and the sum paid might be as low as £3,000 or £4,000. So far so good, but here is the anomaly. If the person killed in action

  705
  has not attained commissioned rank, no Death Duty whatever is payable. Imagine the plots made available for playwrights and novelists. Imagine a widow being turned out of her home by reason of heavy Death Duties. At the last moment, a messenger comes with good news. "Your husband misbehaved himself and was reduced to the ranks the day before he was killed, and under the law of England not a single pound of Death Duty is payable." Is that logical? Is it reasonable? Can you possibly defend it? If a millionaire who is killed in action, has got no further than lance-sergeant, no Death Duties are payable. That is an anomaly for which there can be no possible justification and it contradicts every one of Adam Smith's canons of taxation. I feel justified in asking my right hon. Friend to have a Departmental Committee to inquire into the effect of Death Duties in certain cases, particularly with regard to remedying anomalies of the kind that I have mentioned.
  I think the time has come to give up calling rearrangements of taxation concessions. The Chancellor of the Exchequer to-day, is more than a half partner in every trade, industry and occupation in the country. He is the biggest "bookie" in England, and the biggest stockbroker, as well as the senior partner in industry. He gets more than 50 per cent. on every so-called concession he makes, which is more a concession to himself than to the industrialist, the farmer or the other junior partner. He employs the junior partner to do his work, take part of the profits, and take all the losses, which he himself does not take. In all this legislation and these new Regulations, of which we must have more, because we have to make industry more productive, we have to be certain that we allow larger sums to be dumped back into industry. The Chancellor might think of it as a concession to some person or other, but he himself, as representing the Treasury, derives more benefit from it than the junior partner, the actual farmer or industrialist concerned.
  Dr. Russell Thomas: I do not want to follow previous speakers in considering the effects of the Bill on industry; nor do I wish to venture to-day into the future financial position of our country, as has been done by many speakers in the Debate. I feel that the
  706
  ultimate end in all these matters is the happiness of the individual and that through a Finance Bill the people of this country will either feel the pinch or not, as the case may be. I learnt when I was young that if at first I did not succeed I had to try, try, try again, and that constant drops of water on a rock would sometimes wear it away. So I notice that the Chancellor has not put any provision into the Bill to give relief to that very hard-pressed section of the community—the elderly small rentier. I speak in all seriousness, because since I raised the matter on the Report stage of the Budget proposals I have received a large number of letters from all over the country, testifying to the crushing burden of the financial provisions for the war and the Budgets that have been imposed during the war on a small and pitiful section of the community, for whom I fear, few ever speak in this House. They are the persons possessing an unearned income of about £200 to £300 a year. They are mostly over 60 years of age and are often infirm. Very little indeed has been done for these people, neither, I repeat, do we hear anyone plead their cause.
  I believe that some provision was made in an earlier Finance Act during the war to help people in reduced circumstances. I believe it was in one of the first Finance Measures of the war. In his reply, on the Report stage of the Budget proposals, the Chancellor of the Exchequer followed the note that he struck during the Budget Debate. He read a homily—I say it very respectfully—to myself and others for advocating relief of taxation for these people at this particular time. He warned us of the danger of an inflationary position, of the possibility of a rise in the cost of living and how subsidies could not be continuously increased, and, in other words, told us that we might get a breakdown of the "home front" structure, unless we took every care that relief should not be granted in this and that direction. I assure the Chancellor that we are not in need of any homily of that kind. On the contrary, many of us, even two years ago, read the same homily to the Government and to the Treasury, and although I believe the Treasury fully understood the state of affairs at that time, they took no steps in the matter. So, although we plead for these people, we understand fully the implications of the statement which the Chancellor has made.

  707
  I have brought here a speech made by myself. I have done so because I never thought I was imbued with the spirit of prophecy. It was made on 9th September, 1942. As I am making a plea I have made so many times before, I think I should show the Chancellor that I am fully aware of the circumstances he referred to, and that I make this plea in spite of these circumstances. I remember saying then:
  "The Chancellor of the Exchequer has subsidised food in order to stabilise food prices. A short time ago the subsidy reached the tune of £100,000,000, and at present it is, I believe, in the region of £127,000,000. Very shortly it will, no doubt, be further increased."
  And further,
  "I am drawing attention again to this matter because constant increase of wages may have an inflationary effect which may lead to disaster for all, especially for the workers and small rentiers who have worked hard all their lives and saved for their old age, thereby sparing the country the expense of keeping them."
  I also said:
  "eventually the Chancellor will be forced to increase prices themselves, with the resulting claim for higher wages. The climb up the vicious spiral will begin with all its disastrous consequences."
  I will add this too if I may:
  "In 1940, the Deputy Prime Minister brought in the Emergency Powers Act, which definitely gave the Minister of Labour power to regulate wages. The Act itself says, 'prescribe the terms of remuneration.' The present Minister of Labour has taken no steps in that direction"—[OFFICIAL REPORT, 9th September, 1942; Vol. 383, C. 228–9.]
  The rest of my speech was directed at the same sort of thing.
  We cannot alter things now. "Prices will rise," says the Chancellor. "We have to take every care that we do not help anyone"—but the plea I have, quoted was made by me to the Government nearly two years ago. I still repeat my plea on behalf of the small rentier. I will not pursue that speech any further, as it became more damning to the Treasury as I went along. I would like to point out, however, in all seriousness, that these people are a very fine section of our community. One of the principles that I believe all three Chancellors have laid down in successive Budgets is that taxation must have regard to the commitments of people, the commitments of the individual on whom the taxation falls. Little regard has ever been had to the commitments of these people who, had
  708
  there been no war, would have gone happily along towards the end of their days, just being able to make both ends meet, able to obtain just the necessities of life, and to live quietly to the end. But these commitments have never been considered by the Chancellor in regard to these people.
  The cost of living has increased by 30 points. They have had no increase of their unearned income. Very often their money is invested in two or three small houses for which they have worked all their lives. They are faced not only with the Rent Restrictions Act but War Damage payment, cost of repairs and so on. In addition to that, taxation has increased, the free allowance has decreased from £100 to £80 in the case of single people. Taxation falls on them at the rate of 6s. 6d. in the £. I could go on enumerating their difficulties. I could say indeed a score of other things about them. Many cases and letters have been sent to me giving instances of people being unable even to get proper medical care, unable to get new clothes, unable to get the necessities of life. I know one lady who had not been able to buy anything new for about three years, owing to the effect of taxation and this complete disregard on the part of the Government. Many of them have had to move from the houses where they have brought up their families and lived for years, and are living in the back rooms of towns amongst strangers. Even husbands and wives have had to separate. There is no consideration for these particular people. Why should such a desirable part of the community be crushed?
  I come to another point. Their income has always been regarded, technically, as unearned income; but never was income earned so hardly. It was earned by their striving and hard work in the earlier part of their lives, by their self-denial and their sacrifice, and by their endeavour to spare the country the burden of keeping them in their old age. Technically, I say, it may be called unearned income; but if ever there was income which was entitled to some relief, income which was truly earned, it is the income of those people. We are constantly hearing pleas in this House on behalf of pensioners. Often I have supported them. My hon. Friend the Member for Rugby (Mr. W. J. Brown) has pleaded their cause. I am

  709
  sure he will have sympathy with these people too, people who have always stood on their own feet. I will not pursue this question any further. I will not burden the House with any details; but I hope to put down an Amendment on the Committee stage, and I trust that the Chairman of Ways and Means will be good enough to call it. Then, perhaps, I can go, in a little more detail, into the cause which I have now pressed for two or three years, and to which the Treasury have been completely deaf. I am sorry to have detained the House: it was not my fault; but is my earnest wish that this cause should be heard.
  Mr. Woodburn: I apologise for detaining the House. I listened with interest to the speech of the Chancellor, and to his statement on some remarks that I made some time ago. I accept his statement that, so far as he has been able to find out, the banks are not making excess profits, and that they have no hidden profits; but I gather, from the fact that he has made no comment on it, that he does not challenge the statement that this country is now paying about £20,000,000 more on Treasury bills than it was paying before the war, and about £14,000,000 on Treasury Deposit Receipts plus the £12,000,000 that has been converted into long-term loans. I could have replied further to some of my own points, but that was not my business. I recognise that part of the money which is being paid on Treasury Deposit Receipts is not bank money, but goes to customers of the banks, to the extent that the banks have paid their customers 1 per cent. on their deposits. But all the customers do not get 1 per cent. on money lying in the banks, and, therefore, it is safe to assume, in the absence of any information to the contrary, that the banks collect the greater part of that £14,000,000 which is now in Treasury Deposit Receipts. Certainly, the Treasury are paying out 14,000,000 more to somebody than they were before the war. The Chancellor says that the banks have £50,000,000 less in Treasury Bills than they had before the war. That may be technically true. The question is, Have the banks lent to somebody else to take out Treasury bills?
  Mr. Assheton: A lot of these bills are held by Government Departments, and a lot more by overseas depositors.
  Mr. Woodburn: Well, that was the gap that I wanted the Chancellor to fill up, and give information as to who held these Treasury bills.
  Mr. Assheton: That is the answer.
  Mr. Woodburn: If it is the Government Departments, of course, then that simply means a transfer from one pocket to another and the matter does not arise. The reason why I raised the point is because I think the House is entitled to know that these things are looked after. The mystery should be cleared up as to where this money from the country goes, who gets it, and whether it will be properly and effectively used, and not contribute to the building up of hidden reserves in the banks. I unreservedly accept the Chancellor's assurance that the Treasury are looking into it. I was in doubt whether there was not some way by which they might be putting a little on the shelf, and I wished to place on record that the facts, as I have stated them, are not challenged, except to the extent that the Chancellor has given an assurance, which I accept.
  Lieut.-Colonel Sir William Allen: I have always felt that we from Northern Ireland should have some opportunity of making our views heard on the subject of finance and the Finance Bill. There seem to be some weird ideas that the Northern Ireland Government collect these taxes and pass them on to the Treasury, and, of course, this is fallacious. We have nothing to do whatever with the collection of these taxes. They are collected by persons appointed by the British Government and paid by the British Government, and they are passed on to the Treasury direct. Northern Ireland never touches a penny of the taxes so collected. These taxes are, of course, similar to those in force in this country, that is to say, Excess Profits Tax, Customs and Excise, Post Office, Income Tax, Surtax and Purchase Tax, and all are collected by the officials of the Government and passed on to the Treasury.
  Then there is also a weird idea, that if all help were withdrawn from Northern Ireland, by the British Government, we should be in a state of bankruptcy. Anything more fallacious than that could hardly be said, because, as a matter of fact, there is a considerable credit balance.

  711
  There were times, of course, when there was very bad trade and the contribution was very small. Still, Northern Ireland was the only Government to balance its Budget in those very difficult years, not because of the British Government, but largely, I suppose, because of the way in which the Northern Ireland Government managed its financial business. Latterly, in 1942 and 1943 the Northern Ireland receipts from all these duties went to the benefit of the British Treasury, which got £27,000,000. Last year it was £32,000,000. I do not know what the Finance Minister in Northern Ireland will have said to-day, as it is Budget day there, but I shall be surprised if our contribution to the British Treasury is less than £35,000,000. The contributions which we have made from time to time are, of course, the same contributions as are made in this country, and the powers which were transferred to the Parliament of Northern Ireland provide the means by which we carry on our government. The proceeds of the Death Duties, Stamp Duties, Entertainments Tax, Road Tax, and part of the Land Annuity are retained by the Northern Ireland Government. We have liberty to vary the rates of those particular taxes, because they are taxes transferred to the Northern Ireland Government, irrespective of whatever the taxes may be over here. The United Kingdom retain the control of expenditure on anything that is Imperial, such as the Navy, the Army and the Air Force, and the National Debt.
  Something has been said concerning the Death Duties. I have always a feeling that Death Duties are paid out of capital. They have to be paid by those who succeed, and paid over in hard cash to the Treasury, and it very often leaves those who pay the duties almost in a state of bankruptcy. Death Duties ought not to be treated as ordinary income is treated. Death Duties should be used entirely for the reduction of the National Debt. We in Northern Ireland are able to carry on by the revenue from services that are transferred, but in addition we also receive an allocation from the residuary share of the reserved taxes as an Imperial contribution. There has been appointed a general executive called the Colwyn Committee which meets the Treasury officials in Northern Ireland from year to year. The happiest relations exist between the Treasury Department
  712
  of Northern Ireland and the Treasury Department over here. There has never been any difficulty which has not easily been surmounted and settled by the Treasury over here.
  Reference has been made to the fact that taxation bears more heavily on Northern Ireland because it is a poorer country. There are two methods of taxation. One is direct taxation and the other indirect taxation. Direct taxation comes from income. If a man has no income, he is not taxed. If he has income, he is taxed just the same as the people over here. Indirect taxation is taxation on commodities; mostly on commodities which the community everywhere has power to refrain from purchasing. For instance, in regard to the taxation of tobacco and spirits, there is no reason why people should pay these taxes at all if they do not wish to do so. Indirect taxation is largely a matter of taxation on luxuries. The people of Northern Ireland have contributed towards the war in addition to paying taxation. Their voluntary contributions amount to a very large sum for a small community of about 1,000,000 people. We have the same "Salute the Soldier" and "Savings for Victory" weeks, and by the end of this year that small community will probably have contributed upwards of £100,000,000 to help this country in the war.
  Then there are one or two things I would like to point out in the Finance Bill, for which we are obliged to the Chancellor of the Exchequer. There is, first of all, the relief to small businesses to the extent of £1,000, which will certainly be a great relief to our people. Another point is the re-equipment of buildings and additional buildings which in future may reduce taxation. Then as regards agricultural equipment, I think it is a great thing that we have a Chancellor of the Exchequer who is capable of seeing the difficulties under which farmers work their farms. Under this Finance Bill they are enabled to borrow sums at a much lower rate than they have ever been before.
  Mr. Assheton: Not under this Finance Bill.
  Sir W. Allen: I see by the speech of the Chancellor of the Exchequer on the Budget that there is going to be, perhaps not under this Finance Bill but in the future—
  Mr. Assheton: Under the Agriculture (Miscellaneous Provisions) Bill.
  Sir W. Allen: Then there is the question of research. I think there is nowhere which will benefit more by research than Northern Ireland. Our staple industry there is linen. We have a research department, and I feel that the idea of the Chancellor of the Exchequer with regard to research will be very acceptable to the people of Northern Ireland. Linen is, of course, a very old industry, and it is thousands of years since linen was first used. It was used in the vestments of priests thousands of years ago. King Solomon himself brought yarn for distribution to the merchants in order that it might be woven, and if we dig up some of the graves of people who lived thousands of years ago, we find the bodies wrapped in linen. Research with regard to linen is only in its infancy, and I hope the result will be beneficial to that industry because it is one which supplies the largest amount of export. As soon as we get it to work again after the war I believe there will be a future for our linen industry beyond the conception of any human mind. The shelves all over the world are empty of linen, and factories are only waiting until the war ceases until they get into their stride again. I have no doubt it will be beneficial, not only for our people in Northern Ireland, but for this country as well.
  Dr. Peters: I do not propose to follow my hon. and gallant Friend back to Solomon and bring his history up to date on linen. I rise to ask two or three questions on Clause 24. Here is a very good arrangement made with regard to a matter which has caused a great deal of trouble for some years past, and where there is an order of the court, apparently consideration will be given. What I want to bring home to my right hon. Friend is that in the practice of the law there are many cases where people
  714
  separate for one cause or another, by arrangement between themselves, and where there is merely an agreement or deal. I am wondering whether the Chancellor would consider applying the same principle in those cases to the cases that come before the court where an order is made. The principle should be extended to those cases. There is another point under Sub-section (4) which lays down:
  "A claimant shall be entitled, in computing his total income for any year of assessment … to deduct sums paid by him in or towards the discharge of any such small maintenance payments required … to be made"
  by him. I cannot understand upon what high principle that is based. Here is a man who has been before the court and found guilty either of neglecting to maintain his wife and young children, or of persistent cruelty, or of being an habitual drunkard or something of that kind. Yet he is to be allowed to make deductions from his salary or wages, and it may be a considerable sum; while the poor man who stops at home with a nasty nagging wife and sits it out with his young children and provides for them properly, cannot make any such deduction. I do not know upon what principle that is based, but it seems to me quite wrong. I should like to add a word of appreciation for the way in which my right hon. Friend has met the suggestions from the Law Society for amendments to the law. As a lawyer, I must say that we very much appreciate what the Chancellor has done, and I hope that it will be found beneficial to the community at large.
  Question, "That the Bill be now read the Second time," put, and agreed to.
  Bill accordingly read a Second time.
  Bill committed to a Committee of the Whole House for To-morrow.

  FINANCE BILL

    ADJOURNMENT
    Resolved:
    "That this House do now adjourn."—[Mr. Pym.]

  BRITISH DOMINIONS (NOMINATED APPOINTMENTS)
  BRITISH DOMINIONS (NOMINATED APPOINTMENTS)
  DARTMOOR PRISON
  DARTMOOR PRISON
  NORTH WALES (BOYS, FATALITIES)
  NORTH WALES (BOYS, FATALITIES)
BRITISH ARMY
  Road Accidents (Animals, Compensation)
  Road Accidents (Animals, Compensation)
  Cigarettes (Italy and North Africa)
  Cigarettes (Italy and North Africa)
  Royal Engineer Officers (Pay)
  Royal Engineer Officers (Pay)
  PUBLIC HEALTH (CONSULTANT AND SPECIALIST SERVICES)
  PUBLIC HEALTH (CONSULTANT AND SPECIALIST SERVICES)
  WAR DECORATIONS AND MEDALS
  WAR DECORATIONS AND MEDALS
  HEATING RESTRICTIONS
  HEATING RESTRICTIONS
  SWEDEN (ARGENTINE SHIPMENTS)
  SWEDEN (ARGENTINE SHIPMENTS)
  DIPHTHERIA (GERMANY)
  DIPHTHERIA (GERMANY)
  FAR EAST FORCES (GENERAL MACARTHUR'S COMMAND)
  FAR EAST FORCES (GENERAL MACARTHUR'S COMMAND)
  PENSIONS AND GRANTS
  PENSIONS AND GRANTS
  SCHOOL TEACHERS (EMERGENCY TRAINING SCHEME)
  SCHOOL TEACHERS (EMERGENCY TRAINING SCHEME)
TRADE AND COMMERCE
  Hotel Equipment (Supplementary Coupons)
  Hotel Equipment (Supplementary Coupons)
  Ex-Service Men (Retail Traders Register)
  Ex-Service Men (Retail Traders Register)
  Saucepans (North Berkshire)
  Saucepans (North Berkshire)
  ROYAL AIR FORCE (A.T.C. CADETS)
  ROYAL AIR FORCE (A.T.C. CADETS)
NATIONAL FINANCE
  Income Tax
  Income Tax
  War Savings (Bonds, Selling Arrangements)
  War Savings (Bonds, Selling Arrangements)
  ROYAL AIR FORCE (PAY AND ALLOWANCES)
  ROYAL AIR FORCE (PAY AND ALLOWANCES)
Preamble
The House met, The LORD CHANCELLOR on the Woolsack.
Prayers.
  CONSOLIDATED FUND (No. 3) BILL.
  Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act, 1911; and read 1a.
  EDINBURGH MERCHANT COMPANY ENDOWMENTS (AMENDMENT) ORDER CONFIRMATION BILL.
  Read 3a (according to Order), and passed.
  PENSIONS (INCREASE) BILL.
  House in Committee (according to Order): Bill reported without amendment.
  POLICE AND FIREMEN (WAR SERVICE) BILL.
  House in Committee (according to Order): Bill reported without amendment.

  HARMFUL LIQUOR.
  LORD STRABOLGI: My Lords, I beg to ask the question standing in my name.
  [The question was as follows:
  To ask His Majesty's Government, whether they are aware of a number of cases in recent months of young officers and other members of His Majesty's Forces visiting London on short leave being sold, in so-called night clubs, intoxicating liquor of so poisonous a nature that they have been made seriously ill, have had to enter hospital and have been made unfit for duty for considerable periods up to a month; what steps have been taken, or are being taken, to bring the vendors of this harmful liquor to justice; and whether, in addition, special measures have been taken to warn all ranks of His Majesty's Forces of the existence of this traffic in harmful liquor.]
  THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR INDIA AND BURMA (THE EARL OF MUNSTER): My Lords, whilst no doubt there is a danger that ill effects will follow the consumption of deleterious liquors, my information is that neither the War Office nor the Air Ministry nor the Customs know of any case of the kind to which the question refers, and the Metropolitan Police say that they have no record of anyone being taken to hospital as a result of a serious illness attributable to the consumption of intoxicating liquor of a poisonous nature. I might mention that the manufacture or sale of illicit liquor would render the persons concerned liable to penalties under the Spirits Act of 1880, the Food and Drugs Act of 1938, and other provisions of the law. If my noble friend has any particulars of any cases such as are referred to in his question I should be most grateful if he would let me have them.
  LORD STRABOLGI: My Lords, is my noble friend aware that the Government's information is incomplete on this subject? I can give him the names of three night clubs in the West End of London where at least eleven Air Force officers have been badly poisoned, and also particulars of other cases and of the medical officers who attended them. I should therefore like to ask whether he is prepared to take this matter further.
  THE EARL OF MUNSTER: I should be very glad to have that information if the noble Lord will be so kind as to send it to me.

  INTERNATIONAL MONETARY FUND.
  LORD ADDISON LORD ADDISON moved to resolve, That this House considers that the statement of principles contained in Cmd. 6519 provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war. The noble Lord said: My Lords, I am sure you will welcome a discussion on the matter of first-rate importance that is referred to in the Motion standing in my name. It cannot, I think, be denied by any of us who have any view at all of the post-war situation that an international agreement on monetary policy is a necessity if it can be arrived at, and nothing that will be said in this

  835
  discussion will do anything, I hope, to place difficulties in the way of those who are in charge of the negotiations. On the contrary, so far as I am concerned, though I do not in the least pretend to expert knowledge on this subject, I shall content myself with asking a number of questions in an entirely constructive and helpful spirit, questions which I think represent some of the misgivings which should, in the highest interest, be allayed as far as possible. I am sure your Lordships will want to discuss this all-important matter in an entirely constructive and friendly spirit.
  We have the advantage in this House of having among us the distinguished Lord who took a very active part in this discussion, and I am sure I for one look forward with anxiety and great interest to what he has to tell us on the subject, because this is really the first concrete effort at international co-operation on a large scale in the economic field. I should be glad if the noble Lord, Lord Keynes, when he comes to speak, can tell us wherein the particular scheme that is now before us differs from the scheme for which he himself was responsible or, at all events, to which his name was attached a year or so ago. His scheme, so far as I understood it, possessed certain very great attractions in respect of its elasticity. With regard to the particular scheme that is before us, I should be glad if the noble Lord could tell us something about the British quota in the Fund. So far as one can calculate it, it appears to be inadequate, and it is evident that it is of first-class importance that our export trade after the war should if possible be increased as compared with the pre-war figures, and we must have a scheme that will encourage expansion.
  For instance, take Imperial transactions. Some of us have urged for a long time that there should be large-scale purchases with a view to introducing a certain stability of price. The noble Lord, Lord Woolton, has been responsible as Minister of Food for large-scale purchases in the Dominions, and it would be, I think, against the best interests of the world if anything in this new scheme prevented the British Government, or anyone on their behalf, entering in future into large-scale operations, say, with the Dominions and involving, say, large-scale purchases of food, covering perhaps a
  836
  term of years at a stabilized price. I should be glad if the noble Lord could tell us how the scheme now before us would operate in regard to transactions of that character. It appears to me that it might limit their possibilities, but I should be glad to be reassured on that subject. Another important feature of post-war policy clearly must be a finance policy that will promote full employment so far as possible, and therefore there must be a sufficient measure of independence in our own finance policy that will not be interfered with, or at all events prevented, by the operations of the Fund. I should be glad if the noble Lord could tell us something about that too.
  Then we were assured by the Chancellor of the Exchequer in another place the other day—and I must say that I for one rejoiced to read his statement—that on no account was this country contemplating going back to the gold standard. To me that was one of the best pieces of news we have had for a long time. In this particular scheme, however, it appears that the value of the exchange will, in fact, be related to gold, and I should be very glad if the noble Lord could tell us something about that; because if the rate of exchange is to be determined with some relation to gold, I do not quite understand how we shall be as independent under that scheme—I was going to say fetish—as one would like to be. I confess that, entirely apart from this discussion, I have never been convinced that to dig gold out of the ground in South Africa and to bury it refined in a cellar in the United States is, in fact, adding to the wealth of the world. It may be that I am so ignorant that I do not appreciate that there is some advantage in the process. However, I put that on one side.
  I should be glad if the noble Lord would tell us something as to how the value of exchange is to be determined and by whom. Perhaps it would be useful, too, if we could be told something as to how the Fund is to be managed. I suppose the different nations will appoint their representatives on the management hoard or whatever it is called. I should be glad to know to whom the managers will be responsible, how national policy with regard to the Fund will be maintained or, at all events, promoted through the management of the Fund, and what power will the managers possess apart from any directions which may be given

  837
  to them by the Governments which appoint them. One can see that an international organization of this kind appointed by the different nations to manage this Fund will become inevitably an exceedingly powerful organization.
  I for my part can never get away from the horrid memories of the years from 1929 to 1935 during which the management of our fate, nationally, was largely in the control of the Central Bank. I am quite sure that it is essential in the future that national control of the major matters of finance policy should remain within the Government of the country, and must not be the business of any semi-independent private corporation. I should be glad if the noble Lord can tell us how national policy in that regard can be made effective through the organization which is proposed. On that, I may say that nothing that is suggested here as to the control of the Government of the day over major policies of finance would, or need, interfere in the least with the operation of joint stock concerns or in any way jeopardize or interfere with their relations with their own customers. What we are discussing is the control of finance policy and the operation of our Central Bank organization. It is very important that we should have a little guidance as to how national policy can still be made effective and whether we are creating an organization which can, so to say, dictate policies to the different nations which contribute to its building up. It is that kind of anxiety which a good discussion will help to allay. In any case these are entirely friendly questions, voicing as they do the anxieties of some.
  All I would say is that it is our duty to do everything we can to support those who are trying to bring about an international organization that will deal with these matters because it is essential to the future. We must have, too, if we can create it, an international monetary organization which will not only discourage national isolationism but will, on the contrary, encourage development throughout the world, devote itself to lifting up the standard of people everywhere, thereby providing the surest basis of all for regular employment, and at the same time helping to abate those discontents which in the long run, in times past, have done so much to undermine the foundations of peace. The importance of this matter
  838
  cannot be better stated than it was by Mr. Cordell Hull last Friday, when he said it was so important that we should agree upon a major control and direction of our international monetary organizations for these purposes for without it, he said, the structure of international security would be threatened with collapse as a result of economic disorder. That seems to me to be a very moderate statement of an undoubted truth, and it is with a view to getting further light on these complicated but vital matters that I beg to move.
  Moved, to resolve, That this House considers that the statement of principles contained in Cmd. 6519 provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war.—(Lord Addison.)
  LORD KEYNES: My Lords, it is almost exactly a year since the proposals for a Clearing Union were discussed in your Lordships' House. I hope to persuade your Lordships that the year has not been ill-spent. There were, it is true, certain features of elegance, clarity and logic in the Clearing Union plan which have disappeared. And this, by me at least, is to be much regretted. As a result, however, there is no longer any need for a new-fangled international monetary unit. Your Lordships will remember how little any of us liked the names proposed—bancor, unitas, dolphin, bezant, daric and heaven knows what. Some of your Lordships were good enough to join in the search for something better. I recall a story of a country parish in the last century where they were accustomed to give their children Biblical names—Amos, Ezekiel, Obadiah and so forth. Needing a name for a dog, after a long and vain search of the Scriptures they called the dog "Moreover." We hit on no such happy solution, with the result that it has been the dog that died. The loss of the dog we need not too much regret, though I still think that it was a more thoroughbred animal than what has now come out from a mixed marriage of ideas. Yet, perhaps, as sometimes occurs, this dog of mixed origin is a sturdier and more serviceable animal and will prove not less loyal and faithful to the purposes for which it has been bred.
  I commend the new plan to your Lordships as being, in some important respects

  839
  (to which I will return later), a considerable improvement on either of its parents. I like this new plan and I believe that it will work to our advantage. Your Lordships will not wish me to enter into too much technical detail. I can best occupy the time available by examining the major benefits this country may hope to gain from the plan; and whether there are adequate safeguards against possible disadvantages. We shall emerge from this war, having won a more solid victory over our enemies, a more enduring friendship from our Allies, and a deeper respect from the world at large, than perhaps at any time in our history. The victory, the friendship, and the respect will have been won, because, in spite of faint-hearted preparations, we have sacrificed every precaution for the future in the interests of immediate strength with a fanatical single-mindedness which has had few parallels. But the full price of this has still to be paid. I wish that this was more generally appreciated in the country than it is. In thus waging the war without counting the ultimate cost we—and we alone of the United Nations—have burdened ourselves with a weight of deferred indebtedness to other countries beneath which we shall stagger. We have already given to the common cause all, and more than all, that we can afford. It follows that we must examine any financial plan to make sure that it will help us to carry our burdens and not add to them. No one is more deeply convinced of this than I am. I make no complaint, therefore, that those to whom the details of the scheme are new and difficult, should scrutinize them with anxious concern.
  What, then, are these major advantages that I hope from the plan to the advantage of this country? First, it is clearly recognized and agreed that, during the post-war transitional period of uncertain duration, we are entitled to retain any of those war-time restrictions, and special arrangements with the sterling area and others which are helpful to us, without being open to the charge of acting contrary to any general engagements into which we have entered. Having this assurance, we can make our plans for the most difficult days which will follow the war, knowing where we stand and without risk of giving grounds of offence. This is a great gain—and one of the
  840
  respects in which the new plan is much superior to either of its predecessors, which did not clearly set forth any similar safeguards.
  Second, when this period is over and we are again strong enough to live year by year on our own resources, we can look forward to trading in a world of national currencies which are inter-convertible. For a great commercial nation like ourselves this is indispensable for full prosperity. Sterling itself, in due course, must obviously become, once again, generally convertible. For, without this, London must necessarily lose its international position, and the arrangements in particular of the sterling area would fall to pieces. To suppose that a system of bilateral and barter agreements, with no one who owns sterling knowing just what he can do with it—to suppose that this is the best way of encouraging the Dominions to centre their financial systems on London, seems to me pretty near frenzy. As a technique of little Englandism, adopted as a last resort when all else has failed us, with this small country driven to autarchy, keeping itself to itself in a harsh and unfriendly world, it might make more sense. But those who talk this way, in the expectation that the rest of the Commonwealth will throw in their lot on these lines and cut their free commercial relations with the rest of the world, can have very little idea how this Empire has grown or by what means it can be sustained.
  So far from an international plan endangering the long tradition by which most Empire countries, and many other countries, too, have centred their financial systems in London, the plan is, in my judgment, an indispensable means of maintaining this tradition. With our own resources so greatly impaired and encumbered, it is only if sterling is firmly placed in an international setting that the necessary confidence in it can be sustained. Indeed, even during the transitional period, it will be our policy, I hope, steadily to develop the field within which sterling is freely available as rapidly as we can manage. Now if our own goal is, as it surely must be, the general inter-convertibility of sterling with other currencies, it must obviously be to our trading advantage that the same obtains elsewhere, so that we can sell our exports in one country and freely spend the proceeds in any other. It is a great gain to us in

  841
  particular, that other countries in the world should agree to refrain from those discriminatory exchange practices which we ourselves have never adopted in times of peace but from which in the recent past our traders have suffered greatly at the hands of others. My noble friend Lord Addison has asked whether such an arrangement could be operated in such a way that certain markets might be closed to British exports. I can firmly assure him that none of the monetary proposals will do so provided that, if we find ourselves with currencies in a foreign country which we do not choose to spend in that country, we can then freely remit them somewhere else to buy goods in another country. There is no compulsion on us, and if we choose to come to a particular bargain in the country where we have resources, then that is entirely at our discretion.
  Third, the wheels of trade are to be oiled by what is, in effect, a great addition to the world's stock of monetary reserves, distributed, moreover, in a reasonable way. The quotas are not so large as under the Clearing Union, and Lord Addison drew attention to that. But they are substantial and can be increased subsequently if the need is shown. The aggregate for the world is put provisionally at £2,500,000,000. Our own share of this—for ourselves and the Crown Colonies which, I may mention, are treated for all purposes as a part of the British monetary system (in itself a useful acknowledgement)—is £325,000,000, a sum which may easily double, or more than double, the reserves which we shall otherwise hold at the end of the transitional period. The separate quotas of the rest of the sterling area will make a further large addition to this. Who is so confident of the future that he will wish to throw away so comfortable a supplementary aid in time of trouble? Do the critics think it preferable, if the winds of the trade cycle blow, to diminish our demand for imports by increasing unemployment at home, rather than meet the emergency out of this Fund which will be expressly provided for such temporary purposes?
  I emphasize that such is the purpose of the quotas. They are not intended as daily food for us or any other country to live upon during the reconstruction or afterwards. Provision for that belongs to
  842
  another chapter of international co-operation, upon which we shall embark shortly unless you discourage us unduly about this one. The quotas for drawing on the Fund's resources are an iron ration to tide over temporary emergencies of one kind or another. Perhaps this is the best reply I can make to Lord Addison's doubts whether our quota is large enough. It is obviously not large enough for us to live upon during the reconstruction period. But this is not its purpose. Pending further experience, it is, in my judgment, large enough for the purposes for which it is intended.
  There is another advantage to which I would draw your Lordships' special attention. A proper share of responsibility for maintaining equilibrium in the balance of international payments is squarely placed on the creditor countries. This is one of the major improvements in the new plan. The Americans, who are the most likely to be affected by this, have, of their own free will and honest purpose, offered us a far-reaching formula of protection against a recurrence of the main cause of deflation during the inter-war years—namely, the draining of reserves out of the rest of the world to pay a country which was obstinately lending and exporting on a scale immensely greater than it was lending and importing. Under Clause VI of the plan a country engages itself, in effect, to prevent such a situation from arising again, by promising, should it fail, to release other countries from any obligation to take its exports, or, if taken, to pay for them. I cannot imagine that this sanction would ever be allowed to come into effect. If by no other means, than by lending, the creditor country will always have to find a way to square the account on imperative grounds of its own self-interest. For it will no longer be entitled to square the account by squeezing gold out of the rest of us. Here we have a voluntary undertaking, genuinely offered in the spirit both of a good neighbour and, I should add, of enlightened self-interest, not to allow a repetition of a chain of events which between the wars did more than any other single factor to destroy the world's economic balance and to prepare a seed-bed for foul growths. This is a tremendous extension of international co-operation to good ends. I pray your Lordships to pay heed to its importance.

  843
  Fifth, the plan sets up an international institution with substantial rights and duties to preserve orderly arrangements in matters such as exchange rates which are two-ended and affect both parties alike, which can also serve as a place of regular discussion between responsible authorities to find ways to escape those many unforeseeable dangers which the future holds. The noble Lord, Lord Addison, asks how the Fund is to be managed. Admittedly this is not yet worked out in the necessary detail and it was right that he should stress the point. But three points which may help him are fairly clear. This is an organization between Governments, in which Central Banks only appear as the instrument and agent of their Government. The voting power of the British Commonwealth and that of the United States are expected to be approximately equal. The management will be in three tiers—a body of expert, whole-time officials who will be responsible for the routine; a small board of management which will make all decisions of policy subject to any over-riding instructions from the Assembly, an Assembly of all the member Governments meeting less often and retaining a supervisory, but not an executive, control. That is perhaps even a little better than appears.
  Here are five advantages of major importance. The proposals go far beyond what, even a short time ago, anyone could have conceived of as a possible basis of general international agreement. What alternative is open to us which gives comparable aid, or better, more hopeful opportunities for the future? I have considerable confidence that something very like this plan will be in fact adopted, if only on account of the plain demerits of the alternative of rejection. You can talk against this plan, so long as it is a matter of talking—saying in the same breath that it goes too far and that it does not go far enough, that it is too rigid to be safe and that it is too loose to be worth anything. But it would require great fool-hardiness to reject it, much more fool-hardiness than is to be found in this wise, intuitive country.
  Therefore, for these manifold and substantial benefits I commend the monetary proposals to your Lordships. Nevertheless, before you will give them your confidence, you will wish to consider whether,
  844
  in return, we are surrendering anything which is vital for the ordering of our domestic affairs in the manner we intend for the future. My Lords, the experience of the years before the war has led most of us, though some of us late in the day, to certain firm conclusions. Three, in particular, are highly relevant to this discussion. We are determined that, in future, the external value of sterling shall conform to its internal value as set by our own domestic policies, and not the other way round. Secondly, we intend to retain control of our domestic rate of interest, so that we can keep it as low as suits our own purposes, without interference from the ebb and flow of international capital movements or flights of hot money. Thirdly, whilst we intend to prevent inflation at home, we will not accept deflation at the dictate of influences from outside. In other words, we abjure the instruments of bank rate and credit contraction operating through the increase of unemployment as a means of forcing our domestic economy into line with external factors.
  Have those responsible for the monetary proposals been sufficiently careful to preserve these principles from the possibility of interference? I hope your Lordships will trust me not to have turned my back on all I have fought for. To establish those three principles which I have just stated has been my main task for the last twenty years. Sometimes almost alone, in popular articles in the Press, in pamphlets, in dozens of letters to The Times, in text books, in enormous and obscure treatises I have spent my strength to persuade my countrymen and the world at large to change their traditional doctrines and, by taking better thought, to remove the curse of unemployment. Was it not I, when many of to-day's iconoclasts were still worshippers of the Calf, who wrote that "Gold is a barbarous relic"? Am I so faithless, so forgetful, so senile that, at the very moment of the triumph of these ideas when, with gathering momentum, Governments, Parliaments, banks, the Press, the public, and even economists, have at last accepted the new doctrines, I go off to help forge new chains to hold us fast in the old dungeon? I trust, my Lords, that you will not believe it.
  Let me take first the less prominent of the two issues which arise in this connexion—namely, our power to control the

  845
  domestic rate of interest so as to secure cheap money. Not merely as a feature of the transition, but as a permanent arrangement, the plan accords to every member Government the explicit right to control all capital movements. What used to be a heresy is now endorsed as orthodox. In my own judgment, countries which avail themselves of this right may find it necessary to scrutinize all transactions, so as to prevent evasion of capital regulations. Provided that the innocent, current transactions are let through, there is nothing in the plan to prevent this. In fact, it is encouraged. It follows that our right to control the domestic capital market is secured on firmer foundations than ever before, and is formally accepted as a proper part of agreed international arrangements.
  The question, however, which has recently been given chief prominence is whether we are in any sense returning to the disabilities of the former gold standard, relief from which we have rightly learnt to prize so highly. If I have any authority to pronounce on what is and what is not the essence and meaning of a gold standard, I should say that this plan is the exact opposite of it. The plan in its relation to gold is, indeed, very close to proposals which I advocated in vain as the right alternative when I was bitterly opposing this country's return to gold. The gold standard, as I understand it, means a system under which the external value of a national currency is rigidly tied to a fixed quantity of gold which can only honourably be broken under force majeure; and it involves a financial policy which compels the internal value of the domestic currency to conform to this external value as fixed in terms of gold. On the other hand, the use of gold merely as a convenient common denominator by means of which the relative values of national currencies—these being free to change—are expressed from time to time, is obviously quite another matter.
  My noble friend Lord Addison asks who fixes the value of gold. If he means, as I assume he does, the sterling value of gold, it is we ourselves who fix it initially in consultation with the Fund; and this value is subject to change at any time on our initiative, changes in excess of 10 per cent. requiring the approval of the Fund, which must not withhold approval if our domestic equilibrium requires it. There must be
  846
  some price for gold; and so long as gold is used as a monetary reserve it is most advisable that the current rates of exchange and the relative values of gold in different currencies should correspond. The only alternative to this would be the complete demonetization of gold. I am not aware that anyone has proposed that. For it is only common sense as things are to-day to continue to make use of gold and its prestige as a means of settling international accounts. To demonetize gold would obviously be highly objectionable to the British Commonwealth and to Russia as the main producers, and to the United States and the Western Allies as the main holders of it. Surely no one disputes that? On the other hand, in this country we have already dethroned gold as the fixed standard of value. The plan not merely confirms the dethronement but approves it by expressly providing that it is the duty of the Fund to alter the gold value of any currency if it is shown that this will be serviceable to equilibrium.
  In fact, the plan introduces in this respect an epoch-making innovation in an international instrument, the object of which is to lay down sound and orthodox principles. For instead of maintaining the principle that the internal value of a national currency should conform to a prescribed de jure external value, it provides that its external value should be altered if necessary so as to conform to whatever de facto internal value results from domestic policies, which themselves shall be immune from criticism by the Fund. Indeed, it is made the duty of the Fund to approve changes which will have this effect. That is why I say that these proposals are the exact opposite of the gold standard. They lay down by international agreement the essence of the new doctrine, far removed from the old orthodoxy. If they do so in terms as inoffensive as possible to the former faith, need we complain?
  No, my Lords, in recommending these proposals I do not blot a page already written. I am trying to help w rite a new page. Public opinion is now converted to a new model, and I believe a much improved model, of domestic policy. That battle is all but won. Yet a not less difficult task still remains—namely, to organize an international setting within which the new domestic policies can occupy a comfortable place. Therefore,

  847
  it is above all as providing an international framework for the new ideas and the new techniques associated with the policy of full employment that these proposals are not least to be welcomed.
  Last week my noble friend Lord Bennett asked what assumptions the experts might be making about other phases of international agreement. I do not believe that the soundness of these foundations depends very much on the details of the superstructure. If the rest of the issues to be discussed are wisely settled, the task of the Monetary Fund will be rendered easier. But if we gain less assistance from other measures than we now hope, an agreed machinery of adjustment on the monetary side will be all the more necessary. I am certain that this is not a case of putting the cart before the horse. I think it most unlikely that fuller knowledge about future commercial policy would in itself make it necessary to alter any clause whatever in the proposals now before your Lordships' House. But if the noble Viscount meant that these proprosals need supplementing in other directions, no one could agree with him more than I do. In particular, it is urgent that we should seek agreement about setting up an international investment institution to provide funds for reconstruction and afterwards. It is precisely because there is so much to do in the way of international collaboration in the economic field that it would be so disastrous to discourage this first attempt, or to meet it in a carping, suspicious or cynical mood.
  The noble Lord, Lord Addison, has called the attention of your Lordships to the striking statement made by Mr. Hull in connexion with the National Foreign Trade Week in the United States, and I am very glad that he did so. This statement is important as showing that the policy of the United States Administration on various issues of political and economic preparation forms a connected whole. I am certain that the people of this country are of the same mind as Mr. Hull, and I have complete confidence that he on his side will seek to implement the details with disinterestedness and generosity. If the experts of the American and British Treasuries have pursued the monetary discussions with more ardour, with a clearer purpose and, I think, with more success so far than has
  848
  yet proved possible with other associated matters, need we restrain them? If, however, there is a general feeling, as I think that there is, that discussion on other matters should be expedited, so that we may have a complete picture before us, I hope that your Lordships will enforce this conclusion in no uncertain terms. I myself have never supposed that in the final outcome the monetary proposals should stand by themselves.
  It is on this note of emphasizing the importance of furthering all genuine efforts directed towards international agreement in the economic field that I should wish to end my contribution to this debate. The proposals which are before your Lordships are the result of the collaboration of many minds and the fruit of the collective wisdom of the experts of many nations. I have spent many days and weeks in the past year in the company of experts of this country, of the Dominions, of our European Allies and of the United States; and in the light of some past experience I affirm that these discussions have been without exception a model of what such gatherings should be—objective, understanding, without waste of time or expense of temper. I dare to speak for the much abused so-called experts. I even venture sometimes to prefer them, without intending any disrespect, to politicians. The common love of truth, bred of a scientific habit of mind, is the closest of bonds between the representatives of divers nations.
  I wish I could draw back the veil of anonymity and give their due to the individuals of the most notable group with which I have ever been associated, covering half the nations of the world, who from prolonged and difficult consultations, each with their own interests to protect, have emerged, as we all of us know and feel in our hearts, a band of brothers. I should like to pay a particular tribute to the representatives of the United States Treasury and the State Department and the Federal Reserve Board in Washington, whose genuine and ready consideration for the difficulties of others, and whose idealistic and unflagging pursuit of a better international order, made possible so great a measure of agreement. I at any rate have come out from a year thus spent greatly encouraged, encouraged beyond all previous hope and expectation, about the possibility of just and honour-

  849
  able and practical economic arrangements between nations.
  Do not discourage us. Perhaps we are laying the first brick, though it may be a colourless one, in a great edifice. If indeed it is our purpose to draw back from international co-operation and to pursue an altogether different order of ideas, the sooner that this is made clear the better; but that, I believe, is the policy of only a small minority, and for my part I am convinced that we cannot on those terms remain a Great Power and the mother of a Commonwealth. If, on the other hand, such is not our purpose, let us clear our minds of excessive doubts and suspicions and go forward cautiously, by all means, but with the intention of reaching agreement.
  LORD NATHAN: My Lords, it is a happy but for me a formidable coincidence that it tell to me a year ago to be the speaker immediately following my noble friend Lord Keynes. On that occasion I was the spokesman of your Lordships' House, for my noble friend was making his maiden speech. I would refer to the words which I used on that occasion when I said, speaking for your Lordships, that we knew that Lord Keynes would illumine and embellish his future contributions to our discussions with the same clarity of argument and the same grace of phrase as in the speech which he had just then made. You will agree with me that that prophecy has been fully justified to-day. I believe that, just as I was the spokesman of your Lordships a year ago in congratulating and thanking Lord Keynes, so you will desire me to do so to-day.
  This is, however, a formidable coincidence, because I approach this subject from a different position from that of my noble friends Lord Addison and Lord Keynes. Lord Addison, with long years of profound experience behind him, has put to Lord Keynes certain key questions designed to elucidate the technicalities of the position and Lord Keynes has spoken with all the authority that he rightly enjoys in a matter of this consequence. I am no economist. I have a great regard for economists, but I am no economist myself. I am rather one of those to whom Lord Keynes referred in the closing passages of his speech, in contrast to economists, as politicians; and I wish to address your Lordships' House from the standpoint of a layman, from the standpoint
  850
  of the man in the street, who has done his best, knowing that this is a matter of great moment, to understand what it is all about and to present to your Lordships the results of that consideration.
  As a layman, I should say that an expert monetary scheme of this kind can have only one purpose: it is a technical means for securing a very great and practical human end. The one question which I ask myself as a layman, therefore, in looking at a plan of this sort, is this: What is this going to mean in terms of trade and employment and standards of living? That is what matters most. Finance exists for trade, not trade for finance. Whilst I do not approve very much of the practice of asking your Lordships to be allowed to refer to previous speeches in this House, I should like to recall one passage which expresses what I mean as well as I can express it, a passage from the speech which I made in the debate to which I have just referred:
  "…monetary management … is not a conjuring trick, it is a process … it cannot make possible what is physic ally impracticable"—
  but it can and must make possible all that is physically practicable.
  The main virtue of the Keynes plan last year was that it did take this as its theme. It was deliberately contrived to develop policies of expansion. Under it every country cut its coat according to the full size of its cloth. Now that Keynes plan has been merged in this Allied plan, and some of the noble Lord, Lord Keynes's brilliantly contrived provisions for expanding world credit facilities by means of overdrafts have gone in deference to other views. I personally regret it, and from what Lord Keynes said earlier I gather that he regrets it too. He pointed out that this plan has the advantage of being an agreed plan. It is an attempt agreed to by the experts of thirty-four different countries. What an extraordinary thing but what a magnificent achievement it is that so many experts, representing such diverse interests and with such different traditions, should have come together and have been able to produce a plan such as this with substantial agreement.
  Here is this plan to restore multilateral trade by the technical means of multilateral clearing, so that all nations may

  851
  be able to trade freely with one another, so that all nations may be able to take full and unfettered advantage of the gains to be got from the international division of labour. The noble Lord, Lord Keynes, put that very well the other day when he said that the purpose is that any country should be enabled to use the proceeds of its sales abroad to make purchases in any other country. We in Britain have much the most of all nations to gain by this freedom. If this scheme is sufficient, the needs of the nation can be satisfied from the places where they can best be supplied, and goods can be sold in the places where they are most needed. This will indeed be a very different picture from the self-sufficient policies of mere barter to which so many countries succumbed during the years between the wars. So on those grounds I welcome this plan. I welcome it, too, because it proposes to do something that has not been effectively done in world exchange for a generation—not since 1914. In the old uneasy days between the wars, when balances of payments between nations got out of line, the onus of putting things right fell, as the noble Lord, Lord Keynes, has pointed out, on the countries in debt. They were compelled to cut down their trade all round and to cut down their employment at home. So slumps and depressions became products of export from one country to another, and the effects of world financial derangement tended always at these times to become worldwide restrictions and world-wide distress.
  In this plan there is machinery for bringing pressure to bear upon the creditor countries, the trading nations who persist in selling more than they buy or lend. In this plan, if they do this in the future, they can be pulled up short. The supply of their currency in the hands of other countries will become scarce, and those countries will then he given an explicit right to cut down their purchases from this persistent creditor without cutting them down from other countries. Creditors will be under pressure. They will have both a practical and a moral obligation to find ways and means either of buying more foreign goods or—which is almost equally effective—of lending more, that is investing more, in the development of other countries. I must admit, and indeed Lord Keynes made it clear, that not everybody is agreed about all this.
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  Broadly speaking, there have been three quite different views among experts since this plan was first published a few weeks ago. One school of economists say that so far from being helpful to the growth of world trade, this plan will be restrictive. Another and more sober school of economists say that it will be neither restrictionist nor expansionist, but neutral in its effects on world trade. This school contends that it all depends, not on the international monetary arrangements reached, but on the actual trade agreements that may be made, the trade agreements which are now I believe under active international discussion. I must say that I for my part agree with this view inasmuch as I believe, as I said a year ago, that this is at bottom a problem of exchange rather than of the exchanges.
  The third view, which is stressed by Sir John Anderson, the Chancellor of the Exchequer, and my noble friend Lord Keynes, says frankly that there is nothing in this monetary plan to stand in the way of any trade arrangements between nations or groups of nations that may be needed to maintain and extend the volume of world commerce. If I understood him rightly, my noble friend Lord Keynes specifically repeated that this afternoon. Let me interpolate here what it seems to me that this freedom to make trade arrangements means and what it does not mean—what it cannot mean. When the Chancellor of the Exchequer first gave his reassurances in answer to his critics in another place he was taken by them to mean that our hands would remain absolutely free to make whatever trade or currency arrangements we chose to make. But no international arrangement could possibly mean this; it would not be an agreement at all, and we should not be debating it here. Actually it seemed to be pretty clear what the Chancellor did mean, and if I understand him aright, it has been made clearer since by his mentor, Lord Keynes. I confess I was a little taken aback by a very powerful leading article in The Times this morning, and I want to know whether I have correctly appreciated the position, as I believe I have. Perhaps the noble and learned Viscount on the Woolsack, when he comes to reply to this debate, will be able to say whether I am correct or not. I thought—I still think—that what the Chancellor of the Exchequer meant was that we should be

  853
  free in both currency and trade matters during the transition period, and I welcome that assurance very much.
  The abnormal currency balances that will exist when the war stops—currency balances which have arisen because of the war-time distortions of trade—need special machinery to work them off, but without prejudice to later principles. Today there are already sterling balances in London amounting to nearly £1,500,000,000, mostly due to India, and they my very well reach more than £2,000,000,000 sterling by the time the war ends, more than half Indian. We must be free to work off these balances in our own way before we shoulder our normal long-term obligations, because if we do not no long-term plan for equilibrium can work. Then again I think the Chancellor mentioned that we have not yet entered into any trade commitments at all, and I gather from what Lord Keynes said, that that is correct, even though they may be, and I believe are, under contemplation and discussion now, and we shall, of course, have entered into currency commitments for the period after the transition period. The obligation is, briefly, to secure that all currencies are freely interchangeable, any one into any other. It is only by this freedom of convertibility to which Lord Keynes referred that we can get that desirable freedom to use the proceeds of our sales in one place for making purchases in another, the freedom that we must have to live and trade well.
  It would be quite wrong to dismiss entirely the fears that have been expressed in certain quarters. Broadly they are as follows. Some say that the proposed Fund is rot big enough to finance expansionist trade policies, that it is not big enough to make it possible every time there is disequilibrium in the balance of payments to secure that the rectification is made by increasing trade on the side of the creditor instead of decreasing it on the side of the debtor. The original Keynes idea of an international institution to create international credit, and to lend it out on overdraft to deficit countries for the expansion of their trade, has been rejected, and as I said I personally regret it. We do need—and perhaps we shall have them—definite assurances that the facilities of the Fund will be big enough and that, in particular, its supply of
  854
  dollars will be large enough to prevent its operation from being, in fact, a brake on the wheel of world trade. Perhaps the noble and learned Viscount, whom I have apprised of the questions I am putting, will be good enough to refer to some of these matters when he comes to reply. Almost certainly this exchange plan needs two additions and, if I understand Lord Keynes aright, I do not think he will dissent. It needs the essential supplement of large-scale international investment plans so that the funds of the surplus countries may nevertheless fertilize the rest of the world; and it needs the addition of some agreed and effective emergency scheme for the transition between war and peace, perhaps a standstill before the big plan starts, so that by this means the abnormal war-time balances will be worked off and a position attained which will be balanceable when the transition comes to an end.
  The second fear is that the mutual money and trade arrangements that already exist between groups of nations such as those of the sterling area will be endangered, that the principle of nondiscrimination between the trade of one country and the trade of another which is implicit in this whole scheme means that we and other countries may have to forgo the right to make constructive reciprocal arrangements with, say, Commonwealth, Empire, or European countries. It is well that these fears should be stated. I think that Lord Keynes has done something specifically to allay this particular fear in what he said this afternoon. Nothing should be ruled out which may add to the total world trade and world employment. I speak as an unrepentant believer in expansionist policies. I have only been a follower, in as far as I have understood him, of my noble friend Lord Keynes. Finance is a servant, not a master. The only requirement of money is that there should be enough of it to make all that is physically possible actual, to turn the possible into a fact.
  It is due to the critics that we should state and appreciate the fears that they have expressed, but need we be afraid? There are good reasons why we should not be. There is, first of all the fact I have already mentioned that this is a plan for multilateral trade, for trading on the widest possible basis over the widest possible area without any financial

  855
  impediments. I speak not only as a believer in expansionism, but also as a believer in multilateralism. I believe—and it is the experience of Britain for a century—that this is the method by which the most world trade can be done with the maximum of benefit to all concerned. It is certainly the way in which we, in our present economic position, can look to sell most. We must have multi-cornered trading so that we sell goods to non-American countries with dollar surpluses in order to get dollars with which to buy American goods. We must have the utmost degree of convertibility. But I agree—and I gather from what Lord Keynes said that this is his opinion—that if this turns out to be no more than a pretence of multilateral trading, in return for which we have to give up the reality of extending regional trade, then we shall indeed be grasping at a shadow and foregoing the substance. Is it likely to be so? Even the most cautious and sceptical of critics have been shaken in their scepticism by the forthright statements and reassurances of the Chancellor of the Exchequer, and they will be equally reassured by the equally forthright statement made by Lord Keynes to-day.
  What we want to know, however, is whether there is anything in this plan that will prevent the full and efficient employment of all the resources of all the countries with which we have special ties—the countries of the Empire, the Commonwealth, and Europe? What does the Chancellor of the Exchequer say? He says there is nothing in the plan to prevent reciprocal arrangements from being made with other countries or other groups of countries in either the monetary or the economic field. That seems definite and explicit enough and Lord Keynes seemed to underline that to-day. The Chancellor of the Exchequer says further that there is nothing in the scheme to prevent one country from giving another country a prior claim upon its exports. Lord Keynes referred to that with great clarity and emphasis as well. If I understand it aright, it means that there is nothing in the scheme to prevent us from making long-term purchase agreements with other countries in order to stabilize their employment and our trade at the highest possible level. That is what I understand Lord Keynes and the
  856
  Chancellor of the Exchequer alike to say and to mean. There is nothing in the scheme to prevent us from entering into large-scale and long-term development projects with other countries or groups of countries provided our obligation to keep our currency convertible in normal conditions is carried out. If that is true, as I believe, it seems fair enough, and it is explicit enough denial of the worst fears that have been expressed. So, on balance, we may feel tolerably reassured.
  I put the need for multilateral trading rather than bilateral barter or policies of national self-sufficiency very high indeed. I put equally high, for both political and economic reasons, the essential desirability, if at all possible, of an agreement in all world trade matters with the United States of America. It is worth while devoting great efforts to that. I believe that if the present trade talks with the United States are pursued in the spirit of the Chancellor of the Exchequer's assurances and those of Lord Keynes the result will be the kind of flexible and expansionist system that we and the world need.
  But I must finish on a word of caution as well as one of satisfaction and welcome. It is essential that whatever trade agreement is made should be made in this spirit of flexibility and expansion. If it is not, if we and the United States continue to pursue after the war the same shortsighted policies that we so often pursued before the war, then the critics will prove to have been right. If on the one hand we come back to the restrictive practices of the Ottawa Agreements, or if on the other hand they continue with their old policy of trying to maintain the ever-increasing export surplus without buying or lending sufficient to balance matters, then this plan will work restrictively—and disastrously. In other words, this plan is in that sense neutral. It does not prohibit the steady expansion of trade, it does not command it, and whether there will be steady expansion depends, in my view, on this. It depends on the trade agreements that are now being devised, which are a matter of exchange, not of the exchanges; it depends on the resumption and organization of large-scale and steady world investments, and on there being a transitional scheme for the abnormal problems of the relief and emer-

  857
  gency period. But it depends fundamentally upon the will and ability of all the nations to pursue at home policies of full employment. A last word. The ultimate test is not the technical perfection or the technical niceties of this plan or that plan. The ultimate test is the volume of trade and employment actually provided. It is the standard of living made possible to us and to others. It is the provision of food, homes, jobs.
  LORD MELCHETT: My Lords, I shall not require many moments to voice the approval which I am very anxious to give to the monetary plan which has been put forward this afternoon in very clear and eloquent terms by Lord Keynes. I think myself it is important not to follow too closely the lines of the last speaker in placing upon tare shoulders of the monetary plan under Lord Keynes all the other burdens of international trade agreement which fail to be settled in the post-war period. This plan is a plan for dealing with money, and I think it is an effective plan for that purpose. Of course if the rest of the world pursues a policy of economic madness, no monetary plan, and no other plan either, could possibly withstand the full burden of a great mass of international folly. There is a lot to be said for Lord Keynes's original scheme and I grieve with him in lamenting the loss of Ids dog. As an old master of hounds I feel he had at one time almost a pack, so many different names were suggested to serve his purpose. In fact, if I remember rightly, the noble Viscount who presides over the House suggested the word "moneta" amongst many others as a suitable name. But the dog has gone and the plan is slightly changed. I am not, however, too much discouraged because I think that time and experience may well show that that plan as it was put forward in the first place had advantages which the present plan has not got. But this may well bring us together to form an international monetary standard which everyone will be prepared to accept.
  It is no use in an imperfect world, when one is making slow progress, to hope that everything will be clone at once. That we have got as far as we have at the present stage in this report is, I think, a very great step forward. And I am surprised that there should be any other welcome to Lord Keynes after
  858
  his return from America and a year's hard work, than that of congratulation and praise in his having achieved an extraordinarily difficult task and brought together so many different countries to agree to such sensible proposals. We may look back with great regret over the whole history of the last twenty-five years and wonder what it might not have been if these proposals, sensible as they are, had been brought forward at the end of the last war and carried into practice instead of what we have actually been through. Lord Keynes was here and was eloquent then. And he had as much knowledge as he has to-day of the fundamentals of the problem with which he set himself to deal. As he said this afternoon, he has spent a lifetime fighting the restrictive effects of the gold standard, and to me it is quite amazing to hear people coming forward at this stage to accuse him of trying to tie us to the gold standard system.
  I suppose political criticism is a valuable thing at all times. But it seems to me to have been stretched to its absolute limit in the type of criticism that has been brought forward against the plan we have before us to-day. It is true that at other times in the name of internationalism ridiculous things have been done. But if the people who are going to manage the plan and if the various countries concerned in it set about it with the same energy to defeat the purposes of the plan, it will very likely go under, but that does not necessarily mean it is a bad plan because no plan in the world can with-stand extensive sabotage by those whose duty it is to operate it. All the same, I do not see any reason why we should look forward to anything of that sort taking place. On the contrary, I think the mere fact that thirty-four nations have been prepared to join together shows there is a sufficient number of sufficiently important nations who will try to make it worth while and will succeed. We may find there will be some who will be recalcitrant and difficult, but if the major industrial nations of the world band together, I think we shall find that what we have before us now is a perfectly natural evolution of the monetary system that we have been using in past generations.
  One has seen the whole progress of the banking system of this country develop until we had the bankers clearing-house system, which is the keynote of all we do

  859
  here, and we now have a system something like it for the world at large. I do not think there is any reason why one should expect it not to work, unless we get into the type of difficulty which I mentioned just now and which really would mean that no system of any kind could be expected to work. This country, therefore, naturally has to consider what kind of steps it would take in the face of a major collapse. Well, if the thing gets into a hopeless tangle there is provision for withdrawal. Now comes in what we have been considering—namely, whether we should be forced into a bilateral instead of a multilateral system, and whether we shall need to adopt all sorts of restrictive measures, by no means those which we should first be most likely to adopt but others which we might be forced to adopt for our protection.
  There is one other point which I think worth mentioning before I sit down. The noble Lord, Lord Keynes, said the burdens which we had assumed during this war would make us stagger during the first period after the war. Of course he is right and I think all will agree with him on that point. But it would not be right to overlook the fact that with the fearful destruction which war brings there is a commensurate balance in the extraordinary development of technique throughout the world, not in this country only but in every country of the world. It gives a greater opportunity for recovering than I think mast of us suspect. During the welter of destruction there have been developments of technique of all sorts and kinds and their use will give us a better chance to get civilization going again. Moreover, that advance of technique will be the very thing that will enable us to recover from the great burdens the noble Lord mentioned that will have to be faced in the immediate postwar period.
  In the immediate post-Napoleonic period no one could understand how we could ever recover from the debts incurred in the wars of Napoleon, but by the time of the South African war the Napoleonic debts had become infinitely small. Some idea of what will occur may perhaps be found by using as a measuring stick the horse power per man in existence in the country at the time of the Napoleonic wars as compared with the opening of the
  860
  century. That gives one some measure of the technical advance. It is that technical advance which will enable us to recover from the fearful burden we have assumed and enable us to obtain a measure of that full employment which has been stressed as such an important element in post-war policy. I am convinced there is nothing in this plan which can possibly restrict our domestic industrial development or commercial development. It is a plan for which, in your Lordships' House and in the country, we ought to be very grateful to my noble friend Lord Keynes and those experts who have worked with him. We should be very grateful for it and we should accept it in the warmest possible terms.
  LORD PERRY: My Lords, the subject we are discussing this afternoon is the statement of principles contained in Command Paper 6519. I do not think there is any one of your Lordships who would not approve of those principles as principles, but when one comes to consider the modus operandi of putting those principles into effect, one must be cautious before approving of the application of any such principles. I do not propose to quote this afternoon from the speech of our present Prime Minister, because in the debate on a Motion of this sort in another place within the last week that speech was quoted at length by two honourable members, but unless the Prime Minister has entirely changed his opinion he cannot possibly, as I see it, lend his support to approval of the carrying out of the principles laid down in this White Paper.
  I carried the White Paper in my pocket for a long time and I sought advice from many quarters. I could not quite reconcile the statements in the White Paper. They seem to me contradictory as well as extremely badly drafted. Evidently the statement did not emanate from the pen of the noble Lord, Lord Keynes. I have sat as a pupil, and a very humble pupil, at the footstool of Lord Keynes ever since he removed himself from obscurity some twenty odd years ago and published The Economic Consequences of the Peace. The present Chancellor of the Exchequer has been pressed very hard in another place to disclose the identity of the experts who produced this Command Paper. He has refused to disclose their identity because he says it is tradi-

  861
  tionally incorrect so to do, but I think my noble friend Lord Keynes will perhaps forgive me if I assume that he is one of those experts. If that is so, I beg him to emerge again from behind the curtain of secrecy and obscurity and give us his really frank views, with no special pleading, upon the economic consequences of the White Paper. That I am sure would be as revolutionary and refreshing as was the contribution he made in discussing the disastrous course that was proposed and followed in regard to reparations after the close of the last war.
  I have read this White Paper and I find that roughly one-quarter—a little more—is given up to explanatory notes. When I read them I said "Well, I presume this is just a substitution of Tweedledum and Tweedledee," calling the noble Lord's plan, which he expounded to your Lordships' House a year ago, ether Tweedledum or Tweedledee as you please. There is a difference, and personally I prefer Tweedledum. I agree with the noble Lord, Lord Nathan, in preferring the original plan to a return to the gold standard. I want to be realistic. As I listened to the speech of the noble Lord this afternoon, and in particular to his peroration when he said, "Please do not discourage these experts, do not turn their plans down, because we may be laying the foundation stone of a new order," I wondered where the new order came from. It has a very strong taste of the place from which the League of Nations originated some twenty odd years ago. I wonder, if it is accepted in the same way as the League of Nations was accepted, whether the father of the plan will not renounce his offspring in the same way as the League of Nations was set on one side.
  The noble Lord, Lord Keynes, stated that the new-fangled expression for international currency, "bancor" or "unitas," had been dropped, but he did not stress the, fact that he was resurrecting the very old-fangled, flyblown End disgraced gold standard. That, however, is the alternative to the new-fangled plans of "unitas" and "bancor." If you regard the White Paper realistically, it is quite futile to say that it does not mean a return to the gold standard. If words have any meaning- the White Paper cannot mean anything else. In the Joint Statement
  862
  by Experts on the Establishment of an International Monetary Fund, Clause II (3) says:
  "The obligatory gold subscription of a member country shall be fixed at 25 per cent. of its subscription (quota) or 10 per cent. of its holdings of gold and gold-convertible exchange, whichever is smaller."
  That is pretty clear. It has to be gold. Perhaps the noble and learned Viscount who replies would tell me how much we have to put up to find 10 per cent. in gold or gold-convertible exchange.
  What is the British holding in such securities and where are they coming from? Looking at the statement of the Bank of England Issue Department I find we have less than a quarter of a million in gold. If we are to take the proportion of the total holding explained to us this afternoon, I presume we have to go out and acquire gold, giving goods for it at twice the rate we had to give when we went back to the gold standard in 1925—twice the rate because, using it as a measure of value, gold to-day in terms of sterling, is twice as expensive as in 1925. Exactly what is meant by gold-convertible securities I am at a loss to Know. That is one of my shortcomings, and perhaps the noble and learned Viscount will tell me.
  There was a time, I know, when an English bank-note was convertible into gold, when a dollar-note was convertible into gold, when the bank-notes of most of the civilized Western powers, at any rate, were convertible into gold, but there is not a bank-note in the world to-day of any consequence that is convertible into gold. So it would perhaps be interesting to know what is a gold-convertible security. Clause III of the Paper, by paragraphs 5 and 6, deals with the ways and means whereby paper currencies shall be converted into gold. Clause IV completes the picture and stipulates that the par values of members currencies shall be expressed in gold, and it presumes thereby, and only thereby, to set up an international parity of values based upon the price of gold. The parity of values cannot be acquired in any other way. That is the old gold standard.
  A NOBLE LORD: No.
  LORD PERRY: Forgive me; if it depends on the price of gold—the old gold standard. Details of the working of it may be different, but on questions of

  863
  detail this White Paper conceals more than it betrays. The old gold standard was evolved by one nation after the other stipulating on its own behalf over a period of years, and had its own selected members. For example, just as we said we would buy gold at a certain sterling price, France said she would buy for so many francs per ounce, Germany said she would buy for so many marks, and America said she would buy for so many dollars; and it was by means of that gold standard, by that gold measure—and only by that means—that we were enabled to achieve parity of international currencies. Now we are proposing that we should be able to do it after twelve months' work by 33 experts producing a document of this character, and set ourselves up to control—and it must resolve itself into an autocratic control—the trade and business of the world, determined on the values of gold. That is what it amounts to.
  Gold was spoken of by the Chancellor of the Exchequer in another place last week, when the subject was being discussed, as a very valuable commodity, and he excused its use because it was a valuable commodity. May we reflect on this question: Upon what intrinsic value as a commodity does gold rest? I venture to think it is very little indeed. It will be found that in this there is perhaps something comparable with the situation when silver coinage was abandoned. Up to the time of the abandonment of silver coinage in the 'eighties it was rated as against gold at the rate of 16 to 1. When it had to take its place in the markets of the world and respond to the conditions of supply and demand it sank. To-day it has sunk to such a level that the equivalent values work out at about 80 to 1. When an artificial price and value were put upon it its relation to gold was 16 to 1.
  I ask the noble Viscount what in his opinion would be the value of gold if it were not for its use as a yardstick alone. Is it not thoroughly uneconomic to spend money to dig a thing out of a hole in one part of the earth merely to deposit it in another hole somewhere else—something which is not to be put to any use but as a simple yardstick, a very expensive yardstick. I cannot see why this White Paper plan could not succeed without the use of gold. As I have said, gold
  864
  is merely a yardstick. You might just as well, if you like, take the term dollar, the term bancor, the term unitas, or any other term, and, by international agreement such as is presumed in this particular case here, make a piece of paper—a piece of paper with a common name commonly accepted—a measure of value. Really gold has very little intrinsic value compared with paper. I think that as a matter of real practice we should much prefer paper—that is paper as paper—to gold if we had to choose between one and the other.
  I would like now to read to you what the Prime Minister, than whom there is no greater living speaker or writer in our language, said in 1932 on the subject of America and our relations with America. After recommending what we are all trying to achieve now and what we all desire, he said that we should strive to have a common understanding with the United States. Then he went on to say:
  "Therefore I say that His Majesty's Government should address themselves urgently to the Government of the United States, and they need not be afraid in so worthy a cause of encountering a rebuff. I may be told that we cannot talk to the United States of America because they are busy about their election; that we do not know who is going to govern the United States; that we do not know whether they have at this moment the inherent capacity to make an arrangement and carry it through. We may have to wait for many critical months, and we may find after that that no agreement is possible. All right, do your best, but, if nothing can be done there, let us fall back upon what I must regard as the minor step, the second best, which, nevertheless, may prove a highly practical policy and may become the means of our economic salvation. Let us fall back on what I will call the magnificent congregation of sterling communities. Let us make the best of that in default of a better."
  That was the advice of our present Prime Minister when he was not a Minister. He was then a private Member of Parliament and he was advising the Government of the day.
  He had had to make a confession regarding one of the greatest mistakes of his life—I am afraid I think the very greatest so far as this country's prosperity was concerned. He confessed that in succumbing to expert advice in 1925 he had done a wrong thing. His advice here is to take what we have got, to become rulers in our own house. I am sure there is no salvation to be found in any return to the gold standard or the conditions prevailing when

  865
  the gold standard worked satisfactorily. We certainly do not want in our own country to return to the conditions of sweated labour, child labour and so on, so that we can build up a great creditor position abroad by exporting more than we import and so that we can, according to one estimate at least, lose £4,000,000,000 in bad debts abroad, money which is really taken out of the pockets of our people here at home. I think that we should bear in mind the Fifth Point of the Atlantic Charter, which states that it is the desire
  "to bring about the fullest collaboration between all nations in the economic field, with the object of securing for all improved labour standards, economic advancement, and social security."
  That, I think, should be our object. That can be achieved without any use of gold at all, and without the use of any other commodity, because the use of any commodity at all is a malpractice if it is going to be employed as a yardstick for measuring all other values. I think that if we accept the Motion in the terms in which it has been put to us to-day—namely, that we agree with the principles set forth in paragraph I of the White Paper—there will be no objection, but we should enter a caveat against accepting everything in the White Paper which comes after that.
  LORD BALFOUR OF BURLEIGH: My Lords, I rise to support to the utmost of my ability the Motion which is before your Lordships' House, and I want to go a little further than that and to express my most cordial approval of the general principles which are enunciated in the White Paper. I find myself differing in toto from my noble friend Lord Perry, and I think that, feeling as he does, the only logical thing for him to do is to insist on dividing against this Motion. I rather hope that the noble Lord will do that, because I think that it will reveal the strength of opinion in your Lordships' House in favour not only of the Motion but also of the general principles of this scheme.
  I think that this White Paper gives us very great hope for the future. The first hopeful point to which I would call attention is the solitary one which my noble friend Lord Perry found himself able to approve. It is No. 2 in the statement of principles, and it says that the object of the Fund is:
  866
  "To facilitate the expansion and balanced growth of international trade and to contribute in this way to the maintenance of a high level of employment and real income, which must be a primary objective of economic policy."
  I find that encouraging because I think that it has now become obvious that our greatest object in our internal policy is that of the attainment of full employment. We have arrived at that conclusion after twenty-five difficult years since the last war, and what I like about this scheme is that it seems to show in every clause evidence of a desire to bring the monetary machine under control so as to serve that object of full employment. Full employment is not only our interest, but a common interest of ourselves, of all the Associated and United Nations, and of the whole world. It is a great thing to have discovered a common interest for which we can all work by international means. That, I think, illustrates the advance which has been made since we found ourselves in the same sort of position at the end of the last war. My noble friend Lord Keynes gave your Lordships a brief account of his own personal history and struggles in this matter, and nothing could illustrate better the progress which we have made in knowledge of economic affairs than this consensus of opinion that full employment is not only our aim but the common aim of all the world. Therein I find enormous hope for the future.
  The second point which I find very hopeful is referred to in paragraph (9) of the Explanatory Notes, and given effect to in the details of the scheme. It is the willingness of the nation which is likely to be the greatest creditor nation after the war to discuss the problem when a currency becomes scarce and to take steps to prevent the consequences of which we have already had experience. I read the debate in another place, and I was greatly impressed by the remark of the Chancellor of the Exchequer, that he felt convinced that the great creditor country would take measures to relieve the situation before action by the Fund became necessary. My noble friend Lord Keynes made a remark much to the same effect. What a tremendous advance that is over our past difficulties, to find the United States prepared to put such a provision as that into a scheme to which they expressed themselves as willing to adhere!

  867
  I think that there are four objections which would be conclusive against this scheme if they could be established, and it is right that we should consider them and make quite certain that we are going to be safeguarded against them. I say at once that if the scheme involved a return to the old, rigid gold standard, that would be a sufficient reason to condemn it. I should not have thought it necessary to spend a moment on that, after the explanation which we have had from my noble friend Lord Keynes, but for the speech delivered by my noble friend Lord Perry. Frankly, in the light of Lord Keynes's speech, I thought that that was one of the most amazing speeches which I have ever heard in your Lordships' House. To begin with, Lord Perry said that the White Paper was contradictory and badly drafted. I think he said that it was not written in English. Perhaps it has been written in American. What a wonderful thing it would be if it had been written in American by an American! That would be one of the greatest recommendations that the scheme could possibly have.
  The noble Lord, I thought, built a wholly imaginary case of the dangers which we should incur in backing this scheme. He said that it was not different from the old gold standard. The noble Lord, Lord Keynes, spent ten minutes in proving to your Lordships that the new arrangements, so far from anchoring our internal conditions to other people's conditions through the medium of gold, specifically provided for the adjustment through this scheme of our domestic situation so that we could preserve our own standard of living.
  LORD PERRY: My Lords, I should like to say that I was speaking of the international position, and not of our domestic conditions at all.
  LORD BALFOUR OF BURLEIGH: My Lords, I thought that the noble Lord's objection to the scheme was that our domestic situation would suffer because we ran the risk of having to adjust it to international conditions. If that is not it, I do not understand what the noble Lord's objection is. The noble Lord said that apart from being a yardstick gold had no intrinsic value. I differ from him entirely. Gold always has had a great intrinsic
  868
  value ever since the days of the Pharaohs, when they used to cover their images with gold. Gold always has had an attraction for people, and I think it is entirely a fallacy to say gold has no intrinsic value. Where I agree with the noble Lord is that we should, if we were sufficiently educated, use bits of paper just as well as bits of gold, and it is one of the objects of this scheme to bring that happy state of affairs about. But in order to use bits of paper as a medium of exchange, you have to have confidence in the bits of paper; and it is because confidence has been destroyed that a scheme like this is necessary to try to get us back to a happy state of affairs where we shall all have confidence in one another's currency. Then paper will do perfectly well, and it will not be necessary even to have the remote link which there is with gold in the present scheme. As a matter of fact as long as you have the position in the United States, with their great stock of gold, and as long as you have a dollar-sterling rate, you must have a link with gold. You cannot help it. It is a variable link under the scheme, but you cannot help having a link as long as the Americans have got the gold under the present conditions, and as long as there is trade between Great Britain and America, which involves a dollar-sterling rate. But you have no more of a rigid link under this scheme than you had in pre-war days, days after we had left the gold standard. That is the first objection. I entirely agree with the noble Lord that if it is a return to the gold standard we will have none of it, but I do not believe it is a return to a rigid standard, which clamps our currency down to gold.
  The second point which would be an objection to this scheme would be if it involved loss of control ever our own internal purchasing power. The control of internal purchasing power is the most potent weapon which our Treasury can have to influence the trade cycle—control over boom and slump—and there must be absolute control, so as to remain masters in our own house of the volume of our own internal purchasing power. I do not think anybody, at all events not to-day in this House, has suggested that there is any danger of that. Thirdly—and this is a point which we have to examine with great care—if this scheme debarred us from reciprocal trade arrangements within the Empire, then I think we should have to ask for some modification, or be quite

  869
  clear where we are. As this is a point on which I think there is a good deal of uneasiness, I want to look at it rather carefully. Various pronouncements have been made. The Chancellor of the Exchequer in another place was fairly specific about it. He said:
  "There is nothing in the scheme to interfere with the continuance of sterling area arrangements."
  And he said again:
  "There is nothing to prevent the continuance of the same close monetary and economic arrangements between this country and the Dominions as in the past."
  Well, that is pretty specific. The noble Lord, Lord Keynes, himself in a letter in The Times the other day said that after the transitional period, members of the Fund undertake to refrain from bilateral agreements which would restrict availability of foreign-owned funds arising out of current transactions. And he added this:
  "In other words, we shall all be free, having sold our exports in one country, to spend the proceeds in any other country."
  That is the point that I wanted to be quite satisfied about. It has been referred to by more than one noble Lord to-day.
  The noble Lord, Lord Addison, referred to the bulk purchase of food. In passing, I would like to refer to a point made by the noble Lord, Lord Nathan, in regard to abnormal war balances, and I would remind him that there is in the scheme a saving clause for abnormal war balances after the transitional period. I think he thought the saving clause was limited to the transitional period. In point of fact in the scheme the saving clause for abnormal war balances does apply even after the transitional period. But the apprehensions which have been aroused are that, for instance, there might be a desire to do a big trade deal between this country, and we will say, New Zealand. I well remember at the time of the slump, when New Zealand was having great difficulty in sending enough of her exports at the reduced prices to pay for her obligations over here, New Zealand said to this country: "We will give you an undertaking to purchase with the sterling resulting from our butter the whole of the manufactures you chose to sell." It was very difficult for us to give that undertaking. I do not think we were ever able to. But it is conceivable that New Zealand might want to say to us:
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  "We will make very large shipments of butter to the United Kingdom, and in return you will send us manufactured goods to the equivalent value." I have some slight difficulty in reconciling the right to adopt an arrangement of that sort with the very sweeping definition which my noble friend opposite has given us, because it does seem to me that if the sterling proceeds of that big bulk purchase of New Zealand butter are earmarked for United Kingdom sellers of manufactures, that cannot be said to leave New Zealand free to spend the proceeds of her butter money where she likes.
  LORD KEYNES: By her own free will. I said that a country, having sold its exports anywhere, was free to spend the money resulting from those exports anywhere. In the case of both countries it must be of their own free will.
  LORD BALFOUR OF BURLEIGH: Yes, but having of their own free will entered into such an agreement, does not it limit the possibility of other nations being similarly free? Lord Keynes's letter to The Times put it the other way round, but I think I could best illustrate the point by a quotation of what he said to-day. He said: "We desire to sell in one country and buy in another, therefore it is important to us that others should refrain from discriminatory trade practices."
  LORD KEYNES: "Exchange practices" were the words I used.
  LORD BALFOUR OF BURLEIGH: Discriminatory exchange practices. But is it possible to distinguish between my proposal and allocating definitely a block of currency for one particular purpose? The noble Lord said if we buy ourselves with currency and we do not want to sell there, we can spend it elsewhere.
  LORD KEYNES: The distinction is whether it is voluntary. If it is blocked it is not voluntary.
  LORD BALFOUR OF BURLEIGH: I am very much obliged for the explanation, which I think may go some way to relieve the anxiety of those who really do see a danger to our Imperial trade on this particular point. I should like to reecho the plea that was made by my noble friend opposite for encouragement to the experts. I do not think it is much use saying, as I think my noble friend Lord

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  Perry did, that the Americans would not enter into any such engagement. Perhaps my noble friend did not say it, but those who back their sterling area ideas, I think, are setting up an isolationism, or tending towards an isolationism, of sterling which in its way will be just as inimical to world progress as would the isolationism for which all of us are so-ready to blame our friends on the other side of the Atlantic. There must be co-operation and there must be give and take. My countrymen are sometimes accused of interpreting give and take as "You give and I take." If we are going to continue these negotiations in that spirit then the prospect is grim indeed. I would most earnestly suggest that, having satisfied ourselves that the bogies which have been raised are non-existent—and I am perfectly certain my noble friend Lord Perry, with the greatest good faith in the world, is raising a bogy—then do let us go forward with the intention of encouraging our experts to do what my noble friend Lord Keynes has already told us they are doing, to work together with the sincere intention of finding a workable scheme for the benefit of all concerned.
  I am convinced that on the other side of the Atlantic there is no desire to find some deep dark design, as the Chancellor of the Exchequer said in the other place, to get the better of us. There is a sincere desire to work with us. When I hear our experts blamed and our Prime Minister blamed for giving way in every direction to the Americans, it makes me feel rather happy because I know how many Americans there are who are telling the President that he is being led up the garden path by the British Prime Minister. I suppose nobody can express the obligation which we are under to the United States for Lease-Lend. I believe that the United States of America realize the obligation that they are under to this country for our contribution to the common cause which, I suppose, we have the right to think has been more comprehensive than that of any one else. If we can get mutual understanding on these matters, therein lies the only hope for a future which will be better than the past. I must say also that one of the most hopeful features of this proposal, as was announced a day or two ago, possibly at the time it was published, is that it has
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  secured the adherence of the experts of Soviet Russia. Between the three of us—the United States of America, Soviet Russia, and ourselves—cordial co-operation, not in the spirit of hucksters but in the spirit of partners, is what is necessary for the future of the world.
  THE LORD CHANCELLOR (VISCOUNT SIMON): My Lords, after the authoritative and illuminating speech which was delivered by my noble friend Lord Keynes earlier in the debate your Lordships will not expect from a Government speaker—a politician and no expert, though I am not myself aware why the two things should necessarily be opposed!—any additional light to be thrown on what is a difficult subject. But I would remind your Lordships of the nature of the Resolution which has been moved. If ever there was a moderately phrased Resolution, it is this one. We are invited to say that the statement of principles contained in this White Paper "provides a suitable foundation for further international consultation with a view to improved monetary co-operation after the war."
  I suppose that improved monetary co-operation after the war is the desire of everyone. It is only a portion—it may only be a small fraction—of the international arrangements which will be needed, and I certainly agreed with my noble friend Lord Melchett when he said that he did not think it would be right to put upon this particular proposal the responsibility for carrying out the vast range of international co-operative plans dealing with trade and other things, political as well as economical, which, for all I know, in point of absolute importance, stand at least equal to the proposals contained in this document. I am not ranging these different matters in any order of importance. It so happens that this document has come forward, not indeed in its final form, but in sufficient detail and with sufficient precision for us to be invited to say whether we wish the international conversations to be continued on the basis of what has already been achieved. That is the matter on which your Lordships will shortly decide, and I have a few observations which I wish to offer to the House before the matter is put to the vote.
  I take it that the broad purpose of the scheme in this new White Paper is the same as that of the scheme a year ago.

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  It has been interesting to all of us to observe the deft and amusing phrases in which my noble friend Lord Keynes explained that, whatever might have been the attractions of the object of his notice twelve months ago, he had come to the conclusion on the whole that this was, after all, a better substitute. It would be wrong to charge him with fickleness. I understand the explanation very largely is that it is the same lady, but in different clothes. It is true that the garments of the present lady are not perhaps so abundant as everyone could wish. Lord Nathan raised the question as to whether the total sum mentioned would prove to be enough to serve the purposes designed. It may be not, but that is all of a piece with the austerity of the President of the Board of Trade in providing necessary clothing. I do not say that the two schemes are the same. I do not know enough of the technical side of the subject to be sure, but my own feeling is that they are not exactly the same though they are very closely related. In this House I am glad to think it is still permitted, on occasion, to indulge in a Latin quotation. Your Lordships may remember how the Roman poet describes the sea nymphs who all had a common mother by saying that they did not, in fact, look exactly like one another, but they were not really different-looking either, which is just what sisters ought to be:
  …"Facies non omnibus una, Nec diversa tamen; qualem decet esse sororum."
  Of these two beautiful sisters, I gather on reflection my noble friend Lord Keynes prefers the younger. What is the principal effect of the two schemes? What is the main object which they have? I take it to be this. I take it, as indeed was just said by the noble Lord, Lord Balfour of Burleigh, that really the primary object is to secure as far as possible that there shall be free multilateral exchange and that there shall not continue to be all sorts of obstacles raised with which in recent years before the war we had become familiar and which resulted, for example, in those who bought things from a country like Germany finding that they could not make a free use of the exchange they had acquired but had to use it in that country, sometimes only under most rigorous conditions, so that sometimes that country went to the length of stipulating the actual
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  goods they should be allowed to take in exchange. As I think has been pointed out, our own country and Commonwealth need this facility of multilateral exchange probably more than any great trading community in the world, because it so happens that the things which we produce and which we want to sell to people are constantly being sold to another community whose own products we do not want to buy, and therefore we must have the facility to use through the medium of third countries the credit which we have earned in order to pay for whatever we want to buy in any country in the world. That is my understanding of the last scheme and it is my understanding of the present scheme, and I approach the whole thing from that point of view.
  Now, my Lords, not being myself an expert but having done my best to study this matter, as I did a year ago, I willingly concede the great superiority of experts in the debate in many respects—and in fact I think in all respects, except one. That is, I think, that they know so much about the subject—and they have been in it from the beginning—that they have a slight tendency even in their clearest explanatory passages, to assume that the rest of us know more about it than we really do. I have in my own mind endeavoured to construct an exposition which I will, with great respect, offer to the House. It is admittedly very much more simple and elementary than that which we have heard from highly qualified speakers this afternoon. It seems to me the matter may be approached in the simplest terms like these.
  After the war, by common consent, the re-establishment of our trade prosperity largely depends on our export trade. I do not think there is any difference upon that proposition. Now what would be the ideal conditions from the point of view of currency if you had a large international trade? Well, the ideal situation would be that every currency should stand towards every other currency in a natural, unchanging relation of value, that time should go on and always there would be a natural, automatic par of exchange, with no changing conditions that could give rise to difficulty. If that were so everybody would be pleased—that is to say, everybody except the dealers in foreign exchange. International trade could be planned with complete confidence and carried out without

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  any anxiety that exchanges might alter and that values might change between night and morning. That situation, which I have ventured to call ideal, is, of course, an impossibility. It cannot work out like that. In the future as in the past the currency of a particular country may be put under severe strain. To give only one example, the strain arising from the disequilibrium between imports and exports. The practical question then comes to be, how is that strain to be relieved? Can we devise for the future a better monetary machine to relieve that strain than we have had to use in the past?
  Consider what has been the method that has been common in the past. Hitherto, generally speaking, the distressed country, the country whose currency is under this strain, has endeavoured to relieve itself by unilateral action. It has devalued its own currency. It has taken various steps to try and restore the balance, which may involve the blocking of imports and other grave steps. That is the method that has constantly been followed in cases of difficulty between the two wars. Consider the case of France. I have extracted one or two figures. In 1920, 220 francs went to the pound. M. Poincare made a great effort to pull it up, and he had, I think, pulled it up to 124. In 1934 it was 76 francs to the pound and in 1936, as I very well remember, we had news at the Treasury that francs had been devalued to 105. How can international trade be developed and go steadily on to the mutual advantage of both parties if the length of the measuring rod—that is all it is—is like a piece of elastic which you can pull out or push in as you please?
  There is a further observation. This old system which wrought so much havoc is a system in which one country whose exchange is in question has taken some violent step, as though it would change the exchange value of its own currency without affecting other people. But every change in value that is put on a currency for international purposes operates at both ends. Consequently this old system, like the French depreciation, did serious injury to the trade of other people. Some of your Lordships may remember, for example—I think my noble friend Lord Barnby will—that when the French made the last change to which I have referred they immediately struck at the trade in the West Riding of Yorkshire.
  LORD BARNBY: With disastrous results on unemployment.
  THE LORD CHANCELLOR: That being the old system, I will endeavour to put what is now proposed. If I have followed it at all rightly—and I am very much under correction and instruction—I say the essence of the present scheme is to provide means by which exchanges may, as far as possible, be maintained and further that when changes are needed those changes should take place after an opportunity for international consultation through, or with the assistance of, a permanent international instrument. The Fund created in this White Paper might give the distressed country the use of resources which might enable it to avoid restrictive measures, which would otherwise be inevitable. If I have understood the matter at all, it is the attempt to move from what I have described as the conditions before the war to a new and international system that is involved here. The essence of the thing is that we should recognize that these fluctuations in exchange rates which are bound to occur from time to time, often from perfectly legitimate causes, should not be at the decision of a particular country, provoking in return, it may be, a wholly unjustified beggar-my-neighbour attitude in another country, but that, as far as possible, we should limit these oscillations by having a fund which will be available to assist a distressed country up to a point, and, on the other hand, having an international and permanent institution which would be able to investigate the facts and use its powers of advice and delay, thereby directly promoting opportunities for freer international trade. I have detained your Lordships to put the matter in that way because, as it seems to me, that is an elementary way of putting it, but I hope not too far away from the truth.
  There is an objection raised. It has been voiced in this debate in the most downright form by my noble friend Lord Perry. It was mentioned earlier in the debate by my noble friend Lord Addison in the form rather of a question than a challenge. Lord Addison asked Lord Keynes to explain whether it was not the fact that the value of exchange in the future under this plan would be determined in relation to gold, and whether that did not involve some danger of approaching a return to the gold standard. My

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  noble friend Lord Perry, with his customary straightforwardness, made a much bolder assertion, and I hope he will not mind if I say that it was an assertion which seemed to beg the question. At any rate he said he much preferred the original plan to returning to the gold standard. May I offer respectfully to the House and to my noble friend a few observations on this subject? It is a subject that interests a great many people and, when it is asked whether a plan of this sort does not involve a return to gold, some explanation of the nature of a gold standard is important for people outside, as well as inside, your Lordships' House.
  Speaking on the subject with humility, for I think it is a difficult subject, what I notice is that some people—I do not mean in your Lordships' House—talk about returning to the gold standard as if it was as simple an operation as returning to drink. It is really necessary to remember what happened. When we went off gold in 1931 something happened internally and something also happened externally. Internally the operation was this. The operation which amounted to abandoning the gold standard was an Act of Parliament which put an end to the obligation of the Bank of England to give gold coin in return for bank notes or to buy gold at a fixed price in sterling. That was the internal operation. It is quite certain that nothing in this new scheme touches that. But there is, of course, a second aspect of the gold standard which may be more important. I think it can be correctly stated in this way. The normal gold standard was a firm understanding, approaching almost a moral contract, that changes in the gold value of our currency would not be made except in very abnormal circumstances and under force majeure. It therefore is, as I think the noble Lord, Lord Keynes, pointed out, a principle, a rule of conduct, which is directed to secure rigidity. It is designed to hold things in a relation which cannot be changed.
  If I have at all succeeded in what I have already said, it will be plain to your Lordships, as indeed the debate will have shown, that this new Fund is not aiming at rigidity. It is aiming at elasticity; it is aiming at an adjustment, an orderly adjustment, under the ægis of an international Fund, when adjustment is required. You require that kind of resilience if you are going to keep currencies
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  in good relation to one another. In this respect the preservation of a good currency is like a good swing at the game of golf. If you anchor yourself too rigidly, if you fix every bone and muscle in your body and then try to hit the ball you will not hit it very far and you are extremely likely, occasionally, to miss it altogether. That is not to say that a golfer's swing is a wreckless swagger round the course; it is a most carefully controlled mechanism, but it is a mechanism which recognizes that you have to allow for change to suit circumstances, to suit the ground, to suit, it may be, the capacity of the player. Exactly the same is true, if I understand it rightly, of the new proposal. There is really nothing in the point, as far as I can see, that the new scheme is a return to the gold standard.
  My noble friend Lord Perry desired to prove his assertion by two references to the White Paper, and I will deal with them. First, let me be perfectly sure that I have the right references. I understand one of the references was to paragraph II (3) and the other was to paragraph IV (1). The first I will read, as Lord Perry read it. He thought it meant we were going back to gold. The paragraph reads:
  "The obligatory gold subscription of a member country shall be fixed at 25 per cent. of its subscription (quota) or 10 per cent. of its holdings of gold and gold convertible exchange, whichever is smaller."
  Then my noble friend asked me the question—interesting but indiscreet—"but has the country got as much gold as that?" As much gold as what? Let us suppose we had no gold at all—which is far from being the case—then 10 per cent. of that would be nothing. Ten per cent. of nothing is nothing all the world over. If we were short of the necessary subscription we should only have to produce 10 per cent. of our gold, and having no gold we could not produce anything. That I think is well within the capacity of all of us, whether experts or politicians. Then my noble friend asked what is meant by "gold-convertible exchange." Is that a very difficult question to answer? What is an American dollar? I should have thought that was convertible.
  LORD PERRY: Will the noble and learned Viscount pardon me for interrupting? I deliberately asked that question

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  and I am told that the American dollar is not convertible any more than our bank note is convertible.
  THE LORD CHANCELLOR: I was not aware of that.
  LORD PERRY: I had that on the best authority.
  THE LORD CHANCELLOR: Be that as it may, it does not seem to make any difference.
  LORD KEYNES: May I say that the American experts believed the dollar was convertible? I have not checked the accuracy of their view.
  THE LORD CHANCELLOR: That seems to show the need for further discussion. The same point arises and it is quite conclusive that if there was no gold-convertible exchange in rerun natura 10 per cent. of it would not come to very much. That, I think, is all that need be said about the first of the quotations. The second quotation was from paragraph IV.
  LORD ADDISON: If the noble and learned Viscount will forgive me, may I be permitted to ask this? It is to be in gold or gold-convertible exchange. In the hypothesis—the extreme hypothesis—which the Lord Chancellor has put before us, he has assumed that the people of the country have no gold. Will they still come under the Fund?
  THE LORD CHANCELLOR: Yes, I certainly think so. While I have no authority to disclose the position of our gold account, I wish to make it quite plain that I do not accept the proposition that we have not got any. I was limiting myself to the much simpler proposition that 10 per cent. of no gold is no gold. While Lord Keynes was speaking I gathered that he affirmed that the limited size of any country's holding in gold is not necessarily a disqualification from becoming a member of the Fund.
  I will not delay the House to discuss whether the feeling of having gold gives more gratification than that of paper. Lord Perry, I think, said that he preferred paper. All I can say is that when I played myself in as Captain of St. Andrews Golf Club, the caddy on whom I bestowed the customary sovereign seemed to value it a great deal more than a Scottish paper
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  pound. The other passage in the White Paper which Lord Perry thought had a bearing on this was the provision in IV that:
  "The par value of a member's currency shall be agreed with the Fund when it is admitted to membership and shall be expressed in terms of gold."
  Is not there a danger of a little confusion here? To express currencies in terms of gold has nothing to do with returning to the gold standard, has it? If you are going to compare various currencies you must have some common measure by which you can state their comparative values, and I find it rather difficult to think that the reference to gold here is to anything but a convenient common denominator. If you desired to state the respective weights of all the animals in the Zoo, I suppose you might state them in terms of the weight of the elephant, and that is all that is being done when you say that the various currencies of the world shall be expressed in terms of gold. It means simply that you are using gold as your measuring stick, and it is a very convenient thing to do. It is a good solid, stiff measuring stick, but by using it as such you are not returning to the gold standard in any sense at all.
  You could achieve the same result perfectly well by stating all the exchanges of the world in terms of sterling, or dollars, or anything else you like. But it is very convenient to take a measuring rod that is well known, and in view of the fact that this is an international agreement it is not very surprising that we should agree that for the purpose of measuring the comparative relations of currencies the measuring stick shall be gold. It might, of course, quite well be any other standard you chose to adopt. All this has nothing to do with going back to the gold standard or anything of that kind. On the contrary, as I think my noble friend Lord Keynes made plain, if you have a scheme in which you contemplate the possibility of changes in the exchange value of a country's currency which are to be arrived at as a result of consultation and after all proper influences have been brought to bear, you are providing for adjustments of value according to circumstances, as distinct from tying a currency rigidly to a particular ratio. That is my understanding, supported by Lord Keynes, and I would in-

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  vite your Lordships' House to consider whether that is not the right view.
  In conclusion I would say that several of us have tried, in the course of this afternoon's interesting debate, to sum up fairly the advantages to be derived from a scheme of this sort. I have put them down under four heads. If you take this scheme, and understand it, there seem to me to be—leaving out technicalities—four principles involved which are of great value. The first is this. The scheme contains the principle of the establishment and maintenance of a reasonable stability in the exchanges, so that both seller and buyer may know the value to be put upon the goods which they are dealing in; so that the goods may be sold with owners and buyers knowing their real value. Undoubtedly, the scheme means that, and so far it must be welcomed by a great commercial community like ours.
  The second principle is that the scheme contains provision for the orderly adjustment of the exchanges, not for their rigidity; for adjustment and re-adjustment where it is really necessary instead of leaving a country to alter the value for itself. It will not be left to any country to make adjustments without consideration of others, possibly for illegitimate reasons. Your Lordships will, perhaps, have in mind what I ventured to sketch as our experience between the wars, and you will see what an enormous gain that will be if we can succeed. There is not to be a disorderly scramble, but orderly adjustment of the exchanges, and it is to take place not because one country decides on it without consideration for other countries, but because there is opportunity for consultation and co-operation. When a country takes steps to change its rate of exchange, as France did over and over again between the wars, the operation affects other countries. All exchange modification produces results at both ends. Therefore, while we shall have to consent, it may be, from time to time to adjustment in exchange rates, it will be far better that these adjustments should take place after due international notice and consultation.
  Thirdly comes the provision of temporary financial assistance for a country which finds itself in a situation of emergency because of a serious adverse balance of payments. That is a situation which has tempted a country suddenly to play
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  tricks with its exchange. Such a country may be tempted to adopt desperate remedies. It may stop imports or block balances in its efforts to keep itself afloat, and each of these things manifestly is an obstacle to international trade. If, therefore, you have an international mechanism which will for the time being relieve such a country in its difficulties and render this desperate course avoidable, that is a piece of international monetary co-operation which surely will be generally approved.
  The fourth and final principle of great value in this scheme is that these principles and practices which we have been considering should be given effect to through an international monetary institution. Consider the advantages of such an institution. The argument is much the same as the argument for other international institutions, which my noble friend Lord Cecil of Chelwood has often put with such great force. If you have an international monetary institution, it is a forum for consultation. I do not say that it can impose its will on every country. It cannot, and this scheme does not suggest that it can; but it is a forum for consultation between the various monetary authorities. It will be able—and this is a very important point—to ascertain and to pronounce impartially on the real facts. If in the British Treasury you have word that in so many days' time some foreign country is going to make a serious change in the valuation of its currency for exchange purposes, and it seems to you that the reasons given for that change are not adequate, it is a great step forward to be able to say that the situation should be examined by an impartial international body. Such a body will exert its influence to secure common standards and to prevent, or at least severely discourage, action in the monetary field which may be purely selfish. There have been cases in which sudden tricks have been played with exchange for a purely selfish national purpose, and at the same time the maximum damage done to international trade.
  I do not think that what I have said is exaggerated. It certainly does not proceed from any desire to press this particular scheme above any other. I can quite understand the sentiments of Lord Perry, who said that he preferred the earlier one, and I think that there was

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  a certain note in the speech of the noble Lord, Lord Keynes, which suggested that, after all, there was a good deal to be said for the elder sister. But we have to deal with things as they are, and can anyone hesitate when this Resolution is put forward in these terms. The Resolution invites us to encourage these people to go on with their discussions, in view of the fact that they have reached the point which they have. Who is going to take the responsibility of saying No? Of course, if you do not believe in any form of international co-operation—if nationalism goes to that length—then by all means say No; but if you feel, as surely every well-instructed Englishman must feel, that, whatever may be said in other fields, in this field international co-operation is the only way of safety and progress, I think it follows necessarily that your Lordships will accept Lord Addison's proposition.
  The Government have not said and do not say that they approve all that is contained in this document, nor have they committed themselves to its terms. What we do say is that this matter has been examined with the greatest skill and diligence by a remarkable assortment of people representing many countries, and that we should be betraying our trust, in our view, most lamentably if we did not urge that, on the basis of what has already been published and agreed, the discussions should go on. I trust that your Lordships will accept the Resolution unanimously.
  LORD ADDISON: My Lords, I would merely express the hope that the last sentence of the noble and learned Lord Chancellor's speech will be given effect to forthwith.
  On Question, Motion agreed to.

  FOOD FOR EUROPE: DR. KERSHNER'S PLAN.
  THE EARL OF DARNLEY THE EARL OF DARNLEY had given Notice that he would call attention to the fact that no mention was made by the Minister of Economic Warfare, in the debate in the House of Lords on May 9, of the question of relief to starving mothers and children in occupied Europe, and suggest that recent development of
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  thought in America exemplified by the unanimous Resolutions of both Houses, and the recommendation of the International Labour Office at Philadelphia, together with opinion in this country, show increasing world support for a limited scheme of relief such as the Kershner plan, and enhance the chances of success; ask His Majesty's Government whether they can reconsider the granting of the necessary facilities; and move for Papers. The noble Earl said: My Lords, I put this Motion on the Paper in order that I might briefly—very briefly, as the hour is late—but at the same time most respectfully, call attention to the fact that in the debate on May 9 last the noble Earl, Lord Selborne, made no allusion to any further feeding of starving children in the occupied areas of Europe. In fact, the feeding of those children was not mentioned in the debate at all, except in a few words in the opening speech of the noble Lord, Lord Nathan, in introducing the subject, when he said:
  "The famished people of Europe must now look not to a Kershner scheme; they must look to the onward sweep of our advancing Armies coming as liberators and bringing bread in their train."
  With due deference to Lord Nathan. I do not think that one of those famished mites would get much consolation out of that statement if he could read it. I used to live on the moors in Devonshire, and there there was a superstition about snakebite. If anybody was bitten by an adder people did not bother about the victim at all; they spent all day hunting for the snake, because they believed that if the snake was killed the victim would recover. I think there is perhaps a certain analogy between that superstition and the present case.
  The noble Earl, Lord Selborne, will perhaps think that I have not properly read or digested his speech in the debate on March 15 last, but I assure him that I have. I have studied every word of his long and complete reply, and also of the fervent plea of the most reverent Primate who initiated the debate to those noble Lords—amongst whom was the noble Viscount, Lord Cecil of Chelwood—who followed him. I think that perhaps I have also understood all the difficulties which such a process involves. I noted with satisfaction the apparently satisfactory mortality figures given by the noble Earl.

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  But, whoever is to blame for the state of affairs which prevails, and whatever the difficulties are which are concerned with present military operations, and whatever the even greater difficulty concerned with even greater military operations to come, these children still go on starving and crying and aching every day.
  If the ghastly scenes which I have seen photographically portrayed in Greece in the past are in fact taking place in North-West Europe to-day, surely the relieving of them has become a first priority charge on the general humanity of the whole of mankind, entirely independent of every other human action and ambition; and so I have brought this Motion to your Lordships' notice, not because I do not credit the words used by the noble Earl on March 15, but because world opinion seems to be becoming more convinced daily that some kind of modified scheme of feeding has become more practicable. It is therefore all the more incumbent on those who have full powers, and perhaps more incumbent still on those who have full stomachs, to take some action. America has perhaps led the way in this new trend of thought. That is evidenced, I think, by the unanimous Resolutions of both Houses of Congress, and by the still more recent recommendation of the International Labour Conference at Philadelphia. It seems to me improbable that bodies such as these could be so grossly misinformed as to state something which was entirely impossible, and I believe that opinion in this country and in many other countries is taking more and more the attitude that this horror could be and should be abated.
  I have quoted public opinion as a help, not as a lever. In particular the scheme referred to by Lord Nathan, the Kershner scheme, has taken prominence. Mr. Kershner claims that help can be given entirely independently of any pending or present military action. The noble Earl did not mention this scheme by name, though no doubt he spoke generally of it. It provides for limited help in the way of food and medical supplies for 10,000,000 children and mothers in Holland, Belgium, Norway and France, and though I will not bother your Lordships at this late hour with strings of figures, Dr. Kershner believes that what is proposed to be sent, plus what the children already have, would keep them in a fair degree of health.
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  In a recent broadcast he dealt with the popular objections to this scheme which, with your Lordships' permission, I propose briefly to read. I think if his words are true then his project would appear to have at least the possibility of a safe achievement.
  The first objection is that the Germans would take the food—that is the most generally believed of all. He says in answer:
  "From four years' experience directing relief work in Europe, I am glad to report that the Nazis have never taken a mouthful of our food. Our own State Department is authority for the fact that the Germans do not take any of the 19,000 tons of food going to Greece each month, that the operation is of no benefit to Axis economy and that it does save the Greeks. I received the same assurance from the Ministry of Economic Warfare in London last winter. Since the Germans do not take the food going to Greece, and since they did not take our food in France, it is reasonable to assume that they would not take food which we might now send to Norway, Holland, Belgium and France.
  "But assume the worst, suppose they did take it, what would be the result? As only small amounts would be sent at one time, they could not seize more than enough for one meal for the civilian population of Germany. This, of course, would immediately bring the operation to a close. The small gain accruing to Germany would be far outweighed by the psychological advantage on our side. Over the short wave radio we would tell our friends in Europe that we were anxious to feed their children, but that the Germans had taken the food, and the operation must therefore be stopped. We would have given them moral encouragement, we would continue to enjoy their affection and friendship, and we would have given the lie to the Nazi propaganda that these people are starving because of our blockade. Thus, the very worst thing that could happen would be to our advantage. But experience indicates that the Germans would not take the food and that the children would be saved."
  The second objection is that the Germans might not take the food which we send, but would take an equivalent amount of local food out of the country. His answer is:
  "If the operation were properly controlled, they could not do it. Let me explain. Every child helped should be required to exhaust its own ration card before being given a supplement of imported food. If the child eats all of the local foods to which it is entitled—its full share—just as if no foreign relief were available, it is obvious that there is no equivalent left over as a result of the operation by which the Nazis could profit. True enough, the Germans take food from all these countries, but the point is that they did not take any more as the result of our operations."
  Objection No. 3 is that the Germans would reduce the ration cards of the children whom we helped, so that although the child might exhaust his ration card, the card itself would call for less food, which would leave a residue by which the Nazis could profit. Dr. Kershner's answer is:
  "From experience, I can tell you that the Germans did not do this. The children whom we helped continued to have exactly the same ration card as the children whom we were not helping. This objection, therefore, falls down in the light of experience."
  Objection No. 4 is that "we cannot burden the American taxpayer with additional expense." His answer is:
  "We are not asking for any money from our Government or by private subscriptions. Norway, Holland, Belgium and France have funds of their own in this country more than sufficient to pay for all the food that it is proposed to send. The operation could be financed by unblocking a portion of these funds. The heads of these Governments have all assured me of their eagerness to use some of their resources in this manner."
  Objection No. 5 is that ships cannot be spared to send the food. His answer is:
  "We would not use a single ship available for the war effort. Neutral ships, which cannot be hired for war purposes, would be used."
  Objection No. 6 is that "in view of our growing shortage we have not the food to spare." His answer is:
  "A few weeks ago I saw a dispatch from the Department of Agriculture in Washington, stating that the American people are still wasting enough food to feed 20,000,000 people the year round. That is more than three times as much as we are asking permission to send to Europe."
  Objection No. 7 is that "no American could work in any occupied country, and we would not be sure of careful supervision." His answer is:
  "It is true that no American organization could work in these Nazi-occupied countries, but the International Red Cross, with a neutral personnel, which does it so well in Greece, is ready to undertake the responsibility of distribution. We may be sure, therefore, that the operation would be properly controlled."
  I realize that some of these claims of Dr. Kershner were generally contested by the noble Earl in his speech on March 15, especially perhaps the one that the Germans would reduce the basic ration so that the children's last state would be worse than their first. Dr. Kershner has given an answer to this, and I put this forward, not as a contradiction to the noble Earl, but as a possible assistance.
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  Of course, the noble Earl realizes the sufferings of these people and he knows more of their difficulties than anyone.
  I do not bring this Motion forward in any form of hostility, but because I feel that the terrible urgency of this matter requires that it should permanently remain a subject for constant review and discussion. So, most earnestly and respectfully, I would ask him these two questions. First, does this Kershner scheme or any other recent scheme give him any reason to modify his previous statements, or has any other event since March 15 enabled him to reconsider what he said on that date? Secondly, if these starving children are veritably a first charge on the humanity of mankind, independently of every other human ambition and action, does not the relief of them take precedence over everything else and more rightly challenge every possible difficulty, except perhaps the delaying of their final liberation? It is only on this last point that I would presume to differ from the noble Earl's speech of March 15, because the amounts involved are so very small and the apparatus proposed is so very independent. I would like to assert, and I think I am justified in doing so, that such an act of mercy would redound enormously to the credit of the country which is sponsoring and supporting this operation, and also of any country which would permit it to mature, and not only now but in the future.
  The Continent of Europe is now obscured by the fog of war, but one day it is going to emerge into the daylight of irritated and difficult neighbourliness. Therefore anything that could be done would be of supreme help in these difficult conditions. If His Majesty's Government could see their way to releasing sufficient control to allow some such scheme of modified relief to operate, a scheme which, mark you, involves only surplus American food, neutral ships and distributing agencies, I believe it could be an act of such Christian goodness, and therefore of such benevolent potency, that it could not fail to produce great benefit, not only to the receiver but also to the giver. In conclusion I would like to quote a very few words from Dr. Kershner's broadcast:
  "If these starving children were sitting on your doorstep to-night and you could see their piteous eyes, set in bloodless faces, begging even for the garbage from your kitchens,

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  you would feed them. You could not eat yourself until you had done so. Because they are across the sea does not lessen their suffering or our obligation."
  Those are the feelings with which I beg to move this Motion.
  THE MINISTER OF ECONOMIC WARFARE (THE EARL OF SELBORNE): My Lords, I should like to thank the noble Earl for the dearness and courtesy with which he has raised his Motion. I do not wish to delay your Lordships unduly, but I must answer him fully on the point with which he has dealt although the subject was covered in the very full debate which took place here on March 15. The noble Earl stated that, in his opinion, neither the Archbishop of Canterbury nor I dealt with the Kershner plan in that debate. But the most reverend Primate dealt with the problem, in fact he concentrated his plea on the adolescent children and nursing mothers of Europe and, looking through my own speech, I find that on four separate occasions I referred to that problem. Therefore I do not think my noble friend is justified in suggesting it was absent from my argument. Dr. Kershner is not the only gentleman who has put forward a scheme for the relief of children and expectant mothers in Europe. There is the scheme put forward by Dr. Eigwood and there are a number of other schemes. Since, however, the noble Earl has referred to Dr. Kershner's scheme and especially to his broadcast I feel I must make some remarks to your Lordships on the subject.
  Let me say two things first. I do assure my noble friend that the term "starving children," as applied to countries in Europe other than Greece in 1941 and to Poland and occupied Russia, is I believe an entirely misleading phrase. Except possibly for isolated cases, my information is that nothing of the sort has occurred in Western Europe. There is hunger, there is privation, there is malnutrition, there is distress, but nothing that could be called starvation. When we are considering this very distressing subject—and I fully share and admire Any noble friend's humanitarian feeling—let us not exaggerate. Let us be clear in our minds exactly what the problem is. I cart most solemnly assure my noble friend that the word "starving" is not justified, and it is very important that he should bear that in mind and that other people should bear it in mind
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  as well. In my speech on March 15 I gave reasons why we have come to that conclusion. The other thing I should like to say about the scheme he has advocated this afternoon is that I do not think any form of relief could justly omit Poland from its ambit because Poland is one of the most distressed countries in Europe, and the technical difficulties of getting food to Poland are no greater than the problem of getting food to any other occupied territory.
  Now may I say one word about Dr. Kershner's broadcast? The noble Earl has not had—he may be thankful—to study this terrible problem as closely as I have, and therefore very naturally he has been misled by a number of statements in Dr. Kershner's broadcast which, I regret to say, were misleading, though no doubt quite unintentionally. Let me take the first point—the question whether the Germans would steal the food that was to be sent to these children. Dr. Kershner said that "from four years' experience directing relief work in Europe, I am glad to report that the Nazis have never taken a mouthful of our food." Nowhere in his broadcast did Dr. Kershner reveal the fact that none of his experience was in German-occupied Europe. The whole of his experience was in Vichy France and in the Vichy French Colonies. My noble friend doubtless is not aware of that fact; but on that account Dr. Kershner's argument falls to the ground. He did valuable work in administering relief in Vichy France, but the problem there was entirely different from administering relief in a country occupied and policed by the Germans.
  Then Dr. Kershner went on to say, "Our own State Department is authority for the fact that the Germans do not take any of the 19,000 tons of food going to Greece each month." Then he said, "I received the same assurance from the Ministry of Economic Warfare in London last winter." It is perfectly true that Dr. Kershner visited the Ministry of Economic Warfare. He saw the present Director-General of the Department and the Parliamentary Secretary, but both these gentlemen have assured me that they never gave any assurance of the sort to Dr. Kershner. It is a regrettable fact that I have not been able to assure your Lordships that the relief scheme for Greece does not benefit the Germans. Then Dr.

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  Kershner, in another part of his broadcast, said that he could have fed two million children in Southern France, but he was not allowed to bring the food through the blockade; this forced him to limit the number of children fed to 100,000. Dr. Kershner does not mention the fact that five shiploads of relief foodstuffs were allowed through the blockade to the children in Vichy France, but when that territory became occupied by the Germans naturally we could not allow any more shipments. Therefore, I do say with very great respect that the whole of Dr. Kershner's argument, which is based on his experience in Vichy France (without stating that fact) falls to the ground when it is applied to occupied Europe. The short answer to the noble Earl and to Dr. Kershner is one that I gave in the debate on March 15.
  The noble Earl estimates that something like 10,000,000 people—mothers and children—are involved. These 10,000,000 people are not grouped together in any locality where you can get at them, but they are dispersed throughout occupied Europe, in every city, in every town, in every village. If you are going to get food to them and to ensure that none of this food reaches the Germans you obviously have to have an organization in every one of those localities. The organization of the sort we have attempted to set up in Greece, if applied to the whole of Europe, would be a most elaborate affair. It would take many months to establish and it could only function by the good will and the fair play of the German authorities. As I have told your Lordships, our experience in Greece does not lead us to believe that that fair play would be forthcoming. The noble Earl has said, and Dr. Kershner also, that if we found the Germans taking the food or stopping the rations of those who were receiving it, it would be possible for us to bring the scheme to an end. On that point, with all sincerity I beg to differ. Once you have started a scheme of this sort and once you have encouraged people to be dependent on it, then you have taken the responsibility on your shoulders. If we shut off the food supply we really could not expect the Germans to give food in its place. Therefore the last state of those unfortunate people would be worse than their first.
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  But I am bound to add this in reply to the noble Earl, that even if, say a year ago, it had been possible to erect the vast organization to distribute food for these selected individuals throughout occupied Europe, does he really think it would be physically possible to do so today at a moment when every port and every important railway in Europe is the subject of intense attack from the British and American Air Forces? And not only that, the noble Earl is aware that military operations are impending which will make the whole of Europe a battleground. In my opinion any scheme of this sort was never practical. I should have advocated it before if I had believed in it. But any such scheme under the circumstances of 1944 is fantastic, and it would be exceedingly unkind and exceedingly wrong to hold out hopes to distressed people in Europe that this kind of assistance was coming to them when we know from the facts I have mentioned that it could not materialize.
  What would be the effect of such an announcement? The noble Earl must remember that these unfortunate people eke out their existence by the utmost economy of their supplies. There are the rations that they get which are inadequate; there are also the adventitious supplies that come from friends in the country, from the Black Market, and from charity and the like, and these supplies are eked out with the utmost economy. If the people of occupied Europe thought that they were going to get relief in a comparatively short time there would be a more rapid consumption of these supplies. The only result of taking the step my noble friend advocates would be that these scarce supplies would be consumed rapidly, and in a few weeks they would all be gone and the aid which the people had been led to expect would not be forthcoming. In those circumstances, I think you really might get something like starvation; certainly the situation would be considerably worse than it is now. We had experience of that on a small scale in Greece last year. At one time the military situation led the people of Greece to believe that they were going to be liberated in a very short time. The result was they dipped into their reserves at an optimistic rate and that was one of the factors that produced the deteriorated position last autumn which we have had to meet with increased supplies. Therefore

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  I suggest to my noble friend that the course he recommends, far from assisting the people of occupied Europe, would really inflict great injury upon them because it would lead them to entertain exaggerated hopes which in present circumstances could not be fulfilled.
  THE EARL OF DARNLEY: My Lords, I thank the noble Earl for his full and very courteous; reply to me to-day. There are one or two small points arising out of his reply that I should like to refer to. The most important, it seems to me, is in regard to the organization suggested. It would not be the duty of this country to set it up. It is to be entirely independent. It is going to consist of neutral ships, of food from America, and neutral distribution. Therefore I venture to suggest that the noble Earl may have exaggerated the difficulties that attach to the scheme because of the enormous military operations that are impending. The noble Earl said something about Poland, and I would willingly include Poland in the list of countries mentioned by Mr. Kershner. I was not quoting those countries on my own initiative but entirely on his.
  The noble Earl said something that was consoling in one way but not in another. He said there was no actual starvation in North-West Europe at this time. It is not within my province to know the details of this subject. I can only talk about what I hear and what was said in the debate of March 15, when noble Lords urged that food should be
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  sent and quoted horrible figures in regard to starvation and distress. If that is not the case I am only too overjoyed to hear it. I have not put forward Dr. Kershner's scheme as the only scheme—if there is an improved scheme so much the better—but simply because it is the most familiar. In conclusion I would like to say that I should have liked to see the noble Earl, like Don Quixote, tilting his lance at the windmill difficulty on behalf of these wretched people because I believe the greatest duty of adult people is to the little ones who suffer, not because of their own fault but suffer all the same and suffer hideously. I ask leave to withdraw my Motion.
  Motion for Papers, by leave, withdrawn.

  WISBECH CORPORATION BILL. [H.L.]
  Reported with Amendments.

  DERWENT VALLEY WATER BILL. [H.L.]
  Report from the Standing Orders Committee that the Standing Orders not complied with in respect of the Petition for additional provision in the Bill ought to be dispensed with, and leave given to the Committee on the Bill to insert the additional provision.
  Read, and agreed to.
  House adjourned.