NEW CLAusE. — (Repeal of Imperial Preference.)

Part of Orders of the Day — Finance Bill. – in the House of Commons at on 16 July 1920.

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Photo of Captain William Benn Captain William Benn , Leith

I beg to move, "That the Clause be read a Second time."

This new Clause deals in a wide way with the whole question of Imperial preference. I should like to say at the outset as regards the second new Clause standing in my name "Preference not to apply to mandated territory," I do not propose to deal with that point in the course of the remarks I am now about to make, because I am in hope that I shall be able by avoiding prolonged discussion on the question of the duties in mandatory territories to be enabled by your ruling to discuss that point in detail. I shall deal briefly with the general question of the policy of Imperial preference as embodied in this Bill and as inaugurated in the Finance Bill of last year. The arguments we bring forward on this subject are more or less familiar to Members of this House, but there is this about it, that they grow in force in our judgment from year to year, and we think we can show by what has happened between the time the Finance Bill was introduced and the present time that the evil of these impositions has been aggravated by the circumstances that have taken place. The first argument is that if you are going to have a system of Imperial preference the machinery of these duties and of this tariff is absolutely unsuitable for the purpose. Their imposition is just an accident grafted on to a system created for a totally different purpose. The duties on sugar and tea, and so forth, were intended of course for revenue purposes, but as to the other duties, which are known as the McKenna duties, and which were imposed during the war, they were put on for totally different reasons; mainly, I believe, at the outset, to save tonnage and partly with the view of correcting the adverse balance of exchange. It was never contemplated that they would be substantially an essential part of the Tariff system in which preference would be given to various parts of the Empire. Our first object is that the system is lopsided, and I might almost say, absurd.

The second objection is, if you do give preference under these accidental duties you are doing something to perpetuate their existence. That may be very desirable in the case of some duties, but I do not think that even the most ardent advocate of the protectionist system would have selected beautiful boxes and clocks, watches, motor cars, cinematograph films as a basis on which to elaborate a scientific tariff. They were, as I say, accidental duties, and, if you use them for the purpose of giving preference to products from various parts of the Empire, you, in fact, make them a continuing part of the tariff system of the country, for the very obvious reason that if you give a preference you begin to establish vested interests. Supposing a man establishes in some part of the Empire a factory for the manufacture of clocks and watches. He invests his capital, he employs his staff, he puts up his buildings. Then he finds that there is a proposal for the abolition of the preference. Surely he would have a very strong case if he complained that he had been induced to risk his capital and was now being betrayed by the abolition of the preference. Therefore, the first objection that we have is that this is not a suitable basis for a preference, and that, by giving a preference on these articles, you are perpetuating the duties. When these duties were introduced, it was said by the Government, of which the right hon. Gentleman was a Member, that there was no intention that they should be anything but War duties. I have not the quotation by me, but I think the right hon. Gentleman then said that no one could conceive that such duties would be perpetuated as a permanent part of our fiscal system. That, however, is exactly what this Government is causing to be done.

The second objection that we have is that they involve a sacrifice of revenue at a time when there are so many clamant needs which should be first satisfied. I cannot elaborate this point except by the most casual example. The Unemployment Insurance Benefit is a case in point. I believe that the amount of money required to make the Unemployment Benefit 20s. per week instead of 15s. would be more than covered by the amount of revenue which the Chancellor of the Exchequer is sacrificing by means of these preferential duties. I can understand the right hon. Gentleman asking why we complain when he remits taxation on tea, to reduce which we ourselves have moved Amendments. He will see, if he looks at the answer which he gave on 24th June, showing the yield of the taxes at the preferential and at the full rate, that the largest amount of taxation gathered at the preferential rate was on tea, amounting to £13,000,000 as against £1,700,000 at the full rate. When we complain that he is losing revenue by this preferential system, he will say that really he is making a conces- sion to a class of the community on whose behalf we have ourselves often raised our voices. It lies with the Government, however, to show that the benefit of this concession is in fact being reaped by the tea consumers, and the figures which I have—it is a very complicated commercial topic on which it is unsafe to speak with great definiteness—do not show that there has been any corresponding reduction in price on account of the reduction of the tax on tea grown in the Empire. Unless the Chancellor of the Exchequer can show that the retail price of tea has been reduced by approximately the amount that he is remitting in the form of Imperial preference, we are entitled to say that it is not a concession to the tea consumer, but merely an advantage to a particular interest, namely, the Mincing Lane importers of tea.

I would call attention to some of the absurd results of these preferences. In the old days, when a large number of duties were swept away—I am speaking of the early part of last century—one of the main facts revealed by the investigations of a committee was that there were scores of duties of a complicated and harrassing character which were yielding nothing substantial or really worth collecting at the ports. I contend that the same is becoming true of these preferential duties. It is natural that it should be so, because, instead of selecting articles suitable for preferential treatment, the right hon. Gentleman has selected the adventitious list composed by Mr. McKenna for totally different reasons. I wish the Committee would look at the yield of these duties in the answer to which I have already referred. During the whole of the year the duty collected on cinematograph films only amounted to £400, and the duty collected on clocks and watches to £600. The Chancellor of the Exchequer would be very hard put to it to tell us that the expense of having different systems of registration or whatever the machinery may be in order to determine whether a clock or a watch comes from an Imperial factory or not does not amount to more than £600. It is obvious that the cost of collection must be considerably in excess of the yield of the tax. It is also obvious, if only £400 in one case and £600 in the other be collected, that the advantage to any one manufacturing these articles in the Empire is nugatory. Therefore, you have duties which confer no benefit upon anybody in the Empire and which cost more to collect than they yield to the Exchequer. I submit therefore that there is a very strong case against some of these duties. I come now to the third point which is the effect on prices. We contend that the tendency of these preferential duties is not to lower prices to the consumer of colonial produce, but to make the consumer pay the same and enable the colonial importer or merchant to pocket the difference. I would ask the Committee to bear in mind the report of the Committee on Trusts, a very important report dealing with a subject of growing importance, and, in fact, of prime importance in economics today. In the Addendum signed by four members of the Committee, paragraph 2, I read these words: In considering the prevalence of capitalistic combinations in British industry, it is impossible to leave out of account the check upon profiteering which may be afforded by foreign imports. This operates, however, only so long as the foreign producers are not also brought within the combination. The report goes on to say that free trade is not a complete safeguard, but that it tends in the direction of making trustification of industry and the control of prices more difficult. The most important ground on which we object to these duties is that, however trifling and absurd they are in many ways, they are on the showing and by the avowal of the Chancellor of the Exchequer himself, a part of a larger and definite scheme to Imperial policy, to which we on this side of the House utterly object in principle. On the occasion of the last Budget the Chancellor of the Exchequer said that this was part of a larger policy, and that in the view of the present Government preference was not to be confined merely to customs duties. What has happened since? We find that in dealing with the Crown Colonies and various other parts of the Empire an attempt has been made to force those parts of the Empire to participate in this system of preferential treatment. An example of this is to be found in the £2 duty on palm kernels from West Africa which is part of the general principle that the Chancellor of the Exchequer is endeavouring to embody in the fiscal system of this country. I am aware that the right hon. Gentleman can say that, strictly speaking, this is not in the Finance Bill, but at any rate I am dealing with the principle which he says is the basis of these proposals.

Then there is a preferential duty on the export of hides from India. There was a reply given to me about a month ago by the Colonial Office stating that an invitation to consider the practicability of giving a preference to goods of Imperial origin had been addressed to all the Colonies, and this amounts to pressure being put on the Crown Colonies to force open their door in return for keeping our own door ajar. I wish to point out to Free Traders opposite, who are always contending that this thing is so small that it is of no importance, that it is in fact the principle that is forming the policy of the Government, and it is a principle which will lead them into supporting a full-blooded system of Imperial preference and tariffs for the whole Empire.

I have given India and West Africa as examples, and I have shown that we are trying to bring pressure to bear on the Crown Colonies in regard to this matter. On the question of mandatory territories, I think it would be better that we should have a distinct Debate. What is our objection to this preferential rate, and to the system generally. It is that it sets up economic friction and is adverse to the system of world peace which we wish to see established. War in the past has been initiated by many causes, but often by causes of economic jealousy. The policy we have adopted is already beginning to set up this very friction. Take for example the export duty on hides from India. In the answer given by the Secretary of State for India on this point we were informed that three of our Allies, France, Italy and the United States, have already protested against this preferential duty directed against themselves. Hon. Members opposite may say that that is a small matter which is of no account, but it does show that the result of our embarking on this system of Imperial preference is to set other people by the ears, and cause friction even amongst those who have been our Allies in the Great War. We hear protests against what the French do in the way of restricting imports. We have heard something about the United States giving a preference in the matter of shipping, and the result of all this will be to draw us into economic jealousies with other great Powers, and it will tend to destroy what has been the greatest asset of the British Empire, namely, the goodwill of the world, and the belief that where British rule was all countries had an equal opportunity for disposing of their wares.

This controversy is not a new one. It is in essence the same point as that which was involved in the great fight of 150 years ago which resulted in the loss of the American Colonies. It is the conception that your Empire is to be built up somehow on the basis of a cash or material connection, but that we entirely repudiate. We say there is something far stronger as a basis. I will not weary the House with quotations, but I would remind hon. Members that this very topic has been the subject of some of the most moving periods of our history. Burke said: Do not entertain so weak an imagination as that your registers and your bonds, your affidavits and your suffrances, your cockets and your clearances, are what form the great securities of your commerce. Then he went on to say: Do not dream that your letters of office, and your instructions, and your suspending clause are the things that hold together the great contexture of this mysterious whole. These things do not make your Government. Dead instruments, passive tools as they are, it is the spirit of the English communion that gives all their life and efficacy to them. It is the spirit of the English constitution which infused through the mighty mass, pervades, feeds, unites, invigorates, vivifies every part of the Empire even down to the minutest member.