I understood that it would be for the convenience of the Chancellor of the Exchequer if I opened the Debate, but I certainly did not understand that that would be taken as a reason why the Chancellor of the Exchequer should not be present. [HON. MEMBERS: "He is in the Lobby."] I am glad to see that he has now arrived. [HON. MEMBERS: "Withdraw!"] I have very gladly fallen in with the suggestion which he has made to Me. [HON. MEMBERS: "Withdraw!"] I have nothing to withdraw. [An HON. MEMBER: "Let us have a little courtesy."] I am not, here to bandy compliments with the Chancellor of the Exchequer, and, indeed, it would be difficult to do so, because he has himself already gathered up most of the material available for bouquets and presented them to himself. Moreover, now that the sense of relief which the country felt on finding that a Socialist Chancellor of the Exchequer does not necessarily mean a Socialist Budget has worn off, we naturally look at the Bill which is before us this afternoon from the point of view of what is in it and not of what it omits. Hon. Members below the Gangway opposite have claimed that this Budget is a Liberal Budget. I think they are right, because, in some of its most conspicuous features, it is characterised by that narrow pedantry that adherence to doctrinaire opinion divorced from all reality, and that utter inability to understand the feelings of our kinsmen overseas, coupled with a keen sense of electioneering possibilities that we associate with the old-fashioned Liberal.
To my mind, the feature of the Budget that will longest be remembered, which will dwell in the minds of men long after the remission of the Tea and Sugar Duties are forgotten, and which will hold up the name of the Chancellor of the Exchequer to the execration of future historians, is one which, in its financial effect, is so trifling that it is probably going to be lost altogether in the ordinary fluctuations of the market. In the case of the repeal or the allowing to lapse of the McKenna Duties, we have a piece of work which has already produced a marked and visible effect in forcing thousands of min and women out of employment. As time goes on, these effects will become more marked and more insistent, and not all the sneers of the Chancellor of the Exchequer are going to convince the workers that he knows their business better than they do themselves, or that the employers will be idiotic enough to discharge men and throw away their own profits in order to discredit the Government. The right hon. Gentleman said the other day he wished he had never heard Mr. McKenna's name. I was not surprised. I think that wish will be re-echoed by Members of his party before it is done with, and they are not the only people who are piling up reserves of ammunition for the use of the electors. After all, the repeal of the McKenna Duties and the folly of it is limited both in time and in space. A few industries may go under, some tens of thousands of men may be thrown out of employment and become a permanent charge on the community, but, as time goes on, they will be forgotten, and a new generation will arise, some of whom will live by the sale of foreign goods and others of whom will migrate to Protectionist countries. But we shall survive the shock.—[Interruptions.]
I wish to let the House know perfectly plainly that I will not have these continued interruptions of speeches. No debate can be carried on in that way. We come here to listen to opposing views, and we must listen to them.
As I said, we shall survive the shock given to our industries by these tactics on the part of the Chancellor of the Exchequer. But I want hon. Members to consider what will be the effect of the attitude of the Government towards the people in those countries which form different parts of the Empire. I do not think that anybody who has studied the conditions can fail to feel the deepest concern for the future. I am not going to discuss the question of Imperial Preference this afternoon. I hope there will be another opportunity when we shall be able to say what we think about that. I will only to-day venture to urge that when we do discuss it we should consider, with a full sense of responsibility, the tremendous issues that are at stake. I observe that quite lately there was formed a Labour Commonwealth Group to study the resources and possibilities of the Empire. It has come rather a long way after the formation of those international groups which have hitherto stood first in the estimation of hon. Members opposite. I do not sneer at this Commonwealth Group. I rejoice at its formation, I earnestly trust it will grow in numbers, in influence and in sympathy, for I am sure that the more that group does study the possibilities of the Empire the more proud they will be of it, and the more they will be disposed to trust to it and to its developments as the greatest power to bring about the world movement in the direction of peace and freedom, to which all of us attach so much importance.
But as I said I do not wish to discuss the question of the Empire this afternoon. I desire rather to draw the attention of the House to some of the other proposals in the Finance Bill. The Chancellor of the Exchequer has been fortunate enough to find himself in possession of a substantial surplus. I think he has been rather too apt to forget that he did not make that surplus himself, but that he succeeded to it and has not even paid the succession duty. On the other hand, it is quite clear that the making of a surplus and the disposal of it are two quite different things, and he ought to have the full credit or discredit whichever it may be for the manner in which he has dealt with the surplus at his disposal. There is something I think I must make a protest against, and that is the comparison which he so constantly draws between his disposal of the surplus this year and our disposal of the surplus last year and the assumption which seems to underly his statements that if, for instance, my right hon. Friend the Leader of the Opposition had to-day been occupying the office of the Chancellor of the Exchequer he would have disposed of this year's surplus in precisely the same way as he did last year's surplus. [Interruption.] That is what the Chancellor of the Exchequer said. It is not what I say. The Chancellor of the Exchequer seems to suggest, if he does not actually say so in so many words, that Unionist Chancellors of the Exchequer only remit direct taxation and pay no attention to indirect taxation. Surely the right hon. Gentleman forgets that the year before last a Unionist Chancellor of the Exchequer took 4d. off the Tea Duty, that last year he dealt with the Beer Duty, and that my right hon. Friend also plainly hinted that, in his opinion, the turn of sugar would have to come very shortly. Therefore, hon. Gentlemen opposite are not entitled to say that we on this side are in any way indifferent to the claims of those who are the poorest of the community and who, although their contributions to taxation may be small, find themselves straitened in their means and in need of more relief.
In the course of the Debate on the Budget some question was raised as to the proper proportion of direct to indirect taxation. For my own part, in spite of the dicta of our experts, I find it very difficult to see how one can discover any logical foundation for the drawing of any particular line. Circumstances change, and the proportion must change with the circumstances. I entirely accept the canon that one of the chief principles to be considered in taxation is the capacity of the taxpayer to find the money, and when one remembers that to-day very rich men pay more than one-half of their income in taxation, I think one may fairly say that that principle is already carried into effect. But the extent of the exact proportions which is obtained can only be determined after a general survey of all the conditions and of the results which are likely to ensue from your particular taxation. Still, I am not disposed to quarrel with the Chancellor of the Exchequer over the particular remission of indirect taxation which he has made in this Budget.
It does seem to me, however, that he has used some false arguments in bringing himself to his conclusions and that the results which he anticipates from his remissions are not necessarily going to ensue. The reason why I am going to criticise these arguments and conclusions is because if they were allowed to remain as the standard or classical instance of consideration by future Chancellors of the Exchequer, it might possibly lead to very gravely mistaken conclusions. The Chancellor of the Exchequer has said more than once that his object was to confer the greatest benefit on the greatest number—very good electioneering tactics. But what I want to ask is: Is it certain that by making remissions of particular forms of taxation you are necessarily conferring the greatest benefit on the greatest number? I need not remind the Chancellor of the Exchequer that the budget of the housewife, like his own Budget, has two sides—an expenditure and a receipt side, and the prosperity and tranquillity of the housewife depends not on one side alone, but on the balance between the two.
When I consider this Budget as a whole it seems to me the Chancellor of the Exchequer has devoted himself too exclusively to the consideration of how he might diminish the expenditure, and too little to the question of whether he might not also increase the income. To my mind, an increase of income to the housewife is far more satisfactory than remissions of expenditure which may turn out to be very delusory. There is first the question as to whether the actual reduction in the price of articles like tea and sugar is going to remain in force or whether at the end of the year, when supplies begin to fall short, we shall not find the price of sugar rising again to something like what it was before. [HON. MEMBERS: "Profiteering!"] This sugar is not produced in this country but in foreign countries, and whether there be profiteering or not, we have no control over it. Leaving that point alone altogether, there is the other point that, in the case of a large number of men in the country to-day, their rates of wages are controlled by the cost of living. [HON. MEMBERS: "The fodder basis!"] Call it what you like, that is the fact; and it follows from that fact, that if you reduce the cost of living by making these remissions of taxation you will in a given period of time reduce the wages of these workmen.
I am not talking about the Income Tax I am talking about the remission of indirect taxation, and I am pointing out that those remissions which seem at the moment to be so satisfactory have this element of uncertainty; that they may very possibly bring about a reduction in wages amounting to rather more than the housewife is going to save in the cost of tea and sugar. Why has the Chancellor not done something more to help employment? The fact is we have the President of the Board of Trade coming down to us the other day and telling us it was no part of his duty to find markets for British manufacturers—
To find markets for any particular manufacturers. If he only found enough markets, he would find employment for all. But the Chancellor of the Exchequer goes further, and not only will he not find markets for particular manufacturers, but he will take away from particular manufacturers even that which they have. He and the President of the Board of Trade are a pair of economic prudes. They are always drawing up their skirts lest the purity of their Free Trade principles should be injured by giving a helping hand to anyone who is in need. They lose sight of the fact that the greatest need of the country to-day is more employment rather than remissions of taxation. The Chancellor of the Exchequer has on more than one occasion uttered sentiments which seemed to me to be based upon an entire misunderstanding of what goes on ill the country. He divides the people of the country into the rich on one side and the poor on the other and takes no account of the very largo number of people who are neither rich nor poor. Nor does he take account of the interdependence of all classes one upon the other. He says in effect: "By reducing taxation I am really finding more employment, because by taking off these taxes on the articles purchased by the poorer classes, I increase their purchasing power, and that purchasing power will be expended upon necessaries and will, therefore, give employment. On the other hand, when you come to reduce Income Tax the only result is that the people who benefit spend more money upon luxuries, and, therefore, either they give rise to no further employment or, in so far as they do make more employment, it is pernicious and is withdrawing people from useful industry."
I think I have stated the right hon. Gentleman's case not unfairly. It seems to me to contain an extraordinary number of fallacies. When you reduce the Entertainments Duty, for instance, does it mean that people will spend more money upon necessaries and give rise to more employment. According to my information the cinema houses are full to-day and no remission of taxation can add one single person to the employment which is now given in the industry. Then again take the case of tea and sugar. I have already pointed out that these are not articles produced in this country. I cannot follow the logic of the right hon. Gentleman when he says an increased consumption of tea and sugar is going to increase employment in any way whatever. On the contrary, so far as it has any effect at all, that effect will be in precisely the opposite direction, because there is in this country now an attempt, a struggling attempt, to set up a sugar industry. I need not go into the details which are familiar to a great many hon. Members. It is indeed a matter which has already been raised in the Debate upon the Budget, and the Government have been asked what they are going to do to assist this industry to get over the dislocation and uncertainty now existing in consequence of the reduction of the advantage which the industry hitherto enjoyed of a duty upon foreign sugar not covered by corresponding Excise charges.
The Financial Secretary to the Treasury told us he was going to treat this matter with sympathy and promised a definite statement of the Government's policy on the earliest possible opportunity. I hope the Chancellor of the Exchequer will be in a position this afternoon to state what conclusion the Government have reached upon this matter, because although it does not affect a very large number of people at the present time, yet it is important that the matter should be settled one way or the other as early as possible, and that the further development of this promising young industry, which may have very valuable results in agriculture, should not be jeopardised by any long delay. I hope, therefore, we may have some answer from the Chancellor as to what the Government propose to do in that matter. Let me take the other side. The Chancellor says that any remission of Income Tax is always spent on luxuries.
Not "always." I certainly agree. I have to that extent misrepresented the right hon. Gentleman, but he said it was 20 to 1 that such money would be spent in luxuries. What are these luxuries? Are they motor cars—the price of which he is already endeavouring to raise so that these people should not spend so much money upon them? But, seriously, supposing a man in consequence of a reduction of his Income Tax, employs another gardener, does the Chancellor of the Exchequer consider that is a case of pernicious employment and that it is taking away a man from a useful industry —let us say from the building industry? If so, will he take steps to see that these men who are not to be employed in gardening will be received into the building industry. [Laughter.] The subject lends itself, perhaps, to frivolity, and hon. Members are always ready to tread that path. Supposing this expenditure leads to the employment of more dressmakers; have not the Labour party in their manifesto denounced the schemes of the late Government particularly, because they found no employment for women? Is it not the Labour Government who have hitherto been unable to produce any scheme whatever for the employment of a single woman. If a few extra women are employed in dressmaking, are they going to say it is a pernicious employment, and one which the Chancellor of the Exchequer should do everything in his power to discourage? Of course, the fact is that the savings which are accumulated by reason of the remission of Income Tax are not spent on luxuries for the most part. A great deal of them are saved and are afterwards invested in industry, which in turn gives more employment.
In that connection, I should like to raise again the point made by my right hon. Friend the Member for Hillhead (Sir R. Horne) in his speech on the Budget. My right hon. Friend called attention to the taxation of reserves in business, and he suggested that since industry is replenished out of these reserves, some special treatment might properly be given to them. To that the Financial Secretary made two replies. His first was that the cost would be more than the Treasury could afford, and would amount to from £25,000,000 to £50,000,000 a year. That was on the assumption that total exemption was under consideration, but my right hon. Friend never said anything of the kind. What he suggested was that same special treatment should be given to these reserves. If total exemption is more than can be afforded, do not let us consider that, but something less. For my part, I think something very much less than that would be sufficient to give just that encouragement and inducement which is required to get more money put aside for the reconditioning of factories and their extension, instead of being distributed among the shareholders, as, of course, there is always so much temptation to do. The second reply of the Financial Secretary was that the Treasury were concerned merely with profits and not with the disposal of profits. That is a perfectly sound principle, but my contention is that money put aside in a business for the particular purpose of enabling the directors to replace obsolete machinery by up-to-date machinery, or to extend factories, is not really profit and ought not to be counted as profit. It is really in the same class as that allowance for depreciation and repairs which is already recognised by the Treasury in computing the profits upon which Income Tax is paid. The Chancellor may say: Is not your proposal simply equivalent to increasing the returns for repairs or depreciation? Perhaps it is in one sense, but there is the practical difficulty of putting a plan of this kind into operation. You may find these reserves which have escaped some part of the Income Tax afterwards brought back again into profit and distributed among the shareholders.
I am sorry the hon. Gentleman is not clear. He can call it what he likes. I am discussing that part of the surplus at the end of the year, which is now called profit and is taxed as profit, but which is not distributed among the shareholders being put back into the business. I am suggesting it would be a wise thing to give some special treatment to those sums providing always that the privilege should not be abused. [HON. MEMBERS: "Hear, hear."] Of course you must provide against that. I quite agree. You must provide, whether it be distributed as cash or as bonus shares, that this money, when taken out of reserve and distributed, should bear its proper proportion of Income Tax, and I would not- mind if what they had to pay then was greater than the rebate which they had received. I suggest that it would be a wise and statesmanlike thing to give some special consideration to sums put aside for that purpose, and that this time, above all others, is one when you should give it serious consideration, because there is no doubt that our competitors on the Continent are to-day equipped in their factories to a point higher than they have ever yet reached, and one which is going to mean the very severest kind of competition when they once more come into the market. I hope the Chancellor, when he comes to reply, will be able to tell me that he will give some further consideration to this matter, which is not raised now for the first time, but which, I think, has been treated perhaps rather too cavalierly and not by one party alone—by our party as well as theirs.
I think it could be done very simply, and I do not see any particular difficulty. You would have to provide that any sum brought back again out of reserve and distributed among shareholders, whether by way of dividend or of bonus shares, should become liable to Income Tax at a rate which would be settled in the course of the discussion. Whether you should take that rate simply at the amount which had actually been deducted from the tax when it was first put into reserve, or whether you should take some other and higher rate, is a matter of detail which could be settled in discussion.
There is one other matter upon which I should like to say a few words. I pass now from the question of the distribution of the surplus to perhaps an even larger question, and. that is whether the Chancellor of the Exchequer is justified at all in distributing the whole of the £34,000,000 and keeping only £4,000,000 in reserve. Many good judges think that he has been unduly optimistic as regards his Estimates this year. They think he has reckoned too much upon arrears of hack taxation which he hopes to collect, and they think, on the other hand, that he is placing undue weight upon the economies which he hopes to effect in order to meet new expenditure. I think we must remember that in the last two years we found ourselves in possession of very substantial and unexpected surpluses. The resilience in matters of trade in this country is so great that my opinion is that, in all probability, the Chancellor will get his revenue, and although I doubt, myself, the possibility of his making any very large economies without making a complete change of policy, en the other hand, these new schemes requiring expenditure are taking so long in hatching that I think he is right also in assuming that they are not going to make any very large demands upon him in the course of the present 12 months. But, of course, in considering a Budget, you have not only to consider what is going to happen during the current year; you have to consider also the liabilities which you are building up for yourself in the future, and when I come to the following year and the years afterwards, I feel some real concern as to what may be the effect of the Chancellor's finance this year upon the general credit of the country.
The Chancellor told us that we cannot expect to obtain again anything like the £30,000,000 which this year he is getting from Special Receipts. I think that must be obvious, because these Special Receipts are merely in respect of the surplus war stores being sold by the War Disposal and Liquidation Commission, and it is not possible that we should go on really any longer getting any substantial sum from that source. Then, again, the remissions of taxation which he has estimated this year are going to be a much heavier burden next year and the year after, and I think he allowed for that another £6,000,000 next year and £14,000,000 in a full year. Then there is the amount to be expected from the Excess Profits Duty, which he put at £8,000,000 this year. I should like to know what he would put it at the year afterwards, or whether he thinks that after the current year there is going to be any further substantial sum to be obtained from arrears of Excess Profits Duty. Altogether, taking the items that I have mentioned alone, it would appear that we shall have to reckon upon a diminution of revenue after this year of something between £40,000,000 and £50,000,000.
I imagine that even this Government will get something going by the year after this. There are those four big items of housing, unemployment, old age pensions, and widows' pensions, none of which have been provided for in this Budget, and the cost of which has been variously estimated, but always at a very considerable sum. Then, again, there is the cost of armaments. Hon. Members opposite have already found out that the diminution of armaments, about which they talked so freely when they were in opposition, cannot really be brought about without a general agreement on disarmament among all the principal nations, and although we all live in hopes that may come about, there is nothing in the present situation of the world to lead even the most sanguine to imagine that it is going to be an accomplished fact in the near future. Therefore, you will probably have a further cost of armaments in the year after this, and, putting all these things together, it would appear that, in addition to the diminution in revenue to which I have called attention, we must expect an increase of expenditure, which I should hardly think would be less in amount.
This matter was brought forward in the Debates on the Budget. It was mentioned by my right hon. Friend the Member for Colchester (Sir L. Worthington-Evans), and it was repeated, with a unanimity which the Chancellor thought was rather sinister, by the right hon. Gentleman the Member for Rusholme (Mr. Masterman), and what was the Chancellor's reply? He snapped out that they were both quite wrong, but did not give any indication as to particulars in which they were wrong, and the only point to which he directed his attention was to what he said was an error in the calculation of my right hon. Friend as to the amount that would be required this year in respect of housing. That was quite an irrelevant reply, because my right hon. Friend and the right hon. Gentleman opposite were not talking about this year but about the future.
I read the phrase very carefully, and I think the right hon. Gentleman will find that they were making calculations as to the future, and that they both estimated that after the current year there would be a deficit of something like £100,000,000. The Chancellor commented on it himself, and said it was extraordinary that they should both have arrived at the same figure. I want to know whether he will, this afternoon, carry out the undertaking which he then gave, when he said there would be opportunities for substantiating his claim that this was1 a sound Budget and that it was sound, not only for this year, but for any future years to come. I would ask him, therefore, definitely to tell us, if the calculations of these two right hon. Gentlemen are wrong, where they are wrong, how much they are wrong, whether he anticipates that after this year there is going to be any serious deficit to be made good, and, if so, how he proposes to make it good without additional taxation. I notice that the other day, in a heart-to-heart talk with bankers in the City, the right hon. Gentleman said he hoped they would always regard him as their friend, and he stated that his guiding policy was reduction of taxation so as to lighten the burden upon industry. I cordially appreciate that sentiment. I trust that he will carry it out, and I should be glad if he could give us some information this afternoon which would convince us that he has not only the will but also the power to do so in the future.
I have listened, as has the whole House, with great interest to the speech made by my right hon. Friend the Member for Ladywood (Mr. N. Chamberlain), and, if he will allow me to say so, he has put some very pertinent questions to the Chancellor of the Exchequer, to which I think the whole House will desire to hear what the Chancellor's answers are going to be. But my object in intervening is not so much to criticise the details of the Budget as to
take the opportunity, for which the Second Reading of the Finance Bill is an appropriate occasion, if the House will allow me, to make a more general survey of our financial position. It is well that we should do so at least once a year, without any very specific or particular reference to the proposals of the Chancellor of the Exchequer for the time being, and that survey ought to be undertaken—here I quite agree with my right hon. Friend—with a view to the requirements or the prospects not merely of the existing financial year, but of the years which are to follow. I may, perhaps, be allowed to quote something which I myself said when I was Chancellor of the Exchequer a great many years ago—I think, in the year 1907. I said then, and I believe it to be as true to-day as it was then:
It is a mistake to treat the annual Budget as if it were a thing in itself and not as a necessary link in a connected and coherent chain of policy.…We cannot afford to treat each year's finance as if it were self-contained. The Chancellor of the Exchequer ought to budget, not for one year, but several years.
I think that is a perfectly sound principle, and one that is applicable to all Chancellors of the Exchequer, under all conditions. If, as the present Chancellor knows, I am in agreement with him in approval of the general lines of his Budget, the point at which it seems to me to he most vulnerable and most open to criticism is that I doubt whether he has sufficiently kept that consideration in view. Even if he realises the comparatively modest surplus for which he has budgeted, I see a prospect of very speculative and haphazard provisions for the necessities, incalculable at this moment as to precise amount, which we all know must certainly and inevitably be confronted in the immediate future by any Chancellor of the Exchequer, to whatever party he may belong.
The days of windfalls are over, or very nearly over. In regard to the arrears, on the collection of which I gather—though, I confess, with a vague and nebulous general impression—that the Chancellor of the Exchequer is relying, I think the House will he very glad to have this opportunity of knowing whence they are to be derived, and at what amount they are estimated. Again, my right hon. Friend who has just sat down referred to the loss of income due to the remission of taxes. In principle, I think that the Chancellor of the Exchequer has chosen the taxes which ought to be chosen, which press most hardly on the community. But these remissions, wise in themselves, and politic in themselves, are of such a kind that, of necessity, the main burden of the loss is felt, not in the present year, but in the years immediately following. I should certainly not be doing justice to my own apprehensions of the future if I did not preface what I have to say with a note of warning. May I, in that connection, refer to a matter, which I do not think has been referred to so far, in this discussion, and which is of the utmost importance? Our national balance sheet—it is no blame to the right hon. Gentleman, but it is a blame, if, indeed, it be a blame, he should share with all his predecessors—is misleading in one most important respect. It does not include the amount which is raised from the taxpayers of the country by the local rates. That amount in the last year—I have not the precise, figure, but it is about right—was over £150,000,000.
I am a little belated, perhaps, in my figures. That makes it still more serious. You really cannot estimate, you cannot get a really satisfactory balance sheet of the revenue and expenditure of the country, unless you take into account that which does not appear in the Budget at all.
I am not going into the criticisms which have been made as to whether or not the Chancellor has been oversanguine in his estimate of Revenue, but I want to press this point very strongly upon him. One of the least satisfactory features of this Budget is to be found in the item of Expenditure on armaments and defensive purposes. Actually the issues from the Exchequer last year for all those purposes amounted to £105,800,000. The Chancellor's estimate for the current year for the same services is £115,311,000—an addition of £9,000,000. I have, as the House and my right hon. Friend knows, no disposition to pare down defensive expenditure to danger point, and, in regard to the Air Service, I have more than once expressed the view that we were spending not too much, but too little. I cannot but think, if the right hon. Gentleman applies—as I am sure he will apply, with the assistance of his colleagues—a scrutineering and jealous eye on this item of national expenditure, he may reduce that addition of £9,000,000 by a very substantial amount. That will not only help him to balance his Budget, and obtain his small estimated surplus, but it will give something like reality in the eyes and the judgment of the world to the long series of lip-service tributes which we of all parties have paid in this House to the cause of general disarmament.
I want to look at the larger features of our financial situation, and I will take, first of all, that which dominates the whole, namely, the condition of our Debt. The total Debt in the year of the War, 1914, was, roughly, £650,000,000. By 1920, when it had reached its highest point, it had risen to £7,820,000,000, and it is this year £7,700,000,000. I think those figures are right. Of the constituent elements of that, there is one which is of particular significance—I mean the Floating Debt. I am not for the moment dealing with Temporary Advances, but Treasury Bills, in the year 1914 were only £13,000,000. In 1020 the figure had risen to £1,107,000,000, and in 1921 to £1,120,000,000. What I myself believe, and have always said, is that it was a. wise and judicious policy on the part of successive Chancellors of the Exchequer by which that figure was reduced in 1922 to £877,000,000, and I think it has gone down to about £590,000,000. That was a substantial improvement in our financial position, because it was a sort of floating mortgage on the trade of the country, which, I think, produced damaging results, and we may greatly encourage ourselves with the strenuous and successful efforts which have been made to curtail this amount.
But, satisfactory as that is, there are one or two other points in regard to the Debt situation to which I should like for a moment to call the attention of the House. The external Debt now consists, to all intents and purposes, of what we owe to America That is a really serious item. I have always for myself, without criticising this or that detail, recognised that settlement as an important factor, both in the maintenance of our credit in the world, and as a step—and a very serious step—towards the amelioration of the international situation. There are one or two other points in regard to the Debt which, I think, are of interest, and which ought to be carefully borne in mind. Before I come to them, let me note, also, as a matter of satisfaction—because I am dealing with the general financial situation—the interest charge has been reduced by, I think, £40,000,000 since 1919. I am satisfied myself, that if we maintain our Sinking Fund, and, as I think, increase it, as we ought to do—because I am an absolutely unrepentant Sinking Fund man—and protect it against raids, and if we continue the process of conversion, with which a very satisfactory beginning has been made, and lower the interest rates, so far as I can form a judgment, there is no reason in the next 10 years why we should not reduce our annual charge by at least another £20,000,000 a year.
That raises two questions of very great interest. The first is the relation of our National Debt to our National Income. That income is estimated by good authorities at something like £4,000,000,000—that is the latest estimate I have seen—from which it follows that the Debt is not quite two years' purchase of the national income. The present annual burden of the Debt is about 9 per cent. of the national income. It is a curious fact—I will not call it a coincidence—that the proportion of the Debt to the national income is almost precisely what it was at the end of the Napoleonic Wars. I might be tempted at this point to stray into the twilit territory of currency. I will not do so, because we all know that is a line of country in which the steadiest heads are apt to turned, and the firmest seats to be upset. It is infested, in Milton's words, with
Gorgons and Hydras, and Chimæras dire.
and problems which notoriously rival the tender passion itself in disorganising and disintegrating man's intellectual being. I will, therefore, resist the temptation, strong as it is, of a little adventure in that direction, and reserve it for another occasion. I will content myself with saying that in this matter I am an old-fashioned financier. If we continue to follow, as I hope we shall, the safe and sane lines of our present monetary policy, there is no reason why London should not retain, as there is every reason to believe she will retain,
her primacy in the financial markets of the world.
The other question in relation to the national Debt is a very interesting one. How is the Debt held? According to the opinion of the most competent experts out of a total of £7,700,000,000, the amount held by private persons does not exceed about £2,300,000,000. I note that in passing, because it has a bearing upon the project which is now in a state of happy hibernation—I refer to the Capital Levy. I pass from that. I cannot help saying—and I hope the House will agree—that the result of the survey of the Debt situation is, on the whole, very satisfactory. It shows that this country has been more successful than any other belligerent country in reducing its debt, and in going on imposing taxation—unpopular as taxation necessarily must be, particularly in times of depression and unemployment—imposing taxation for the purpose of making an adequate annual provision for the repayment of the interest and for the redemption of capital. I pass to another aspect which may be called the general financial situation.
The right hon. Gentleman who spoke a few moments ago said very truly that, notwithstanding the great efforts we have made, we have also made very substantial remissions of taxation, both direct and indirect, since the War. I have not all the figures, but for the year 1922–3 the amount of tax remission, under Customs and Excise—what is commonly called indirect taxation—the figure is £5,000,000, and in direct taxation another £40,000,000. In 1923–24 the remissions in indirect taxation—beer duty principally —amounted to £13,250,000 in direct taxation £20,900,000. In the present year, the right hon. Gentleman is going to reduce the Customs and Excise substantially by £30,000,000—I think the figure is £29,800,000. On the score of direct taxation, that is to say, Corporations Profits Tax and Inhabited House Duty, he is going, I think, to reduce it by another £4,000,000. That shows very substantial remissions both in direct and indirect taxation during the time.
That leads me to say one or two words about the question referred to by the right hon. Gentleman just now, and always referred to on these occasions, the relation between direct and indirect, taxation. There was an old rule of thumb prevailing when I was at the Treasury, which was done homage to, more or less completely, by successive Chancellors of Exchequers that they ought to be in the proportion of 50-50, that is to say half and half. If the figures are taken during 10 years from 1898 to 1908, it will be seen that that proportion was substantially maintained. But later the figures were tilted, and the Budget of 1909, associated as it is with my right hon. Friend the Member for Carnarvon Burghs (Mr. Lloyd George) tilted it still further. Direct taxation for the first time, took first place and indirect taxation took second place. I confess I do not attach very much importance myself as a whole to this, and for this reason, amongst others, it is impossible to draw a scientific boundary line between the two. There are one or two items which are clearly on the one side, and others which are equally clearly upon the other. Customs and Excise, for instance, are put under indirect, and Income Tax, Super-tax and Death Duties are put under direct.
In the matter of Stamps, it is not altogether easy to say to what category they belong, because stamps are not a tax upon a commodity but upon a transaction. It is not altogether easy even for a skilled economist to say whether they ought to be treated as direct or indirect. I think, however, the dominant opinion on the whole now is that it is better to treat them as indirect taxation, but it does not very much matter so long as you adopt for comparison the same basis of calculation. I have here some figures which I think are interesting in this connection. In 1912–13 the balance was in favour of direct taxation, being 52 against 47. That was in the year before the War. In 1921–22, the year after the War, the proportion had altered to: direct taxation, 63; and indirect taxation, 40. For the present year, according to the Budget of the Chancellor of Exchequer, I make out the proportion to be, direct, 60; and indirect, 40. I think it works out at that. The direct has gone slightly down in proportion, and the indirect has gone slightly up. I think those figures are substantially correct.
It does not really, as I say, so much matter so long as you adopt one method. It is like the distinction made between a tax on capital and a tax on commodities. It is often ignorantly assumed that the taxation on capital falls entirely upon the well to do, and that taxation imposed upon commodities falls on those who are not well to do. That is not the case. Those who look at it this way do not realise how much of what is called capital represents the savings of the working classes. Take building societies, Take co-operative societies. Take war savings. Hon. Gentlemen opposite who know something of the textile industries, cotton and so on, know that in some towns the mills, the spinning mills and, I believe, the weaving mills, are very largely put up and equipped by the savings of the working people.
Quite. Therefore, it is open to misunderstanding. There is no correspondence and no real comparison in point of fact between the two. These things are ultimately to he determined, not by verbal distinctions: The real question is not whether it is direct or indirect taxation, but whether it corresponds to practical rules of justice and equity. In regard to that, there is the old platitude of every Chancellor of Exchequer that in my experience has always been repeated at the Box opposite, that taxation should be in proportion to capacity to pay. That, however, though a blameless is not a very instructive rule. I am sure I shall have the assent of the Chancellor of the Exchequer that, whether you are dealing with indirect or direct taxation, we should try to exempt from it the necessary minimum, That is a broad distinction between the taxation of necessary articles of food, tea, sugar, coffee, etc., and what, I have called sumptuary taxation, which includes alcohol and tobacco. I am glad to see the Chancellor of the Exchequer has recognised that, in reducing indirect taxation, he should make, as a first choice those necessary things. John Stuart Mill pointed out long ago that Income Tax should not be exacted, be exempted, if at all possible, from what we may call the necessary minimum for a man and his family. We have recognised that principle, but much is still to be done in order to make the Income Tax fair.
Let me add that one of the most important rules to observe is that we should not tax the raw materials of industry. I think sugar is a very good illustration because it falls under both categories. It is a necessary food, and it is also the raw material of important industries. I have always held that view, and I have acted upon it, and nobody, I believe, has reduced the Sugar Duty more than I have done. My right hon. Friend (Mr. Baldwin) refused to deal with the Sugar Duty last year, and his justification was that he did not think that under the fluctuating conditions of the sugar market the reduction would reach the consumer. Whether he was right or wrong I do not know, but at any rate the Chancellor of the Exchequer has selected that article as the first and the most expensive to the Exchequer of all his forms of reduction.
On this point, I want to have a word with the Chancellor of the Exchequer himself, In 1913, which was the last but one of the Budgets introduced by the right hon. Gentleman the Member for Carnarvon (Mr. Lloyd George), the present Chancellor of the Exchequer—he had not then entered the warm precincts of the Treasury, and was still a free lance—moved an Amendment in Committee to our Finance Bill to this effect: To substitute for the taxation of food further direct taxation on the unearned income of large estates in order to get rid of taxation of food altogether. He has not proposed that to-day. I am not suggesting that he has changed his aspirations or ideals, but the argument he used is worth recalling to the attention of the House. What the right hon. Gentleman then said was that the working classes contributed £60,000,000 to the annual revenue of the country, and he admitted as what he called a set-off to that £60,000,000 about £40,000,000 as services paid for by the Exchequer for the benefit of the working classes themselves, and he brought out a balance of £20,000,000 contributed by the working classes to taxation. I had to follow the right hon. Gentleman in the course of the Debate, and I pointed out that he had excluded from the services benefit which the working classes the Army, the Navy and the Civil Service and the cost of administration. I ventured to suggest that those things could not be regarded as being kept up exclusively for the benefit of classes other than the working classes, and I gather that my right hon. Friend is now of that opinion.
I am not saying this in any polemical spirit, hut it does raise an interesting collateral question which I do not think has been discussed in the House and which is worthy of immediate attention. That is the growth of our expenditure on what are called social services. I am not saying anything about what has happened since the War. I will take the 10 years before the War to show the. House what the growth in those services has been. In 1905–6 they cost the Exchequer mainly for Education, £16,000,000 and that was 11 per cent. of the total gross expenditure of the nation. By 1912–13—after six fruitful years of Liberal administration during which new items of social service in the shape of Old Age Pensions and National Insurance were introduced, the cost of which had to be provided for—the cost of those services had risen from £16,000,000 to £35,500,000, and the 11 per cent. of the total gross expenditure of the nation became nearly 20 per cent. for these services.
In the meantime, and these are instructive comparative figures, the cost of our defence services, which in 1905–06 was £62,000,000 or 41 per cent. of the gross expenditure, in 1912–13 had become £72,000,000 or 38½, per cent. of the gross expenditure. Of course, those figures have now to be largely revised. Next year we are to have the full programme of the present Government, and that must involve large additions to the cost of social service. I hope he will then reduce still further the expenditure on the Army and Navy.
I have one or two definite ideas which may seem to some people to have an extra conservative colour. In the first place, I am strongly of opinion that we ought not to relax but to strengthen and develop our provision for the repayment of Debt. I do not believe in the long run that we can do a greater service to the country and the prosperity of the country and the employment of those who are out of work. Next, of course, we ought to make a much more determined effort towards the reduction of unproductive expenditure. [HON. MEMBERS: "Hear, hear!"] We all agree with that and are ready to cheer it, but who is going to do it? The Chancellor of the Exchequer has told us more than once that the estimate on which this Budget is framed are Estimates for which he is not directly responsible, as they were inherited from his predecessors. I think that is all the more reason why he should take the sharpest pruning knife that is to be found in the armoury of the Treasury—and there are some sharp ones there—and attack with a ruthless hand this particular item which is now on the wrong side of his balance sheet.
I am going to make one other suggestion. Surely the time is now ripe for a re-adjustment of the relations between Imperial and local revenue. Nothing could be more irrational than the basis upon which our local revenue is now raised. The assessable value of a house is not the proper basis either for local or Imperial taxation; in fact, it is a tax upon house building. What are the difficulties with which you have to contend when you are seeking, and very properly seeking, to carry into practical effect a largo scheme of national housing? There are items of local expenditure which are necessarily adapted by the local authorities to a national standard, and which ought to be met out of national resources. I know that it is a difficult and complicated problem, but I hope, from some indications I have seen, that the Government are considering it, because you will never get a really honest, accurate view of your national resources and expenditure until this matter has been adjusted.
I want to add a final suggestion which is not my own idea, but which I think is well worth considering. One of the great arguments used in favour of the Capital Levy by its advocates was the necessity of doing more than any sinking fund, however ample and generous, can do for the reduction of the burden of Debt. The suggestion is that, without anything in the nature of a compulsory Capital Levy, the option might be given to persons who are in a position, and for whom it is convenient to do so, to hand over parts of the Debt in their possession, in return for a certificate of comparative exemption or reduction in the payment of their Income Tax for the following years. I am quite prepared to see the Chancellor shake his head. The plan has this great advantage, that it would enable people when most convenient to themselves, and least disturbing to their businesses and to their general interests, to make a solid contribution toward the repayment of Debt, and at the same time they would get in return a proportionate reduction or exemption on their direct taxation in the future. I throw out that suggestion for what it is worth, and I hope it will not be summarily dismissed without full consideration. On the main lines, as I have endeavoured to indicate, I see nothing in the present financial position of the country which ought to excite serious apprehension, and still less pessimitic views, as to the future, provided we maintain the wise monetary policy and the policy of reduction of Debt pursued during the last few years, so long as our unproductive expenditure is reduced, and our taxation re-adjusted on lines of real equity and justice.
I should not have intervened in this Debate, but for a statement that was made by the right hon. Gentleman the Member for Ladywood (Mr. N. Chamberlain) with regard to Clause 8 of this Bill, which deals with the withdrawal of the McKenna Duties. It will be within the recollection of the House that a few weeks ago I, with others, took up a certain stand with regard to the operation of these duties and their proposed withdrawal, and, as one who is keenly interested, I felt very seriously the remarks which we have heard with regard to the discharge of workmen. Representing, as I do, a trade union actively engaged in the motor-car industry, and having been employed in that industry all my life, I was, I confess, concerned with regard to the proposed withdrawal of these duties. After the discussion had taken place and the Division had been taken which gave power to the Chancellor of the Exchequer to make the withdrawal on the 1st August, I caused certain inquiries to be made through our general office and throughout the various branches in the country with regard to the threatened discharge of workpeople; and I am bound to say that, in so far as those figures are concerned, the industry to-day, from the workmen's point of view, is in a rather better position than it was two or three weeks ago. Statements such as we have heard from the right hon. Gentleman the Member for Ladywood, that the rumoured withdrawal of these duties has been responsible for throwing tens of thousands out of employment, are detri- mental to an industry which is struggling at the present moment, and is endeavouring to carry on to the best of its ability.
A statement was made last week by the hon. Member for Macclesfield (Mr. Remer). I have been endeavouring to find the hon. Member all clay, and I regret that he is not now in his place. In a Supplementary Question to the Minister of Labour on Wednesday of last week, following a question by the hon. and gallant Member for Bilston (Lieut.-Colonel Howard-Bury), the hon. Member for Macclesfield said:
Is the right hon. Gentleman aware that 300 men were dismissed last Friday at a large motor works in Lancashire? [HoN. MEMBERS: 'Which one?']."—[OFFICIAL REPORT 21st May, 1924; col. 2177, Vol. 173.]
I regret that the name of the firm does not appear in the official note, but it will be within the recollection of the House that the hon. Member for Macclesfield definitely stated that the name of the firm was the Willis-Overland Company, of Manchester. Having travelled to Manchester on Friday night, on Saturday I got into touch with the management of the Willis-Overland Works; and they stated that, as regards the discharge of 300 workpeople, there was no truth in the statement at all. They stated that, as I perfectly well knew, it had been their custom occasionally, when work v as not forthcoming, to turn some workers off for a period of two or three days, and that had operated on the previous Friday to some small extent; but they promised to go into the figures and let me know definitely. I have received a telegram this morning which states that less than 50 men of all grades were affected, and I am in a position to state that the majority of those men were re-started two days later.
There is such a thing, even in politics, as playing cricket, and in the interests of this great industry I appeal to hon. and right hon. Members opposite to play the game and allow the industry to take care of itself. It is manifestly unfair, both to the employers and to the workers, in this industry in the country as a Whole, to find the campaign which has been carried on for the last five or six weeks, affecting the industry so injuriously. I witnessed an incident in this House when the Chancellor of the Exchequer made his speech some weeks ago on this particular part of his Budget. He said that a gentleman engaged in the motor-car industry had given a statement to the Press to the effect that 40,000 workpeople directly and indirectly connected with his firm would be affected by the withdrawal of these duties, and I noticed that the gentleman who made that statement was sitting in the Visitors' Gallery. The Chancellor of the Exchequer stated that he had made inquiries, and that, instead of 40,000 work-people, the number was, I think, round about 4,900. I noticed two hon. Members opposite make their way to the Gallery to investigate. They consulted the gentle who had given the statement as to the number being 40,000, but they never came back to repudiate the statement of the Chancellor. That, I repeat, is not playing the game; it is not playing cricket. I appeal to all parties in the Douse not to indulge further in tactics of this kind, but to allow this and every other industry to look after itself without interference in the direction I have indicated. I am sorry to have taken up so much of the time of the House, but I felt that it was absolutely necessary to give first-hand information from my own knowledge with regard to this matter, and to endeavour to put a stop to this practice, which, unfortunately, is a rapidly growing one throughout certain sections in the country, and it does not only apply to workpeople.
I do not quite know what the hon. Member for Gorton (Mr. Compton) meant when he said that the Willis-Overland Company had not dismissed their hands. I do not know that that has very much to do with the McKenna Duties, because I understand that the Willis-Overland Company is a firm importing from the United States of America. I do not want to go into that question at the moment, though I will do so in a minute; but, before dealing with the question of the McKenna Duties, I wish to say one or two words on the speech of the right hon. Gentleman the Member for Paisley (Mr. Asquith). He threw bouquets at my right hon. Friend the Leader of the Opposition, and said that he agreed with the Debt settlement which my right hon. Friend had fixed up with the United States of America. I do not know what the right hon. Gentleman the Member for Carnalvon Boroughs (Mr. Lloyd George) thought when he heard what the right hon. Gentleman the Member for Paisley had to say on that subject, because I understand that, in describing that settlement, he called it an appalling settlement. I am afraid, therefore, that the two voices of Liberalism are not altogether in accord on that particular subject.
I want this afternoon, if I may, to say one or two words on the McKenna Duties, because, although they have been debated quite recently, I was not successful in my endeavour to get in and speak on the subject on that occasion. I voted in favour of the retention of the McKenna Duties at the present time, although I stood, both at the last election and at the one before, as a Free Trader. It is as a Free Trader that I want to talk about the McKenna, Duties. I know that I was not altogether popular on this side of the House in standing, as I did, as a Free Trader. I did not stand in that capacity because I have any special love for the word "free," whether it be free beer, or a free breakfast table, or free anything else. I think it rather sounds as if you were going to get something for nothing, which is not really what we Free Traders hope for. I stood as a Free Trader because I thought, and I think that most hon. Gentlemen on the other side of the House will agree with me, that that policy, broadly speaking, is the best policy for the country. After all, we live on an island, and we import a large proportion of our food. We import 70 per cent. of our food. We also live on our export trade for that reason, because we cannot import either food or raw materials into this country unless they are paid for in some way or another.
Unless we export goods as cheaply and as efficiently as we possibly can into the markets of the world we shall be unable to get the raw material and food which we want, as we are not self-supporting in that way, and it is for that reason that I stood at the last election as a, Free Trader. There are three principles that I hold as a Free Trader. The first is that you must not have a tariff which is going to increase the cost of living of the working people, because if you do, you are going to make it more difficult for them to produce goods to sell in the markets of the world in exchange for the food and the raw material which you have to get into the country. The second danger of Protection is to my mind that if you have a protective wall round some particular industry, the effect may quite possibly be that you will create a condition where the manufacturer is going to exploit the consumer. The third danger is, that if you restrict the import of goods, you are going to restrict exports.
I think I have given a pretty fair explanation of Free Trade principles as I see them, and as I think hon. Members opposite see them too. I want to examine them from the point of view of the McKenna Duties and how they affect them. First, the increased cost of living and the difficulty of exporting for that reason. Do the McKenna Duties in effect increase the cost of living so as to make it more difficult for the working people to produce things cheaply and efficiently and sell them in the markets of the world? I say most definitely no, they do not, because the McKenna Duties—I am thinking more about the duty on motor-cars than anything else—are duties on luxuries. They are duties on something which is not going to increase the cost of living and make it more difficult for us to export into the markets of the world. The hon. and gallant Gentleman the Member for Leith (Captain W. Bean), referring to these duties, said:
For one of the instruments of your business you will pay an additional £40 or £50 to go into the private pockets of a certain group of manufacturers in this country,"—OFFICIAL REPORT, 13th May, 1924; col. 1227, Vol. 173.]
That quotation brings me to my second point. Is it a fact in the Free Trade argument that the consumer is actually being exploited by the manufacturer? I do not think that is so, because 75 per cent, of manufacturers in the motor car industry are not paying a dividend to-day. Only six motor firms are paying a- dividend. In 1923 the motor manufacturers of the country did not make a profit of £1,000,000. In 1922, £27,000,000 worth of motor cars were bought in this country, of which £20,000,000 were British and £7,000,000 were imported. In 1923, £29,500,000 worth of cars were bought, of which £24,000,000 were British and £5,500,000 were imported. Assuming that the Free Trade argument is correct, that the duty is paid entirely by the consumer, of the £24,000,000 paid for motor cars last
year the sum that ought to have been paid was £18,000,000. I am not saying that is correct. I am taking the full Free Trade argument that the duty is paid by the consumer, and if it is correct, a subsidy of £6,000,000 has actually been paid to the motor manufacturing trade. I have just said that the profit made by the motor manufacturers in 1923 was only £1,000,000. Therefore, if my previous argument is correct, £5,000,000 of that subsidy which is assumed to have been paid to the motor car industry went to the workers in the industry. How did that happen? I think it can be explained to a certain extent in this way. In France and Italy the wages of the engineers vary from 5d. to 7d. an hour. We pay our skilled engineers in different parts of the country 1s. 6d. to 2s. 3d. an hour. [HON: MEMBERS: "Where?"] I do not know the exact place. Do you say we do not?
No, that is the ordinary pay. What is happening is that we are subsidising the workers in the industry to the extent of—I am assuming these figures; I do not say they are correct in the least in the world as far as the £5,000,000 is concerned. You think all the tax does not go to the consumer, presumably. I agree with you rather. The result is that you are subsidising, at least to a certain extent, the workers in this country to keep their standard of living at a certain height as against the standard of living of the workers in Italy and in France. I think you want to do that. You do not want to try to reduce the standard of living to that of the workers in Italy and in France. The third point is the restriction of imports and the consequent restriction of exports. As far as that problem is concerned—and I think it is the basis of the Free Trade argument—we have rather a bewildering variety of views on the part of Free Traders in this House. I am glad to see the hon. and gallant. Gentleman the Member for Hull (Lieut.-Commander Kenworthy), and I notice he is making a moral gesture to the Government Benches.
As the hon. and gallant Gentleman has made A personal reference to me, which I do not understand as being relevant to the Budget, is he aware that this colour [red] is the Conservative colour in certain parts of the country and the Liberal colour in other parts? It has no political significance whatever. I am wearing it out of compliment to the lady who gave it to me.
This is what the hon. and gallant Gentleman had to say about the McKenna. Duties:
It is said they do no harm to anyone, that they are very good, and so forth.… I think they do harm in this way, that for every ear, or clock or watch or gramophone that they keep out of this country they produce direct unemployment in two directions, because these goods would be imported and paid for by other manufactured goods from other countries.
That is perfectly good Free Trade argument. A little later on he went on to say:
"I admit that the motor car trade, in particular, have a grievance."
After that he said:
"I suggest.… that, instead of charging £1 tax per horse power in the case of British ears up to, say, 15 horsepower, you should charge a less tax, possibly 10s. That would be a direct incentive to people to buy British light cars."—[OFFICIAL REPORT, 1st May, 1924; cols. 1921–22, Vol. 1721]
I think that is exactly the same thing. If you are going to put a smaller tax on British cars you are going to encourage people in this country to buy British cars at the expense of foreign cars, and you have exactly the same effect, that you are not going to import so many foreign cars as you did before. In other words, the hon. and gallant Gentleman is advocating a form of Protection, which I think is worse than the McKenna Duties.
It was only a temporary expedient that I suggested to tide the manufacturers over an admittedly difficult time, though I think their fears are exaggerated.
I agree with the hon. and gallant Gentleman, but I think the tiding over should be done by allowing the McKenna Duties to lapse gradually instead of lapsing at the end of three months, which is more or less the same idea as that of the hon. and gallant Gentleman. The other argument of the Free Trader is this: The Chancellor of the Exchequer tells us, first of all, that the motor car trade would develop just the same if there had not been any Protection. He then went on to ask if the duties had stopped imports, insinuating by the answer which he himself gave that they did not do so. He quoted the figures for 1913, which were 14,728, and for 1923, which were 30,025, assuming by his argument that the McKenna Duties had not in effec7, restricted the importation of foreign cars. He went on to say that the effect of the duties had ceased to be protective. After telling us that the duties had ceased to be protective, he told us that they had not stopped imports, and then he goes on to take them off. That seems to me to be illogical on the face of it. Have these motor car duties restricted the importation of cars into this country? I do not think anyone can say "yes" or "no" to that question. What they have done, undoubtedly, has been to increase employment in the motor car industry. I agreed entirely with the right hon. Member for Paisley when he said that the McKenna Duties were put on not for a protective purpose but to save shipping, and also to save, to a certain extent, the American exchange We do not want to know why the duties were put on, but what effect have they had. It does not matter whether they were put on for one reason and another thing has happened. What we have to decide is whether they have done good or harm. When we have decided that question, we can decide whether we shall take them off now, or in two years' time, or gradually.
I think hon. Members opposite will agree with me when I say—they can look at the figures if they like—that the McKenna Duties have increased the number of employés in the motor ear trade in this country. There were four times as many people employed in 1923 as in 1914 in this country. The question is, will the removal of the duties harm the workers and manufacturers in this country? The right hon. and gallant Member for the Isle of Wight (Major-General Seely) told us, in a most admirable speech as a Free Trader—I am speaking as a Free Trader—that 23,000 people were likely to be unemployed as the result of the removal of the McKenna Duties. I want hon. Members opposite to think of the state of the post-War engineering trade. During the War a large number of individuals were put into the engineering trade who would not have been put into that trade had it not been for the War, and a large amount of machinery was put into the engineering trade during the War which would not have been put into it had there been no War. As a result we have a large amount of capital in the skilled artisans who have been put into the engineering trade during the War, and we have a large amount of capital in the actual machinery which was put into the workshops during the War. Are we going to risk getting rid of a certain number of skilled people, whom we have taught engineering, and scrapping also machinery which was put into the workshops during the War? Are we prepared to risk that, for a fetish, a theory, a doctrine?
I do not think that is right to give only three months' notice to the people engaged in the motor car industry of the withdrawal of the duties. As a Free Trader, I am anxious to see the McKenna Duties removed when the time conies for their removal, because they are absolutely contrary to the principles of Free Trade; but I do not think they should be removed at the present time on three months' notice. Our whole argument as Free Traders is, that if people are taken out of the motor car industry they will be put into other industries to manufacture goods which we can export to the markets of the world. Do hon. Members opposite honestly think that three months is a long enough period in which to take people from the motor car industry and put them into other industries and enable them to carry on, without a great deal of hardship and unemployment? I do not think that that is the right way to act. The present is not the right time for taking off the duties. The right hon. and gallant Member for the Isle of Wight says that these duties should not be taken off so quickly, within a period of three months. Mr. Churchill, whom no one can accuse of being anything but a Free Trader, takes the same view.
It may be. I do not mind whether the duties are taken off two years hence, as was suggested by the right hon. and gallant Member for the Isle of Wight, or whether they are reduced gradually, as has been suggested on this side of the House, but I rather favour the suggestion that they should be reduced gradually. One of the principles of Free Trade is that Protection leads to a condition where the manufacturer is exploiting the consumer. If it comes to a condition in this country that the manufacturer is making large profits and, in effect, exploiting the consumer, I should say most certainly that the duties should come off. If we reduce, the duties by 10 per cent. each year, that would mean that we should have taken them off in two and a half or three years. We should then give the workers in the industry a chalice of getting other employment. They will not then, necessarily, need the duties, because they will have adjusted themselves to the standard of living and, possibly, the French and the Italians may have come up to our standard. At any rate, the workers would by that time have had a chance of getting into a condition where they could get employment in other industries and adjust themselves to the new conditions, rather than our giving them three months' notice now, and practically telling them that the duties are to be taken off three months hence and that it is no business of ours whether they get other employment or not. I should like to make an appeal to the Chancellor of the Exchequer, but I am sorry to see that he is not in his place. I think he ought to be in his place during this Debate.
The statement of the hon. Member opposite is not correct. On a point of Order. When an hon. Member makes a statement that a right hon. Gentleman has been absent for two hours and, as a matter of fact, he has only been absent 10 minutes, is it not necessary for the hon. Member immediately to withdraw words, which are not correct, but are untruthful?
The right hon. Member for Ladywood (Mr. N. Chamberlain) told us that the Chancellor of the Exchequer had gathered together all the flowers for bouquets and presented them to himself. As far as I represent the City and financial interests, I can say that they desire to lay a tribute at the feet of the Chancellor of the Exchequer for the Budget, which meets with the general approval of the City. It is, from our point of view, a Liberal Budget. It carries out the mandate which was given to Liberals to bring in some reduction in the cost of the breakfast table and to give some relief to the poorest part of the community. On the one hand, it lops off all that putrid policy of Protection which should be dead and damned, and, on the other hand, it lops off that speculating policy of metaphysics, undigested and impracticable, namely, the policy of the Capital Levy. It, therefore, steers the straight course that Liberals would have it steer and is to all effects and purposes a Liberal Budget.
That is not the only pride that Liberals take in the Chancellor of the Exchequer and his Budget. It is Liberal work that made it possible, and that gave the Chancellor of the Exchequer the position he now occupies. It was Liberal work of years and generations that has swept away privilege, and given every man an equal opportunity. The Liberal policy has been to extend as far as possible the sphere from which the nation may choose those who seek the privilege of doing the work of the nation, and the opportunity of choosing the most able of those who wish to serve it, and among the ablest servants that have come forward out of the last Election we may class the Chancellor of the Exchequer and his excellent lieutenant. I wish I could say the same of any other Ministers who sit on the Government Bench. When one looks round and sees what is given to us, one feels that our Liberal work is not finished, and that we must go on.
I want to thank the Chancellor of the Exchequer for the splendid fight he made to sweep away the pretence and humbug of the agitation for the McKenna Duties, and to bring the whole matter into the light of day, and to bring it, therefore, to ridicule. The Chancellor of the Exchequer, having risen from the ranks of the Civil Service, understanding all the details of finance and fighting against, financial fallacies, has, I think, earned the title of "Fighting Philip."
These McKenna Duties show how little understood by the great historic party opposite is the real principle of Free Trade. Free Trade is the free exchange of commodities, and in order to understand that principle let, me picture for you an actual balance that will represent the balance of trade. On the one side of the scale are the things we sell, and on the other side of the scale the things we buy, while the dial plate between them represents the course of exchange, and as you load up the one side so you affect the exchange and you make it possible for things that were too dear to be bought in the first instance, to be bought when the exchange is favourable, and so rectify the balance. And if you want to improve our export trade you are bound to improve our import trade. The dial shows it, and a proper understanding of the whole question of exchange is to be found on that dial I have described.
It is a fascinating subject which seems, to mystify a great many people here, and I could refer to it at length, but I shall not do so. I shall now turn to another subject. It is contended that this Budget is optimistic. Having examined it from the point of view of the financial interest of the city, I do think that it does err on the side of optimism, but we can only wait and see what the result will be hoping for the best. The provision made is not the provision which I think should be made, but we must leave it at that. There is the criticism that points to the fact that there is no provision made for the social reforms promised in the Labour programme, and which gave Labour the power to govern in this country, for which they paid, in order to get votes, in the false coin of promises that they never could perform. I think that the Chancellor of the Exchequer is correct when he makes that provision, because telephone as you will to any of the Departments of the present Government, you will find nowhere a programme that requires any money whatever. They have no idea of where they are going or what they are going to do. Yet we have had a most extraordinary scene when the Minister of Labour proposed certain things which he could not explain—when we had one Minister who was able to broadcast his speeches without the use of an aerial, trying to be funny and merely moving us to tears, when we have another Minister trying to talk seriously and merely making us laugh, and another, the Deborah of the Labour Ministry, coming to the help of Barak, and telling him.
The journey thou takest is not for thy honour.
I have allowed myself to go into a Biblical quotation, but, turning to
another matter, I thank the Chancellor of the Exchequer for the first great step which he is making towards the Liberal policy of taxing the land, and letting the buildings go free. It is of splendid promise for the future. I t means, and must mean, more for employment than anything else, because by employment you mean the opportunity to produce, and if the land is free, then, and then only, can we have a full opportunity to produce.
There is another question which has been touched on by my Leader, but it is one which is worthy of consideration when there is a possibility of dealing with it effectively. That is the question of the Sinking Fund. The Sinking Fund, as fixed by the present Government, is £45,000,000, and curiously enough the amount estimated from the Death Duties is £56,000,000. Last year the Chancellor of Exchequer was indignant at the idea that he should specially hypothecate any special tax for a special purpose. The present Chancellor of the Exchequer made it clear that it is contrary to the best interest of the country to take a specified tax which was never of a calculable amount to be used for a specific purpose. If I can I want humbly to differ from him, and to say that we Liberals think that the true Sinking Fund for the country, the true Capital Levy, if we must have a Capital Levy, is found in the Death Duties. The sum that divides the product of the Death Duties from the amount set aside for the Sinking Fund is £11,000,000 and those £11,000,000 make a difference in the general revenue of this year's Budget. But if we once begin to tax site values, and tax them on the valuation made upon what they would produce if they were put to the very best use, it would be found that something like £3,000,000,000 worth of value at a penny would produce £12,500,000, and thus if the House would go along the road that you have already started to travel, we should have that beginning of the taxation of the land values to makeup any deficiency that may be required.
It is generally recognised, and was stated by Sir William Harcourt when he brought in the Death Duties, that the right of a man to have the disposition of his property after his death is given to him by the State, and that the State is right in taking a contribution to itself the first charge upon that estate. But I would go further and point out that this generation in the War has wasted the savings of two generations past, and the result is that men have got to live harder and do without many things in order to pay something towards the immense debt which has been incurred, and that when a man shifts off the mortal coil. [HoN. MEMBERS: "Shuffles!"] I never shuffle; still I claim I am allowed to alter the quotation to fit in with what I mean. When peope leave this world they leave behind to others responsibility, and, therefore, there should be a contribution from those who pass away to be used entirely for the liquidation of debt. There are two ways in which this money could be used. The one is that it should be used year after year in the reduction of debt, and the second way is to allow it to accumulate with the interest thereon, so that it may form one big sum. In the one instance you give relief to the present generation, and in the second case the present generation gets no relief for a certain number of years.
The figures which I have amount to this. If you take year after year a sum varying from £56,000,000 to £60,000,000 and apply it directly to the cancellation of Debt, it would be something like 135 years before you would have succeeded in wiping out the Debt. If you allow the interest to accumulate and if it accumulates at 5 per cent., then in 41 years it would be paid, and not I, but many a younger Member of this House, may look forward to that time and then wonder what we are to do with our enormous surplus. But if you take an interest basis of 4½ per cent. you will be able to pay off the whole National Debt in 44 years. If you take the calculation at 4 per cent., then 47 years will be required to do it. But you must remember that all the time the Government is absorbing the National Debt, and by the rules of supply and demand the demand for investment gets stronger and stronger, and the wages of capital, which is the interest provided for the use of capital, gets less and less. Thus, if you at the end of 15 years will have accumulated by compound interest a sum of between £1,100,000,000 and £1,200,000,000 which can be applied to Debt, on the other hand the effect of reducing the amount of security current will have the enormous advantage of reducing the rate of interest to be paid.
One great advantage in dealing thus with the Death Duties was seen in 1920 or 1921, when the introduction of a tax upon war profits was found to be impossible because of the absolute chaos that would ensue if a Capital Levy had been introduced. If that had been done you would have been able when the hand of death came upon the possessor of wealth to examine how that wealth came to him, and to distinguish between money made in the War and money made by ordinary honest methods, and that possibly may be done yet. I have taken up some of the time of the House but I felt that I might be listened to on a matter of which I am not entirely ignorant, when I was trying to press forward one great reform to which we attach the greatest importance, and that is to use the Death Duties, which are something cut off capital, in order to reduce the general burden upon the whole nation.
I can probably begin my speech best by saying that. I do not propose to mention motor cars at all, I wish to justify, if I can, two epithets which I would like to apply to the Budget. A great many epithets have been applied to the Budget, most of them of a complimentary nature, but I propose to endeavour to show to the House in a few sentences that the Budget is insincere and cunning. I do not wish to make any attack upon the personal sincerity of the Chancellor of the Exchequer. On the other hand I feel, and I am sure that my Friends feel, a great degree of delight in welcoming the Chancellor of the Exchequer among the really sound Conservative financiers. At the same time one must not forget that he is the Chancellor of the Exchequer who, a little more than a year ago, moved in this House a Resolution in these words:
In view of the failure of the Capitalist system, this House declares that legislative effort should be directed to gradual super-cession of the Capitalist system.
In the very powerful speech which the Chancellor of the Exchequer made in support of that Resolution, he said:
How is it possible, without changing the basis of our economic system, to eliminate the admitted defects and evils of the existing order?
If the Chancellor is to-day of the same opinion as he was in March, 1923, surely this is his great opportunity to introduce into this House his legislative effort for the changing of the basis of our economic system. On the other hand, there is no indication of any such thing; there is no financial preparation suggested in this Budget for carrying out the great ideals of the Socialist party; there is no mention of the nationalisation of anything; there is no mention of the capital levy. In fact, there are no financial suggestions made for the carrying out of any of the reforms which the Chancellor himself last year recommended so strongly to the House.
We are looking on at a remarkable event in natural history. We are seeing the leopard change his spots. If this Budget represents the Chancellor's sincere financial opinion, it does not represent the financial opinions of the party that sits behind him. Therefore, I think I am not exaggerating at all in saying that this Budget is thoroughly insincere in being presented as the Budget of the Socialist party. How comes it then that the Socialist party is prepared to accept the Budget? That is a very amazing thing. That is where the cunning comes in. I suggest that the Chancellor's followers have been led to believe that the leopard's spots have only been whitewashed, and that in due course the whitewash will come off. I suggest that the followers of the Chancellor of the Exchequer take a much longer view of the situation than the Chancellor himself. They have been taught to wait for one more year to see what would happen then; they have been taught that if they will only rely on the Chancellor for this year, their turn will come next year. For that reason I ask the House to look ahead for one moment, just as the followers of the Chancellor are looking ahead. We know that the Chancellor is relying on many things which will help not only to balance his Budget, but to leave a surplus at the end of the year. But suppose that the economies to which the Chancellor has referred are not effective. Suppose that nothing substantial is received from War disposals. Suppose that trade does not improve, and that no payment is made by our Allies of the debts due from them.
These are all grounds on which the Chancellor is relying to balance his Budget and to carry out the reforms which are due. I think my suppositions are likely to be fulfilled and that these things may not happen. If that be the case, we know for certain that all the commitments which have been mentioned in this House will certainly become due for settlement either this year or next year. We know that the Chancellor proposes to give away many millions in his improvident generosity. I refer particularly to the several millions he is giving away in remitting the Inhabited House Duty. There has been no demand for the withdrawal of that tax. It is a tax which is very easily collected, a tax which the Financial Secretary knows costs nothing to collect. It has never been objected to, and, moreover, it does not touch the small man at all. Therefore, in my opinion, the Chancellor is deliberately giving away £2,000,000 or £3,000,000. We also know that he is giving away large sums in connection with the McKenna Duties, and that he anticipates a small surplus of £4,000,000. In these circumstances, how is any Chancellor going to balance his Budget next year? That is where the deliberate cunning of the Budget comes in. Imagine the position of a Chancellor of the Exchequer next year, having to face the position of taxes remitted this year, which cannot possibly be re-imposed another year—at any rate, it would require a very strong Chancellor to re-impose any of them—and on top of that the only possible alternative, the finding of fresh taxes. We all know how that is almost impossible. What is left? The only thing left is that which the followers of the Chancellor are relying on, namely, a large increase of direct taxation of the wealthier classes. [How. MEMBERS: "Hear, hear!"] Those cheers are quite sufficient for me. They show that the opinion of the followers of the Chancellor is exactly what I say.
Thus we are led to believe, and hon. Members do believe, that next year, owing to the improvident generosity of the Chancellor this year, owing to the fact that the Chancellor is making no reserve for the great commitments of the country next year, their great pet Socialist hobby of increased direct taxation of the wealthier classes must be carried out by whatever Chancellor is then in power. Imagine the irony of the situation. Possibly the present Chancellor of the Exchequer will no longer sit on that seat. A Conservative may be in his place. Whoever the Chancellor may be, whether a Conservative or a Socialist, he will be forced, I prophesy, to increase very largely the direct taxation of the wealthier classes. Surely, if the Chancellor has any sense of humour at all he would be fully satisfied in that event. If my fears for the future are well founded, it behoves all of us who have the interests of the Income Tax payers at heart to watch their interests very closely indeed.
I am glad to say that I and certain of my friends in this House will be placing upon the Table a considerable number of new Clauses and Amendments to this Bill, with the object of helping and protecting the Income Tax and Super-tax payers [HON. MEMBERS: "Especially the Super-tax payer."] I was somewhat alarmed, when I read the Chancellor's opening statement on the Budget, at the suggestion which he made that he would introduce provisions into the Finance Bill for tightening up the payment of Income Tax. I would remind the House that the Chancellor told us that the surplus of Income Tax last year, about £8,000,000, may be attributed to the arrears from the previous year having proved more productive than was expected. Surely that shows that the tightening-up process had already reached a very high pitch of efficiency. I am sorry to see in the Finance Bill a proposal to give further powers to the authorities for ensuring more prompt collection still of arrears of Income Tax. I am not prepared to discuss that in detail, because it would not be order, but I hope that when the Finance Bill is in Committee anybody who is at interested in Income Tax will watch very closely indeed the powers which it I$ proposed to give to the Inland Revenue authorities for the more prompt collection of Income Tax arrears. Even to-day the pressure upon Income Tax payers for the payment of arrears has reached almost the danger position. I shall be very watchful indeed of the possible effects of the new Regulations before I vote for them.
I do not propose to say anything more in criticism of the Budget. I would like to offer a word of thanks to the Chancellor for having accepted in advance certain propositions which I, personally, made to him in connection with the granting of an appeal to English residents abroad in connection with payment of Income Tax. I am very glad, in the presence of the Financial Secretary, to convey my thanks to the Chancellor and his advisers for having accepted my view of the situation, and I feel sure that it will be of great service to a very large number of our fellow-countrymen who live abroad to have this opportunity of appeal. I would like also to thank the Chancellor for having granted another Amendment which I placed on the Paper last year. That is the increased allowance to widowers I am not sure that the allowance suggested in the Finance Bill is exactly what I should have liked to have seen, but at any rate it is some satisfaction to know that a reform which not only I but the Labour party urged last year, will be granted this year.
The hon. Gentleman who has just sat down opened his speech by welcoming the Chancellor of the Exchequer as a good, sound, Conservative financier. He went on to say that his Budget was insincere and cunning. Have ever cause and effect been more clearly demonstrated? The hon. Gentleman went on to complain that the Labour party had carried no Measure of Socialism in the present Budget. It would be equally just to complain that his own party are not carrying Protection in the present House of Commons. They have more Members than we have. But there is this difference between the Labour party and the Conservative party. The Conservative party have abandoned altogether from their programme the great principle of Protection which they say is vital to the welfare of the country, while the Labour party have not abandoned Socialism and will fight on it again. After one defeat they have not abandoned their principles. After one defeat the Conservative party have abandoned their principles. The hon. Gentleman went on to advance fears as to next year's Budgetary position. Well, there is a prospect that yet further Conservative bodies, such as Singapore, will be dug out and extirpated as Labour proceeds in office; that economies will be made in unproductive services which were not made under a Conservative Government; and, if he is looking for fresh sources of taxation, Income Tax is not the only source. I would recommend to him land values, and I was delighted to see that the Chancellor of the Exchequer foreshadowed some such event in a recent speech. There is also the possibility of the Super-tax. The ruin of the country will not be involved by finding money from either of those sources for the carrying on of most progressive, essential social reforms. The Capital Levy, again, cannot he carried by a minority Government in this House.
Certainly. I have seen no principle, abandoned yet from the programme of the Labour party. The principle of a Capital Levy was always this, that the great burden of National Debt must somehow be reduced. As the Prime Minister has said on innumerable occasions, if someone would produce a better scheme, he would gladly welcome it. He has now referred the whole matter to an impartial and authoritative expert commission on the subject of the National Debt, and, no doubt, from that commission will emerge some scheme for the carrying out of the principle involved, namely, the reduction of the National Debt. Not one of these principles has been abandoned and betrayed, as was the principle of Protection, which was the one device on which the Conservative party appealed to the country last time.
I would refer to the rather weightier observations of the right hon. Gentleman the Member for Paisley (Mr. Asquith). It would be an impertinence, of which I certainly should not be guilty, to attempt to follow him, with his great experience, through his very fascinating survey of our financial position. I would only comment on one or two of his remarks. In the first place, I was very sorry that he did not pursue further the great question of monetary reform, one of the most burning topics of our day. I think, possibly, he was lacking in his usual benevolence when he talked of the "Gorgons, Hydras and Chimeras" which beset the path of this thorny subject. Poor Mr. Keynes! It was rather had luck thus to describe him. Mr. Keynes suffered very hardly at the hands of his Leader this afternoon, for he also crushed and overwhelmed the project of the Capital Levy, which Mr. Keynes so ardently advocates in the very same book; although, possibly, Mr. Keynes may be compensated for this rough treatment by the considerable argument presented to advocates of the Capital Levy by the right hon. Gentleman, when he said that the most that could possibly be hoped from any measure of conversion for many years to come was a relief of £20,000,000 a year. It is worth very little at all. That, indeed, is an argument in favour of Capital Levy.
Then the right hon. Member for Paisley taunted the Chancellor of the Exchequer on not having abolished altogether the food taxes, in the way he wished to do before the War. Well, when the new circumstances are considered, when we consider that to-day a Labour Government, as the result of the War, have to raise £800,000,000 a year from taxation, and that the Liberal Government before the War had to raise only £200,000,000 a year in taxation: and when we consider that today the Tea Duty stands at 4d. to the lb., while before the War, under the Liberal Government, it stood at 5d. to the 1b., I think the Chancellor of the Exchequer has a very good answer to that taunt. Labour has to raise four times the amount of taxation, and the Tea Duty—this tax on a vital food of everyday life to poor people—stands at a lower point than it did before the War, when the Liberal Government had only a quarter of the amount of taxation to raise.
The right hon. Gentleman the Member for Birmingham (Mr. N. Chamberlain), who opened this discussion, sought to compare the present Budget with the previous Conservative Budget, and to answer the evident argument contained in this Budget that the welfare of poor people has been considered to a far greater extent than it was in the Conservative Budget. Of course, we are told that in the very next Budget they were going to introduce much the same thing, that they were working all through those years to this moment to bring in this great reform. We have had four years' practical test of Conservative Budgets. I can run through them in a few sentences. In the year 1920–21 they reduced the Excess Profits Duty by 40 per cent. In the following year, they evidently considered they must carry a reform in accordance with their great position, and as the burden of life was pressing rather hardly on the poorer members of our population, in the first year of industrial depression, they abolished the heavy duty previously imposed upon cigars. The following year they reduced the Income Tax, at a cost of some £50,000,000 a year to the revenue. The year after that, they reduced the Income Tax by another 6d., at a cost of £26,000,000 a year. They reduced the Corporation Profits Tax by 6d. in the at a cost of £12,500,000 a year. They reduced the Beer Duty, at a cost of some £16,500,000. In those last years in which they made most substantial reductions in taxation, the only tax remitted on the necessities of life of the poor was 4d. in the pound off the Tea Duty, at a cost of some £5,000,000 in revenue. In those last years of the Conservative Budgets, of the total reductions made, those given to the poor only amounted to about 4.1 per cent. of the whole.
In the very first year of a Labour Budget, of the total reductions made, those in remission of taxation to the poor amount to 65 per cent. That is what the country can see of the different attitudes of the two parties. From Conservatives, 4.1 per cent. goes to the poor. From Labour, 65 per cent. goes to the poor. Then the right hon. Gentleman this afternoon launched into a long defence of the remission of direct taxation to the rich instead of indirect taxation to the poor. I hope the country will read, mark, and learn that extraordinary argument. The right hon. Gentleman in the most substantial argument, as I conceived it, that he adduced, observed that the benefit of the remission of indirect taxation would not really be handed on to the consumer, in that so many wages are based on the cost-of-living index figure, and that as the cost of living goes down wages will go down, and consequently these people will not benefit. Well, it certainly is not so in all cases. In some cases, it is true, and it is a problem which the Government must face and must inquire into. But in those cases in which it is true, it is an argument turned against every Conservative argument last year for the reduction of direct taxation. Why did they tell us they wanted direct taxation reduced in order to lower the cost of production, because direct taxation was a charge on the cost of production?
I will show in one moment that a remission of direct taxation does not affect the cost of production at all. But, obviously, if it be true that, owing to this remission in indirect taxation, wages will be lowered, then the cost of production will be lowered, and our goods will compete more successfully in foreign markets and in the home market, with the result that more men will be employed. I air merely taking their own argument of last year. We know well that the way to reduce the cost of production is not by lowering wages, but by increasing efficiency in organisation and in production. But as for the argument that direct taxation increases the cost of production, they make this extraordinary admission: If it be true that direct taxation increases the cost, then they are admitting that the great manufacturers, instead of paying taxation out of their normal profits, are passing it on to the consumer by raising their prices. If, on the other hand, they are not handing it on to the consumer, then direct taxation is no factor in the cost of production at all. Direct taxation is only considered after the distribution of profits. It is on an altogether different footing from rates, which are considered as an overhead charge prior to the distribution of profits, and which present us with yet another argument for the shifting of rates from property and machinery on to the Land.
Then the right hon. Gentleman, in pursuit of his indirect taxation argument, advanced this extraordinary contention. He said that if more sugar and tea are consumed it will not benefit British employment, because they come from abroad. Well, the fact that duties are lowered on these particular articles does not necessarily mean that only extra sugar and extra tea will be consumed. The effect is felt in the whole balance sheet of the working class budget. It may mean no increase in sugar consumption, but more likely art increase in the purchase of clothing, boots, shoes, etc., which are staple trades in our country. But, even if it were true that it would only lead to an increase of consumption in sugar and tea, the increased amount of these commodities coming in has to be paid for by more commodities going out. It is one of the Conservative fallacies that the foreigner is a philanthropist prepared to send us goods for nothing. Of course, that would result in an improvement in all the great export and staple trades of the country. Our main exports are in such things as cotton and steel. If more goods come in through a reduction of these taxes, it means that more of these goods will go out to pay for them and more employment will be granted by those industries. But the right hon. Gentleman said: "Lower direct taxation, and people may employ more gardeners. People may employ more dressmakers." So, for cotton and for steel, we are to substitute the manufacture of orchids and of satin. This is the new Conservative doctrine. Women are to be encouraged to employ 300 to 400 people to provide them with clothes every year. [Interruption.] If you make a simple calculation on the basis of what some people spend on their clothes, you will find that employment is given to 300 or 400 people every year in looking after one woman. If you doubt the amount spent on these things, just consult your own picture papers. Then the right hon. Gentleman went on to say that money not thus spent in luxuries might accumulate as fresh capital. What is capital employed for? To set up fresh machinery and to provide facilities for the manufacture of goods. What is the use of that if there is no market for the goods when manufactured? A market can only be produced by purchasing capacity, and if there is no purchasing capacity, then obviously there is no market. Really the right hon. Gentleman will have to produce some better arguments than those before he will persuade the people of this country that they will not benefit by a reduction of indirect taxation which has relieved every householder in the land. Having run away from everything in which they believe, having thrown over the great policy of Protection, this is all the criticism which the Conservative party can bring forward against the first Budget of Labour. The practical effect of that Budget will be felt throughout the length and breadth of the land, and when the right hon. Gentleman goes to the great cities and towns with arguments like that they will be received with the derision they deserve.
I think we all listened with interest to the eloquent words of that sturdy working man who has just spoken. I do not suppose that he ever did a solid day's work in his life.
I did some work in the War, and I shall be interested to hear if the hon. Member did. I should like him to point out one single moment in my life since I left school at which I have not been working.
I was talking about an honest day's work. I do not think my distinguished Friend has ever done an honest day's work in his life, but I do not want to be led into following that argument—
I think the hon. Member has made a reflection on every Member of this House. Do I understand him to say that the hon. Member who attends to his duties here from morning to midnight is not doing an honest day's work?
As far as the interruption of the hon. and gallant Member for Hull is concerned, if there be, any misconception in that direction I readily withdraw the remark. What I referred to was manual labour. I frankly admit that Members of this House do work, but I do not think the hon. Member for Harrow (Mr. Mosley) ever earned a good day's pay by a hard day's work. I will pass from that. I tried the other night, when the discussion on the McKenna Duties was proceeding, to say a few words for reasons with which hon. Members will sympathise, because in my division there are, with probably the exception of Coventry, more concerns affected than there are in any other part of the country. It is with some diffidence that I go back to this subject again, for I know it is of mere academic interest to many hon. Members not directly concerned, although it is of vital importance to my own division of Acton. Therefore, if the House will bear with me for two or three minutes, I should like to put some points before it. I do not wish to bore the House by going through the lengthy arguments to every one of which I listened a few days ago. But I think I am entitled to touch upon one or two specific cases in my own constituency, especially as two or three times this afternoon a query has been put forward as to whether the repeal of the duties is going to have the effect upon industry and its employment which has been anticipated.
We have in Acton between 30 and 40 different concerns engaged in the making of motor cars, motor parts and motor accessories. Immediately on the suggested repeal of these duties a meeting was summoned—it was an open meeting—at which an absolutely unanimous resolution was passed against the repeal of the duties. I will not take tip the time of the House in dealing with the question of motor car manufacturers, but will deal with one or two instances where firms are manufacturing accessories. Accessories, of course, have to be made on a pretty wholesale scale, if they are to be made at a profit, and in Acton We have three or four of the biggest concerns making accessories. Some months ago the great firm of Ford, 95 per cent. of whose cars in this country are made in Manchester, got into touch with one of the biggest accessory firms in Acton, whose electrical work is famous in this country, with a view of getting the remaining part of their electrical outfit made at Acton. Ford's invited this firm to send engineers to Detroit to discuss details, and this was done at considerable expense. Contracts were drawn up and were ready for signature, and would have been signed by now had it not been that on the repeal of these duties a cable arrived cancelling the whole business. That contract, if carried out, would have meant employment for 1,000 additional men in these works at Acton. That is not a wild statement. It is a fact that can be substantiated by the firm concerned
We have another big concern at Acton, one of the largest manufacturers in this country of magnetos which are vital to all internal-combustion engines. Before the War, these magnetos were largely made in Germany. The head of one of the firms in my constituency was an agent for Mr. Bosch, the head of the Stuttgart firm which manufactured most of them, and in the year before the War broke out, there was a turn-out of over £1,000,000 sterling of German magnetos. His firm started works at Acton, and are able today to make magnetos at 25 per cent lower than Mr. Bosch's pre-War prices. The head of this firm now tells me he is afraid he cannot possibly go on under the present conditions, and will again have to take up the agency of Mr. Bosch's German firm. My last instance is in connection with another accessory firm which had a projected extension to be carried out in the next few weeks at a cost of £40,000, but confidence has been so undermined by the repeal of these duties that the extension of the works has been cancelled.
I was told the other day by a distinguished Frenchman that throughout the Continent of Europe Englishmen were always thought to be mad, but that the opinion was now general that they were mad, because they had repealed the McKenna Duties. Perhaps my right hon. Friend remembers a little story in that delightful book "Pickwick," where Sam Weller talks to a friend who tried to impress his doctor that "crumpets was wholesome", and, who, in despair at his failure to do so, blew out his brains to vindicate his great principle that "crumpets was wholesome." I do not say that the Government in their defence of their policy of repealing the McKenna Duties are blowing out their own brains, but they are certainly ruining a great British industry. We are not ready for the abolition of these duties. We want another few years, as far as my own constituency is concerned, to prepare and strengthen ourselves to such an extent that we can stand against foreign competition. We are not profiteers in the motor trade. The 20 chief concerns laser year, which are capitalised at £25,000,000, made a profit of 396 per cent. That is not profiteering. Every one of these firms is paying out good money to British workmen, and the workmen are doing their best against abnormal foreign competition. I appeal to the Chancellor of the Exchequer to give them a helping hand. I appeal to him, not as a Conservative, but as a fellow Yorkshireman coming from the county where we have hard heads but not hard hearts, to give us a fighting chance for our people to make good, and I for one can assure him that Acton will do her part in that.
I am sure the House listened with considerable interest and satisfaction to what the hon. Member for Harrow (Mr. Mosley) said about the death of Protection, but we are not altogether satisfied that it is dead, because it seemed to me from two speeches we have heard to-night, one from the right hon. Member for the Ladywood Division of Birmingham (Mr. N. Chamberlain) and the other from the hon. Member for Acton (Sir H. Brittain), Protection is very much alive. I imagine if I were to say much about the McKenna Duties would be ruled out of order, but I would remind the House that when those duties were being considered it was asked from the other side of the House, "Why repeal them now?" I do not think that question was answered then. I will give it an answer to-night. It is because this year is the first year since the War in which we have had a Free Trade Government in power, and therefore it is only now that the duties can be repealed. I am not going to prophesy that the present Government is always going to be a Free Trade Government, but at present they are. It was also asked, why repeal these duties when the motor industry is one of the bright spots in British industry? After the exposure of the fact by the Chancellor of the Exchequer earlier in the Debate that 50 per cent. of the motor industry is in the hands of the bankers, I can only say if that industry is the only bright spot in industry, then God help England. It has been stated that the Chancellor of the Exchequer is too optimistic with regard to the future, but possibly the right hon. Gentleman has not yet had time to search the pigeon holes in the Treasury, or he would have found a very interesting document put up to the Government of the day by one of the few Ministers of State who never sat either in this House or in the other House. I think my right hon. Friend the Member for West Birmingham was at the time Chancellor of the Exchequer.
Lord Maclay, or, as he then was, Sir Joseph Maclay, protested very strongly against the flirtation of Mr. Bonar Law with the possibility of a capital levy, and he told me he put up a proposal to the Chancellor of the Exchequer at that time which, unfortunately, the Chancellor of the Exchequer would not consider. I hope I am not spoiling any plan of the present Chancellor of the Exchequer for springing a pleasant surprise upon us, but I think I am not doing so, because I have a feeling that the right hon. Gentleman has not seen the document to which I refer. I had some conversation with Lord Maclay about this matter, and he told me that he pointed out to the Chancellor of the Exchequer of that day two things which it was necessary to consider in relation to taxation. There were two causes of saving which must not be interfered with. One cause or reason for saving was that a man wanted to improve his own position, or his own business, to have more money to spend upon himself, more money to spend on the things in which he was interested or, it might be, that he was a miser and desired to increase his money for its own sake. The other cause for saving lay in the desire of a man to provide a better education for his children, or to give his children what may be regarded as a better start in life—though it is not necessarily so. Lord Maclay held that these two motives must always be recognised in taxation, and that a capital levy, such as has been proposed, not by the present Government, but rather by their friends behind them, taking effect at once and during the lifetime of the makers of the wealth to which it is applied was wrong. He held that you must never tax wealth in the making, because by doing so you destroy the motive of saving, which is what you want to increase, and, as the motive for saving is not only a question of a man's own advancement but of the fancied improvement of the opportunities of his children, you must never impose heavy taxation when a man dies and his children come into possession of his estate.
Lord Maclay's view was that we should not mind about the third generation; that nobody ever saved for the third generation. He put it to the Chancellor that, for example, in the case of a man; who, after all debts and expenses have been met, leaves a sum of £100,000 the following procedure should be followed. It is supposed that there are two children and that it is an old-fashioned will under which £50,000 goes to John and £50,000 to the trustees of Jane. The Somerset House authorities then; step in and say, to John, "You are going to have the equity on £50,000," and to the trustees of Jane, "You are also going to have the equity on £50,000," but they add, "We are going to make an exchange with you. We will give you suitable notice and reasonable time to do it. We are going to leave you with £25,000 each to dispose of as you wish and in exchange for the balance, we are going to give you 5 per cent. or 4 per cent. annuities on the basis of that balance, so that when you die the State will receive half of what has been left to you.' That would not interfere with any person's wish to save; and Lord Maclay's calculation was that the whole National Debt would be paid off in 37 years by this method, and the National Debt then was considerably higher than it is now. I do not recommend the Chancellor to bring forward such a drastic proposal, but I honestly think it would be much better for the trade of this country and much better for all the taxpayers and for everyone that the heavy charge should be met by the next generation but one and not by this generation or the next generation. If Lord Maclay was right, this proposal to tax the third generation would pay off the National Debt in 37 years without any interference to the saving of the nation and with the least possible hardship to all concerned.
In the Bill before the House the party which has frequently passed sentence of death on our economic system appears now to desire the safeguarding and fostering of what hitherto it has desired to destroy. In this Bill there are few examples of that class favouritism which Socialist orators are prone to associate with Socialist policy. For this restraint on the part of our opponents we may all be thankful, but many of us have been asking ourselves and, I think, naturally,' whether the speech of the Chancellor of the Exchequer when he introduced the Budget really betokened a new party outlook, and whether it really marked a new epoch in our political and financial history, but from the speech of the hon. Member for Harrow (Mr. Mosley) I understand we must see in the present purposes of the Government a resemblance to the ministrations of the prison doctor in the condemned cell. We believe the provision made by the Government for their social schemes, many of which are dear not to them alone, cannot be regarded as adequate. There are such schemes as the removal of the thrift disqualification in regard to old age pensions and the unemployment proposals, and we want to know how the money is to he found. It is difficult to believe that the Government will allow the fear of a deficit to prevent the realisation of these schemes, and yet a deficit—and there seems to be a considerable risk of one—would go far to neutralise the good effects which may be expected to follow the Conservatism of the Chancellor of the Exchequer in regard to debt reduction.
Granted that it is the aim of every party to get an improved standard of life in the country, vast sums of money have already been spent on this object. We know there are various schemes for further improvement, and these new charges upon the national income can only be met in one of two ways. If the national income is increased to a corresponding extent the charges can be met without adding to the burden upon the non-beneficiaries. If the national income is not so increased that burden must be added to, with results which cannot but be prejudicial to our industrial recovery. If we are to have that increase of the national wealth, upon which all sane progress depends, we must of course economise in every direction possible and we must reduce debt by a substantial amount every year, thereby hastening the day when the debt can be put on a lower interest basis. I hope the optimism of the Chancellor of the Exchequer in regard to revenue will not prove to have been at the expense of the allowances he has made for debt reduction. Certainly he has spoken clearly more than once about the importance of debt reduction and of economy but, admirable aims as these are, they are not in themselves sufficient to solve our troubles or even to finance the more practical aims of the party in office. I should like to know if the Government have got some positive dynamic policy for increasing national wealth, because such a policy as the Capital Levy is more likely to destroy than increase national wealth. Surely there are other and more fruitful fields.
To take only one instance, there is the development and acceleration of transport within the Empire. To us on this side of the House I think the most regrettable feature of the Budget was the neglect of Imperial interests. The abandonment by the Government of the Resolutions of the Economic Conference, the whittling down of the preference to the Empire producer, the abolition of the McKenna Duties, all have created a profound impression throughout the Empire, and already the cables speak of retaliation. It is a very serious situation. If the Government really mean to tackle this problem properly they must accept the condition that, if our resources are to be developed and if, thereby, the purchasing power of the Dominions and Colonies is to be increased, they must do their utmost to develop Imperial trade, and they must also encourage saving which alone can produce the money necessary for the great schemes which must be undertaken if we are to obtain an economic return on the resources of the Empire. I should like to ask the Government whether they really want to enlist wholeheartedly the present economic system of the country and the Empire in the service of their social reforms? It may be that recent speeches of the Chancellor of the Exchequer have allayed some of the uneasiness and nervousness in the City which followed the appearance of the present Government, but we must remember that confidence and credit are very sensitive plants which any cold winds—in this case one or two indiscreet speeches—may more or less shrivel up. We should all like to know if confidence and credit are likely to be sheltered?
No doubt the Government would like to give a lead to the world in the application of the Socialist theory to the modern industrial State, but we as a nation are self-supporting to a very limited extent and if we should move too fast, if we should slip on the untried ground of the road to Socialism, we may find ourselves doomed to hungry decades while we assimilate economic principles anew. I should like to press one final consideration upon the Government, and I will support my appeal with a statement which the Chancellor of the Exchequer made last week to the Bankers' Association to the effect that many false impressions about the Government were duo to a lack of knowledge of what the Labour party really was. I submit that this lack of knowledge of what the Labour party really stand for is easily understood. It is true their financial policy up to now has not been so dangerous as we feared but they could do a great deal more to secure for the country the benefits of their moderation. The hon. Member for Harrow told us his rather ominous views about the future. Could not the leaders of his party go a step further and take the public into their confidence and tell them what are the lessons they have learned and how many are the instalments of Socialism which, given power, they believe they could introduce in the next 10 years. I am sure it will be better for all of us to know the worst that is in their minds rather than that any unnecessary uncertainty should remain. If they could tell industry that, so far as they are concerned, there will be a 10 years' respite from the more revolutionary schemes which they favoured in the days of their unresponsibility, or even that such evolution as they still contemplate would proceed at a calculable rate, they would do much to ensure stability. They know, as we all know, that every speech which promises what is known as the unattainable inflicts grievous injury upon the economic interests of the community. If they would he frank now, they would not only allay the apprehensions which otherwise will surely dog their course, but they might even facilitate the attainment of an agreed financial policy, a policy framed with a foresight which extended over Years, and with a knowledge which made it practicable, and this, in my humble opinion, is one of the most urgent needs of the time.
I am afraid I cannot agree with the hon. and gallant Member for Dover (Major Astor) upon the possibilities of an agreement as regards financial policy for the next few years, and I will say why. It is because every suggestion which is put forward from any quarter in this country by which we are to increase the resources of the State is at once attacked with the utmost violence, not only in this House, but in the Press, and you cannot ever get any really fair hearing for any new proposals at all. We shall want some new proposals, and it is because the Chancellor of the Exchequer has not seen his way in this Budget to go very far, or, indeed, to go any distance, in the direction of what I think is the most important financial reform that can possibly be brought into this country, that I propose to say a few words at this stage of the Debate. I recognise the difficulties which the Chancellor of the Exchequer had in proceeding upon the lines of a real taxation of land values in this country. I regard that question as being the most important financial question at present before the country, and I never can understand why it is attacked with such violence from the other side or why the very mention of this question rouses such feelings.
It is 40 years ago, all but one year, since the Royal Commission on the Housing of the Working Classes recommended as a cure for our housing difficulties in this country that a tax should be imposed upon land values. During those 40 years there have been efforts here and efforts there to do something in that direction, but nothing serious has ever been done, and to-day it is sometimes suggested, particularly from critics on the opposite side of the House, that the be-all and end-all of this reform of which I speak was found in the Clauses of the famous Budget, Clauses which have now practically ceased to operate, everyone of the proposals in which Clauses was condemned root and branch by the people who had been fighting on behalf of this reform in the country. I do not want to see the Chancellor bring in any scheme for an Increment. Duty or a Reversion Duty, nor do I want to see him butting his head against the wall of the difficulties of what is undeveloped land and what is developed land, but what I wanted to see him do in this Budget, and what I greatly regret was not done in this Budget, although I recognise the difficulties, was a flat tax on the unimproved value of land, which, in my view, would be far better for industry and is well worthy of the full consideration of those who talk about the evils of Income Tax and Super-tax, and particularly of the intolerable strain of a high Income Tax and a high Super-tax.
I regard the Income Tax and the Supertax as a tax on industry, and therefore as evils in themselves, although we have to put up with them, but a tax on land values is not a tax on industry. It cannot be a tax on industry. No one is going to raise the price of land because there is a tax on rent. A tax on rent is a tax on a tax, and everybody knows that no tax on land can ever be shifted. Here you have this position in the country—unemployment, causing men and women of good will in all parties to wonder how we are going to deal with this question, and no one really going to the root of the matter, but everyone trying little tinkering schemes which are going to do precious little good, and first one Gov-
ernment and then another attacked by its critics for not doing anything, and then finding, when it gets in, how very difficult it is to do anything. I remember years ago a speech of Joseph Chamberlain's, in which he said:
The land of England is in too few hands, and that is the true and permanent cause of the depression and unemployment that we ail deplore. The remedy is equally simple. It is not to be found in the return to a Protectionist tariff, but in freeing the land of England from die trammels of a by-gone age.
We never hear that now from hon. Members opposite. I am not talking about the rating of land values. The taxation of land values will get exactly the same results by considerably quicker methods, because we have control of taxation, which we do not exercise over rating, as we know from what happened when we tried to value the land of Scotland in 1906–7. We have this position at the present time: The money of the public is spent, let us say, in the extension of a tube railway in North London, and the result of that extension is that all the land to which that tube goes suddenly acquires an enormously enhanced value. Into whose pockets does it go? We are looking for revenue, yet we allow the whole of that enhanced value to go into the hands of people who have never lifted a finger in its creation, and we talk of ourselves as the financiers of Europe. When anybody says it is public robbery to allow that to go into private hands, they talk about Socialism and Bolshevism. What you really want to do is to see that wealth created by public means in that way does not drift into private hands. Here you have, on the borders of your towns, huge values created day after day by the needs and labours of the public. You would have thought—I should have thought—that all the big commercial men in this country, quite apart from the question of the Labour voters and the Liberal voters of this country, would have wanted to see that this wealth, that is not earned by anybody, remained in the hands of the State or was got back into the hands of the State.
Does anybody deny that that is happening all round us to-day All round London and our big towns you have this position, that instead of creating a treasure house on the borders of your towns, upon which the municipalities and the State can draw, as the town increases its borders, you create a barrier that you have to buy back at fabulous prices, and, instead of seeing that the wealth of the country goes into the pockets of those who create it, you let this money go on drifting year after year into a few private hands. On the borders of the towns you have great resources that you ought to have for public purposes, but you allow them to go into private hands The effect is twofold: Not only do you lose the revenue which you ought to get for the further development of your towns, but, if you do not allow the town to develop outwards, it develops inwards, as the Royal Commission on Housing said 40 years ago. All the courts and alleys of our big towns, all the slum dwellings of our big towns, are largely caused by an utter lack of any economic purpose in our taxation system. Here you have in London, just behind Victoria Street, for instance, large areas of land underdeveloped, and if you go to Liverpool or Manchester or any other big town you find exactly the same thing—acres and acres of slum dwellings, under-developed, paying low rates, and paying no taxes.
Suppose you do not wait for any scheme of rating of land values, but put a tax upon the actual selling value of that slum land, how long will it remain slum land? The economic force of that tax is bound to clear the slums of this country, and it may be, you may think, a ruthless method, but when you have oases where hundreds of thousands of people are living lives in which no decent moral conditions are possible, and when you have acres and miles of our great towns festering with slums that could be cured, you must not mind if your remedies are drastic. It is necessary to take drastic remedies to handle these abominable evils. I remember, not long ago—it is not only in our big towns, but on our countrysides—that I represented a Division in Wales, where we had a housing question in one of the most beautiful villages in the country. There I found a position which is typical of many others. I found the same in Norfolk, and many other parts of the country, and hon. Members will know from their own experience similar cases. There we had a housing difficulty, and one of the Scottish Members, who happened to have been born there, offered to finance a housing scheme in the village, and asked me to look into it. The land was rated at 15s. an acre—all that we wanted to buy—but I could not get a yard of it under £800 anywhere, and the bulk of it ran up to £1,000 an acre. A tax such as I am advocating would solve that question. I want to say to the landowner of a place like that: "What is your land worth?" If he replied, "£1,000 an acre," then I should say, "I propose to tax you at that." If he says, "It is not worth that," I should say, "I never thought it was. What is it worth?" He might say, "£25 an acre," and I would reply, "Then I propose to buy it at that." Then he says I am a Bolshevist or a Socialist because I say it is outrageous that the public should be exploited in this manner.
Here is this reform at the bottom of rural housing, at the bottom of town housing, at the bottom, as Joseph Chamberlain told us years ago, of the whole question of unemployment, and we do not realise that, while we are tinkering with unemployment doles and one thing and another, we have the root of the matter in our own hands if we are prepared really to tackle the question. Rural housing, town housing, the whole question of slum dwellings—it all depends upon it, and that tax will do its work. People will complain and will say that widows and orphans have all put their money into land values. They used to put it into brewery shares in the old days. Whenever you attack a great evil, people always try to advance under cover of a shield of women and children. I do not believe in those stories. I know perfectly well that if the Chancellor of the Exchequer will in his next Budget, next year—when I am confident that he will have the opportunity of doing even better than he is doing now—go boldly forward on the really economic lines of the taxation of land values, he will find that he has not got a minority support in this House, but a big majority support. I see many of my own friends on these benches who did magnificent work in the old days fighting for this reform, and I remember how, at the end of it all, a Government utterly ignorant of the principles of the taxation of land values invented some extraordinary atrocities in the way of the taxation of land values that never did any good at all and that had to be abandoned.
What I speak for here to-day is not anything on those lines, but something simple, something drastic, something without exceptions. I hope that the Chancellor of the Exchequer, if he goes on, as I am sure he will, next year to deal with this question, and to find new sources of revenue, will not listen for a moment to those who say, exclude this and exclude that land. If I may give any advice, I say exclude nothing. The principle is absolutely vital that you have to take all land values, and you have to make this a great solution of all our difficulties in this country. You have got to go into it upon the basis that it is the great vital reform that means almost everything for the future of this country. It is not Socialism, although the Socialist party support the taxation of land values as a means for dealing with the land question. Looked at in another way, it is the highest form of individualism. You are breaking down all the barriers that obstruct production in this country. I take it that one ideal of the Liberal party is to break down barriers, and to give everyone a fair chance. We are breaking down barriers when we come to that. I will say to some of my hon. Friends on those benches that when there is talk about throwing out Governments upon some small matter of unemployment reform, let them remember we have got here on these benches and on those benches, a majority that can settle the land question in this country once and for all, and not be led aside by any little dispute of any tinkering measure to upset the magnificent chances we have got of doing big work upon this question.
We have got in this Parliament the opportunity of settling the land question on lines that really mean something. We have got in the Chancellor of the Exchequer a man who understands it, and who has shown more sympathy with this movement than anyone who has ever sat in that place in this House of Commons. I urge upon the House not to lose this opportunity, not to let the ridicule that has been cast, sometimes, upon the foolish efforts that were made in this direction a few years ago to embarrass them in any way, not to let any small question break up what ought to be this great army of land reformers that can really make this the living, vital question in the near future; and if the Chancellor of the Exchequer goes forward on these lines next year, I am perfectly certain he will go forward to a triumphant conclusion, to which this Budget is merely the prelude.
The right hon. Member for Paisley (Mr. Asquith) surveyed the financial position in a nonpartisan spirit, and I propose to deal with a few of his observations in the same spirit. I propose to examine three or four of the points which he laid before the House, in the hope that the Chancellor of the Exchequer will take into consideration whether there is anything in the points I put before him. Like the right hon. Member for Paisley, I am an unrepentant repayer of debts, and I have said over and over again in this House that I consider the way the Debt should be repaid is by reducing the floating Debt, bringing down the rate of interest on Treasury bills by restricted supply in issue, driving money into longer dated Government securities and so putting up the capital value of Government Debt, so that you car convert to Debt at a lower rate of interest. I am quite aware that our effort should be to reduce the weight of taxation for Debt service by reducing, with the consent of the lender, the amount of interest payable upon the Government Debt, and I think that by the Sinking Fund we can get to that desirable end by the best possible method. But I want to know how much the country can really pay off Debt by the Sinking Fund without injuring itself.
I want to correct a statement, if I may, that was made by the Minister of Labour a day or so ago, and which is often made, in a roundabout way, by Members on the other side, that the greatest burden that the country has to bear is to pay interest on Debt. That is not so. Look at the figures in the Drage Report. The cost of public assistance in various forms in the coming year will place a greater burden on the people of this country than the interest on Debt. I make that protest, because I do not like the Minister of Labour saying that the Debt is our heaviest burden and it going uncontradicted. We paid off last £88,000,000 by the Sinking Fund. I offer this axiom to the Chancellor of the Exchequer, that the only sound way to repay debt in a healthy manner is by repaying it out of saved national earnings. If you pay off by any other means, and trench on capital, you are not performing a useful and a natural function in the economics of the nation. I will give an instance. Suppose I am a shopkeeper with £1,000 worth of stock. Suppose I borrow £500 to increase my business, and suppose I earn so much a year and I save £100 after paying for my cost of living for the year. If a man comes along and says, "Will you pay off in one year the £500 you owe?" I say, "I can only pay off £100; if you take more, you take it out of my capital." If you ask me for £500 I have 400 less capital to work with.
That is exactly what is happening in this country. I am not going to accept a rule-of-thumb estimate of what the country can repay annually. I want the House and the country to know from the Government what is the amount that the country can pay off by the Sinking Fund without infringing upon the capital of the country. We paid off £88,000,000 last year. The Chancellor of the Exchequer may say we saved more than that. We saved £97,000,000 on our foreign trade. We must have saved more, in addition, on our home trade. But take into consideration that every year we increase our population by something like 400,000 souls. These 400,000 souls come into the general body of the population, and require something like £400 each as capital with which to house them, to educate them, and find them in machinery, material, credit and equipment. Therefore, you really require, in round figures, something like £160,000,000 increase of capital savings every year, or you will not have enough to equip the annually increased population. I doubt whether we saved last year from our earnings by the balance of production over consumption as much as £248,000,000. I doubt whether we secured saved earnings amounting to £160,000,000 plus the £88,000,000 which we paid off the Debt. The deduction I therefore make is, that unless we saved last year out of earnings £248,000,000, we infringed in some degree upon our capital, and, if we did, we have done an injury to the State.
The point to which I want to come is this: Does the Chancellor of the Exchequer accept the fact that the population increased 400,000 last year? Does he accept the statement that it requires £400 to equip each one of those 400,000, and that if we do not find that money to provide them with the necessities of life and the equipment to earn a living, we reduce the standard of life for the population, plus the annual increase of population If he accepts that view, I ask him to say whether we did save £248,000,000 last year to justify us in paying off £88,000,000, on top of finding the £160,000,000 we need for placing at the disposal and use of the increased population. I am not, like the right hon. Member for Paisley is, content to let these things be done by rule-of thumb. I am perfectly convinced we never had £88,000,000 available last year, after finding £160,000,000 for our increased population, although I do concede that the Chancellor was quite right to pay off as much as £40,000,000 or £45,000,000; but the amount of £88,000,000, plus needs of new population, I think, depletes our capital, and in some degree is lowering the standard of life of our people as a whole. It is not a partisan or contentious point. Hon. Members opposite take great interest in economics, and I ask them to bring their minds to bear upon this question, and that they, or Lord Colwyn's Committee, should consider what this country can out of savings put into the Sinking Fund for the repayment of Debt without injuring our working capital, and consequently injuring those who need that capital by which to earn a living.
The other point made by the right hon. Member for Paisley was the point at which he shied, namely, the currency point, and he spoke about the American Debt. The right hon. Gentleman the Leader of the Opposition came to the arrangement with regard to repaying the American Debt. The right hon. Member for Paisley praised it. I agree. I think it was a matter of honour and also of economic foresight and will do us a great deal of good. We have a right to send gold to the United States, and, whether they mint it or not, they have to take it. The effect of our sending gold for some while now has been to stuff this gold down the throat of the United States, and cause an incipient inflation, which has been indirectly seen in the difficulties through which the United States farmers are passing. The farmers now have a great struggle to make things meet. Farm produce values are low because America cannot sell her produce in Europe and, owing to the large accumulation of useless gold in the United States Treasury, Inflation in some form has taken place with the result that the goods that the farmers have to buy are dearer than the farmers can pay for. Farm staples have gone down, manufactures are dearer. As we force gold on the United States, prices of American manufactures go up, and as prices go up in the United States, so it will be increasingly tempting to the people of the United States to buy goods abroad, and increasingly difficult for them to sell their goods abroad. The result will be that as they will sell less abroad and buy more from abroad, it is very likely that the American Exchange value of sterling will rise, which, of course, will be of considerable value to us in paying our Debt. and in buying foodstuffs and cotton from the United States.
I am going to put clown a new Clause to this Bill asking the Chancellor of the Exchequer to arrange for the transfer of the control of the Treasury notes to the Bank of England, and I hope to have the opportunity of discussing the principle in full detail on the Floor of the House in due course. I am of the same opinion as when I had to give evidence before the Cunliffe Committee, that we ought to revert to a gold basis, and that we may hope for a free market in gold again. and I have not been so foolish as not to change my views slightly as conditions alter or develop. I have seen the announcement of the Federal Board of the United States, in which they have offered Germany some of their gold for the purpose of helping the German bank of issue. Why are the Americans so anxious to help what they call "suffering Europe" with their gold? For this reason: First, they covet the international bill trade and on a dollar basis. They are—to use a slang expression—"holding the baby." They cannot now usefully get rid of £900,000,000 of gold; it is of no trading use to them, and they are frightened that, unless they get this gold into circulation outside America. they will be hung up with the metal in an idle form, which will cause further injury to their farmers. I therefore make this suggestion to the Chancellor of the Exchequer, if I may. Eager as I am to see a free market established in London for gold, I say it must be done very very slowly, and we must be careful not to become the cat's paw of the Federal Board policy of unloading their gold upon Europe with injury to ourselves. They talk anxiously about seeing a gold free market in London. But, look a little behind it. It is not for the benefit of suffering Europe, but, it may be for the benefit of the United States first to capture the bill market on a dollar basis, and then to let their gold come out, and so relieve their farmers of the disadvantage which this £900,000,000 of gold in the Treasury vaults of the United States will cause them, if you let them keep their gold. Stuff all the gold clown their throats. Let inflation take place in the United States by our doing what is honourable and paying our debts. You will then find the price of commodities in the United States will go up, and it will be more difficult for the United States to sell their goods in our and other markets, and they will be more eager to buy goods from us and Europe, as we in Britain shall be able to produce them at a lower rate, because here we have not the inflation they have. By the time you get the sterling value of the dollar at about 4.97 or 4.95 you will find gold and not goods being shipped from the United States to England and sterling at a gold parity again without. the slightest trouble. That is what we should aim at.
The right hon. Gentleman the Member for Paisley dealt briefly, and rather timidly, with the currency question. I am younger and perhaps a little more rash, but in this respect I have taken my courage in both hands, and I have said what I have to say on the currency question. But I will go a little further even than I have gone. I hope, and I know that the Chancellor of the Exchequer hopes, that some part of the debt owing by France to us will be paid by France. He said so when I spoke recently on this subject here. It is well known that we all are the best friends that France has got, and nothing that I am going to say is to be taken in any way as indicating that I feel other than very friendly to France. France owes us £653,000,000. I am sure she would not be so dishonourable as not to pay it. Italy is willing to pay her debt to us, and can pay. But only when France has made up her mind to come to some arrangement to pay us. France has got about £250,000,000 in gold. What is she doing with it? Nothing. France must pay her debt to us sooner or later. She cannot go on without making some attempt to pay it. We hold Treasury Bills against France— Bills that are unconditionally payable; I believe after 12 months on demand—and I suggest that if we were to present them that France would have to pay or dishonour her obligation. I am sure she would not wish to dishonour her bills. Supposing, say, we asked her to pay over £200,000,000 of the gold that she has in France, and, on condition that she pays over £200,000,000, or perhaps a little more, we say to her that we will cry quits and let her off the rest of the debt of £653,000,000? Supposing we get that, then we turn round to the United States, to whom we are under an obligation, due to our guaranteeing payment for goods needed from the United States for France during the War, to pay off our debt in about 60 years, and say to the States: "Let us anticipate the payment of part of the large sum that we owe you "—amounting to many hundred millions—" we will pay £200,000,000 gold now, which will be of the value of £600,000,000 30 years or more hence"—how would such an arrangement appeal to the Chancellor of the Exchequer? What effect would it have en the United States? It would inflate her currency, because it is gold that she does not need, gold which she cannot digest, and which will do her more harm than good. Still, it would be in payment of the debt that we owe her on behalf of France which she pressed for, and which we would be quite entitled to press her now to accept., and say, "There you are, take the money, you demanded it of us."
In the Budget speech the right hon. Gentleman the Chancellor of the Exchequer made use of an expression which rather surprised me, and, I believe, surprised hon. Members on this side, too. I think, also, the Chancellor was equally. surprised that the statement. was allowed to go unchallenged by us. But the right hon. Gentleman has read his Bastiat. He has read his Mill. I think he will admit that what. I am about to say is incontrovertible. I note that in his Budget speech he said:
I have done it in a way which I believe, increasing the purchasing power of the
people, will stimulate trade and industry."—[OFFICIAL, REPORT, 29th April, 1924; col. 1610, Vol. 172.]
A statement like that ought not to be made without qualification. I know it is quite right that the broader shoulders ought to bear the larger burden. But, on the other hand, if money that is saved in taxation, direct or indirect, is spent in a way that is not reproductive or in a way that does not increase the health, physical or mental, of the people, then the wealth, then the spending is an injury to the nation. Such expenditure will do more harm than good. What is the purchasing power that the Chancellor wishes to increase so as to stimulate trade and industry? I think the right hon. Gentleman will recognise this illustration from Bastiat which I appropriate to the present situation. Take the stained-glass windows that are in this Chamber. Suppose I take a stone up and smash everyone of those windows. Would that stimulate trade and industry? It would, but it would be economic waste. The broken window would create work for the glazier. and give the workman wages, it would provide work for the stained-glass maker, but if you give me purchasing power to break windows it is spent in such a way that it is not reproductive, and you do not help but you hinder real industry. That is a point into which I think the right hon. Gentleman ought to look. If he is striving for economic benefit in what is being spent, then the extra money which he has given in the relief of taxation must enable the people to add to the reproduction upon increased health and wealth in the way I have mentioned, and not for unreproductive objects. If a man, say, who drinks so many cups of tea per day, which are sufficient for him, because of the reduction in the Tea Duty drinks more tea than is really necessary, because he can now afford to pay for more by remitted taxation, though he may be giving employment to the dealer, the shipper, and so on, to the dockmen, bankers and railway men, yet he is guilty of economic waste. I need hardly say I am perfectly certain that the right hon. Gentleman will recognise what I have said as true, as he doubtless has recognised the windowpane illustration
from Bastiat. He must differentiate between what is healthy increased spending power for reproductive purposes and what is for non-reproductive expenditure, although trade may be stimulated by unreproductive expenditure, which, in effect, is economic waste, and injures those whom he seeks to aid in the long run.
The ratio of direct and indirect taxation was touched upon by the right hon. Gentleman the Member for Paisley. He made it 60 and 40. I make it 65 and 35. But I want to put one or two points in this connection. If you look at the real purchasing value of wages from 1834 on to 1900, you will find that there was a continuous upward curve. In 1900 it stopped, or became, nearly stationary
The curve was steepest, I think, about the time I was a boy, in the "seventies" and "eighties." Notwithstanding the fact that, about 1900, the working classes had increased meat and other foods, and all cheaper, from Argentina, and ampler and cheaper supplies of necessities from India, Canada and the Australasian Colonies, the purchasing value of a man's wages remained stationary from 1900 to 1914. I do not go beyond that, for I do not count in the War years. Why did they remain stationary after 1900? I am not speaking in any polemical spirit when I ask this question. As the new Death Duties and Super-taxes became operative, money became dearer and scarcer, and so we experienced greater difficulty in industry. Money became dearer, and that is the raw material of industry, and it is then that we find the purchasing power of wages languishing. The Income Tax does affect the cost of goods, but not in the way which was suggested by the hon. Member for Harrow (Mr. Mosley). Charges for rates are placed on the goods while they are being made, the effect of taxation is a year later; all taxes have a sooner or later effect. All these heavy costs in production come to be felt sooner or later, and this is where the heavy Income Tax and Super-tax affect the cost.
After you make the goods which are effected by rates, at the end of the year you pay Income Tax upon your profits. A business must go forward or else it goes backwards: it cannot stand still. You must make experiments in production and increase your plant and your buildings. At the end of the year you find that you have taken away, by means of the Income Tax, Super-tax and perhaps Death Duties, more than is reasonable and such an amount as does harm, and what happens? You are hampered by want of liquid capital and up go your costs. Your goods are not purchased in such a large quantity and the pressure of taking the tax from you often results in this, that you have to borrow and get fresh capital in order to increase your plant and extend your business, and if you extend your trade and increase output your costs go down. The great secret of success in English businesses in olden times was to build your extensions out of reserve profits, not in companies but in ordinary family firms. I maintain that this ratio of direct to indirect taxation and this heavy burden of Super-tax, Death Duties and Income Tax has had some effect, in that it keeps up overhead charges and prevents reduction of cost, thus keeping down the purchasing power of the working man's wages.
I ask the Chancellor of the Exchequer not to deal with this matter by rule-of-thumb. This is a question we ought to have fixed down by some definite rule so that we know what the proper relation should be between direct and indirect taxation, no matter whether the proportion is 50 to 50 or 40 to 60. Let us examine the effect of the ratio of direct to indirect taxation as it has operated since 1900 to 1913, and now, again, from 1920, say. At present we are really groping about in the dark in this matter. I notice in the Civil Service Estimates there is a large amount provided for education. I have great hopes in the educational movement, and am, indeed, a member of an education authority; but I would like to ask are we spending that money in a way that is best for our people? The right hon. Gentleman the Member for Paisley gave some figures, and he pointed out that in 1901 we spent £17,000,000 upon education. During the same year poor relief amounted to about 11,500,000. May I now add that in 1922 we spent £80,000,000 on education, and I should have thought, in view of that expenditure, that poor relief would have fallen, but that was not the case. In 1922 we spent £80,000,000 on education, as against £17,000,000 on education in 1901, and in 1922 we had to find £42,000,000 for poor relief, notwithstanding the fact that, in addition, we spent £108,000,000 upon old age pensions, health insurance and unemployment pay.
Then comes this very sad reflection to me. I ask, have we spent the money in right methods, and have we given the right sort of education to our working people, when we are spending so much on poor relief Is it not too clerical? I saw the other day a humiliating statement made in the "Times," showing that out of 1,000,000 people now out of work, almost half of them are males between the ages of 18 and 28. Mr. Cramond, the adviser of the Labour Ministry, states that out of those 500,000 persons between the ages of 18 and 28, few of them knew a trade. That fact must make every one of us wonder what our accepted type of education is doing for our people. I know the benefits and the blessings of education in general, and I know the blessings of technical education in particular; there must be something vitally wrong with our system of education when we find out of 1,000,000 souls who are out of employment nearly 500,000 males between the ages of 18 and 28 have no trade to help them, The knowledge of a trade is a great stand by for a man. When we look into these Civil Services Estimates in detail later on, I think we ought to ask ourselves whether we are on the right lines in spending money on the form we are doing at present in education. Is there not some flaw here in our economic system and policy? I hope the Chancellor of the Exchequer will look into these points and try to get the Treasury away from the rule-of-thumb idea in debt repayment; and in the ratios of direct and indirect taxation. I do not believe in this rule of thumb for paying debt off and not knowing whether we are paying it out of income or capital. To pay out of capital must be wrong, and he will agree. I ask him to find out what is the effect of direct taxation upon industry and to ask Lord Colwyn's Committee to come to a conclusion on non-partisan lines in regard to this matter and let us know exactly what the ratio should be between direct and indirect taxation.
I think if the Chancellor of the Exchequer ever had any doubt as to whether he would be able to carry his Budget through to a successful issue that doubt must have been dissipated by the discussion which has taken place this afternoon. Speeches like that to which we have just listened from the hon. Gentleman opposite are bound to be of deep interest of the whole House. There is a wide difference between speeches of that type and those we have been accustomed to listen to in the past when the Chancellor of the Exchequer has often had to fight for his very life in defending his Budget. Whatever view one may take about the provisions of this Budget, I think we are all bound to congratulate the Chancellor of the Exchequer upon having achieved a real personal triumph. I think everybody present who is a House of Commons man must feel that it is a gloat tribute to this Assembly and to the toleration which it displays and the training which it gives to its Members that my right hon. Friend—whose colleague I was for some nine years during a portion of which time he stood almost alone foe ideas which at that time were extremely unpopular, not merely in the Horse of Commons but in the country—is notwithstanding that experience able to-day to present this Budget with almost the universal approval of the House of Commons and the country.
While there are on the other side, as naturally there would be, these criticisms with regard to the McKenna Duties, on the main principles of the Budget proposals there is no criticism of any kind. I should, indeed, regret it if I were to become for the first time a critic of my right hon. Friend, and, while there were portions of his Budget speech to which I listened with deep disappointment, I do not make that remark by way of criticism, because it indicates a state of mind which probably my right hon. Friend himself shares. My hon. and learned Friend the Member for Crewe (Mr. Hemmerde) has drawn special attention to the reference made by the Chancellor of the Exchequer to the question of the taxation of land values. Like him, I regret that it has not been possible to deal with the taxation of land values in this Budget. I regret it, because, while I join in the sense of relief at any portion of the load of taxation being taken off the food of the people, I feel that this Budget does fail in that it does not to any marked. degree deal with the great problem of unemployment and the great problem of housing, to the solution of both of which, I am sure, the Chancellor of the Exchequer would like to make a substantial contribution. I do hope that he will utilise the year which lies before him in endeavouring to make every preparation that is possible, not merely to carry through a Measure for the taxation of land values in his Budget next year, but to have so dealt with the preliminary work that that tax may become productive at the earliest possible moment.
I join entirely with my hon. and learned Friend the Member for Crewe in expressing the hope that any proposal of that kind will be supported, not merely above the Gangway, but also below the Gangway on this side of the House, and I think I speak, not merely for myself, but for a great many other Members on this side, when I say that we do not care a single bit to whom the credit goes so long as this great measure of reform is carried out. I do not pretend that I represent my whole party, but I do say that there are many on these benches who feel that this reform is the greatest economic reform that could be carried out at the present time, and Who will be prepared to give whole-hearted support to the Chancellor of the Exchequer in any effort that he makes to carry it through. I say in no party spirit, but, on the contrary, because I think it is extremely desirable that the question should not be approached merely from a party point of view, that I do not think it is quite wise to indulge in, shall I say, somewhat sarcastic references to the efforts which were made in 1909–10. I think the Chancellor of the Exchequer himself realises that those efforts were made in circumstances of greater difficulty than any he will have to face. That compromise, probably, had to be made for the purpose of carrying through the valuation which is the basis of all land values taxation, and, on behalf of the party with Which I am associated, I feel bound to point out that we were never satisfied with those duties, but that., on the contrary, in 1913–14, just before the War broke out, we were engaged in a campaign which had as one of its objects the substitution of a straight tax and rate upon land values. Having said so much, as I feel I ought to do, I agree with my hon. and learned Friend the Member for Crewe in hoping that the Chancellor of the Exchequer will not be beguiled into any attempt to set up fancy duties of that kind. At any rate, whatever may have been the justification or excuse for attempting to deal with the question in that way, it has been tried and it has failed. The experience in many of our great Colonies and throughout the world shows quite plainly that a straight tax on land values without exemption can be carried through in a perfectly satisfactory way, and can yield a considerable revenue. Although, no doubt, those duties were subjected to very severe criticism, those who believe in this reform ought never to be content to hear the criticism that enormous sums were spent upon creating a valuation under the 1909–10 Budget for which no return of any kind was received, because, if that idea is allowed to gain ground throughout the country, the Chancellor of the Exchequer, when he comes to deal with this matter, will be met with the criticism that, after all, this has been tried and has failed, and it is no use trying it again. Members of the Land Union have said again and again that the valuation of 1909–10 cost this country from £4,000,000 to £5,000,000, and that the return in revenue was nothing like that sum, so that there was a net loss upon the transaction. I am one of the few left in this House who were members of the Select Committee upon these Land Values Duties, which was, I think, created for the sole purpose of pronouncing sentence of death upon them, so that there might be some justification for the Chancellor of the Exchequer in a succeeding year saying that he abolished them after an impartial inquiry had been made. Upon that Committee the Land Union was very fully represented, and had a substantial majority, but I look back with some satisfaction to the fact that, notwithstanding that, the Committee finally reported that they were unable to agree as to the interpretation of their terms of reference, and they got no farther than that
We did have submitted to us certain evidence from a number of competent officials, including among others, Sir Edgar Harper, who was the chief valuer; and he pointed out in his evidence that, in all these high estimates as to the cost of valuation, what was included was not the cost of valuation only, but the whole cost of the Valuation Office. That included the Estate Duty valuations, work in connection with Liquor Licences and with housing sites, and work for the Admiralty, the War Office, and various other Departments, for all of which work there was a much more than equivalent return, and the Exchequer benefited from it accordingly. When these deductions were made, the total cost of the valuation was just over 22,000,000. What did we get in return for that? We had, according to Sir Edgar Harper's statement, valued 10,500,000 hereditaments at an average cost of 3s.9¾ or to put it another way, we had valued over 56,000,000 acres at a cost of 8½ an acre. The acre was not merely the agricultural acre of the value of £25 or a little more, but it included also the Devonshire House acre, which has been valued by those who sold it. at over £1,000,000 an acre. While it is quite impossible to say, because we have never been furnished with particulars, what the total amount of the valuation is, if we assume that the total value of the land which was valued came to only £2,000,000,000, which would be a very absurd under-estimate, we find that the whole of this work was carried out. at a cost of a tenth of I per cent. of the value of the land that was valued. Therefore I say in advance it will be quite useless, when these facts are clearly stated, to say that the cost. of land valuation out-balances the cost. of the revenue which may accrue.
I will not refer to the argument that the beginning of our housing troubles was to be found in the Budget of 1909–10, except to say that, as a matter of fact, the number of unemployed people in the building trade fell steadily from 1909 every year right down to 1913, when the War broke out. The number of people unemployed in the building trade in March, 1909, was 13.3 per cent., in 1910 8.9 per cent., in 1911 6.5 per cent., in 1912 6.2 per cent., and in 1913 4.6 per cent. So that., however open these Land Duties may have been to criticism—and I agree they were extremely open to criticism—it is, in the first place, quite untrue to say it cost far more for the valuation than the product of the taxes, and it is equally untrue to say they were in the slightest degree responsible for bringing about the bad housing conditions which have since followed. At any rate, there can be no doubt that there is here a great source of revenue waiting for the Chancellor of the Exchequer to tax—a source of revenue which probably more than any other is of communal creation, and therefore ought to be called upon to make contributions before anything which is the product of labour or of industry. It would be futile without a proper valuation to say what the site value of the land of the country alone is, but if we are to judge by the experience of other countries where there has been a valuation, I cannot imagine the value of the land of London, for instance, can be less than £100 per head of the population. In New York the valuation works out at a higher sum than that. London is a wealthier city and is more likely to have a higher site value. If the value of London is £400,000,000, surely the value of the land of the whole country cannot be much-less than something like £4,000,000,000. But even if that is an under-estimate—I should be somewhat surprised if it turns out to be very much of an over-estimate—here is a very large sum which can be called upon to make contribution without any industry suffering or any man being poorer by being deprived of anything which he has honestly earned. Every penny of this value was created by the energy, the expenditure, and the enterprise of the community, and it is a source to which the Chancellor of the Exchequer may legitimately turn.
But while I should be glad to see this contribution made for the purpose of the relief of taxation in other directions, more particularly the Chancellor should consider side by side with this the question of dealing with the whole problem of Imperial and local taxation, for which, so far as I can see, he can find funds in no other way which would not impose a burden upon the community, and I should welcome this new system of taxation still more for the reasons given by the hon. and learned Gentleman the Member for Crewe, because the effect of a tax of this kind falling upon vacant or under-used land would be to force into the market millions of acres which are at present held entirely out of use or are terribly under-used. If you were to free the land in that way so that access could be had to it by those in a position to work upon it, there would be no need for us to consider, as we have had to do, the question of doles for unemployment or of providing work which may or may not be productive, but at any rate is found to make a charge upon the resources of the community. There can be no question, I think, that the army of 1,000,000 unemployed people who are at present drawing unemployment relief could be absorbed easily into industry and into agriculture if you were able to open up the land for the people. [interruption.] I know hon. Members opposite meet suggestions of that kind with a certain amount of scorn, but I think that is probably because they have not considered all the implications of the question. I am not thinking merely of the development of agricultural land, although that is very important. Surely hon. Members opposite are not satisfied with the fact that more than half the land of the country is lying under pasture. Surely they will agree that it ought to be possible here, as in Denmark, to produce by a peasant population a far larger quantity of food at home.
They agree to that. Do they agree with this? The Scottish Chamber of Agriculture, a body of as hard-headed men engaged in agriculture as any in the British Isles, when they came to consider what could best make the land more productive, took for consideration two farms on each of which something like £3,000 could be expended with advantage. In the one case the money was expended and in the other it was not. In the case where it was not expended there was nothing like the production there was on the other, but what happened was that the assessor left the person who allowed his farm to become more and more derelict not only to pay no increase in rates, but actually reduced his rates as the value of the farm decreased. In the other case, where the £3,000 was spent, the assessor immediately came clown and every year imposed a fine upon the farmer because of the expenditure he had laid out. How can we go on under a system of that kind. Our friends in Denmark, the pioneers of small holdings, partly through the pressure of the smallholders are carrying through a system for the taxation of land values. We could quite easily absorb at least half a million or more people on the soil if we adopted this system, which would encourage instead of discouraging small holdings.
Look at the position in our great cities. Think how much under-used land there is in London which is being held off the market merely by extravagance. I referred to the Devonshire House site. It is standing there idle because land speculators one after the other bid up. each against the other, running up the value from £500,000 an acre to £750,000 an acre and then to over £1,000,000 an acre. Then the last speculator bid more for it than the market can stand, and it stands there now totally idle. If you follow the advice of my hon. and learned Friend, if you go to these people and say, "The value of this site is £1,000,000 an acre and you are going to pay your tax on £1,000,000 an acre," how long is the Devonshire House site going to stand there idle? Before a single year is over you will have workmen there busy erecting upon it some building which would help the position of trade and industry. If my hon. Friends opposite are as anxious as we are to solve this problem, and I give them credit for sincerity, and they will consider this matter with an impartial mind, they will come to think with us that there is no reform which can be carried which would be more beneficial from the point of view of solving the problem of unemployment and housing than the proposal for the taxation of land values. I trust, therefore, that the Chancellor of the Exchequer will not be satisfied merely with having said that he sympathises with our movement, although we appreciate what he has said, but that, whatever the pressure of Parliamentary business may be—and we know it is great —he will see that the necessary steps are taken, at the earliest possible moment, for the purpose of setting up again the full powers of the Valuation Department that were taken away last year, and that he will lay the foundation stone of a system of land values taxation which will be carried through in next year's Budget. The hon. and learned Member for Crewe, speaking for those associated with him, was able to promise support to the Chancellor of the Exchequer, and as one who belongs to another party I can only say that no question of party advantage, or as to what party will get the credit, will prevent me from giving the right lion. Gentleman hearty support in carrying such a reform.
I should like to take the Debate back to the speech of the right hon. Gentleman who opened the Debate, and to refer to what he said as to the formation of a Labour Commonwealth Group in connection with this House. One of the difficulties that we experience on this side in connection with the Colonies is that hon. Members opposite always consider that the Colonies are part of their political organisation. We have been criticised because our Government has intimated that it cannot agree to the recommendations of the recent Imperial Conference.
I apologise to the Noble Lord and I will refer to them as Dominions. I confess that I do not see the difference which the Noble Lord sees between the two terms. A point that has never been made plain, and is even misunderstood by the Dominions, is the fact that we on this side are just as keen as hon. Members opposite for the best and the closest relationship between this country and the Dominions. Hon. Members opposite happen to hold the same views in regard to economic questions that are held by most of the Dominions, in that they favour Protection, either publicly or privately. We on this side hold the opinion that Protection must inevitably lead to the taxation of food. Hon. Members may not agree with us in that view, but we say that it is impossible for us to sacrifice the interests of the great masses of wage earners in this country for the benefit of men and women living in the Dominions, a large number of whom are far better off than many of the dwellers in the mean streets of the cities and towns of this country. It is on that round that we say to the Dominions that the sooner they understand our position and know where we are, the sooner they will realise that it is impossible for us to go forward with the propositions that they have made.
I should like to ask the Dominions whether they will consider the question of Free Trade within the Empire? When I have put that question to members of the Dominions and asked them whether they are prepared to consider absolutely Free Trade between the Dominions and this country, Free Trade within the Empire, I have never yet found any one of them prepared to make such a proposition. I am not surprised, because I fully recognise that there may be countries in which Protection is better than Free Trade. If all the world were Free Trade, it would be the most satisfactory solution, but seeing that we cannot have that, it does not necessarily mean that because a man is a Free Trader in this country he must be a Free Trader in New Zealand or Australia. I fully recognise that a small country, building up its trade, may possibly find that there are certain reasons why they want Protection in a way that a country like this does not.
I am a Free Trader in this country because we are situated in a position that is almost unique amongst the countries of the world. If we were dependent upon the food that is grown in this country, we should find that our food supply would last only about two months. Even if we were to use the whole of our land, it is exceedingly doubtful whether we could feed our great town populations with the food grown in this country. That being so, when Mr. Joseph Chamberlain introduced his great campaign and raised the question of Protection, he realised that ultimately it must come to the taxation of food if you are going to have Protection at all. The taxation of food here is not a possibility. It would inflict the greatest hardship upon our people. If we put that plainly before the Dominions, they would understand the position of the Members of the Government when they say that it is in no spirit of hostility to the Dominions that we are unable to agree with the proposals that they have made.
The same line of argument applies to the question of the McKenna Duties. We have heard a great deal about the motor industry in this discussion. We have not heard so much about some of the other industries that are affected. I do not want to say much about the motor industry, beyond making reference to a statement of one hon. Member opposite that the dividends paid by the motor companies average something like 3 per cent. He said that it was not a high dividend, and another hon. Member said that they had paid no dividends at all. They used it as an argument that, because these companies were hardly paying any dividend, it showed that they were not in any way profiteering or exploiting the consumer. I would like those hon. Members to look into the question of motor finance, to take a number of the motor companies, and find out what they were in 1910–12–13, and then find out what the increase in capital has been since 1013 up to the present time. I believe they will find there that the explanation why the dividends are so small has nothing whatever to do with the general question of trade, and that it is a question of the way in which the motor industry has been financed. In other words, many of these companies are over capitalised, and cannot possibly in any circumstances pay a decent dividend, quite apart from the question of Protection or Free Trade.
In the constituency which I represent, the industry most affected by the McKenna Duties is the watch trade, and they made representations to me on the matter. Hon. Members opposite have pleaded that if the duties were to come off the date of their abolition should be, at any rate, postponed. Those connected with the watch industry are most anxious that if the duties are to come off they should come off at once. I was asked to urge upon the Chancellor of the Exchequer, if he had made up his mind to take them off, not to keep them on until the 1st August, but to let them drop the moment they would have expired. Therefore, there is this difference between the motor industry and those trades connected with Finsbury, that they are anxious, if the McKenna Duties are to be abolished, that they should be got rid of at once.
My own view upon the McKenna Duties, and one which I gave to my constituents, is that these trades are very fortunate to have had these duties for three or four or five years. Hon. Members opposite have argued that Protection is beneficial to a trade. If you take a single trade, I concede the case of the hon. Members opposite. If you protect any trade, it is almost inevitable that people interested in that trade will be better off. What is happening in regard to the few trades which are covered by the McKenna Duties is that for a number of years they have been in a privileged position, which was bound to come to an end when a General Election took place, and for two reasons. First, there were just a few trades protected and the rest of the country was not. Therefore, they could get many of the things which they required more cheaply than they could have got them if these other industries had been protected. The men and women employed in the protected industries were living on the cheap food coming in freely, which, if a protective system were carried to its logical conclusion, would have been protected. Therefore, they were in the illogical position of being protected in a Free Trade country. In one sense, might say they had the best of both worlds.
As soon as the right hon. Gentleman opposite decided to go to the country on the question of Protection, that condition was bound to come to an end, because if hon. Members opposite had won the election, and Protection had been introduced, the other trades would have been protected and the people who have been enjoying the protection afforded by the McKenna Duties would have to pay more for the things which they required from other industries, because these industries would then be protected. Therefore, with Protection on those other industries, those persons would be worse off than they were before. On the other hand, the country gave a decision in favour of Free Trade, and these people now say to my right hon. Friend, "continue us in the privileged position which we have occupied for five or six years."
I would remind the House that in the last year of the War there was a Committee, set up by the Coalition Government, on which there were nine representatives of the motor industry, and that at the close of 1918, just before the War ended, they passed a Resolution saying that they considered that, in view of the disorganisation in the motor trade due to the War, it was only fair that they should be allowed three years' protection under the McKenna Duties. Well, they have had six years' protection. Therefore it seems to me impossible for any Government pledged to Free Trade to be expected to continue these duties. Hon. Members opposite are always complaining that we do not fulfil our promises. When we do fulfil our promises on Free Trade, by the abolition of the McKenna Duties, then they complain because we are carrying out our promises. We are, rather, in the unfortunate position of the man and the lad with the donkey. If they did one thing they were criticised, and if they did the other thing they were equally criticised, and the only resolution to which my right hon. Friend could have come was the one that he has come to, and that was to end these McKenna Duties, in giving a short notice in order that people might make such arrangements as might be needed.
There was one other factor which has been pointed out to me by a gentleman who used to be a Member of this House as showing how it might be unfair to other people if we continued these duties. In the year 1913 there was a re-export trade of something like 700,000 watches out of this country. Last year that re-export trade had shrunk to something like 38,000, so that other people are affected by these trades, and the privilege for which they are asking is really given at the expense of others. The only fair thing to do, in view of the fact that this country is a Free Trade country, is to tell people interested in these trades that they really should be thankful that they have had the advantage for the years during which they have had them, and that they must now accustom themselves to the organisation of this country.
The hon. Member for Farnborough (Mr. A. M. Samuel) dealt with the question of Debt. I cannot help thinking that when the hon. Member talks about capital and Debt he muddles the two things together. I regret that he is not here, as I would like to put a question to him, but on this occasion, and on other occasions, he has spoken of War Debt as being capital. I agree with him that if an hon. Member is so fortunate as to own £1,000 of War Debt it is capital for him, but, on the other hand, it is not the capital of the country, and that is where the hon. Member seems to me to be mixed in the arguments that he brought forward this afternoon.
I may have misunderstood him, but he talked as if these two things were the same. Otherwise, if by any chance you could argue that war debt was capital, it would mean that at the end of the war the country would be infinitely wealthier than at the beginning of the war, because it would have such an enormous Debt. If Debt were the capital of the country as a whole then the more Debt you had the better, but everyone knows that it is not the capital of the country. The hon. Member in another speech spoke about this Debt and the profits accruing to trade and so forth. What I would like to point out is that if you have a Debt of £10,000 in the shape of a war loan, the interest on ½that is provided by taxation., and all of us are the poorer because those who hold the war debt are the wealthier, and that is the point that has to be understood, and on which I do not think some of the arguments of the hon. Member were as conclusive as one would imagine, because they did not differentiate sufficiently between the capital of the individual and the capital of the nation.
There was another point which the hon. Member put in connection with the effect of taxation upon wages. He pointed out that in the 13 years immediately before the War, although before that date the real value of wages had been increasing, it began to stop, when taxation by means of Death Duties and Income Tax was increased. I would ask the hon. Gentleman whether he considered, when looking at the figures for those 13 years, the effect of the gold production from South Africa upon the value of money all over the world? I put it to the hon. Member that we were really seeing in those years a kind of inflation due to the quantity of gold that was being brought out of the South African mines. Although the inflation may seem small compared with the inflation which we have seen in France, Italy, Germany and Russia during the last two years, and so small that we hardly noticed it at the time, yet there was a real inflation taking place, and, while prices were rising, wages were not going up in proportion.
Another point raised by the hon. Member related to direct and indirect taxation. I agree with the right hon. Member for Paisley (Mr. Asquith) when he said that he did not attach any great importance to the fixing of any definite figure as between direct and indirect taxation. The point of importance is that the taxation should fall upon the shoulders best able to bear the burden. We were told recently that about 2,500,000 persons are paying Income Tax to-day, whilst 22,000,000 are electors in this country. From those figures we can see how wealth is uneven1 spread over society to-day; you have great wealth at the one end and poverty at the other. The hon. Member for Ilford (Sir F. Wise), in a speech a few weeks ago, asked the Chancellor of the Exchequer to study Gibbon, and referred to a passage in the "Decline and Fall of the Roman Empire," in which Gibbon stated that towards the end of the Roman Empire the taxation was all direct. As far as I could understand the hon. Member, he implied that the downfall of the Roman Empire was partly due to the fact that taxation was imposed in that way. No doubt there was a temptation to put the taxes where the wealth was, but I maintain that the downfall of the Roman Empire was due to the rottenness of having great wealth at one end of the community and poverty at the other.
I apologise to the. hon. Member if I ascribed to him what was someone else's idea. With all respect to the great name of Gibbon, I challenge his statement. I cannot conceive that the form of taxation could have had much to do with the downfall of the Roman Empire, but I can see that the ill-distribution of wealth can have a great deal to do with the suffering that we see to-day. In conclusion, let me say that I cordially welcome the Budget. The hon. Member for Central Hackney (Mr. Franklin) has given my right. hon. Friend the support of the City for his Budget. I would not dare to do that myself, as the views which I hold are not very largely held in the City of London. But I have noticed that my right hon. Friend has succeeded in winning the esteem of the bankers of the City. I hope that he will walk warily when all men speak well of him. We shall soon find, if he remains long in the position of Chancellor of the Exchequer, that he will not be sailing in quite such smooth water, hut that when he comes to some of the other schemes that must lie before any Socialist Chancellor, he will inevitably come into conflict with the City. I was disappointed with the speech of the right hon. Member for Paisley. In a Budget two things have to be kept in mind. One is that taxation should be raised from those who are best able to bear it, and the other is, that we want. a Budget and the power of finance to be used in order to help forward larger schemes of development. I confess that I have more sympathy with the ideas brought forward by Mr. Keynes this week in the "Nation" than with the views expressed by his distinguished leader this afternoon. We should use the power of finance to develop some of the great resources of this country. There is need of electricity, of better transport and better roads. All these things help industry. I hope that my right hon. Friend, when considering these questions, will see whether he cannot find some money to develop the trade of this country on these lines.
I can promise that I will not refer to the question of the injury to the motor trade by reason of the removal of the McKenna Duties, except to say that as far as my constituency is concerned I associate myself entirely with the protest that has been made. But, like the hon. Gentleman who has just spoken, my constituency is interested in a particular trade, and it is a trade which has not yet been mentioned. refer to the film trade, which has grown under the protection of the McKenna Duties—a trade in which a Prime Minister showed his interest by gracing the lunch that was given last November at the inauguration of the British Film Week. Under the McKenna Duties of 1915, as amended by the Act of 1922, and with the addition of a Clause which I was successful in persuading the House to pass last year, the film trade enjoyed a very limited amount of protection, represented by a duty of 5d. a foot en negative films, ld. a foot on positive films, and ⅛ of 1d. a foot on blank films. I cannot follow the last speaker. This is in no way a charge upon the consumer. It is really only a limited protection for an infant trade. It. has been a very small protection against American competition, but it has served as a great encouragement to the enterprise of the British film companies, and has been productive of a very large measure of employment. I remember the Prime Minister said how tired we had been getting of American films in this country. Well, the protection of this duty has encouraged British films, and they have increased sevenfold, while imports have fallen by 50 per cent. The hardship of the proposals of the Government will fall particularly on the film printing side of the industry, and will lead to the closing down of many film printing factories, and the throwing out of work of large numbers of employés.
The House knows that large numbers of films exhibited in this country are produced and manufactured in America. Thanks to the duty, it has been the practice of the American companies to export the negatives to this country so that the positive films might be made here. The number of prints required for this country has been very much larger than for any other part of the world, except America. Thanks to the protective duties, we have also had the opportunity of printing off the films for use on the Continent. In consequence, therefore, our output of printing has been very large, and the amount of labour employed has been very considerable. Should the duty be now abolished the printing will be done in America, with the result that the positives will be imported instead of the negatives. A negative film is probably of 6,000 feet, and the duty at 5d. per foot will be £125 or thereabouts. Suppose an average of 20 prints is made from a negative, there would be a duty of £500 put on the American producer. At the present time there is as much as 3,250,000 feet of positive film printed every week in this country, so the House will see that this industry has developed to a very considerable extent and finds employment for thousands of people. The Chancellor of the Exchequer might be interested to know that the petition which I forwarded to him a week or so ago was voluntarily signed, practically within 48 hours of his speech, by the employés of these film printing laboratories without any suggestion from the employers. That petition contains about 2,000 names, and many of them come from the constituency which I have the honour to represent.
During the nine years that this trade has had this very limited amount of protection, the men who have been employed in it have become skilled craftsmen, and they would have very great difficulty in finding any other employment. Also, the policy of the right hon. Gentleman would affect the employés in a great number of allied trades. There are the makers of raw stock, who dope celluloid with the sensitive photographic emulsion for two purposes, namely, the exposure of the camera to produce a negative, and the making of the positive films from the negatives. The manufacture of raw stock is mainly carried on in conjunction with the making of photographic plates and papers, and in consequence a number of such manufactures will be affected. A very considerable business has been done in that direction, and at the present time an American and a French firm of manufacturers are looking for sites. One of them has acquired an option on a site in this country in order to make his raw stock himself, and the other is on the point of doing so. Should the policy the Government have suggested to the House be carried out, neither of those factories will be erected, and a great mass of employment will he lost to the people of this country.
The Chancellor of the Exchequer has been called an optimist for his estimate of the revenue. With trade as it is, and in view of the considerable amount of unemployment which will result from his policy, he must be an optimist to budget for an increase of £7,500,000 in the Customs Duties. Also, I should have thought it was optimistic of the Chancellor to budget for £8,000,000 of Excess Profits Duty. Most of the manufacturers and firms one comes in contact with are presenting claims for repayment of overpaid Excess Profits Duty, and it will be interesting to see if the optimistic forecasts of the Chancellor are justified in the ensuing year. I want also to call his attention to another thing. I see he refers to a Budget of £21,000,000 in stamps. I do not know whether he is aware of the tendency in modern Articles of Association of companies to allow directors to pass their transfers of shares for delivery without the necessary stamped document. If that policy is pursued, I can imagine that his revenue from stamps will not quite equal the amount for which he has budgeted. The Chancellor of the Exchequer has made liberal reductions in sugar and tea, and I imagine he must be out for the votes of the women; but he has done
little for the necessities of mere man. He has not helped in the reduction of taxes on tobacco or on beer, and the House will remember, in the very interesting statement which the Chancellor of the Exchequer made, in reply, I think, to the hon. Member for Moseley (Mr. Hannon), he pointed out that in London a working man paid 40 per cent. of the price of his pint in duty to the Exchequer as against 10 per cent. in Germany, 5 per cent. in Holland, 4 per cent. in Denmark and a very negligible amount in France and Belgium; and at the same time, the volume he could purchase was far less in London than in any other town in Europe with the exception of Berlin. I would like to refer him to the speech of the present Deputy-Leader of the House on the question of the Beer Duty last year when he said:
The Beer Duty, however, is worth a little notice, even as it has now been left by the Chancellor of the Exchequer. I doubt whether in all history there is an instance comparable to this, where in such a subtle and effective way a government has been able to use during a time of exceptional national stress one particular article to do so much of its work, and to rid it of so many of its burdens. The annual yield from the Beer Duty last year was roundly £124,000,000. Taking it now with the reduction of £16,000,000 it still approaches £110,000,000. What does that do? It goes far to pay nearly altogether the old age pensions, the pensions to wounded soldiers, and the moneys to widows and dependants and children. In short, it is a plan which in the main enables Chancellors of the Exchequer to dip deeply into the pockets of the working class who are largely the beer consumers, and to make them pay almost entirely for all these other great obligations arising from social necessities and from the conditions of the War.
I feel I can add nothing to what the Deputy-Leader of the House said last year. I can only hope that—although I know that the Chancellor of the Exchequer cannot take it into consideration this year—it may live in his memory, and that he may have the opportunity at some future time of reducing such necessary articles of a working man's budget as beer and tobacco, the duties on both of which stand at enormously enhanced figures as compared with those before the War.
I never quite understood until to-night that the proposal for the taxation of land values was to merely provide a new source of Imperial revenue. I thought it was to transfer from buildings to land the rateable burden at the present time. I am not at all sure that I agree with the hon. Member as to the amount of possible revenue from that source. I was a member of the Land Inquiry Committee in 1910 which, after very careful investigation, came to the conclusion that the prospect of a large Imperial revenue from this source was exceedingly small. There are cases where the value of land has no relation whatever to its rateable value, and I know of one case where county council was asked £4,000 per acre for a piece of land which contributed nothing whatever to the rates. I hope when the right hon. Gentleman takes this question of land values into consideration he will bear in mind the equalisation of rates in the localities rather than an increase of his own revenue.
When the right hon. Gentleman introduced his Budget the other day I turned up a book which he wrote about 15 years ago, and I was interested to find that the Budget was practically a reproduction of the proposals made by the right hon. Gentleman in that book. In view of the fact that his Budget has been so well received, even on the other side of the House, it is interesting to note that that book was called "The Socialist Budget." [HON. MEMBERS: "Hear, hear!"] Hon. Members above the Gangway cheer that statement, but they should remember that the right hon. Gentleman in introducing his Budget said it was not a Socialist Budget, but a Radical one. I have been a Radical for a good many years, and there is not much doubt about my Radicalism. Hon. Members opposite suggest that by doing away with indirect taxation and by relieving the poor man of the duties on tea and sugar it might lead the way to an uneconomic use of the tax. But hon. Members who say that must surely have forgotten that Sir Henry Campbell Bannerman once stated that a quarter of the people of this country are on the verge of starvation. It is well known that even to-day, in certain parts of the country, the labourer is not making more than 20s. a week and, according to figures supplied by the National Farmers' Union, their wages do not exceed 27s. weekly. It seems, therefore, there is little possibility of the working classes wasting the little relief that is going to be given them by this Budget. I congratulate the right hon. Gentleman on the relief he is giving, and I hope that in future years—for I have no doubt he will be Chancellor of the Exchequer again, either for his party or for another party, and if he is the Chancellor of the Exchequer for the Radical party I shall be pleased to sit behind him—he will extend that relief. I make an appeal to the right hon. Gentleman whether some further provision cannot be made for the relief of earned income. At the present moment there is an allowance of 10 per cent. up to £200 of earned income. It strikes me that the real burden of taxation in this country, in all its severity and unfairness, falls upon men with earned incomes which they may lose by death or by ill-health; and that is one matter with which, in future years, the Government might not unnaturally deal in the interests of those who are very hard-working every year of their lives, and are unable to make more than a very small income.
The right hon. Gentleman may ask where the money is to be obtained if he is to give further relief of taxation in that direction. I am not going to discuss the question of land valuation, but I am going to suggest to the right hon. Gentleman one method which, if adopted, would enable him to have a largely increased revenue without any additional taxation. I am referring to the transfers of property in lifetime in order to evade the Death Duty. I know that transfers three years before death have to be, accounted for by the executors, and that on them the duty is paid. But consider what takes place with regard to transfers during lifetime. At one time there was a nominal Stamp Duty of 10s. Later on the property had to pay the ordinary Stamp Duty, but no extra duty whatever is imposed where owners of property come to the conclusion that they are in a position to transfer the property to their children or grandchildren. It is a very common practice, and it is well known that during the last 10 years owners have been transferring property, both real and personal, to an enormous extent during their lifetime. By so doing they avoid, first, the Death Duties. As a matter of fact, the Death Duty returns are a quite inaccurate indication now of the wealth of the country. Not only do they transfer property in order to avoid the Death Duties, but they also reduce their own Income Tax payments and, in particular, their own Super-tax. I suggest to the right hon. Gentleman that here is an opportunity without further taxation of getting an exceedingly large increased income.
The right hon. Member for Paisley (Mr. Asquith) referred to the desirability of rearranging taxation and in particular to the relation between local and Imperial taxation. Those who take any part whatever in local Government work are aware of the fact that the burden of local taxation at the present moment is an almost impossible one. Other new sources must he found or greater contributions must be made from the Imperial Exchequer. A question which has not been raised so far is whether it would be wise or not to impose a local Income Tax. So far as I know the experiment has never been tried in this country but it has been tried elsewhere. At the present moment the burden of local taxation falls upon the occupier of property. However necessitous he may be, taxation is imposed upon his house although that house may be too large in comparison with his income. On the other hand, there may be living in that particular locality a man drawing a large income from the locality occupying a small house or perhaps lodgings and contributing practically nothing to the local rates. When the relationship between local and Imperial taxation is being considered, the Chancellor of the Exchequer might well go into this matter of the desirability or otherwise of a local Income Tax.
Many hon. Members in their speeches seem to pay more attention to the next Budget than to the present one. It would be well if we were to confine our attention in this Debate to the present Budget and its effects. In connection with this Budget I can congratulate the Chancellor of the Exchequer in one respect—that he has adopted a bolder policy with regard to reducing taxation than any Chancellor of the Exchequer since the War. I congratulate him sincerely on doing so because for many years I have advocated a policy of that sort with regard to in direct as well as direct taxation. On another matter, I cannot congratulate the right hon. Gentleman, and that is the repeal of the McKenna Duties. Nor can I congratulate him upon the manner in which he referred to the employers of labour and their methods of opposition to the repeal of these duties. I suggest that employers, in the main, have just as much regard and consideration for the well-being of their workpeople as anyone such as the right hon. Gentleman himself. In the course of to-day's Debate we have heard a great deal about a mandate at the recent. Election for Free Trade. It is claimed that there was a definite mandate for Free Trade. There was nothing of the sort. According to the speech of the Prime Minister himself the election was not fought on Free Trade, but on the issue between Conservatism and Socialism, and it ill becomes any of the supporters of the Prime Minister to say that they got a direct mandate for Free Trade am willing to admit that there was no mandate for increased Protection. That was the issue at the Election. It was not whether the country should go back to an absolute Free Trade policy, but whether the existing measures of Protection should be increased or not. According to the speeches of the present Leader of the Opposition, the country was asked to increase existing measures of Protection because that, in his opinion, was the only remedy for unemployment. The Conservative party lost on that issue and, therefore, there should be no increase of Protection, but those opposed to the policy of the Conservative party have no right to assume that the result of the Election gives than a perfect right to undo such Protection as was in existence.
The great mistake which we are making in our fiscal policy is that we are swinging about too much from one side to the other. I hold that there should be two elections before any distinct change in policy is made. Many of those who have spoken from the opposite side of the House on the repeal of the McKenna Duties have expressed the view that it will tend to cause great dislocation and hay argued in favour of delaying the repeal. There have been many speeches from the other side to the effect that whether the repeal of the duties be right or wrong as an economic theory, the industry should be given time to adjust itself to changed conditions. We all know what is the trouble as regards employment under the Free Trade system. Other countries put up barriers against us and we suffer because of the dislocation. It may be that in time we adjust ourselves to the altered conditions and carry on, but in the meantime unemployment becomes more rife in this country than in the others. I was interested to read a speech by the Chancellor of the Duchy of Lancaster in which he said we wanted freedom to buy and to produce. That is very fine from the Free Trade point of view, but it is remarkable that we never hear anything about the freedom to sell, which is just as important. If we had freedom in other markets there would be some reason in talking about Free Trade, but what was the use of talking about Free Trade when all the freedom is on the other side of the barrier?
There should be no big change in the policy of the last Government until there has been a second Election. During the previous Election Mr. Bonar Law said that if he were returned there would be no change as regards increased Protection, nor was there any change. Not a single change of that kind was made by the then leader of the Conservative party because he had given a pledge. I know something about the matter, because I had advocated for many years the removal of an injustice which was inflicted in the making of the duties by the fact that motor-car tyres were not included. There were four words in the Finance Act which were put in for a special purpose, "other than motor-car tyres." Mr. Bonar Law refused to take those words out because he had given a pledge not to extend Protection. I wonder if there is the same regard for pledges on the other side? I ask hon. Members of all parties whether it would not be much better for regular employment in this country that we should not decide on a complete reversal of our policy at one Election, but should have two Elections before any definite change in fiscal policy is decided upon? Before referring to the speech of the hon. Member for Harrow (Mr. Mosley), may I say that in his division there happen to be particular works which support my argument as to the effects of Free Trade, and in this connection I wish to make a very definite challenge to the theoretical Free Traders who say that all we want is more scientific management? If five of them will form a board they can have these two works at a valuation and see what they will do with them. The proof of the pudding is in the eating, and I shall be very glad to see some of these theorists trying to put their theories into practice. The hon. Member for Harrow said direct taxation was not a charge on industry. I do not know what business the hon. Member has been engaged in, but I was very sorry to learn from him that since he left school he had never missed doing an honest day's work. I am sorry for him. I have been brought up as a worker. I started when I was 10, but I have always been very glad to have a holiday when there was a chance, and I am sorry that the hon. Member for Harrow has never had one.
When he says that direct taxation is not a charge on industry, I wonder if he knows anything about the Oldham trade and the Lancashire cotton trade. There has begin a system in vogue there for 50 years—whether or not it is recognised as being a sound financial system does not matter; it is the one that has built up that industry, which is the greatest industry of its kind in the world. [An HON. MEMBER: "Under Free Trade."] It has been built up under a system of capital on which interest has been paid, absolutely subject to the Income Tax being paid, so that there is a very direct charge on an industry, which is only second in importance to agriculture in this country, and which in the past has done a great deal to help carry this country forward. In that way it is bearing, and has borne, a very definite cost on its charges with direct taxation. Therefore, it is unfair for men who have not the experience to talk about that, and say there is no such thing as extra cost when the direct taxation is increased, as the hon. Member did. I think that a decrease in both direct and indirect taxation will be all to the good, and that is why I congratulated the right hon. Gentleman on his boldness. He has been the only man who has dared to do it, but when other Chancellors have gone a little bit on that road, they have been told by the right hon. Member for Paisley (Mr. Asquith) that they were gambling. That is what was said of our Chancellor, the right hon. Member for Hillhead (Sir R. Horne), that when he was a little bold in his system he was gambling. The right hon. Member is gambling still, and I think he is justified in gambling. He is gambling to give the people a chance to get some work, instead of finding a lot of money by taxation in order to pay unemployment benefit. It is a different system from that under which we have worked since the War, and in that regard I congratulate the Chancellor of the Exchequer.
As to the question of Income Tax, and saying it should be borne, in a great measure, by fewer people, that is all very well. You can put taxation on to those 2,500,000 Income Tax paying people, but there may come a time when, although you may think they can pay it, it may be impossible for them to do so. There is such a thing as having to pay Income Tax, not out of revenue or out of profits, but absolutely out of capital, and when you do that you defeat your tax. I myself have known many instances where the depletion of capital, by taking taxation from businesses requiring it, has meant the closing down of works and the loss of wages to the community. To show hon. Members how people dislike direct taxation—and they are not all on this side of the House—I would like to tell about one of our workers. He said, "I would like to leave work, if you do not mind, at a quarter-past five instead of half-past, because I am troubled a little bit with gout; and, another thing, it would allow me to get to the trams before the crowd, and I do not mind if you knock it off my wages; it will just save me from paying Income Tax."
The self-abnegation shown by the Treasury Bench this evening, though I fully understand the motive, has accumulated a very large number of questions, which I hope the Chancellor of the Exchequer will find time to answer before the end of the Debate. The speeches that have been made to-day have confirmed the opinion which has been developed on this side of the House as to the flashiness of this Budget. It has a certain meretricious appeal, but when it is examined in detail very serious defects show themselves. Of course, we none of us wish to criticise the reduction of the taxation on food. Especially do we support the reduction of the tax on sugar. The right hon. Member for Bewdley (Mr. Baldwin) when introducing the Budget last year, committed himself to a reduction of the tax on sugar as soon as the world supply was great enough to provide against the danger of the increased consumption of sugar putting up the price against the consumer.
That rather looks as if it were dangerous to reduce the taxation on sugar at the present time, but I do not agree with the hon. Member in that conclusion. I am informed by those who are in a position to judge that there is a sufficient supply in sight to enable the market to carry the increased consumption which will result from reducing the taxation and raising the demand. What I want to mention in connection with this Sugar Duty is the very unfortunate byproduct of the proposed change, namely, the blow to the sugar beet industry. I know of two proposals in East Anglia—two factories which were projected—which have now been completely brought to a standstill. [An HON. MEMBER: "Where?"] At Halesworth and Bury St. Edmunds. Negotiations had proceeded a considerable length, but the whole thing has been brought to a standstill, and I understand that there are parallel cases throughout the country. What I suggest is that we ought to take steps, in connection with this reduction, to see that this industry does not get a knock-out blow. It is an excellent avenue for employment, not only for the employment of skilled agricultural labourers on the farms—that is a certain result—but also for a very large amount of unskilled labour. For every thousand acres of sugar under beet, a hundred unskilled workers are employed in the factory during the busy season.
The difficulty about this industry is that inevitably it takes some years to establish. There is a very heavy initial outlay, and as each factory projected in this country means about 10,000 acres of beet every year, it means a slow process of conversion for the farmer and the rearrangement of his crops. This means a big and a slow organisation, and during the period of development, when the factory cannot run at full speed, it means a very heavy cost. I do appeal to the Chancellor of the Exchequer, who has already indicated his sympathy with this claim, to lose no time in giving a favourable decision in this matter, because the whole of this development is now at a standstill. I do not think a flat rate of subsidy is necessary. I do not think any permanent subsidy is required. But if you are to establish these factories, and tide them over the difficult period of development, you can only do it by guaranteeing them a minimum price in one shape or another, and the simplest way is to guarantee this minimum as the aggregate of preference and subsidy. This can be done in the case of each factory over a term of years, to enable them to organise the volume of beet production, and reach a self-supporting basis. I do hope the Chancellor of the Exchequer tonight will be able to give some message of encouragement to those who are trying to develop this industry, so that they may be saved the complete smashing of all their plans.
I come to the other reductions in taxation, and, in these cases, my criticism would be that the Chancellor of the Exchequer has shown a failure, in certain cases at least, to ensure the passing on of the benefits to the public. The House will remember that last year, when the Chancellor of the Exchequer of that time made a large reduction of indirect taxation, he took very definite and certain steps to see that the public received the whole of it, and more. He arranged that not only should the whole of the reduction of the beer duty be passed on, but that the brewers should make a contribution in anticipation of the increase of trade, which, the House knows well, has not proved to be the case. Anyhow, the Chancellor of the Exchequer has failed to take that same precaution. Take the Entertainments Duty. The scale is so worked out that at certain levels it is quite certain the benefit will not be passed on to the public.
Seats now sold to the public at 6d. pay l½d. in Entertainments Duty. From inquiries I have made, those seats are going to be sold at 5d. There is no question of the odd ½d being charged. One halfpenny on those seats will certainly go into the pocket of cinematograph proprietor. Take the 3d. seat that at present is paying ½d. The cinematograph proprietor receives 2½ the Exchequer, ½d. There, again, I am advised there is no question of 2½d. being charged for the seat, but the whole of the reduction will go into the pocket of the cinematograph proprietor. Take the higher level. Take the very popular price of 1s. at football matches. At present time, on the 1s. admission, 3d. is paid in Entertainments Duty. Under the new scale, it is going to be reduced to 2d. The Id. which is remitted will not go to the public; it will go into the pockets of the promoters of the match. I am informed this is already decided, and, indeed, it is obvious to the House it would be impossible, when you have tens of thousands of people passing through the turnstile, to charge the odd figure of 11d., instead of the round sum of 1s.
What confirms my conviction that a lot of this remission will not go to the public at all, but merely to the promoters of these entertainments, is the cinema-owners' agitation. They were not looking for fuller houses. As we were told this afternoon, they are already crowded. [An HON. MEMBER: "Quite untrue!"] That may be untrue in the hon. Member's division, hut in certain disc rids they are certainly crowded. Undoubtedly, incertain districts they are not looking to a larger attendance on the part of the public, but they are looking to a larger profit out of that money which used to go to the Exchequer, and which now will be diverted into private pockets. I say the scales could have been framed so as to give relief only in those cases where it v as certain and inevitable that that relief would have been passed on to the public.
I do not want to deal in any detail with the McKenna Duties, but there is one point which I cannot help making, after having listened to the speeches from the opposite side of the House on this question. What concerns us in this matter is not what was intended by the Government of the day at the time of the imposition of those duties. It, is not whether those duties were imposed with a protective object, or, indeed, whether they transgress the strict canons of Free Trade at the present time. Our real concern ought, surely, only to be their present effect.
I think the Chancellor of the Exchequer, in talking about this theoretical question of Free Trade and Protection, shows himself singularly out of touch with public opinion in this matter. Since his Budget was introduced; in fact, since he made his very long and exhaustive speech Oft this subject, the matter has been considered by a body which is in no sense political. It was discussed at the annual meeting of the Associated Chambers of Commerce. [HON. MEMBERS: "Oh!"] My attention was drawn to this by one of the leading Free Traders of the country. He told me that at that non-political gathering the overwhelming feeling on the part of Free Traders, as well as political Protectionists, was that it was madness to abolish these duties. The Association passed a resolution that they viewed with grave alarm the policy in respect to the non-renewal of the McKenna Duties, and they called for the setting up of a committee. That was passed without a division, and the only opposition to that resolution was one which said they must not commit themselves to this political doctrine, but showed the same dissent from the Government proposal by moving as an amendment that a committee should be appointed by the Government to consider the question. I am completely puzzled at the decision of the Chancellor of the Exchequer in this matter, and the only explanation is that he sees red on the question of Free Trade. If he had restrained himself from giving way to this doctrinnaire impulse; if he had also limited his remission of Entertainments Duty to those parts of the scale where provision could have been made for a certain passing on to the public, he could have given the masses of the country the great boon of a restored penny postage. Instead of a remission benefiting nobody except, perhaps, the foreign producer and the shareholders in cinematograph companies, he would have given a great benefit to every class of the British community. He would have brought relief of taxation into the very poorest homes. The Chancellor of the Exchequer in his Budget statement said that it would be absolutely Unsound to subsidise the Post Office at the expense of the general taxpayer. As he subsidises the producer of cheap foreign goods, as he is subsidising cinema owners, I should have thought that through the Post Office he might, in in the form of a subsidy, have given remission of postage to the masses of the country. [An HON. MEMBER: Why did not you do it when you were in office?] Because we had not the same large surplus, and the same prospect of remitting taxation. That is the same answer which applies to other criticisms from the other side of the House that we did not make provision for housing. We were going to make that provision out of the surpluses of the following years—out of this surplus instead of carrying out these doctrinnaire proposals! I am sure that this side of the House would have given strong support to remitting these heavy burdens of postage upon all classe of the community.
I think, really, that the great difficulty in the whole of this Budget is the failure to redeem the pledges which have been made as to social expenditure. If those proposals are to be carried out we are faced next year with a deficit quite unprecedented in our peace time financial history. [An HoN. MEMBER: "What a prophet!"] We are waiting for an answer to that prophecy! We hope that the Chancellor of the Exchequer will be able to set our doubts at rest this evening, because in all the Budget discussions no such answer has yet been vouchsafed. We do say that in financial policy we ought to have continuity. At the present time, although the sky is overcast, although we are inevitably running into difficult times ahead, the Chancellor is throwing the last grain of ballast overboard. How is he going to meet the difficulties of finance next year? It has been suggested to-day, or recently, that he would be in his office for several Budgets. We are glad to hear the corollary to that, that he is looking ahead, and that he is only budgetting for this year. We want to know how he is going to meet next year. [An HON. MEMBER: "That is not relevant!"] It is very relevant, because it is not sound to have sudden jerks in your financial policy.
In his Budget speech the right hon. Gentleman suggested that he might achieve reductions in expenditure. I had some knowledge of the Estimates at the Treasury before they were laid before the House. I have had a detailed examination of another set of Estimates with the Accounting Officers responsible who have appeared this Session before the Public Accounts Committee, and we have heard evidence from all except the fighting Departments. From those sources, as I have said, it would appear that we cannot rely upon any continuance of that under-spending which has contributed so largely to the surpluses of the last few years. We are, I am glad to say, getting back to strict Treasury and Parliamentary control. You cannot find any large savings in administration at the present time.
The aftermath of war expenditure is drawing quickly to a close, and you cannot provide any large amount of money except by legislation cutting down the social provisions made for health, unemployment, education and war pensions. So far are we from cutting that expenditure down that already all parts of the House are committed to increases in this direction. Whatever the prospect it is surely unsound to budget upon unspecified savings, a course which has never been pursued before. No Chancellor of the Exchequer has ever before budgetted blindly on the possibility of cutting down estimates without being able to disclose to the House the savings that are going to be made. Such a course at the present time is more dangerous than it ever was before in the past. Far from the possibility of cutting down social expenditure the whole tendency is the other way.
I do not want to cover the ground that has been dealt with by the right hon. Gentleman the Member for Colchester (Sir L. Worthington-Evans) and the right hon. Gentleman the Member for Rusholme (Mr. Masterman), who gave figures in regard to the expenditure which we may have to meet on housing and widows' pensions. Until we see those measures then those figures must be very problematical, but I want to deal with one other very large source of expenditure in regard to which I think the figures given the other day were unduly conservative—I mean the cost of the reform of old age pensions. A statement was made by the Secretary of State for War during the Burnley by-election in which he said that old age pensions
should be given at 65 at the rate of 15s. per week, and he stated that, if the Labour party was given a real chance, those figures were not very far off. Now the Labour party have got an excellent chance, and the House is waiting expectantly for the introduction of those proposals. The right hon. Gentleman said:
The country is not merely wealthy enough, but it could do it with both hands and one leg tied.
The Secretary of State for War added that.
The removal of the means limitation in old age pensions would take effect in a very few weeks.
Since then we have had from the Chancellor of the Exchequer the figures on which we can base the cost of this policy which was put forward by the Secretary of State for War. We were told by the Chancellor of the Exchequer, in answer to a question by the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy), that if the means disqualification were abolished it was estimated that the present charge for providing a pension at the age of 65 would be £73,000,000. The Secretary of State for War has told us that we are to have a pension system at 15s. per week, therefore we must increase this £73,000,000 by one half, and that brings it up to £110,000,000. From the answer of the Chancellor of the Exchequer, it is clear that this is not a final figure, because, in an earlier part, dealing with the present incidence of charge, he showed that to get the final figure we must multiply the present figure by 5/3, owing to the longer expectation of life of pensioners. For my purpose, however, next year is enough, and I do not want unduly to raise the hair of the House by alarming prophecies. Apparently it does not alarm hon. Members opposite to have £110,000,000 instead of the present charge of £24,000,000 on Old Age Pensions.
We shall look forward to the proposals of the hon. Member when he becomes Chancellor of the Exchequer, but I think that in certain quarters of the House an extra expendi- ture of £86,000,000 on old age pensions is a matter of considerable anxiety. At the same time I would point out that, appalling as these figures are, we have this consolation that they are based on a Cabinet Minister's Election pledges. Now that the Home Secretary is safely elected for Burnley, we may expect them to be very heavily discounted. I do not want to stand between the House and Chancellor of the Exchequer any longer, but I do just want to focus the point on which we most of all, on this side of the House, want to hear him answer. We are hoping that he is going to clear up this dilemma: Do the Socialist Government intend to carry the very extensive programme of legislation which they have promised—in which case they are convicted of wildly unsound finance and a failure to make any adequate provision—or, on the other hand, do they intend to do nothing—in which case these promises of social legislation must be added to their already very large collection of broken pledges? Personally I have a very strong impression as to which alternative will prove true. We all know what path it is that is paved with good resolutions. For their downward path the Socialist Government seem to prefer the more slippery paving material of broken pledges.
I rise to reply to the Debate that has taken place this afternoon with a rather unusual feeling. A very old Member of this House once said to me that he never could make an effective speech in reply to a Debate unless he had been bitterly attacked. I have not had that inspiration this afternoon. With the exception of the first few sentences of the opening speech of the right hon. Gentleman the Member for Ladywood (Mr. N. Chamberlain), the Debate has contained no features and no observations of which I could make the slightest complaint. But this Debate has other unique or exceptional features. It is the first occasion, in recent years at least, when no Amendment to the Second Reading of the Finance Bill has been brought forward by the official Opposition. There was a striking discrepancy between the earlier language of the right hon. Gentlemen opposite, and the fact—I may assume it to be the case—that they have so little opposition to this Bill that they are not prepared to put down an Amendment to it, and I should be very much surprised if they have the courage to go into the Lobby to-night and vote against it. The right hon. Gentleman said I had committed in the Budget such iniquities that my name would be held up to execration by future generations. If that be the characteristic of this Budget, why then do not the Opposition oppose it by their votes in the Division Lobby?
The right hon. Gentleman is really mistaken in the matter. He will see that when he reads the OFFICIAL REPORT to-morrow. I was contrasting the effect of the repeal of the McKenna Duties, which I said was temporary only in its mischief, with the untold mischief which I expected to arise from his attitude towards Imperial Preference.
The right hon. Gentleman may be right, but I have a very distinct recollection, and I shall be very much surprised to find that his reference to my future execration was not in relation to the McKenna Duties and my callous conduct in throwing tens of thousands of men out of employment. However one useful purpose the Debate has served has been to enable a number of hon. Members opposite who were disappointed in not giving the House the benefit, of their prepared speeches on the McKenna Duties an opportunity of delivering them. We had the speech of the right hon. Gentleman in opening the Debate, a speech which I might describe as containing a superabundance of intended spite and spleen. I have myself at times been credited with the power of vitriolic rhetoric, and have been regarded as having a monopoly of that quality. I have now a very successful rival in the right hon. Gentleman, but I hope I shall be able, should I ever in future have occasion to call upon my resources, to use it much more effectively and in a far better cause than that in which he has employed his powers to-day.
I think a more striking contrast between the speech of the right hon. Gentleman and that which followed it, it would be impossible to conceive. The right hon. Member for Paisley (Mr. Asquith), in no partisan spirit, gave us an intelligent, reasonable and penetrating analysis of the national financial position, and before I sit down I hope to be able to answer, or to attempt to answer, some of the questions which he put to me.
The right hon. Member for Ladywood complains that I did not make the surplus. If that be so, that, I have no doubt, to some extent explains his chagrin. At any rate, the right hon. Gentleman last October did not expect that there was going to be a surplus on last year's Budget. I remember a speech which he made in the country in which he was preparing the taxpayers for a not improbable increase of taxation on the Budget which he was expecting to produce in place of the Budget which I have produced. It serves no useful purpose to dispute as to whether it is the right hon. Gentleman's surplus or my surplus. At any rate, through the folly of the right hon. Gentleman and his friends, they were deprived of the opportunity of doing what I have done with the surplus, however it may have accrued. The question is, what have I done with the surplus, and what would the right hon. Gentleman have done with it if he had been in my place?
The right hon. Gentleman who has just sat down, in reply to an interjection, said that they had not the opportunity last year that I have had of relieving taxation. At the moment, the right hon. Gentleman had evidently forgotten that the Chancellor of the Exchequer a year ago had a larger surplus at his disposal than I have had. The right hon. Gentleman also said, in complaining about what he described as the smallness of the sum that I have kept in hand for prospective expenditure upon social reforms, that no Chancellor of the Exchequer before had ever estimated or taken into account the possibility of meeting the non-estimated, but anticipated, expenditure out of savings. The right hon. Gentleman has evidently forgotten that that is precisely what the Chancellor of the Exchequer did a year ago. He admitted that there was unestimated, but anticipated, national expenditure, and he kept in hand only half, indeed lees than half, the sum that I have kept in hand. He said that he had not made any provision for Supplementary Estimates, and that he expected to meet any unestimated charges by reductions of expenditure. The right hon. Gentleman said that he did not expect that I should be able to effect any saving upon estimated expenditure this year, and the right hon. Member for Ladywood implied, if he did not expressly state it, in his speech this afternoon that no reductions of expenditure had been made from the time that he left office until I presented the Budget. He is quite mistaken.
I think the right hon. Gentleman did make such an allusion in dealing with the point of my probable deficit next year. As a matter of fact although we came into office very near the end of the financial year, when the Estimates had almost been completed, I was successful in making a not inconsiderable reduction in the expenditure which the right hon. Gentleman himself had passed. If the right hon. Gentleman had remained in office, the Navy Estimates would have been £6,500,000 higher than the Estimates which were presented to Parliament a few months ago, and I am hopeful that during the coming year we shall be able, without starving any of the essential services, to effect further considerable savings.
The right hon. Gentleman the Member for Paisley (Mr. Asquith) pointed out that the Exchequer issues last year were less than the present estimates for the fighting services. There is a very simple explanation of that. In regard to the saving on the Army, recruiting had been delayed, as the right hon. Gentleman knows. In regard to the saving upon the Navy Votes, there was a prolonged strike of boilermakers that held over constructive work for a considerable time, and at the beginning of the year there were certain Exchequer balances in hand. But, notwithstanding all that, I repeat that during the current year I hope that we shall be able to effect not inconsiderable reductions upon the Estimates which have been presented to Parliament.
Many other speeches—and this topic was first introduced by the right hon. Gentleman the Member for Ladywood—have dealt with the question of the relationship between direct and indirect taxation. I have often expressed my views on this question in this House. I agree with what the right hon. Gentleman the Member for Paisley has said, that it is mere pedantry to lay down arbitrarily any fixed proportion between direct and indirect taxation. The whole point is the question of justice. The right hon. Gentleman the Member for Paisley spoke rather contemptuously about the phrase "taxing people according to their ability to pay," and yet a moment or two later he himself conceded the wisdom of that canon of taxation, by saying that the taxation should be based upon justice. My reason for this year giving practically all the relief which I was able to afford to indirect taxpayers is, that, although the sum of taxation which they pay is probably smaller than the sum of taxation paid by the wealthier section of the community, their capacity to pay is enormously less. It is a far greater burden for a workman with £2 a week, and a wife and family, to have 1s. taken from him than it is for a man with an income of, £5,000 a year to have £1,000 taken from him, and when we are discussing this question of the relationship between direct and indirect taxation, we must bear that point always in mind.
The right hon. Gentleman the Member for Ladywood said that I had paid very little attention to income this year. I paid a great deal of attention to income, because I am not so foolish as to think that I should be able to finance expenditure except out of income. We must have the income, and, while doubts are expressed upon this matter, I have every confidence that my revenue estimates will be realised. Of course, it is far too soon in the financial year to be either confident or pessimistic as to the course of revenue, but, at any rate, the revenue returns for the first two months of this year have not been in the least disappointing, but have given me reason to believe that my estimates of revenue for this year will be realised.
The right hon. Gentleman asked me why I had not done more for the unemployed. The right hon. Gentleman knows quite well that it is not the business of the Budget to bring forward schemes of that kind. The business of a Budget is to provide the cost of schemes which Parliament has already approved or which Parliament is likely to approve during the current financial year. So far as it is possible to devise a Budget that will do something for the unemployed, I claim that I have done more than has been done by any Budget, in this generation, at any rate.
What have I done? It was represented to me by the right hon. Member's friends, the Association of Chambers of Commerce, that one of the chief drawbacks or hindrances to the improvement of trade was the existence of the Corporation Profits Tax. Well, I met them there, and I totally repealed the Corporation Profits Tax. Therefore, upon their own showing, their own claim, their own representations, I have taken what is, in their opinion, a very considerable step to the improvement of trade and, therefore, to the improvement of the state of employment. Then the right hon. Gentleman argued that relief of Income Tax, which put an increased spending power into the hands of the Income Tax payers, would be more likely to stimulate trade than the same amount of reduction in indirect taxation. I think that the right hon. Gentleman was particularly unfortunate in the arguments that he used. He said, for instance, that by reducing the price of the seats in cinemas we are doing nothing to increase the purchasing power of the people, but, he added, if we relieve a man of his Income Tax we are enabling him to keep another gardener, or his wife to buy another dress. Why the man with 2d. or 3d. more, because his seat in the cinema is cheaper than before, has no increase of purchasing power, I do not know. [An HON MEMBER: "He will spend it on beer!"]
I had a letter sent to me the other day, an anonymous letter, in which the writer said: "I wish you knew what the genuine working man thinks about your abominable Budget. You ought to be ashamed of yourself, letting off the teetotalers their tax by cheapening the price of tea. I have been a Labour man up to now, but for the rest of my life I shall be a true Conservative." I heartily congratulate hon. Members opposite upon their recruit, and upon the reason why he intends in future to be a true Conservative. That, perhaps, is the explanation of the reason why the Chancellor of the Exchequer, 12 months ago, devoted half his Budget surplus to getting recruits. Any increase in spending power, by reason of reduced taxation given to the working people, stimulates trade to a greater extent than giving relief on the Income Tax to the rich. There is a certain expenditure which is stable, which must go to the necessaries of life.
Good trade depends upon the prosperity of the staple industries of the country. To apply expenditure, not continuously, but at one time to one particular article and at another time to another article, upsets trade, causes oscillation, and adds to the floating army of unemployed. It is only in so far as you can encourage the great staple industries like the building trade and agriculture—industries which are producing and providing the necessaries of life—that you can make employment stable. That is the reason why this reduction of taxation which I am giving this year is calculated to do far more than an equal amount of relief would have done if it had been given to people who have already quite enough means to support the staple industries of the country and who would, therefore, be more likely to spend the money in transitory pleasures.
The right hon. Gentleman asked if I was justified in keeping only £4,000,000 out of between £30,000,000 and £40,000,000 as a Budget surplus, and he then went on to make a sort of amateurish Budget of the expenditure I was going to have to meet during this year.
Well at the end of this year. The hon. Member for Guildford (Sir H. Buckingham) said my Budget was cunning, if not diabolical, and that I was spending the last penny, in the expectation that I would not be in office next year, and that I would leave it to a Conservative Chancellor of the Exchequer to impose taxation to pay for my profligacy. May I say this for the consolation of the hon. Member, that he need not fear that a Conservative Chancellor of the Exchequer will stand at this Box next year. Still should there be one, if he has to increase taxation, the hon. Member may rest assured that he will have regard to his own friends, the Super-tax payers, and the hon. Member need not fear that the Chancellor of the Exchequer will increase the Super-tax. No; any increase of taxation by a Tory Chancellor of the Exchequer will be imposed in such a way as to let the rich escape, and put the burden on the poor. So far as revenue was concerned in the tariff proposals at the last Election, that was the whole purpose of it—to increase indirect taxation. Or, to use the words of Mr. Balfour, as he then was, during the late Mr. Chamberlain's fiscal campaign, it was "to broaden the basis of taxation." That was the real revenue purpose of the Election programme of the Opposition in the autumn of last year. The right hon. Gentleman, in the speech to which I have already referred, anticipated a probable deficit at the end of the year. That was one way in which they proposed to make up that deficit; not to increase the Super-tax, or the Death Duties, but to put a tax on a large number of manufactured articles, and, as William Pitt once said, in such a way that the tax would be lost in the price of the article. The people would grumble about high prices, but they would never know that the high prices were caused by heavy taxation.
The right hon. Gentleman says I am probably going to realise my revenue. Very well! What about my expenditure? If I have so miscalculated as the right hon. Gentleman's predecessors did two years ago, I shall have £100,000,000 surplus. If I do not make such an egregious miscalculation, if I am no worse than the right hon. Gentelman's predecessor a year ago, I should have a surplus of £48,000,000. That will be accruing during the year, and some part of it, at any rate, would be available for meeting any increase of expenditure which may take place between now and the end of the year, and which is not already provided for in the Estimates submitted to Parliament. May I repeat to the right hon. Gentleman that his estimates as to the cost of under-estimated expenditure are simply grotesque? Take the question of housing. Suppose that we build 100,000 houses this year, at £9 a house, it would entail less than £1,000,000. I believe the right hon. Gentleman the Member for Colchester (Sir L. Worthington-Evans) talked the other day of some £90,000,000 that I should want for housing. In regard to widows' pensions, I have given no pledge about the introduction of a Measure this year, but I have expressed a confident hope that before the end of the year we may be able to submit proposals for them. I have made no provision in my Budget this year for widows' pensions. If such a scheme should call for financial assistance before the end of this year, then Parliament will have to make the necessary provision.
I do not know whether the right hon. Gentleman is deliberately misrepresenting me, but he continually refers to my criticism as being directed towards the Estimates for this year. I have explained over and over again that what I was asking him about was the possible liability in future years.
No, the point I am dealing with just now is that I have made no provision in this year's Budget, because the financial liability is not likely to accrue until nearly the end of the year if it does accrue during the present financial year. If, next year, we have to make provision, and if it cannot be done out of our present resources, then Parliament, having approved of these proposals, will have to make the necessary financial provision. In spite of the fact that there may be a falling off in certain items of revenues, I believe that by economies which we shall be able to effect in other directions, we should be able next year to finance our social reform programme without, at any rate, any heavy increase of taxation. I may say this, that if I am here next year, and if there are certain social reforms which we think are desirable and necessary, we shall not hesitate to ask Parliament to approve of them, and if it be necessary to increase taxation to meet the cost of those new social services, I certainly shall not hesitate to propose an increase of taxation. To talk as the right hon. Gentlemen did about the following year and about a loss of revenue of some £50,000,000 and an increase of expenditure of £50,000,000 is, if he will permit me to say so, arrant nonsense. There is no justification whatever, in any of the analyses which have been given for such a conclusion as that. He said there were certain items of revenue from which we could not expect much in future years, I think it was he who ridiculed any expectations from the Excess Profits Duty. As I stated in my Budget speech, that is one of the most precarious of the items of revenue upon which we are to some extent relying. I would remind the right hon. Gentleman there is over £160,000,000 of Excess Profits Duty still outstanding. Much of it I dare say may be written off as a bad debt, but is it not reasonable to expect that, if trade improves, we shall he able to get a fairly considerable amount of revenue from that source? I believe we shall.
A number of other interesting points have been raised in the course of the discussion, but I have to deal with those which have a closer relationship to the subject matter of the Finance Bill. There was one point raised in a very interesting speech by the hon. Member for Farnham (Mr. A. M. Samuel), to which I should like to make some reference. I was specially interested in it because it brought to my mind the recollection that I brought that point before the House of Commons on many occasions in the days before the War. The hon. Member pointed out that during the last 50 years of the 19th century there have been, so far as effective wages were concerned, an improvement in the condition of the working class. The hon. Member is perfectly right. Then he went on to say that about 1900 and up to the outbreak of the War that progressive improvement had been arrested, and he wondered whether there was any connection between that and the fact that the proportion of direct taxation to indirect taxation was higher than it had been during the last 50 years of the nineteenth century.
That is precisely what I said, but I do not think there is the slightest connection between those two facts. A number of reasons might be assigned for the lesser purchasing power of wages from 1900 to the outbreak of the War. An hon. Member behind me mentioned one, in the increased output of gold after the South African War, but the hon. Member for Farnham forgot that very important fact, that there was a war near the end of the last century, the South African War, and that it led to very considerable financial dislocation. I do not attach a very great deal of importance to the increase in the output of gold as affecting prices. I daresay it had some effect, but may I suggest one or two other possible reasons? If my hon. Friend will go into this matter, he will find that from 1900 to the outbreak of the War there had been a quite unusual drain on this country for investments abroad. That, I think, was perhaps the most important of all the causes which led to an increase of prices, and, as the hon. Member knows, the capital which is employed in the development of new countries—railway making, road making, harbour making, and the like—is not immediately fruitful. It does not immediately increase the volume of marketable commodities, and, therefore, the effect of it must be an increase in prices.
That, I think, was one of the main reasons for the phenomenon to which the hon. Member called attention. May I mention one other as affecting wages? Wages did not rise during that period. They fluctuated a little, there were occasional rises and occasional falls, but on the Whole there was no advance in wages during that period, although the cost of living increased. I will tell the hon. Member what I think was one of the main reasons for that. From 1900 onwards there was a remarkable development in this country of the trustification and syndication of industry. There was a rise of trusts, combines, and the like, and employers' federations, and capital became much more powerful and was much better able to resist the demands of the organised workers than it had been in the years immediately preceding. However, all these are most interesting points, and I think they all come within the terms of reference of the Colwyn Committee. I hope that the Colwyn Committee particularly will deal with the point which the hon. Member made as to what should be the relation between national income, national savings, and the amount that is available for the reduction of debt. That is most important, and I am quite sure the Colwyn Committee will give some attention to the matter. I think now I have dealt with most of the important points that have been raised in the course of the discussion to-day. [An HON. MEMBER: "The McKenna Duties!"] The McKenna Duties? No; there is no reason why I should say anything about them. I have already referred to the fact that the speeches have not been made by hon. Gentlemen who felt that any useful purpose would be served at this stage, but it was necessary that they should get these speeches off their chest.
Oh, yes, I was asked about that. I suppose that hon. Members opposite will laugh if I say that this matter is under consideration, but I certainly am not in a position to say anything definite this evening. I have had the matter under consideration. I have been receiving representations from various interests associated with this industry I have other deputations this week, and before, we come to the Committee stage of the Finance Bill, I hope to be able to state the views of the Government on this matter. Meanwhile it must not be assumed, because I do not criticise the statement made by the right hon. Gentleman who spoke last that I accept his statement as being incontrovertible.
I must say a word about another matter. We have had two very powerful speeches this evening urging the importance of the taxation of land values. I am sure the two hon. Members who spoke, and all hon. Members who sit on this side of the House, know there is no need for them to press me upon this question, and I hope they will not be offended if I say that I thought they were just a little unreasonable in their criticism of me for not having dealt with the question in this year's Budget.
So far as I am concerned, and, I think, my hon. and learned Friend the Member for Crewe (Mr. Hemmerde), we expressed disappointment it was not; but we expressly said that we realised wholly the difficulties were too great.
I am very glad to hear that, because, much as I would have liked to have dealt with this question in this year's Budget, I do assure hon. Members that everything is being done with regard to this matter that can be done. We are most anxious, in introducing our proposals, that they shall be of such a character that they will be simple, that they will be effective, and I hope that they will not share the fate of those Measures to which reference his been made to-day, and upon which the House spent so many days and nights a few years ago. I hope that we shall be able to introduce before very long a short Bill to enable the Revenue Department to get the particulars of which it was deprived by an Amendment to the Finance Act of last year. I may take the House of Commons so far into my confidence as to say that I did very much hope that I should have been able to do that in the Budget this year, but I was advised that it would not have been in order in a Finance Bill. But I hope there certainly will not be any unnecessary delay and I hope the Valuation Department will not suffer very much in consequence of the unavoidable delay that has taken place.
I think there is no other matter that has been raised in the Debate to which I have not referred, except that of the penny postage raised by the right hon. and gallant Gentleman the Member for Bury St. Edmunds (Lieut.-Colonel Guinness). The penny post is not an economic proposition. It could not be done without calling upon the general taxpayer to provide very considerable assistance. I was very anxious indeed to get penny postage in this year's Budget. I spent a great deal of time in going thoroughly into the matter. I am quite convinced that it would not be a sound business proposition. I am quite sure that even those who are pressing me to give penny postage would not he willing that there should be increased taxation to make up a Post Office deficit. There may be much to be said against the Post Office making a large profit; there is nothing to be said in favour of the Post Office being worked at a loss, and at the expense of the general taxpayer. When the economic position is such that penny postage cannot be given without calling upon the general taxpayer I am not prepared to consider it.
I am very much obliged to hon. Members who have taken part in the Debate for their courtesy to myself and my hon. Friend for the manner in which they have received our proposals. There has been practically no criticism of what we have actually done except, perhaps, in the case of the McKenna Duties. Any point of criticism has been that we have budgeted merely for this year, and not for next year, and the following year. May I assure the House of this, that in preparing this year's Budget I did not blind my eyes to the fact that another year is to follow this. I certainly prepared this Budget with the expectation that I should be here next year, and that I should be held responsible for the sins that I may have committed in this Budget. I am quite prepared to face the finance of next year's expenditure, too. I believe that in this year's Budget I have given a sound economic basis to our financial proposals upon which, next year, we can build an even more satisfactory structure.
I have not had the opportunity—[HON. MEMBERS: "Divide, divide!"]—although I have waited for a considerable time, of putting two or three points to the Chancellor of the Exchequer. I assure the House I am not going to trouble with the McKenna Duties. But there are several points that I raised on the Financial Resolution, one in particular, that which has reference to double taxation, the right meaning of which is double income taxation. It is referred to in the Finance Bill. I notice that the Finance Act, 1923, Section 23, makes a certain provision in regard to shipping in this country and in the United States of America. What is the position of that Section to-day? I am pleased to see that the right hon. Gentleman has extended that Section, if this Bill be passed, to the British Dominions. In that way we shall get rid of a certain amount of difficulty in this double Income Tax which has lain on the shipping companies both here and in the Dominions. What is the meaning of it? [Hon. MEMBERS: "Divide!"] I think this matter is important from the unemployed point of view. I brought this matter forward when the Financial Resolution was in Committee, but may I
point out how it is affecting us. Take the Irish Free State. An Englishman who has money invested there is charged 5s. Income Tax by the Irish Free State Government, and he is also charged 4s. 6d. in this country, and that is 9s. 6d. Owing to the Irish Free State being a Dominion he is entitled to half the amount of the British Income Tax. Even then if you deduct the 2s. 3d. from the 9s. 6d. it comes to 7s. 3d., and it takes several months, even if you get the difference between the 4s. 6d. and the 2s. 3d., back into your own purse. I wish the Chancellor of the Exchequer would lock into that point and see if it can be remedied. I know it is very technical. The Financial Secretary was on the Royal Commission that dealt with the double Income Tax in 1919–20, and I feel sure that he has realised the importance of the position, not only from the Income Tax point of view but also with regard to firms leaving this country who have businesses in such places as Chile and other parts of the world, taking their head offices from London to places abroad. There is another point which I should like to raise. I notice in the Finance Bill a very important point with regard to Turkey. I do not know if hon. Members realise the position. They have practically defaulted against British investors. Clause 27 states:
Stamp Duty shall not be chargeable on any securities which, under the provisions of the Treaty of Peace with Turkey, signed on behalf of His Majesty at Lausanne on the twenty-fourth day of July, nineteen hundred and twenty-three, are to be exempt in the territory of the contracting parties from all stamp duties.
What is the position? The Financial Secretary has replied to certain questions on this point, but I would like to know why this Clause is put in. Is it a condition of the Treaty? If not, why is it put in, and why is Turkey exempt from the Stamp Duty when other countries are not exempt? That is not finance, and it is not the way to increase the revenues of the country.
With regard to other matters, I feel that Turkey before long will be wanting credit. Where is she to go? She can only come to this country or the United States. Are we going to grant a loan to Turkey under these conditions when she has practically defaulted with her investors, who have been hardly treated in the past? These Muharrem Loans started in 1875. In 1881 the £191,000,000 of the loan was reduced to £66,000,000 by cancellation. That is not fair. Turkey will want money, and she cannot get it without credit. What is credit? It is confidence, as the Chancellor of the Exchequer knows as well as anyone else. It is important that there should be confidence if money is to be lent to another country by our investors in this country. Certain circulars were referred to in Debate on the Financial Resolution, by the right hon. Gentleman the Member for Colchester (Sir L. Worthington-Evans) and the right hon. Gentleman the Member for Hillhead (Sir R. Horne), about the nationalisation of banking. That is affecting our credit. I should like to know from the Chancellor of the Exchequer, yes or no, whether he pretends that he is going to nationalise the banking of this country?
I am sorry. I thought I could have followed upon what was said on the Financial Resolution. With regard, to the credit of the country, I feel that it is absolutely essential that we should realise that we must keep up our credit, and I notice that part of the terms of reference of the Colwyn Committee is
to go into the national credit of the country.
I sincerely hope that the Chancellor of the Exchequer will reply to these two points, and that he will, perhaps, form a Committee with regard to the question of double Income Tax, especially in connection with the special position as between this country and the Irish Free State.