Orders of the Day — Finance Bill

– in the House of Commons on 20 May 1919.

Alert me about debates like this

Order for Second Reading read.

Motion made, and Question proposed, That the Bill be now read a Second time.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

The Bill which is now before the Committee asks for new powers of taxation. I submit that before the House gives that new power hon. Members should be satisfied that the Treasury, through the Chancellor of the Exchequer and those associated with him, have exercised to the full the power of control which certainly before the War they fully possessed—I refer to the checking and controlling of the expenditure by the public Departments of the fruits of the taxes which have already been levied under the powers granted by this House in the last Finance Act and those Acts preceding it. It is common knowledge that that control has not been exercised in a way which has given satisfaction to the House during the War. Indeed, the lack of that control has given very grave consideration to the Chancellor himself. In the Debate which we have already had on the Resolution, one of the main grounds of the appeal of the right hon. Gentleman was that his hands should be strengthened. One or two instances may be quoted of this serious state of affairs, of which hon. Members are, in a very general sense, pretty well aware.

For instance, take the three Departments where no very exceptional pressure like that at the War Office and the Admiralty has been felt during the War. Great pressure, it is true, has been felt, but not in the same disruptive manner as applies to the fighting Departments. The Home Office, far instance, in 1914, cost £255,000. It has reached, according to the last available figure, £352,000. Take the Friendly Societies Registry. In 1914 the demand on the Treasury was £18,000. In the last, year of which I have been able to get figures it was £34,074. My right hon. Friend the First Commissioner of Works—and I am taking his own statement to the House two or three days ago—told us that he had hoped that by this time very considerable reductions would have been made. That has not happened. On the whole the total of the different Departments has very little diminished. A very significant statement was made at the Inquiry now sitting in regard to the motor depot at Slough. I am not, of course, going into the merits of that matter. I am just taking what was said by one of the witnesses who is a personal friend of my own, Sir Benjamin Johnson. I do not know in the whole circle of my friends a more upright and zealous man than Sir Benjamin Johnson. What did he say? It was most extraordinary. He was asked how he proposed to deal with that great undertaking. I am quoting from the "Times" report, and his reply was: They could not carry through a scheme of that kind if they were to meet with difficulties from any Government Department, from the Treasury downwards. He had been in the Government service in an honorary capacity for some years and he had found that one could generally get round the fences. There were more ways of killing a dog than by choking it with butter. What does that really mean? It means quite clearly that Treasury control in the real sense is non-existent. Those who have been at the Treasury—my right hon. Friend had previous experience before war-time and will, I am sure, confirm this—know that the Treasury put a very small tooth-comb through every proposal which was placed before them. Every Minister, no matter how great the merits of his proposal, always puts the Treasury before us, and blames it, as the one obstacle which he has really to get over before he can fulfil the object he has in mind. We require a real serious check upon national expenditure. When the War was going on we really, I think, agreed to let that check lapse, but it is true to say that year by year as the War went on Treasury control became less and less. The Armistice came into force on 11th November. It is now getting on to the last week in May. Still, if we are to judge by the daily expenditure, which is, I think, somewhere about four millions, we see that this stream of public money still flows on. The point I want to make in this Bill is that before these powers are granted we should know, and not only we in this House, but the country, whether the Treasury has already taken steps to reassert its old-time authority, and, if not, why not? I am quite certain that if it were possible to put a Motion down and a day given for discussion by my right hon. Friend, without such a Motion being taken as a Vote of Censure on the Government, stating that, "in the opinion of the House, it was a most urgent matter that complete Treasury control should be forthwith reestablished," there would be a single vote against it.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

There would hardly be a Member who would support the Treasury in the exercise of its power.

4.0 P.M.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

That is lamentable. But my right hon. Friend has one achievement to his credit. If, however, he takes his courage in both hands he would find, like many leaders of forlorn hopes, that a great many men would rally to his standard. Let him raise that. My right hon. Friend is the guardian, and the trusted guardian, of the public purse, and if he took that step and said, "I am a member of the War Cabinet, and I am going to insist that Treasury control shall be reestablished," he might not get the support of hon. Members opposite and he might have to resign, but he would not be out of office very long, because ho would obtain support throughout this country, and this would be reflected in the House, and he would become master of the position, as Chancellors of the Exchequer were before the War. I contend that there is a real concrete agreement throughout the House and throughout the country that Treasury control should be re-established. After all," old things are very good things very often, and experience teaches us that what has worked well in the past will work well in the future. There is nothing to take the place of the Treasury, and that is the only way. I will give the House a quotation from one of the most famous Chancellors of the Exchequer, Mr. Gladstone. In the old days when to talk of a £60,000,000 or £100,000,000 Budget was absolutely staggering, Mr. Gladstone said: All excess in the public expenditure beyond the legitimate wants of the country is not only a pecuniary waste, but a great political and, above all, a great moral evil. It is characteristic of the mischiefs that arise from financial prodigality that they creep onwards with a noiseless and stealthy step; that they commonly remain unseen and unfelt until they have reached a magnitude absolutely overwhelming. I want to make two other points. One of them is with regard to the financial position with which the Treasury is faced in the coming year. It is perfectly clear that the taxes which my right hon. Friend proposes to levy in the powers he now seeks and the powers he already has will leave a very large deficit next year, because his proposals for taxation this year were based upon a normal year, an imaginary year, which one was so glad to hear was something approaching reality. What my right hon. Friend ought to do is to say that the next year's Budget shall be a £1,000,000,000 Budget and no more. Suppose he said that, and suppose the circumstances did not justify that demand which he made. What is there to prevent him bringing in another Budget if he wants more money in any great national crisis which might arise! When the War started the Government asked for fresh powers, and I am sure under those circumstances the House would back the right hon. Gentleman up in any eventuality which might arise. He is face to face now with a very big deficit, and how is he going to meet it? I think the right hon. Gentleman was quite right in his proposed reduction in regard to the Excess Profits Tax, and there are certain economic reasons for it. That revenue is going to disappear and sooner or later lie is going to be left with £300,000,000 less. How is he going to make it up?

There is only one way and that is by increasing the Income Tax, and if you are going to meet a Budget of £800,000,000 or £900,000,000 then you are face to face with an Income Tax which on the very large incomes will not be anything less than 14s. or 15s. in the £, and on the higher incomes it already touches 10s. 6d. Taking the lower incomes of £2,000 and £3,000, they have nothing less now than an 8s. Income Tax, and therefore the thing resolves itself into a hopeless position and something has got to be done. There is only one concrete proposal at present before the House and the country, and that is the proposal known as a capital levy. I want to say a word or two with regard to that. [HON. MEMBERS: "Hear, hear!"] I do not know whether my hon. Friends who are cheering me now will be quite as pleased with me when I have finished. It is a concrete proposal, and the only one so far as I know which has been put forward for dealing effectively with a great danger which threatens us. Let mo say that in the opinion of those very well qualified to judge, and the Leader of the House is one of the best qualified to judge upon this question, that this question is not one of principle at all. It is a question of expediency and practicability. I would like to remind the House of one or two things which the Leader of the House has said on this point. He said on 14th November, 1917: The question whether or not there should be conscription of wealth, then, is entirely a matter of expediency, and I think it is a matter which concerns mainly, not the working classes, but the people who have money. In my opinion it is simply a question whether it will pay them best, and pay the country best, to have a general capital levy and reduce the National Debt as far as you can, or have it continued for fifty years as a constant burden of taxation. Perhaps I have not thought enough about this to justify me in saying it, but my own feeling is that it would be better, both for the wealthy c'asses and the country, to have this levy of capital and reduce the burden of the National Debt. That is my own feeling. Later on, when the right hon. Gentleman certainly had from 14th November, 1917, to 20th January, 1918, to think it over, he said: He did not in the least wish to have the subject treated as if it were a practical question now. All he did claim was that there was nothing confiscatory about it, if the thing were good otherwise. The War Debt had behind it not only the revenue but the assets of the country, therefore if the thing were wise there was nothing confiscatory about it, no more than about the present system of taxation. Some right hon. and hon. Friends of mine have on the Paper a reasoned Amendment dealing with this as well as other points, and I do not wish, as far as I am concerned, to give an unqualified approval of this proposal at the present time. It is clear that before it could come into practical operation the views of men of high financial repute and wide business experience should be heard, and their views for and against carefully sifted and weighed. For my own part, I urge that the right hon. Gentleman should set up a Commission immediately, or, failing that, why not make use of the existing Committee now sitting on the general question of the Income Tax, and charge them at once with the duty of hearing evidence from all available responsible quarters, with a view to reporting to him as quickly as possible on this really important matter?

As far as I am concerned, and I express my own view, I do not see how you can have a capital levy under war conditions. As long as the existing conditions prevail, I do not see how it can be done. I may be wrong. I do think, however, that this special inquiry should be held and a report obtained before the autumn, so that whoever is responsible, and I hope my right hon. Friend opposite will be for the next Budget, he will have material upon which to found his decision for or against such a proposal. I very much deplore a question of this kind being turned into a party cry, because, after all, it is a mere question of meeting a grave emergency by an emergency measure. If this is a sound thing it ought to be tried. If it is unsound do not let us try it, but you can only find out from the judgment of others whether it is sound or unsound by hearing what the men who know have to say for or against it. If that is done I think we shall have made a step towards clearing up a proposal which is rapidly gaining a large amount of support and adherence in very unexpected quarters. It is being seriously debated on all sides. A grave emergency exists. This is admittedly an emergency proposal, and let us find out by an inquiry at once whether the men competent to express an opinion think it is a sound or an unsound proposal.

Photo of Mr Henry Croft Mr Henry Croft , Bournemouth

The speech which the right hon. Gentleman has just delivered is very interesting, more on account of its omission than on account of what he has said. There are one or two points which I would like to call attention to. I should like to say how cordially I agree with him with regard to what he said concerning Treasury control. The financial stress of this country, as we all know, is very great, and this House is encouraging the nation to think that we can go on with our wild expenditure for the period of the War. I hope that everyone who feels the extreme danger of our present position will assist the Chancellor of the Exchequer who undoubtedly has a most difficult task, because he is assailed from every quarter of the House with fresh reforms and expenditure, and we have to try and bring the nation to its senses. Although the right hon. Gentleman may have to spend a great deal of money upon industrial reforms in the hope of bringing about industrial peace, that is all going to react against this country if we get our finances into a bad condition, and then the last stage is going to be worse than the first. The Treasury, as the right hon. Gentleman has just said, have apparently, owing to the War, lost all control over the Departments in this country, and have no power to call a halt. Most business men will agree that the Departments are employing almost twice as great staffs as are necessary. It is almost inconceivable to believe that the work in these new Minis- tries could not be carried out just as efficiently with very much smaller staffs, but apparently the Departments do not consider the question, and the Treasury is not in a position to act. The House of Commons will only see this extravagance ended if we can persuade the Cabinet to give definite orders on specific dates to cut down the staffs of these Departments, say, by 10 per cent, one month, and by 20 per cent, the next month. Only in this manner are we going to get rid of this host of officials, clerks, and typists that are at present in Government employ.

The financial stress of this country, however, does not warrant us in departing from the traditions of our financial past and indulging in immorality in various forms in our Finance Bill. I have taken some interest in the question of the double Income Tax, and I have each year received an assurance from the Chancellor of the Exchequer that it must end directly the War is over. The House will bear me out that it was generally understood that the moment the actual fighting was over and our Dominion statesmen could be gathered together for consultation, we were going to have an end put to this matter. May I remind some hon. Gentlemen who were not in the House on previous occasions when this matter was discussed that all through this War the Dominions have been paying double Income Tax, paying for the whole of the upkeep of their own military forces, and various expenses in connection with the War, and those who happen to have money invested in this country paying for the Imperial Army and forces. It has become a serious burden, and, remembering the traditions in which the right hon. Gentleman was brought up, I hope he will do something on the earliest possible occasion to see that this great wrong is put right. It is not fair that any citizen who has contributed in Australia or Canada should also contribute in the Mother Country, and be deprived by Imperial, Dominion, and State taxation of something like 17s. in the £.

I want to say something with regard to the Death Duties. It is not a popular question, because one may appear to be advocating something in favour of the Members of this House. Consequently, all my hon. Friends who are wealthy men naturally hesitate to speak on it, but I can do so much more easily. We have passed the realm of reason in this matter of Death Duties. Everybody admitted that they were high before the War, and now the War seems to be an excuse to deal with them in an extremely unfair manner. The duties have now become confiscatory in character and are absolutely disastrous in their ultimate effects to the Exchequer itself. Why are the Death Duties at this height immoral? You are taxing men engaged in big businesses and making fortunes over 50 per cent. on their incomes, and the House generally approves of that form of taxation under the stress of present circumstances. The estates of those very men who are yielding over 50 per cent. of their incomes, if they have made a real success of their lives, will be confiscated, according to the latest proposal of the Chancellor of the Exchequer, 30 per cent. or 40 per cent. How can the right hon. Gentleman justify it! This kind of Bolshevism is quite a new line for him to take, and I can only imagine that he has come under the influence of some of his new friends who have persuaded him that this is a good thing. For £10,000,000 sterling he is indulging in this iniquity. When we examine this matter from the point of view of revenue, we see that it cannot be justified. It can only be justified from the point of view of an ulterior motive, namely, the splitting up of the estates of this country which the present Prime Minister failed to achieve by his notorious Budget. The Chancellor of the Exchequer will agree, broadly speaking, that the whole of his new Death Duties are going to come from the men with very large incomes. The largest contributors will be the largest estates.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

The bulk of the money will not come from the large estates.

Photo of Mr Henry Croft Mr Henry Croft , Bournemouth

When I speak of large estates, I mean estates of £50,000 and upwards. These are the estates of the very men who are at present paying, let us say, an average of 8s. in the £Income Tax and Super tax. I hope my hon. Friends on the Labour Benches will note the facts. That is the wealth which the Chancellor of the Exchequer is confiscating, and, if hon. Members work it out, it is very easy to see that ten or eleven years hence the country will be worse off, because the £10,000,000 per year that the right hon. Gentleman is confiscating would have yielded £4,000,000 a year. That is clear to the meanest intelligence. These kinds of ideas are floating round the world, and we know where they end. The Chancellor of the Exchequer, I am certain, would regard with abhorrence the ideas prevailing in Russia, and he would say that Lenin and Trotsky are thieves and scoundrels because they arc collaring 100 per cent. of a man's possessions, but he himself is getting on pretty rapidly when we find him taking 30 per cent. and 40 per cent. of large estates. The Death Duties have passed all idea of fairness, because they penalise the man who has been thrifty, and the man who has made no use of his life and is a mere waster gets off scot-free. If a man has been contributing to the success of the country and, as the right hon. Gentleman has been advocating recently, has been saving his money, then the Chancellor of the Exchequer comes down on him like a cartload of bricks and tries to smash him completely.

The same argument applies to the question of a levy on capital, which is to be raised later by an Amendment. I confess, when the right hon. Gentleman (Sir D. Maclean) sat down, I wondered whether he was in favour of that Amendment or not, but I would remind him that, although the Leader of the House on one occasion expressed himself ready to consider the question, Mr. Asquith very soon afterwards, finding that there was something of a panic in regard to our national security, made a very recent speech, showing that he had somewhat different views. If you want to destroy confidence, then depart from your old methods of taxation and go in for confiscation. That is what hon. Gentlemen behind me have demanded year after year.

Photo of Mr Henry Croft Mr Henry Croft , Bournemouth

The hon. Member thinks that I mean that he has advocated new confiscation year after year. What I mean is that we have, year after year, heard the hon. Member make his admirable speeches on this subject. I am, in a small way, a business man, and three-quarters of my capital is in bricks and mortar. It is not nearly sufficient to carry on my trading concern all the year, and I have to borrow money as working capital. How do hon. Members who favour this Amendment propose to deal with that question? I presume they are going and come along and take a quarter of a building here, and some tiles off a roof there, and so on, but if you work it out you will sec it is absolutely impossible. You will only cripple your industries if you are going to extract the capital of particular industries at particular times. So much for that speech, which I am glad to see the right hon. Gentleman does not take seriously. He says it is a thing which ought to be discussed, and which we ought to ask business men to consult upon with us. I quite agree it ought not to be taken as a serious proposal.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

On the contrary, it is a very serious proposal.

Photo of Mr Henry Croft Mr Henry Croft , Bournemouth

The right hon. Gentleman did not take it seriously. He is quite prepared to have it inquired into, to see whether it is an advisable policy, but it certainly is not a policy with which he or his great leader, Mr. Asquith, would associate themselves at this moment. May I say one word as to other gathering thunder clouds with respect to Imperial Preference. When I listened to the right hon. Gentleman introducing his scheme I understood for the first time how it was that the consciences of the Coalition were satisfied; I saw then how it was that the right hon. Gentleman the Secretary for War could join a Coalition with Free Traders, and how it was that the Unionist Party could feel that something was going to be done in the direction of Tariff Reform. But surely the complaint with regard to the right hon. Gentleman's proposal on Imperial Preference is not on the side of the hon. Gentlemen on these benches, who hold that you have no right to treat the Empire differently from the rest of the world. Surely the complaint should be with us who think that something more robust should have been attempted. I hope the right hon. Gentleman will not imagine for one moment that I do not appreciate the fact that he has established a principle. But it is a little one—a very anæmic affair, and I hope that as years go on he will gather courage and establish something of more lasting importance to the British Empire as a whole.

But what is the effect of the opposition to such proposals as these? After all, are we not in a different position now to what we were at the beginning of the War? Let me read what Mr. Asquith said in 1916—and here may I say that I am referring to the Mr. Asquith—speaking with his full responsibility as Prime Minister of the country, and not to the Mr. Asquith who speaks now in the country and whose speeches, I gather, are not so often read. Mr. Asquith said, in 1916, that it was difficult, and indeed impossible, to believe that Germany would not continue to be animated by the same spirit and policy when the War was over. We were then discussing the fiscal situation. The right hon. Gentleman said he might be reproached with the fact that the Paris Resolutions were a departure from Free Trade, but no one can possibly be blind to the fact that this War must and ought to suggest to us new problems or possibly modifications in the solution of old ones. He continued that it would be deliberate blindness to the teaching of experience if they had learnt nothing and forgotten nothing from a war like this. He urged the House to take part in securing for the future not only protection against a possibility of military domination, but also true well-grounded and lasting economic independence. It is a pitiful thing to see the betrayal of that great leader of the Liberal platoon, who, I understand, still leads it, although he is outside the trenches. Hon. Gentlemen before they go into the Lobby on a question like this this evening will, I hope, think there is something greater than mere Party considerations, which should move them at this present moment. You have only to go down Victoria Street and you will pass hundreds of gallant men who have come 7,000, 12,000, and even 13,000 miles to fight for our common cause, who have given the very Power of their race, who have died beside our men in the trenches, and have established a comradeship of one family for the British Empire. And when the right hon. Gentleman comes along with a proposal not for increasing duties, but for reducing existing duties in order to favour our Dominions, are you going to let these men go back and say there is a small party, it may be only a few Scots, on the Front Bench, reinforced by a champion heavy-weight boxer in a recent by-election behind them—surely you are not going to allow it to be said there is even a small negligible group in this House who are prepared to fight against that principle and thus show that these brave soldiers who have come from overseas are still outside the family of the British race?

I cannot believe that they will take this step. I hope that the warnings they have uttered may be taken in good part as meaning simply that they do not want the Chancellor of the Exchequer to go further, that they do not want him to go in for real protection—the paternal protection of the industries of this country in days to come. Although they may find little support for that among some of their friends in the country, I hope they will not press the question at this moment, when we are trying to show we really desire this to be a true Government of the Dominions, Crown Colonies, and Protectorates, because it is immensely valued by them, and it will not be valued in the same degree if it should go forth that even one party only is not in favour of it. I hope the right hon. Gentleman will take into consideration the questions of double Income Tax and Death Duties which I have asked him to look into. If he works them out, I think he will find that they are both war policies. I hope he will also feel, in regard to the other question to which I have referred, that this House is doing one of the greatest things in its history by proving to the Dominions that at long last we are determined to regard them as of more account to us than anyone who is without our gates.

Photo of Sir Francis Acland Sir Francis Acland , Camborne

I beg to move, to leave out from the word "That" to the end of the Question, and to add instead thereof the words this House declines to give a Second Beading to a Bill which makes inadequate provision out of revenue for the expenditure of the country, which fails to deal with the War Debt by means of a capital levy, which reduces the taxes payable by the recipients of business profits without lessening the burdens borne by those whose labour contributes to the creation of the profits, and which initiates a system of preferential and protective tariffs. I hope I shall be able to imitate the two speeches we have just listened to, both in the matter of general good temper and of avoiding excessive length. I think I am certain on the latter point, because since I was informed yesterday I was going to have the honour of being called upon to move this Amendment, I have had to spend five hours on the business of the Public Accounts Committee and another two hours on another Government Committee to-day. Therefore, I cannot attempt anything like a complete covering of the ground of the Amendment which I have the honour to move. The first point I have to deal with is that the Bill before us makes inadequate provision out of Revenue to meet the expenditure for the year. The general feature that one took away of the Budget statement was this, that we bad to face an expenditure for the year of about £.1,450,000,000, and that there was a provided Revenue of £1,200,000,000, leaving £250.000,000 to be raised by borrowing. That made us feel as if we were doing a virtuous thing, as we seemed to be raising about six-sevenths of-the total sum needed for the expenditure of the year. We appeared to be raising, in fact, £1,200,000,000 out of the £1,450,000,000 needed. But really I want to suggest that that final picture of the Budget was not a justifiable one to leave with us. It was attained simply by the expedient of treating the amount to be gained from salvage of war stores and things of that kind as proper to be included in the income for the year.

I remember thinking things were bad enough when we had to listen to the Secretary for War almost proving to us at one point that the War Office was an organisation for conferring wealth on the country, because they were getting so much from the disposal of their surplus stores. But I was horrified when the Chancellor of the Exchequer seemed to take up the same line and to appropriate the sum of £200,000,000 which was to be gained from salvage towards the Revenue of the year. That really ought to have gone straight to the reduction of the Debt. These, surely, were simply surplus borrowings which, when they were found not to be necessary, should have gone back to the lender. The argument, of course, is easy, and the path is tempting. Here you had a body of stores and other things which you did not need. You got them nearly all out of borrowed money. If you could have foreseen, which, of course, you could not have done, that you would have no need for these things, you would not have borrowed the money. But you had bought all these things—all these surplus requirements—mostly out of borrowed money, and the. proceeds of their sale should have gone to wards extinguishing the debt that had been raised in order to buy them. It should not have been taken to the credit of the income of the year. You borrow the money to buy material; you find you do not want it; you sell the material for what you can get for it, and you pay the proceeds to income, and then you say, "Look how well we are paying our way!" That is not sound finance, whether it be carried on by a nation, as in this case, or by an individual. If an individual were to do it, things might go swimmingly for a time, until someone took the trouble to ask as to the basis of the trade upon which the loans were raised; then that individual would go smash.

Had the proceeds of these sales gone in payment of the loan, then we should have had practically this position. We have to raise something like £1,500,000,000 to meet the expenditure of the year. We propose to raise by taxation about £1,000,000,000, and not £1,200,000,000, leaving a deficiency of from £450,000,000 to £500,000,000, and not a deficiency of £250,000,000. We should then have come away from the Budget statement feeling that a proposal had been made that in this year we should only raise by taxation two-thirds of what we need, instead of practically six-sevenths, which was the result of the proposal actually made, and that would have brought the Houst of Commons and the nation up with a round turn. We should have realised that we ought to find more money out of Revenue, and that it was not justifiable to find only £1,000,000,000, which is what is actually proposed. The proposal to use this salvage money in the ordinary Revenue of the year has, in fact, produced a false picture of our real financial position, and it has produced a false picture not only at home but abroad.

I was certainly surprised to hear—and more experienced Members than I am must have been almost horrified to hear—the Chancellor of the Exchequer suggesting, as if it were almost the most natural thing in the world, that he had had to advance to our Allies since the Estimates were framed a sum of £28,000,000. One does not want to be lacking in generosity to the Allies side by side with whom we have fought all through the War. But we seem to be drifting into the state of thinking that we are the nation which can indefinitely supply the financial needs of all our friends. I think some of us must have been very much discouraged by the very doleful tone in which the Chancellor of the Exchequer spoke with regard to our prospects of repayment of these large advances. Ho spoke of the possible relief we might get later on from repayment. He used very guarded words about it, saying that ultimately and gradually that relief will, we hope, mature. One does not know what has been done in the negotiations with the Allied Governments, but I think that the fact that we have not yet started to receive, as I gather, any payment at all of interest on the £1,600,000,000 that w have advanced to our Allies and that we even to-day are making further advances to them, or that, at any rate, £28,000,000 has been advanced since the Estimates were framed must have put our Allies to some extent under the idea that our finances are in a misleadingly favourable position. We seem to have got into this state steadily of not expecting them to pay interest on the £1,600,000,000. I suggest we are in danger of something worse in allowing ourselves to drift into the position of being the paymasters and finders of money for them even when we settle down in a time of peace, as we were during the war period.

The only other point I want to make in this matter is this, that this Budget seems to me not only almost entirely a War Budget so far as our expenditure is concerned, but to some extent a Peace Budget so far as Revenue is concerned. When one sees how finances depend upon military policy, it is. I think, clear that the Exchequer is still practically bound to the chariot wheels of military, naval, and air expenditure. I think that is to some extent the prevailing mood of the country, and of this Parliament. I do not suggest that the Chancellor of the Exchequer would not stand up against it. I have heard people rejoicing, for instance, in the Estimates of the Air Ministry, until they realised that the £66,000,000 therein asked for were equivalent to an Income Tax of 1s. 3d. in the £. Although perhaps the Chancellor of the Exchequer could not have avoided in this year of transition—we hope it will be the only year of transition—having to foot these enormous Estimates for our fighting services, yet he could have made a stand and said, "Though I have to pay emergency special Votes to the great spending Departments, at any rate I will go on with very special emergency systems of raising the money to provide for very swollen Estimates." It would have made the country more conscious of the very serious position of our national finance if he had insisted that, if he was to find these huge sums of money, they should be found out of income, and not by renewed borrowing to the extent to which we are now committed. He has not been able to make both ends meet out of the proper income of the year, and has not been able to find any fresh or new financial expedient which will strike people's imagination with the seriousness of the position in which we are at present existing. On the contrary, his Budget has given the general impression that the worst is over and that we may hope that taxation will be lighter in the future. Yet I believe that everybody who has looked into his estimate of the probable cost of national finances next year and the year after, must believe that he has been unduly optimistic. He has not made in that estimate sufficient allowance for the inevitable, right, and proper developments of social reform, and I very much doubt whether he has made anything like an adequate allowance for the naval, military, and air expenditure with which we shall be faced. It would be generally a disappointment and a surprise to the nation if, as I and my Friends greatly fear, we find that next year, after having a time of riotous living and the almost unbridled extravagance that we see going on all around us, we have to have fresh taxation put on at a time when it was expected there would be relief.

Let me come to the question of the capital levy. We are greatly chaffed for going separate ways on this matter. The position I and my Friends take up is perfectly simple. The matter is, of course, complicated and very difficult. If the Government had promised to subject it to thorough investigation and inquiry at once or at some date previous to the present, we should not have thought it necessary to press for its adoption in this Budget. But the proposal was dismissed in a column and a half of the OFFICIAL REPORT in the Budget statement. So far as we know, there is no intention of giving it that real investigation which we think it deserves. Some of us who have studied it rather carefully are convinced that it is a fair and practicable proposal. That being so, in the absence of any apparent intention to give the matter that serious attention which we think it deserves, we are left with no option whatever but to urge it in the Amendment to the Finance Bill we are asking the House to consider. I have seen it suggested that in doing so we are advocating some system of spoliation and robbery. If the enormous abstractions from annual earnings which are likely to take place indefinitely under the Income Tax are perfectly legitimate, a levy on capital for the special and sole purpose of reducing our War Debt and making a great reduction in the Income Tax cannot be regarded as robbery. If the enormous levies on capital at the time of death which are now made and which will be bigger when the Finance Bill is passed are fair, there cannot be anything monstrous in the special proposal we are advocating, that a sum of capital shall be provided from the living for the purpose of dealing with our appalling load of debt. As the Leader of the House said—we have already been reminded of it once this afternoon—it is simply a question of expediency. If that is so, we have simply to consider whether it can be done justly to the different cases concerned. I would remind the House that it is not a new proposal put forward by a band of doctrinaire Radicals or Members of the Labour party. It has a great deal of backing in important, financial, and business quarters, and it has a most respectable past. Ricardo, over one hundred years ago, at the close of the Napoleonic Wars, dealt with the matter, and I should like to inflict on the House a short quotation from what he said: A country which has accumulated a large debt is placed in a most artificial situation. It is the interest of every contributor to withdraw his shoulder from the burden and to shift this payment from himself to another, and the temptation to remove himself and his capital to another country where he will be exempted from such burdens becomes at last irresistible.


Hear, hear!

Photo of Sir Francis Acland Sir Francis Acland , Camborne

Quite so. Therefore the question of a capital levy ought to be carefully considered. He goes on to say: A country which has involved itself in the difficulties attending this artificial system would act wisely by ransoming itself from them at the sacrifice of any portion of its property which might be necessary to redeem its debt. That is a respectable and honoured source of opinion of over 100 years ago. Where Ricardo 100 years ago led the way, even Radicals like myself need not be ashamed to follow. The House knows one thing about a capital levy, that it takes long speeches to discuss it. I am not going to attempt anything of the kind this afternoon, nor am I going over old ground. But it is justifiable for me to say why I agree with the view expressed by the Leader of the House which has been quoted, that it would be better both for the wealthy classes and for the country to have this levy on capital and to reduce the burden of the National Debt. Take the question of the benefit to the country at first, and the benefit to the wealthy classes afterwards, because the country is even more important. First, we have to realise that the proposal is for one purpose only—to pay off, say, £6,000,000,000 of our Debt. No question whatever is involved of reducing the liquid capital of the country by a single farthing. Therefore, one has to consider, at least I have gained some light by considering, what would be the effect of this proposal in the case of the average man holding, as most men do, a certain amount of War Loan, and having to pay, as a great many men have to pay, some share of the Income Tax. You could find out what the average man holds of War Loan, and what the average man in that position would normally have to pay annually for Income Tax. Of course, from that man's point of view, as even the strongest critics of the proposal will realise, there is no sort of injustice whatever in carrying through the proposal of a capital levy. You ask that man, say, to provide £10,000 by a levy on his capital to extinguish £10,000 worth of his War Loan. If you do that, you cease to pay him interest on his loan, and you cease to charge him the Income Tax which was required to provide that interest. He ceases to have his War Loan and to get his 5 per cent. interest, but he has his £10,000, which he can invest or use for any other purpose he likes. [HON. MEMBERS: "No!"] It shows a misunderstanding of the proposal if anyone denies that the average man who pays average Income Tax and who has an average holding in War Loan is in one farthing the worse position if a capital levy is imposed for the purpose of cancelling a capital contribution raised from him, that is the War Loan which he holds. If that is denied, it must be argued that the proposal of a capital levy is for the purpose of some destruction of national or personal capital. [HON. MEMBERS:" Hear, hear! "] That is not so. I willingly leave that point to be made by the opponents of the suggestion.

If the average man whom I have imagined is exactly in the same position afterwards as he was before, we have only to see if the proposal would be of advantage to the nation. My suggestion is that, although that man cannot in any way lose, the transaction is of advantage to the country. We are now at a time of inflated currency and of inflated prices. That inflation is by far the most serious of the financial problems we have to face. In the course of years it will have to be dealt with unless we are to come to an extremely difficult financial position. Presumably, prices will have to come down, and the value of money, measured in commodities will rise. Therefore, under a proposal which is the only alternative to a capital levy which is now before the country, that of a continuing high Income Tax with a small Sinking Fund, we shall gradually, as that Sinking Fund is made operative, be dooming ourselves to pay at a time when our money is worth more, instead of now, when our money is worth less. That is a very simple statement of the gain to the State. The State will have a chance of paying back when the money is something like the value it was when it was borrowed, instead of paying back when money is worth a great deal more than it was at the time it was borrowed. If, therefore, the proposal is fair to the average man I have imagined, and if it is advantageous to the State, I cannot believe that the task of trying, after very careful inquiry, research, and investigation to adjust the levy to the abnormal case of the man whose position differs, either because he is not holding any War Loan and is paying high Income Tax or because he has a large amount of War Loan and very little Income Tax, will be insuperable. I cannot believe that the practical question that will arise in making this proposal fair to the different types of persons in the community can be insuperable. At any rate, I claim that it ought to be so carefully considered, and that not until it has received that careful consideration and been turned down as a result of it, should we be justified in refraining from pressing it at every available opportunity.

5.0 P.M.

The second point the Leader of the House made was that this levy was to the advantage of the wealthy classes. If I were a capitalist—a really rich man—I should feel that the greatest danger we had to face lay not in a capital levy which, applied as a single and special financial expedient, I should feel pretty sure of getting it so carried out as to be fair and tolerable to the different interests concerned, but in the country getting permanently accustomed to a high level of Income Tax. Persons judge the rate of Income Tax not so much by amount as by proportion. When the Income Tax was, say, at a 1s. or so, an increase of 1d. seemed a great matter Even I, as quite a young politician, can remember the time when before the Budget Statement the great and absorbing matter for speculation was whether the Income Tax would go up from 1s. 2d. to 1s. 3d., or something of that kind. Now we never mention pennies at all. We talk in shillings, and very soon, if we go on with an Income Tax at the 6s. rate, people will get into the way of thinking that no increase of less than 6d. or 1s. is really worth while, and especially if, as the hon. Member who discussed this matter gave us good reason to think, the Income Tax is almost bound to go up to 8s. in the £l, we shall find it going steadily up by sixpence or so annually, and everyone will think that the most natural thing in the world. The only way to get these people back to thinking of pennies in the Income Tax as being a serious matter, as I believe them to toe, is to get the Income Tax back into the realm of 2s. or 3s. in the £, which the discharge of £6.000,000,000 or so of your War debt would, of course, enable you to reduce it to. I make this serious suggestion from the point of view of the wealthier classes, that there is infinitely more danger to them in the continuation of a 6s. or 8s. Income Tax, and in people believing that an extra 6d. or 1s. is no greater matter than the proposal of a capital levy to be carried through once and for all as a great expedient for dealing with an emergency and a return to the comparatively modest level of Income Tax which that would enable to be done.

Do not let us prejudice the matter by vain imaginings. It is difficult of course. All great financial expedients are difficult. But it does not seem to be more difficult than the proposal of the Income Tax or the Death Duties must have seemed before they were initiated. All great financial expedients have their difficulties and the only thing is to try to face them. But do not let us be put off by the idea that if the principle of the capital levy were to be used for a legitimate purpose, namely, dealing very specially once for all with the great body of our War Debt, it would lead to its being used again for illegitimate purposes. You can substantiate any argument you please if you ignore that general sense of justice which the British people always have towards matters which are fairly and squarely put before them. I do not believe, if the capital levy was worked out for this one special purpose, there would be any danger of its passing into an ordinary part of our financial machinery. First of all, of course, it is not suitable for that sort of thing at all. It is admittedly a complicated, difficult, and really heroic financial expedient. If at any time say £200,000,000 or £300,000,000 were wanted for some scheme of social reform or anything of that kind it would be far simpler to raise it by the ordinary machinery of taxation than by having recourse to a capital levy. And I believe this is true. If some party or some combination of interests obtained powers in this House and make up their minds on some predatory course of action towards capital they will not be deterred from that by the fact that we at this time have not had resort to a capital levy for the purpose of nullifying off a large amount of our debt. You will not avoid a resort to this instrument by postponing the time when you will face it and consider it seriously. We ought to look at the thing simply on its merits, without imagining what might happen. Let us realise that it is a choice between a capital levy and doing nothing. It is a choice between a capital levy and the continuance indefinitely—because that is really what it comes to with the very small, amount suggested for Sinking Fund—of the tremendous level of Income Tax which is really facing us. It seems to me that will be a crushing burden on us for many generations, and the least the Chancellor of the Exchequer can do is to appoint a strong committee to investigate it from every point of view, and unless and until he can consent to it my Friends and I think it right to press this proposal upon him as a practical proposition for dealing with the terrible financial crisis which the country now finds itself in.

I should also like to comment on the fact that there is a considerable reduction of the burden on the business community without any corresponding decrease of the burden on the less well-to-do classes. There seems to be almost a general chorus of agreement that the Excess Profits Duty had to be modified. I agree with that. I think it did act as a deterrent to real economy and real development. But we deplore that in modifying it no further proposal has been substituted, a duty of a like nature falling on the same sources of wealth. I think the working classes have a legitimate grievance that whereas the reduction of the Excess Profits Duty has been undertaken this year to a very considerable extent, there is nothing like a corresponding reduction of what they have to pay

The last point in the Amendment is the question of preferential and protective duties. I was asked to-day by an hon. Friend belonging to the same party as myself, but generally sitting opposite, how I could show that any of the duties now pro- posed were protective except those to which he said he was committed when he gave a general agreement to the Coalition that he would permit of Preference being given on existing duties. Of course it is recognised universally that the existing duties on motor cars, films, watches and clocks, and so on, are definitely protective, but he said, "Is there any other really protective element in the Budget than that to which I hold myself committed? "There is. I have not made a very thorough study of it, but the duties on such matters as saccharine and chicory are now so arranged as to be definitely protective. None of these things come from the Dominions at all. I believe the rate of Excise has been fixed on the basis that the rate of duty on such articles will be the same as if they were to come from the Dominions. Therefore, although the duty is exactly the same as it was before, the corresponding Excise has been reduced by one-sixth. To that extent that is, of course, direct protection to British manufacturers and growers. At any rate, it is a fair inference that there is a definite and deliberately protective intention in some of the duties which have been introduced. My hon. Friend said to me, "If you can show that there is a definitely protective element in these duties quite apart from anything we pledged ourselves to with regard to Preference, possibly I shall vote with you." I hope he will.

I pass from that to the question of Preference, on which I shall try, although it is rather difficult at this time of day, to break fresh ground to some extent. I will not, of course, amplify the four points which were made by Mr. Asquith a few days ago, first, that there is involved an illegitimate abandonment of revenue; secondly, that it is illegitimate to use the taxes put on for one purpose, purely temporary, as a vehicle for introducing a preferential system; thirdly, that the duties really are a sham because they practically do no good to the Dominions; and fourthly, that they are intended to be the precursors of a fully-planned system of Preference and Protection. It is rather an obvious argument, and we shall all hear more of it before we have done with the subject. When I used to take part in fiscal controversies before the War, I was struck more than anything else by this, that British trade is an extremely complicated and delicately balanced affair, and that if you blunder into it with some doctrinaire interference, as is now being done, you cannot tell what the effect will be, and with the very best intentions in the world you will often find that you are doing a perfectly different thing from what you intended. I should like to consider whether that is not so in the case of tea, which, of course, is by far the most important question with which these preferential duties are concerned. That accounts for well over £2,000,000 of the total estimated loss of revenue of something like £3,000,000. Some of us assumed—I did until I studied some of the trade reports this morning—that with regard to tea all we were doing amounted practically to a reduction of 2d. in the 1b. on all ordinary tea consumed by ordinary people, and there would simply be an extra duty of 2d. against China tea, which is rather a special case and is generally sold at a higher price, which it was argued people who liked China could very well afford to pay. That is not so. This is the result of such examination on the subject as I have been able to give. I think about 13 per cent, of the tea we generally get comes from foreign countries. Roughly two-thirds of that come from Java and one-third from China—say 9 per cent, from Java and 5 per cent, from China. All the Java tea and two-thirds of the China tea is not of the type that we usually associate in our minds when we refer to China tea. It is, on the contrary, amongst the cheapest tea we get. It is bought very considerably for mixing with some of the blends which are sold at the cheapest rate and consumed by those who are less able to afford high prices for tea. It is to that type of tea, except in the case of a comparatively small amount, that these duties will apply. Putting it in a different way, of the 37,000,000 pounds of tea which were imported from abroad, I think only about 5,000,000pounds w as what is called China tea proper, which has a certain flavour, and which may be considered a luxury, while 32,000,000 pounds were brought in because of their cheapness and because they helped in the blending of cheap tea for which there was demand, especially by the poorest people. What is going to happen? The prices for this Java and ordinary China tea were cut pretty fine. A question of a penny or the fraction of a penny makes all the difference, and it seems to be definitely admitted that with the extra 2d. duty it will not pay to bring in the Java and cheap China tea at all.

Therefore, there will not be the same material available for making these cheap blends of tea which some of our people have got accustomed to, and which a great many of our traders have definitely relied upon and tried to get hold of.

But that is not the main point. This tea which will not be taken by us from Java or China will find a fresh outlet somewhere else. These teas will be pushed vigorously in competition with our own. teas, not in our own market, which is a. comparatively stable and limited market, but in foreign markets that are capable of great expansion. Those are the markets where we definitely have to compete with these teas, which are of the greatest value in many cases to our growers and traders. They are far more expansionable than, ours, and there is far more to be done in competition there than there is at home. That being so, we are going to be handicapped in these expansionable valuable foreign markets where great development is still possible by having the Java and China tea which we used to take ourselves pushed forward in competition with us there. So much is that realised by the trading associations representing India and Ceylon that I do not believe, although there is going apparently to be more help to the Dominions in this matter of tea than in anything else in the Budget, the right hon. Gentleman can get a majority resolution of any association of persons interested in Ceylon or China tea to approve the proposals which he is now putting before the House. He has probably received dispatches or telegrams from the Governments in India or the Government of Ceylon on this subject, and I would suggest to him that if that is so, and if, as of course he does, he believes in the real benefit that these proposals are going to offer to India and Ceylon, he should lay those telegrams or dispatches on the Table or tell us what is contained in them. If I am wrong, and those Governments have really approved, I should be the first to retract the suggestion that I now quite deliberately make, which is that these tea proposals, which are the most important proposals so far as Preference is concerned, are really not welcome at all, but that, on the contrary, they are considerably criticised and viewed with considerable fear by those who are most closely concerned.

The Chancellor of the Exchequer said the other day that the duties against imported manufactured goods were intended to be sumptuary. I made a brief intervention then which my right hon. Friend was not able to listen to. I do suggest that it is really almost an insult to the intelligence of the House to suggest that these duties against watches and motor cars are meant to check extravagant expenditure, because that, I take it, is the meaning of the adjective "sumptuary" when applied to them. We are quite well aware that the great bulk of watches and clocks that we import from abroad are cheap Waterbury watches, and that sort of thing, and a very large proportion of the motor cars imported from abroad are Ford cars, which are amongst the cheapest cars, if not the cheapest, cars that people can get. To suggest to the House that he really intends to check luxurious and excessive expenditure by keeping on duties against these cheap articles, consumed by people of limited means, when he is doing nothing at all to check extravagant expenditure on jewellery, Rolls-Royce and other cars which the people at home purchase, is not an argument which we can really treat seriously. If he wanted to check some of the sumptuary expenditure, there was a weapon to his hand. I do not suggest that the Luxury Duty was free from difficulty. It was difficult; but, at any rate, the late Chancellor of the Exchequer thought so well of it that this House appointed a Select Committee, and the late Chancellor of the Exchequer gave me an undertaking that if he remained in his office as Chancellor of the Exchequer he would have included the Luxury Duty in the Budget which is now before us. That shows, at any rate, that he thought very seriously of our work, and considered that the result of it was thoroughly worthy of serious consideration by the Government. That was swept aside in one phrase by the present Chancellor of the Exchequer. I am not criticising him, but the Luxury Duty not having been considered seriously, lie cannot now seriously say that the real purpose and intention in this Budget is to check luxurious expenditure by these duties against manufactured goods.

I think the House knows the breeding of these proposals well enough. They are not expounded to the right hon. Gentleman by the Inland Revenue Department as a means of checking luxurious expenditure. They are not by Frugality out of the Inland Revenue Department, but they are by Filial Piety out of the Board of Trade. They are part of the regular proposals of the Board of Trade for assisting industries here, and cannot be regarded as sumptuary in any sense of the term at all. I have tried to reason out the subjects I have dealt with, and I can assure the right hon. Gentleman and the House that I only move the Amendment that I now have the honour to move because I feel that this Budget has not risen to the very serious emergency with which we in this country are confronted, and that we are in danger of drifting into a very serious financial position unless we can deal more drastically with the present situation.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Before I address myself more particularly to the different Clauses of the Amendment I hope I may be permitted to refer to one or two of the more general subjects which have naturally arisen in the Debate, though they are not specifically mentioned in the Amendment. The right hon. Gentleman who opened the Debate, for example, said that before the House consented to grant the Second Reading of the Finance Bill they had a right to reasonable assurance that the money was being well spent, and that efficient control was being exercised over expenditure. That is a very natural and very proper claim to make, and I hasten to re-assure my right hon. Friend as far as I can. Treasury control has been restored as completely in the time that we could restore it, since the signature of the Armistice. Our object is to make the Treasury control in its nature and its spirit comparable "with what it was at the best times before the War. The right hon. Gentleman, who, I think, was a Member of the Government which preceded the War for many years, appears to think that Treasury control was preserved intact during the years when Mr. Asquith was Prime Minister. That is not, if I may venture to say so, the view which anyone gets who goes to the Treasury. The officials of the Treasury are impartial people, and they view the succeeding Governments without fear or favour. Indeed, one very distinguished ex-member of the service said to me, "In my long experience I find that all Governments are pretty much alike with a tendency, however, on the part of the last to be the worst." I think the Treasury tradition would be that the last great Chancellor of the Exchequer, from the point of view of this financial control, was not the Chancellor of the Exchequer in more recent years, but we should have to go back to Sir William Harcourt, who carried out in their full measure the old traditions of what I suppose I might call Gladstonian control, I think that control was sometimes exaggerated. It was sometimes irritating in its particularity and in the absence of knowledge to inform it, and it sometimes, I think, took graver risks than we were entitled to run in the realm of defence, because it thought more of economy than of safety.

I quite agree that control had been largely relaxed—and the right hon. Gentleman must permit me who was a critic and not a supporter of the Government before the War, to add the words" unwisely relaxed"—in the years before the War, and it is our business now to re-establish efficient control. I yield to no-one my respect for the House of Commons in which I have passed more than twenty-five years of my life, and it is with no disrespect to the House that I say that it is not an efficient body for checking expenditure, and that it does not help the Chancellor of the Exchequer of the day, be he whom he may, to exercise control over expenditure. It is quite true that, one section of Members calls for economy here and another section of Members calls for economy there, and so on over the whole sphere, but at any given point there is always a majority for spending more, not less. Each man economises on those services for which he does not care, and calls for more expenditure on those for which he does care. So long as that is the corporate attitude of the House, it does not help the Chancellor of the Exchequer to promote economy. The Chancellor of the Exchequer and the Treasury must shoulder their own burden, fight their own fight, and come out as successfully as they can. I will tell the House frankly that my endeavour is not and will not be to fight my colleagues. On the contrary, my endeavour is and will be to secure their co-operation in their own Departments, because, if it be true that Treasury control is an essential of efficiency, yet to make Treasury control really effective, to make it produce the results that it might secure, the help of the Departments themselves and the Ministers who administer them is essential to the Treasury itself.

The right hon. Gentleman spoke of the large growth of Estimates for Departments not specially affected by the War. There is no Department which has not been affected by the War. I have obtained information as to the particular cases which he gave. Take friendly societies registrars. There was an increase of £16,000. War bonus alone accounts for over £8,000. Take the Home Office increase. I am not certain what it is, but war bonus there accounts for £15,000; the maintenance of conscientious objectors, £15,000; Press Bureaus, £6,500; salaries in connection with alien administration and travelling expenses, £24,000. Those figures are an illustration of the way in which the War has penetrated and affected all the offices and added to their work enormously. I know nothing dearer to the heart of the House than that we should reduce the swollen staffs of public Departments. I can assure hon. Members that nothing is dearer to the heart of the Government, and we are doing our utmost to secure that desirable end. But do hon. Members ever consider, when they put questions to my colleagues at Question Time, what the effect of the question is, either on expenditure or on staff? I sit here and listen to question after question inviting this colleague or that to put pressure on the Chancellor of the Exchequer to add one, two, or twenty million pounds to a Vote, and then I hear hon. Gentlemen getting up impatiently and saying that there is intolerable delay in replying to a letter or dealing with a case. But that all means more staff.

Photo of Mr George Lambert Mr George Lambert , South Molton

A more efficient staff.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

It means more staff. Take a Department like the Pensions Department in which to deal with new problems you have to set up a new staff, in which the Regulations dealing with pensions have been changed again and again, Regulations which have to be administered by hundreds of committees all over the country. Do you wonder that there are mistakes, and that the staff is not always efficient and is it not necessary that there should be a little forbearance by Members of Parliament if they want these reductions of staff to take place? The case of the Pensions Department applies to one Department after another. The time is shortly coming when a great deal of stall will be dispensed with. We might close down accounts in which there is practically no money recoverable, but that in years to come every public official who has dealt with the matter is to be taken before the Public Accounts Committee and cross-examined as to why a voucher is not correct to 1d. or 2d., or why there is no voucher for this small payment or that, and then you must spend thousands in order to protect the honour of your public service without having any chance of getting any money back in return. I hope that I have not spoken with any disproportion on this subject, but I do want to bring home to the House the fact that we share the desire to reduce the expenditure and to get down these staffs. I want to bring home to the House some of the difficulties under which we labour in attaining this object.

I come now to the Amendment. It is a very interesting production. I think that it is sponsored by six gentlemen. They have almost produced a Clause apiece in its composition. What interests me most of all is that though the Whips of the party opposite have both put their names to this Amendment the Leader of the party opposite is not in agreement with them, and I am very glad to think that if and when we do go into the Division Lobby I shall have the support of my right hon. Friend. I am sure he would never vote for what he does not approve of and that he would not take that unmeaning and futile course of merely walking out of the House without voting at all. What are the two propositions from which the right hon. Gentleman dissents? The Amendment before the House condemns me for reducing the Excess Profits Tax. The right hon. Gentleman expressly stated that he thought I was right in doing so.

Photo of Sir Francis Acland Sir Francis Acland , Camborne

Not without lessening the burden on other persons.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

The right hon. Gentleman expressly states he thinks I am right in reducing the Excess Profits Duty, because the tax, avowedly, was not considered by those who introduced it to be suitable for normal conditions—it was recommended only for the exceptional circumstances of the War—and because it was having a bad effect on the restoration of industry. The right hon. Gentleman the Member for Camborne (Mr. Acland) adds to that that I should not have reduced it without reducing other taxes at the same time. How does that square with the first paragraph of the Amendment? A moment ago it was the two right hon. Gentlemen who were not in accord. Now it is a single Gentleman who cannot agree with himself. The first sentence of the Amendment is, that the House declines to give a Second Reading to a Bill which makes inadequate provision out of revenue for the expenditure of the country, and he proceeds to explain that I have reduced a tax unduly, that it would be all right if only I had reduced other taxes as well. Now I come to the charge of having made an inadequate provision out of the revenue for the expenditure of the year. If I understand the argument, it is that I am wrong in using, to meet the expenditure for the year, the £200,000,000 expected to be brought into the Exchequer on the realisation of the Vote of Credit assets. In his opinion, I ought to have raised the sum by taxation instead. Will he go a step further? If he reads my Budget Speech again he will see that the £200,000,000 which comes into the Exchequer is not the only sum derived from the realisation of Vote of Credit assets which I have taken in aid of the expenditure of the year. There is another £250,000,000 appropriated in aid of particular Votes, and on his principle it is not £200,000,000 but £450,000,000 additional taxation which I ought to raise this year. Would he do it if he were Chancellor of the Exchequer? Would he contemplate it for a moment? Would anyone consider that it was wise?

We are not talking at this moment about capital levy. Capital levy would not be appropriate for that purpose, as he himself would admit. The question between him and me is whether it is right in the circumstances of this year to appropriate the money coming from the sale of these assets in aid of the expenditure of the year. He says that it is wrong, that the money should be provided for in taxation. The first plank of the Liberal party is £450,000,000 additional taxation this year. How it is to be got we do not know. What about the Luxury Tax? He did not say a word about that. I should be very sorry if he thought, in consequence of my dismissing it so briefly in my Budget Speech, that that argues any disrespect to or want of appreciation of the work done by the Committee over which he presided and the Sub-committees which assisted. It was very valuable work, and I do not dismiss the results of it lightly. On the contrary, what they did was to examine the whole problem, and, assuming you wanted a tax of that character, to frame the best scheme for it, subject to minor alterations. Suppose I had been willing to proceed with it, I could not simply have taken their schedules, because their schedules overlapped. I could have pointed out on information "from my advisers in consequential features that the Committee would certainly correct if they had had the knowledge before them.

I do not say if the War had been still going on that one might not have confronted that or any other difficulty, but consider what it was. It was called a Luxury Tax. You had to measure your luxury by money value. You had to do that at a time when values were changing, or, to put it another way, you measured it by the price of commodities, and you had to do that at a time when prices were abnormal and were changing, and if the figures fixed by the light hon. Gentleman's Committees were right when they were fixed they would all be wrong now, and would have to be recast, and they might be made equally wrong six months hence by some further change in the price either up or down. But more than that. Is price any measure of luxuries? When you came to have those proposals on the floor of the House, and to debate them here, what figure would the Government have cut even with the aid of the right hon. Gentleman? Imagine my right hon. Friend discussing exactly where a child's bodice or lady's underwear ceased to be necessaries and became luxuries. What is the answer to the question, Which is the more wasteful expenditure—to buy one good article and use it for a long time or to buy a lot of cheaper articles and throw them away the moment they show any signs of wear? I think that a tax based on that principle is vicious at its source. I think it is a tax which you might be driven to in the stress of war, but I will undertake to say that we should have a long Session if I tried, to force through an elaborate Schedule such as this of the right hon. Gentleman's Committee, defining exactly the prices at which each article or class of articles ceased to be a necessity and become a luxury, and then imposing a tax above that line. That is the only suggestion for meeting the deficit of £450,000,000 by taxation, which the right hon. Gentleman gave In the course of his speech. I differ from him.

In the circumstances of this year where the expenditure is very largely abnormal, where from the same causes that produce the abnormal expenditure there are abnormal receipts, it seems to me legitimate, and not merely legitimate but the right thing to do, to use these abnormal receipts towards meeting the abnormal expenditure and so to reduce the borrowing which would otherwise be done. I quite agree that if we had got back to normal times, to use these receipts, which come out of the sale of goods procured by borrowed money, for anything but the reduction of debt, would be a wrong thing to do. This year I would use them not in reduction of debt. That would merely force me to borrow more; while I paid off debt on the one hand I would have to borrow more with the other. Then the right hon. Gentleman looked forward to next year. I said in my Budget that next year would be an abnormal year. My fore casts were made as carefully as I could make them. They were expressed, as lie rightly, says, with great caution, and above all with full information as to the basis upon which they were made, so that hon. Members may judge for themselves whether I was over-sanguine or not, and as time went on might test the trustworthiness of my forecast by the actual march of events. Next year will be an abnormal year. It will be abnormal in expenditure, and again it will be abnormal in receipts. There will be overlapping of the Excess Profits Duties at the old rate of something like £100,000,000. There will be another £350,000,000 probably—I hope so—of assets to be realised, before next year or in the course of it. Between now and the end of next year I hope that the Allies will be in a position to begin to shoulder the burden of their debt towards us, and I hope our late enemies will have at any rate made part of that contribution which they owe us on account of the losses and sacrifices to which we have been put by the War which they forced on Europe. But as long as you have these obnormal circumstances, greatly swelling your expenditure on the one side and equally swelling your receipts on the other, I do not think it would be reasonable to ask the country to find the whole of the expenditure of the year out of the revenue of the year—the whole of the expenditure normal and abnormal out of the revenue of the year, and yet to deprive the country of the use, for meeting that expenditure, of the abnormal receipts which come in on the other side of the account.

I suppose I must say a few more words about Preference. The right hon. Gentleman who spoke on the subject here, endeavoured to break, as he said, new ground, but incidentally and in a passing phrase he adopted all Mr. Asquith's criticisms delivered at Newcastle the other day. Mr. Asquith was very free of criticism. He posed as an expert and a purist in financial matters, but I think his memory betrayed him. He thinks I am making insufficient provision out of Revenue. He thinks I ought to be doing more to reduce debt. He was Chancellor of the Exchequer in happier years, when he inherited a surplus from his predecessor, when he had two years each with a surplus. Did he add a penny to the Sinking Fund? He added £500,000 one year, only to take it out of the Sinking Fund next year for a purpose for which the Sinking Fund was never intended. What was the last and final achievement of: this purist in economic and financial method? What was his last Budget, immediately after the presentation of which he transferred the office to his successor and himself became Prime Minister? He introduced old age pensions. He introduced them, estimating the cost at £6,000,000, which was a ludicrous and careless under-estimate; and he made provision for only £1,250,000 in that year. He had a surplus. He did not reserve it to meet the coming cost of old age pensions in the next year, but proceeded to distribute it at once in relief of taxation, and he invited his successor to raid the Sinking Fund in order to help to pay for old age pensions.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

Having previously reduced the National Debt by £110,000,000.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

That was the figure at which his predecessors had fixed the Sinking Fund. What was the result? He handed on to his successor a deficit in the year for which he had been responsible and the prospect of a deficit of 15¾millions in the year succeeding, for which his successor had to make provision. I think any Gentleman who has that record should not throw stones quite so freely at other people's glasshouses. I turn from these general observations. I cannot turn from them yet, because I must express my disappointment that he never completed, or so imperfectly completed, the intention which he expressed in his speech. Like the right hon. Gentleman opposite, he dwelt on the formidable situation with which we were confronted. He said that" There are only three ways out of it—increased taxation, additions to borrowing, or reduction of expenditure. No human ingenuity can suggest any fourth. If the Chancellor of the Exchequer proposes to meet it by some increased taxation "—which I do—to which Mr. Asquith says, "in principle I see no objection"—"or by borrowing to some extent on the £250,000,000 "—which I do—on that point he said, "I must pause before I come to what I consider is the true solution of the financial difficulty." He paused to consider Preference. I read on, not very much perturbed by his denunciations of Preference, but in eager expectation of the great remedy which was to come when he got over this little diversion. What was it?" What is our remedy?" says the right hon. Gentleman." Let us return to Cabinet government." I venture to permit myself one observation. I hope to see a return to normal Cabinet government before very long, but I hope never to see a return to that form of Cabinet government which was practised under Mr. Asquith—an assembly of twenty-one or twenty-two gentlemen held publicly responsible by the Prime Minister for matters which they could not discuss, and which it would have been injurious that they should discuss—a machine which would not work well in peace, and which broke down under the stress of war. If that is really the great secret for- all our troubles, if it is the only contribution the Leader of the Liberal party can make, I do not think he will help us very far on our road. If he does not help us, the right hon. Gentleman opposite can criticise us very freely. The right hon. Gentleman adopted the phraseology of Mr. Asquith. He complained that it was a trumpery affair. I do not pretend that the Preference on duties embodied in this Budget is a very large one. I think it is a big question. There I agree with my critics opposite. It is not in itself a very large affair, but it is part of a larger policy. In view of the present Government Preference is not to be confined merely to Customs Duties. It is to inform: our whole policy. Take a particular case. The other day I issued new instructions for the guidance of the New Issues Committee. In those instructions I directed that, other things being equal, preference was to be given to cases where the capital was to be expended in one of His Majesty's Dominions. Was I wrong? Does anybody criticise me? That is part of the policy of Preference. Take another case. The Government decided three years ago that pur- chasing on behalf of His Majesty's Government when not made in this country should be made in the Dominions or in the British Empire overseas, rather than from other countries. This year on 10th March we issued from the Treasury a letter to the different Departments in consequence of a decision by the Government: It is the desire of His Majesty's Government that the preference in Government contracts here spoken of should be effective, and whilst they think it undesirable to lay down any exact percentage they desire that both in regard to opportunities to tender and in regard to prices the Dominions, Colonies and Protectorates should have the full advantage of their decision.

6.0 P.M

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I hope it will be carried out. It is our intention that it should be. I say that the policy of Preference informs our whole policy, and is not to be confined to the mere Preference in these Customs Duties. What is the complaint about that? The right hon. Gentleman adopted Mr. Asquith's complaint that we were sacrificing revenue, or, as Mr. Asquith put it, throwing away three millions of money for nothing. Is that the view of the Liberal party? Is that their attitude towards a decision of His Majesty's Government, small as it may be, which is hailed with enthusiasm in the West Indies and with approval, I believe, in every Dominion of the British Crown? I have seen no adverse comment upon it, except that they would have liked it to have been more. I have seen favourable resolutions from the West Indies as to it, and the friendly and favourable references of the High Commissioner of Canada in London, and Press telegrams describing the gratitude and hopes of the people of South Africa who saw the opportunity for the development of their industries.

Photo of Sir Francis Acland Sir Francis Acland , Camborne

What about India and Ceylon?

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Perhaps the right hon. Gentleman would address that question to the Secretary of State for India and the Secretary of State for the Colonies. I am not authorised to speak in their names, but I know this, that there were Indian representatives sent to the Imperial War Cabinet and to the Conference, which was held in 1917. I am quite certain that the Indian and Ceylon Governments would not have pressed us to create a Preference in tea against our will, but I cannot believe that the people of India or of Ceylon or the Governments of India or Ceylon would have liked their products to be the single exception, from the opening of Preference to the products of all the other parts of the Empire. Is it nothing to respond to a desire, a wish, a hope, expressed at every Colonial and Imperial Conference for fifteen or twenty years by the Dominions? Is it nothing that we should at last fall into line with the policy which was pressed on us, and then embraced by men of other races, and by the great French Prime Minister' of Canada (Sir Wilfrid Laurier), and after being accepted by all of them, has been put in practice by all of them, as to British products entering those countries. Do the Liberal party propose, when they come into power, to instruct their Colonial Secretary to press the then Prime Minister of Canada—and I hope Sir Robert Borden will still be Prime Minister, though his career must, in those circumstances, be long—will they propose to address a dispatch to him to say that, in giving a Preference of 33⅓ per cent. on British goods entering Canada he is throwing away money for nothing, and that we, the British Government, invite him to cease that policy. Members of the Liberal party must surely know that the Preference that has been given to us in the Dominions has been of great advantage and is what is of great advantage when we meet it in the Dominions, of no advantage to the Dominions and Protectorates and Colonies when they meet it here?

The right hon. Gentleman said quite truly that trade is a very intricate affair. He is very much afraid that we are doing no good to Indian or Ceylon teas by reducing the duty on their products, and he is enormously concerned lest we should do them injury by spreading the consumption of Java and Chinese teas elsewhere. He said that those Java and Chinese teas were largely teas of a very cheap and poor quality, used either by themselves or more frequently blended to produce a very cheap tea. I remember an hon. Member who sat on one of the Benches opposite and who was a colleague in a Government of which the right hon. Gentleman was a member, once observing in this House that it was a great mistake for poor people to drink cheap tea, and lie said that cheap tea was bought by mean rich people for their servants, and that cheap tea was not an economic article. However that may be, let me try and follow the right hon. Gen- tleman's argument. He says that with the extra 2d. it will not pay to bring in Java and Chinese teas. The extra 2d.! You would suppose that I had raised the tax on Java and Chinese teas. I have not. There is no extra 2d., but there is 2d. reduction on Indian and Ceylon teas. What will happen? If it does not pay to bring in Java tea—that is to say, if there is not 2d. difference between Java and Indian teas, the poor people in this country will get the better Indian tea at the same price as that which they used to pay for the poor Java tea. That must be so. Mr. Asquith said that in the case of tea the Preference is obviously nugatory, and a sham, and that it is equivalent to reducing the duty on tea. I said in the Budget Speech that it was equivalent to reducing the Budget duty on tea. What are the advantages to be derived from it? The British consumer gets his tea cheaper, and, paying less for it, he buys more of it, and, therefore, there is a greater demand in this market for Indian and Ceylon tea. The right hon. Gentleman said also that the growers would be driven out of foreign markets by the competition of Java and Chinese teas, which had hitherto been sold here. What is the logical outcome of that argument? If we pursue his argument to its logical conclusion, we should protect our markets not against, but in favour of the foreigner, so that he would be induced to send his products here, in order that we may not suffer from his competition elsewhere. Have you ever known Free Trade argument reduced to such an absurdity?

I agree that trade is complicated, and that traders are apt to be nervous, but I think they prefer to go on in their own way, without otherwise being disturbed in their course. Then we were told that in the case of tea they were afraid they should lose the entrepÔ t trade by competition in foreign markets; but they have lost that trade, and if they had lost it before the War, and if my Preference had begun before they lost it, they would have said they lost it because of that. Now that they have lost it, not because of Preference, what is said is that Preference may prevent them regaining the entrepÔ t trade which they have lost. I think those are rather idle speculations, about which we need not concern ourselves. Then there was a reference to certain taxes which I described as sumptuary taxes, and we are told that I have applied a Preference to them also. I did not intend them for the purpose of creating a Preference, or of giving Protection. They were put on during the War by an orthodox Free Trader, for two purposes only, which Free Traders sometimes say, cannot be combined. They were put on with the object of stopping imports at a time when we could not well afford to pay for them, and, secondly, of securing, if we could not entirely stop the imports when we could not afford to pay for them, and were not manufacturing them ourselves, because of the absence of our men at the War, to secure revenue at a time when revenue was very necessary. But trade has not got back to normal conditions, and things are very far from normal, and it is very undesirable that we should buy great quantities of articles, which are not necessary, from countries like the United States, where all our recources in dollars ought to be conserved for two purposes, paying our way and paying our debts. If, in spite of these duties, the articles do come in, I think there is as much need of revenue now as there was when Mr. McKenna imposed the duties. Therefore, for all those reasons, I should have retained them, Preference or no Preference, for the present.

Let me say here again, for myself as well as for the Government, that neither, in respect of these duties nor as to any others, is the fact of there being a Preference on them a guarantee by the Government that the duties will be maintained at their present rates or that they will be maintained at all. There is, for instance, a Preference on spirits, but that will not impose upon this country the necessity for having the duties on spirits continued if it wants to give them up for other reasons. The principle on which we proceed is that each part of the Empire settles its own duties for itself, and according to its own wishes and its own interests. Where we part company from the right hon. Gentleman is that when, for our own purposes we have established duties, we will give a Preference to the British Empire over the countries outside. That is the offence which cannot be forgiven, that you should treat kinsmen better than the stranger, and that you should recognise within the fiscal sphere the unity of the British Empire, and thus embody in its commercial relations something of that-high spirit of united endea- your which carried us through the great struggle of the War. That is the real offence which hon. and right hon. Gentlemen opposite allege against us. I shall be very happy to see how many, I will not say of their small party they carry with them in the Lobby to-night, but how many of their countrymen they carry with them in the country in so narrow and mean a view of the duties and responsibilities and opportunities of Empire.

I suppose I must say a word or two about the capital levy. This Motion invites the House to refuse to proceed with a Budget which does not provide for a capital levy. The right hon. Gentleman the Leader of the Liberal party in this House will not commit himself by speech to a capital levy, and I presume he will not by vote. Mr. Asquith would not commit himself by speech to a capital levy. The right hon. Gentleman who moved the Amendment explained that he did not know whether a capital levy was a good thing or a bad thing. [AN HON. MEMBER: "What about the Leader of the House!"] But my right hon. Friend the Leader of the House is not going to vote for it until he has found out whether it is a good thing or a bad thing. That is the difference, and, on the, whole, it seems to me that the course pursued by my right hon. Friend is wiser than that of the right hon. Gentleman opposite, who first wants to decide to have a capital levy in the Budget and then will decide whether or not it is a good thing. I have given some study to the question. I have no doubt in my own mind, and even if you have a doubt, which I do not share, even if people are prepared to take the responsibility for this proposal at some time, which I am not, I suggest to them that this is not the moment for launching into an inquiry of this kind. I do not think they would countenance it if they had my responsibility. My task is going to be difficult enough under any circumstances, but it would be rendered infinitely more difficult if you started inquiries which would cause insecurity and fear, which would disturb the minds of the men to whom you have to appeal in order to help you to put the finance of the country in a sound condition. I can only say that my views are unchanged. I am not attempting to argue the question again. My views are unchanged. They were not formed without consideration, and the more I study it and the more I listen to speeches which are made in support of it, the more difficult does the proposition appear to me to become. [AN HON. MEMBER:" What are your arguments?"] The hon. Member asks me to argue it out, and I will take a couple of points.

The right hon. Gentleman who moved the Amendment was insistent that it should be done once only and for only one purpose—that was, to get the Income Tax down by paying off debt. if he goes into the Lobby with a Motion in favour of a capital levy, the majority of the supporters he takes with him will not accept either of his propositions. He obtains their votes but they will not accept his meaning. They will take his Amendment, but they will put their own interpretation on it. They do not mean a single levy, they mean a repeated levy. They do not mean to use it merely for paying off debt, they mean to use it for other social purposes. They do not intend that it should be used to reduce the Income Tax, unless it be the income Tax of people with less than £250. What security is the right hon. Gentleman going to give to those to whom he comes and says, "Better than pay this high Income Tax for the term of your natural life, sacrifice a quarter of your capital; have done with it once for all, and you are free of this great annual burden? "What security has he got? None. The majority of those who vote in his favour mean to repeat the operation and continue the Income Tax at the high rate. That answers one of the arguments of the hon. Gentleman opposite (Mr. Arnold). The moment you try to work the thing you will find you cannot take a slice out of everyone's capital. There must be exceptions, and there must be a limited option to contract for paying by instalments. I am asked what security has the taxpayer who makes the sacrifice that his Income Tax will be reduced, but I would ask what security the State will have that when having forced one man to pay on the spot it allows another to defer payment, it is ever going to see the other payment. I think the hon. Member for South Hackney (Mr. Bottomley) answered my hon. Friend himself when he inquired what he would do with the gentleman whose property consisted of some shares in a not very nourishing newspaper and a few racehorses. There are many conundrums of that kind.

I will suggest one more subject for inquiry to the hon. Member when he next deals with this question, because I think it is an aspect of it he has never touched upon. How is he going to deal with all the life interests and contingent interests and remainders which enter very largely into our British social system, I am told much more largely in this country than in any other, and which affect the estates of a very considerable portion of the populatio of the country and of a much higher proportion of the wealthy? That is a problem which he has never touched upon, so far as I know, and I think he will find that it is a very difficult one when he comes to work it out. I venture to make one other remark. If you have got a tax which is admittedly very difficult to assess fairly, very difficult to adjust to our complicated social conditions, if it is resented, if it is considered unjust by a large part of your population, you will create a great social evil which may lead to resistance to the law. I do not mean violent, open resistance, but you do not carry their good will. It is one of the first canons of taxation, that as far as may be you should do everything you can to carry the good will of the taxpayer with you. It works for a smooth, efficient, and accurate collection of taxation, it helps you to guard against evasion and fraud, and it is of enormous importance to the Revenue authorities that they should have that kind of general public assent behind them when they have to go into the Courts and plead before the judges or their fellow countrymen in revenue cases. For my part, I can only say that the more I study the matter the more difficult it becomes, and the less do I find that those who have propounded it can claim to have considered the greater dangers and difficulties of embarking on such a course at a time like this, when we have a vast floating debt which we are anxious to fund as soon as we can, and which it is essential that we should provide for within a limited time in order that we may be free from anxiety. At such a time to start an inquiry into a tax of this kind, never tried anywhere else, so far as I know [AN HON. MEMBER: "Russia!"] I am not talking of societies in revolution. I am not talking of the methods of King John.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Has it been tried in France?


The scheme has been prepared.

Another HON. MEMBER:

It was done in Germany before the War.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Has the hon. Gentleman ever looked at what the tax there was? Let me tell the House. The tax was a tax spread over five years. It was graduated according to the wealth of the possessor. I speak from memory, but at the highest point of this scale, and that applied only to the last slice of the wealth of the wealthiest man, it amounted to l½ per cent. of his capital, and payment of it was spread over five years. It did not get as much money as our Income Tax. It got under fifty millions in five years, and that, and a suggestion of a tax in France, which has not yet made its appearance, are the models of practical experience which hon. Members opposite invite us to proceed upon. I think no country in the world has such a fiscal engine as our Income Tax. The French Income Tax is not to be compared with it; the German Income Tax is not to be compared with it. I do not know what the future of capital levies may be in France. I doubt very much whether the French Minister of Finance intended a capital levy in the sense in which it is spoken of here. I rather read him as intending a small annual tax on capital, but at any rate its reception by the French Chamber was not so encouraging that the tax has yet seen the light. It therefore gives us no experience to go upon. I have been led further than I meant to go. I think I have dealt with most of the points raised in the discussion, and I can only say that I am grateful to hon. Members for the kindness with which they have treated me personally throughout these discussions, and I am gratified also by the general reception which the Budget has had. It was at least an honest attempt to unfold a plain story to the country as to its position both now and in the near future, as far as I could gauge it, and an honest attempt to meet the necessities of such a situation. To propose in this year such an increase of taxation as will, if these expectations are realised, balance income and expenditure in a normal year is, I think, the largest sacrifice I ought under present circumstances to ask the country to make.

Photo of Mr John Clynes Mr John Clynes , Manchester Platting

The House will notice on the Order Paper the names of some hon. Members on this side of the House attached to an Amendment substantially similar to the one which is now being considered, and I want to say a few things in relation to some three or four points covered in the Amendment to which I have referred and the Finance Bill itself. I may begin where the right hon. Gentleman left off with a reference to the capital levy. I suggest to the House that the number of questions put to the House by the right hon. Gentleman himself on the great difficulties surrounding this question, its uncertainties, how it will apply in practice—those questions show the necessity for the Commission of Inquiry which he has definitely refused. We have certainly not reached a point at which the Chancellor of the Exchequer can close the door upon any extraordinary methods of meeting an extraordinary financial difficulty. Wu are still spending very largely, despite the fact that we are told the War is over, and probably for some time very heavy expenditure will have to be incurred. The levy on capital is not rejected on moral grounds even by the Leader of the House. The main objection appears to be grounds of expediency, though the Chancellor of the Exchequer has just put to us the view that we ought to carry with us the good will of sections of the community towards. the taxation imposed upon them. Has the right hon. Gentleman got the good will of the miners in respect of the tax which was put upon them, and upon other wage-earners, as a war measure when the Income Tax level was lowered? Probably he has seen or heard, and if not, I am sure he soon will, of resolutions passed within the past few days by great bodies of miners declaring that they will not pay the tax, and they are asking their very large federation to take effective action on their behalf. I trust no workman will think of going to the length of refusing to obey the law so long as it is the law, though I observe that a workman has already been in Court for having refused to pay Income Tax, and he decided to go to gaol, because be said, it was unfair to compel him to pay this tax upon comparatively low earnings at the moment when the Government was paying out weekly, large sums of money to other people for doing nothing at all. So that the argument that you must get the good will, and almost the consent, of the people who are taxed to any taxation you impose does not carry us far.

I do not say for myself that if, for the purpose of reducing, if not altogether ter- minating, the enormous burden of debt, which we now have to carry, the device of a capital levy were resorted to, that that necessarily would mean a continuance of such a policy year by year for any purposes of national revenue. I quite agree with all the right hon. Gentleman said as to the virtues of our Income Tax system, but I can assure the Chancellor of the Exchequer that this subject of a tax upon capital as an emergency measure to meet extraordinary financial difficulties, is arousing very great interest in the country, and creating very serious discussion, and, therefore, such a Commission of Inquiry as has been suggested might well be appointed in order to explore the difficulties, and probably to suggest the best means for applying it with equity and with justice to those who might be affected by it. The right hon. Gentleman in his earlier speech upon this question adduced only two arguments against the imposition of a capital levy. One was that it would discourage saving, and the other was that it would discourage enterprise and production. If it be true that anything of the kind would discourage enterprise and production, how can hon. Gentlemen in any part of the House criticise or condemn those who, in a more humble sphere of activity, are charged with a policy of ca' canny in pursuance of their interest. The argument that it might discourage trading is answered by the fact that the heavier the taxation has been in the past, the greater the saving has been. The fact that men have to bear burdens does not in practice diminish in any way their effort to maintain or improve their general position. The immense burden which the War has thrown upon us cannot be carried year by year by the ordinary processes of taxation to which we might resort, nor even by such an increase in the Income Tax as would at all be tolerable to the general body of taxpayers. And I would suggest that it is not only the manual wage-earners who are looking for the use of some such expedient as that which we suggest. There is a very considerable number of the lower middle-classes, brain workers, men and women alike, giving service of great value to the community, but yet receiving only very meagre salaries or wages, who feel very heavily indeed the burdens of taxation which the right hon. Gentleman has not in the slightest degree diminished in any part of this Budget.

It is a commonplace to say that expenditure follows policy, but we need to remind ourselves that, although the War has long been over, the rate of expenditure in which the War involved us is almost now being continued. If we are to judge by the expenditure itself, one may say the War is still on. If it be true that Britain dominates what is being done in this Island on behalf of the Allies in relation to what had to follow the War in the settlement of peace terms, it cannot be said that the job is being done well. It is being done certainly at a great cost. We are still paying immense sums for the Army and for the Navy. Under that first head of policy there is no ground for the Government to congratulate itself, and certainly little has yet been done to diminish the enormous charges of those two great Services, which properly had to be made for the purpose of war while the War had to be continued. And, under another head, I think there is good ground for criticism of the action of the Government, namely, its failure effectively to take in hand any of those great branches of the work of reconstruction which would have saved at least some part if not all of the £1,000,000 a week still being paid out to people who have no opportunity of employment at all. The Budget, in the mind of the ordinary workman, i3 viewed in this way: It borrows an additional sum of about £3,000,000. It leaves to the capitalist an additional sum of about £50,000,000 a year, and it gives to Colonial traders some £2,250,000 for doing business with us. That is not a Budget which a House such as this, having after-war conditions to consider and decide, can find any cause whatever for congratulation. Under what head is there any prospect whatever of reducing the colossal borrowings which are continued even in this Budget? We could, I believe, even while the War was on, have found a larger sum for the payment of war expenses and of war debts than we did find out of the wealth still possessed by the community, for this fact remains, that, in spite of the taxation, saving amongst a large section of the community has been continued. Taxation, heavy as it has been, has not broken the back of that more favoured and fortunate class which, in spite of its extravagance, is able to save, and add even to its former store. The important point of leaving a large part of the gain derived in excess profits has in no way been Justified by the Chancellor of the Exchequer this afternoon. The only argument which one can recall as being used by him on a former occasion was that the objection to the Excess Profits Tax was that it was imposed on the principle of a flat rate upon all. Yet that same principle is maintained. The 40 per cent. is to be continued regardless of any of those reasons or arguments that have been adduced by those who have previously taken part in the discussion of this subject.

I will allude only to two other points. There is the question of the Beer and the Spirit Duties, and their consequences, and the question of Imperial Preference. The Government is making a great mistake indeed in treating lightly the supplies of adequate quantities of wholesome beer, not merely for the working people—though I think it can be said mainly for them—but for the masses of the community, and no matter how much I might incur the displeasure of so-called advocates of temperance in this country, I want again to bring before the notice of the House the working-class opinion on this matter, without, I hope, doing any damage whatever to the cause of true temperance reform. All that the Budget has done under this head has been to take an additional £31,000,000 from the sale of beer and spirits, and yet leave a shortage of beer supplies of 16,000,000 barrels as compared with the quantities that were supplied before the War. Through some other machinery—I believe that of the Liquor Control Boavd—workmen have been mocked by being told that the public-houses can be opened half an hour later at night, whereas the fact is that many are closing half an hour earlier than before for this very reason of shortage to which I have called attention. There is no such ground as existed while the War was on for the beer shortage that was then caused. There is no such question now as a choice between bread and beer.

I think that the present shortage of these necessary refreshments ought not to be maintained, as obviously it is being maintained, in order that in some later Budget even heavier charges may be imposed upon the refreshments in exchange for belated concessions which probably will be made some twelve months hence. There is a very serious and growing outcry amongst the working classes as to what is being done by the Government in the curtailment of their liberties and the refusal of a supply of adequate quantities of beer and refreshments. These protests cannot be kept within reasonable bounds as soon as the Peace terms are signed. Many things to which citizens would submit, and have submitted, during the period of the War, and until that period is at least technically if not completely terminated by the signing of Peace, will not be submitted to by them when Peace is actually concluded. I hope, therefore, that even during the discussions on this Finance Bill the Government and the right hon. Gentleman will take occasion to revise this part of this measure and meet these real grievances which can be redressed with out the loss of any good cause and without loss to the revenue of the country.

In closing let me say a word or two on the question of Preference, to which I am provoked by the very eloquent appeals made to our emotions, our nationalism, and our patriotism in the speeches of the right hon. Gentleman. All that very fine language about bringing our kinsmen nearer to the Mother Country really does not make the relations any better at all. You are not going to give a reward to the men in any part of the Empire for what they did for the Mother Country in the great War by putting into the pockets of certain Colonial traders larger sums for business. We know what was the real cause that prompted these great communities to come forward and help us to maintain the forces in this country it a level of great strength while the War was on. These actions were prompted by qualities of human nature high above any such mercenary purchase as the right bon. Gentleman opposite suggests by means of these trading bribes. If we could imagine that the consumer would benefit from this, or that the individual purchaser of these commodities was to gain, something might be said for the transaction. All practice is against reaching any such conclusion. I think we will find here, when this matter is further considered, that that actually is the experience we shall have, and that neither friendship nor finance is in any way improved by a fiscal device of this character. So far, therefore, as I can express the worker's view it is this: That the Finance Bill now before the country is giving no relief whatever in regard to any one of the very serious burdens which the workers are bearing to-day in the matter of revenue. Their food has in no way cheapened. Their disappointment is felt in the continuance of all these heavy charges for which they did properly look for relief as soon as the War was over. There has been no process of cheapening. There has been no relief of any kind. There has been no lesening of the burdens, which are very heavy indeed, for the few million people who work but whose earnings still keep them at the same subsistence level. No relief of any kind is offered by this Bill to these. So deep is the disappointment of the workers at the proposals submitted by the right hon. Gentleman that I trust that in a few respects at least, in regard To that level of taxation which affects their wages, low as they are, and in respect of their personal liberty and their humble enjoyment to which I have referred, while the Bill is going through its Committee stages the right hon. Gentleman will see his way fairly and reasonably to consider some of these points and make amendments.

Photo of Mr George Tryon Mr George Tryon , Brighton

I think it is an extra ordinarily unfortunate thing that when this House is about to come to a decision on the great Imperial question of Preference that the right hon. Gentleman who has just spoken for the Labour party should, have used in this House, and in the presence of us all, terms which to my mind are almost insulting to the Colonies—


No, no.

Photo of Mr George Tryon Mr George Tryon , Brighton

The right hon. Gentleman has spoken—[HON. MEMBERS:" Oh!"]—Well, if hon. Members opposite will listen they will hear what I have to say. The right hon. Gentleman has described this policy as one of mercenary purchase. That is his description of Imperial Preference. Who put this policy forward? Hon. Members should, indeed, know perfectly well that for thirty-three years the Dominions have been putting this proposal before this country. They know it was put forward by a Dutchman in South Africa. The Labour party practice it in Australia. Does the right hon. Gentleman who talks of mercenary purchase consider the policy of the Labour party in Australia a mercenary one? It has been tried and it has succeeded. It is a policy which has extended all over the world amongst our Dominions. To-night we are to give a great, and I think what will be an historical decision. To-night we shall have to decide—I hope by an overwhelming majority—whether in these great economic questions the Empire is one or whether we alone stand out of the arrangement which all the other Dominions have put into practice with each other.

We are discussing great questions of Reconstruction—housing, for instance. Before people put forward schemes of housing they consider what is the area over which they can spread their scheme. I think when we come to the great economic reconstruction of the Empire, after this War, we must try to build the economic future of this country, not on the narrow basis of these islands, but on the much wider and surer foundations of the whole British Empire. That is what this policy means. We have been told that the tendency is one towards Protection. As a matter of fact the whole movement is towards freer trade within the Empire. This is a reduction of duties within the Empire, and it is the whole Empire moving in the direction, with present duties and present arrangements, of gradually lowering the tariffs within, the Empire. I think all this will be found a much nearer approach to Free Trade than anything else we are likely to get. It has been suggested that the Customs will disappear altogether. The right hon. Gentleman the Secretary for War, some time ago, in one of his most eloquent moments, told us that he looked forward to the day when Custom House officers and those engaged on purposes of war-like preparations will have followed the mammoth into deserved extinction. We are not going to get rid of Custom House officers. I think the right hon. Gentleman himself, as a matter of fact, has been engaged in war-like preparations. The Customs are going to remain. We hope whatever Customs there are put on for our own purposes shall, at all events, be favourable to the Dominions of our own Empire. We have really got to consider what the world is that we are living in.

We have heard a lot of theoretical speeches from the other side. But what is the world in which we are? If the world is going away from Protection and is going to adopt Free Trade, I do not think this country is likely to be one to set up any tariff walls when other countries are pulling down their tariffs. I ask, however," What is the world in which we find ourselves?" The greatest country outside our own Empire at the present moment is the United States. There are there two parties—the Republican party, which is the party of a high tariff, and the Demo- cratic party, which is the party of a low tariff. President Wilson told us when standing at his Presidential election that" there is no fear of the Free Trade bugaboo." I am not aware of the exact meaning of that singularly beautiful expression, but the meaning of it is, I think, fairly clear, because President Wilson went on to say, "The Democrats do not propose to revise the tariff in any other way than will conserve the real interests of the country." "Neither I nor the Democratic party, "he said," stand for Free Trade. "That is pretty plain speaking on the part of the President of the United State. Next comes France. We find a definite Protectionist policy has for years been the national policy of that great Republic. In the case of Ireland and India it is, I think, obvious that the grant of self-government in fiscal matters would be followed at once by the abandonment of Free Trade and the adoption of tariffs. I am not rejoicing at these things, nor am I condemning them. I only desire to consider the whole world in which we are, to deal with realities, and not with the old theories of seventy years ago. I believe the world will remain Protectionist. Naturally, therefore, we have to consider our policy. I hope we shall face the difficulties, and will endeavour to work with our Dominions. That is what we hope to achieve by our present proposal. There are in facing this economic situation two classes of people. There are people whom I might term the "economic militarists," and there are those who may be termed the "economic pacifists." There are people who are very military and aggressive in their economic policy, and, on the other hand, people who do not mind what happens to us, and who will suffer anything. Let me examine the case first of the economic militarists. One of the speakers—I will give his name in a moment—said: So far as commerce is concerned Germany is a beaten nation. It is our business to take good care that she does not get her head up to the same extent after the War. I do not know whether hon. Members opposite will agree with that, but those are the words of Mr. Runciman. On the other hand, we have people who do not mind what happens to us economically. For instance, if we have clay in this country and a foreign country puts a duty on china we stop sending out china and send out only the clay. If a duty is put on something else we alter the course of that trade or trades. We immediately change them to suit the new situation. I call that by the name of economic foolishness. In this question it is time that, as a nation, as an Empire, we resume control. We have had quotations from Mr. Ricardo. I will give one from Mr. Cobden. He said: I doubt the wisdom—and I certainly doubt the prudence—of a great body of industrial people allowing themselves continually to live in independence on foreign countries for their supplies of food and raw material. That is a very sound doctrine. If we cannot get the free Trade we desire within the Empire we ought to try to get it more free than in the past, because, as some of us contend, we have within our own Empire essential supplies, and if we follow the course suggested we shall not be so liable for our trade to be interfered with and cut off by foreign Powers. We have just had a speech from the Labour Benches. I know that some hon. Members opposite regard tariffs as something in the nature of economic war. They would not regard the withholding of the ordinary supplies from the community in order to influence the policy of this country by a foreign Power as an act of war. But only the other day at the Labour Congress there was a threatened withholding of coal from the community in order to influence the decision of this House. That surely was economic war. A resolution was passed to this effect, and at the same time the Congress passed a resolution favouring the League of Nations and a peaceful settlement of disputes between nations?

Photo of Mr John Clynes Mr John Clynes , Manchester Platting

I would like to ask the hon. and gallant Gentleman whether he is referring to some one speaker at that Conference who made a suggestion of that kind, or does he mean that a Resolution was passed at the Conference advocating that policy?

7.0 P.M.

Photo of Mr George Tryon Mr George Tryon , Brighton

I refer to the Congress at which two resolutions were passed at the time of the miners' dispute, the first in favour of a League of Nations, and the second resolution threatening a strike if the Government did not withdraw their Bill with reference to Conscription. Now I come to a point put forward by Mr. Asquith. He said: If this policy of Imperial Preference had been put forward five years ago the whole Liberal party would have voted against it. I am sure they would, but I think those who are going to vote for this proposal, and I hope many Liberals will vote for the Government, are entitled to answer Mr. Asquith in his own words. He says that five years ago they would have voted against Imperial Preference, but since then he has said: The War has opened our eyes to the meaning and manifold implications of the German system of economic federation, and commercial and financial control are a vitally important interest. I think the War has opened our eyes, and it has so opened them that I hope the whole country will work with our Dominions in co-operation for the economic development of our great resources. There is one argument that has been put forward which it is a little difficult to take seriously. We were told during the Debates upon tea that we must not introduce the policy of Imperial Preference which for thirty years has been proposed by our own Dominions because the people of the Chinese Empire would not like it. Those, however, are not the real Chinamen, because the industrious people in China are not complaining of Imperial Preferential duties, but they are complaining that they were compelled to adopt Free Trade by the bombardment of their ports, and they have been held by treaties ever since to practise Free Trade, although they want to give it up I wonder if the Chinaman who forbids us to introduce Imperial Preference is going to be transferred to the election posters during the election campaign? I met this Chinaman in 1906, and I suppose ha did render a very valuable service to a certain party during the 1906 Election. Apparently Labour Members are most anxious that the Chinese should be in no way impeded in competing with labour in supplying commodities to this country. There is another curious tiling which recalls our old disputes, but I think we can discuss it without any bitterness. I am told that one of the great sources of success in the new Budget is to be found in cocoa. It is something peculiarly interesting to me, remembering the political history of cocoa, to think that in cocoa we should discover the most successful application of Imperial Preference. No doubt the writers in Free Trade journals will find their cocoa all the sweeter since it has been grown in the British Empire.

I now come to the very serious question of the League of Nations. It has been suggested from the benches opposite that those within this Empire are not to do as they please within our own Dominions, because the League of Nations forbids us introducing Imperial Preference. This view was put forward from the Front Bench opposite; but we have a higher. authority in the Liberal party on the question of the League of Nations than anyone sitting on the Front Bench opposite, because Viscount Grey, better known as Sir Edward Grey, speaking of the League of Nations said: I understand that President Wilson con-templates leaving each individual member of the League of Nations, each Empire, each State and each Republic free within the League to settle its own fiscal questions for itself. That is the opinion of Viscount Grey. He says that each Empire can settle its own fiscal questions for itself, and how could it be otherwise? Earlier in our Debates it was suggested that we were not introducing this scheme in accordance with the principles of the League of Nations. May I point out that within the United States are now included distant countries and islands, some of them obtained by conquest, and all of them contained within the fiscal area of the United States? Under. these circumstances, how can anybody suggest that President Wilson would go to the League of Nations and stop the British from introducing Imperial Preference. The French Republic have extended their fiscal boundaries in their own areas to include not only the North of Africa, but even such distant places as Madagascar, and if the French may give Preference there under the League of Nations I cannot understand why we should not have equal liberty to do as we please in our own Dominions within the Empire.

I have one more word to say with reference to Labour. The Labour party—and I saw an unhappy instance of it in the speech we have just listened to—think they can settle this question by raising prejudices against capital and denouncing profits. If ever the Labour party should come into power, they will not get rid of this question by denouncing capital. No matter whether our products come from State factories or from privately-owned enterprises, they have to go out to the markets of the world. The products of a Labour Government in State factories would still have to go to Canada. Are they going to say that they do not want the Canadians to give us a Preference? They would have to decide these questions if they are in power next summer, and I hope and trust they will not be. I will give a sound reason for this, and it is because next year there is going to be a great Imperial Conference, and when the Colonies meet us after the War, and if you have a Labour party in power, are you going to say to them, "We intend to treat you exactly the same as we treat the Chinaman and the German. We are going to give you no Preference, because we think everybody should be treated equally"? I hope long before that Conference meets this question will have been decided. I congratulate the Chancellor of the Exchequer on the method by which this question is going to be decided. It is going to be settled by the vote of a responsible Government, and by the votes of the Members of the House of Commons, and it is not going to be referred to a Royal Commission. He might have appointed a Commission of people like Sir Leo Chiozza Money. But this policy is going to be decided by the votes of elected Members, and not by the votes of rejected candidates, and I hope it will be decided by a vast majority.

I apologise to the House for having detained it so long, but this is a subject upon which I have fought four elections, and I put it in my election address. It is a thing which I believe to be the beginning of a great policy of Imperial reconstruction for the future development on a wider basis of the Empire. It is the policy, I believe, which the great man who went out and fought in this country for the policy of Imperial Preference worked for, and it is a cause which I am sure many hon. Members opposite also have at heart. This great man worked not necessarily for a tariff, and not merely for a change, but for the great principle of Imperial union, and when hon. Members tell us, as they did in their speeches this afternoon, that this is a thing which does not make for unity, I cannot help remembering that the United States of America were federated under a great scheme by one of the greatest men that has ever lived. When you look at that you will find that it is the principle of economic union that is the foundation. If you look at the Australian Commonwealth, the Union of South Africa or the United States, or in the old days of a separated Germany, you will find that in all these cases economic unity has made for and helped, and in some cases has created, Imperial unity, and it is for that reason that I support the Government's proposal.

Photo of Sir Alfred Mond Sir Alfred Mond , Swansea West

I should not have occupied the time of the House at all in this Debate but for a remark which has been made to the effect that no Liberal member of the Government could justify in any way the position he will take up in the Division Lobby to-night. As one who for many years was one of the leading protagonists in the fiscal controversy, and as one who has fought that battle without stint and with sincerity and strength, I am now charged with changing my faith because in the Finance Bill there is a movement for freer trade between us and the different parts of the Empire. The hon. and gallant Member who has just spoken, with whom I would never have thought I would have been in agreement on this subject, made a statement that a few years ago all Liberal Free Traders would have opposed Imperial Preference. That is an entire misunderstanding of the Liberal Free Trade position. We were fighting to decide as far as I was concerned not the question of Preference, but a proposal to impose duties on the importation of food-stuffs into this country, a policy which we considered, and which I still consider, harmful to the country, to the community, and to the Empire. That, however, is not the proposal on which we are asked to vote to-night, and which is concerned in the Finance Bill.

How anyone can contend that a reduction of existing duties can be an infringement of the principle of Free Trade quite passes my comprehension, because it is obviously a movement towards Free Trade and a very strong movement. [HON. MEMBERS: "Oh, oh!"] Hon. Members opposite seem to be astonished at that statement, but if you abolish all the duties existing in all the Dominions and in this country, then you will have absolute Free Trade, and obviously a reduction of duties must be a movement towards Free Trade. I think hon. Members opposite must credit me with possessing as much knowledge on this subject as they have, and therefore the kind of denunciation which is showered upon those who are going to vote without the slightest hesitation and fear and without detriment to the purity of our Free Trade morals absolutely passes my comprehension. I have heard the speeches made in this House and I have read the speech made by Mr. Asquith the other day, and I must confess that it seems to me extraordinary that the late Prime Minister, who was responsible for the Paris Resolutions, a subject which was thoroughly investigated and debated for nearly two years, and which involved not a reduction of duties but a system of tariffs, should allow his Government to accept Resolutions of this character and should at this moment gibe at the proposals in the Finance Bill to-day.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

Those Resolutions were governed by the Preamble, as my right hon. Friend knows.

Photo of Sir Alfred Mond Sir Alfred Mond , Swansea West

I know, and we were going to depart from every fiscal principle that we had hitherto advocated. We are not now asking anybody to depart from any fiscal principle. I ask in all seriousness, What arc we asking the House to do? Are we to say of the Liberal party that, like the Bourbons, they have learned nothing and forgotten nothing, that all the great events that have happened, all the triumphant feelings that we have had individually and collectively, all the extraordinary rallying round this country by our kinsmen from all over the seas and the Dominions is to be forgotten in a moment, and no effort is to be made to meet the wishes and desires of all the representatives of these men at the Imperial War Cabinet? Is that the policy that the Liberal party, or such of it as remains outside the Coalition, deliberately want us to adopt? Is it a policy which they think will be of any value either to them or to those they represent? I can imagine nothing more disastrous. The right hon. Gentleman the Member for the Platting Division of Manchester (Mr. Clynes), who spoke for the Labour party, referred to a mercenary bond. I am sorry that he used that term. He said that trade did not create patriotism. Nobody ever claimed that it did. Nobody ever imagined that the men who dropped their tools in the mines of Australia, the men who left their farms in British Columbia, and the men who came from the ranches of the West, and in thousands of cases ruined themselves, were thinking of trade. They were thinking of their duty, and wonderfully they performed it. To refuse the elected Premiers of those peoples their unanimous request, not that we should put any burden upon our own people for their benefit, but that in relation to duties that already exist we should treat them better than anybody else, would be one of the greatest and gravest blunders that this House could make. It is not a question of business; it is a question of sentiment. Anyone who has visited the Dominions, as I have, knows how very much they have felt the fact that we will not treat them better than we treat others. You can argue that the amount is trifling, that the benefits are small, and that the results are inadequate—I admit all that—but it does not make the slightest difference to what we are asked to do to-day. We are able to do something to benefit all of them, and to reject the proposal on purely theoretical, and unsound theoretical, grounds would be a greater disaster, and for the Liberal party to endeavour to associate themselves with this opposition seems to me to be driving a nail into the coffin of the party to which I still belong and always hope to belong. It is a great and foolish responsibility to take, because there is no principle which any Free Trader in this House or in the country violates if he votes for this Bill to-night.

The right hon. Gentleman the Member for the Platting Division of Manchester made a few general observations on a subject on which I should like to say a few words. He laid down a general principle which it would be rather dangerous to let pass. He laid down the general principle that no amount of taxation, however great, could ever possibly discourage enterprise. The right hon. Gentleman will not find that the history of taxation in any way bears out that theory. There is a very definite limit beyond which the burden of taxation not only discourages but absolutely destroys enterprise. I do not say that the camel of the taxpayer is not a very patient animal and will not carry a heavy burden before he lies down, but I do say that there is a limit after which the camel collapses and goes no further, and to try and lay down a general doctrine that however heavy you make taxation the camel will still struggle on is very dangerous. The right hon. Gentleman rather attacked the Finance Bill on the ground that there were no increases of duties for the wealthy and no decreases of duties for those who belong to the manual classes. He seems to have overlooked two facts. There is a heavy increase in the Death Duties, so heavy indeed that the hon. and gallant Member for Bournemouth (Brigadier-General Croft) raised a violent protest against the policy of my right hon. Friend, and the only duty that is reduced is the Tea Duty, and the reduction there of £3,000,000 is a direct benefit to those people for whom the right hon. Gentleman was speaking. Might I also point out to him that part of the heavy taxation is directly due to large expenditure for the benefit of those whom he so ably represents? A large amount of money is spent on the bread subsidy, on the unemployment benefit, and on other matters of that kind. It seems to me a little ungenerous of the right hon. Gentleman on the one hand to accept large sums of expenditure and on the other hand to say," We are groaning under heavy taxation. Why do not you take it off and put more on other people's shoulders?" Lt is obvious that consideration must be taken of this very heavy expenditure—I do not say it is wrong expenditure—which exists and for which money has to be found.

I do not propose to enter the somewhat fascinating subject of a capital levy, but I must confess that I have listened to very remarkable arguments on the subject this afternoon, and I would like to say one general word on the question. Practical experience shows that in business nothing is sooner forgotten than either increases or reductions of capital. Both are forgotten in a very few years. If at the same time that you made your capital levy you reduced the Income Tax, you might make people happy, but you would have merely camouflaged the, matter, and you would have made people more extravagant, because you would have deluded them with the idea that by transferring private capital to the State you had in some mysterious way increased the wealth or diminished the debt of the community. That is a practical and very considerable danger. It is very much as if a man who owned a considerable sum of money sold out a lot of his capital to pay his debts and then started again on another course of extravagance. If, on the other hand, he had to pay off his debts over a large number of years he would be much more likely to live quietly until he had paid them. At first sight a capital levy may seem a brilliant surgical operation, but, as a matter of fact, it is really a book-keeping transaction rather than a wealth-producing transaction. At any rate, I think the Chancellor of the Exchequer was well advised when he said that this was scarcely the moment, when you are still a borrower in the market, to come forward with a scheme, part of which seems to be to con- fiscate in a very short time that which you are now asking individuals to lend. I certainly think, when you are no longer a borrower but are actually in a position to reduce expenditure would be a better time to inquire into the subject. May I also suggest that when you are paying a very high rate of interest and cannot say definitely what your debt burden is going to be is not a time when you can usefully arrive at any conclusion. I do not suppose anybody imagines that eventually the State will pay 5 per cent, on its debt The time must arrive when you can convert it into either 4 or 3½per cent. By that time you will be able to get at a more just estimate of your debt burden. I doubt, however, whether data exists or will exist for some time either as regards our indebtedness or our income to enable us to form a sound balance-sheet. In these circumstances, I am surprised that my right hon. Friend (Mr. Clynes) should actually propose that my right ho-n. Friend (Mr. Chamberlain) should have introduced in this very Finance Bill, without inquiry or investigation, this capital levy which is so difficult that the greatest economists that I have ever studied cannot explain it, which is so untimely, as far as the financial position is concerned, and which if introduced in that kind of way would merely spell disaster, check enterprise, increase unemployment, already too great in this country, and add to that terrible uncertainty in commerce which is paralysing our position in the affairs of the world at the present time.


I ask the indulgence of the House in addressing it for the first time. I shall say a few words on the question of the Amendment as far as it affects Imperial Preference, and I could not wish for a more appropriate subject for my maiden speech, because it is the question which brought me into political life. When Mr. Chamberlain, sixteen years ago, left the Cabinet and went out into the wilderness to preach this gospel, he made one life-long disciple. I believed then, and I have believed since, that this was the most important subject that had ever been brought to the notice and consideration of the people of this country. My part was a small one in the North of England where the seeds of Cobdenism had struck rather deeply and where the soil was none too fertile. I endeavoured there to do my small part in bringing about the success of this policy. If I may be allowed to say so, it is to me personally a matter of great satisfaction that after all these weary years we have arrived at one end of the journey and we are within sight of the other. We have reached the time when the majority of the Members of this House and the overwhelming majority of the people of this country have come to regard this as a practical proposition, and my satisfaction is only tempered by the fact that that great protagonist, that great statesman who taught his countrymen to think imperially, did not live to see the success of his policy. The right hon. Gentleman the Leader of the Liberal party has issued a trumpet call to every Liberal in this House to rally round the cause of Free Trade as against Imperial Preference. This has been described by the" Westminster Gazette" as the acid test. But may I suggest that there is another test, which I will venture to apply, and that is the test of consistency.

I would like to apply that test to the position of the Liberal party on this question of Preference. In the first place, there is the question of the Paris Resolutions which have already been alluded to. The Paris Resolutions were drafted by Mr. Runciman. They received the blessing of Mr. Asquith, and they were adopted by the Government of which he was the head. The Paris Resolutions provided, amongst other things, that our Allies should have preferential treatment in the British markets. If that principle is agreed to, it is difficult to understand by what process of reasoning, or logic or common sense, it can be denied to our Colonies. Then there is the question of the Report of the Balfour of Burleigh Committee, a Committee which was composed of Free Traders and Tariff Reformers, a Committee amongst the members of which were eminent and well-known Free Traders, who reported in favour of Preference. This Report was adopted by the War Cabinet, and became the accepted policy, not only of the Government, but I believe of every individual Member of this House. I would apply the test of consistency there. Then there is the question of the food duties—the taxes on food. Has there ever been a Liberal Government which has not taxed food? Has there ever been a suggestion by a Liberal Government that the food taxes should be taken away altogether or that they should be reduced? The only practical opportunity for obtaining cheap food in this country was lost. That was the opportunity when Mr. Chamberlain proposed a revision of the taxes on food, by the transfer of duties on certain articles of food to certain other products within the Empire, and within this country. That was the time when the loaf cost 5½d. or 6d. The proposal was rejected because the cry was raised, "Hands off food of the people." That is a cry that has done duty during three successive elections. I think it has been proved to demonstration that that revision of duties would only have involved an increase of 1d. or 2d. in the average working man's budget per week. That was when the loaf was at 5½d. or 6d. Now when the loaf is 9d., when the margin is so narrow that our safety depended upon it, when anything from £50,000,000 to £80,000,000 is paid to keep the loaf at that price, we do not hear any protest or any expostulations from any of the hon. Members who were so eager and so anxious to raise the cry of Free Trade in those days, yet of these many millions, the amount of the subsidy, a very large proportion will come out, and does come out, of the pockets of the workers.

Applying the test of consistency to the Coalition Liberals, I notice that Mr. Asquith, a few days ago in Newcastle, expressed his regret that only seventeen of them voted against the Preference Resolution. I thought there were more. But what is the position of the Members of Parliament who accepted the position of Preference as laid down in the agreement between the Prime Minister and the Leader of the House, and who were returned to this House? I am not referring particularly or solely to the Coalition Unionists, or to the Coalition Liberal Members. I am including in these remarks Liberal Members who are followers of Mr. Asquith, some of whom sit on these benches, who accepted the policy of Imperial Preference during the election, and who were returned to this House. All those who were returned as Coalition Liberals accepted in principle the duties that existed and afterwards to be imposed. That was the principle accepted. What were those duties? They were clearly defined. There were duties on certain articles, such as motor cars and so on, which existed then, and which in the ordinary process would be renewed. Every member of the Coalition party who accepted these proposals and fought under the banner of them, must have known, be- cause the terms were clearly expressed, that they were duties which would be continued and renewed. There could be no mistake about that. There could be no risk, no error of interpretation. They accepted that policy—the 400 and the 100—they are in this House in consequence, and it will be for them to explain to their constituents—I do not think any of them have explained in this Houses—their attitude on this policy.

I referred, a moment or two ago, to the Liberals who were not Coalition Liberals, but who were returned to this House after having accepted the full policy of the Coalition at the time they went to the country. Mr. Asquith, the other day in Newcastle, made a trumpet-call to his followers, both inside and outside the House, to rally round the cause of Free Trade, and to oppose the policy of Imperial Preference. My opponent in the last election was and is chairman of the National Liberal Federation. He took the chair at one of the two meetings held in Newcastle last week. He listened to this denunciation of Imperial Preference, and the only observation I will make on that is that my Liberal opponent, who is chairman of the National Liberal Federation and second in power and in authority only to the leader of the party, accepted the full policy of the Coalition Government, including Imperial Preference. He described himself as a Coalition Liberal candidate—it was Sir George Lunn—and in order to leave no doubt that he was a real supporter of the Government policy, he issued, during the last few days of the election, a poster which stated that a vote for "Lunn, George, 'was a" vote for Lloyd George." If the chairman of the National Liberal Federation went out of his way not only to accept the policy but to make it apparent that he accepted it in its entirety, there are probably a great many other Liberal Members in this House and certainly a great many defeated Liberal candidates who also accept this policy. I notice that the Leader of the Opposition (Mr. Adamson) objected to this policy of Imperial Preference because it meant the thin edge of the wedge in regard to the raising of a tariff wall. That was not the first opportunity the right hon. Gentleman had of observing the thin edge of the wedge, because he was present at the annual Trade Union Congress held in Birmingham in1916, at which a resolution was passed against the free importation of goods, at least it was against dumping. unfair conditions, and Free Trade. That was not merely the thin end of the wedge, tout the whole wedge itself. It might be interesting to the House to refer to the proceedings of that Trade Union Congress held in 1916. A fiscal policy manifesto was proposed by Mr. Bramley, of the Furbishing Trades, which read as follows: In view of the attempt now being made to capture the support of the trade union movement for a change in our fiscal policy, with Protection as the main objective, the Parliamentary Committee be instructed to prepare and circulate a manifesto demonstrating that, in our opinion, the industrial, economic, and social interests of this country can best be preserved by— Four means, which are given. The one relating to the economic part was this: the abolition of sweating in all industries, trades and employments, and the maintenance of an industrial system under which the physical and mental efficiency of the worker shall not be sacrificed to the profit of the employer. That was the resolution proposed. There was an amendment proposed by a Mr. Stokes, of the Glassblowers, to add this sentence: And as one means to this end, methods should be adopted which will restrict or prevent the importation of cheap manufactured goods, which have been produced at lower rates of wages or worse labour conditions than those prevailing in this country. The issue was clearly joined, and it gave rise to a very interesting debate. The amendment was carried on a card vote by 1,642,000 to 619,000, a majority of 1,023,000, and, when put as a substantive resolution, it was carried by 1,739,000 against 500,000, a majority of 1,239,000. The resolution as it stands is an informing one, but it is not more interesting than some of the speeches made in support of it. I do not see my hon. Friend the Member for Silvertown (Mr. J. Jones) here. He made the most interesting speech in support of that amendment. He said: As representing the National General Workers, it is rather unfortunate that our old friend, Tariff Reform, has been introduced into this discussion, because you will see from the agenda that nearly every trade is asking the State to interfere to protect them against competition with sweated labour. We want to see to it that we are protected against all forms of unfair competition. If it is right to ask that the sweater inside Great Britain shall be muzzled, it is equally right to ask he shall be muzzled outside the State by the exercise of our national powers. … How are you going to get rid of sweating? If it is wrong to sweat inside, it is wrong to allow the products of the sweater from outside to come into this country without let or hindrance. He went on further to say: Are we going to say[...] at after the War we shall allow our [...]rians and the Ger- mans to come along with their articles, and cause us to lose all we have gained by bringing them into unfair competition with our own, and then, because we have maintained our conditions, we shall lose our wages? That is not good enough for some of us. I am sorry the hon. Member is not in his place, because I believe this would be the first time he and I would go into the same Lobby if the question was pressed to a Division. I should like to make one quotation from the speech of the Gentleman who proposed the Amendment which was carried by this large majority. He said: Ever since the establishment of the principle of Free Trade in this country—which is to buy in the cheapest and sell in the dearest market—have not the Free Traders been trying to capture the trade union movement? In the early days the Free Traders did their best to destroy trade unionism because they were afraid of it. …Must Labour always be tied to one or other of the political parties on the question of fiscal policy? What is the use of your program me of reforms unless you are going to advocate a distinct line with regard to fiscal policy? That is the point I want to deal with. It is not only going to be a question of the sweated trades bringing their products here, or of sweated articles manufactured at home. This fiscal policy is one of a very broad character. It will affect neutrals as well as belligerents, and it will affect those neutrals whose standard of living cannot be touched by any European country, however low it may be. India, Japan, and China have all entered into the production of manufactured goods with the highest form of modern machinery. Their goods are going to Continental markets, and if you are going to protect yourselves by your trade unions in this country you must recognise that producers are consumers as well, and that they have the right to decide whether their industries shall be destroyed, or their means of living taken from them by the lowest forms of manufactured products being imported. 8.0 P.M.

That is a very suggestive report of that Conference. I would suggest to the right hon. Gentleman and his Friends that a workman joins a trade union because he wants to protect himself. He wants to protect the only asset, the only commodity he has to sell—his labour. He joins a trade union to protect himself against unfair conditions of labour, against the grinding employer, against sweating, against low-paid labour, and against any unfair conditions that tend to lower his standard. That is justifiable. I have always been an advocate of the scientific development and organisation of trade unions in this country. I place no restriction upon it. The position of some of the Leaders of the Labour party or of the trade union movement to-day is that they claim to be entitled to higher wages, shorter hours, and yet at the last confer- ence they demanded unrestricted free imports. That is a wholly illogical position. I ask the right hon. Gentleman by what system of logic or legerdemain or conjuring is he going to reconcile those two mutually antagonistic and destructive propositions? Under the trade union system, if a British workman goes into a shop to work, if lie is foot-sore tired and weary, if he is hungry himself and has a sick wife at home and starving children, if he is a skilled workman he is not allowed to vitiate any of the established conditions, to take one penny an hour less in wages, or to get employment in any circumstances different from those established in the particular industry. The laws of the trade union are inexorable. They crush him. If an Asiatic comes So this country and is willing to work for one-tenth, one-fifth or one-half, or at any price he can get, if he goes into the shop as a skilled man, the trade unionist will not work beside him. Why? Because by doing so, if it is a penny an hour less, it lowers the standard. They will protest, and in the last resort there will be a justifiable strike. The Asiatic goes back to his own country, a skilled man, with up-to-date machinery, and works for 2d., 3d., 6d. a day, and he makes pianos, flat-irons, engines, cotton blouses, and works woollen and leather goods up into manufactured articles and sends them to be sold in this country. At the present moment the only declared policy, as far as I understand, of the official Labour party is that that condition of things is not only allowed but is welcomed. I do not know how that condition is to be met and I do not know what is the position of the leaders of the trade union movement and of the Labour party.

What we want is world trade. We are faced with a load of debt and enormous responsibilities. We are faced with conditions which may lead to unemployment on such a scale as we have never had before. The gaunt spectre of unemployment has always stalked in our time. It looms in the future. What we want is world trade, more production, new markets, and the best way to obtain world trade is by developing our own estate. We have within the Empire every soil, every climate, and every advantage. We have a world of our own, a world in which we can trade and do business. But we have the outside world as well, and the best way to obtain new markets, to obtain a grip in trade and commerce in the other world is to develop our own and to use it as a lever. We have raw material; we have every condition suitable for enterprise, for the employment of capital and of labour. Take Canada alone. Canada has an area larger than the United States of America. You could drop thirty United Kingdoms into it and there would be some still lapping over. Canada has more than one-half of the total fresh water area of the world. She has. 500,000,000 of acres of timber, more than one-half of which is marketable. She has 400,000,000 acres of cultivable land of which only 12 per cent. was cultivated last year, and that 12 per cent. produced in crop value over $1,000,000. What will it be when it is cultivated twenty-five, thirty, fifty, seventy-five per cent.? We have one-third of the whole silver product of the world, copper in abundance, coal to an illimitable extent. The same applies to other parts of the Empire. What we want to do is to develop that magnificent estate and co-ordinate and organise it to work together. A tariff preference will do much, but there are other forms of preference than a tariff. There is the preference of a common race, common blood, common ideals and common sentiment. As we have fought together, let us trade-together—the co-ordination of the different parts of the Empire. The beginnings may be small, but the possibilities-are great. I look forward to a time in our lifetime, within a measurable number of years, when we shall see a self-contained Empire inhabited by a hundred millions of people of the British race, united in sentiment and in trade and standing together as one unit against any menace which may arise.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I support the Amendment whole-heartedly, but propose to confine my remarks to that part of it which relates to the subject of the levy on capital. The Chancellor of the Exchequer told us he would not argue about the matter and that his mind was made up. I cannot help thinking it would be very interesting to those of us whose minds are also made up in favour of it if he had told us a little more in detail the considerations which have closed his mind against it. This is a big question and it has to be argued all round. It is not sufficient for the Chancellor of the Exchequer in a few perfunctory remarks to mention some of the dis- advantages and difficulties in the way of carrying it out. These difficulties have to be balanced against what are, in my opinion, the much greater difficulties of the alternative, which is the high Income Tax scheme. That really is the problem before the House. The critics of the capital levy will not face facts. Apparently they will not recognise that there is no easy way of dealing with the very serious financial position in which the country finds itself. Either course will be difficult. What has to be decided is which of the two courses on balance is it the best for the country to adopt? It really is misleading for the Chancellor to ignore, as he has done, not only to-day but also when he introduced the Budget, the stupendous difficulties in the way of the high Income Tax scheme, which will be necessary if the country does not adopt the capital levy. Let me take one in detail.

He referred to-day, as he did in the Budget Debate, to the fact that in his opinion the capital levy would be a great discouragement to saving. One would imagine in listening to him that on the other hand the Income Tax was a most ingeniously devised instrument to encourage saving. As a matter of fact, the very high Income Tax which will be necessary if the country does not have a capital levy will have precisely the opposite effect. It is bound to discourage saving. Many people will say," It is not worth while saving because for long years to come I shall have to hand over nearly a half of the interest on my savings to the Government." In the Budget Debate the right hon. Gentleman dwelt upon what he regarded as the iniquity of having a levy on capital so soon after you have asked people to save during the War. He said: It is a bad time to propose such a tax when for the past five years yon have been begging people to save and when you are still obliged to ask them to save and to give you their savings. It is a bad time to tax those who have responded to your appeal by reducing their expenditure and making economies and to let those go free who disregarded your instructions and who spent their money in ways which were not in the interests of the State. The whole fallacy of that argument put in that way lies here—that under the alternative scheme, even as far as it has gone, under the Income Tax of this year, you are taxing those who have saved during the War. In my view, Income Tax will have to be raised to 8s., or, with a fall in prices, 10s., and you may be taking half the interest of the people who have saved during the War. Under the scheme which I have laid before the House you could get at people who have not saved in a way you cannot under the alternative scheme, because where there was found to be a great disproportion between income and capital, where a man had a large income for a long series of years and then was found to have only a small capital, you could levy a special Income Tax, and that man would not be allowed to have the advantage of the deduction from Income Tax which would come about in the ordinary case. Surely the point about this matter of saving is that the Government has undertaken to pay 5 per cent. interest on War Stock. But that interest has to be paid, substantially speaking, out of taxation, and can and will be paid, substantially speaking, in no other way. That is the crux of the whole matter, and those War Stock holders who have responded to the right hon. Gentleman's appeal and have saved during the War will not receive 5 per cent. interest. Six shillings in the £ at present, and in the case of those who pay Super-tax 8s., and from very wealthy men 10s. in the £, is taken in Income Tax. Therefore, what becomes of the Chancellor of the Exchequer's argument about the unfairness of a capital levy on those who have responded to his appeal, and saved during the War? If a capital levy is unfair, so is a high Income Tax unfair. What is to be the reward of those people who have regarded his instructions and saved money? Nearly half, or perhaps before long more than half, of the 5 per cent, interest which was promised to them will be taken away in Income Tax. The right hon. Gentleman may say that this capital levy will have a psychological effect in discouraging saving. That may be true, but the Income Tax does in practice work in the same way. It is said, however, that people will fear a capital levy more than a high Income Tax. If you are going into psychological considerations, which, by the way, are of questionable soundness, there is one overwhelming reply, and that is that, unless there is a levy on capital, as years go on, the workers and the returned soldiers will think, and they will be right in thinking, that they are helping to pay this enormous amount of interest, and they will ask again and again, To whom is all this money going? The reply can only be that most of the money is going to older men who did not fight, and many of whom made profits out of the War. Tile Chancellor of the Exchequer talked about good will. In coming years will the returning soldiers think that this payment is fair, more particularly in view of the inflated nature of the debt? He did not say a word about that, which is a very vital consideration.

The money has been borrowed at a time of high prices, and as time goes on, and prices fall, the money of the War Stock holders will have greater and greater purchasing power, and in time you may have to repay a sum which in real value represents twice the sum you have borrowed. The Chancellor of the Exchequer always ignores that argument. Consider what that means. It means, as time goes on, the increasing purchasing power of money will represent huge unearned increments for the War Stock holders. I ask the Chancellor of the Exchequer whether, in these circumstances, he thinks that a situation of that kind can be maintained over a long series of years. Take the question of the interest you pay. The First Commissioner of Works spoke about the rate of interest being 5 per cent. He hoped that that would be reduced and that that would go far to solve the Chancellor of the Exchequer's difficulty; but with regard to the big War Loan, 1929 to 1947, you cannot in any circumstances reduce your 5 per cent. on that until 1929, which is eleven years hence. What are you going to do in the meantime? You may be able, to some extent, to reduce the interest on your short date loans as they fall in, and effect a small saving there, but it will not make a very material difference. Because of inflation this debt is £8,000,000,000, and if there had been no material rise in prices it would only be £5,000,000,000 at the most, and the interest ought really to have been only 3 per cent. as it was in the South African War. If those conditions had prevailed in this War the charge against this Budget on this debt would have been £150,000,000 instead of £400,000,000, and the charge for sinking fund would have been less.

The Chancellor the Exchequer has not referred to the inequalities and incidence of the high Income Tax. There will be inequalities and there will be a great difficulty in assessing Income Tax fairly, which is very vital, when the Income Tax is high. When the Income Tax is low it does not matter so much, but at the present time it is a very serious matter. If a business man is to make a correct return he can only do so by employing an accountant. The Income Tax is so complicated that it is practically necessary to employ expensive professional assistance. Nobody wants to pay too much, and people have to employ assistance, and that will go on for perhaps the best part of half a century. Surely the expense and labour involved there should be put against the expense and labour involved in a valuation for the purpose of a capital levy, which would be one operation, carried out for the purpose of a quite abnormal problem. The Chancellor of the Exchequer has not referred to the enormous, burden on industry and consequently on enterprise of the high Income Tax. I regret that the Leader of the House is not still the Chancellor of the Exchequer. If he were, we should not have had the talk about a capital levy which we have had from the Treasury Bench to-day, and which we had a few days ago. The Leader of the House, in the words which have been quoted to-day, pointed out that there was a case for consideration, and suggested it would be better to wipe off a large part of the war debt from existing capital, rather than to leave this heavy burden as a charge upon future earnings. As an economic point, I have no doubt whatever that the balance of advantage there does lie in a levy on capital. The Chancellor of the Exchequer never refers to the fact that under the high Income Tax scheme more and more the cost of the War, as time goes on, will fall upon men who have done the actual fighting. The older man will pass away and the men who have done the fighting will grow up and they will have to bear more and more the cost of the War. I think that is most unfair.

Whenever difficulties in regard to Income Tax are raised, the Chancellor of the Exchequer takes refuge in the fact that the Government has appointed an Income Tax Commission. The appointment of this Committee is a perfect godsend to the Government, because it enables the Chancellor of the Exchequer to avoid all sorts of awkward questions. Whatever the findings of this Income Tax Commission maybe, they cannot really alter the essential difficulties of the problem. You may appoint Income Tax Commissioners until you are black in the face and until they are black in the face, but it will not alter the fact that you will have to raise by Income Tax and current taxation an enormous amount of revenue year by year. Your tax system cannot bear such a heavy strain and it will break down, particularly as prices fall, as they are likely to do, and profits fall at the same time. I have seen many scales of Income Tax, but I have never seen for such a high Income Tax as 8s. in the £, or thereabouts, a scientifically graduated scale which is equitable and fair and economically sound. If the Income Tax is reasonably low, you may secure those conditions, but if it is high in practice it is bound to break down. The Chancellor of the Exchequer said he had thought this matter out carefully, and that his mind was fully made up, but I cannot help thinking that he has not worked it out carefully, and there are many points about a levy on capital which he has not clearly apprehended. A few days ago he said that since very few people would have money lying idle sufficient to pay their obligations under the tax it would mean immense disturbance of capital; everyone would be seeking to sell securities of one sort or another, and when all were sellers, who would be the buyers? He asked who shall measure the loss to the country by the depreciation of security, and who shall measure the loss to the individual through the same cause? Under the scheme which has been put before the House nothing of that sort will occur. Difficulties of realisation are avoided, because payment can be made either in war stock or in securities which can be exchanged for war stock. That does not mean that the war stock owners would be penalised or be in a worse position than anybody else. As a matter of fact, they would be in a somewhat better position. It would not be necessary to have large amounts of money lying idle in order to meet the tax. By the operation of the scheme which has been put before the House that necessity would be avoided. A scheme has been outlined in regard to men who have money locked up in private firms. The hon. and gallant Member for Christchurch (Brigadier-General Croft) evidently does not seem to know what would be done. The point is that where a man has no war stock, but all his money is locked up in a private business, and he has no security outside that business—these cases are most exceptional—the Death Duties returns show that the total amount of the capital of the country locked up in private firms is only 5 per cent., and moreover nearly all these people have some war stock outside their business, or should have in view of the fact that most of them have been making money for the last few years. But where you have a man with his money locked up in private firms, and no securities outside, he should be allowed to pay out of income over a long series of years. The Chancellor of the Exchequer asks, what security have you got that he will go on paying? You have just as much security as you have under your Income Tax scheme. If ho goes bankrupt under this levy he will go bankrupt under the Income Tax levy. What security is there for the payment of deferred Death Duties? This is merely the same thing, but slightly more extended.

The point is in effect—these men are a most exceptional case—the man would be allowed to fall out of the levy and to go on paying the higher Income Tax. If he was going bankrupt he would go bankrupt anyhow. The question was asked, how about a man who had racehorses, and all his money locked up in newspapers, which might be good or bad, according to the view one took. That does not cause me any embarrassment. If a man keeps racehorses he certainly ought to have some War Stock, with which to pay a part of the levy, because a man who keeps racehorses and has not taken War Stock certainly has not been doing his duty by the country. But assuming that he has no War Stock, and lie has got his shares locked up in a newspaper company, it depends on the character of the newspaper, and it would depend probably upon whether the shares were preference or debenture shares. If they were ordinary shares in a newspaper I do not think that they would be accepted by the Treasury in part payment of the levy in a ease like that. But these cases would be very exceptional. It would be a matter for commissions to determine what should be done. Doubtful and difficult cases should be submitted to commissions, who would adjudicate upon them, and if this particular person could not meet a levy in any other way he again would be allowed to pay out of income over a long series of years. The number of these persons is really very small, very much smaller than is commonly supposed. The First Commissioner of Works said this afternoon that he thought, in some mysterious way which I did not understand, that a capital levy would lead to extravagance so far as the individual was concerned. I am prepared to put this argument, that the absence of the capital levy makes many people believe that they are a great deal better off than they really are, and they will not face facts. A man who was worth £100,000 before the War is not worth £100,000 now, assuming that all his securities remain of just the same value now and that he has not sold any. That man in effect is only worth about £60,000, because of the Income Tax, which really means that so much of his capital is mortgaged. But in his own mind he still thinks that he is worth £100,000. I submit that it is much better both for the individual and the State to face the facts and to come down to bedrock and let people see where they are.

I would like, in conclusion, to refer very briefly to some other matters. The Chancellor of the Exchequer said to-day," If you once have a levy it will come again and again." I am not going to argue that out at length now. I mention only one general point. Hon. Members opposite live in constant fear of some future Government which will do, or attempt to do, all kinds of things of which they disapprove. This future Government is a perfect nightmare to them. There may be a Government in future years which will do things of which they disapprove, and personally I should prefer any Government to the present Government, because, in my view, it is the worst possible Government. But has it ever occurred to hon. Gentlemen who support the present Administration that, even when there is a future Government which will do all kinds of things of which they disapprove, that future Government would do them whether you do have or do not have a levy on capital now? There will indeed, be much less chance of extreme courses being resorted to and of unrest in the country and a much better chance of a stable position in the country if the present Government would deal boldly with the present problem, particularly with that of the debt. If they will get that out of the way, that is the best way to avoid extreme courses in the future. Lower taxation would put the country's finances on a sound basis. That can only be done by a levy on the capital.

The choice is between a levy on capital and a high Income Tax, and this whole problem deserves very much more serious consideration and more serious argument than the Chancellor of the Exchequer has given it this afternoon. The question is, which, on balance, is the better of these two courses for the country to adopt? My contention is that the balance of late advantage lies with the capital levy. The Chancellor of the Exchequer says that it has never been done before. But the Government of France has prepared a scheme, and it is quite clear that in the view of some of the ablest men of France a levy on capital is both practicable and not nearly so disastrous as hon. and right hon. Gentlemen seek to make out. The Chancellor of the Exchequer was referred to the fact that there has been a levy on capital in Germany, and he immediately rejoined that that was a very small affair. That is not the point. It is not a question of degree but a question of principle. It shows that the thing has been done. What I contend is that this is practicable. There have been taxes of this kind also in other countries. I will not go into that now. I may also add that in Germany there has been a great deal of discussion on the point and the German Government has prepared for the last year or two for a big levy, which shows again that in the opinion of some of the ablest men in Germany a capital levy can be carried through. Therefore, there is no good in saying that it is impracticable and cannot be done because it has been done, and these schemes which have been prepared show that some very eminent men abroad think that it can be done. To my own knowledge the scheme of a levy on capital is being viewed with favour by a large and increasing number of business men and of rich men. The industrial and business community is afraid, as well it may be, of the appalling burden of taxation, mounting ever higher and higher, which is strangling industry, discouraging enterprise, and having a most disastrous effect upon the whole condition of the country and the working classes. A large and increasing number of people is beginning to see that there is a way out, and that a levy on capital would be practicable and equitable, and an economiclly sound method of getting rid of this awful burden of a thousand million pounds of dead money, which otherwise will cripple us and weigh us down for the best part of a century.

Photo of Mr Matthew Simm Mr Matthew Simm , Wallsend

I will not detain the House long in making my protest against the idea of a levy on capital. The idea is a new one so far as the Labour movement is concerned. The hon. Member for Penistone has made two long speeches, and I question very much whether he has convinced anyone who was not convinced before. I fee sure that he will not have made the least possible impression upon his opponents. To begin with, I fancy he is labouring under a mistake. In a speech in this House about a fortnight ago I think he laid it down that by a levy of 20 per cent. he would secure £6,000,000,000, and reduce the War Debt to that degree. He leaves out a levy on persons with £1,000 and under. Therefore he bases his calculations on the assumption that leaving out municipal capital, leaving out all persons with less than £1,000, there are still £30,000,000,000 of capital left in this country. I should like to know where his figures come from. I fancy he is making a gross over-estimate. If there were that much money it surely means that in this country we have a capital value of £50,000,000,000—an un-dreamed of sum. I have never seen a statistician who has indicated that there is such an amount of wealth. Apart from that, no tax could be devised which would be more mischievous in its influence than a tax of this kind, or one which would cause more dissatisfaction. Take any street, take any man carrying on industry. The Chancellor of the Exchequer has some doubts as to his power in collecting the money. In any street we might have a draper with £20,000 of capital in his fixtures and stock. You may call on him for £4,000; you may call on all drapers to yield one-fifth of their value. What is to transpire? There will be a large number of sales in that town, and things will be going cheap. Above the draper upstairs you may have a man who is a lawyer. The draper may with his £20,000 worth of stock make £2,000 a year. The lawyer may make £20,000 a year. What is his capital? He may have a roll top desk and a typewriter and a clerk or two, but his capital is in his head and he may shift it very easily, and the Chancellor of the Exchequer could not chase his securities, and the Member for Penistone could not catch up with him. Next to the lawyer you may have a bookmaker, who may even make, sometimes, £4,000 a day. His capital consists mostly of the gullibility of those who back horses. I want to know how the Chancellor of the Exchequer is going to chase and catch up with the elusive bookmaker. There is no stock to be laid hold of. He would welsh you. Go further than that. Let us take a street anywhere you like. You may have a person, assume a widow, who has been left £5,000 by her husband, and she has had it invested at 5 per cent., which brings in £250 a year. Next door to the widow you have a man who has a yearly income of £2,000, and he spends the lot. The widow you can get at. The Member for Penistone would go along and take £l,000 for a fine. The man who lives next door with £2,000 would get away; you cannot get anything. And so the widow would be called on to hand over her money to pay the taxes of someone else. Take street by street and road by road. Could you imagine a system which would cause more friction than that? When the Member for Penistone charges the Chancellor of the Exchequer with not having weighed it all up, it is possible that the Member for Penistone himself has not weighed it all up. Go further. Mark you, the Labour party at its last Conference passed a Resolution in favour of a levy of 25 per cent., to be followed by a further 25 per cent, and even 100 per cent. What would be the effect I Take a large town. If you take 25 per cent. of its value out you reduce its assessable value by 25 per cent.: you cannot take it out and leave it there.

Photo of Mr Thomas Griffiths Mr Thomas Griffiths , Pontypool

Produce your facts now.

Photo of Mr Matthew Simm Mr Matthew Simm , Wallsend

The Labour party Conference was in favour of the conscription of wealth, to begin with 25 per cent.—even up to 100 per cent. Take the suggestion of 25 per cent. You may have a town with a rateable value of £2,000,000 and a municipal debt of £3,500,000. What is going to happen to this municipal debt? If you take away the assets of that town you reduce the value of that town: you jeopardise the money of the people who have invested in the municipal debt. Who are these people? The trade unions, of course, are large investors in municipal loans, so are friendly societies, whose, investments are rightly restricted by the Registrar-General. These societies are going to be destroyed if this principle is carried through. The proposal is not even a Socialist proposal. It is an anarchist proposition and born of evil times. It was never thought of until two years ago—at the time of the passing of the Military Service Acts, when the conscientious objectors and others said: "They have conscripted our bodies, let us now conscript their wealth." The proposal was born of spite. They said: "We will try to get our own back." If this were carried through, whatever influence it might have upon taxation, there is not the slightest doubt that there could be no more evil influence brought to play to upset our country. I believe that if we are to improve our condition, to lessen the burden of taxation, it will not be by taking capital here or there, but by fuller employment and increased production, whereby the wheels of industry will not be restricted but will go round more rapidly, and the output of wealth will be made greater.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

So much advice and so large an amount of abuse have been hurled at the Labour movement from time to time that one almost hesitates to say anything in defence. I might assure the last speaker that we did not embark in this case for any campaign of wholesale burglary of wealth, or of taking the property of the nation. We founded our movement on its financial side by a quite scientific process, and perhaps we are not so destitute of political or public morality as he seems to think. One has very great difficulty in approaching a problem of this kind because the issues raised on any Budget statement are so vast. I would like to assure hon. Members opposite that we in this movement have not failed during the course of the War to apply our minds very seriously to the grave financial considerations as they confronted the country. More particularly we have been appalled by the enormous growth of the indebtedness of this country from £650,000,000 in pre-war times to £7,000,000,000 or £B,000,000,000 at present. During the War we felt very strongly as one of the plain principles of finance that we should raise as much as was required for war purposes by way of taxation and as little as we possibly could, consistent with maintaining the standard of life in the community, by way of borrowing or mortgaging the future. While we candidly and frankly admit that in that respect our country had an almost marvellous record compared with other countries throughout the world, we still feel that more might have been done by Way of taxation during the War, mainly from the point of view of curtailing great expenditure on luxuries during the war period, and secondly, from the-point of view of reducing the burden passed on to succeeding generations. We find ourselves at this hour faced with the enormous indebtedness to which my hon. Friend the Member for Penistone (Mr. Arnold) has referred. This Budget falls properly into four divisions by way of meeting those obligations. There is, first of all, our attitude to the Income Tax, and more particularly our attitude to the-level at which it is imposed. We on these benches have no desire whatever to urge that any class in the community, and least of all the workers, should shirk their obligations as far as the national exchequer is concerned, but we do contend in the strongest possible terms that before any Income Tax is levied or imposed in this country, or in any country, it is our plain duty to have full regard to the manner in which that taxation is going to-bear on the lives, the homes, and elementary comforts of the people. In the preliminary Debate on the- Budget, the right hon. Member for Spen Valley (Sir T. Whittaker) made very great play of the fact that the wages of the masses of the-people had greatly increased during the War, and that when they were called upon to pay Income Tax they squealed more loudly—I think those were his words—than any other section in the community. It is quite true that in many of the industries wages were artificially raised. It is also true, on the other side, that a very large section of the workers of this country were unduly penalised during the War period and more particularly that section of the workers who had one or more members of the household on active service. On that problem our contention is broadly this, that it is wrong to pay regard to the great and very largely artificial rise in incomes, and not to look deeper and more closely at the problem, as we ought to do, and seek to ascertain how the real position of the people has been affected. I agree at once when we get into the realm of prices and wages, we embark on very complicated economic and other doctrines.

One of the most popular documents, and I think in many respects one of the most admirable, which was issued within recent times, was the Report of the Committee which inquired into the cost of living during the War. Broadly stated, the conclusion of that Committee was that for the three grades of unskilled, semiskilled, and skilled workmen, the increase-in the cost of living had been round about 80 per cent., that is including what may be called the more urgent necessaries of life, and excluding what many of us would without much hesitation regard as almost necessary if conditions were to be tolerable at all. If those items are included the increase in the cost of living was from 100 per cent. to 120 per cent. Before we get what the masses of the people of this country have gained on balance, compared with pre-war conditions, we have got to ask ourselves the further question as to whether the rise in wages, generally speaking over that wide field, has been such as to make good that increase in the cost of living, ranging from 80 per cent. to 120 per cent. or more. In some industries the gain has been undeniably great, but in other industries there has been relatively little advance even during the great shortage of labour throughout the War. Taking the masses of the people as a whole a recent conclusion, which was based on very strict investigation, expressed grave doubt as to whether their real position, that is measured in terms of purchasing power, had been improved since 1914. The very fact that this question admits of doubt must make us pause on this question and problem of the Income Tax. We agree that with the concessions which are made to men with families you have a higher limit than £130, but even keeping the higher limit, with all the concessions in view, it remains true to say that the Income Tax falls to-day in such a manner on a very large number of the homes of this country as seriously to endanger a real healthy standard of life, or what is more popularly called a minimum in this important matter. May I suggest with all respect to the Chancellor of the Exchequer that at this hour in our history it is not good business in this country to wait for the conclusions of the Royal Commission on the Income Tax on such a matter. I have no desire to give away any of our doings up to this stage in that important Commission, but I think I am at liberty to say that the evidence we have already taken points to the urgent need of far-reaching changes in the administrative side of the Income Tax and certainly far-reaching changes in its economic significance. If the Income Tax of the country is levied in such a way as to impose unnecessary and avoidable hardships on a very large section of the people, then there is no gain to the Exchequer by the collection of the tax on such a basis, because we find that as we bring down the Income Tax level up goes the demand for all manner of public ser- vices, and the increased burden on the Exchequer more than wipes out any gain which is achieved by reducing the Incomes Tax to such a very low level. That is our first criticism of the Budget statement. In the second place, we greatly regret that, while the Chancellor has not seen his way to make any immediate improvement in the Income Tax system such, as would have tided us over the year until the Royal Commission reports, he has seen his way to reduce the Excess Profits. Duty on the other side by 50 per cent. I want to be perfectly candid and fair with the right hon. Gentleman. My own private view, for what it is worth, of the Excess Profits Duty system is that it is radically bad. It patches up an evil after you have allowed that evil to grow to tremendous strength and significance. The real remedy probably during the War period was to have instituted from the very commencement an effective system of control, and it might even have been of ownership, in the great things which were urgently necessary if we were to come through the crisis with success, but as these prices were not regulated from the start, and as we had to depend upon a system of industry and commerce in this, country which was rapidly advancing towards great monopolistic concerns, these huge profits emerged undeniably due to-war needs and war conditions. One of the theories behind the Excess Profits Duty was that it was right and proper and just on the part of the State to take from the men who had made these vast profits some portion—in the long run I agree a quite considerable portion—of the money which they had made out of the acute crisis and difficulties of their fellow men. During the time that the Excess Profits Duty was levied, it brought in £8,000,000 or £10,000,000 per week, and I think sometimes more, but at all events a careful and a considered estimate of the probable sum that would be yielded by that tax, keeping in view the reduction of 50 per cent. in the existing rate of duty, was that it would produce in the long run in this country something like £1,000,000,000. That is a very striking commentary on the system of industry and commerce which obtained in Great Britain during the War period, and there is something very seriously wrong with the management of any economic system which in the midst of war allows £1,000,000,000 of Excess Profits Duty to emerge, having regard to the sorrow and suffering and sacrifice of such a very large proportion of our people. But the evil having emerged, it is our business to try to put it right, and the argument was that this is an emergency measure, and we are entitled because of the tremendous pressure of war conditions to take 60 and ultimately 80 per cent. of these excess profits after allowing a margin based on pre-war returns, but the War being over there is no longer justification, so the argument runs, for a device of that kind, which" will hamper industry, will restrict speculation, and may have an adverse affect upon employment. My contention in reply to that point is simply this, that it is altogether wrong, and foreign to plain, obvious facts in this country, to say that the crisis is past at all. All economists have argued strenuously that the crisis of the first few years of the reconstruction will be not less than the crisis of the concluding years of the War, and that being so, and keeping in mind the fact that we have still to depend upon large concerns in this country which have been considerably trustified, if I may use a popular expression, within recent times, there is to-day the very strongest case, especially as we are still borrowing money, why you should continue to take the proportion you were taking during the last years of the War, and why you should continue to appropriate for the community what obviously belongs to the community, having regard to the crisis and difficulty through which it continues to go.

9.0 P.M.

I had intended to say a word on the capital levy, but I will leave that to later speakers, because I want to close with a brief examination of the fiscal proposals of the Budget. We on these benches are very often charged with being bigoted and narrow-minded Free Traders, but I think most members of the Labour movement in this country who have analysed their case have agreed that in the long run Tariff Reform or Free Trade, separately and as individual items, do not mean a very great deal to us on any final analysis of the system under which we work. We have been free traders for the most part because we believed that that was consistent with a world ideal, an ideal of universal Free Trade, and because, in the second place, as applied to this country, we thought that on the balance it was prob- ably the better proposition for us as an island community. I am not going to rake up that past, but as far as this Budget is concerned it has been argued very strongly, and I think not incorrectly, that the proposals which have been made are such as could offend only the doctrinaire Free Traders. If that is true on the one side it must be equally true that they are only such as can satisfy the doctrinaire Tariff Reformers, and I gather that that is the confession and the attitude of the right hon. Gentleman in his speech this afternoon. He indicated that the proposals were moderate and modest beyond description. We agree that they may have very little significance or practical meaning or real application as far as the Colonies are concerned, but the point we do want to emphasise in this Debate to-night is that while the immediate proposals are relatively trifling and unimportant, the ultimate or the future significance of them is worthy of the very serious consideration of this Chamber. This is regarded as an instalment, as a beginning, as something which is calculated not to give offence. It maybe some minor, feeble, initial step to put into practice the policy embodied in the Paris Resolutions, if they still hold the field. Going back to those Resolutions, and trying to ascertain the attitude of the public towards them at the present time, one can only say this, that they outline a form of tariff which would occasion very serious unrest and very serious uneasiness in all minds in this country that had really full regard to the course of world trade.

I remember seeing one scheme worked out, I think, in five departments, which gave one grade of Preference, probably that now embodied in this Budget, to the Colonies, which gave another grade of Preference to the Allies who have been associated with us in the War, which had a fourth and fifth class, consisting of the neutrals during the great campaign since 1914, and then, in the last, in a ring of apparently utter exclusion, they had the enemy Powers. They were going to try to work out a tariff system which was going to fall into compartments of that kind, and which was to be based so far on the War conditions obtaining since 1914. I do not know how far that policy holds the field in the minds of the Government, but I know, from time to time to-night in this discussion, it has been represented, consciously or unconsciously, in the speeches of numerous Members who have spoken, and I do say we should think twice and thrice before we embark in a Budget on any principle, however trifling, which is going to be made the basis or starting-point of a policy of that nature. I say it is not enough to offer merely negative or destructive criticism on this Budget. I would be the first, as a Labour Member, frankly and freely to admit that we would have ro claim as a party to represent the workers of this country, or to speak from a world-point of view as regards Labour, unless we had thought out a policy of international relationships in these affairs. I am prepared to see, rather than the policy embodied in these Resolutions, rather than any trifling step taken towards that end in this Budget, a strong, compact, and determined economic policy under the shadow and protection of an equally strong League of Nations. That is to say, we would desire to see the League of Nations built up on its political side, but, added to that political side, we would desire to see an economic policy which would be consistent with a broad justice to all peoples, wherever found, and which would build up, through the pacific enterprise of industry and commerce, a state of affairs which would render a recurrence of world war impossible.

Photo of Mr Ernest Pretyman Mr Ernest Pretyman , Chelmsford

I have listened, and I think the whole House has listened, with very great interest to the speech which has just been delivered from the Labour Benches, and I, for one, would agree very largely with many of the sentiments expressed. With regard to the last subject which the hon. Member discussed, there is one consideration which enters my mind which has hitherto not been mentioned. I do not propose to argue the fiscal question here now, but we were the only nation among the great commercial nations of the world who, consistently, over a long period, followed a Free Trade policy. It has often occurred to me—of course these underlying causes are extremely obscure—that one of the reasons for adopting a Free Trade policy—in fact, the main underlying reason—was that we were the great creditor nation of the world, and we were receiving goods in payment of our debts from all parts of the world, and therefore it paid us as a creditor to have a Free Trade policy. America vas a debtor nation to us, and she followed a protectionist or tariff policy, and I shall be lather curious to know whether, now the position is reversed, there will be a tendency in America to become more free trade, and a tendency in this country to adopt measures to protect ourselves where we find our flank exposed through the fact that we are now debtors where we were creditors. I think that is a consideration which will eventually weigh very much with us in forming this policy.

I agree entirely with the last speaker, that this question of Fiscal policy and Preference is not one upon which we can dogmatise, or upon which we can make a party issue in this House at all. Really we have now reached the point when, either on that question or on the question so much debated of Income Tax versus capital levy, and the raising of this enormous revenue, we can no longer afford to treat these matters as academic questions. They are really matters of life and death to us. Our financial position is a really serious one, and what interests me most particularly in considering this Finance Bill is not so much its actual provisions, or to argue whether the Income Tax is a little too high, or whether at this moment a capital tax would be better than an Income Tax. What interests me in it is to look to see whether it points the way to a return to future stability. We are now in a transition stage, and we are passing back to the day, which must come upon us very shortly, when we shall have to live upon our incomes and to pay our way. When we get back to that position, the question which has got to be decided is, Can we bear the burden which is placed upon us, and will each succeding year as it comes find us a little better able than the previous year to bear the burden? If so, we shall be on the right road. If, on the other hand, the burden is so distributed that each successive year finds us more difficult to bear it, and that our production is hampered and our wealth is decreasing instead of increasing, then it is a very bad outlook for the country, and I am of opinion that, at this transition period to-day, it is quite impossible, and quite premature, to lay down a definite preference and a final decision for this House, as between the various forms of direct taxation which are being advocated here to-day. We do not yet really know where we are. We do not really know what our final debt is going to be. We hope we may be going to get, at any rate, some considerable contribution to it from those who were the authors of this War.

There is another factor in it. Hon. Gentlemen opposite who represent the Labour party have referred frequently to the effect of taxation upon small incomes and the altered value of money, and to the fact that money only represents to-day, something like half what it represented in pre-war days. But surely that consideration applies all up the line. It applies to all our financial problems, and I find it most difficult—and I think the Debates of the House show that we all find it most difficult—to adjust our minds to that new value of money and appreciate what it really means. I do not like to dogmatise upon that, but does it really mean that the debt of £8,000,000,000 is only equivalent to what a debt of £4,000,000,000 would have teen in pre-war conditions? It may be so. Certainly it applies all the way up the line to the Income Tax, and if it is the fact—as it is the fact—that the purchasing power of an income of £250 to-day, as put for ward from the Labour benches, is no greater than the purchasing power of £130 in pre-war days, it absolutely follows as a certainty that that same consideration goes all up the line, and a man who is taxed to-day at 6s. in the £ on an income of £2,000 a year is in exactly the same position as a pre-war Income Tax payer who was paying 6s. in the £ on £1,000 a year. The purchasing power of money is reduced just as much to a man with £2,000 a year as it is to a man with £250 a year, and that means that with the same rate of tax "being applied to him to-day as was being applied before the War, he is really paying a rate of tax double in proportion to the purchasing power of his income. From that there is no possible escape. When you look at that you see that the rate of In come Tax is really very high. I entirely agree with what the hon. Member for Penistone said, that this enormous high rate of Income Tax tends to obstruct trade. I do not think—

Photo of Mr Robert Richardson Mr Robert Richardson , Houghton-le-Spring

Surely the hon. and gallant Gentleman opposite ought to know that the Income Tax on £l,000 is only 3s. in the £l and not 6s.!

Photo of Mr Ernest Pretyman Mr Ernest Pretyman , Chelmsford

I am sorry my hon. Friend did not appreciate my point.

Photo of Mr Robert Richardson Mr Robert Richardson , Houghton-le-Spring

I quite saw the point of the hon. Member, but he ought not to have taken the higher figure.

Photo of Mr Ernest Pretyman Mr Ernest Pretyman , Chelmsford

No, no, no ! What I said was—and I think I said it correctly and I am glad to have the opportunity of explaining it again to the hon. Gentleman—that the tax on £2,000 a year was actually 6s. That is a fact. Between £2,000 and £2,500 the tax is actually 6s., but the purchasing power of that £2,000 to-day—I agree with the statements of hon. Members opposite on this—is no more than the pre-war purchasing power of £l,000. Therefore, when compared with pre-war taxation the sum to-day on £1,000 is on a basis of 6s.


Well, a man would not starve on that!

Photo of Mr Ernest Pretyman Mr Ernest Pretyman , Chelmsford

I never said he would starve. I do not think that a working- class family would starve on £250 a year. The hon. Member opposite opened his remarks by saying that in respect to sacrifice there must be evidence that all classes in the country are willing to stand together and bear their share of the burden. I agree with that. That is the real issue arising out of this. I am perfectly certain that by merely shifting this almost in tolerable burden about and by squabbling amongst ourselves as to which class is to bear it we shall never get through. That is the point. The hon. Member for Penistone suggested that we should have a capital levy in order to avoid placing on the younger generation who have shed their blood the burden of this heavy tax. I would suggest to the hon. Member for Penistone that we can do much better than that by laying our heads together and increasing production and prosperity to the best of our ability, so that whatever the tax may be we shall have increased the ability to bear it. That is not only shifting this burden about, and each class trying to put it upon the other. That is not the way to enable the country to pay off the debt. The only way in which this burden can be met is by constant and increased effort, increased sacrifice, increased unity, and increased production. That is how we got through the War. Hon. Members opposite, both in their individual and collective capacity, as Leaders of the Labour party, put their hands to the plough and did their best to increase the output of munitions and to get the best out of every man. The whole country stood together during the War. Whether capitalists, employers, or wealthy men, or whatever they might have been called, each who had to bear these tremendously heavy burdens of taxation did so willingly. For this [...] because of the feeling of patriotism and unity, because every man was doing his bit, and every organisation upon which he depended for advice was advising him to get the very best increase of output to help in the War. If that spirit is carried out in the crisis of reconstruction before us, I am more hopeful of the result. But tin thing is more difficult.

If it is not carried out, then I do not think winning the War will do much to bring us individual prosperity or make the place fit for heroes, which we all wish to see. I would respectfully ask hon. Members who represent the Labour party—I have just acknowledged the attitude they adopted during the War, and I will continue to acknowledge the efforts of thousands and hundreds of thousands of workers who are doing their best in their labour to increase production—whether they have continued in this course the same as during the War? Can they point to any collective act or any act by organised labour since the peace to promote increased production in the country? Have they done anything in this matter? I do not think that any Resolution has been passed at any Trade Union Congress. I do not think that any policy has been officially announced by the Trade Union Congress. I and other hon. Members in this House do not forget the very straight words which we have heard from the right hon. Gentleman (Mr. Clynes). He has spoken as forcibly as any man could speak in this House on the necessity for increased production, but he has done that in his private capacity. He has not done it as a leader of Labour, and speaking officially for the Labour organisations. I do think, if I may respectfully say so, that the Labour organisations and those who represent Labour would stand on a very great deal firmer ground in the country if they, instead of devoting all their time to prove how much less taxation people ought to bear and how much less other people are bearing than they should, were really prepared to ask their own class to bend to their own share of work to increase the production of the country. I assure them that that is likely to be the best way to reconcile the Income Tax payer to the high rate of Income Tax—perhaps more than anything else. There is a feeling of unrest at the threat that has been held out that it is the object of the Labour party, and their hope and desire, to conscript wealth. In face of this, the rate of taxation being as high as it is, it clearly tends to extravagant spending and the purchasing of luxuries or of articles which can be kept rather than investing money in industry.

There are only two purposes, so far as I am aware, to which capital can be applied. One is investment to yield interest in some reproductive form of enterprise. The other is to spend it upon something which will give pleasure or will satisfy some need of the moment. Surely one of the most important aspects of the financial policy of this country ought to be the encouragement to invest money in the employment of reproductive labour, and in producing that return, rather than in encouraging its expenditure on some transitory pleasure. I am afraid the latter is the effect of what is happening now. If a man puts money into his business and receives £1,000 interest, a very large proportion of that is taken in taxes. That really largely accounts for, I believe, the enormous prices which are obtained when articles such as pearls, jewellery, objects of art, and things which have a permanent and usually an increasing value are put up for auction. People are unsettled and will not invest their money in business. People will put their money into these objects of art upon which they have to pay no Income Tax at all. This, to my mind, is a very undesirable state of affairs. I do not see how it is to be remedied. It certainly would not be remedied by a capital levy. You might in some cases getsomething out of people who have spent their money in that way, but its difficulties make it really impracticable. One difficulty was mentioned by the Chancellor of the Exchequer when he introduced his Budget. I cannot see how you are going to value all the property, movable and immovable, from one end of the country to the other, and obtain a fair valuation of it. It is really impracticable, and after all it seems to me that all these heavy direct taxes, whether in the form of Income Tax or capital levies or Death Duties are really all one and you cannot differentiate between them. There is no dividing line between capital and income. When income is saved it becomes capital. When a man has considerable means and he is liable to be taxed upon that means it does not matter to him whether the tax is nominally upon income or capital, because if it is a tax upon income he can pay it out of capital; if it is upon capital then if he is a prudent man he will do all lie can to pay it out of income. I think what- ever heavy direct tax is imposed upon the wealth of the country may be regarded as & single unit, and it will be felt by the community which pays it in its cumulative effect.

When the Death Duties were introduced by Sir William Harcourt he justified them as a deferred graduated Income Tax, and it was recognised from the very first that the Death Duties bore the most intimate relation to the Income Tax. When a man has to pay a large income and also a heavy Death Duty the two are really the same. The Death Duties have been steepened and heavily increased and they have been levied on income and capital values which represent only half their nominal value on a- pre-war basis, and that makes them all the more heavy to bear. Take the case of a man who has an income of £4,000 a year, representing a capital value which will pass at his death of £100,000. He would pay on his £4,000 about 7s. in the £ Income Tax and Super-tax, and that would be £l,400 out of his £4,000, leaving £2,600 actual income. The £100,000 which would be charged on his death would have to pay 14 per cent. The only way he can meet that to the advantage of the country is to insure against the Death Duties, and that would probably cost a man of average age something like £300 or £400 a year. When he died of course there is the insurance money, which he has never had any right to, and it is money which his successors will never see, because the whole of it will be taken by the State. That is not a reasonable method of taxation. It is not a question of hardship, but a matter of conserving the wealth of the country, and letting the people believe that the State has some interest in trying to conserve wealth out of which the taxes are to be paid. That wealth is being sensibly reduced in many ways, and any measure which can show some desire to conserve wealth will have a very good effect in the country.

There is another way in which our revenue is being reduced, and that is by the statutory minimum wages which are being imposed in the interests of labour. We have now high statutory minimum wages in the mining industry, the railways, and the agricultural industry, and what does that mean? It means the transfer of vast sums from profits to wages. As long as it is being received as profits a large proportion goes to the revenue, but when it passes as wages hardly any of it goes to the revenue, and in the case of the agricultural industry none at all, and even in the case of the railways and the mines probably only a very small proportion. Therefore, that is a direct loss of revenue. I am not putting this as a question of right or wrong. I know that our debts have to be paid to those who have lent us money, and to those who have lent us their lives and limbs in the War, but our revenue has to be maintained. I believe we are within measurable distance of arriving at a rate of direct taxation when we shall pass the milestone when, if you increase the tax, you will no longer increase the revenue, and once you pass that I do not know what the next step will be

The present high rate of taxation and some of the policies put forward in this House and outside distinctly tend to induce people to spend their money rather than to conserve it. If a man has got £2,000 in War Loan he received £100 a year nominally, but the State, if he has Super-tax to pay, takes half, and you may look upon it that the State is taking one-half and him the other. People should recognise that it is not a mere question of hardship, but a matter of maintaining-the revenue and the producing power of the country, and also maintaining the desire to increase production. I do feel very strongly that we are at this very moment at a very critical state of our national progress, and I repeat that unless we can secure unity of effort and sacrifice, and a feeling that both workers and capitalists are prepared to make the necessary sacrifice, and stand together to increase production, I look with the gravest anxiety on the results which are to follow. I think nothing more encouraging could have been heard than the speech of the hon. Member who preceded me. He no doubt realises that both he and I wish that others would make those views more widely known and use their influence in Labour organisations so that there may be some evidence to those who have to pay heavy taxes and to employers of labour that there really is the same feeling, and I am sure it must be there. It would be very desirable if we could have some assurance that organised labour does desire to increase production, and for the workers of the country to take their fair share of the sacrifices after the War as they took their fair share of the sacrifices during the War. It would be the greatest possible factor in the financial future of this country and in its return to that material prosperity which we all hope to see reached.

Photo of Mr Archibald Williamson Mr Archibald Williamson , Moray and Nairnshire

There is a great deal that is attractive to a business man in any proposal to face a debt and to pay it off at once and be done with, but there are many undertakings in the world which, while desirous of being in that happy position, are unable to do so without causing great evil and, perhaps, ruin to their enterprise. We may hope, if the peace terms are such that we expect them to be, that a state will be brought about in this country and in the world in which we may well look to posterity to help us to bear some of the cost of the War. If we can bring about the League of Nations and thereby avoid piling up this great expenditure on armaments, we shall confer a benefit upon posterity, and can reasonably and properly look to posterity to pay some portion of the debt in return for the benefit which it will receive. Some of the speeches which have been made this afternoon seem to have been conceived with the idea that capital is in the form of money in the bank, or in War Loan, or in stocks and shares, but men who are in business know full well that it is very often in a different form. Capital is sometimes invested in machinery or in a factory. A man may put practically his whole capital into his factory, and even borrow money in order to complete it and equip it with machinery, lie may carry on his undertaking entirely or almost entirely on borrowed money, having mortgaged his factory to give security for the advances. Even if we were all united as to the desirability of this matter, there would, therefore, be very great practical difficulty in such a case in carrying out such a levy as is proposed. The dislocation of values that would ensue would certainly bring in its train a dislocation of business, and it might very well bring ruin to a great many businesses.

There is also a great deal of unfairness in the position that a company would occupy as compared with the position of an individual under the proposal, because, as I understand it, the levy is to be put upon the individual and not upon the company. If two persons started rival businesses, say two mills, and one started with his own capital and the credit that he could obtain and the other formed a company, then although 95 per cent. of the stock might be held by one individual, there would be no capital levy on the company at all The only capital levy would be upon the shareholders as individuals. The other mill, owned by the individual, however, would have to face the capital levy. What would that mean? It would mean that the one concern would be able to continue to trade with its credit at the local bank unimpaired while the other individual's credit would be gone. It is thought that this levy would only affect people who have a considerable amount of capital, but, as I understand the proposal, it would apply to everyone in the country who had £1,000 capital. It would affect very seriously a great many people who cannot be classed among the wealthy, people who own small shops and businesses throughout the country. There is no class that would feel it more than the man with small capital. The man with a very big capital would perhaps feel it less, but the man struggling along with a capital of £1,000—and usually in such a case he has borrowed up to the hilt in addition—would feel it most, and very many such men would be ruined. We must not forget that a great deal of British capital is invested in foreign countries. Take a man who invests money in a sugar mill in the Filippines—his whole money in that undertaking and probably he owes in addition a great deal to the bank. How can the Government possibly ascertain the value and make a levy? Even if a mortgage is given and is spread over a number of years, it will only be a second charge, because the bank probably has a first charge. The position is different as between a company and an individual owning a mill. I know of such a case in the Filippines. One mill is owned by a company and another by a private individual. In the one case the credit of the company would be unimpaired with the local banks, but the credit of the other concern owned by the individual would be ruined owing to the operations of such a levy, and he would be unable to continue operations. I only give these instances to show that it is not a practical proposal, but would cause great dislocation of values and great ruin. At the same time it is attractive to face an obligation that is hanging over you if it is possible to do so, but I do not think it is possible in the way proposed by a capital levy.

I would like to say a word with respect to the objection to a system of preferential tariffs. I occupy the position of having always been a free trader and of having always supported Free Trade, but I have never regarded Free Trade as a fetish. I take a practical view. I do not think that there is anything morally wrong in Protection or tariffs or in Free Trade. It is merely a question of practical politics what is best for us. Here we are in these islands not producing the raw material that we use. We are entirely differently situated from the United States or from the position which Germany occupied before the War. In both of those countries there are certain natural advantages that we do not possess. The United States produces cotton, wool, timber, and oil, and a great many raw materials which we do not produce in this country. We have to bring them overseas. We have to manufacture the raw material and send it abroad again for sale to other countries. That is practically how this country makes its money, and, that being so, it is clear that we, as a nation, should set ourselves to the task of producing as cheaply as we can. We ought not to hamper our production by anything we can avoid in the way of hindrance or expense. I have always held that in our circumstances Free Trade suits us best.

I now come to the concrete proposals with regard to Preference for the Colonies. I certainly must oppose any tax for motor cars and things of that sort, which I judge to be protective taxes. But when you come to the taxes on tea, coffee and cocoa, they are not protective taxes, and while I look at the proposal with some hesitation as to giving the Colonies Preference, if you bear in mind that the Colonies have asked for this Preference, if you bear in mind, also, what they have done for us, and that they and we desire to be linked together, then I say, if they ask it, let us give them this Preference on taxes which are non-protective. It may be said that it is unfair as between one colony and another. It benefits some Colonies not at all and others it benefits but slightly. But there are many gifts in this world that are useless when you have given them. They may not be of great value, but what is of value is the spirit in which they are given, and if the Colonies look to us in this matter, and would appreciate the gift of Preference in connection with tea, coffee, cocoa and sugar, then, these things being non-protective, I am prepared to go that length. But I wish to make my posi- tion perfectly clear as a supporter of the Coalition, that I am not prepared to support taxes of a protective character. I am ready to admit that these taxes were put on by a Liberal Chancellor of the Exchequer to begin with. It has been said that they are no longer only of a temporary nature. I supported them as war taxes of a temporary nature. The War, perhaps not officially but in fact, is over, and I am very much afraid that these taxes are not now regarded as temporary war taxes, but are looked upon as the beginning of a system of taxation. If that be the case if we are going to have protective taxes, if they are going to increase, partly I suppose with the idea of giving Preference to the Colonies, then I cannot follow the Government as far as that. I am only prepared to go as far as giving Preference to the Colonies in non-protective taxes, and I cannot support this suggested system because in my experience of international trade I think that Free Trade is the best policy for an island situated as we are.

Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

With regard to this omnibus Amendment I must congratulate the political economist who compounded the various concoctions that go to its ingredients. It seems to me that it is based on both parochial and predatory ingredients. I only propose to deal with two of those ingredients—one of them of a predatory nature, and the other of a parochial nature. First, there is this levy on capital, and it is very interesting to try to realise the origin of this extraordinary proposal. It has not the hallmark of Newcastle, because it was carefully omitted from Mr. Asquith's speech there, and when one considers that the late Prime Minister's speech was mainly devoted to the question of public extravagance, we cannot be surprised there was no mention of a capital levy. When one tries to realise what was the genesis of this proposal, I think we may describe it as the offspring of an unhallowed union of the doctrinaire political economist who comes from Penistone and that audacious political strategist who represents East Edinburgh. The whole object of including capital levy in this Amendmet was in order to go one better than the Labour party, because I notice that in the Amendment of the Labour party there is no mention of the capital levy. My right hon. Friend the Member for Peebles (Sir D. Maclean) and my right hon. Friend who proposed the Amendment (Mr. Acland)—to whose speech I listened with the greatest pleasure, and I am very sorry, as all the Members on this side were, that he should have met with any unmannerly interruptions—told us that all that was wanted was an inquiry, but if the House will look at the terms of the Amendment, they will see there is no mention whatever of an inquiry. The terms of the Amendment are these: That this House declines to give a Second Reading to a Bill which makes inadequate provision out of revenue for the expenditure of the country, which fails to deal with the War Debt by means of a capital levy. That is supposed to be the considered Amendment of a body of responsible statesmen. But when they come to present it to the House, it is no longer a question on their part of proposing a capital levy. All they say is that they want an inquiry. It is not right that responsible statesmen should propose an Amendment which in definite terms states that the Budget should be rejected because it fails to deal with the War Debt by means of a capital levy, and then, v/hen they come to argue the matter before the House, say that all that is wanted is an inquiry. My objections to a capital levy are only four in number, and I can state them in about four sentences. I object to it—first, because it is dishonest; secondly, because it is impracticable; thirdly, because it is improvident; and finally because it is blackmailing. Beyond that, I know nothing whatever against it. It is dishonest because you are proposing to take, I think it is, a quarter of the capital not only of what you call the richer classes, but of those capitalists of whom my right hon. Friend spoke, and of whom the right hon. Gentleman one of the leaders of the Labour party spoke as "that more favoured and more fortunate class." It is one of the profoundest mistakes—and the great tragedy of it is that it is made by men who ought to know better—to represent capitalists as all very wealthy—as the dukes have been insulted by Mr. Smillie—and as if they had a monopoly of capital. The capitalists are the small men, the middle classes, who, perhaps, are the most responsible classes in the whole community—people who are not represented, who have no cohesion, who pay a large amount of taxation and who have laid aside a reasonable amount of capital. These are the people whom you are proposing to mulct of one-quarter of their capital. You have gone to them for the last five years and said: "Save! Give us of your savings invest your money in War Bonds." Having done that and having got them, upon the representations and upon the honour of the British Government that their in vestment is a safe one, you then go to them and say: "Now we are going to take a quarter of your capital." I call that dishonest. A capital levy is impracticable for the simple reason that valuation is impossible. Capital cannot be valued without a vast and intricate machinery which would tax the resources of the State in order to arrive at the real value of capital. It is improvident because it disturbs credit. When you disturb credit you promote unemployment. It is quite easy for my hon. Friends the members of the Labour party, who have got to learn their politics—


Have you?

Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

We are quite accustomed to being shouted down, but, fortunately, in this Chamber stentorian lungs do not amount to argument.


And criminal lawyers are not debaters.

Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

I am not so sure of that. They can go on to their platforms and denounce capital.


And denounce you.


Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

That is a very easy cry to catch the ears of the voters. I suggest that the credit of this country is the wealth of this country, and that if you once disturb that credit capital will fly elsewhere.—to use the words quoted by the right hon. Gentleman (Mr. Acland) from Ricardo, one of the political economists whom we read with respect and one of those theoretical economists who say, "Lest capital should fly elsewhere, go and get what you can of it." That is a fair epitome of what Ricardo said. That brings me to my fourth argument against a capital levy, which is that it is blackmail. It is all very well and there is something attractive about it if, as the right hon. Gentleman says—I honestly accept his statement that it is his view—you can make your levy on capital once and for all. If you can say, '' There has been a big war; let us take a certain proportion of your capital and start afresh with a, small Income Tax," there is something very attractive about the proposal. But you cannot do it. You are simply putting a weapon into the hands of the political blackmailer. If it is done to-day, it will be done in ten years' time, then in five years' time, then in five years years' time. Consequently, whenever you get into a difficulty and you have, perhaps, a Labour Chancellor of the Exchequer—if the country is ever so ill-advised as to put its affairs into the hands of a mere class government, because that would be the only class government—you will find that the capital levy is the familiar weapon of the uninstructed Labour Chancellor of the Exchequer. Therefore, I submit to the House that a capital levy is not a doctrine that ought to be accepted. May I say a few words upon the parochial part of this Amendment, that is, the question of Imperial Preference. Anti-Imperial Preference is no new doctrine. It is a very old doctrine. It dates, at all events, from the year 1842, for writing on the 12th April of that year the apostle of free imports, Mr. Richard Cobden, said this: The Colonial system, with all its dazzling appeals to the passions of the people, can never be got rid of except by the indirect process of Free Trade, which will gradually and imperceptibly loose the bonds which unite our Colonies to us by a mistaken, notion of self-interest. That is the origin of the free imports doctrine. Then came the War. I do not desire to indulge in rhetorical periods with regard to what the men of the Dominions did for us in the War. We know it and we all recognise it. At all events, it stultified the boast of Mr. Richard Cobden that the Colonial system wanted getting rid of. They came over here, they fought for us, bled with us and showed themselves an integral part of the Empire. That being so, who are the Jingoes? The Jingoes are people who wave flags and shout Imperial sentiments.

Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

The Jingoes are on the benches opposite. Those are the gentlemen, perfectly honest gentlemen, that wave the flags. [An HON. MEMBER: "You are beating the drum!"] They are quite content to accept what the Colonies have done for us. They are quite content that certain Orders of Merit should be given to their leaders. They are quite content that there should be these demonstrations through the streets, and that we should cheer them. They are the Jingoes. We are the practical people who say, "You ask for something. It is not much. Not only have you asked for something, but you have given something all these years." [Laughter.] It is not a matter for ribald jest,

Photo of Mr Peter Raffan Mr Peter Raffan , Leigh

They have never asked for this.

Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

With all respect, they have asked for it at Colonial Conference after Colonial Conference, and the hon. Gentleman ought to know it. They asked for it at the Imperial Cabinet. They have given us a Preference, and they have said to us, "Give us something in exchange." Although it may be a very small matter, it is a question of principle, and, speaking with all humility and earnestness, I say that the Mother Country cannot do better than answer the call of her kith and kin. who have done so much for her. I am not presuming to argue with hon. Gentlemen opposite. I am quite convinced that they are impervious to any argument—[An HON. MEMBER: "From you! "]—from me or anybody else. They are the only people who have learned nothing whatever from the lessons of the War—[HON. MEMBERS: "Hear, hear! "]—and they agree.


made an observation which was not heard in the Reporters' Gallery.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

I must ask the hon. Member not to keep up a running commentary. He is not interrupted when he speaks himself, and he might extend the same courtesy to others. He is not asked to agree with everything he hears.

Photo of Sir Ernest Wild Sir Ernest Wild , West Ham Upton

I wish to address a word to members of the Coalition Government and its supporters. The electorate, rightly of wrongly, has given the Government of the country for the next five years to the Coalition Government, under the Prime Minister and the Leader of the House, and it becomes an important question to us as to what we are going to do with the great charge which has been submitted to us. The foundation of the Coalition was a letter addressed by the Prime Minister to the Leader of the House, in which he said: I have already accepted the policy of Imperial Preference as defined in the resolution of the Imperial Conference to the effect that a preference will be given on existing duties and on any duties which may subsequently be imposed. He went, on to point out that it did not include a tax on food except in so far as there were existing duties. He dealt with the question of key industries, and said he would be no party to the dumping of cheap foreign goods into this country. He said: Without regard to pre-war views or to prewar speeches, without any regard to theoretical opinions about Tariff Reform or Free Trade—" and upon that basis we Coalition candidates fought the election. That was, I hope, not a scrap of paper. It was a considered agreement between the leaders whom we elected to support, and without whose support many of us would not be Members at all. There is one thing which hon. Members opposite cannot realise. It was an attempt of patriotic candidates riot to try to play to discontent, as was done at Hull, not to try to play down to the masses, not to try to make capital out of the natural reaction and recrudescence that comes with war. I quite understand that people who cannot learn from the war will not believe in political honour. At all events it was an attempt, and an honest attempt I believe on the part of most of us, to bury the hatchet of mere parochial partisan differences and to say "cannot we, in God's name, begin our political career on 4th August, 1914." In these circumstances what is the duty of the two wings of the Coalition? There is a duty on my wing not to regard this proposal as a triumph for Tariff Reform. We ought not to say ''this is a splendid idea that a Radical Prime Minister should introduce Prefer-once proposals. "That is not the view that I take, and that I believe a great majority of my party take. At the same time the Liberal Coalitionists have the rather elderly siren singing to them on the rocks of Newcastle in these words: I am speaking now to all Liberals, not only in Newcastle, but throughout the length and breadth of the. country, to all Liberals and to all Free Traders, that they will reject to the utmost and by every means in their power the proposals for what is called, as I think with very little reason, Imperial Preference from the point of view of principle. They have got to choose. There is the Odysseus of the Liberal Coalitionist. It is the old choice between Circe and Penelope. Make the choice. A man who, with that clear understanding put upon paper and put to the electorate chooses to vote against Imperial Preference, the sooner he goes over to follow the red shirt of Garibaldi the better.

There has been mention in the Press of the so-called Centre Party. A number of now Members have formed themselves to- gether for the purpose not of formulating a policy, not of political advancement, not for the purpose of making a cave or a group, but because, being new Members and, therefore, somewhat unsophisticated, they have believed the things they said at the election. I know it is perfectly ridiculous to old Members to say it, but we believe that this War has made a profound difference in the political point of view, and that we have for the first time got a great and a unique opportunity of burying the hatchet of parochial differences and coming together to face these questions de novo. Let me ask any honest man to put this question to himself. Supposing there had never been a Richard Cobden, a Newcastle program me, or a Newcastle speech, and you were asked now, for the first time, "You have a duty on tea of Is., will you give the Colonies, who have done so much for you a 2d. advantage? You have a. duty on sugar of which 7 per cent. comes from the Colonies. Will you improve their trade and give them a better opportunity by giving them a one-sixth preference? "The same with tobacco. You would do it in a moment. In these circumstances we, at all events, are banded together for this purpose, not to lead, but to be led, and to tell the leaders of the Coalition Government, whether they be Liberals or Conservatives, we are prepared to support a policy of Colonial Preference or any other matter that makes for Imperialism of social reform.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Derbyshire North Eastern

The Chancellor of the Exchequer made a most lucid statement in his Budget speech on the country's indebtedness, the estimated expenditure for the current year, and the means by which he proposed to raise the necessary revenue. But having built the structure of his Budget, he turned himself into a camouflage-artist and proceeded to paint it with the gaudy colours of Colonial Preference and Protection, with the result that most people only see the outside colours and regard the Budget merely as one that will introduce Colonial Preference into this country. I want to take the House back to the Budget itself, and to remind them that the Budget is a means of raising revenue, and to ask them to discuss other things besides Colonial Preference. Before the War this country occupied a unique position. We had a. small Army and an invincible Navy. The workers were badly paid, but we were preparing to pay them better. We were lightly taxed, we had cheap food, and the other requisites of comfort were all cheap. We had a huge trade and a small debt. To-day we find ourselves with a net debt, after deducting the amounts due to us from foreign countries and our Allies, of £6,000,000,000. Our trade is restricted, food is dear, and other requisites of life are at prohibitive prices. The workers are really no better off, because the cost of living has in most cases gone up in the same ratio as the increase of wages, end in many cases they are relatively worse off. Our taxes are a burden- We have a large conscript Army, but still, thank God! an invincible Navy. It is a disappointment that under these circumstances, with this huge debt, with enormous expenditure, and with industrial unrest such as the country has never known, the Chancellor of the Exchequer did not seize the opportunity of lending a hand in trying to allay the industrial unrest which prevails in our midst, and endeavour to provide for getting rid of this enormous debt which is round our necks.

I would like to show how the Chancellor of the Exchequer in his Budget might have assisted in getting rid of the industrial discontent. The discontent is not confined to trades where strikes have taken place or have been threatened. The unrest is throughout every trade, business and industry in the country. Men and women can see huge profits being made in many businesses and they feel that the employers are getting more than their fair share of the fruits of industry. They feel that to a certain extent their labour is being exploited and that they themselves are not receiving their fair share of the reward. This feeling is uppermost in the minds of the working people of the country at a time when the greatest need of the country is an enormous output. We are going to wage another war, happily one in which no lives will be lost and no blood will be shed, but a great commercial war in which all nations will be against us, both Allied, neutral and enemy. We must have, if we are to wage this commercial war successfully, increased output of the raw materials we possess and of the manufactured articles we create, for two reasons: In the first place, because the nation which produces little prospers little, while the nation which produces most will recover the soonest from the ravages of war; and in the second place, because wages must be kept at the war level. It would be a most dangerous doctrine if it was popularly held that wages were higher in times of war than in times of peace. If we pay higher wages and merely maintain the same output the cost of all our manufactured goods will be greater than before and we shall have difficulty in meeting competition in foreign markets. The prosperity of this Kingdom in the future as in the past depends upon our foreign trade. We are a small island with a high ratio of population to the acre. Our home trade really counts for little. The increase of output that we require cannot be obtained while you have the great majority of the people of the country seething with discontent. To wage a successful commercial war we must be united. We can only reach unity—I want to submit this to the House as a basis of taxation—if we lay down as a first principle that every man shall receive a fair share of reward according to the risks, responsibility, ability, and industry which he puts into his job, and that no man should receive more than a fair share.

There was a moment during the War when there was more discontent in this country than at any other time. The discontent was with regard to food. Women were standing outside the shops in queues, and there was a general feeling throughout the whole nation that there was profiteering in the necessities of life. At that moment the late Lord Rhondda became Food Controller, and with the assistance of the right hon. Gentleman the Member for the Platting Division of Manchester (Mr. Clynes), he succeeded in a few months in getting rid of the discontent. He did it in two ways: First, by laying down the rule that we should share and share alike—whether you lived in a castle or a cottage you had the same amount of meat; second, by seeing that no man who dealt in the necessities of life should make more than a fair profit. As soon as those two things were established the public realised that the fair thing was being done, and discontent vanished like a morning mist. I would suggest that the present discontent in the industrial world would, to a large extent, disappear, and the increased output which we require would result if we could convince the industrial workers that profits were apportioned on the principle which I have suggested. This could be done in two ways. It could be done by a complete system of profit-sharing, but that would require great consideration and great discussion, and it would not be proper to discuss it here to-night. The other way is by means of taxation. The Chancellor of the Exchequer has had a great opportunity and great power to do as I say, and to allay industrial unrest. He could have devised a scheme by which taxes would approximately fall on every man so that the amount of income which would remain to him would be very nearly the amount that he should have in accordance with the proportion of the services which he has rendered to the trade of the nation. But instead of that the Chancellor of the Exchequer has reduced the Excess Profits Duty without any alleviation or abatement to the people who have small incomes, with the result that instead of assisting to allay industrial unrest, he has done something to add to it. I know that there are various side issues with regard to the Excess Profits Duty, but substantially that is true.

I wish to say something about Excess Profits Duty. For the last three years I have spent most of my time in settling on behalf of companies and firms the amount of Excess Profits Duty which they should pay to the Inland Revenue. It amounted, on the average, to about £100,000 a week for over throe years. This has given me an opportunity of seeing something of the effect it has had on trading concerns, and it has also brought me into personal contact with many of the officials of the Inland Revenue. I would like to take this opportunity of paying a tribute to the manner in which the Inland Revenue officials, from the higher officials of Somerset House, to the youngest surveyor, have carried out the tremendous task. With increasing work and a decreasing staff, with new-duties being constantly thrust upon them, they have, by common sense, industry, and tact, succeeded in collecting a revenue for successive Chancellors of the Exchequer, and they deserve a warm tribute of praise from this House. Excess Profits Duty may have been a ready means of raising revenue during a difficult period like the War. Excess Profits Duty is a thoroughly bad tax, and for three reasons. The first reason is that it has caused great extravagance. A business was called upon to make some expenditure. The argument everywhere was, ''When the Government pays 60 or 80 per cent. of it, why worry about it?" In the second place, it has encouraged profiteering. When the Excess Profits Duty was 80 per cent., men have seen that if they wanted to earn £1 for themselves they had to put £5 on the price, and at a time when the demand was always greater than the supply there has been no hesitation about doing so. A great deal of the high prices from which we have suffered during the past two years in this country has been due to the operation of Excess Profits Duty. In the third place, Excess Profits Duty acts as a check on new businesses. By the arrangement of a profits standard it gives the established business a great pull over any new business. At a time like this we want to encourage men to start new businesses, but they will not do it because of this duty. The difficulty has been to a certain extent alleviated by the reduction to 40 per cent., but the old-established business has still a great pull, and this particularly applies with regard to the men who have given up three or four of the best years of their lives to the service of the nation as soldiers—men who are now desirous of starting in business and find they are handicapped from the very outset because their rivals have a profits standard and they have to start with none, in advocating the abolition of the Excess Profits Duty it may appear that I am differing from some of my Friends on my right. But there is really no difference between us. They have no desire—in fact, the hon. Member for Wednesbury said so—that Excess Profits Duty as such should remain. What they desire is that if the 80 per cent, to 40 per cent, reduction is to take place, presumably putting additional profits into the pockets of the shareholders and wealthy men, there should be a corresponding concession to those at the other end of the scale. I submit that Excess Profits Duty should be abolished altogether, because it promotes extravagance, assists profiteering, creates monopolies, and discourages the opening of new businesses, and that the Chancellor of the Exchequer should submit a new system of taxation by which each man should be rewarded according to the services he renders.

It is necessary for us to build up a big trade. Those who have capital or labour to give should devote either or both to the service of the nation, but we are all human and must have an incentive. All manners of new businesses are required, capital must be risked and men of brains must be encouraged to indulge in enterprises. You cannot get that done unless you give them an incantive, and the capitalists ought to be rewarded according to the risk which they run, and the organisers and supervisors of labour should be rewarded in accordance with the services which they render. Do not let us forget, notwithstanding the capital which is provided and the brains which enter into the organisation and supervision of these things, the ultimate result will depend upon, the co-operation of those who give their labour to whatever concern it may be. Those who toil and carry out the plans of others will only do their best if they are convinced that the man who provides the capital land the man who provides the labour are getting their fair share for what each has don and not more than their fair share. Therefore, I submit that instead of reducing the Excess Profits Duty the Chancellor should have substituted a Profits Tax by which capital would have been rewarded according to the risk which it runs and brains would be rewarded according to the way in which they developed the business, and they would have been encouraged to go on developing the business and profiteering would be entirely done away with; and if taxation were so enacted that surplus profits would come to the State and to the common good, then I suggest that much of the prevailing discontent would disappear.

I desire to say a few words in regard to the capital levy. [HON. MEMBERS: "Divide! "] I hope one may say on the Finance Bill what one thinks, as this is the only opportunity of expressing our views on matters of taxation. If the Government only give one day, while in the past they gave four, five, six, or even ten days—[HON. MEMBERS: "No!"]—one surely must be allowed to say what one has to say. I frankly confess that at the General Election I refused to submit to the question of a capital levy, but the more I think about it the more I feel that it is, at any rate, a subject worthy of the most serious consideration. I hope hon. Gentlemen will not dismiss it without full thought and inquiry. I found in discussion lately that very many business men are in favour of it if, and this applies entirely to my own view, the capital levy is a clean cut and will not recur. [HON. MEMBERS: "Oh, oh !"] It is all very well to jeer, but we may as well discuss this thing. It is not put forward as a means of taking from certain people by those who have not. The reason why busi- ness men favour it is because in their own businesses, if they have a heavy debt they try to get rid of it as soon as possible, and they feel that it should be the same with the nation, and if we have got a heavy debt let us get rid of it if we possibly can. What are the objections to it? One chief objection put forward several times to-day has been that it would be confiscation and repudiation of the National Debt. That argument surely ignores the elementary relationship between the individual citizen and the State. What is the net wealth of any nation? It is the possessions which belongs to the State—its land and buildings, Suez Canal shares, etc., the value of the property which belongs to the municipalities less the debs which they owe, together with the individual fortunes of the citizens of the country, from which must be deducted the net National Debt. If I may be allowed to ignore what belongs to the State and the municipalities, the net wealth of the nation is the combined fortune of every individual, less the National Debt, and therefore, if a man thinks that, because he has property and securities of £100,000, he is worth £100,000, he is surely making a mistake, because he is liable for his proportion of the National Debt, and if the combined fortunes of the individuals of the nation are £24,000,000.000 and the National Debt is £6,000,000,000, surely every man whose fortune goes to make up the £24,000,000,000 is liable for one quarter of the National Debt! It is the same in the case of a company or firm. If a firm has liabilities, the partners are liable in accordance with their capital in the business, and in the same way in the nation each separate individual is liable for his portion of the National Debt. Then a capital levy would simply mean that he would be dealing off the mortgage which always exists upon his own fortune straight away.

I am going to give three reasons in favour of a capital levy. [Cries of "Divide!"]The first is that we borrowed our money when prices were high, and if we wait until prices have fallen and things get normal we shall repay far more money than we borrowed. The second point is that we should save at least two or three hundred millions a year interest on the National Debt, and be able to reduce the Income Tax to 3s. in the £; so that if anyone who has earned income as well as unearned income will work it out for himself he will find that if one-fifth of his capital was taken from him, but that for the future he only paid 3s. in the £ Income Tax instead of 6s., he would have more retainable income every year than he had got before the capital levy. The third reason, and it is my last. [Cries of "Divide!"]

Photo of Commander Hon. Joseph Kenworthy Commander Hon. Joseph Kenworthy , Kingston upon Hull Central

Parliament is on its trial. [Interruption] Parliament is on its last trial!

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

I must ask the hon. and gallant Member for Hull not to keep making interjections.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Derbyshire North Eastern

The third reason I want to give in favour of a capital levy is that it would stop extravagance. At the present moment we are living in a false atmosphere of prosperity. Everybody is spending. If a man were asked to pay one-fifth of his capital straight away, it would immediately make him economise. It would certainly make him tell his wife to economise. The result would be that, if a man with £50,000 had to pay £10,000 over to the nation, leaving him with £40,000, it would alter his whole view of expenditure and his mode of living. He would immediately save and take other steps to get back to his £50,000 position as soon as possible. I suggest to the Government that the best way to correct the extravagant idea of spending and not saving is to impose a capital levy. It has been suggested by some hon. Members that this suggestion of a capital levy is merely made by people who have nothing to lose, in order to take from those who have something to lose, but you will find that many men with large possessions and

large incomes are perfectly prepared to face the clean cut to get rid of our national debt. I hope hon. Members, instead of dismissing it with a laugh, will consider it fully. I hope the right hon. Gentleman, after possibly he has finished his borrowing, so far as the War is concerned, will have an inquiry, because I believe that if we did it then, if we did get rid of the National Debt, if we did get our Income Tax down to a reasonable limit, if we grappled bravely with this great problem, coming generations would recognise the unselfishness of our" action.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

May I interpose with a suggestion as to the course of Debate to meet the convenience of the House generally? The House is aware that this Bill is not subject to the Eleven o' Clock Rule, and the Government might ask the House to sit after that hour, but I see many Members want to speak upon the Second Reading, and I am unwilling to press the House to sit late. I suggest, therefore, that we should take a Division on the Amendment now, and that we should resume the discussion on the Motion for the Second Reading tomorrow, with the understanding that we come to a decision upon it about seven o'clock. I believe that that would meet the general convenience of the House, and I hope it will be accepted by the House.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

As far as we are concerned, that arrangement is one which we will gladly fall in with.

Question put,

"That the words proposed to be left out stand part of the question."

The House divided: Ayes, 317; Noes, 72.

Division No. 32.]AYES.[10.45 p.m.
Adair, Rear-AdmiralBellairs, Com. Carlyon W.Buckley, Lieutenant-Colonel A.
Adkins, Sir W. Ryland D.Bennett, T. J.Bull, Rt. Hon. Sir William James
Ainsworth, Capt. C.Bentinck, Lt.-Col. Lord H. Cavendish-Bunion, Col. Rowland
Allen, Col. William JamesBetterton, H. B.Burgoyne, Lt.-Col. Alan Hughes
Archdale, Edward M.Big land, AlfredBurn, Col. C. R. (Torquay)
Armitage, RobertBirchall, Major J. DButcher, Sir J. G.
Ashley, Col. Wilfred W.Blades, Sir George R.Campbell, J. G. D.
Astbury, Lt.-Com. F. W.Blair, Major ReginaldCampion, Col. W. R.
Astor, Major Hon. WaldorfBlake, Sir Francis DouglasCarlile, Sir Edward Hildred
Bagley, Captain E. A.Blane, T. A.Carter, R. A. D. (Manchester)
Baird, John LawrenceBoles, Lieut.-Col. D. F.Cautley, Henry Strother
Baldwin, StanleyBorwick, Major G. O.Cayzer, Major H. R.
Balfour, George (Hampstead)Boscawen, Sir Arthur Griffith'Cecil, Rt. Hon. Evelyn (Aston Manor)
Banbury, Rt. Hon. Sir F. G.Bottomley, HoratioCecil, Rt. Hon. Lord H. (Oxford Univ.)
Banner, Sir J. S. HarmoodBowyer, Capt. G. W. E.Chamberlain, Rt. Hon. J. A. (Birm.,W.)
Barker, Major R.Boyd-Carpenter, Major A.Cheyne, Sir William Watson
Barlow, Sir Montague (Salford, S.)Brassey, H. L. C.Child, Brig.-Gen. Sir Hill
Barnston, Major HarryBreese, Major C. E.Clay, Capt. H. H. Spender
Barrand, A. R.Bridgeman, William CliveClough, R.
Barrie, H. T. (Londonderry, N.)Brittain, Sir Harry E.Coates, Major Sir Edward F.
Beck, Arthur CecilBritton, G. B.Coats, Sir Stuart
Beckett, Hon. GervaseBrown, Captain D. C. (Hexham)Cobb, Sir Cyril
Bell, Lieut.--Col. W. C. H. (Devizes)Buchanan, Lieut.-Col. A. L. H.Cockerill, Brigadier-General G. K.
Colvin, Brigadier-General R. B.Kidd, JamesRaw, Lt.-Col. Dr. N.
Compton-Rickett, Rt. Hon. Sir J.King, Com. DouglasRawlinson, John Frederick Peel
Conway, Sir W. MartinKinloch-Cooke, Sir ClementReid, D. D.
Coote, Colin R. (Isle of Ely)Knight, Capt. E. A.Remer, J. B.
Cope, Major W. (Glamorgan)Lane-Fox, Major G. R.Rendall, Athelstan
Cory, J. H. (Cardiff)Larmor, Sir J.Richardson, Albion (Peckham)
Craig, Col. Sir James (Down, Mid.)Law, A. J. (Rochdale)Richardson, Alexander (Gravesend)
Craig, Lt-Com. N. (Isle of Thanet)Law, Rt. Hon. A. Bonar (Glasgow)Roberts, Rt. Hon. G. H. (Norwich)
Craik, Right Hon. Sir HenryLewis, Rt. Hon. J. H. (Univ. Wales)Robinson, T. (Stretford, Lancs.)
Croft, Brig.-Gen. Henry PageLewis, T. A. (Pontypridd, Glam.)Roundell, Lt.-Col. R. F.
Curzon, Commander ViscountLindsay, William ArthurRowlands, James
Davies, Major David (Montgomery Co.)Lister, Sir R. AshtonRoyden, Sir Thomas
Davis, T. (Cirencester)Lloyd, George ButlerSamuel, A. M. (Farnham, Surrey)
Dean, Com. P. T.Locker-Lampson G. (Wood Green)Samuel, Rt. Hon. Sir H. (Norwood)
Denison-Pender, John C.Locker-Lampson, Com. O. (Hunt'don)Samuel, S. (Wandsworth, Putney)
Dennis, J. W.Lorden, John WilliamSanders, Colonel Robert Arthur
Dewhurst, Lieut.-Com. H.Lort-Williams, J.Sassoon, Sir Philip A. G. D.
Doyle, N. GrattanLoseby, Captain C. E.Scott, A. M. (Glas., Bridgeton)
Duncannon, ViscountLowther, Major C. (Cumberland, N.)Seager, Sir William
Du Pre, Colonel W. B.Lyle, C. E. Leonard (Stratford)Seddon, J. A.
Elliott, Lt.-Col. Sir G. (Islington, W.)Lynn, R. J.Seely, Maj.-Gen. Right Hon. John
Elliot, Capt. W. E. (Lanark)Lyon, L.Shaw, Capt. W. T. (Forfar)
Eyres-Monsell, Com.M'Curdy, Charles AlbertSimm, Col. M. T.
Falcon, Captain M.M'Donald, D. H. (Bothwell, Lanark)Smithers, Alfred W.
Falle, Major Sir Bertram GodfrayMackinder, Halford J.Sprot, Col. Sir Alexander
Farquharson, Major A. C.M'Laren, Hon. H. D. (Bosworth)Stanier, Capt. Sir Beville
Fell, Sir ArthurM'Laren, R. (Lanark, N.)Stanley, Col. Hon. G. F. (Preston)
FitzRoy, Capt. Hon. Edward A.M'Lean, Lt.-Col. C. W. W. (Brigg)Stanton, Charles Butt
Foreman, HMacmaster, DonaldStarkey, Capt. John Ralph
Forestier-Walker, L.McMicking, Major GilbertSteel, Major S. Strang
Forster, Rt. Hon. H. W.McNeill, Ronald (Canterbury)Strauss, Edward Anthony
Foxcroft, Capt. Charles TalbotMaddocks, HenrySturrock, J. Leng-
Geddes, Rt. Hon. Sir A. C. (Basingstoke)Magnus, Sir PhilipSurtees, Brig. Gen. H. C.
Geddes, Rt. Hon. Sir E. (Cambridge)Malone, Major P. (Tottenham, S.)Sutherland, Sir William
Gibbs, Colonel George AbrahamManville, EdwardSykes, Col. Sir A. J. (Knutsford)
Gilbert, James DanielMarks, Sir George CroydonSykes, Sir C. (Huddersfield)
Gilmour, Lt.-Col. JohnMarriott, John Arthur R.Talbot, G. A. (Hemel Hempstead)
Goff, Sir R. ParkMason, RobertTaylor, J. (Dumbarton)
Grant, James AugustusMitchell, William Lane-Terrell, G. (Chippenham, Wilts.)
Greame, Major P. LloydMond, Rt. Hon. Sir Alfred MoritzThomson, F. C. (Aberdeen, S.)
Green, A. (Derby)Moore, Maj.-Gen. Sir Newton J.Tickler, Thomas George
Green, J. F. (Leicester)Moore-Brabazon, Lieut.-Col. J. T. C.Townley, Maximillian G.
Greene, Lt.-Col. W. (Hackney, N.)Moreing, Captain Algernon H.Tryon, Major George Clement
Greer, HarryMorris, RichardTurton, Edmund Russborough
Gregory, HolmanMorrison, H. (Salisbury)Vickers, D.
Greig, Colonel James WilliamMorrison-Bell, Major A. C.Walker, Col. William Hall
Gretton, Col. JohnMosley, OswaldWalters, Sir John Tudor
Griggs, Sir PeterMount, William ArthurWalton, J. (York, Don Valley)
Guinness, Capt. Hon. R. (Southend)Murray, Hon. G. (St. Rollox)Ward-Jackson, Major C. L.
Guinness, Lt-Col. Hon. W. E. (B. St. E.)Murray, John (Leeds, W.)Ward, Col. L. (Kingston-upon-Hull)
Hacking, Captain D. H.Neal, ArthurWardle, George J.
Hailwood, A.Nelson, R. F. W. R.Warner, Sir T. Courtenay T.
Hall, Lieut.-Col. Sir Fred (Dulwich)Newman, Sir R. H. S. D. (Exeter)Watson, Captain John Bertrand
Hambro, Angus ValdemarNicholl, Com. Sir EdwardWeston, Col. John W.
Hamilton, Major C. G. C. (Altrincham)Nicholson, R (Doncaster)Wheler, Col. Granville C. H.
Hancock, John GeorgeNorman, Major Rt. Hon. Sir HenryWhite, Col. G. D. (Southport)
Harmsworth, Cecil B. (Luton, Beds.)Norris, Colonel Sir Henry G.Whitla, Sir William
Harris, Sir Henry P. (Paddington, S.)Oman, C. W. C.Whittaker, Rt. Hon. Sir Thomas P.
Herbert, Dennis (Hertford)Palmer, Major G. M. (Jarrow)Wigan, Brig.-Gen. John Tyson
Hewart, Rt. Hon. Sir GordonPalmer, Brig.-Gen. G. (Westbury)Wild, Sir Ernest Edward
Hilder, Lieutenant-Colonel F.Parker, JamesWilley, Lt.-Col. F. V.
Hohler, Gerald FitzroyPearce, Sir WilliamWilliams, Lt.-Com. C. (Tavistock)
Hood, JosephPease, Rt. Hon. Herbert PikeWilliamson, Rt. Hon. Sir Archibald
Hope, James Fitzalan (Sheffield)Peel, Lt.-Col. R. F. (Woodbridge)Willoughby, Lt.-Col. Hon. Claud
Hope, John Deans (Berwick)Pennefather, De FonblanqueWills, Lt.-Col. Sir Gilbert Alan H.
Hopkins, J. W. W.Percy, CharlesWilson, Capt. A. Stanley (Hold'ness)
Horne, Edgar (Guildford)Perkins, Walter FrankWilson, Col. Leslie (Reading)
Horne, Sir Robert (Hillhead)Perring, William GeorgeWilson, Lt.-Col. Sir M. (Bethnal Gn.)
Howard, Major S. G.Philipps, Gen. Sir I. (Southampton)Wilson. Col. M. (Richmond, Yorks.)
Hughes, Spencer LeighPhilipps, Sir O. C. (Chester)Winterton, Major Earl
Hunter, Gen. Sir A. (Lancaster)Pickering, Col. Emil W.Wood. Major Hon. E. (Ripon)
Hunter-Weston, Lieut.-Gen. Sir A. G.Pilditch, Sir PhilipWood, Sir H. K. (Woolwich, W.)
Hurd, P. A.Pinkham, Lieutenant-Colonel CharlesWood, Sir J. (Stalybridge and Hyde)
Illingworth, Rt. Hon. Albert H.Pollock, Sir Ernest MurrayWood, Major S. Hill- (High Peak)
Inskip, T. W. H.Pratt, John WilliamWorsfold, T. Cato
Jackson, Lieut.-Col. Hon. F. S. (York)Preston, W. R.Worthington-Evans, Rt. Hon. Sir L.
Jameson, Major J. G.Prescott, Major W. H.Yate, Col. Charles Edward
Jesson, C.Pretyman, Rt. Hon. Ernest G.Yeo, Sir Alfred William
Jodrell, Neville Paulpulley, Charles ThorntonYoung, Sir F. W. (Swindon)
Johnson, L. S.Purchase, H. G.Younger, Sir George
Jones, Sir Edgar R. (Merthyr Tydvil)Raeburn, Sir William
Jones, Sir Evan (Pembroke)Ramsden, G. TTELLERS FOR THE AYES.—Lord E
Jones, G. W. H. (Stoke Newington)Rankin, Capt. James S.Talbot and Captain Guest.
Jones, J. Towyn (Carmarthen)Ratcliffe, Henry Butler
Acland, Rt. Hon. Francis DykeGriffiths, T. (Pontypool)Roberts, F. O. (W. Bromwich)
Adamson, Right Hon. WilliamGrundy, T. W.Rose, Frank H.
Barnes, Major H. (Newcastle, E.)Harbison, T. J. S.Sexton, James
Bell, James (Ormskirk)Hartshern, V.Shaw, Tom (Preston)
Benn, Capt. W. (Leith)Hayday, A.Short, A. (Wednesbury)
Bowerman, Rt. Hon. C. W.Hayward, Major EvanSitch, C. H.
Brace, Rt. Hon. WilliamHirst, G. H.Smith, Capt. A. (Nelson and Colne)
Bramsdon, Sir T.Holmes, J. S.Smith, W. (Wellingborough)
Briant, F.Irving, DanSpoor, B. G
Bromfield, W.Jones, Henry Haydn (Merioneth)Swan, J. E. C.
Brown, J. (Ayr and Bute)Jones, J. (Silvertown)Taylor, J. W. (Chester-le-Street)
Cairns, JohnKenworthy, Lieut.-CommanderThorne, G. R. (Wolverhampton, E.)
Cape, TomLunn, WilliamThorne, Col. W. (Plaistow)
Carter, W. (Mansfield)M'Callum, Sir John M.Walsh, S. (Ince, Lanes.)
Davies, Alfred (Clitheroe)M'Lean, Neil (Glasgow, Govan)Waterson, A. E.
Davison, J. E. (Smethwick)Maclean, Rt. Hon. Sir D. (Midlothian)White, Charles F. (Derby, W.)
Devlin, JosephMorgan, Major O. WattsWignall, James
Donnelly, P.Murray, Dr. D. (Western Isles)Williams, A. (Consett, Durham)
Edwards, C. (Bedwellty)Newbould, A. E.Wilson, W. T. (Westhoughton)
Edwards, Major J. (Aberavon)O'Connor, T. P.Wood, Major Mackenzie (Aberdeen, C.)
Entwistle, Major C. F.O'Grady, JamesYoung, Robert (Newton, Lanes.)
Finney, SamuelRattan, Peter Wilson
Glanville, Harold JamesRedmond, Captain William A.TELLERS FOR THE NOES.—Mr.
Graham, D. M. (Hamilton)Pees, Captain J. Tudor (Barnstaple)Hogge and Mr. An old.
Graham, W. (Edinburgh)Richardson, R. (Houghton)

Question put, and agreed to.

Main Question again proposed.

Photo of Mr James Hogge Mr James Hogge , Edinburgh East

I beg to move, That the Debate be now adjourned.

Debate to be resumed To-morrow.