We have now reached the last stage in the consideration of this measure, which remains substantially as it was outlined in the Budget speech of the Chancellor of the Exchequer. So far as I am aware, no Amendment of great significance has been introduced into the measure, either in Committee or upon Report, though I may take the opportunity of welcoming a very useful and desirable, though perhaps rather tardy, concession—I mean the provision which exempts from assessable income the allowance made to a war widow for her children. The right hon. Gentleman accepted that proposal, and has incorporated it in the Bill. That relieves a deserving class, which is entitled to the sympathy of the House if any class in the country is, of what has been hitherto a great hardship and injustice. In substance, however, this Bill reproduces the financial statement of the Chancellor of the Exchequer. So far as I am concerned, the criticisms which I ventured to make upon that statement on the night of the Budget remain unaffected. I have always thought that it was a useful, if not perhaps an indispensable gift, for a Chancellor of the Exchequer to have a sanguine imagination. In that respect, as in many others, the right hon. Gentleman has shown himself extremely well fitted for his high office. He has made a heavy draft, perhaps an exceptional draft, upon the probabilities and even the possibilities of the future. I can only say once more that I earnestly hope that his anticipations may be realised. But I cannot disguise from myself, nor can the House, that the Budget is founded to a large extent upon conjecture and even upon hope.
It is quite true that on the side of the expenditure the right hon. Gentleman has prudently added an estimate of £25,000,000 for supplementary charges which may come in the course of a year. Some part of that, I believe, has been already eaten up. Judging by our experience of the last few years, I doubt very much whether it is an adequate provision for similar contingencies. It is, however, as far as it goes, a prudent step.
On the side of the estimate of revenue I hope that the scepticism I expressed a few months ago may turn out to be unfounded. I find on reading the report of the Revenue returns up to the end of last week that the total receipts as from the 1st April are £214,000,000 as compared with £235,000,000 in the corresponding period of last year. Up to date there is a deficiency of something like £14,000,000. That decrease may be of a purely temporary nature due to the non-collection of arrears of Income Tax or a hundred other things, but I wish to know whether the right hon. Gentleman will be able to make any prognostication or tell us how things are shaping as compared with the expectations formed three months ago.
If the right hon. Gentleman is justified in making remissions of taxation I personally see no ground to quarrel with the manner in which he has disposed of that particular part of his duty, but I should certainly have preferred if in the region of indirect taxation the sugar duty had been taken first and the tea duty afterwards. Our indirect taxation may be divided under three heads, namely, necessaries, comforts and simple luxuries. Sugar is a great deal more than a food—it is a raw material—and I am not at all sure that sugar as a food should not be in the category of necessaries, whereas I do not think that tea can be put so high. Tea is, for some people, a necessary, while others among whom I may venture to regard myself, look upon it as a luxury although one of the simplest kind. At any rate, sugar seems to me to have first claim. I remember the last proceeding, to which I was a party, when I was responsible for the finances of the country was a very large reduction in the sugar duty, which was attended with most beneficial results. Tea, however, has a claim because the taxation on tea is very high.
In regard to the Income Tax, again I say that if remission and reduction on other grounds are justifiable, I think the right hon. Gentleman was quite right in taking off a shilling. A six shilling Income Tax in time of peace is an intolerable burden on the whole community. It is quite true that the number of persons directly assessed for Income Tax is relatively small. It does not exceed at this moment 2,500,000 out of the whole population. I am repeating an old thesis of mine, and I repeat it only because something which I heard in the course of the present Debate has made me doubt whether it is sufficiently appreciated in some quarter? of the House—when I say there is no greater fallacy than to suppose the burden of Income Tax is confined to those on whom it is directly assessed. It has effects in a thousand ways, which every man of business knows it is impossible to ignore. It affects the whole reservoir from which the industry of the country is fed, and drains it at the source. It is as injurious to Labour, to those who are engaged in industry, in its effects, as it is to Capital, to those engaged in employing others. This Income Tax of 6s. in the pound was, I am satisfied, a most serious clog on the springs of the industry of the country at large. I heartily welcome the reduction of one shilling.
To come to the substantial point which I want to make to-day, what is the price we have to pay for these remissions of taxation? The price we have to pay is the suspension of the process of reducing the capital of our lebt. Do not let us for a moment ignore that. We have had a great deal of discussion in the course of these Debates upon debt and debt reduction and the amount which was in fact being expended during the last few years in reducing our capital liabilities. The broad fact remains, and is admitted, that at the end of the financial year during which the Armistice was completed, on 31st March, 1919, the capital debt amounted to £7,435,000,000. On 31st March of this year it was estimated at £7,654,000,000. I am quite aware that this figure, without explanation, might convey a misleading impression. In the first place, there has been an addition to the nominal capital of the debt—an addition through the conversion Loan, which in the long run is no addition to our national liability. Again, it is quite true, though not really a relevant point, that in the year 1919, after the 31st March, for which I have given the figure, the debt was very substantially increased, whether for necessary or unnecessary purposes is not for the moment the point to discuss. It was substantially increased, and the increase so made was wiped out in the years that followed. That does not affect my general proposition. with the qualification I mentioned a moment ago, that the debt is substantially at very much the same figure as it was at the conclusion of the War.
I asked the right hon. Gentleman to furnish a return—which is strictly relevant to this question of debt—of the manner in which, what I may call our capital War assets have been dealt with and disposed of during these years. The right hon. Gentleman was good enough to suggest to me the form in which the question should be put. The return has now been circulated and I presume is in the hands of hon. Members. It is a return of sums derived from the realisation of War assets, appropriated in aid of Supply grants or paid direct to the Exchequer, for the financial years 1919–20, 1920–21 and 1921–22. The figures are certainly of a startling kind, and I confess they are not all very intelligible. In the first year 1919–20 the total realisation amounted in round figures to £589,000,000, of which £357,000,000 was appropriated in aid of Supply and £231,000,000 paid direct to the Exchequer. In the next year, 1920–21, the total was £360,000,000, of which £73,000,000 was appropriated in aid and £286,000,000 paid direct to the Exchequer. In the third year the total was £l83,000,000, of which £34,000,000 was appropriated in aid and £153,000,000 paid direct to the Exchequer. I do not profess to understand why these very large sums were appropriated in aid of Supply, but no doubt the right hon. Gentleman will toll us. I think I can understand to some extent the first year, when demobilisation was taking place and a number of expenses of that kind might naturally have to be made, and of course the amount so appropriated has fallen very substantially year by year. In fact, last year it had fallen to £34,000,000. I do not know whether the right hon. Gentleman has any estimate of what it will be in the current year, hut I imagine a still smaller sum.
Then, again, the -explanation is given, as far as it is an explanation, that these figures include very considerable suras paid by one Department to another. That, of course, is bookkeeping, but they also include approximately £45,000,000 paid by the Germans towards the cost of the Army of Occupation. I do not know how that comes under the head of capital assets which have been sold by us.
The total for the three years is the enormous figure of £1,137,416,000—eleven hundred million pounds realised in one way or another, in the form of appropriations or in direct payments to the Exehequer from these war assets. None of that has gone in reduction of debt. It has all been treated as revenue and set off against the expenditure of the year. I stated before, and I say again, in this House that I do not think that any auditor in the City of London would pass a balance-sheet drawn up on those lines. It is a confusion—in my opinion a most unwarrantable confusion—of capital and revenue. In one way or another that £1,100,000,000 has gone without making any inroads upon the net burden of our national liabilities.
Parenthetically, I think it would be of interest if the Chancellor of the Exchequer could inform the House how he is dealing under the new conditions with the case of Ireland, both as regards revenue and as regards expenditure. I think some considerable allowance must have been made for the changed situation there, but I do not know—and I have not been able to discover from any of the accounts submitted to us—exactly what it is. I suppose he will be able to tell us. That is by way of parenthesis, but to revert for a moment to the question of Debt, I want to say two or three words about the character and quality of the Debt. It consists, as the House knows, of various categories, which are not mutually exclusive. There is External Debt and Internal Debt; there is what is called Funded Debt and Unfunded Debt, or it may be called Floating Debt in the strict sense of the word, and quickly maturing Debt, which is not quite the same thing. All these categories require to be carefully distinguished the one from the other, particularly as they have very different economic results upon the country and upon the world. I want, simply for the sake of elucidation, to ask the right hon. Gentleman, first of all, as regards the External Debt. I think he gave us the figure in the Budget and told us that practically it was ail held in America. I forget the precise figure, but it was a very large sum, depending, of course, on the rate of exchange. Now, I suppose, the capital figure is lower than it was when the right hon. Gentleman made his Budget statement.
And, of course it is very substantially lower than it was a year ago. I would like to know what he estimates it at now. I do not press him, because I do not think this is an opportune moment to do so, to tell us with any precision—or, indeed, if he does not think it expedient, to tell us at all—what arrangements are in contemplation, if any, between ourselves and the United States Government with regard to the future of this large sum. We read a great many things, and some very strange things, and some which I am sure are absolutely untrue, in the newspapers on this subject. We read strange things which I feel sure are the children of conjecture in the Press on this subject, and it might at any rate have a reassuring effect on public opinion if the right hon. Gentleman were to give us information with regard to that extremely important matter. It cannot be long delayed, and one would like to know if any progress has been made towards a settlement. The Floating Debt has been—and I am very glad of it, because I think it is a very inconvenient form of debt to take, especially when it reaches such gigantic dimensions as it has during the last few years—has been, happily, steadily diminishing. The Chancellor gave us a very satisfactory figure, but I should imagine, from all I hear, that there must have been a substantial further reduction in the Floating Debt since the Budget was introduced. The fact is that, with the new money conditions which now prevail in the City of London, with the Bank rate reduced to 3 per cent., the situation wears a very different aspect from what it did six months and still more 12 months ago.
I have spoken of another form of debt which it is desirable to keep separate—I mean the maturing debt, the debt which matures at early dates. The right hon. Gentleman will correct me if I am wrong, but that I think he estimated, taking the year 1924–25, at £620,000,000 odd. That figure, I presume, to-day remains the same. Of all these forms of indebtedness, those which it seems to be most desirable to deal with promptly are the Floating Debt, which is still at a very large figure, and the external debt to the United States of America. I think it is essential, not only to our own relations with other nations, but to the general economic development of Europe and the rest of the world, that this question of Allied indebtedness—and I am now speaking only of our own debt; I am not speaking of the indebtedness of other nations—this question of our indebtedness to America should be put on a stable and equitable foundation. There is no disposition in any section of opinion in this country to regard that debt as anything but a matter of solemn obligation. It was incurred at a time, partly through our own necessities, but very much more through the necessities of our Allies, when we were really acting as a conduit pipe to the extent of quite two-thirds of it, if not more.
We really were acting on behalf of the Allied Powers in Europe, and there was no other source of supply than the United States of America. The United States stepped into the breach and did what nobody else could have done, and thereby rendered priceless service to the Allied cause. Therefore, there can be no obligation which stands in a higher degree of sanctity than that.
At the same time, it is most desirable that this question should not be left simmering on month after month, and year after year, but should be put on a permanent foundation, and, above all— and I wish to say this very explicitly—whatever settlement is made, care should be taken, both in the interests of debtor and of creditor, to see that the mode of liquidation is one which is consistent with the freest possible interests of industry, and the interchange of wealth and of commodities between the two nations: and not of a nature to do equal harm to debtor and to creditor alike. That requires a great deal of careful statesmanship and prudent, economic foresight, and now that these European Conferences, for the time being, have come to an end, there is no matter which more urgently calls for the attention of the Government, and the best expert advice they can get. I thought it desirable to say that, because, although it does not technically affect the Budget, one way or other, still we cannot form any real, and intelligent. forecast of our own financial future, until this overshadowing cloud, or at any rate, until this unsettled liability, has been put, as I said before, upon a stable and rational foundation.
I think those are the only further criticisms I have to make at this, the last, stage of the Budget. I deeply regret, not only that we should be suspending all provision for the reduction of our capital liablities during the present year but, so far as I can forecast the future, the right hon. Gentleman, or anyone who may sit in his place, after the 31st March next year, will be in a still more unfavourable position. In other words, he will be, very probably, in a position in which he can neither remit taxation nor reduce Debt. In that I hope I am a false prophet, but, in the present state of the economic world, any prophecy has to be more or less in the nature of a gamble. The condition shifts so much from day to day, certainly from month to month, that nobody's powers of prevision are, or can pretend to be, infallible. Although, as I said at the beginning, the Chancellor of the Exchequer should have imagination, it is a wise thing to look at it both ways, and I deeply regret that, so far as my prevision goes, I can see no prospect, or very little prospect, of any substantial inroad being made into this colossal burden of debt, which, unless all experience be falsified in. the future, must be a hindrance to the economic recovery, not only of this country but of the whole world.
My right hon. Friend indicated, in opening his speech, that this is the last occasion, for the present year at all events, on which we shall have an opportunity of saying something on the financial position of the country, or the problems which this Bill raises. I propose to refer this morning, very briefly indeed, to two large questions, the first being the general position of the Income Tax law in this country, and the second the great burden of indebtedness to which the right hon. Gentleman has referred, the steps we have taken to reduce it, and the bearing of that upon industrial recovery in Great Britain. On the first point, I question very much whether the House quite realises, largely because of the lack of opportunity, the danger into which we are drifting as far as the British Income Tax is concerned. This matter was very carefully considered, in 1919, by a representative Royal Commission, and it is a perfectly accurate summary of the position to say that the Report of the Royal Commission may be divided into two parts, the first part involving considerable concessions to the taxpayers, and the second part suggesting administrative and other changes which would have imposed, undoubtedly, an extra burden upon other sections.
Taking the Finance Bills of 1920, 1921, and the present year, it is true to say that we have made considerable concessions in Income Tax to large sections of the British public. We have introduced a more generous scale of abatements. We have given concessions in other directions, and, although it is admitted that certain blemishes still remain to be removed, on the whole we have sacrificed in the past three years a considerable amount of revenue, which would probably have been collected if the Income Tax had remained in its former position. On the other hand, we have failed to put into application the recommendations of the Royal Commission on the Income Tax which would have altered the basis of assessment for certain sections in the community, and would also have prevented that considerable evasion of Income Tax which still takes place in this country. The House will remember that, on the administrative side, an attempt was made to incorporate many of the recommendations of the Royal Commission in the Revenue Bill of last year, but that Revenue Bill was eventually withdrawn, not so much because of widespread opposition to the scheme of the Bill as a whole, as to opposition which was concentrated on one or two proposals, which appeared to remove the protection which taxpayers enjoy as against the machinery of the Board of Inland Revenue, that protection being afforded by representative taxpayers in the capacity of Commissioners and others, who, presumably, would be inclined to take the taxpayers' view in any controversy which arose. That seems to me singularly unfortunate, and the problem is raised again in two forms in the Finance Bill we are now discussing. There is not the slightest doubt that a considerable amount of revenue is being allowed to escape which should properly come to the Treasury. I do not want to refer to-day, because it would be inappropriate, at any great length to the evasion of Income Tax which takes place, but, on the most moderate estimate, it is anything between £5,000,000 and £10,000,000 a year, and it may be anything between £10,000,000 and £20,000,000, according to the estimates of people who cannot be accused of exaggerating this problem.
Then, again, there is the very great difficulty of the present basis of assessing farmers in this country. The Finance Bill of the present year makes a concession in that it goes back to one time the annual valuation. But the Chancellor of the Exchequer knows that the Royal Commission unanimously recommended that farmers should be taxed, like all other sections of the community, on the basis of profits under Schedule D, and that conclusion was reached after very careful consideration of every argument that the agricultural community had put forward. These changes have not been introduced, and I think it is fair to urge this morning, in parting with the Finance Bill of the present year, that we have made some-concessions recommended by the Royal Commission at a cost to the Treasury-year by year, and we have failed to put into operation other recommendations which would have altered the basis of assessment, and which, I think, in many cases would have brought additional revenue to the State. It is not unfair to press these arguments, and for this reason, that they have a very considerable bearing upon the amount of the taxes which other people are called upon to contribute There is no doubt whatever that Income Tax for many people is higher to-day because of either bad assessment or the mischievous basis on which others are assessed, and because of the evasion which a certain section of the community continues to practice. We can, therefore, urge that elementary reform in common justice, to which, I think, a very large majority of Members will subscribe.
In the second place, we on these benches are very much interested in that part of the problem which was discussed by the right hon. Gentleman the Member for Paisley (Mr. Asquith) a few minutes ago, namely, the appalling burden of the indebtedness under which this country labours, and in the fact that on this occasion we have suspended our efforts in repayment. That debt, as we have been sharply reminded this morning, is rather more than E7,000,000,000, and the question which faces every Member of this House, wherever he sits, and which particularly faces every Labour representative keenly interested in industrial problems, is how best we are going to reduce the enormous volume of that indebtedness, and at the same time recover our overseas markets, and provide employment for the 1,500,000 still unemployed and the large number who have only partial occupation at the present time. We on these benches have always been twitted with the reply that, however strong we might make a case for an imposition on accumulated wealth, it was something which could not be attempted in this country because of the financial and economic disorganisation to which it would give rise. Before we leave the Finance Bill of the present year may I give one or two arguments on this point which will stand the test, I think, of economic experience in this and other lands.
Is it fair to suggest that the very wealthy classes in this country have escaped by comparison with the wealthy classes in other countries as regards the contribution they have been called upon to make to the enormous burden which the War has brought? What are the facts? In certain European countries which were, of course, profoundly affected by the War a levy on accumulated wealth is imposed. It is perfectly true that under most of the schemes which have been introduced it has been found necessary to give time for payment. I am not disposed this morning to deny as an essential financial fact that some of these schemes have, in the last resource, amounted not so much to an imposition on the accumulated wealth as a form of penal taxation for a certain period of time. But the fact remains that in those countries a definite effort has been made to impose upon the people who undeniably gained by the War some special and extra burden in order to contribute, not merely to the immediate needs of their country, but to the reduction of indebtedness which had fallen upon those lands. What has been the position of affairs in Great Britain?
Before my hon. Friend leaves the point with which he has been dealing, would he very kindly state what has been the result of these efforts to those countries which he alludes —each of the countries?
I cannot. I am afraid, give my hon. Friend exact details at the moment, but I say they lave brought a certain amount of revenue in some cases a substantial return: altheagh I am quite ready to concede that the return has fallen short of what their advocates expected. That is not denied. We have of course nothing to gain by denying facts in these matters. I was proceeding to ask, what was the position of affairs in this country? In many of the arguments which are put forward both here and outside hon. Members suggest that we have made a definite effort to attack these war gains in the Excess Profits Duty. We on these benches, while agreeing that something had been done to deal with the enormous gains which undoubtedly flowed into certain classes, have always made it perfectly clear that we never regarded the Excess Profits Duty as a sound fiscal device. In point of fact I have often said that a more mischievous form of taxation could hardly be introduced, because of the widespread evasion which was readily possible and because of the waste which it inevitably, or almost inevitably, led to in many businesses, and because of the undeniable unfairness of its incidence over the different classes of traders in the community. But it was put forward by the Government of the day. It has been so far defended by many people in this country as the attempt which we made to deal with war gains. What is the position? Immediately the artificial prosperity of the War passed away concessions ware introduced into Finance Bills providing for repayment: very heavy claims for repayment were lodged, and a very large proportion of the Excess Profits Duty which was collected has been repaid, or is in process of repayment, to the people who made the contribution.
Let us pass to the second stage of What is very often described, more narrowly, as war gains. It was not the Labour party after all, but the Government of the day, that appointed a Select Committee to consider this problem. After taking a good deal of expert and other evidence the Select Committee which sat upstairs pointed to an accumulation of £4,000,000,000 which could be described as war gains. I am, I think, correct in saying while there might have been certain differences of opinion amongst the officials and experts who gave evidence it was indicated that if the Government of the day was agreeable there was no administrative or practical difficulty in imposing some charge upon that undeniable accumulation as it then was.
Instead of taking that step, which seemed to many of us a matter of elementary justice to large numbers of the people who have made enormous sacrifices of material and even of a physical kind in this country, no action whatever was taken upon that report. It was put in the waste-paper basket, and I am bound to say that from my experience of the poorer working-class sections of the community there is nothing which has led to a greater feeling of irritation and a stronger sense of injustice than the action adopted by the Government of the day in connection with the Report of that Select Committee. Here we are considering again the Finance Bill with more than £7,000,000,000 of debt over our heads, and with an annual sum of between £350,000,000 and £400,000,000 to find for the service of the debt. This is nearly twice the total amount of the pre-War revenue of this country, and we have one and a half million of unemployed! Annual taxation has been raised from about £3 per head pre-War to about £21 per head of the present day. We have all these circumstances, unfortunately and I think it is not unfair to suggest that the prospects of the material reduction of that debt are not very rosy from at least the economic point of view. It may be true that the case for some capital imposition has been weakened by the grave industrial depression of recent years, but I wish to remind the House that on this proposition you are dealing not merely with something put forward by Labour Members and those sitting on these benches, but you are dealing with a problem which has been discussed by the most distinguished economists in this country, and we are arguing a course recommended by some men whose names are amongst the highest and most influential in economic circles in Great Britain. I was very much impressed by the conclusion reached by Mr. A. H. Gibson in that book of his in which he summarises the proceedings of the British Association on War-time finance between 1914 and 1921, and if any hon. Member will turn to that conclusion he will find that that summary amounts to this, that almost the greatest stain that remains upon our War-time finance is our failure to deal adequately with those who made enormous gains during the War period, and who, in my judgment, have escaped that fair contribution which they should have made in view of the appalling sacrifices which were falling upon so many other sections of the people.
I do not think any hon. Member will seek to divorce the large sum which we have to find as interest on the debt and the burden of taxation from the general problem of our industrial recovery. In this Bill the Chancellor of the Exchequer is undeniably taking risks, and it amounts simply to this, that he is saying to us, "I am going to suspend the provision made for the repayment of debt in order to reduce taxation immediately, to give some encouragement to the recovery of industry in the hope that, when that industry recovers in the near future and is in a position to make its contribution, we shall find our revenue healthily and steadily increasing, and then we shall be able to reduce those great burdens of indebtedness which we all have in mind." There is a great deal to recommend an argument of that kind, because it is quite true that you must allow the industries of this country to get on their feet again before they can pay anything at all.
When we have made that statement we are bound to look rather beyond these shores and ask ourselves whether the provision made in the Finance Bill we are now discussing will be sufficient. We have been confronted in the past with competition from two sides of the world. On the one hand there has been the great competition of the United States, and on the other hand the competition of the continent of Europe. I think it is a relevant consideration to take the financial problems which are raised in the United States and on the Continent of Europe, and ask how we stand in Great Britain under the Finance Bill which is now passing finally through the House of Commons. In the United States there is at the present moment the very strongest complaint about the great burden of taxation. They are faced with certain imposts under a shipping subsidy, and they have had to introduce a provision in the interests of those men who have served in the War, a Soldiers' Bonus Bill, the aim of which is to give to those men what they have lost in industrial earnings during their period of war service. They have drawn up all sorts of restrictions from which some of us imagined the United States was at least comparatively free One of their most distinguished authorities said the other day that in many of the agricultural States they are selling the farms in thousands in order to meet their obligations under the taxation which has been imposed. That is what is happening in the United States of America.
On the other hand we have the Continent of Europe more or less in a state of chaos, and there are in Central Europe those who were our most powerful competitors in pre-War times. Although we have had conference after conference and reports of economic experts and all sorts of proposals on international lines, and almost everything that could be done under the sun, the inevitable breakdown continues, and we have still this chaos, with its reaction in this country on unemployment and everything else. A short time ago some of us ventured to make the statement on the Finance Bill from this side of the House that unless we could arrive at some sound policy in Europe which was going to deal with reparations, and the rest of it, a German collapse would come just at the time when our industries were beginning to recover, and would actually throw us back. That is exactly what has happened at the present time, and I think it is a very important consideration before we allow this Finance Bill to go through.
There are certain pessimists in all parts of the House on British finance, and there are pessimists as well in the Labour ranks of this country. Our position is very grave indeed. A country like ours, with a burden of more than £7,000,000,000 debt, cannot be in any other than a grave financial position, but we have nothing to gain by the kind of arguments which are constantly used by in any people outside, and even inside, this House, who are inclined to say that we are living on our capital and imperilling our resources and taking steps the inevitable effect of which must be to impair British credit in the eyes of the world. I do not think that we have anything to gain by that kind of argument, and I would prefer to say our position is grave, and having said that let us do everything in our power to restore industry and commerce, but in that task let us be just to those sections of the community who have made the greatest sacrifice in the War, and are continuing to make it, and let us also ask ourselves whether we have taken all we might have taken from those who undeniably gained during the War experience through which this country and others passed.
I feel that the Chancellor of the Exchequer to-day, on the Third Beading of this Finance Bill, should be a proud person, because I believe this is the first country to reduce taxation. We all realise that it is necessary to reduce taxation, not only at the present time, but also in the future, as our industries cannot possibly stand such enormous taxation, even after the reduction made by this Finance Bill. I am not a pessimist, and I am sure the hon. Member for Central Edinburgh (Mr. W. Graham), with whom I agree in most of what he has said, is really not a pessimist as to the future. Anybody who looked into the national financial figures—and I fear many of us do not watch those figures closely enough —must appreciate the position we are in, and, although we may be interlaced with European finance, our credit, I consider, stands higher than any country in the world. Let me take the figures which were referred to by the right hon. Member for Paisley (Mr. Asquith) for the first three months of the year, 1922–23. In the Budget for this year, the revenue is estimated at £910,000,000. In the first three months, from 1st April to 30th June, we have already collected £195,000,000. The estimated decline in our revenue for the whole year, comparing 1921–22 with 1922–23, was £214,000,000, and actually for the first three months, from 1st April to 30th June, we have only a decline of £9,000,000. How is that made up? Our Customs are estimated for the whole year to show a reduction of £18,000,000. For these three months, they actually increase by £3,000,000. Take our Estate Duties. The Estimate for the whole year is a decline of £4,000,000. For the first three months of this year they are actually up £5,500,000. I daresay that may be attributable to the rise in the securities; if you take postal and telephones, comparing the first three months of this year with the first three months of last year, you find they show an increase of £3,000,000. There is a decrease in the Income Tax and Super-tax of £6,500,000 in the first three months, but the estimated decline for the whole year was £69,000,000. Surely that is satisfactory, with our stagnation of trade and even considering that we had £64,000,000 carried forward on 31st March, 1922.
The hon. Member for Central Edinburgh referred to the Excess Profits Duty. I believe that for the first three months the amount is a debit of £16,000,000. We have to collect £296,000,000 which is due to us, and, although there is a deficit of this amount, I cannot help thinking that it will be made up in the next nine months and that we shall exceed the estimate of £27,000,000. The hon. Member for Central Edinburgh spoke of the unfairness of the Excess Profits Duty. Perhaps it was unfair. But I wonder if he has looked at it from this point of view. To-day industry is wanting more capital and the repayment of the Excess Profits Duty in many cases which I know personally has helped industry.
Anybody who looks at the expenditure side must appreciate that enormous economies are being made. If you compare the three months of the present year, from 1st April to 30th June, with two years ago, you find a reduction of £200,000,000. It is a large sum. The estimated reduction in expenditure for the whole year is £169,000,000, and in the first three months of this year we have a reduction of £72,000,000. That is a large sum. Our fighting forces are down £25,000,000 in the three months. I do not know whether that is right or whether it is wrong. We must leave that to the experts. But, as long as we have security—we cannot trade without security—and we find that that security is safe and sound, we must agree to this reduction of the fighting forces so far as pounds, shillings and pence are concerned. The Civil Service for the three months is down £29,000,000. That is a large sum. I think further reductions could be made there, possibly larger than in the fighting forces.
What have we gained by cheap money? Nobody knows better than the Chancellor of the Exchequer. Last Friday we were borrowing at £1 18s. 4d. on Treasury Bills compared with £5 3s. 6d. on the corresponding Friday of last year. To-day the rate is probably down again; we all know the Bank Bate is three per cent., the cheapest rate anywhere in the world. The only rate that bears any comparison to our own Bank Rate is in Switzerland. Wherever else you go you find five, six, seven, and eight per cent. That is all helping our trade. Anybody who refers to the figures will find that the Floating Debt is down about £400,000,000 on the year. Treasury Bills, which are included in the Floating Debt, are down £350,000,000. What surprises one is that, in spite of the stagnation in trade, War Savings are up. War Savings subscriptions are about £27,000,000 in the three months and the encashment is only £6,000,000. That is an increase of £12,000,000 compared with a year ago.
The right hon. Member for Paisley referred to the National Debt. The National Debt is up in the last three months. On 31st March it was £7,708,000,000 and on 30th June it was £7,766,000,000. I wondered whether the party opposite would find that out. The right hon. Member for Paisley rather missed the opportunity of criticising the Chancellor of the Exchequer for the actual debt being up in the last three months. I congratulate the Chancellor on it being up. A question was asked on the 20th June as to the amount of short-dated bonds converted into long-dated securities. The amount was roughly £194,000,000 converted into £257,000,000, but the great point in that is that there is a saving in the interest to the country of nearly £500,000. It is a large amount. This shows the increase in the nominal amount of the National Debt and a saving in interest. There is one other point to which I should like to revert, mentioned by the right hon. Member for Paisley and other Members on previous occasions in dealing with this Budget. It is with regard to sugar. We all want a reduction in sugar, but has anyone looked into the actual figures? I cannot conceive how anyone who has looked into the visible supplies of sugar can wish for a reduction, because it is no use making a reduction unless it goes to the benefit of the consumer. In 1913 the world's visible supplies of sugar were 4,200.000 tons. In 1921 they were 2,800,000 tons, and in 1922 they were 2,500,000. I feel that a reduction in sugar would be a great mistake at the present time because it would not go to the actual consumer.
One other point about the European position. As I said before, I consider the credit of this country is better than that in any other part of the world. We dare not look at the Budgets of any European State. Only in to-day's paper you have the new Estimates of France. Those Estimates do not come out anywhere near the figure proposed, or which was estimated for in her Budget a few months ago. You have Italy, who estimated for a decrease in her figures for the Budget for this year of £52,000,000. The figures appeared this week showing that they had to revise their Estimate, and the figure is £65,000,000. Europe cannot live under this chaos. It is not conferences, although I am in favour of conferences that put these matters right. It can only be done by taxing the people in the proper and fair way, and by bringing about stability so that trade can revive to enable countries to balance their Budgets. If you have to deal with these countries in Europe it is no good endeavouring to deal with them unless they will help themselves and endeavour, domestically, to assist in the financial position in their country. Germany, Austria, Poland, or Russia are not worth considering on this present Budget. It is a feature which must be dealt with entirely separate from this. I again congratulate the Chancellor of the Exchequer on his figures and his Estimates. I feel that, with him, I have confidence, and that the permanent officials who help him are a great asset to this country. These permanent officials, no doubt, make the Estimates out with the assistance of the Chancellor, who introduces them to us, but anybody who compares these Estimates with the Estimates of other countries must be proud of this country, and must be proud of the credit of this country.
I beg to move to leave out the word "now," and, at the end of the Question, to add the words "upon this day three months."
After listening to the hon. Member for Ilford (Mr. Wise), I feel that we ought to see sprouting from the head of the Chancellor of the Exchequer opposite either a halo or an Earl's coronet, and I can assure him that either transformation will be equally welcome from this side of the House. It appears from the enormous increase in the return of the Death Duties that even millionaires are dying off to please him. It may be that for the first time they find they can afford to die, and that is, of course, one of those extra-economic results for which only a divinely-inspired Chancellor of the Exchequer could budget. I congratulate him, even if I cannot congratulate the millionaires. We on this side of the House opposed this Budget on the Second Reading, and I am afraid its passage through Committee and the Report stage has intensified our hostility to it and has amplified our reasons for moving its rejection. Our reasons were that the Budget is a rich man's Budget benefiting the rich at the expense of the poor, and that it is a Budget without that old financial virtue that for the last 70 years in times of peace has always been lived up to by previous Chancellors of the Exchequer. For the first time we are not paying off debt, and even in this we see the hand of high finance, over-persuading the natural reluctance and virtue of the Chancellor of the Exchequer. It has been high finance that has decided that this deflation of the currency must cease, and that inflation must take its place. Hence the Chancellor of the Exchequer has deliberately introduced the Budget which, while it balances this year, is intended to Budget for a deficit next year for the sufficient and sound reason that inflation is necessary in the interests of British trade.
So much has been said about that, that I do not propose to go into it now at any further length, but I do want to make quite clear that this Budget has got worse so far as our party is concerned in its passage through the House, and that from its inception to its close it has beer operated by Big Business. I daresay Members of the House know that in the Labour party itself there is an extreme wing which states that in view of the increasing purchase price, of money the interest on the National Debt should be reduced. To my mind the whole of that argument is based on a misapprehension of the terms and conditions on which the interest of the debt has been reduced in the past, and the debt converted; but the argument behind this desire for a reduction in the interest on the National Debt is that while the workers wages have come down and the interest from ordinary capital has come down, the interest on the National Debt remains the same, and the capital value of all money loaned to the Government has enormously increased in value. That is the basis of the movement, and while I am still old-fashioned enough to believe that when you have entered into a bargain you should stick to it—especially if you have to borrow more money hereafter —I cannot for the life of me understand, unless there has been some influence at work, why the Government in bringing in this Budget should deliberately go the other way to work, and increase the interest to be paid on the National Debt.
Let us understand where we are. When the greater part of these War Loans were borrowed, the Income Tax was 6s. in the £. The money was lent on the assumption that the Income Tax was 6s. in the £, with the risk of its going even higher. It was lent on certain terms, and I should be quite satisfied if we continued to pay the interest on those terms. But, in this Budget—I do not think it has been observed hitherto—we are deliberately adding ¼ per cent. to the interest we are paying on the whole of the National Debt, except such small portions as at present escape Income Tax owing to their being owned by small holders. The addition of that ¼per cent. means a present of £18,000,000 a year to the holders of War Stock, War Loan and National War Bonds. If we had stuck to the bargain, we should have been doing all that was right and necessary by the people who lent money to the State, and I do resent this departure on that side, particularly because it gives grounds for saying that, as the bargain has been changed on the one side, so it may hereafter be changed on the other. It was unnecessary, and, so far as that reduction in Income Tax is concerned, it does not benefit trade in any way. It goes straight from the pockets of the taxpayers into the pockets of the bondholders. How they spend their money is their own concern, but the taxpayer loses the £18,000,000 and the bondholders get the £18,000,000. How does that benefit trade? The whole idea that reducing the Income Tax, and thereby increasing the return to the bondholder, is going to improve the trade of the country is, to my mind, based entirely upon a fallacy. Let me pass from that to a few other illustrations of the way in which this Budget treats big business on the one side and the vast mass of the community —the consumers—on the other. Let me take the case of the ordinary shareholders in railways. As everyone knows, they have seen the value of their capital increased by about 60 per cent. on the average in the last eight months, since the passing of the Railways Act.
I really cannot go into the financial position of the railways, but I may point out that other people besides the railway shareholders had a bad time during the War and after, and no such provision has been made to put that right in their banking accounts. All unnoticed, apparently, by the public, the railway shareholders, under this Budget, are getting £2,500,000 a year by the remission of Corporation Profits Tax.
They have never been under it except when the Government introduced the Bill, and they very soon got out of it. They were exempted at the request of the right hon. Gentleman the Member for the City of London (Sir F. Banbury), because they could not pass the tax on. To compare some of the other remissions for which we have pressed on this side of the House, the allowance in respect of workmen's travelling expenses would have cost, according to the Government, not £18,000,000 or £2,500,000, but £150,000. It was refused. Then take the case of the daughter of a widowed mother. That exemption would have cost £75,000. It was rejected with tears on the other side, because they could not afford it. So in the case of the widower's daughter who is keeping house for her father after her mother has died. We asked that she should be put in the same position as the mother, at a cost to the Exchequer of £140,000. They could not afford it; but they can afford £2,500,000 for the railway shareholders and £18,000,000 for the bondholders.
Let me pass on to the farmers. The farmers—that is to say, nominally the farmers, but really in the long run the landowners—are to be allowed to pay Income Tax in a way that is not permitted to any other trader or producer in the country, their Income Tax being thereby reduced by £2,000,000 a year. Yet when we asked for 2d. off tea, which was to cost £2,750,000, it was quite impossible. After the farmers have got their £2,000,000, which will go gradually in increased rents paid to the landowners—after they have got their slice out of the pie—then we get the millionaires back again; and I am bound to say that the millionaires had the best time of it, even a better time than the farmers. They got £300,000 for their pleasure grounds. Amenity land-land which is not used productively, which is producing nothing that we want, which is, indeed, kept from production-is to have a special benefit in this Budget, and it is going to cost the rest of the taxpayers £300,000 a year. I think that when this was discussed we heard from the millionaires who had these pleasure grounds that it would be in the interests of the public to preserve them. But the public are not allowed in, and when we proposed that only those amenity lands—pleasure grounds and gardens—which were open to the public should be exempted from the tax, we were told that that was not in order. The farmers, the millionaires, the railway shareholders and the bondholders are all right; and when we asked for an exemption for the pensions of the widows of the men who were killed in the War, which would have cost £100,000 instead of £300,000 for the millionaire's gardens, we were told that it could not be met.
I am sorry to continue this deadly parallel, but it is right that the public should know the different way in which these two sets of people are treated. Another relief to big business given by this Budget, almost unseen by anyone except big business itself, was the £3,000,000 reduction in the Excess Profits Duty. The people who were due to pay Excess Profits Duty have benefited to the tune of £3,000,000 by the special Clause in this Bill exempting from the Duty people who passed their business on from father to son. They have done very well out of it. £3,000,000 has been given to them, and the allowance for the widowed mother, which would have cost £120,000, was rejected. There is some consolation that in the passage of the Budget one Amendment that we proposed was accepted. The club tax was reduced by one-half, at a cost to the country of £189,000;but the other interests gained a good deal more. The Super-tax dodgers got £400,000 cash down. I know they are not called Super-tax dodgers; they are called single-men companies, which have been formed in order that the single man might avoid Super-tax by borrowing the money from the company and declaring no dividend. It is the one point in this Budget which would really evoke animation in the House.
I must protest against that. I never took that line. My hope was only to protect the innocent, and the Chancellor of the Exchequer took that view. We were in favour of it. What we wanted to do was to help him hit the wicked. He will not do that, but we protected the innocent.
The protection of the innocent, as far as I can see, took the form of postponement for a year of the attempt to hit the wicked. We were told it cost £400,000. But that was not all the gift to the Super-tax dodgers. Besides that, all single men companies formed with this delectable object of evading Super-tax, between 1909, when Super-tax was invented, and 1914, when it became formidable, were exempted, so that we do not know how many have escaped for all time from the payment of Super-tax for these fraudulent companies.
I must withdraw the word "fraudulent." They were acting within the law. I hope the House will observe the fine distinction between the man who is acting within the law and the man who is prepared to get up and say he did it. It is one thing to act within the law and it is another thing to get out of paying your dues and leave someone else to pay them for you. It is apparently considered now that a good citizen has done all his duty in this way if he has avoided getting into prison, and they cannot all avoid that. Generally in England there is a rather higher standard of doing our duty by the intentions of Parliament than employing a clever solicitor or accountant in order to evade the law. The Super-tax dodgers get £400,000 cash down and an unknown amount by the postponement of the date from which these single men companies would get into trouble—[Interruption]—I know they are not all single. Many of them are married and the wives are partners in the companies. Sometimes the sons come in too if they are lucky enough to have sons. Besides these people who have got their squeeze, the royalty owners came in later on and took £50,000 out of the pool—not £50,000 cash down, but £50,000 a year for all time—a very substantial addition to the indebtedness of this country. You will observe that at the same time the wages of the workers, taken as a whole, more particularly the workers in the mines, the men who get the coal, have fallen by £500,000,000 a year. Just at the time when you have the very worst conditions for ordinary unskilled labour, you have a Budget provision that does everything on earth for the wealthy, and which makes a gift, out of £61,000,000 all told, of £5,500,000 in the reduction of the Tea Duty. There is 1d. off tea for the poor and 1s. off the Income Tax for the rich, and all these additional gifts to railway shareholders, farmers, millionaires, excess profiteers, Super-tax dodgers, and royalty owners.
There is one feature of this wonderful Budget that I should like to refer to more particularly, because it has also somewhat slipped the attention of the public. This Budget really ought to be described as the children's charter. It stabilises the position of what are called revocable trusts. I do not mean the children of common people, but the children of the well-to-do. They are really put for all time on a sounder foundation. In the old days, when a parent wanted to avoid Super-tax, and was lucky enough to have children, he transferred half of his capital to his children, and said, "That is their income and not mine, and it shall escape Super-tax," and at the same time he was able to revoke the trust when the daughter married the chauffeur. Now Lady Emmeline is able to many the chauffeur, the stern parent cannot stop it, and the trusts are irrevocable. If the father in Park Lane should be so ill-advised as to give independence to his children, under an irrevocable trust, ho will not be able to prevent them marrying whom they like. He will not be able to prevent them going to night clubs. They will be, in fact, independent, and, therefore, there should be a very large number of young people who ought to be very grateful to the Chancellor for this Budget. They are put in a position of independence instead of dependence, and that, no doubt, will secure a certain amount of approval from the electors of the future.
But what I want to emphasise is that, right through, the Chancellor of the Exchequer has given way to the rich, and he has not given way to the rich really simply because they are rich. To do him justice, he has given way to them—and all their arguments have shown it—because he believes that by making concessions to the wealthy he is able to improve trade. Eight through, he has tried to improve trade by remitting taxation on the well-to-do. That is the secret of the shilling off the Income Tax, the £3,000,000 for the excess profiteers and all the rest of it. He thinks that, by reducing the burden on the wealthy, trade will improve, and the argument which I believe is at the back of his mind was put even better and more clearly by the hon. Member for Moseley (Mr. A. Hopkinson) in Committee. The hon. Member took the severe economic line that taxation should be levied in such a way that the maximum amount would be saved by the individual and re-invested in business. He went so far as to say—I do not mean that he advocated it, because that would be unjust to him, but he showed that really Income Tax should not be graduated higher on the higher scales but higher on the lower scales. He said the more you exempt wealthy people from taxation the more those wealthy people will invest in business, so developing the trade and industry of the country, whereas exemption for poorer people means that they spend their money on cinemas instead of investing it in War bonds or industrial concerns. I think that is putting his argument quite fairly. He did not advocate it but said, if we want to save, that is the way taxation should be levied and graduated. That, I think, is the idea at the back of the Chancellor's mind. He knows instinctively that the best possible thing for trade is that there should be saving, that we should reduce our debts, that money should be cheap, and I congratulate him on getting his money cheap. NOW that the bank rate has come down. he will be able to get money, and industry can get money, at a fairly cheap rate. But he wants people to save in order that money may be cheap. The alternative before the community is whether you are going to leave it to the individual to save, and hope that he will save, without any certainty that he will not spend the money, as I shall, on a trip to Switzerland in the winter, or of leaving it to the State to save money by paying off Debt. The right hon. Gentleman sees that, so far as paying off Debt is concerned, his financial virtue has left him. He does not like to be a Chancellor of the Exchequer who ceases to pay off Debt, and he thinks that by increasing the opportunity for wealthy people to lay by money, he is putting the country in the same position that it would be in if he continued the honest course of paying off the Debt himself. We on these benches prefer that the State should lay by and pay off Debt, that the State should carry out the good old English middle-class virtue of paying off Debt, rather than leaving it to individuals, however wealthy, or bribing individuals by remission of taxation to do what the State ought to be doing itself. That seems to me to be the difference between us. We believe that the State should reduce its Debt, and that the example of the State in paying off Debt is worth more than any chance that rich individuals will invest their money.
This question of paying off the £7,300,000,000 is really a problem that the Chancellor of the Exchequer ought to be tackling to-day, not only in this country, but in every European and foreign country. The Chancellor of the Exchequer has ceased to inquire how he may pay off this Debt. Whereas three years ago his predecessor was devising schemes of paying off the whole Debt, I think, in 30 years, my right hon. Erend has ceased to attempt to pay off the Debt. When we suggest methods of paying off the Debt, by means of a capital levy or otherwise, we are ridiculed for interfering with those matters of high finance which we cannot possibly understand. There must be some way out, and when we hear the answer given to my hon. Friend the Member for Central Edinburgh (Mr. W. Graham) that the capitalist of this country has suffered as severely as the capitalists in other countries, we cannot help reflecting that the capitalist in this country has seen the value of his stock increasing. Since the rise in the gold standard he has seen his fixed securities rise by at least 33 per cent., while those capitalists here who lent money during the last few years have seen their capital restored very nearly to what it was before the War On the other hand, in every European country except Switzerland and Sweden. the capitalist has seen his capital slipping away like sand between his fingers. The franc has gone down to half its value, the mark has gone, the crown has gone the rouble has gone. In these countries where they have not followed the old-fashioned principle of making their income balance their expenditure, the capitalists have seen their wealth vanish. That is owing to the Chancellors of the Exchequer in those countries not making their income balance their expenditure, and being content not to pay off debt, but to increase their debt. That has been owing to their following an example which, I regret to say, is only too easy for a Chancellor of the Exchequer to follow, and which is very difficult to stop when once a Chancellor of the Exchequer has started upon that road. The capitalists in these foreign countries have lost their money, they are ruined, and when I am told that the capitalist in this country, who has seen his capital increase in value by at least 25 per cent., cannot possibly face a capital levy. I am inclined to say that, whatever the difficulties may be in other directions, the difficulty is not that we are not entitled to take a slice of that wealth in order to pay off debt.
Sir S. ROBERTS:
The hon. and gallant Member who has just addressed the House entirely forgets what is the duty of the Chancellor of the Exchequer. The duty of the Chancellor of the Exchequer is to defend his revenue, and if he is not successful in defending his revenue, then we shall be in a very poor way as a country. I do not wish to follow my hon. Friend in his review, but I should like to join with other hon. Members in congratulating the right hon. Gentleman on being successful in defending that system which he has thought fit to adopt. I have been presiding over a Standing Committee, and one hon. Member, in congratulating the Minister on getting his Bill through, said that it could be attributed largely to his genial manner and the pleasant way in which he was able to say "No." I congratulate my right hon. Friend on having been successful in getting his Budget through, by his geniality and his ability to say "No" in a pleasant way. I happen to be a banker, and I know that one of the qualifications of a bank manager, and a very important qualification, is to be able to say "No," in a genial and nice way, to customers who want advances. That is what my right hon. Friend has been doing.
I only rise to ask one serious question in connection with the Geddes Report. When that Committee were asked to take into consideration the question of reduction of expenditure, a circular letter was sent out from the Treasury to the Departments requesting economies with a view to reducing the supply services from £603,000,000 to £490,000,000, or about
20 per cent. The result of that circular was that the Departments volunteered reductions amounting to £75,000,000 only. I should like to know what course the Government propose to take in the future for the reduction of the expenditure of this country, because I am satisfied that until expenditure is further reduced taxation cannot be reduced. The Geddes Committee pointed out, very wisely, that it is no use depending upon the voluntary reductions by the Departments. They have been tried and found wanting. I want some assurance from the Chancellor of the Exchequer that in future the Treasury will lay down their own regulations as to expenditure by the Departments. It is no use leaving it to the voluntary action of the Departments. I would draw attention to an important paragraph in the Geddes Report, in which they say:
In many cases the reductions proposed by the Departments are automatic, due to the fall of prices and wages, or to windfalls or to the cessation of special expenditure on services arising out of the War. The reductions in Estimates shown in response to your circular are therefore by no means fully the result of the curtailment of activity, or of economical administration, and this point cannot be too clearly brought out.
That confirms exactly what I have said My right hon. Friends must lay down their own standards of what should be done. It would be a great relief to this House and to the country if they knew that during this year serious attempts are going to be made by my right hon. Friend to curtail expenditure. I believe that I saw a statement by the right hon. Gentleman that he had appointed two special Sub-committees of the Cabinet to take this matter into consideration. If ho would kindly explain in what way they are going to act it would be a great relief. My own view is that rationing in some form or other must take place. It can be done, and it is being done by local authorities, I know several large corporations which have been able to make big reductions in all departments, by simply saying, "we will give you so much money and you must make it do." It is on those lines that my right hon. Friend will find salvation, and if he would explain what steps the Government are going to take in this direction, I shall be greatly obliged.
The hon. Member for the Ecclesall Division (Sir S. Roberts) has referred to a most interesting point— the result of the famous Treasury circular of May last, which achieved a total economy of £75,000,000. I put two questions recently to find out how much of this reduction is due to a decrease in the demands of war services, and how much is due to the automatic decrease in war bonus. £60,000,000 of the reduction is due to decrease in war services, and £10,500,000 to the automatic reduction in the bonus, leaving a net reduction of £4,500,000 to the credit of the Departments in securing economy. These figures were given within the last few weeks, in an official reply, by the right hon. Gentleman, and there can be no doubt as to their accuracy. Therefore, I hope that when my hon. Friend's recommendation is acted upon, as I trust it will be, and the Treasury presses for further economy, they will not be economies of this kind, but will be a genuine reduction of expenditure.
Before touching on the very interesting question which my hon. Friend has raised, I would like to say one word upon the fascinating and very pressing subject-introduced by the hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood). That is the rival merits of paying off Debt and reducing taxation, situated as we are in peculiar circumstances at present. It must be, evident that the release of capital by the paying off of Debt is more likely to achieve a direct stimulus to trade than a remission of taxation. The paying off of Debt releases capital, which in all probability will be re-invested unless the bondholders who are paid back intend to spend their capital. It is more likely that they will invest their capital than invest their income, and thus if he pays off debt the capital thus released is more likely to be invested than the money saved by reducing Income Tax. Further, it is very doubtful to what extent a high Income Tax is a direct factor in the high cost of production. We are always informed that the incidence of Income Tax is of necessity a factor in raising the cost of production and impeding the trade of the country. If we admit that Income Tax is a cost of production, we also admit that the Income Tax is not paid out of normal profits but is handed on to the consumer. I am very doubtful if that is true in all cases, but if it is paid out of normal profits then evidently it is not a direct factor in raising the cost of production. It can far more justly be argued, on this basis, that indirect taxation is a powerful factor in raising the cost of production. For this reason. Indirect taxation must inevitably raise the cost of commodities, and wages are based largely on the cost of living. Consequently, when wages are high the cost of production must be increased, granted that the rate of production remains the same. I think that my hon. and gallant Friend on these grounds can summon a very great measure of reason to his aid when he argues, first, that for a real stimulus of trade, paying off a debt is more effective than remission of Income Tax, and second, that in the matter of cost of production, remission of indirect taxation is more likely to be effective than remission of direct taxation.
But one other factor has introduced itself into this question: that is the psychological factor. It is, and always will be, true that men will not take great risks in the promotion of enterprises, they will not devote their energy, vigour, and special capacity to the amassing of wealth unless they are allowed to enjoy very considerable fruits from the result of their action. They will not exert themselves, and they will not labour if the results of their efforts are expropriated by the tax-gatherer. To that extent, in a psychological manner alone, the remission of direct taxation acts as a direct stimulus to trade, and the light hon. Gentleman would, perhaps, be better advised to base his case for the remission of direct taxation purely upon these psychological grounds rather than on the economic grounds which he usually selects, and which cannot be so adequately defended from the assaults of my hon. and gallant Friend the Member for Newcastle-under-Lyme.
Reinforcing the question advanced by my hon. Friend the Member for the Ecclesall Division, I would ask, what hopes of effecting economies during the present year present themselves to the right hon. Gentleman The House will be well aware that during the progress of the last financial year the right hon. Gentleman effected a total economy of £69,000,000 on the Estimate for the current year. He had to effect that economy because his revenue had declined by no less than £91,000,000 below the Estimate. If he had not effected the economy of £69,000,0000 he would have been faced with an actual deficit of something over £20,000,000, and so last year an automatic rationing was imposed on the Government through the fact that the revenue had declined. He had either to economise or be faced with a deficit. It is better, of course, to ration in advance than to ration in a panic in the middle of the year when you find that your revenue expectations will not be fulfilled. But it is better to ration in such moments than not to ration at all.
I would ask the right hon. Gentleman whether, since the introduction of the Budget, he has conceived any economy which may be effected on the present Estimate during the progress of the current year, not the sort of economy effected by the Treasury Circular, not an automatic decrease of £70,500,000 and a genuine economy of only £4,500,000, but a genuine saving by the cutting of surplus expenditure? Surely the necessity for such further economy must be borne in upon the right hon. Gentleman's mind by the alteration for the worse in the European situation and consequently in the trade position of this country, which has come about since the introduction of his Budget. That Budget depended largely upon the prospects of a great trade revival. Since the occasion of his Budget speech those prospects have deteriorated very considerably. The complete collapse of the mark, the prospect of a universal depression of trade and of chaos in financial conditions throughout the European Continent, must have their bearings upon the trade position, and consequently upon the financial position of this country. Any hopes of windfalls from German reparations appear finally to have vanished. Further, the reflex of this financial condition in the centre of Europe upon the trade conditions in this country must go far to militate against the right hon. Gentleman's hopes of securing arrears of Excess Profits Duty and other taxation which was expected to accrue during the present financial year. In addition, I have always felt that the right hon. Gentleman was on rather weak ground in imagining that the first effects of European and world recovery would, of necessity, have benefited the financial position of this country.
It is, of course, obvious to any tyro in economics that the ultimate effects of the recovery must immensely benefit this nation, and that in fact we are entirely dependent on such a prospect for any hope in the future financial position of this country. But we are now faced with the consideration only of the present situation. I have long entertained the seemingly fantastic belief that the first effect of this recovery would be, not to improve the trade and financial position of this country, but further to depress it. And for this reason. This country is dependent upon export trade in manufactured articles. We deal very little in the export of raw material. Obviously, the first effect of European and world recovery will be to intensify the competition in an equally restricted market. The market for manufactured articles will not extend for a very long time to come, but the competition in this restricted market will be intensified through the gradual improvement of the position of other countries which are competing with us in the same sphere. For a long time to come the market will be extended only in the realm of raw material and machinery, and in the latter category-only, the export of machinery, will this country benefit.
This rather strange theory is entirely supported by recent figures of a very interesting kind. We find, for instance, that during the first six months of this year, compared with the first six months of last year, our exports of manufactured products declined from £319,000,000 odd to £281,000,000. That is a decrease of some £37,000,000, or 12 per cent., compared with last year. When we turn to the sphere of raw materials we find an increase. Last year we exported, in the first six months, only £24,500,000 value of raw material. This year during the six months we exported over £46,000,000 value. That is an increase of over £21,000,000 value, a very largo increase indeed. I submit that those figures exactly bear out my conception of the first effects of European recovery upon British trade. The first effects must be further to depress our export trade in manufactured articles, and to create a demand only for raw materials and machinery. That view is borne out by these figures, and by the additional proof supplied by the signs of revival in our steel and mechanical trades. The demand is for raw material and for capital in the form of machinery and plant. It is in the latter category only that British trade will benefit during the next year or two from the prospects of a European and world revival of trade.
We alone of European countries had our industry organised to supply the wide demand which followed the War period, when the world was mortgaging the future in an orgy of immediate buying. Consequently, we benefited in that period more than any other country. But now we must face the fact that other competitors are gradually returning to the fray, that our market is equally restricted, that competition is intensified, and that for some time to come recovery of trade will not benefit in any great degree the fortunes of this country. Therefore, I urge upon the Chancellor of the Exchequer, in face of the prospect of a prolonged depression and only a slow and gradual recovery, that he should at once devote his energy to the securing of yet further economies, which can be effected only through the plan adumbrated by the hon. Member for Ecclesall (Sir S. Roberts), namely, the definite rationing of national expenditure well within the limits of the national revenue.
I fully realise with others the difficult position in which the Chancellor of the Exchequer has been placed with regard to finance. I also realise that when he gave us concessions on Income Tax and on the Tea Duly we could not hope to get from him any further concession of substantial value. All I have risen for is to ask him in future carefully to remember the very serious plight in which local authorities are, because of the increasing burden they have to bear for the maintenance of roads and things of that sort. That is specially the case with the rural authorities, many of which contemplate the future with very great misgiving. I would urge that between now and next year the Chancellor of the Exchequer should consider whether it is not possible to make some readjustment of these burdens, as between the Imperial Exchequer and the local authorities. We have only to realise the national use which is made of the roads now, compared with a few years ago, to realise the increasing necessity of looking at the matter from the point of view of a readjustment of the burdens. Speaking on behalf of agriculture especially, I would ask my right hon. Friend's attention to this matter. In the course of the proceedings on this Budget hon. Members supporting the Government have had in several Divisions to vote in a way in which had they been free they would not have voted. On the question of the Beer Duty, I ask the. Chancellor to bear in mind the great burden which it-inflicts and again, I speak especially for the rural districts. The agricultural labourer is suffering from wages difficulties owing to the decreased value of produce, and it is very hard for him to get that which he is entitled to, namely, a reasonable amount of beer during the weeks of summer and at any other time he may require. The increase from 7s. 6d. to 100s. per barrel is one of the biggest increases in proportion that has taken place in any kind of taxation as a result of the War. I know the Chancellor cannot do anything this year, but I ask him to give the assurance that this will be one of the first matters to engage his attention if he still holds his present office at this time next year. He should do something to compensate for what was a very widespread disappointment among—if I may use the expression—the beer-drinking community of this country. I had hoped that some arrangement might have been possible for a reduction of the charges during the summer months or something of that sort which would have lessened the loss to the Exchequer and brought it below the /22,000,000 which we are told a remission of 32s. a barrel would cause. However, the Chancellor has made up his mind that nothing can be done this year, and I am only asking that next year he will take into consideration the serious burden which is imposed on the poorer classes of our people, and especially on the agricultural labourer with his reduced wages. I hope they will get the first consideration next year. As the Chancellor knows perfectly well, we have all been pressed very strongly to support this reduction, and we did not many of us support it, because we realised it was impossible this year. Now we ask for an assurance that something will be done next year.
I wish to urge upon the Chancellor a point which I have raised in questions. I think there is a means whereby he can secure somewhere near £1,000,000 for the Treasury and at the same time become a public benefactor. In the course of these Debates not much has been said respecting the question of beer, and it is to that subject I wish to address myself. In the Metropolitan area, in particular, there is a common practice of serving beer in glasses of four-fifths measure. I suggest that the Chancellor of the Exchequer, through the Board of Trade or through some other means, should bring about a reversion to the old practice of only using standard measures. In that way he will bring in a large sum to the Exchequer and he will also give an immense amount of satisfaction to millions of beer drinkers in the country. This question is about a thousand years old. Long ago, St. Dunstan instituted the practice of driving pegs into the drinking horns, and no man was supposed to drink below his peg. The mischief to-day, at least around London, is that very often when a man calls for a glass of beer, instead of getting what he is paying for, which is a half pint, he gets short measure and short measure is also applied in the case of spirits.
That is one complaint, and there is another, in regard to which a reversion of the Chancellor's present policy is called for. I believe it is now true to say that the better the beer brewed, the higher the taxation. Why not reverse that, and tax the bad beer more heavily and lighten the tax on the good beer. In that way again, the Chancellor could prove himself a double benefactor. Just as the memory of St. Dunstan has come down to us from 1,000 years ago, so another memory might be created which would last for 1,000 years from now, and the present Chancellor might be honoured by all beer drinkers, as having been one of the great benefactors, not only to the people of his own time, but to following generations. These are matters of real interest. Men are paying to-day for five barrels of beer, where they only drink four. They are paying taxation on five barrels and only consuming four. The greater part of the price of the beer to-day is really for taxation and not for beer, and the beer itself is of very poor quality. The Chancellor and the Board of Trade should take the matter up seriously, and ensure that when a man calls for a half-pint of beer, he shall not be robbed by the brewer or the publican, but that they shall be called upon to fill up their tankards with standard measure. In that way the Chancellor of the Exchequer will gain, there will be a better temper among the people, and justice will be done all round.
I wish to put on record a slightly different view-point on the question of the remission of taxation and the reduction of Debt, to that which has been indicated in some of the previous speeches. The hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) expressed the view very strongly that the Chancellor would have assisted industry more had he gone directly for a reduction of Debt rather than a remission of taxation. It is because I believe the Chancellor of the Exchequer adopted an entirely different view to that, that I so strongly believe in the right hon. Gentleman's policy. Many of us would never have voted for any relaxation in the efforts of the Exchequer to reduce Debt, if we did not regard this as a purely temporary and emergency measure. The Chancellor was faced with an emergency, almost as critical as that which faced the Chancellor of the Exchequer during the War. He was faced with unemployment figures of almost 2,000,000 men, and I am convinced it was the colossal unemployment figure, and that alone, which induced him temporarily, and I am sure it is only temporarily, to relax his efforts for the reduction of Debt. I wish to put the view-point of the soldier in this matter, and it is a view-point which is not put forward with nearly sufficient energy by our public men. The soldier did not fight a selfish battle. He fought for posterity. He is perfectly prepared to recognise that we in this generation will never get clear of the immediate results of the War. He would adopt this view, that as he fought unselfishly, and fought for posterity, so he would like to see the civil population prepared to bear some similar burden, and that having fought the fight of which this debt is the result, they should assist him to clear up the mess. If I thought for one moment that the Chancellor of the Exchequer—and I do not think so—had any sympathy with that selfish section of the population which said they would not aid in clearing up the mess, I would not dream of voting for him, but I am convinced that the effort will be made, and made in a determined manner, the moment this temporary emergency has passed to clear this vast burden away —I hope within the lifetime of one generation.
My hon. friend the Member for Wallsend (Mr. Simm) raised the very fascinating subject of beer, and I would like to pursue it. A great deal of disappointment has been felt from the fact that no remission of the Beer Duty has been made. The desire expressed was for a penny off the pint, which would have meant a very considerable sum indeed, running past £20,000,000. Nobody who asked for that amount ever really hoped to get it, but I think there was a real expectation that something might have been done in the way of an arrangement between the Government and the brewers by which the Government would have taken off ½d. a pint and the brewers would have done the rest, so that a penny a pint would have been achieved. That point was dealt with by the Chancellor in a very astonishing way. He said, in effect, "I understand this desire, I know what has been suggested, I have been to the brewers, and we have discussed this question. but nothing can he done along the lines suggested. It is not possibile for any arrangement by which we may make a remission of tax and by which they may make a remission of price and so secure the desirable end of getting beer a penny a pint cheaper." What was remarkable was that the Chancellor of the Exchequer, in describing his position and his qualification for dealing with the experts whom he had to meet, represented himself as being really unequally matched. There were the brewers on one side, who had all the knowledge which pertains to the active pursuit of their business, and there was he on the other side without any such knowledge. I do not remember his exact words, but they were certainly to the effect that he did not know anything about the costs and was not therefore in a position to meet them on equal grounds.
I want to comment on that, because I think it is a very surprising admission from the Chancellor of the Exchequer. It seems to show—what, of course, we have all known all along—that there is a very great lack of co-ordination between the various Departments of the Govern- ment, because I believe that almost at the time when he was making this statement there was seated beside him a Minister who a year ago was promoted to the position of being chief brewer to the Government. It was nearly a year ago, I think, that we passed the Licensing Act, under which we put an end to the Central Control Board, and put the whole of the operations of the State-managed scheme in the Carlisle district under the Home Secretary, and we charged him, as part of his duty, to keep accounts under the direction of the Treasury—that is to say, under the direction of the Chancellor himself. It is an amazing thing that, a year after that, the Chancellor should come forward and tell the House that he was not equipped with the necessary information that would have put him really upon an equal footing with the brewers. If there be anybody who ought to know what the costs of brewing are, it is the right hon. Gentleman opposite, because the Home Secretary, under his direction, is engaged in that industry to a very largo extent, and if there were anybody who at such a conference ought to have been able really to test the value of the assertions of the brewers, it should have been the Chancellor. I think the attitude of the Government in regard to the Beer Duty is one of great mystery.
A number of Members of this House have been endeavouring from time to time to find out from the Home Secretary what really were the costs of the manufacture of beer, and have been pressing the Government to disclose their information in regard to the profits on beer, but every attempt of that kind has been met almost with a blank refusal. Inquiries have been refused, and even when inquiries have been made, the results of the reports have been refused, and we now find this extraordinary thing, that apparently the results of these inquiries have been denied, not only to Members of the House, but to the Chancellor himself, and while the House has been left in ignorance, and not able to judge as to the value of the assertion that it is impossible for the brewers to bring down their prices, the Chancellor himself has been in no better position. When he went to this conference on this very important question, on a matter which was concerning a very large part of the population of this country, he went unprovided with the material that should have been at his disposal in order to enable him to judge of the value of the statements put before him, and I think that is a very grave reflection on the Government and on the co-ordination between the various Departments of that august body.
Passing from that, and coming to a question more intimately connected with the Finance Bill on its Third Reading, I think we are here taking part in the third act of a play which is very largely devoid of the qualities of human sympathy and imagination. I do not mean to suggest that the author of the play is himself devoid of those qualities. Nobody could maintain that thesis in his presence, as I think the Chancellor of the Exchequer is an outstanding example of the fact that a man may have the most admirable private qualities and the most detestable public qualities. The curtain rang up on his Budget statement, but, as is customary with most plays, before the curtain rang up there was some evidence of confusion on the stage behind the curtain. We heard some scuffling going on, and, if common report be true, there was a struggle taking place between the Chancellor of the Exchequer and the Postmaster-General.
We were certainly led to the conclusion that the Postmaster-General was trying to hang on to his surplus for the purpose of bringing down the charges in his Department and that the Chancellor was endeavouring to get it for use in another way, but the Chancellor now disclaims that, and, of course, I accept it. I think, however, something-else must have gone on and that the Chancellor of the Exchequer must have received, prior to his Budget statement, a deputation of distressed dukes, who represented to him that unless he did something for them in the matter of the taxation of their park lands, they would be obliged either to shut down their castles or else just to live in one corner as a kind of glorified caretaker, because, when the Budget did come to be pre- sented, one of the features of it was the concession that was made to the owners of these park lands. That all went on before the curtain rose and is probably a matter of speculation. The outstanding feature of the play itself is the fact that this Budget discards a doctrine of taxation which has been, I think, accepted in the past by all parties, and that is the doctrine of direct and indirect taxation. In the past we have always assumed that there was a difference between those two things and that the one ought to bear some relationship to the other, but apparently that has all gone to the winds. I do not know that the Chancellor of the Exchequer has explicitly discarded it, but certainly the Financial Secretary to the Treasury, in one of the Chancellor's absences, relegated it to the limbo of obsolete economic theories.
As far as I can gather, in its place a new doctrine has been established, and that is the doctrine of direct and indirect benefits. As I understand it, it is this, that, if you take taxes off commodities, you are giving a direct benefit to the consumer of those commodities, but if you reduce direct taxation, then you are giving an indirect benefit to them, so that, whether you reduce direct or indirect taxation, you are giving a benefit to the general mass of the people. That is the theory upon which this Budget is based. It does not matter whether you take taxes off beer, tea, or sugar, or whether you reduce the Income Tax—in any event the general mass of the people benefits. In one case the benefit is direct, and in the other case it is indirect, and the theory of the Chancellor of the Exchequer is, apparently, that the indirect benefit is the best, so that, I suppose, democratic Budgets in the future will be based upon the theory of increasing indirect taxation and compensating for it by giving this indirect benefit to the people of this country by reducing direct taxation. I must confess that I think the people of this country prefer to get their benefit directly, and not indirectly, and that they would rather sec something coming off tea, beer, and sugar than visualise it coming to them through the indirect channels of a remission of Income Tax given to other people. At all events, the theory which I have stated is the theory upon which this Budget is based, I that the best thing for the country is to reduce direct taxation, on the ground, as far as I can understand it from the arguments adduced, that by so doing you assist in developing industry.
The theory, apparently, was that there was not enough money in the country to employ for capital purposes in the development of industry, and, therefore, it was necessary to reduce direct taxation, and leave more money in the pockets of those who would benefit by that reduction, so that people might employ it in the development of industry. On that theory, I think we have got an extraordinary comment in the fact that this day, when we are engaged in the Third Reading of the Finance Bill, the Bank Rate is down to three per cent., and depositors in the country can only get one per cent. on the money they have deposited in the banks. That does not seem to indicate that there is any shortage of money available for industrial development. The fact that the Bank Rate is reduced looks as though more money were coming in than going out, that they are offering an inducement to people to borrow money, and are placing an obstacle in the way of people depositing money. It looks to me as if the whole theory that it was necessary to give away £30,000,000 odd of Income Tax has been very badly damaged, and that, so far from that money being required for the development of industry, there were ample sums available. Some of us on this side think that the best way to get industry going at the present time is not to increase the saving power of the people, but to increase their spending of money. It is really the money spent week by week by the working classes of this country that is best at this time. However, the Chancellor of the Exchequer came to another conclusion. He had some £38,000,000 to get rid of—the happiest position, I suppose, a Chancellor of the Exchequer has been in during the last seven years. He stood at the Treasury Box with £38,000,000 to dispose of, and, all around him hungry applicants. He decided, of that £38,000,000, to give £32,500,000 to the Income Tax payers, and some £5,000,000 to those who would benefit by a remission of indirect taxation. Some 87 per cent. of his relief went to the Income Tax payers, and some 13 per cent. to those whose incomes were not sufficient to bring them under that charge.
The principle was established that that was the best thing to do, and I want to look for a moment or two at some of the results, leaving out the question of whether the right hon. Gentleman should have taken that course or not. He decided to make a remission of Income Tax, and he decided to make it by a flat rate reduction. What was the first effect of his decision? It was this. There are about 5,346,000 incomes of £130 a year and over. The first effect of his decision was to exclude over 4,000,000 of those from any relief whatever. Here we have 5,000,000 people who might have had some relief from the Chancellor. He pushes aside over 4,000,000 at once. "NO relief for you," he says. Seventy-six per cent. of the people of this country with an income of £130 and over were not to get anything at all out of his £38,000,000. He was going to concentrate the whole of his benevolence upon those who were left—some 24 per cent. of persons whose incomes were brought under review. That was the first effect. He brushed aside 76 per cent. who might have had relief, and who most needed it. Then he proceeded to make a flat rate reduction. There have been evolved, from time to time, certain plans of taxation. One, I have always understood to be that when you are imposing taxes, you should put those taxes upon the strongest shoulders. That was a canon which, I thought, was accepted by all parties. I should have thought that the converse of that would have been, that when you were remitting taxation, you should begin by taking it off the weakest shoulders—that you should remove the burden from those least able to bear it. But the application of the right hon. Gentleman's flat rate reduction has produced the most fantastic results.
A White Paper was issued—Command Paper 1652, of 1922–a very interesting paper, well worth studying, and that Paper shows what has been the result of the application of this flat rate reduction. It appears that the single person gets a benefit over the married person. That is the first effect of the flat rate. The single person, with fewer responsibilities and fewer burdens, get* the largest remission, and the married person without children gets a larger remission than the married person with children. Further still, the effect of the remission is that persons whose incomes are all un- earned, get a larger reduction than persons whose incomes are earned. So that really the principle on which the Chancellor of the Exchequer is proceeding in this state of dire necessity, when the heavy burdens are felt by all, is that he is giving the largest measure of relief to the single person with an unearned income. The right hon. Gentleman seems to be utterly reversing the whole principle upon which taxation has been based in the past. Those who have most get most under this present Budget. What really must have influenced the Chancellor of the Exchequer is that he wanted to avoid, if possible, being confused with what they were doing in Poplar. He wanted the scale of relief there reversed in his own dealings. In Poplar those who needed most got most. In the case of the Chancellor, he gives most to those who have most. In the case of the people coming before the Poplar Guardians for relief, the single person gets the least. With the Chancellor of the Exchequer the single person gets the most. In the case of the Poplar Board of Guardians, a body which has been so much abused, the person with one child is not so well treated as the person with three. The Chancellor reverses this process. He prefers the person with one child and gives him the most. and the person with three children gets the least.
It is not altogether out of idle curiosity that I have looked at the Chancellor's scale of relief set up in the White Paper. I find, according to the methods in which he has applied it, if you have £150 a year, you get 7s. 6d. relief. If you have £150,000 a year you got relief of £7,400 odd. Between these two extremes the scale varies. I prefer the Poplar method to the method of the Chancellor. The Chancellor concluded that the best form of remission was the remission of Income Tax in the form of a mechanical reduction—a flat rate reduction of 1s. in the pound irrespective of the size of income. Seriously, it did not require a Chancellor of the Exchequer of the acknowledged ability and capacity of the right hon. Gentleman to adopt a method of this sort. It might have been done by an automatic machine. What ought to have been done was, after he had made up his mind as to the possible amount to be given in relief to the Income Tax payers, was to look at the condition of those taxpayers. They were not altogether absent from his mind, because in his review of the situation in his opening speech on the Budget, he told us that unemployment was widespread, that it was breaking hearts and embittering the lives of hundreds and thousands of our workpeople, and he went on further to say, that the professional and middle classes were, to-day, enduring privations such as they had never before had to face. But he has not dealt with these conditions adequately by merely giving this flat-rate reduction. The general sense of justice is not satisfied with the remission that has produced the inequalities to which I have referred between a man with an income of hundreds of thousands and a man with an income of a few hundreds. It would have been more equitable if the Chancellor had made up his mind, when he was giving £30,000,000 back to the people paying Income Tax, that instead of giving it back at the rate of 1s. in the £ on all incomes, a fairer and equitable way would have been to have given a larger rate of reduction on incomes of such moderate dimensions as those of the professional middle classes, incomes of from £500 to £1,500. This is the question: whether the remission of Income Tax ought not to have absorbed the whole benefit he had to give: that is the real criticism of this Budget! The effect of it is to give large sums of money to people who can do nothing more with it than merely invest it, and the evidence to-day shows that the money which is available for investment is very much more than needed. If the money the Chancellor has at his disposal had been given to the general body of people in the shape of the remission of indirect taxation, or given to the people of moderate incomes in the middle classes who, he himself admits, are in a state of privation such as they never were in before, it would have been very much more in a way of financial and economic correctitude.
May I confess myself at once as a confirmed and incorrigible believer in the doctrine as to the indirect benefit from the remission of direct taxation which has been so emphatically condemned by the hon. and gallant Gentleman who has just sat down. He may be interested to know that that doctrine has been used by me in defence of the Budget on several occasions during the last few weeks. But I have not risen with a view to entering into what might prove to be a somewhat unprofitable review of fiscal theory, unprofitable, at all events, on a Third Reading, but simply to endorse in a few words the plea put forward by my hon. Friend the Member for Faversham (Lieut.-Colonel Wheler) to the Chancellor of the Exchequer in regard to the Beer Duty. I may fairly press this matter upon the Chancellor, because I have strongly supported him in his refusal to reduce the Beer Duty, and I have supported him from conviction. I believe that the greater advantage to the working classes will ultimately result from a relief in direct taxation than would have arisen or been derived from a reduction of the Beer Duty. The matter has been brought to my notice by a number of my constituents, but I think I have satisfied most of them that it was to their advantage, to the advantage of the greater number at all events, that this year the Beer Duty should remain at its present rate. But I have ventured—and I think I have shown some courage in doing so—in promising those who have written to me that next year they might be sure that the reduction they ask for now would be given. [Laughter.] Yes, of course, a private Member can undertake a promise which no Chancellor of the Exchequer would think of giving! I put it to the Chancellor that, although on this occasion I have felt it my duty to support him, I am one of a great number who a year hence may be very doubtful as to whether we can support him in continuing the Beer Duty at its present rate. I press this point upon my right hon. Friend as one who has supported him from conviction, and I hope that between now and then he will realise the fairness of giving relief in this particular direction.
During the Debates on this Measure the whole field has been well covered, and there is very little fresh to say. I want, however, to emphasise one or two of the points which have been raised. The hon. and gallant Gentleman who has just sat down made a reference to the Beer Duty and suggested that at some future date there should be a modification of that duty. With very great trepidation I venture to say that I am not at all convinced as to this course by the agitation which has been set up, which has been largely engineered by the brewing trade. The actual sax levelled on a barrel of beer, after alt, permits the brewers to gain a great profit by watering down the stuff and serving it at a much lower gravity than they are supposed to supply it.
The proper gravity is 1057, and even under these conditions the working man pays pretty heavily and provides great profits for the brewers For beer at 5d. per pint the gravity sold is 1030°, and at 6d. it varies between 1033° and 1036°. Therefore the whole talk of a tax of £5 per barrel on beer is utter moonshine, the actual amount paid is about 23s. 6d. when one has regard to the quality of the stuff which is being sold to the public. Therefore any reduction in the Beer Duty is not going to benefit the consumer, but it will simply put more money into the pockets of the brewers if it is continued in this way unless some stand is made against is by the Chancellor of Exchequer whereby he ran ensure that the proper gravity of the beer is supplied to the consumer. In this respect, one feels that the whole agitation is a fictitious one and has simply been used as a stalking horse to raise the cry of the beer being taxed so heavily.
We cannot emphasise too much what has been called the deadly parallel. All through, the Chancellor of the Exchequer has been adamant in regard to all the pleas for relief from taxation put forward on behalf of the poorer members of the community who are suffering at the present time very much from unemployment and the high cost of living. Every attempt has been made to obtain reductions of indirect taxation, and every time our efforts have been resisted whole-heartedly by the Chancellor of the Exchequer. Nevertheless, the right hon. Gentleman has again and again yielded to vested interests, and he has made to them pretty considerable concessions. Only quite recently the right hon. Gentleman made a most astounding concession of £500,000 a year to the royalty owners of this country.
I do not know where my hon. Friend gets his figure of £500,000, because the amount is nothing like it. The proper figure is £15.000 this year and £50,000 next year.
But even if the amount is only £50,000, it is a great injustice when it is; given to people who do not render any service to the community, and this at a time when the miners are suffering considerable reductions in wages. Surely this is not a time when such concessions ought to be made. This is a matter which we shall not fail to bring prominently before the electors, because it will be one of the things to show how in reality this is a, rich man's Budget. We find now that the mass of the people are in a bad state economically, and have been got down to a position almost of subjection. Apparently the Government think they can do as they like now, and impose even greater burdens upon these people.
The Income Tax dodgers are another instance of the great concern that is being shown towards these people who ought to be bearing their fair share of after-War taxation. Instead of looking after these people the Government are imposing fresh burdens upon the poor sections of the community. I have the unique experience of actually living right in the heart of a slum district, and therefore I know from first hand experience the burdens which are being borne by the poor people. I am well aware how more and more it is becoming increasingly difficult to drag out a bare existence from day to day. Trifling as the remission of taxation on tea and sugar which we ask for would be, it would have made an immense amount of difference to those who are now compelled to live on unemployment benefit and relief from the guardians. All these things have been turned down by the Chancellor of the Exchequer. The hon. Member for Ecclesall (Sir S. Roberts) said that the chief duty of the Chancellor of the Exchequer was to defend the Revenue. There is no doubt about that, but this depends upon what line you adopt. The Chancellor of the Exchequer has been defending his Budget all along by refusing concessions to the masses of the people, whilst he has willingly yielded to the demands made on behalf of those with big fortunes and big interests.
It has been said that the majority in this House are largely representative of the people directly concerned in big businesses, and, as a recent writer has stated, they look as if they have done very well out of the War. If that is so, one can understand how readily the Chancellor of the Exchequer has yielded to them, but at the same time that is distinctly unfair to the poorer section of the community. One hon. Member said in regard to this question the Chancellor the Exchequer must be in the position of a bank manager who knows how to say "No" and say it nicely to the people who come to him for an advance. One can understand that, and we can appreciate it as good business, but when the right hon. Gentleman says "No" to the people upon whom, after all, in the long run, he is dependent for his revenue and who produce the wealth of this country, and, on the other hand, he is always willing to put his hands up to any robber who comes along and delivers the goods, then we have a right even to challenge that suggestion.
The outlook is not very hopeful and the Chancellor of the Exchequer has not pointed to any possibility of getting an increased revenue for the coming year. This Budget' looks as though it is going to add increased burdens to our trading possibilities, already rendered bad by the conditions on the Continent and the keen competition we have been forced into there, because it is a fact that we cannot compete with them under any fair terms in the markets of the world. The remission of 1s. on the Income Tax does not mean a fraction of benefit to the mass of the working people of this country, and it has been given to those who have already got money to invest although the fall in the Bank Bate has indicated that there is no lack of money. While this sort of thing goes on it is simply imposing greater burdens on those in industry who have to work and pay the dividends on these investments. I regret very much that all through the fight the Chancellor of the Exchequer has shown himself obdurate to all the appeals made on behalf of the poorer sections of the community. Hardly a single concession has been given to them though he has given away all along the line to the vested interests and to those who already have money and have profited out of the War. Those who bore the heat and burden of the fight and who were cheered during the time of national extremity are now guarded and herded by the police in corners outside and are having further burdens imposed upon them by the Government in the Budget now before us.
I was somewhat encouraged when I was listening to the speech of my hon. and gallant Friend the Member for Newcastle-under-Lyme (Colonel Wedgwood). He indicated that this Debate was the third act in a play, at the end of which the author would be required to say something. As I understand such circumstances, the author is called for in order to be presented with a bouquet, or, at least, to receive the acclamations of his audience. But on the present occasion, I gather from the speeches to which I have been listening, that is not the chief desire of those who wish to hear the author. I have, however, really nothing to complain of in the character of the criticisms that have been made on this Bill. Indeed, I feel I owe to the House a meed of gratitude for the courtesy and consideration which they have shown to me and the fairness with which all these discussions have been conducted. The Debates have certainly led to an illumination of all the topics with which we have been dealing, and have had the result of improving the Bill in many respects.
The right hon. Gentleman the Member for Paisley (Mr. Asquith), for whose speech I certainly owe him some thanks, questioned, as he has done on previous occasions in this House, the likelihood of the Estimates being realised. The main criticism in that part of his speech was to the effect that he thought that I had over-estimated the revenue which would be obtained in the course of the present year. It is rather futile to put prophecy against prophecy. The statement of revenue, of course, is an estimate. It is the best estimate that I can make. It may be that the right hon. Gentleman thinks that the estimate is over-sanguine. Only the results can determine which of us is right, and certainly nothing that I could say upon the present occasion could lead to any elucidation of that question. He did, however, refer to the out-turn of the present year, in so far as it has gone. He indicated that perhaps not very reliable inferences could be drawn from the first three months of the financial year, and that, indeed, is true. He would be a very imprudent guide who would ask the House to form any definite conclusion of the revenue of the year upon the experience of the first three months. But he did ask me a question as to whether the Estimates were in any way affected by the results that we have so far seen. I am glad to be in the position to inform the House that, while not going into the matter with that particularity with which my hon. Friend the Member for Ilford (Mr. Wise) dealt with the figures, I am certainly able to say that, so far, the Estimates have been entirely justified. I do not wish to put it higher than that. They have been really rather exceeded in most instances, but, taking the matter as a whole, we have no reason to revise the Estimates as the result of our experience of the first three months of the financial year. The right hon. Gentleman went on to make the suggestion that the results as a whole might not show that balancing of the Budget which I endeavoured to disclose in the course of my Budget speech, and in that connection questions have been asked me on the matter of expenditure.
My hon. Friend the Member for the Ecclesall Division (Sir S. Roberts) sought to be assured that the Government were carrying out their campaign of economy, and, from the benches opposite, a speech was made by the hon. Member for Harrow (Mr. Mosley) who, ignoring altogether the economies which are being effected in the present year, made a rather ineffective and inapposite criticism of the economies which were effected last year. He complained that of the £75,000,000 of economies which were effected last year, £61,000,000—I think be said—had been effected by reductions in the war services. I do not see why he should not give us credit for these reductions. It is one of the complaints of those who talk so much about economy, but who very seldom practice it, that we are holding on to war services which ought to be disbanded. When we do disband them, and effect economies, it is not erroneous to put those economies as one of the factors in the result which we achieve. In point of fact, the Estimates for the present year, in the shape of expenditure upon the Supply Services, are £242,000,000 below the Estimate of last year, and £172,000,000 below the actual cost of these services last year. I do not think that anybody who pays attention to these figures will say that we have not been effecting very large savings.
I do not say that we should stop there —for from it. It is our desire and intention to continue to make economies in every part of the public service where it is possible to achieve them. We have set up two Committees of the Cabinet, one presided over by myself, which deals with the civil expenditure, and the other presided over by the Secretary of State for the Colonies, which is going to deal with the expenditure upon the fighting services. It is my hope, and, indeed, my anticipation, that we shall be able to effect economies, not merely in the Estimates for next year, but in the actual expenditure of this year, as the result of these investigations. We are having "sketch" estimates submitted to us on the 25th of this month by the Departments—a very much earlier period than usual—in order that we may be able to guide and advise them, and, indeed, warn and admonish them in connection with their expenditure for the coming year. As I have said, it is my anticipation that we shall be able to do still further service in the way of bringing about the economies which the country at the moment so urgently requires. That upon the side of the Estimates of Revenue and Expenditure.
The right hon. Gentleman the Member for Paisley went on to say that he had no real quarrel with the way in which the surplus brought out in the Budget had been dealt with, although he had certain regrets. He regretted, for example, that we were not able to reduce the duty on sugar. I share his regret. I should have been very glad, indeed, if we had been able to reduce the duty on sugar, but it was very expensive to achieve. It would have cost £11,000,000 to reduce the duty on sugar by 1d. per lb, and, accordingly, one had to look for other ways in which we could best employ such surplus as we have. I regret, as many other Members do, that we cannot reduce the duty on beer and also on entertainments. If it had been possible this year, one would have been very glad to do both of these things, and I certainly hope that in more propitious times we shall be able to accomplish what hon. Members desire in that respect. In the meantime, I am sure that everybody has been fully convinced that, in the circumstances of the present year, these remedies are not possible, and, accordingly, are not to be found in the present Budget.
I come to the point which, perhaps, has been the most debated, namely, the propriety of reducing Income Tax by 1s. in the £. The voices from the opposite benches have been very varied upon this topic. The right hon. Member for Paisley welcomed this alteration in the Income Tax, not merely because of its direct effects on the people who pay it, but because of the great relief it gave to industry throughout the country. He certainly gave his adhesion to the theory which was supported by the hon. Member for Tonbridge (Lieut.-Colonel Spender Clay), that the indirect effects of the remission of such a tax are immeasurably greater even than are the direct effects. I do not stop to add anything to the very pointed and cogent reasons the right hon. Gentleman used in support of that view, but I should like now to deal with some remarks made by the hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood) in dealing with the same topic. His theory, of course, is that this is a rich man's Budget. That seems to be the phrase which we are going to hear repeatedly, and to find constantly employed in the propaganda which they are going to conduct in the country.
Well, a phrase may either express an idea or it may not. I think in this case the phrase that hon. Gentlemen opposite are going to found themselves upon in the constituencies has no merits whatsoever. The whole attack is directed upon this question of the Is. Income Tax reduction—
There are other matters, but this is a phrase, used when the Budget was introduced and which has been constantly employed since, directly addressed to the reduction of 1s. in the Income Tax. I have the complete support of the right hon. Member for Paisley for thinking that it is an entirely inapposite and inaccurate description of what the real position is. But the Labour party profess to take no in- terest in any remission of the Income Tax. They say this is a, remission purely and simply for the wealthy people of the country. When I heard that kind of remark, I had the curiosity to look at the Order Paper to see what the topics were on which Amendments have been moved. I find that 41 Amendments appear on the Paper from the Labour Party Benches on the question of Income Tax. That does not look as if the Income Tax did not touch the constituents in whom they are interested, and in point of fact their whole action is directly contrary to the theory they are going to use on platforms, and which they have expressed, no doubt, with more moderation here than they will display outside. It was left, however, to the hon. and gallant Member for East Newcastle (Major Barnes) to develop an argument of the most perverted ingenuity. He did not say he opposed the reduction in the Income Tax; in fact, in the speeches I have been able to read I have not yet found anyone with the courage to tell his constituents that he would vote against the reduction of 1s. The hon. Member for Harrow (Mr. Mosley) gave us a lofty address, but he did not seem within himself to be quite unanimous on the subject, and when he sat down I did not quite know whether he supported me or whether he did not.
I shall look to see whether he has the courage to go to Harrow and tell the people of Harrow that he is against the reduction of 1s. in the Income Tax. The hon. and gallant Member for East Newcastle was much more interesting and ingenious on this topic. He, like everybody else, did not say he would vote against it, but said I had done it the wrong way, that I had relieved the Income Tax by a flat rate of 1s. instead of by some means, that I confess I cannot understand, of relieving people in different degrees instead of on a flat rate basis. He said the result was that the single man got greater relief than the married man, and the married man with no children got greater relief than the married man with children. I am sure this will be developed at great length in Newcastle, and I have no doubt the great multitude of his constituents will think this is a very iniquitous process. The argument, however, as I have pointed out, is really one of perverted ingenuity.
What is the plan of the Income Tax? It is a system of graduation which steadily puts upon the people who are better oft the heavier burden of the tax. It was the plan given to the Treasury by the Royal Commission, I believe almost to the fullest detail, though there may be smaller differences. It is the plan which the Royal Commission elaborately worked out, and I do not think there is any fairer or juster system of tax existing in the world to-day from the point of view of each person, according to his capacity, bearing his proper burden, than our system of Income Tax. It is a most carefully adjusted and devised plan that puts on persons the burden they can bear. It means that as you go up in the scale, from 1s. to 2s., 2s. to 3s., 3s. to 4s., 4s. to 5s., and 5s. to 6s., the allowances given to the people least able to bear the tax are growing greater steadily as the tax goes up. That is obvious. The man who is least able to bear the tax gets greater advantages proportionately when the tax is 6s. than when it is at 5s. or at 5s. than when it is at 4s. Accordingly when you bring down the tax from 6s. to 5s. the amount of allowance he gets on the 5s. tax is necessarily proportionately less because when it was going up the proportion of allowance was greater. No one can say there is any unfairness in what has been done, and I think when the hon. and gallant Member for Newcastle realises what is the character of our system of Income Tax, he will not be so rash or audacious as to develop this argument in a constituency which, no doubt, could be very easily misled on this subject.
I turn to some other points of view which were expressed by my hon. and gallant Friend the Member for Newcastle-under-Lyme. He said it was right that these matters should be revealed in their entirety to the country, and I agree; but the speech which he made really did not reveal the facts to the country. It only revealed the innocence of my hon. and gallant Friend's mind. I use the word "innocence" in preference to another, which is, perhaps, less complimentary. My hon. and gallant Friend advanced the argument that, when you reduced the Income Tax by 1s., you were making a present of £18,000,000 to the stockholders of this country, the people who hold Government securities, because to that extent their Income Tax was reduced. He said they had no right to it, because the basis upon which they invested their money was a 6s. Income Tax. In point of fact it was a 5s. Income Tax up to March, 1918, when by far the greater amount of our securities had already been established, and most of the money, if not all, had been borrowed. Accordingly, there is absolutely no ground for my hon. and gallant Friend's argument, if it was an argument of any merit at all. Of course, the reduction in Income Tax not only affects the people who hold Government securities, but it affects everyone, from whatever source he derives his income, and I cannot imagine that, even in the palmy days of a Labour Government, if my hon. and gallant Friend were Chancellor of the Exchequer, he would propose to have a rate of Income Tax which would affect only certain portions of the community, and would exclude others.
But a time when the holders of War Stock are doing uncommonly well—far better than other clashes of the community—is not a time to select for giving them £18,000,000.
For the most part, they are only getting back, if they choose to sell, the money which they invested, and the number of people who lost heavily on our War Stock is not to be numbered upon the figures of your hand. I pass to one or two other of my hon. and gallant Friend's criticisms, of which, I daresay, more will be heard in the constituencies. He is going to say, as he has said here to-day, that we have been unjustly relieving the wealthy classes. He points to the people who pay Excess Profits Duty, and he airily says we have relieved them of £3,000,000 of the burden which would ordinarily rest upon them. I would ask the House to recollect the point to which my hon. and gallant Friend refers. I cannot imagine that any person who had looked into the facts of the case on which that £3,000,000 has been remitted, would for a moment contest the justice of what has been done. Here is the situation. A man is carrying on his business, and he pays Excess Profits Duty when he is prosperous. If there comes a period in which he has losses, he is entitled to set his losses against what he paid in Excess Profits Duty, and claim back from the State the deficiency. According to the law as it stood, however, if, unfortunately, the man who was carrying on his business died, and his son succeeded to the business, the son was not entitled to set off the deficiencies which he, carrying on the same business had suffered, against the Excess Profits Duty which his father had paid in respect of precisely the same business.
That is perfectly true, but, seeing the results that it produced, surely any wise and just assembly would correct them. Does my hon. and gallant Friend really say that this is a gift to the rich people of this country? He must know as well as everyone else that at the present time a great many of the businesses of this country are at the edge of the precipice, and if you are going to apply the strict doctrine which he says he finds in the Statute, and wishes to be continued, to all such businesses, you are not only not going to benefit the working people of this country, whom my hon. and gallant Friend professes to represent, but you are going to do them irretrievable detriment by destroying their source of employment. My hon. and gallant Friend refers also to what he says is the dole to the farmers. He knows as well as everyone else here does that at the present time the assumption upon which the farmer is assessed to Income Tax is entirely unjustifiable. He is assessed to Income Tax on the footing that his income is twice as much as the annual value of his land. Where is that condition of affairs to be found in this country to-day? This Bill puts him back to an assessment on the basis that his income would be the annual value of his land, and I am perfectly certain that even that, in the great majority of cases, cannot be realised by the farmer at the present time. Is my hon. and gallant Friend really prepared to say that this is another case of a dole to the rich as against the poor people of this country? One has only to examine the facts to see that the criticism which my hon. and gallant Friend applies to them is entirely unjustified.
Then he takes up the case, which, I am sure, will be made still more of, of the allowances which are to be made to the owner of mineral rights in respect of the expenses to which he is put for management and supervision. In every industry in this country the expenses of management and supervision are deducted before the amount is arrived at upon which the Income Tax is assessed. Why is it to be said that, in the case of the owner of mineral rights, he is not to be entitled to deduct the expenses of management and supervision before his assessment is arrived at, which is the recommendation of the Royal Commission on Income Tax.
They are rights which are bought and sold, just as sugar is bought and sold, though not so frequently; and if you have to employ a man to deal with the sale of sugar, and deduct the expenses of his employment in order to arrive at the income upon which you are to be assessed to Income Tax, why, in the same case, should you not, where coal is being bought and sold—because that is the real factor in the situation-deduct the expenses to which the man who owns it is put in supervising and managing his estate? The suggestion of the Royal Commission is perfectly sound on this matter, and I am sure we were quite right in adopting it. My hon. and right hon. Friends forget, or choose to ignore, the fact that the owner of mineral rights has to pay, not only Income Tax upon what he derives from those rights, but also the Mineral Rights Duty, and in Scotland, in addition, he has to pay rates upon what he derives from his mineral rights. Indeed, in Scotland, in most cases, the owner of mineral rights scarcely has anything left after he has paid his Income Tax, his Mineral Rights Duty and his rates. An hon. Member says "Poor fellow!" in a tone of derision, but at least, so long as the system we have at the present time continues, let us be fair and just to all sections. It may be that my hon. and gallant Friend's view as to the changes which should be made in this country is right, but I do not think he will ever find a majority of people in this country to agree with him. If, however, he docs, then he will be able to apply his doctrines in his own peculiar way. In the meantime, so long as the country is based on the present system, we must be fair and do justice in applying our Income Tax law.
I do not propose to go through in detail each of my hon. and gallant Friend's lines of criticism. I think I have said sufficient to show the kind of point of view from which he makes his attack upon this Bill, and in every case he fails to arrive at a just conclusion, because he starts from hopelessly erroneous premises. He suggested, indeed, at one stage of his speech that in other countries capital had rapidly disappeared, and he indicated certain European countries where capital was running away, as he said, like water through your fingers. I cannot think he wishes us to follow the example of these countries, and I am sure, looking to the experience we have had, we are right to follow our old and well-established plan of dealing with capital fairly, because, after all, as he admits, there is nothing that is more required for a revival of the prosperity of this country than a sufficient supply of capital.
I turn now to the criticisms which the right hon. Gentleman the Member for Paisley addressed to us on the suspension of the Sinking Fund. He did not re-argue the principle, nor did he again refer to the suggestion which he previously made that a country must always be paying off some portion of its debt. At the time our discussions took place on the Second Reading of the Budget Bill, it was gloomily prognosticated that the result of the proposal to suspend the Sinking Fund would be that our credit would depreciate and we should find our currency much lower in value than it had previously been. All these gloomy prognostications have been absolutely falsified. Our credit to-day is not only higher than it was a year ago, but higher even than it was three months ago, and the value of our currency is higher now than it has been at any time since the War. The right hon. Gentleman said there were special reasons for paying off Debt at present in respect that we had been using War assets to pay our current expenditure. That really was the basis of his attack. He presented to the House some figures which I gave him some days ago showing that £11,370,000 worth of War assets had been used in this way, and had appeared in the Budget Statement. It is quite right to say that we have been spending these War assets in the way he described, but the House has to remember that we have had War liabilities to meet in the same way, and we have had to meet War charges—I am excluding pensions, and I am excluding interest on War Debt—to a greater extent than the value of the War assets which we have sold. If you are going to put in a special account your War assets which you have applied towards your annual revenue, and if you are going to exclude them from what you are entitled to apply to your annual revenue, equally at the same time you must exclude from your annual expenditure that which you are bound to pay in liquidating your War liabilities, and if you take that view the result is that you have a separate account in which the cost of the War liabilities will at least be as great as the money we received from the War assets. What is the proposition that is really being advanced? It is supposed to be that you ought to have applied the money obtained from the sales by the Disposal Board to the liquidation of Debt. Let me test it in actual practice, and see where it is going to land us. In the year 1919–20 we had to borrow £327,000,000. We sold War assets, speaking roughly, to the amount of about £500,000,000. Is it suggested that we should have put the money derived from the sale of War assets to the extent of £500,000,000 to the redemption of debt instead of putting it into the revenue of the year? We should have had to borrow, in addition to the £327,000,000, £500,000,000 to fill up the hole in the expenditure of the year. Is it not ridiculous, as a mere matter of accounting, to say that on the one hand you are going to devote £500,000,000 to the redemption of debt and borrow £500,000,000 for the Revenue. This really is purity of finance run mad, and I cannot imagine that any sane or sensible person would really argue that the country should conduct its finances upon that footing. It has been a canon of finance ever since Budgets were made that no person pays off Debt at the same time as he has got to borrow in order to make up for a deficiency in his Revenue.
That was the gravamen of the right hon. Gentleman's criticism. But he asked me one or two questions which I will answer as rapidly as I can. He asked me what we are doing with regard to Southern Ireland. Southern Ireland is now, financially, practically cut off from this country, although the Civil Service which previously operated there is still operating and collecting for the Irish Government the Revenues of Ireland. But Irish finance has no longer any connection with ours. The only connection it has is that under the Treaty with the representatives of Southern Ireland they are bound to bear a proportion of the War Debt. That proportion is to be determined by an arbitration which has not yet been held, but so far as current revenue and expenditure are concerned, nothing appears in our Budget which has any connection with the revenues or the expenditure of Southern Ireland. Then the right hon. Gentleman asked me what is the amount of our indebtedness to the United States. At the present rate of exchange it is approximately £938,000,000. Of course it. was very much greater when the pound sterling was standing at 3.20 in comparison with 4.44.
No, that is the capital Value of the Debt. The next question the right hon. Gentleman put to me was as to the amount of the Floating Debt to-day as compared with what it was on 31et March. The reduction during these three months is £71,273,000, and in the year from July last year to now, the reduction in the Floating Debt has been £409,000,000. Then he put a question upon the amount of Debt immediately maturing, and I am glad to be able to tell the House that the Internal Debt maturing on 1st April, 1922, was £155,000,000, which has now been reduced by conversions to £44,000,000. These figures are of very great significance, as showing the increased stability of this country in financial matters. It is true, as my hon. Friend the Member for Central Edinburgh (Mr. W. Graham) pointed out, in a very thoughtful and able speech, that the financial position of the world to-day is one of the most serious gravity. No one who watches the situation can for a moment close his eyes to that fact. The condition of Austria, which has become steadily worse, and the great change that has been recently taking place in Germany, naturally give cause for the gravest anxiety. These are matters which will have to be dealt with in concert with our Allies at a very early period; indeed, they cannot be delayed any longer. I am sure that the House would not desire me in the present delicate situation to make any particular disclosures upon what is actually going on.
Our relation with the United States of America in the matter of the debt which we owe to that great country is engaging our constant attention at the present time. I welcome the reciprocity of views which were expressed by the right hon. Member for Paisley that our debt to the United States of America is one of the solemn obligation, which, undoubtedly, we shall meet—there is no question about that—and that the request which the United States has made to us recently to consider the question of the funding of the amount of the debt, and of placing it, as my right hon. Friend said, upon a stable and equitable foundation, is one which will be completely met. There is no question at all as to the attitude of this country upon that matter. I do not think there is any doubt existing in anybody's mind as to the complete and absolute necessity of our fulfilling our duties in that matter to the very uttermost.
There are great questions which are connected with both these particular points of view. There is on the one side the position of Europe, and there is on the other side our obligation to the United States of America. I do not think that the right hon. Member for Paisley considered, indeed he intimated very clearly the contrary, that the present time was the moment to say much about either of these topics. Accordingly, I hope that the House will forgive me if I do not deal any more elaborately with it to-day, because the House may depend upon it that as soon as definite proposals can be disclosed complete information will be given. In the meantime, I should like to re-echo what my hon. Friend the Member for Central Edinburgh said in the closing part of his speech. The outlook is grave, but nothing is to be gained by decrying your country's credit. If you take our position alone, if it is possible to isolate it for the moment in regard to financial matters, we are in a stronger position to-day than we have been at any time since the Armistice. The Chancellor of the Exchequer can look forward to the future, so far as our own country is concerned, with much less apprehension and anxiety to-day than was the case a year ago, and still more than was the case three years ago. Accordingly, there is no reason for our looking upon the present situation with any kind of despair. I believe that ways will be found by which these great financial perils may be averted, and that in that connection this country will be able to play a very great part.
The Chancellor of the Exchequer has made an able defence of his Budget, and has attempted to reply to the case which we have made as to the indefensible remission of taxation upon certain sections of the population. He stated that where it was proved that a tax bore hardly upon any section of the community, no wise and just assembly could do otherwise than reconsider it. Therefore, assuming that this is a wise and just assembly, I am going to appeal at the eleventh hour to Members who will have to face their constituents upon this issue to judge whether or not the statements I am about to make are in any way malicious, exaggerated, or indefensible. We are here realising that finance is not what it was in the days before the War, and realising the hypocrisy of Ministers and their supporters, who say that the only remedy is to get back to-pre-War wages and pre-War prices, at a time when one item of our civil expenditure, namely, the interest on debt, is more than double the total cost of pre-War government.
I would draw attention to the case which the right hon. Gentleman has been building up. He has stated that the graduation of Income Tax and the exemptions allowed for children prove what a wise system of financial administration we are living under. Let us examine that statement. The concessions to the direct taxpayer have been in the region of £60,000,000, while the remission of taxes to the indirect taxpayer has been something less than £6,000,000. There are many hon. Members, and many people outside, who fail to take into account how this incidence of indirect taxation falls. Let me remind the House of the way in which it does fall. The Income Tax machinery stops short of a given level of income, and acknowledges, I presume, the poverty of the individual. Even on that basis if a person is paying Income Tax, and he has one, two, three, or four children, he has a remission of Income Tax in respect of each child. When you come down to the worker who is receiving wages or salary—in these enlightened and scientific days of ordered industry, men, whether they be trained workers or manual workers, do not get a return for their labour in proportion to the services they render, but they get a remuneration based entirely upon their power to demand—he may be a brain worker, a hand worker, a worker on the field or in the factory, if his wages are less than the amount assessable for Income Tax, then, no matter how many children he has, your indirect taxation increases his taxation in proportion to the number of his family.
Your Income Tax machinery relieves the man in proportion to the number of his children, but your indirect taxation, by which you secure money from those unable to pay Income Tax in the ordinary way, operates as a direct tax upon the worker's wages, whether he be a clerk, a technician, a worker on the field or in the factory, and the burden imposed upon him increases in proportion to the number of his children. For that reason, I beg of this House, if they are going to accept the term used by the Chancellor of the Exchequer that this is a wise and just assembly, to consider some of the effects of the facts which I am going to adduce. From time to time Ministers have brought forward Measures designed to protect the public. They brought forward a Measure, known as the Rent Restrictions Act, which was to give the landlords of houses, whose property only stands together because it would not stand separately, certain increased rent, to be paid for 52 weeks of every year in order to enable the landlord to do repairs which had been held up for five years of the War.
The hon. Member for Govan (Mr. Neil Maclean) and myself have been described as optimistic financiers, dreamers and every other kind of epithet, and we were laughed to scorn for daring to say that this so-called Rent Restrictions Act was actually a Measure by which those who were paying rent at the moment would be paying before the Act had operated twelve months more than 100 per cent. above the pre-War rent. These rents are being paid during the whole year, and because your legislation is permissive people have to pay the extra rents and the repairs are not done, and people are still compelled to live in second-hand houses and have to pay 100 per cent. above the pre-War cost. Not only that, but men are compelled to travel miles to their work, when they can get it, because of the housing shortage, and have to pay from 8s. to 14s. a week for workmen's fares for which in the days before the War they paid only 2s. 6d. These are facts which I put before you, because any wise or just assembly would consider the burdens that are inequitably borne. These are burdens of 100 per cent. above pre-War burdens which are imposed upon the wage earner who is earning less than the income assessable to Income Tax. The burden of railway fares in some cases is 300 per cent. above the pre-War level.
The Chancellor of the Exchequer defended his refusal to take a penny a lb. off the duty on sugar by saying that it would cost £11,000,000. I am the father of a family, and there are many like myself who are below the Income Tax limit, and have a number of children, and they buy pounds of sugar a week because it is one of the building foods, and they are being taxed at the rate of 21d. a lb. in proportion to the number of their children, whether they are or are not in work. Surely it is not right that when a man draws money from the Employment Exchange, and begins to spend it on the most elementary needs to maintain human life, he should immediately have to hand back to the Chancellor of the Exchequer some of the money received in unemployment benefit. Take the case of old age pensions. Is it defensible that old men and women drawing 10s. a week must pay back again 2¾d. a lb. on sugar, 8d. a lb. on tea and 6d. on an ounce of tobacco if they buy any? If you maintain indirect taxation there is a case made out for some remission for those who are not assessable for conventional Income Tax.
I agree with the hon. Member for Seven-oaks (Sir T. Bennett) as a fellow Kentish Member. I do not share the opinion of the hon. Member for North Camberwell (Mr. Ammon) with regard to the tax on beer. I object to it because of one thing only, that it is a further tax on the wages of men who are below the Income Tax limit, and until the basis of? power is changed there will be an. unceasing protest against the inequitable burden of taxation on those who are unable to bear it. Ever since the Armistice the only remission of taxation which has been given has been given to people with incomes far above those of the working people. In the case of the remission of Tea Duty, the benefit goes to the payer of Income Tax equally as to the person who is below the Income Tax limit. A remission of taxation was given to the owners of mining royalties, which were imposed by this House generations ago on every ton of coal or iron ore brought to the surface by the labour of men. You do not say that you can defend that at a time of financial stringency like the present. It is true that trade has improved in sparkling wines and Havana cigars by the lightening of taxation, but will any hon. Member claim that there has been any appreciable reduction in the proportion of taxation paid by the workers of this country?
The Chancellor of the Exchequer, in defending the Budget against the criticism of the hon. Member for Newcastle-under-Lyme (Colonel Wedgwood) spoke of the men and women who held stock in War Loans, and said that if they sold out now they could sell at a profit. But the great majority of the working class population of this country have had to sell their War Loan at a loss. In the area in which I live men who have been deprived of the opportunity of work for 18 months have sold £ after £ of their holdings in War Savings Certificates. In a shop in which I worked £40 or £50 a week was subscribed, by fewer than 300 men, for War Savings Certificates. Every penny of that had to be sold at a loss, because these men refused to go to the guardians until they were compelled. Therefore I claim that due consideration is not given to the proportion of burden borne by the working community. If this were a wise and just assembly there would be full time given for an analysis of the proportions of burdens that are borne.
I do not claim to knew all that there is to know about finance. [HON. MEMBERS: "Hear, hear!"] Some of you gentlemen were preparing to go out to public schools when I left school to go to work, and if any of those who are sneering now will dispose of my argument, I should be only too happy to know that my case is unsound. It will occasion among many millions of men far more calmness and patience than obtain at present if it can be proved, but I am afraid that you will have a difficulty in proving it, and I have yet to know that a reduction of taxation of this kind would not stimulate production. Before the War I worked as a working mechanic for a firm of engineers, the head of which was a Member of this House, the late Sir Joseph Allen Baker. For every machine that was manufactured for British use there were 85 manufactured for the American and European markets. That was an engineering firm based entirely upon the confectionery trades.
The reduction of the Sugar Duty would mean some help to those trades, and it might help in some degree in the reduction of the tax on beer, because there are 9½ lbs. of sugar, I believe, to the barrel of beer. Perhaps the hon. Member for Basingstoke (Sir A. Holbrook), who is the champion of the brewing industry, can support or contradict this assertion, but I am willing to stake the reputation of the Labour party on this, that by adding to the purchasing power of the working people, by a reduction in direct taxation, you will stimulate spending power in this country far more than by a reduction in the taxation imposed upon wealthy people, who are subscribing, not to industries in this country, but in any country outside of ours which will yield a greater profit and a quicker return. I make no apology for having butted in this afternoon. I assert with profound conviction and increasing bitterness that some day or other Members of this House will have to justify themselves in a manner which may be painful to them, for hard and sheer necessity is driving men who have not known unemployment before, into a study of the proportion of taxation borne by the worker, and the result will be that more interest will be taken in politics and less interest taken out of it.
I take this opportunity to utter the protests that are necessary against the passage of a Measure of this kind. The Chancellor of the Exchequer attempted to be rather humorous at the expense of the Labour party. He tried to indicate the wonderful things that were to be said by Members of the Labour party on platforms in the country in their denunciation of a Budget of this kind. It was to be called "The Rich Man's Budget," and outside this House we were to say things with less moderation than we have shown inside the House. We have been quite moderate in the House, and we will be just as moderate outside. But the things that we have said inside the House could not be denied by the Chancellor of the Exchequer or the. Solicitor-General, and they cannot be denied outside. Hence we shall not require to exaggerate. The only excuse put forward by the Chancellor of the Exchequer, when we have appealed for concessions on behalf of the workers, was that the country could not afford them. If he cannot afford concessions to the workers, who produce the wealth of this country, he cannot afford concessions to the wealthy classes, for if he has not the money for the one class, he cannot have it for the other class. The last speaker referred to the burden of indirect taxation. The Chancellor of the Exchequer knows that the amount which is paid by the workers in indirect taxation upon the necessaries that appear on their breakfast tables and their dinner tables and their tea tables, is 7s. 7d. out of every sovereign spent. The Chancellor of the Exchequer will not give any remission to the worker upon that taxation although he has given remissions to every class of property owner in the country.
The right hon. Gentleman made a passing reference to the Entertainments Duty, and I was rather astonished that he should have made it. I will quote it, because I do not wish to go out of this Howe with a wrong impression of the Chancellor of the Exchequer. I recognise him as a political opponent, but I have always looked upon him as one who took up an attitude because he felt himself honourably bound to take it up from his point of view in political life. The statement made to-day, if used outside in the country, may represent the right hon. Gentleman in a rather dishonourable attitude. I wish to have his assurance that I am wrong as to the inference which may be placed upon his words. He said, and I took down his words at the time, that he could not give any remission in the Entertainments Duty to the entertainments managers, because he had not sufficient money to enable him to do so.
What the right hon. Gentleman said was, that he had not any possible means of meeting the claims for a reduction of the Entertainments Duty. Those were approximately the words which he used. The House will remember that a night or two ago, when we were discussing this matter, the right hon. Gentleman met me with the statement that he had appealed to those in the entertainment profession to submit a scheme whereby he could give a remission of the duties upon the lower-priced seats, and he complimented an hon. Member of this House on the fact that he had produced the best scheme yet submitted. The scheme that was submitted, however, was objected to by the Chancellor on the ground that it took away from the money realised by the duty, whereas in asking for schemes, it was intended that the suggested schemes should allow him to derive the same amount of money from the duty while altering the scale. The right hon. Gentleman knew perfectly well that no private Member could submit a scheme to this House involving an increased charge. That can only be done by Members of the Government. I hope the Chancellor of the Exchequer is going to inform the House that the inference is wrong that he said to-day he had no means of remitting it, while at the same time, he invited a section of the community outside to submit schemes and is prepared to consider them, knowing all the time that schemes cannot be submitted here by private Members which will give him the same amount of revenue without increasing charges.
I would not rise to say anything at all, were it not for the fact that the hon. Member suggests there is some imputation against my honour There is really a confusion in his mind. I have been considering this matter for more than a year, and I have repeatedly asked those concerned outside the House to produce to me a scheme which, by a different system of graduation, would give me the same money as at the present time. If they had submitted such a scheme to me, I would myself have brought in an Amendment, it being entirely competent for me to do so.
My hon. Friend does not seem to understand. I have asked repeatedly during the last year—I asked several times during the discussion on the last Budget—the people who represent the entertainments industry to submit to me, if they could, some system of graduation which they would like better than the present one which would yield me as much, and on which they would have agreed. Then I, myself, would have been prepared to adopt such a scheme and propose it to the House. My hon. Friend is right in saying that a private Member could not submit a scheme which would increase a charge, but that does not impute anything against my genuine and sincere desire to meet the entertainments industry, because I myself would have submitted such a scheme, if they could have presented it to me.
I am glad to accept the statement of the Chancellor. As I said already, I have always held the right hon. Gentleman in the highest esteem, and I think I pointed out that I hoped he would clear himself from what I considered might be a wrong inference placed upon his words. The Government comes forward with its Finance Bill, in which it lays down certain scales of Income Tax, and certain scales of duties to be imposed on different commodities that come into the country and are used in the country. Is it beyond the wit of the Chancellor of the Exchequer, or the men who draft for him the Finance Bill, to draft that necessary scale of charges on entertainments that would give him the same amount and yet, at the same time, relieve the burden on the lower-priced seats? It is rather throwing upon the industry itself the statement: "Come, choose your own rope, and we will hang you." That may be all very well on the borders of Scotland, but as a Scotsman
the right hon. Gentleman knows we have got away from those days of Jedburgh justice. Members on this side of the House have had no results in drawing the attention of hon. Members of this House to the points I am going to put. They have tripped in behind the Chancellor of the Exchequer in practically every Division we have challenged. We have made suggestions with regard to remissions of taxation, and these have been refused. The Solicitor-General, in the first speech he made in Committee on the Bill, quoted Mr. McKenna, in 1916, in reply to the request of Members for a further reduction in the duty upon tea, as having imposed certain increased duties upon coffee and cocoa with the idea of making the taxes on tea, coffee, and cocoa more evenly distributed. He WAS using that as a justification for retaining the duties as they are, and he went on to say:
As a matter of simple economy, the Exchequer cannot go any further than it has done, and I venture to submit to the Committee that that is absolutely a final answer."—[OFFICIAL REPORT, 19th June, 1922; col. 899; Vol. 155.]
In other words, at that stage in the Finance Bill, the first day of Committee, Monday, 19th June, the Chancellor of the Exchequer and those associated with him in bringing in the Finance Bill had gone as far as they could and could give no further remissions to anyone, and yet, as day followed day, and as speech followed speech, while he would listen to nothing from these benches and could concede nothing to Members on these benches, when the clamour came from the benches below the Gangway and behind him for remissions of taxation, for giving something to the wealthy classes of this country, he bent always before the storm, not standing out like a strong Scotch pine, but bending before the wind like some reed that grows out of some marsh —the marsh of Coalition, in this case. He gave nothing to us at all, but he gave everything to those behind him, and today he excuses it on the ground that mineral royalty owners are entitled to have this particular remission that is given to them. Has he read what his own Prime Minister has said about mineral royalty owners? Let him go back to the days when the Prime Minister went thundering about the country, using more extravagant language than ever I have used, or than any Member of this House
can accuse me of having used, when the dukes were arrayed against him instead of sitting behind him, as they do now, when, he was denouncing the party to which the right hon. Gentleman belonged as the party of the dukes. Why not ask his leader what he said about mineral royalty owners? You say that they are entitled to the relief.
You use the parallel of sugar, but sugar is a product of labour. Does the mineral royalty owner place the coal in the ground? Is he a producer of anything? He produces nothing in this country, but is really a burden on the coal-mining industry. He takes over £6,000,000 a year from it, and the miner has to dig coal in order to provide him with that money. The mineral royalty owner comes along begging for some remission, while the miner in the mining villages is practically starving. When he does get work, every ton of coal he digs bears its tax, and has to have its certain proportion deducted to be paid to the mineral royalty owner. I suggest it is time we ended all this nonsense. The Minister of Labour, the right hon. Baronet the Member for the City of London (Sir F. Banbury), and other Members of this House get up and talk about shirkers who are living upon the dole If there be a shirker in this country, it is the man who is taking mineral royalties. If there be a man who is living well without working, it is the man who is battening on the coal industry, and burdening it with this additional £6,000,000.
The argument of the hon. and gallant Member is that, no matter how much you pay people for doing nothing, we should not object, because they pay half of it back to the country.
I am putting the proper construction—the construction that. is held by the man-in-the-street, if not most of the Members of this House, that the mineral royalty owner does not confer any public benefit or social service, but is actually living on the labour of the people and is taking that to which he is not entitled. It is absurd for anyone to apologise on the ground that he pays half back in taxation. You would have a wonderful country if you went on the lines of paying men for doing nothing, and saying they are entitled to it, because they hand back one-half to the Chancellor of the Exchequor. I fancy the right hon. Gentleman would be the-first to object if everyone in the country sought to be dealt with on those lines. This Budget will be hailed outside as the rich man's Budget. It is the rich man's Budget. The poor woman who is getting an old age pension of 10s. a week, is going to pay, under this Bill, for the articles she buys to place on her table, roughly 3s. 9d. in taxes. Can anyone justify that, especially when you are giving remission of taxation to the excess profits taker, the profiteer during the War, the man against whom you had to pass a special Act of Parliament to-prevent his plundering the people of this country while the young men were dying overseas. [An HON. MEMBER: "Were you?"] No, I tried to stop the bloodshed.
It is quite true, I am not ashamed of what I did during the War, and never have been ashamed, and the people who sent me here knew what I did during the War. [An HON. MEMBER: "The more fools they!" Yes, the more fools they. And there are a lot of fools in this House, and they were sent here by a lot of fools. After the next election there will be a big change. [HON. MEMBERS: "Hear, hear !"] Yes, I will be here. Some of you will not. And you will not have money to buy titles to take you to the other end. However, Mr. Speaker, I am asking the Chancellor of the Exchequer—I do not ask hon. Members—to consider this matter in the best possible light for the people of districts in his own country that he knows of where the people cannot afford these things. We are pleading for these poor people, who cannot afford to purchase the necessaries of life because of the heavy burden of taxation. If you can, as you have done, remit taxation for the wealthy, if you can yield to the clamour of rich men—who are more anxious now to get away home—are more concerned about that than about giving concessions to the poor of the country—if you can yield to their clamour, and agree to take back the Clause in the Budget that you thought necessary to prevent evasion of the payment of Income Tax by some of these people who did well out of the War, and now want to escape the payment of Income Tax and take advantage of certain legal technicalities in the Income Tax Clauses—if, I say, you can do this, surely it is time you gave some concession to other sections of the community who are more honourable in the fact that they meet their payments.
I hope that if these concessions for which we have asked are not made by the Chancellor of the Exchequer he will not consider that we are exaggerating outside when we denounce this Budget. We know quite well the fear that lurks at the back of his mind, and the mistake that he makes about the Members of the Labour party, using the platform to denounce the Budget, is that there may be some justification for our attacks. We know quite well that he himself realises the uses to which the platform outside can be put. I hope when he does read the reports of some of us speaking at meetings outside at which we denounce the Budget he will realise it is not the personality of the Chancellor we are denouncing, not the Chancellor as an individual, for we have no grudge or feeling against him personally, but it is against the Chancellor who stands at that box, who has to pilot through this House of Commons this Bill, and who refuses to give concessions to one section of the community and gives concessions lavishly to other sections of the community. It is that Chancellor of the Exchequer that we are denouncing. It is that Bill to which we are taking exception. I am confident of this that when, as will ultimately happen, the Labour party passes to the other side of the House, and when a Labour Government—[An Hoy. MEMBER: "When?]"2— after the next election—
Well, you will not be here to question us. When we take our places on the benches opposite there will be taxation brought into the House of a character that will place the burden upon the shoulders of those who are responsible for the wealth of the country and those who are best able to bear that burden.