We all hope that the expectation of the Chancellor of the Exchequer in regard to a trade revival during the coming year will be realised, and that we shall pass out of a world in which we have the paradox of poverty in the midst of plenty. But, even if the normal volume of trade were restored upon the capitalistic basis, we should still have a situation in which the masses of the people would not be able fully to enjoy all the great things which science and invention are now making available for the use of mankind. It seems to me that it is the capitalist system that is in the dock. Millions of human beings are unable to get the work that they want, and there are millions of human beings with unsatisfied wants, while at the same time we have all that is necessary to meet those wants. I can only say that I hope that before very long the people of this country will see fit to give to a Socialist Government a Socialist majority with a mandate to organise the resources of this nation and to control their use in the interests of the great masses of the people.
I hope that as a country Member I may be permitted to reiterate what has already been said in many quarters of the Committee, and that is how glad we all were to see the Chancellor of the Exchequer here on Monday last, and able to introduce his Budget personally. I should also like to express the hope that during the rest of this Parliament—which many of us sincerely trust, for the sake of the country, will not be long—the right hon. Gentleman will be able to attend without undue fatigue to the duties of the high office to which he is called.
The Budget which the right hon. Gentleman introduced on Monday will, I fear, be a very disappointing Budget to most of us in the House of Commons. The hopes of those Members who sit on the Government benches must indeed be dashed to the ground by what the Chancellor of the Exchequer has said, and I fear that they will have to give up all hope of "Socialism in our Time," which merely means a transference of individual capitalism to State capitalism. I think that this Budget can probably be best described as a beggarly Radical Budget to secure Liberal support and so maintain the Socialist Government in power against what I believe to be the overwhelming wishes of the people at the present time. The price that is paid for this unholy alliance we on the Opposition benches do not, of course, know. As time goes on, doubtless the policy and the arrangements will be outlined to the House, but I fear that they may involve some scheme of large borrowings for expenditure on unproductive enterprises which can only be regarded as mere palliatives for the solution of the unemployment problem with which we are confronted. May I remind the Chancellor of the Exchequer, and the Government as a whole, of one of our old English adages, for in these old English adages we find a good deal of wisdom and common sense. It is that which says:
He that goes a'borrowing goes a' sorrowing.
When vast liabilities are piled up as a result of borrowing, either individually or nationally, those liabilities have to be met at some time or another, and cannot be indefinitely put off. This Budget is a Budget of speculation, the gambler's last chance, and, as my right hon. Friend the Member for Epping (Mr. Churchill)
pointed out in his brilliant speech this afternoon, contains a real gap, which the Chancellor has been unable to bridge, between real revenue and expenditure, of somewhere between £30,000,000 and £40,000,000. The problem of balancing the Budget, therefore, is really being left to the next Government when it comes into power, let us hope within the next few months, even though a General Election may have been postponed as a result of arrangements made between the Government and their Liberal supporters. It will, indeed, be an appalling legacy for the next Government, but, when that Government comes into power, I feel sure that a sounder and saner financial policy for dealing with the great problem of balancing the Budget will be found. In his speech on Monday the Chancellor referred to the policy which is dear to many of us in the House of Commons—a policy for which the country seems to be crying out louder and louder with each succeeding month—and that is the policy which will safeguard the markets of this country for the products of its industries. The Chancellor of the Exchequer, speaking on this subject, said:
A revenue tariff apart from its Protectionist object, is a means of relieving the well-to-do at the expense of the poor and is an indirect method of reducing wages."—[OFFICIAL REPORT, 27th April, 1931; col. 1403, Vol. 251.]
I should like to reply to that statement by two quotations. The first is as follows:
I still believe that there is but one way to extricate the country from the calamities which it now experiences and those which are impending—and that is by the frank adoption of the principle of reciprocity as the fundamental principle of your commercial code; and that such is the only means to be pursued against hostile tariffs and countervailing duties. To tax the community for the advantage of a class is not protection; it is plunder, and I disclaim it. But I ask you to protect the rights and interests of labour generally, in the first place by allowing no free imports from countries which meet you with countervailing duties, and, in the second place, with respect to agricultural produce, to compensate the soil for the burdens from which other classes are free by an equivalent duty. This is my view of what is called 'protection.' I am not an enemy myself to Free Trade according to my idea of Free Trade, but my idea of Free. Trade is this: that you cannot have Free Trade unless the person you deal with is as liberal as your-
self. If I saw a prize-fighter encountering a galley-slave in irons, I should consider the combat equally as fair as to make England fight hostile tariffs with free imports.
That quotation is taken from a speech delivered at Shrewsbury on the 9th May, 1843, by Disraeli, and I am inclined to think that the words that he spoke nearly 90 years ago are as applicable to-day as they were when they were uttered.
I have only one other quotation to give. It is a more modern one, being taken from what was said by Professor Keynes in the Press only last night. Professor Keynes, if I remember aright, is the one who, until recently, has always advocated the policy of Free Trade, or rather, free imports. He now writes:
This Budget marks time. But it also wastes time. Things will not come right by themselves, however much the intensely negative mind of our Chancellor wishes they would. Nothing has occurred in recent months—quite the contrary—to modify my belief that a tariff is a necessary ingredient in any constructive policy, and that events will force us in this direction whether we like it or not. But a constructive policy, alas! is far from our Chancellor's heart.
May I turn to the three sources from which the Chancellor is balancing his Budget? The first is the raiding of the Exchange Account. This, as I understand it, is nothing more nor less than a suspense account for capital, so that he is guilty of drawing upon capital resources—as a financial expediency I agree—in order to obtain this amount of the deficit, with which he is faced. The hon. Member for East Leicester (Mr. Wise) yesterday drew the deduction of the country being prosperous as represented by the savings bank balances. I cannot imagine a more erroneous deduction for, when the country is confronted with a glut of money, as she is at present, it simply means that money is cheap, and cheap money invariably means the stagnation of industry which is the real source of wealth of our people. Were I in the Chancellor's place, I should aim at two things: First, the emergency Budget, which the right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain) advanced yesterday. Secondly, I should like to see an international Currency Commission created for the purpose of investigating the whole of the monetary systems of the world, for there appears to he no doubt that the United States and France between them holding something like 60 per cent. of the gold and refusing to take payment of debts by goods has dislocated to a very large extent the free flow of international trade.
The second item from which the right hon. Gentleman proposes to take £10,000,000 is the anticipation of the Revenue. That also introduces a principle which cannot for a moment be admitted to be sound, for, if we reduce it to a complete absurdity, we come to perhaps drawing upon our income of 50 years hence and applying it to our expenditure of the present day. Long before we could find the revenue to be obtained in 50 years from now I am afraid the State would indeed have become bankrupt. The right hon. Gentleman the Member for West Birmingham (Sir A. Chamberlain), when Chancellor of the Exchequer shortly after the War, when he was confronted with far greater difficulties than the Chancellor is at present, laid it down that we must pay our way from year to year, and I sincerely trust that that principle will very soon come into force again.
With regard to land values, I hold no brief for anything in the nature of exploitation, but we all remember the failure of the last Land Taxes, which resulted in costing the country considerably more than the actual amount derived from the taxation itself. Nothing, of course, could be more foolish than to put into operation any legislation of this sort. If a Land Tax is to be put into effect, I trust that the Government will exclude agricultural land, because agriculture is, perhaps, the most depressed industry in the country to-day, and anything in the nature of increased taxation will make it more and more difficult for those who depend upon the land to derive an existence at all, more especially at present when the Government aims at getting more people back on to the land in smallholdings.
Another point I should like to touch upon is the question of the collectors of Income Tax, whom the Chancellor proposes to place under the Inland Revenue Department. They have always been regarded by the taxpayers as a real buffer between themselves and the Inland Revenue Department, and, if they are placed under the Inland Revenue Department, one of the safest buffers that the taxpayer has will be removed, and, consequently, he will not have the confidence which he has to-day that his position will be safeguarded by that type of official. It is true that heretofore they have not, perhaps, been adequately paid, but this is a matter that could be readily overcome by paying a more adequate remuneration. I understand that a great many of them do not wish to be placed under the Inland Revenue Department, and I trust that the Chancellor will bear this in mind and will not put this provision into effect.
The hon. and gallant Gentleman who has just spoken gave us a long quotation from Mr. Disraeli which is entitled to our respect, not only because it falls from that statesman but also on account of its antiquity. I have made it a rule not to indulge in that form of retaliation which consists in quoting my opponents' speeches. I have never found that that contributes to the solution of any business that happens to be in hand. But the hon. and gallant Gentleman rather tempts me to reply with a quotation that is somewhat more up to date. It is only a year or two ago and it is from the right hon. Gentleman the Member for Epping (Mr. Churchill), who said, on the subject of retaliation by means of tariffs, that it was not a question of ancient theory but a matter of ascertained fact that there is no country in the world to-day that obtains better terms of entry for its goods into any other market than this country of England. I believe that is true to-day. At any rate, I have never heard anyone inside or outside the House question the veracity of the statement.
I listened to-day, as I always do, with the very greatest pleasure and entertainment to the speech of the right hon. Gentleman the Member for Epping, and I found myself in a far greater measure of agreement with the latter part of his speech than I generally do, and, in particular, with those few sentences in which he urged upon the country the necessity of not allowing the time that has to elapse between now and the next Budget to be passed in idleness and without making preparations to try to set our house in order. This Budget has been received with feelings of relief tempered by very great apprehension. If the country is to take it as an opiate to send us to sleep for the next 12 months, the most pessimistic feeling that has been expressed in the House or outside it may very well be realised. It is not to be denied that this Budget is in a very considerable measure a gamble upon the return of prosperity.
It is, unfortunately, the case that prosperity is conditioned by many factors of an international character which are quite beyond our control. There are, however, some conditions which we can seek to control, and it is on one or two aspects of that question that I should like to make a few remarks. Attention has been drawn to the subject of international debts. It is true that international debts rank with the spirit of economic nationalism, which rages so much in Europe, expressing itself in tariff barriers and trade obstacles, as being a very formidable, if not the most formidable, obstacle in the way of trade recovery. The key to the solution of international debt—a subject which I hope will be faced sooner or later—is to be found in the United States. There, there is a division of opinion on the subject. It is true that there is probably a greater measure of feeling in favour of some re-opening of that question to-day than there has been in the past, but there is also a very strong, indeed an overriding, opinion against re-opening the question of the Debt so long as Europe continues to squander so much of her substance on armaments. The argument—and if I were an American I should feel very great sympathy with it—is that if Europe can afford to spend £520,000,000 a year on armaments, she may just as well spend it on paying the interest of our Debt. That is a clear call to everyone in the country to do everything possible to promote a proper atmosphere which will permit a successful result of the Disarmament Conference in February next. If we can do that, it will be the first stage towards a solution of one of the most awkward financial problems that we have to face.
To fill the gaps in the Budget, the Chancellor has had to rely on the hope that there may be some substantial results in the way of economy during the next 12 months. He has also laid stress on the fact that he hopes to obtain some relief from the conversion of our Debt at the proper time. I wonder whether it is fully realised that it is almost impossible to look forward to any conversion of our Debt within a reasonable time unless it is linked with this question of economy. We all remember the means that were adopted to float the 5 per cent. War Loan. We know how the aid of every financial agency, great and small, was invoked in the effort. We also realise that the existence of that great block of 5 per cent. War Loan is a drag upon the gilt-edged market. It has raised, according to one competent authority, the price of all borrowings in recent years by the Government, by municipalities, or by any of those who are able to borrow within the range of first-class security by at least ½ per cent. It must obviously be the desire of the Chancellor to convert that Debt at the earliest possible moment. I hope that at the appropriate time he will call upon the whole country to assist him to get rid of the debt. No attempt can be made with any prospect of success unless, as a preliminary condition, the whole country is satisfied that every national transaction has been reviewed and that it is quite clear there will be no money spent upon unproductive purposes which can be avoided, and that everything which can be described as an abuse in our unemployment insurance scheme has been removed. That is an essential preliminary. If the Chancellor of the Exchequer is enabled to do that, he will be entitled to go to those who have previously helped to raise that money and say, "I look to you for no less an effort to try to convert it on a basis which will help to relieve this country in time of emergency of a very serious burden."
There is another aspect in regard to which we can help ourselves, and which is in no way dependent upon a tariff. I do not think, if one reviews the trade statistics of this country, that there is really any ground for extreme pessimism, if we are prepared to help ourselves. If one compares, even in these black days, the volume of production in this country with that of other countries, there is no ground for pessimism. In 1930 as compared with the previous year, for example, the volume of production in this country fell by 8 per cent., in Ger- many by 16 per cent., in Canada by 14 per cent., and in the United States of America by a somewhat similar figure. When I look at these figures, and when, in conjunction with them, I read the reports published from time to time of the trade missions which have gone overseas at the initiation of the Overseas Trade Department, I am not surprised at the decline in our export trade, but I am surprised that we do as well as we do. It does not matter which of those reports one takes up, whether it is the D'Abernon Report with regard to our business with South America, or whether it is the report of Sir Arthur Balfour's Mission which went to Egypt, they all tell the same story. The same feature occurs in every one of them, although there are some notable and distinguished exceptions, and those exceptions are the people who, in spite of the present hard times, are enjoying a fair measure of prosperity. The attitude of the English exporter and the English manufacturer towards his customers overseas is still "Take it or leave it."
For the last 50 years, or up to, perhaps, the beginning of this century, we led the world in the matter of trade and export business. Our competitors overseas had to learn from us. We must admit now, on the irrefutable evidence of those most competent trade missions which have been overseas, that in the matter of salesmanship and of understanding the overseas business, we have something to learn from our competitors. If we do not set ourselves to learn the lesson speedily, our export trade, in spite of any adventitious aid or anything we can do, will continue to depart. When one hears of the efforts which are made to sell our goods in competition with other countries, he cannot be surprised that our efforts fail. In Rhodesia, where we had a sympathetic market if not an absolute monopoly, we find business being done by Germany and by other foreigners. In Northern Europe, in Holland, Denmark, Sweden and so on, where there is a natural preference for dealing in British goods and where people would be prepared to buy them, not only at equal prices but even at slightly increased prices, it is clear that our manufacturers and exporters are either ignorant of the fact that such a preference exists and of the opportunity which exists there for the cultivation of British trade, or they have neglected altogether to avail themselves of those opportunities. It is to be hoped that they will act promptly, and at once, upon the recommendations of the valuable missions which have been overseas. The work of the Overseas Trade Department is as valuable a contribution to the solution of the unemployment problem in this country as the contribution of any other Government Department working on the problem at the present time, and it is a little disconcerting to find that when they ask for money for the purpose of investigations overseas, they are unable to obtain it. I hope that in the future the Government will give more sympathy to the very excellent work which is being done by that Department.
The right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain), again supported in this respect by the right hon. Gentleman the Member for Epping, has expressed the view that the present Budget was the last Free Trade Budget which would be introduced in this country. I cannot help wondering what would have been the state of the finances of this country if in the past we had relied upon a tariff for our revenue. We know what has happened in the United States of America. They rely very largely for their revenue upon their tariff system. They have in America to-day two recipes for prosperity upon which they had always relied in the past and which had never failed them previously—a Republican Government and a large increase in tariffs. These two blessings in the United States have coincided with the biggest slump in their industrial history. Bad as are things in this country, it is true to say that only a little more than 50 per cent. of the industrial population of the United States of America are to-day working full time. We heard yesterday that they were anticipating a deficit this year in their national accounts of £160,000,000 and an increase in their gross debt of £60,000,000. That is an irresistible argument against any change in our fiscal system. Wherever one looks one sees that there is no conclusive argument to be derived for our adopting a system of that kind.
It will greatly facilitate discussion on this subject if we know exactly what it is that is proposed. The programme has been changed so frequently, that even the right hon. Gentleman the Member for Epping, with his great mental activity, has expressed himself as being unable to keep pace with it. It is now described as the policy of the "free hand." There may be, perhaps, someone in this country to whom people would be willing to give a free hand to manage their industrial affairs and fiscal policy. I do not know if there is such a man. But the country should think twice, and if it thinks twice, it will certainly refuse to give a free hand with regard to fiscal policy in this country to that statesman to whom it gave a free hand once before, and who went to America and, with that free hand, made a free agreement which has saddled this country with an Income Tax equivalent to 11d. in the £ for the lifetime of the present generation.
Sir HILTON YOUNG:
There were two parts in the argument of the hon. Gentleman the Member for East Birkenhead (Mr. White) with which I fail to sympathise. The first was that in which he attributed the decay of our export trade to defects in the energy and enterprise of our manufacturers and industrialists. When you subject a class to taxation heavier than that of similar classes of any other nation, when you impose upon them the burden of maintaining a standard of living higher than that of any other nation without the protection of tariffs, it is neither common sense nor generous to blame them for the difficulties in which they find themselves. There is another point in regard to which, I confess, he fails to carry me with him. It was when he repeated the old, baseless misrepresentation that the bargain made upon our part by the right hon. Gentleman the Member for Bewdley (Mr. S. Baldwin) was not a good bargain. By means of that bargain, our annual liability to the United States of America was reduced, if my memory serves me, from £60,000,000 to £30,000,000 a year. That at the time seemed a good bargain, and it is foolish wisdom after the event—it is most ungenerous and false criticism—to attempt to turn back the clock of time and visit him with criticisms which are undeserved.
I have only one reference to make to the speech of the right hon. Gentleman the Member for Darwen (Sir H. Samuel), and that is a note of most unqualified admiration of the extraordinary dexterity with which use is made of the device of a fictitious opposition in order to have two Government speeches for each one of the Opposition. I have heard some wonder expressed lately, now that a compact has been signed, sealed and delivered on the part of the Government and the Liberal Opposition, that any trouble should be taken to maintain any formal distinction, but as long as it is so much to the advantage of both parties not to do so, in order to confuse the Opposition forces, it is no wonder that the distinction is maintained. The right hon. Gentleman, most ably as ever, discharged the characteristic functions of an auxiliary in battle. First of all, under a cloud of dust, on the extreme flank, he made a sham attack upon the Government, in order to confuse the issue. He then proceeded to carry out the true function assigned to him and that was to try to raise a false issue by a vigorous attack upon the flank of the Opposition on tariffs. We decline that issue to-day. [An HON. MEMBER: "Hear, hear!"] Issues are raised for our discussion to-day—and let me say to the hon. Member who has just cheered, that this is about the only day in the year we get to discuss those issues—of such gravity and moment that they deserve all the time we can give to them. The right hon. Gentleman the Member for Epping (Mr. Churchill)—his absence at the moment is due to an unavoidable cause—with characteristic vigour ranged himself on the side of the Chancellor of the Exchequer, and, indeed, claimed him as a follower in regard to some of those points of the Budget which seem to us on these benches to be most open to criticism. If the right hon. Member for Epping does so, he of course gets into the line of fire of criticism upon those points of policy in the Budget, and undoubtedly he will be the very last to complain if some of the criticism reaches him.
It is a pleasant thing to find a good point in the Budget, having regard to the hard labour that is involved in its preparation, in order to relieve the monotony of criticism. It is entirely to the good that we should be rid, once and for all, of the pretence of keeping the litter of old deficits unburied. One small voice was raised last year to criticise that policy when it was introduced by the Chancellor of the Exchequer with such a great flourish of trumpets. It was then said that it could serve no useful purpose to confuse the accounts of future years by the pretence of carrying forward an obligation in respect of these old deficits, and I am glad the Chancellor of the Exchequer has been converted to that point of view. One always suspected that he was anxious to keep the deficit in the public eye because it was his predecessor's deficit. Now that the deficit is his own, he is not so reluctant to bury it.
I really value this occasion for its having produced in the speech of the Chancellor of the Exchequer one of the most brilliant gems of, if I may call it so—I am bound to use the words—Snowdenian finance, that has yet been given to us, in all his brilliant speeches. He said:
The first £5,000,000 of the 1929 deficit was duly provided for. That sum has been included in …. last year's deficit."—[OFFICIAL REPORT, 27th April, 1931; cols. 1396–7, Vol. 251.]
This is a point of minor importance in the Budget, but it is of interest as showing the general methods of the Chancellor of the Exchequer's finance. His mentality is that of one of the great preachers of financial incorrectitude, the great Mr. Micawber, who derived the same satisfaction from signing an I.O.U. as he did from settling a debt. It would be a satisfaction to all of us could we provide for last week's butcher's bill by including it in this week's butcher's bill, leaving both unpaid.
Let me call attention to another characteristic of the Budget. I suppose there has been no general principle which has so much tended to the building of our finances upon a sound basis and to making them, as they have been, and indeed still are, an example to the world, than the fact that the British Budget has ever been not a fancy, not an hypothesis. It has ever been hitherto an actual fact. It is a programme which is to be carried out in fact during the year. Certainty in the Budget is what has made British finance a model for the world. That has meant adopting a scheme for the Budget which you know that you can carry out. This year, and I think for the first time, that can no longer be our boast. This Budget is not a certainty; it is not a programme which the Chancellor of the Exchequer knows he can carry out. It is a thing of hopes and guesses, and nothing more.
Let me invite the attention of the Financial Secreary of the Treasury to both sides of the account. Let me invite his attention first to the expenditure side. What does the Chancellor of the Exchequer rely on there? On the hope of economy. First of all, he relies on the work of the Economy Committee. Criticisms have sharply and justly been made upon the Government for the feeble devolution of authority in this respect to a committee. I am not one who builds very great hopes upon the labours of that committee, despite the great ability and industry which its members bring to bear upon their task. The economy for which the Chancellor of the Exchequer looks must be economy in great matters of policy. How can any committee face up to that? The Socialist Government dare not face up to it themselves. Do they expect a committee to have more courage than they have themselves? It is indeed likely enough that the committee will have more courage than the Government. They may have more courage, but in matters of policy they have not the power. So much for economy in that direction.
Then there is the Chancellor's hope that the Government may economise on their own initiative. What are the hopes there? Economy is not a matter of professions. To be effective, economy must be a habit, a principle, and a faith. In order to economise you must seek economy and ensue it. Much to be deprecated is the habit into which this Government has fallen of trying to run with the hare and hunt with the hounds. The Chancellor of the Exchequer comes here and makes the most eloquent and correct speeches, with which he dopes the country, about his passion for economy. Then he goes away and the spending Minister comes along for the money which is to be used for vote-catching. This Box and Cox method is not creditable. It deprives us of any confidence whatever in the Government being able to effect economy of their own initiative.
Next, there is the question of Supplementary Estimates. There is no provision in the Budget for them. Again, in this the Budget is a matter of hopes and aspirations. If there is anything certain in the world, it is that there will be Sup- plementary Estimates this year, and it may be as big as last year. The whole of the Estimate side of the Budget is contingency, and it is the same on the revenue side. I will not repeat the arguments which were so ably developed by the hon. Member for Westmorland (Mr. O. Stanley), in which he criticised the solidity of the Chancellor's Estimates of revenue. I can only say that they have surprised instructed public opinion, and there is some doubt of his ability to fulfil those Estimates. There is only one source of revenue in connection with the Estimates to which the Chancellor of the Exchequer feels absolutely confident, and that is the Sur-tax. He is absolutely confident that he will get the amount for which he estimates there, which is a little increase on last year. Why has he that confidence? Because he tells us it is the one source of income which is not affected by the depression of the times. The only reason why he can depend on this particular revenue is because it is based on a so-called statutory income and so bears no relation to the true income of the country. It is independent of the depressed state of trade. What a point upon which to pride oneself in a financial scheme! Practically his whole estimate of income is contingent.
The last element of doubt in the financial situation is the financing of unemployment insurance. I venture to say that that is the most important single factor in the Budget, and I say, too, that whether the Chancellor of the Exchequer realises it or not, he has given absolutely no idea of what the valuation of that factor is going to be in this year's finances. He has omitted from the Budget scheme, by a polite and dangerous fiction, any full account of this, the greatest, and, at the present time, the most dubious burden that we have to bear. I would make two appeals to the Ministers of the Treasury. The first is this. Owing to the modern growth of unemployment finance, owing to the fact that the forms of our Budget and our accounts are not adapted to this novelty, they do not give the House and the country a true picture of national finance. Therefore, I appeal to the Treasury Ministers that, in their own interest and in the interest of the education of the country, in order to give a true account of the state of our finances, they should publish a public paper in addition to the Budget giving the true state of unemployment finance, and showing the actual ascertained liabilities and the contingent liabilities in that respect. The hon. and gallant Member for Kelvingrove (Major Elliot) made a criticism of the figures of unemployment insurance finance which, if they are justified—and we believe them to be justified from so well-informed a source—make it futile to criticise the Budget in its present form as a full account of national liabilities. His criticism was that adeqate provision has not been made for transitional benefit. My first appeal is for a supplementary Budget, to show what liabilities we have to meet under this heading.
My second appeal is this. I think that enough has been said, if not by myself by other speakers, to show that the Budget has lost the certainty which was the foundation-stone of good finance in the country. It has become a matter of hopes and guesses, of contingency and gamble. The old practice by which the general control of our finances was allowed to go on uncontrolled by us over the whole 12 months between Budget and Budget is not suitable to the present state of our financial affairs. I would ask the Chancellor of the Exchequer, since his Budget is all contingency, to come back sooner to the House with a statement, so that when the House meets in the autumn he can tell us how the contingencies have been realised—in order that the House and the country may brace themselves for any necessary restriction of expenditure which may be forced upon us by the way things are turning out.
I have said, and I will justify the criticism a little further, that this Budget does not show to the country the true state of our financial affairs. As my lawful avocations have taken me about the world, I have had an opportunity of learning some of the characteristics of the evils which beset nations in financial difficulties. I have learned what the historical facts are and the manner by which countries get into difficulties. I have learned some of the symptoms of a nation in financial difficulties. I have noticed that the descent into financial difficulties always follows a certain course. It begins with overspending, and that overspending, according to my observation, has very often been based upon schemes, which in this country we think of as Socialist schemes, which set out to maintain a standard of living regardless of the revenue of the country as it varies in good and bad times, and which seek to produce a distribution of wealth which is greater than can be endured by the existing organisation of industry. That overspending, according to observations which seem to me to be true, is followed by attempts to meet current expenditure in other ways than out of current revenue, and I always have found that two expedients are adopted, first of all the expedient of the anticipation of revenue, and secondly the expedient of confusion between revenue and capital accounts.
I observe both these features in this year's Budget. The next stage, when every other expedient has been used and critics and the public begin to find out what the Government has been doing, finds the Government beginning frankly to borrow in order to maintain the expenditure that is forced upon it by its extravagant followers. It does that until its credit is exhausted and it can borrow no more. When it can borrow no more it resorts to the expedient of inflation and the degradation of its currency. After that, there comes unemployment for the wage-earner and ruin to the middle classes and, finally, want and civil strife, and the matter ends by someone being hung up on a lamp-post. I have observed the beginnings of these symptoms in this Budget. There is anticipation of revenue. There is confusion between capital and revenue account. Now, certainly, I do not want to see the Chancellor of the Exchequer hanging from a lamp-post: I should deeply regret it on Personal grounds although there would be political compensations. But, unfortunately, the Chancellor of the Exchequer is producing an impossible position for those who will have to follow him, and I should regret it even more if any right hon. Friends of mine on the Front Opposition Bench were to grace the halter.
It is not without a sense of grave responsibility that I call the attention of the Committee to the fact that we have in this Budget these first two fatal symptoms of a descent into national unsoundness. With regard to anticipation of revenue, let me refer to the device in the Budget by which the Chancellor of the Exchequer is going to raise £10,000,000 by the anticipation of Income Tax. Can we not strip away all pretence, all the petticoats which are hung around this, in order to pretend that it is not an increase of taxation? Ten million pounds more of public money is to be got by the Chancellor of the Exchequer this year; and it does not come from nowhere. It is, of course, a fresh burden of direct taxation.
What astonished me in this proposal, or rather in the attempt of the Chancellor of the Exchequer to camouflage the proposal, is that he has actually succeeded in taking in the right hon. Member for Epping, upon which I congratulate him, because it is not easily done. One of the most eloquent passages in the speech of the right hon. Member for Epping was when he congratulated the Chancellor of the Exchequer for having recognised that there could be no increase of direct taxation. There is an increase of direct taxation, equivalent to a general additional 2d. on the Income Tax for this year, and in the cases actually affected equal to an additional 1s. 1½d. in the £. The Chancellor of the Exchequer has made loud professions in this House of his intention to place no further burdens on productive industry. In view of this new burden on productive work, those professions are worth no more than his plea for economy. He is doing nothing to make good his professions; the only thing which distinguishes this proposal from any ordinary increase of direct taxation is that it is for a year only and cannot be repeated. That has an advantage from the point of view of the actual taxpayer, but it has a grave disadvantage from the point of view of the education of this country as to the true present financial situation.
One would not speak on this subject without referring to a constructive alternative. There is one. It is a tariff, which whilst not having revenue as its first object, would nevertheless produce revenue. The Chancellor of the Exchequer tells us that he will never be a party to such a proceeding, and he seems to think that that finishes it. It would finish it if he were Chancellor of the Ex- chequer by the grace of God, but he is only Chancellor of the Exchequer by the grace of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), and that is a much more uncertain tenure. Although the Chancellor of the Exchequer will never be a party to a tariff, the strange thing is that there will be a tariff, because if there is anything upon which the country has obviously made up its mind it is upon the question of a tariff. The Chancellor of the Exchequer, in an eloquent passage, told us that tariffs should be opposed because they are Excise Duties upon articles needed for home industry, because they involve such Excise Duties, indirectly.
Let me ask him: What is his tax on land? Is not that a duty upon an article which is the necessary raw material for all industries? Is he going to make production easier, is he going to assist the standard of living, by increasing the trouble and expense of ownership of this raw material of industry and housing? No. There is a constructive programme which the country awaits. I have said that in the present course of our national finances we are showing the symptoms of the first two dangerous steps towards financial unsoundness. I will not emphasise the first aspect of over-spending because that has been dealt with adequately in other speeches, but it has to be remembered on such occasions as this that the real condemnation of the Government's policy is not in any particular measure it takes in order to meet the additional expenditure of the next year but in the fact that any such additional expenditure is necessary at all in such a year as this. This Government will stand condemned, when the history of its financial policy is reviewed, not so much on account of its measures for providing taxation, because bad as they are there has been no great opportunity of going too far astray, as because at a time when the industries of the country were falling into a state of greater and greater depression, when the country was definitely getting poorer and not richer, it has been utterly blind to the true state of the nation and has been piling on expenditure which the nation could not afford.
The conclusions I draw, looking at the Budget of this year in the light of these criticisms, I may express in a single sentence which, if it be true, should cast upon this Committee a burden of responsibility and an obligation for action greater than any which has been cast upon it in regard to any political issue in my time. It is this. This Budget does not balance. For the first time in modern history we are presented by the Chancellor of the Exchequer with a Budget which does not make both ends meet. When I say that, I do not refer to any formal deficiency in the Sinking Fund account, or to the fact that we shall not be able to live up to our Sinking Fund policy. Apart from that, if you cleave through the obscurities which are imposed upon us by our Budget system and by our accounting system and look at the facts you will see, not as a possibility but as a certainty, that at the end of the year we shall not have met current expenditure out of current revenue. That is clear; it is the fact; and nobody who troubles to understand the Budget can doubt it. In one passage of his speech the Chancellor of the Exchequer sought to escape by the plea that this was only to meet a temporary emergency. It is not a matter of a temporary emergency. Unless some great effort is made in economising on public services the expenditure upon our shoulders this year will be permanent expenditure. It should be met, by every principle of common sense and sound finance, by permanent revenue. It is not so met. That being so, the Budget does not balance.
The Chancellor of the Exchequer allows for a formal sinking fund of £52,050,000. What is there to set against that? Let us agree and admit that if there be any surplus at all, however small, for the redemption of debt, that leaves you an actually balanced Budget. But that will not be so this year. Against the apparent £52,000,000 for Sinking Fund we have the overwhelming burden of the borrowing on the Unemployment Insurance Fund. That is £1,000,000 per week; at least that is our present information. If that be so, then there is £52,000,000 that must at once be set against the apparent Sinking Fund. I beg the Committee not to be deluded into the belief that you are reducing your Debt if you have a Sinking Fund of £52,000,000 and are borrowing £52,000,000 at the same time. No useful purpose whatever is served by having a Sinking Fund of £52,000,000 if you are borrowing £52,000,000. You are serving a useless and mischievous purpose, because you are deceiving yourself as to the true state of your finances.
But it is not only this £52,000,000 which must be set against the apparent sinking fund; there is also the £20,000,000 from the Exchange Fund. There is no doubt that this sum came from capital account and should go back to capital account. Is there £20,000,000 worth in dollars in the banks in the United States which can be brought to the assistance of the Chancellor of the Exchequer in his difficulty? I take it that to the extent to which this £20,000,000 is brought to the assistance of the Chancellor of the Exchequer for revenue the floating Debt of the country will be enlarged. Further, there are the probable Supplementary Estimates, and the possibility of a failure in the estimate of revenue. In these conditions it is apparent that the £52,000,000 Sinking Fund is more than offset. The Budget shows in fact a deficiency. It is a Budget which does not balance. In deed, it shows already a deficiency of at least £20,000,000. Words fail a speaker to express the gravity of that situation. What is even more grave is that the people are not realising it, and that the Government gets away behind a smoke screen which is preventing the country from seeing its real financial position.
At the present time what this country needs most of all is a clear sight as to the true state of its national finances. A great effort is necessary, great sacrifices may be necessary, and the country is capable of making them, but only if it knows the true state of affairs. The right hon. Member for Edgbaston referred yesterday to the relief which the Budget has produced. It is true that there is a feeling of relief, and I look upon it as one of the gravest things that has happened in this country in regard to its finances. It is the sort of relief which comes to a drunken man who wakes up with a bad headache in the morning and finds his faithful servant awaiting him with another drink. It will set his nerves at rest, but it will not improve his general condition. That can only be done by careful dieting and total abstinence; a total abstinence from these financial expedients which drug the country into thinking that it is capable of spending more than it has got. At the present moment we are in a position of great gravity, but it is not one of despair. It is the position of a man who has begun a climb down a cliff and finds at each point another little tuft of grass or gnarled root to which he can hang on. He climbs lower and lower without realising that he is steadily getting into a more dangerous position. Then he suddenly realises that he is in a position of grave danger from which he can only be rescued by desperate exertions on his part.
Such is our state at the present time. From precarious tuft to tuft, we are lowering ourselves down. If we do not pull ourselves up, we shall suddenly find that we are in a position of grave danger. The country should be told that it cannot afford to go on increasing expenditure in the present state of its finances. It should be told that such Budgets as the present are unsound, because they do not allow for the covering of current expenditure out of current revenue. If you tell the people the true state of affairs, there is nothing to fear. Nobody need fear the people of this country when they are properly informed. How clearly we proved that in the War! Hon. Members opposite used to criticise the Government of the day for not telling the people the truth, and say that if the Government would only tell the people the truth about the War, how much better the country would brace itself to meet the situation. That is just the situation now. The Government is not telling the country the truth about the financial situation, and if it does not tell the people the truth it will have need to fear. No man need fear the people if it is fully informed of what is needed of it. There is much cause to fear the people if it is left in the dark. There is cause to fear for the nation from its uninstructed action. There is cause to fear the penalty it may exact from those who have deluded it.
The hon. Member has criticised Snowdenian finance. In my view the Chancellor has done well in his present Budget in not being so exceedingly orthodox as he appeared to be this time last year, having regard to the situation in which the country finds itself. At a time of trade prosperity it is legi- timate and desirable to use every effort to pay off the National Debt. A time like this, when there is not only trade depression but monetary deflation, and when world prices have been falling and are still, apparently, going on falling, is not a time to assist the tendency of deflation still further by paying off the debt at the same rate as formerly, but to relax somewhat in that effort, if only for the purpose of trying to keep prices steady. That seems to me to be a wise movement and one to which this Committee has no reason to object.
The Chancellor's speech on Monday was permeated by a certain measure of optimism. I am sure the Committee wishes to reflect, as far as it can on all sides, that optimism; at the same time, there are many hon. Members, and certainly there are some on these benches, who would have liked to have heard from him some reasons for the optimism, and for his hope that fins year would see the turning of the tide and the lifting of the veil of world industrial depression. I realise, as we all do, that the Chancellor's desire was to raise the spirits of the country and not to make it evident that, in his opinion, there was no chance in the immediate future of the lifting of the industrial depression. In spite of that, I think there are many of us who feel that there are reasons why there might be an improvement in the situation, provided certain things were done. I am not altogether satisfied that the Chancellor is in a position to do those things. There was a person listening in the Gallery to his speech last Monday who, I venture to say, has had as much influence and power as has the Chancellor, and as much opportunity, in assisting towards the industrial recovery of this country, and, indeed, of all Europe and, possibly, of the world. I refer to the Governor of the Bank of England. It is the policy of the Bank of England, together with that of the Chancellor, which alone can give us the grounds for the optimism which the Chancellor expressed last Monday. We all know that the Governor of the Bank of England has been in America not very long ago, and that rumour would have it that his visit was in connection with the question of international credit.
There is no chance of the world crisis lifting, unless some measures are taken to extend credit in such a way as to increase the purchasing power of the undeveloped or colonial areas of the earth. Australia is unable to pay her debts because of the catastrophic fall in wholesale prices, and in the South American Republics revolutions are breaking out periodically. These are only a political reflex of the grave situation brought about by the fall in the wholesale price of food and raw materials, and, in consequence of that, the purchasing power of those countries is cut down and they are unable to buy our manufactured goods. Thus our revenue falls, owing to trade depression. There is a very close connection between the problem of the Chancellor of the Exchequer in raising revenue for the coming year, and the purchasing power of those countries which are now in financial difficulties owing to a fall in wholesale prices. There is a still closer connection between the level of wholesale prices, and the revenue which the Treasury will receive in the course of this year.
I have a strong suspicion that the Bank of England is not as helpful to the Chancellor as it might have been in this matter. There has been a tendency for some months past, if you look at the returns published in the "Economist" and other financial papers, to sell Government securities which the Bank of England holds, and thereby to decrease the deposits which the public and the trading community have at the banks. I see that the Government securities held by the Bank of England on 22nd April totalled £5,000,000 less than the total a week before. It is not very helpful to the general situation of the country, if that course is being followed. It may be that there is a change coming, and the fact that we have heard a certain amount of talk about the possibility of international credits to assist the undeveloped countries like Australia and the South American Republics, makes one hope that there is some greater consciousness of the existence of this problem. If that is so, all I can say is that we are glad.
I will come to another point. The Chancellor has, I am sure, caused relief to many people who were afraid of an increase in direct taxation. Certainly, as far as Income Tax is concerned, there is a great deal to be said in a year like this for not raising the Income Tax, which falls, as one might say, upon the just and the unjust. I am not one of those who join the Jeremiahs opposite who take the view that industry in this country is on its last legs. Analysis of the figures of industrial profits, published by the "Economist" on 11th April, shows that there are quite a number of industries that are doing very well. I refer to brewers, whose net profits increased last year by.7 per cent.; electric light by 7.5 per cent.; gas by 3.7 per cent.; tramways by 10 per cent.; trust companies by 2 per cent.; and miscellaneous by 1.8 per cent.—a total increased profits amounting to £750,000. I admit that there are largely decreased profits, particularly in iron and steel, coal, shipping, rubber, textiles and tea, which amount to not less than £8,000,000. But an Income Tax would fall equally upon these industries which are struggling with the necessity for reconstruction and rationalisation, as upon the luxury industries which are still doing well in spite of depression.
Moreover, there is that very large class of person generally known as the bondholders, holders of gilt-edged securities, who have profited very much by the general deflation in prices that has gone on in the last 10 years. It is time that the Chancellor explored the possibilities of making this class of person contribute more than it has in recent years. For this purpose, the income Tax and the Super-tax are not, to my mind, an altogether useful weapon or one which is likely to discriminate between those who are well able to bear the burden and those who are not well able to bear it owing to industrial depression. What is needed is an examination of the possibilities of linking the rate of interest on fixed-interest bearing securities, with the level of wholesale prices. I understand that it is being done by some public companies in America who issue debentures on a fixed-interest-bearing basis, and the rate of interest varies with the level of the wholesale prices. I do not know whether it is possible to think out a means of doing this, but I certainly believe that there is a very large source of revenue possible by that means. In any case, it is one in which I do not see how the Income Tax and the Super-tax can very well be used.
Did I understand the hon. Member to say that the receipts of Income Tax for the last two years have gone up, or gone down? I understood him to say that Income Tax earnings under Schedule D were larger than before. As a matter of fact, from 1929 to 1930 they had fallen from £1,064,000,000 to £1,060,000,000.
I was not quoting Income Tax figures, but the figures of industrial profits of certain companies, as they were given in the "Economist," and I was showing that certain industries were doing very well, and that last year they increased their profits. I admit that others have decreased. I was not quoting the whole returns of Income Tax. I wish now to come to another point. The optimism of the Chancellor of the Exchequer, which we should all like to share, of course depends very much on the possibility of bringing in revenue in the coming year, and that will not be possible unless there is a big push towards reconstruction and rationalisation in this country. The reason why the figures I have quoted for certain industrial companies are so poor—in textiles, iron and steel, coal, shipping and so forth, and particularly iron and steel—is that there has not been that reconstruction. Therefore there is a very close connection between the prospects of the financial year for the Treasury and the industrial reconstruction which the Government will have to push on if the optimism of the Chancellor is to be realised. In this connection capital will be required, and with the present political situation we still have to rely upon the private investor and the City of London to supply that capital. I do not think that the evidence shows that the City or some of the investing public are particularly anxious to develop or are interested in developing the natural resources of this country. If the wider public were appealed to, I believe that the appeal would be answered, but the fate of the issue of the Lancashire Cotton Corporation the other day, when 90 per cent. remained in the underwriters' hands, indicates that there is some obstruction which is quite unwarranted.
Does the hon. Member realise that the people who hold stock in that Corporation are the people in the City to whom he so greatly objects, and that it is the British public who will not touch the issue, not the City?
I am quite aware of that. I said that there are some, not all, who are not doing their best to push it. Others are no doubt doing their best. I am also aware of the fact that, since this Government came into office, there have been attempts made, sometimes successfully, to send gold and capital over to France. I have here a recent issue of the "Economist," which contains figures of interest. In 1929 the amount of gold in the Bank of England was £160,000,000. The very moment the Chancellor of the Exchequer took office the amount began to go down, until in September of that year it reached £130,000,000–230,000,000 sent to America and France. I am prepared to admit that some of that gold may have gone to the United States owing to the boom there. But in the autumn of that year came the crash in the United States, and some of the money came back, until the right hon. Gentleman introduced his Budget. In April, 1930, down it went again. When the Chancellor quite rightly and justly asked the Income Tax and Super-tax payers to pay their fair share of the taxation of this country, that was their reply—to send gold away. [Laughter.] The hon. Member opposite may laugh, but I have a few more facts to tell him.
Possibly the hon. Member is not aware that there has been a very considerable development of what is known as the construction of holding companies in recent years. These holding companies exist for the purpose of transferring capital from this country to certain countries where Income Tax is very low or non-existent. In the State of Panama there is a holding company which exists for the purpose of attracting capital from this country and from all over the world. Money can be invested, and the interest is not returned to this country, but accumulates there in the form of coupons. That company is being used by certain people. I am not going to accuse the whole of the City of London, but certain people in the City of London. I shall not mention any names.
There is in Switzerland a canton called Graz where Income Tax is very low, and there other holding com-
panies exist. There is a Duchy called Lichtenstein, where the Grand Duke is so well off that he can afford to do with out any Income Tax at all. There is another holding company there, in which capital has been accumulating while patriotic people here have refused an opportunity to the Lancashire Cotton Corporation to develop home industries. True it is that capital knows no country; it is not like labour, which has to stay here and work with the sweat of its brow for wages which capital tries to cut down and does cut down. Then there have been a number of companies formed, not holding companies, which according to my information are engaged in investing money in France. There are two. One of them is called the Anglo-French Banking Corporation, and the other the British and Continental Banking Company, Limited. There are prominent members of the British aristocracy who are members of these bodies. This is what appears in the prospectus of the Anglo-French Banking Corporation:
In pursuance of the above policy the company has acquired an important interest in the Banque des Pays du Nord, which was established in France in 1911, and has valuable connections in France and the Scandinavian countries.
I happen to know also that the British and Continental Banking Company was formed in 1926, the year in which the coal lock-out took place in this country, and that the British and Continental Banking Corporation is closely connected with the Union Des Mines, which is the banking company for all the big coal mining and iron and steel companies in the north of France. There is strong evidence justifying the belief that at the time when British miners were fighting for their lives in 1926, capital was going over from here to develop the mines in France. No doubt the Chancellor of the Exchequer is aware that this is going on. If he can do anything to stop it, I am sure that he will have the good will of those on these benches. It is time that the House of Commons should know it, and that someone got up and stated the facts.
This is the time when, as was said by the right hon. Member for Sevenoaks (Sir H. Young), we ought to "make every sacrifice" to meet the situation in the current year. But the right hon. Gentleman's argument seemed to be that we ought to economise. He did not specify the kind of economy that we were to make, but he indicated that we should cut down the social services. He did not say so in so many words, but that was the implication of his reference to the inquiry into Unemployment Insurance. We feel that the time has come when the Chancellor should use all his influence with the Bank of England and with those who have as much power as he has, to bring about a more stable level of wholesale prices in this country and throughout the world, and push forward with the national development, without which he will not balance his Budget next year.
Sir F. HALL:
When listening to the speech of the hon. Member who has just sat down, I wondered whether he was satisfied with the proposals of the Chancellor of the Exchequer or whether he was entirely opposed to them. The hon. Member dealt with reconstruction and gave us information with regard to breweries, electric light companies, gas companies and others, to show that there has been an increase in profits to the extent of something over 2 per cent. He also dealt with other industries in which he said that there was admitted profit of £1,750,900, and mentioned industries in which profits had depreciated by over £8,000,000 a year. I gathered that he desired some reconstruction of industries. No matter where we sit in this House we all desire to do all that we can to improve the conditions of labour and industry as a whole. Whatever the hon. Gentleman's ideas may be, I want him to realise that capital and labour can only get the best out of industry if they work hand in hand and recognise that there are difficulties on both sides. It is no good thinking that the man who supplies the capital has nothing but easy sailing.
The hon. Member referred to shipping. I wonder whether he knows that at the present time there is less shipbuilding going on than there has been since the advent of the steel ship. The work in progress in the March quarter was only 32,685 tons, or one-thirteenth of the work commenced in the corresponding quarter of last year. Does the hon. Member know, with regard to the shipping industry, that it is practically impossible at the present time to send a ship to any part of the world and earn a single cent on the money involved? That is without allowing for depreciation, and it is well known that depreciation is tremendous during a ship's first two or three years. What is the result? Not more than 17 per cent. of the shipbuilding yards of this country are working at present. I think I may say that 25 yards have been closed recently and, as regards several others, when they have completed the contracts on which they are now working, unless there is a considerable improvement in trade, they also will have to close. These facts ought to be stated very plainly. It is easy to talk general platitudes as the hon. Member has been doing, without knowing the facts of the case.
There are three great industries which I may call fundamental, and by which the industrial pulse of this country can be tested. They are the shipbuilding trade, the coal and iron and steel trade, and agriculture. [HON. MEMBERS: "And textiles!"] Yes, the textile industry is also one of the chief industries. I am dealing more particularly with shipping because the hon. Member for Whitehaven referred specially to it as one of the fundamental trades which requires reconstruction. I would like the hon. Member to think over the subject and to tell the Chancellor of the Exchequer what in his opinion is the best way to deal with these important industries and restore them to prosperity. The hon. Member for Lincoln (Mr. R. A. Taylor) who is well up on these matters knows that some of these ships, usually called tramp ships, cost from £70,000 to £100,000, and yet after being completed by the builders they have been "hung up" and not put to any use. It has been found cheaper to "hang up" these ships instead of sending them to foreign countries. This simply means that we are not able to utilise our shipping. The goods are not there to be conveyed. The shipping industry is not being utilised, and consequently there has been enormous loss of money and an enormous amount of unemployment.
I had not the slightest idea that the hon. Member intended to raise this question, but recently I have been going into some figures relating to unemployment in the shipbuilding industry and I find, according to the returns, that there are 107,000 unemployed out of 201,000 generally employed in the industry. There must be some special reason for those figures. When we consider the fact that the amount of tonnage under construction is less than it has even been in the annals of shipbuilding, since the steel industry came into it, we must ask ourselves what is the reason for that state of things. The United States and France and Italy support their shipbuilding industries by means of bounties. I have always been against bounty-fed industries. I think that it is the duty of the Government in regard to these big industries to find out what is wrong with an industry, and endeavour to put it right, and the shipping industry ought to be put into a state by which the shipowner will be able to utilise his ships to plough the seas instead of having them hung up at home, and it will be possible to employ seamen and shipbuilders and engineers and others.
We must also consider that the costs of labour and construction in this country are much higher than in foreign countries. That is one of the reasons why there is such a tremendous depression in this industry. I notice that the hon. Member for Rochdale (Mr. Kelly) shakes his head. With regard to steel, for instance, it is easy for Continental shipbuilders to obtain steel at a much lower price that we can obtain it, and if we use, as we desire to use, British steel in the construction of our ships I would like to tell the hon. Member that it involves the difference of £2 a ton—which he knows to be a very important factor—between the price at which the Continental shipbuilder can contruct tonnage, and the price which the British shipowner has to pay.
It was not in reference to the price of steel that I indicated dissent. It was at the hon. and gallant Member's statement as to the cost of labour. As one of the investigating committee in connection with the shipbuilding trade, I must say that that is not so.
Sir F. HALL:
I have not here the actual figures as to the cost of construction in France, but the cost of constructing an ordinary tramp steamer of 8,000 or 9,000 tons is, to-day, in the neighbourhood of £7 a ton, and it can be obtained at a much lower price on the Continent than in this country. I would impress on the Committee this fact—that the tonnage under construction in Britain at present is 921,000 tons less than it was a year ago, and the corresponding decrease in the case of foreign countries is only 345,000 tons. Some years ago Britain was building more ships than all the rest of the world, but now, only one-third of the world's tonnage is constructed in this country. I wish hon. Members would give careful attention to this matter, because this is one of our fundamental industries, and the question affects, not only the construction of ships, but the conveyance of cargoes and the utilisation of our tonnage for the general merchandise of the country. As regards the general principle of economy, we all want to economise. We have to economise, but if hon. Members opposite will excuse me for saying so, it is always with them a case of economising as regards other people, but not allowing anything to be touched which concerns labour. But we have all to come into line on this matter and recognise the difficulties from which the country is suffering.
Sir F. HALL:
I am not raising any question as to what the workers have given up, but I wish hon. Gentleman opposite to understand that it is not only the workers who have had to make sacrifices but also the industrialists. The hon. Member for Lincoln said that Income Tax had not increased but Super-tax had increased. Super-tax has increased, not because a larger amount of money has been earned but because an additional burden has been placed by the Chancellor of the Exchequer on the Super-tax payers, and hon. Members opposite may say what they like, but the Super-tax payers have been a great help to Chancellors of the Exchequer in recent years. We have heard all sorts of suggestions about the raiding of hen roosts. I suppose there are not many more hen roosts which can be raided, but I would like to pay my tribute to the Chancellor of the Exchequer on the manner in which he has faced a difficult situation. I am delighted that the right hon. Gentleman has recognised the difficulties under which trade and commerce are at present being conducted in this country.
Hon. Members opposite sometimes seem to think that there is a constant supply available from taxation and that it does not matter what proposals the Chancellor of the Exchequer brings in—that if he puts an additional 6d. or 1s. on the Income Tax and something further on the Super-tax, it will be all right and he can get the money. But the Chancellor of the Exchequer has recognised, notwithstanding all he has said in the past, that the time has arrived when further direct taxation is more or less impossible. I am very glad that the right hon. Gentleman is optimistic. I like to see optimism. One cannot see his optimism being justified, however, unless there is a considerable improvement in trade during the next 12 months, and I sincerely hope that his anticipations in that respect will be realised to the full. I am not one of those who believe in running up debts. I have always said that one's first duty is to discharge one's liabilities, and that if there is an increase in national expenditure it has to be met either by taxation or by a corresponding reduction of expenditure.
I hope that during the forthcoming year we may see considerable savings in the matter of expenditure and that the Chancellor's hopes with regard to an improvement in trade will be realised. In 1924 the expenditure was £795,770,000, and in 1930, notwithstanding that the cost of articles had been reduced very considerably, the expenditure was £881,037,000. But there was this difference, that the revenue in 1924 exceeded the expenditure by £3,659,000, whereas unfortunately the revenue in the year that we have just finished bas left a deficit of £23,276,000. If the hopes of the Chancellor are realised, he is taking £20,000,000 from the Currency Fund, £7,500,000 on his Petrol Tax, and £10,000,000 by dating forward the Income Tax, which I am sure will be found very hard on some of the small Income Tax payers.
I am a great believer in the British people facing up to their difficulties. We have passed through bad times before, and I am not one of those pessimists who believe that we are always on the brink of bankruptcy. We are in difficult times, and we have to get ourselves out of these difficulties, and I think the Chancellor of the Exchequer has acted in a very judicious manner in recognising the difficulties with which we are faced and in deciding that no further taxation shall be imposed. When you have your present unemployment rate and are fixing that up by borrowing £1,000,000 a week, have the Government considered what they are going to do with regard to that matter? You cannot carry on with a big debit balance against you the whole time. If you have £50,000,000 or £60,000,000 standing out as a debit balance against the Unemployment Insurance Fund, is it going to be funded, or is it still to be carried on as a debit balance? I should like the Financial Secretary to the Treasury to tell us what are the intentions of the Government with regard to that matter.
There has been a proposal from some quarters of the House with regard to the taxation of company reserves. I do not know how far that carries one. I was always under the impression that before you had a reserve it came out of profits, and according to my knowledge of business in the City, I find that the Chancellor of the Exchequer looks carefully to see that taxes are paid on all profits. Surely it is not the intention, because people have been reasonable in their business and have not divided up the whole of their profits, without looking forward to times of depression, that there should be a further tax on industry and that those responsible for the finances of those companies should be debited with an additional Income Tax, taken out of the shareholders' money. I cannot think that that will be recognised as a reasonable proposal, and from what I know of him, I do not think the Chancellor of the Exchequer would give that matter serious consideration. In any case, I certainly trust that my hopes and anticipations in that matter are correct.
As the Financial Secretary to the Treasury knows, I have raised during Question Time recently the question of Income Tax collectors. I believe that those collectors, who are up to the present under the control of the local Commissioners, are to all intents and purposes those who were provided, when the Income Tax was started, to look after the interests of the taxpayers themselves, and being under the command of the local Commissioners, who are not part of the Inland Revenue, it was recognised in the old days that there should be some consideration given to the taxpayer. Although this question has been brought up a great many times, I trust that the Government will give it their most careful consideration before they decide to make any change. The taxpayer at present feels that he has someone who looks after him. It would ill become me to say that the Inland Revenue officials were inhuman or anything like that, but for goodness' sake let the taxpayer have that buffer and the satisfaction of thinking that he can go to someone who is free from the Inland Revenue authorities. I hope the Government will not make any alteration in that matter.
I would like to say a final word with regard to industry as a whole. I never try to go behind a smoke screen or to hide my principles. I am and have always been a confirmed Protectionist, and I use that word perfectly plainly. When I look around and see in my own country £250,000,000 or £280,000,000 worth of manufactured articles that were imported without paying a penny piece for the utilisation of my markets, I say that if other countries would give me the same advantages, it would be all right. In matters of business, I am prepared to deal with you if you reciprocate, but here there is no reciprocity. Those goods, which are manufactured in many cases under conditions to which hon. Members opposite and on this side also would be no party, are allowed to come in here bearing nothing towards the cost of the Army, the Navy, or the Civil Service. They put out of work a vast number of our own mea who are not desirous of continuing to receive out-of-work re- lief week by week. The Englishman wants to earn his money, and he wants an opportunity of earning it, and it is the duty of the Government to see that every facility is given to the working people of this country to use their labour and to obtain employment.
I know very well that the Chancellor of the Exchequer is adamant so far as he is concerned, but, with all deference to him, he is but one member of the Government. He may be a very dominant member, but I know there are some other members of the Government and many hon. Members opposite who are of the same opinion as I am and who think that what is good for other countries where they have tariffs may be good for us, too. I have every hope that if we do not get some change in our tariff system before long, the day is not far off when those Members of the party opposite who question the advisability of making no change in our tariff system will vote with us. Let us go to the country, and we will nail our flag at the masthead and say, "We are out for a change in our tariff system, because we believe it is for the good of the country as a whole." I look forward with hopeful anticipation to the day when we shall get an opportunity of appealing to the country, and I have no doubt in my own mind what the result will be.
It is only proper, as representing the City of London, that I should express some interest in what is called the financial statement. At first the City seemed inclined to welcome the speech and the views of the Chancellor of the Exchequer. They are well aware of the difficulties of the situation, the conditions of trade, and the obstacles to balancing the Budget, but on reflection doubts occurred as to whether this was a financial statement at all, and further as to whether it was a correct one, and when they gave further thought to it, I agreed with several of them that if any company of repute had presented such a statement and asked that anyone should lend that company money, and had obtained it, that company and its officials would have obtained it under false pretences. I do not hesitate to say that, though there has been criticism of certain people engaged in business, anyone who had presented such a faked statement as this would certainly have been sent in due course to what is called a house of correction.
The whole world has looked at our Budget statement as showing exactly the position of this country, and when a Chancellor of the Exchequer has told the world and this country that his Budget was balanced and that he was paying off debt, they have taken that as a true statement. To-day, this Budget statement is a statement, first of all of figures, and next of pious hopes, and the great difference between this statement and those of the right hon. Gentleman's predecessors is that it is distinguished by its omissions. We know that the Chancellor of the Exchequer was aware of the bad state of the country a year and a half ago. He made statements showing that, with Income Tax at 4s. and Super-tax at 6s., this country was suffering the heaviest burden of any country and that to that fact was largely due the depression from which we suffered. In his Budget a few months later he increased the Income Tax, the Super-tax, and the Death Duties, and that surely made him fully aware that he perforce was adding to the difficulties of the country and increasing the depression.
So sensible was he of that fact that he allowed his chief official at the Treasury to give evidence before the Royal Commission. I am not accusing the Chancellor of the Exchequer of attempting to conceal anything. When evidence was given by that distinguished official indicating that the pursuit of the course which we were then adopting meant that we were not going to balance the Budget, due notice was given to this House, and the Chancellor was fully aware that we were going down the path which has led other countries to destruction. I cannot understand how the Chancellor is able to buoy himself up with the two hopes which led him to think that the country would get through. One hope was that there would be a recovery in trade. I regret to say that there is not to my mind the slightest indication of that here or elsewhere. The world is to a large extent one, and I do not think we shall recover until other countries recover. The blame is not entirely on us, but there are no symptoms of improvement which lead me to think that the Chancellor was justified in buoying up himself, or the country, with false hopes. The second indication he gave of what he hoped might remedy some of our misfortunes was the report of the famous May Committee. I am getting pretty tired of these committees and commissions, but the Chancellor himself has no more love for them than I have. What have these committees and commissions done in the past? Each Government, Conservative and Socialist, has got into the habit of appointing committees and commissions on every conceivable occasion. Sixty or 70 of them have been working or are now acting. Whom do they get to sit on these committees and commissions?
That is exactly what I thought would be said. They get learned professors, leaders of industry, and judges of the High Court, and they give them a secretary, a man full of ability, from the Civil Service. They then permit or instruct these committees and commissions to get further experts to give evidence; they occupy the time of these judges, professors and witnesses, and often use a judge as chairman. At the end of months, sometimes years, reports are presented, but seldom are they made use of. They are, as a rule, put in a corner, and the time of these business experts and judges has been wasted. The appointment of these committees and commissions, however, gives a little rest to Ministers, and allows them to say that they are doing something or letting somebody else do something. They ask all these experts and business men to leave their businesses and waste their time and the Government's money in presenting reports to which no attention is ever paid. If the Chancellor of the Exchequer is hoping that that kind of thing will get him out of his difficulties, it is but a slender reed.
I have been connected with a great many companies of various sorts, and I have now left most of them, fortunately for myself, but I can assure the Chancellor that any of those great institutions which have got into difficulties in the last few years have not done so through any fault either of the masters or of the men. There are circumstances over which neither have control, but I do think that the economies suggested will have to be practised by both sides. A previous speaker produced certain figures with regard to shipbuilding, shipowning and ship employment. They were very grave figures. We have got to the point where, instead of our producing 50 per cent. of the world's tonnage, we are hardly producing any. At the beginning of this month practically all yards were free of fresh orders. That is a most serious thing, because it means that we are not only not employing the men in building, but not employing the men in running the ships. There is hardly room in the ports of England to moor the ships, many of them new, which are laid up, and for which there is no employment. I can assure the Committee that in many cases when a ship comes home and the owners decide to lay her up, they have the greatest difficulty in finding room to moor her. You have only to go to the Clyde or to Southampton or to other places where there are mooring facilities, to realise that. It is one of the saddest sights I have ever seen. It is terrible.
It was said in the Committee yesterday that it was not patriotic to explain the state of the country publicly. Let me say this as regards the present financial statement in the Budget, that the Chancellor has no wish, I am sure, and I do not intend, to conceal anything about the state of the country. If this Committee do not understand it, they ought to; if the City do not understand it, they ought to. Whether they understand it or not, I would assure the Committee that in every bank in Paris, in New York, in Berlin or in Basle, where the new International Bank sits, they know all these particulars about the finances of every other country, including our own. This country has been an example to them all; long may it remain so, but it will not remain so, and other countries will not take our experts, as they have done in Australia, or Brazil and elsewhere, to advise them in finance, unless we rigidly adhere to our old principles. One of these principles is that this financial statement should tell the case and the whole case, and that nothing should be omitted. I have been occupied in my life in several reconstruction schemes for foreign countries. I have prepared schemes, as the right hon. Member for Sevenoaks (Sir H. Young) has done, and they have all been based on what I thought was the English tradition. Long may it remain so, and for ever I hope there will be a frank statement to this House, which will be encouraged to know the worst as well as the best.
There is a certain consciousness among Members of all parties that this week we are taking part in an historic Debate, because it is probably the last time that the House of Commons will be asked to discuss a Free Trade Budget. [Interruption.] I can quite understand that the prospect thus opened up is not a gratifying one to hon. Members opposite, but they will gain nothing by shutting their eyes to the facts. The Chancellor of the Exchequer showed in his Budget, and in the speech that he made in introducing it, that he realises, as some of the quicker-minded of those who sit behind him will soon realise, that the limit of direct taxation has been reached, if not passed. That means that under Free Trade no more money will be available for further expenditure, whether on social services, on defence, or on any other public objects. It means more than that. It means that under Free Trade we are unable at this moment to provide for our current expenditure out of current income. The Chancellor of the Exchequer did not seek to hide the fact. He pointed out, in effect, that be had two alternatives before him. One was to broaden the basis of taxation by indirect taxation added to direct taxation; in other words, by some method of tariffs to supplement our existing direct taxation. The other alternative was for the time being to live on our capital. The Chancellor yesterday unsaid a good many things that he had said rather bitterly in the past few years, but he was at least consistent in one thing. He was as determined a Free Trader yesterday as he had been all his life. I do not think that the Committee expected to hear from him the announcement of a tariff. He was, therefore, driven to take the other alternative, to live for the time being upon capital.
Neither the Chancellor of the Exchequer nor the Financial Secretary to the Treasury, nor, I think, anyone who has spoken in the Debate, has pointed out the full extent to which we are at this moment living upon our capital. The first figure to which I would direct the attention of the Committee is that of the amount realised for Estate Duties—£82,610,000. That is a direct tax upon capital. It is spent by the State, and it is therefore a diminution, in effect, of the capital of the country. The next item is the Rating Relief Suspense Account. That is capital not in private, but in public hands, but it represents part of the gross capital of the country. There a sum of £16,000,000 was used, so that last year, in order to balance the Budget, we used up £28,610,000 of private capital in the form of Estate Duties, and £16,000,000 of public savings which had been set aside in the Rating Relief Suspense Account, making a total of £98,610,000. I am aware that to the extent to which that money was applied to the reduction of Debt, it was not a capital loss, because, if the State uses capital money to pay off capital liabilities, it is in the same position as a private person doing the same thing. It does not thereby diminish its total capital.
Therefore, in order to see how much we are over-spending and drawing upon our capital, we must consider what the position was in regard to the redemption of Debt. The figure given for sinking fund of £66,830,000 does not represent in any way the net reduction of Debt. The Chancellor of the Exchequer put the figure of actual reduction of Debt at £43,554,000. If we take that sum from this capital sum of £98,610,000 to which I have referred, we find that we have overspent capital to the extent of £55,056,000. But that is not the whole of the case, because when the Chancellor of the Exchequer told us that the actual reduction in debt last year was £42,000,000 he neglected to remind us that in that calculation he was taking no account of borrowings for unemployment insurance. Therefore, I have to add to the figure of £55,000,000 of capital spent another £40,000,000 for money borrowed for unemployment insurance. From that record we find that, in respect of last year, as shown by the figures put before us by the Chancellor, supplemented by the accounts of the Unemployment Insurance Fund, this country actually used up a capital sum of £95,000,000.
In the current year the position will be worse. The corresponding figures for the current year are as follows: Estimated Estate Duties £90,000,000—that is private capital to be used up; Rating Relief Suspense Account, £4,000,,000—that is public savings to be used up; and Exchange Account, £20,000,000—another form of public capital to be used up. They make a total of £114,000,000. Against that has to be set a Sinking Fund of £52,000,000, and, assuming that to be the actual amount of debt reduction, we get a balance of £62,000,000 of capital which it is intended to spend in the current year. There, again, no allowance is made for unemployment insurance. We have been told repeatedly that the borrowings for unemployment insurance amount to somewhere about £1,000,000 a week. Suppose I take it as £52,000,000 for a year. If we add that £52,000,000 to the £62,000,000 referred to we get a figure of £114,000,000 of capital which the Chancellor of the Exchequer proposes to spend this year in order to make his Budget balance. Having used up a capital sum of £95,000,000 last year, he proposes to use up a capital sum of £114,000,000 this year; and in arriving at that figure he has been obliged to anticipate revenue to the extent of £10,000,000 by his device for the alteration in the payment of Income Tax, has had to take a comparatively optimistic view of his revenues, and to ignore absolutely the possibility of Supplementary Estimates.
It is alarming that we should see, not in one year only but in two years, this deliberate using up of the capital resources of the country for our current needs. The Chancellor laid stress, as he was entitled to do, upon the exceptional severity of the trade depression, but even with a very considerable trade revival we might still find some difficulty, under our present system, in obtaining sufficient to bridge the gap of £95,000,000 in one case and £114,000,000 in the other. And what of all the avowed intentions of supporters of the Government to incur further expenditure on improving the social conditions of our people? How is all the money to be found? If we continued living upon our capital the end would very quickly come. Our credit would go first, and as that went so would the general standard of living of our people decline. It is no use trying to blink that fact. You have only to overspend your capital for a comparatively few years for those two effects to follow—a loss of credit and a lowering of the standard of living.
We ought, I suppose, to be grateful to the Chancellor for this at least, that he has disposed of some of the wilder theories of his colleagues, such as the statement made by the Minister of Health that what a country wanted badly enough it could afford. That statement, and other nonsense of that kind, has received a very severe snub from the Chancellor of the Exchequer in his Budget statement. On the other hand, the country must continue to suffer, while the present Chancellor remains at his post, from his attitude on fiscal matters. Unless we get a reduction in public expenditure on a scale of which there is no sign whatever to-day, we cannot continue, under our present Free Trade system, to find what we require for current needs, and therefore some broadening of the basis of taxation by means of indirect taxation is absolutely necessary. The longer it is delayed the worse for all concerned.
After passing a few days in listening to the speeches of hon. Members on both sides of the House one's material evaporates somewhat, and, perhaps, one's knowledge is enlarged. This afternoon we have listened to several admirable contributions to this Debate, particularly those of the right hon. Member for Epping (Mr. Churchill), the right hon. Member for Sevenoaks (Sir H. Young) and the hon. Member for the City of London (Mr. E. C. Grenfell). The hon. Member for Birkenhead East (Mr. White) said many things to which I take strong exception. We do not accept for one moment his allegations that our industry is not as efficient as the industry of any other country, that we do not send as competent representatives abroad to get trade, and that we cannot turn out articles as good as those of any other country. I will give an illustration because we get far too many generalities in this House. In the wool textile trade we have done the most widespread business throughout the world that any country could possibly wish to do. It is not through lack of salesmanship or through lack of goods that we are unable to get business to-day. We are not getting trade to-day because we are unable to produce at the price.
I will give an illustration. Not long ago a Bradford merchant came to me and stated that while in Shanghai he had said: "I will entertain to dinner every traveller from Bradford who happens to be in Shanghai at this moment." The House will be surprised when I say that that gentleman had to entertain to dinner 80 representatives from the district of the West Riding of Yorkshire. Therefore, I take the strongest exception to hon. Members in this House making statements which are published abroad to the effect that our trade is declining because we have not efficient trade representatives abroad, and we cannot do this and the other.
The hon. Member for Whitehaven (Mr. Price) gave some rather startling information to the House. He referred to the Bank of England, and said it was possible for the Bank of England to cure all the ills from which we are suffering at the present time. The hon. Member for Whitehaven also referred to another matter to which I take exception. He referred to the Governor of the Bank of England. The Governor of the Bank of England has no seat in this House and has no responsibility for the deliberations in this House, and the more we realise that the Bank of England should be kept out of party politics, the better it will be for this House and for the Bank of England.
The policy of the Bank of England, like the policy of any other organisation in this country, is subject to criticism, but we do not wish to drag the Bank of England into the political considerations which arise in this House. The hon. Member for Whitehaven also referred to the question of rationalisation and reorganisation, and he gave that as a reason why we were not getting trade. Again, the hon. Member is completely wrong. I happen to be primarily interested in industry more than in politics, and for a long time I have been engaged in breaking down impossible rationalisation and endeavouring to get individuality, economy and efficiency into business so that it can prosper. Allusion has also been made to the Lan- cashire Cotton Corporation which has been brought into being to reconstitute the cotton trade. If ever there was an instance of failure before the start, I think that will be one. A concern which has to borrow money at 6 per cent. on first debentures at a discount and then cannot produce 10 per cent. of the amount offered is a failure to start with. I have paid much attention to the Debates during the last two or three days because this happens to be my first experience of a Budget. Here we are in this House discussing the raising of more than £800,000,000 of public money and its allocation. I have been somewhat disappointed with the back benchers, not because hon. Gentlemen opposite have not been attentive throughout the Debate, but because their speeches have shown a lack of knowledge on the questions we have been discussing and the circumstances which surround them. I have been disappointed because of the lack of broadmindedness displayed.
I admire the Chancellor of the Exchequer for some things. First of all, he is a thorough Yorkshireman; and, secondly, he has a sterling belief in his own opinions and a determination to carry them out. I admire him for that. I admire the right hon. Gentleman for his presentation of the Budget, but there are many things for which I do not admire him, and one is the obstinacy with which he adheres to beliefs which have proved to be wrong, and which are known to be wrong by a majority of persons connected with trade and industry in this country. As politicians, the Members of the House of Commons to-day are in very poor repute—[HON. MEMBERS: "No!" and "You mean the Tory party!"]. Perhaps hon. Members will permit me to say in this House what I have heard outside. I do not say that I do not do everything in my power to prevent such an opinion spreading, but there is a lack of faith. I have heard hon. Members opposite say that they wish we could do away with the word "politicians" and call ourselves "statesmen," and with that I thoroughly agree. I think we ought to be statesmen, and, when we call ourselves, by the honourable name of parliamentarians or statesmen, when we have a proposition before us like the one we are now considering, let us bring to the problem the attitude that is expected from statesmen and parliamentarians.
In discussing the Budget, we should first consider the circumstances under which it is introduced. What are the surrounding elements which we ought to take into account in considering the Budget itself? Ours is a sturdy nation, a wealthy nation, and a nation of the highest and best type of inhabitants on the earth. I know that is rather self-congratulation, but I believe it is so. What are the circumstances in which we are placed to-day? We have an admitted over-taxation, which is not a very bright feature. We have unemployment of terrible dimensions whatever may be said by hon. Members opposite about the state of unemployment in America and other countries. At the present time, we have more than 2,500,000 unemployed in this country, and I say with all seriousness that we have a crumbling industry. I am giving my experience outside the House, and I do so with the greatest pleasure because I am a newcomer, and I am still very much impressed by outside information. We have a crumbling industry and we have an Empire which seems to be—I will not use the word I have on my notes—in difficulties at the moment. If any hon. Member wishes to have authority for my statement, he does not need to go further than the Chancellor of the Exchequer.
The right hon. Gentleman has admitted all these facts and consequently, when we are considering the Budget, we have to consider it in the light of those circumstances. Perhaps I may be excused for regarding the position of a Member of Parliament as being one of responsibility. I have heard it said for a long time that our primary duty is to secure, so far as we can, peace and happiness and truth and justice. When we are discussing a Budget, we are exercising one of the main privileges of the House of Commons, that is to say, the provision of money and the control of its expenditure. As Members of Parliament, are we fearless, and are we doing what we ought to do to protect the rights and privileges of the House of Commons in that respect? I say that we are not. I say that, with the consent of this present Government, we are handing over to all sorts of outside committees the control of expenditure—of what is recommended, how it should be raised, and how it should be spent. All these matters we have referred to committees of one kind or another, and I say that in so far as we do that, and in so far as the President of the Board of Trade, who is representing the Government here at the moment, accepts those recommendations without a full knowledge on the part of the House of the real facts which are in his mind, we are delegating the most priceless possession that we have, namely, the control of taxation. When I make these statements, I have in mind the Goverment's Economic Advisory Committee. We have been told over and over again that we are to be debarred from having any of the opinions and information furnished by that Committee. How, then, can we properly criticise or assist the Government if we are to be debarred from information?
The Budget has five main features. The Chancellor of the Exchequer, in the first place, has failed to present a true balance sheet. He has omitted the liability in respect of the Unemployment Insurance Fund. I will not enlarge upon that matter, because the hon. Member for the City of London has just done so. In the second place, the Chancellor has utilised capital for income, and that also has been dealt with. In the third place, he has anticipated income. That, again, has been dealt with and criticised. In the fourth place, and this, perhaps, is the most sensible of all the features, he has put a tax upon oil, which is at present taxed. I do not know that there is much to be said against that particular feature. The fifth point is that he has left a surplus for contingencies of little more than £100,000. Those are the broad features of the Budget. I do not wish to go into them in detail, but the main fact, so far as I am concerned, is that the whole basis of the Chancellor's proposals is that he has in his mind the prospect of a recovery in trade and business.
So far as the woollen textile industry is concerned, there is no hope of an immediate improvement in the prospects of trade and employment. Our prices are too high; the trade has already shrunk by one-third; one-third of the operatives are out of employment; and there is not the slightest prospect of any improvement at the moment. Indeed—and I would like the President of the Board of Trade to bear that in mind—the effect of this Budget, and of the speeches that have been made in regard to it, is that another place at any rate will close down in Yorkshire, because that place manufactures moquettes, which cannot be manufactured in that district at the price at which they are imported into this country from Germany. Efforts have been made by patriotic people who have provided capital to carry on that trade, but, after the pronouncements which have been made to-day, there is not the slightest hope of the continuation of that business.
If the Chancellor of the Exchequer has based his Budget on something which we know cannot possibly happen, is he meeting the House of Commons with truth, is he elucidating the position to the nation, is he going to do anything for the 2,500,000 unemployed, is he going to do anything for any of those in whom hon. Members opposite profess to have such a great interest? Hon. Members opposite do not give us at any time the slightest credit for having the same interest, but, nevertheless, it is there. I want to point out that the only means of bringing about a recovery of trade and industry—and this is the opinion of many hon. Members opposite, and is the opinion of the trade union leaders in every basic industry—is for the Chancellor of the Exchequer and the Government to throw overboard altogether his Free Trade notions, and to adopt a system of Protection wherever it is necessary to protect the people in whom hon. Members opposite profess to have such a great interest. If that were done, there might be some justification for the optimism that the Chancellor has expressed, and for supposing that this Budget may close at the end of the present financial year on the lines that he has laid down. Otherwise, there will be no confidence whatever in the country, and the only solution that there can be for the position is the substitution of a new Government which will bring confidence, and also the alteration in our fiscal system which is so necessary for the revival of trade in this country.
I am one of those who was rather surprised to hear that this Budget was received in the House of Commons with relief, and in the public Press with the same feeling of relief. For my part, I should like to support the views expresed by my right hon. Friend the Member for Sevenoaks (Sir H. Young) when he denounced the principle of the Budget as wholly and absolutely dishonest. I listened with a good deal of attention to the speech of the right hon. Gentleman the Member for Darwen (Sir H. Samuel), and I could not help asking myself what that speech would have been if the Budget, instead of having been produced by the present Chancellor of the Exchequer, had been produced by Members sitting on these benches. I venture to say that the right hon. Gentleman's denunciation of the proposals then would have been a great deal more violent than his commendation of the speech of the Chancellor of the Exchequer.
It is the custom to mention the name of Mr. Gladstone in connection with such matters, and I should like to know what Mr. Gladstone would have said about these proposals. I do not think he would have supported the opinion of the right hon. Gentleman the Member for Darwen. The right hon. Gentleman challenged Members on this side of the House by asking whether we would be prepared to support the opinions which have been expressed by Mr. Maynard Keynes and Sir Josiah Stamp. I confess that for my part I would. I have always been a Free Trader by conviction, but I cannot but feel that we do not get Free Trade, or anything approaching Free Trade, and that some change in our fiscal system is undoubtedly necessary. I would go as far as Mr. Maynard Keynes and Sir Josiah Stamp have gone, and would institute a general tariff on all manufactured goods and I should be prepared to regard it as an emergency tariff. The right hon. Gentleman the Member for Darwen says, "You call this a revenue tariff, but at the same time you expect it to help by reducing the number of unemployed." Surely, it would have one or other of two alternative effects. Either manufactured goods which our unemployed are perfectly able to produce for our consumption would be kept out of the country by a revenue tariff, thereby giving employment to some of our unfortunate 2,500,000 people who are unemployed at the moment, or, if that were not the case, at least we should get revenue which would help to meet the financial obligations of the country.
I always feel, when talking on the tariff question, that there is considerable danger of thinking it is a simple problem which can be treated in a mathematical sense, with two or three unknown quantities and two or three equations. It is a very much more complicated question than that. But I am converted to Tariff Reform sympathies for another reason. If it would do anything whatever—and I believe it would—to reduce the number of unemployed, there is one factor which I think is beyond all value, and that is the moral factor which will undoubtedly follow from the reduction in the number of our unemployed. Feelings of despair and self-depreciation would be replaced by feelings of hope and self-respect, and that is of more value than anything that could be measured in pounds, shillings and pence.
I listened again with a good deal of interest to the speech of the right hon. Gentleman the Member for Epping (Mr. Churchill). I could not help but appreciate the natural elation which he expressed at the proposals now made by the Chancellor of the Exchequer, although I am afraid I cannot quite join in the approval that he bestowed. I am a comparatively new Member of the House, but when the proposals of the late Chancellor were made, I think, had I been here, I should have voted against them. I feel very strongly that this Budget is financially dishonest, and I cannot join in any of the expressions of approval which have been given. It seems to me to reveal a standard of financial dishonesty which has been absent from any previous Budget statement. Last year, apparently, there was an ordinary income of £776,000,000 and an ordinary expenditure of £732,500,000, leaving a surplus of £43,500,000. The Chancellor claims that by this amount the Debt of the country has been reduced, but he completely fails to remind the House that in the meantime loans to the extent of £35,000,000 have been contracted for the Unemployment Insurance Fund. Those loans are a liability just as much as the Funding Loan, the War Loan or any other, and ultimately they have to be met. When you deduct that from your £43,500,000, your net reduction amounts only to £8,500,000. The Chancellor would have been better advised if he had faced that position and told the country exactly where we stood. Take the figures for this year. The estimated revenue is £766,000,000 on the basis of existing taxation, and the estimated expenditure £803,500,000. Provision is made for a Sinking Fund of £52,000,000, and there is an estimated deficit of £37,500,000. Again the Chancellor is completely silent on the subject of the Unemployment Insurance Fund. The debt is accumulating to the extent of £1,000,000 per week, exactly enough in the course of the year to wipe out the Sinking Fund.
I join in the criticism which has been made by others in regard to the estimate which the Chancellor has given us. He bases his estimate on the assumption of an improvement in the industrial situation, but he completely ignores the fact that any such improvement will be accompanied by a time lag and that it will need a year, or even two years, of industrial improvement before the effect on the Revenue will become appreciable. In fact, at present the time lag is in favour of the Chancellor. He has been collecting his revenue for the past year, and for one or two years previous to that in which earnings and profits have been better. He seems to me to have overestimated his revenue by about £10,000,000. He has, therefore, to make some provision for a deficit of about £47,500,000, instead of £37,500,000. I have cancelled out the increased loan for unemployment insurance against the £52,000,000 for the sinking fund, so that during the year the situation seems to be that, apart from any increased taxation, there would be a deficit of £47,500,000 without any appreciable change in the amount of Debt with which the country is faced.
How does the Chancellor propose to meet this £47,500,000? He is putting on an extra tax on petrol, which I cordially support. That will give us about £7,500,000. I join issue with the Chancellor in regard to the piece of jugglery by which we are going to collect in advance one-quarter's Income Tax on certain schedules and bring it into the income for the year. If any company director were making a suggestion of that nature, it would not be very long before he found himself before a magistrate. He is going to raid the dollar fund to the extent of £20,000,000, and he is taking another £3,000,000 of the profits which that fund has earned in the past. That, to my mind, is about the worst feature of the whole Budget. He is deliberately using capital to meet annual and recurring expenditure. It is exactly on the same footing as a company which pays dividends out of its capital, and we know what happens when that is done. There is nothing whatever to justify action of this nature, and it is to be condemned on every principle of financial honesty. The Chancellor, to my mind, is gambling desperately on chances, and it will be the community that will suffer if that gamble does not come off. He is going to hand on the burden of the responsibility, in the event of failure, to the next Chancellor, and I feel pretty certain that in his own mind he is hoping and praying that he will not have to face the situation a year hence.
To sum up, it seems to me that the Chancellor is proposing to meet the current expenditure, first by the use of a large capital sum, and, secondly, by the anticipation of revenue. When he has done that, he will still have a deficit, with no reserves whatsoever to meet what invariably occurs, a demand for increased money for Supplementary Estimates, and no provision whatever is made, notwithstanding the statement last year for wiping out last year's deficit. The people who will suffer from all this are not those whom hon. Members opposite are pleased to regard as capitalists. I am not a capitalist by any means. I have been a working man all my life, as much as hon. Members opposite. The people who will suffer are those whom they claim to represent, namely, the hard-working classes. You have only to look to my own native country of Australia to see the effect that this kind of finance produces. Australia, unfortunately, has not got large reserves which it has accumulated in the past and which it can bring forward to meet a special emergency of this kind. I speak from a very intimate knowledge of the conditions existing in Australia when I say that the people who are suffering more than anyone else are the working-classes. The working-classes of this country will be the first to suffer from the Socialistic legislation which involves vast expenditure and leads to a country living beyond its means. I have, therefore, no hesitation whatever in saying that I cannot join in any of the congratulations of the Chancellor of the Exchequer on the effort which he has made to balance his Budget.
I should not have intervened in this Debate if I had not had the privilege of listening to the speech of the hon. Member for Shipley (Mr. Lockwood). Like him, though from a different end of the scale, I know a little about the textile trade of the West Riding of Yorkshire. I am not going to emphasise the point except to say that there was a report issued in favour of Safeguarding, and that I do not think it would have touched the particular class of article mentioned by the hon. Member, namely, the cloth which is called moquette. That report ruled out all cloths which were, I believe, over 9.9 ounces in weight, and therefore it would not have touched that class of cloth at all. Moreover, I would remind the Committee that the report was issued in sufficient time for the late Conservative Government to have given effect to it if they had had any real confidence in it or believed that it was worth the paper upon which it was printed. As a matter of fact, I believe that the home trade of the West Riding was never better. What we want is a larger export trade. I am afraid that a tariff would not help us towards getting a greater expansion of the export trade.
While I have every sympathy with the hon. Member for Shipley in what I know are sincere efforts in trying to better the West Riding trade, I am not inclined to be as pessimistic. I would remind him that a late Member of this House who is now a member of the other place, Lord Barnby, recently pointed out that the West Riding textile trade is looking up. I, therefore, ask my hon. Friend to be of good cheer and not to be so pessimistic in his outlook, because from what we have heard from the Conservative Press and from leaders opposite, the Budget almost seems to be a perfect Budget. In fact, our trouble is that so few people are condemning it, especially on the other side, that we are inclined to think that there is some catch in it. The hon. Member for Shipley was rather sorry that the Chancellor of the Exchequer had left a margin of only £130,000 as surplus. I, also, am rather sorry. The Chancellor of the Exchequer might have taken away a grievance from one distinguished Member of this House who, unhappily, we shall see no more upon these benches, or in this House as long as this Parliament lasts, or even, I am afraid, any other Parliament. The hon. Baronet the Member for Smethwick (Sir O. Mosley) told us that those whom he termed the "old women on the front benches" had made him the pampered darling of the rentier class. I regret that the Chancellor could not have taken that grievance from the hon. Baronet and made him a firm friend of the Government by putting a tax upon the dividends from gilt-edged securities. I believe that even in the City they expected what they termed a coupon tax to be put upon the dividends of Government stock. I am sorry that the Chancellor has lost this opportunity of placating this new party, which, I am sorry to say, will not be with us any more during the lifetime of this or any other Parliament.
There is another matter to which I wish to call attention. It does not interest the West Riding, but it interests the constituency which I have the honour to represent. One of the staple industries in the East Riding is the production and manufacture of paint and varnish. We use considerable amounts of what are called hydro-carbon oils as raw material in the manufacture of paint and varnish. These oils are of a different nature from petrol, but, still, there is a handicap in the trade and manufacture of paint and varnish owing to the imposition of a tax upon this class of hydro-carbon oils. Though a rebate is supposed to be given upon those oils, there is a hardship in their manufacture, and I appeal to the President of the Board of Trade, as representing the Chancellor of the Exchequer in this matter, to review the impost of the tax upon oil used in the manufacture of paint and varnish and see if it cannot be remitted altogether, so that this important trade which is carried on at Kingston-upon-Hull will have absolute freedom to get its raw materials without the imposition of a tax, or intricate machinery for the claiming of a rebate.
With the exception of the hon. Member for Cambridge University (Mr. G. Wilson) and the right hon. Gentleman the Member for Sevenoaks (Sir H. Young), there seems to have been a universal paean of praise of the Budget, and in view of the fact that it has also received the benediction of the right hon. Member for Epping (Mr. Churchill), I am afraid, as I said at the beginning, that there must be some snag in the Budget. I hope that there is not, and that it will work, as I believe every one wishes it to work, for the prosperity of the community. The right hon. Member for Epping in his closing benediction stated that the Budget, at any rate, gave relief both psychologically and in other ways, and we hope that Members opposite will join with us in trying to get a new atmosphere, so that instead of talking so pessimistically and joining what I call the all-is-lost-brigade, we shall gird our loins and see if we cannot restore the prosperity of the trade of this country.
The snag in the Budget, as I see it and as the City of London sees it, is that it is a gamble at the expense of somebody else and not at the expense of the Chancellor of the Exchequer. It is a gamble which trade and commerce does not appreciate. As there are other hon. Members who wish to speak, I shall confine my remarks to the £10,000,000 which the Chancellor of the Exchequer expects to get from the Income Tax payers under Schedules B, D and E. I look upon this as typical class legislation of the kind of which the Chancellor of the Exchequer is particularly fond—attacking one particular class. I do not think that it is in the interests of the country, and it is not fair to these unfortunate people, most of them of the middle class, who will have to pay an extra sum in Income Tax at the most inconvenient time of the year. [An HON. MEMBER: "It is always inconvenient!"] It is always inconvenient. It is inconvenient for those who have to pay the Income Tax, whereas it is not an inconvenience for those who have no Income Tax to pay. On the let of January these particular people will have to pay extra Income Tax at a time when insurances, subscriptions to various societies and charities, local rates, rent, motor car tax, it they are fortunate enough to have a motor car, gas, electricity and telephone bills and many other similar payments become due. These debts all accrue at the end of the year at a time when men and women who have families will have their children at home and will wish to spend a pleasant Christmas. At the end of the present year, instead of spending money on Christmas, they will have to keep it in reserve in order to pay the extra impost on the 1st of January.
This money could have been collected without any inconvenience to anybody had the Chancellor of the Exchequer not been so pigheaded—[Interruption]—and had suggested a tariff. Scottish people are called pigheaded, but Yorkshire people beat us hollow. Even if the right hon. Gentleman was not willing to adopt some sort of tariff or safeguarding Measures, I see no reason why the £10,000,000 should not have been collected from that great mass of people who pay no Income Tax. If the £10,000,000 were divided among them it would mean very little out of their individual pockets, whereas the unfortunate people who are assessed under Schedules B, D and E are already very much overtaxed. Many of them are small shopkeepers, professional people and widows who can ill afford even the taxation which they have to pay at the present time, and this last blow will be very severe. I look forward with regret to the discomfort which will accrue to them owing to this extra tax. We have to remember that when once this has been done it cannot be undone. No succeeding Chancellor of the Exchequer will be able to right this wrong. There are many other points of the Budget with which I disagree. I certainly disagree with the last speaker, who said that on the whole the country approved of the Budget. I do not think that they do, and certainly the more they understand it the less will they approve of it.
Owing to the growing habit of hon. Members opposite of leaving the House the moment they have delivered their speeches, I shall not trouble the Committee with any references to the last speech from the benches opposite. I bad hoped to say something in regard to the views that were put for- ward by the hon. Member for East Hull (Mr. Muff). That habit reduces this House to a mere sounding board for delivering a certain number of speeches for consumption in the constituency. Much as I regret that tendency, it has had the advantage this evening of shortening any remarks with which I shall trouble the Committee. I want to refer to one main consideration underlying the Budget. When any legislation is introduced during the present time of crisis, we consider, first and foremost, how the proposed legislation will affect the problem of unemployment, and when we have to deal with the annual Budget that is still more the case. How is this Budget likely to affect the question of unemployment? The right hon. Member for Darwen. (Sir H. Samuel) referred to unemployment. From those benches it seems to be an adequate answer to any consideration of that side of the problem to look at the United States of America. The hon. Member for East Birkenhead (Mr. White) carried the argument further and said: "Look at France, the latest country to have an unemployment problem." He said that there are 1,250,000 unemployed there. I should have thought that was an argument exactly the other way from that which the hon. Member sought to put it. France being the last country to feel the cold blast of the economic blizzard, it would argue that their economic policy must be somewhat better than ours, seeing that we have suffered from unemployment for over 10 years.
We shall never arrive at any conclusion as to the way to deal with this problem and how it is connected with our national finance until we realise that unemployment in this country is not one problem but two, and that there is not one body of unemployed but two bodies, one of over 1,000,000, which we have had with us for over 10 years, and the other an addition of 1,500,000, due to a large extent, not altogether, to economic questions which are world wide. Viewing the matter from that point of view, what are the reasons for this unemployment? Obviously, if you have two problems you cannot have one reason. The addition to our unemployed of 1,500,000 is due to world causes and in regard to that hon. Members opposite always say that we have to consider a reason which is common to us and the United states of America, namely, the collapse of commodity prices, generally known as the slump. While that may be true of the addition that has taken place to our unemployment, and while that may be applicable to the 1,280,000 people who have become unemployed and have made a new problem in France, it cannot possibly account for the million people who have been unemployed in this country for eight, nine or 10 years.
Therefore, when we deal with the question of how national finance will affect that problem, we have two totally different considerations to bear in mind. We have our permanent unemployment, which is a problem peculiar to Great Britain and common to no other country. We can find the cause of that unemployment in the economic policy in which we have persisted of leaving our markets exposed to the competition of other countries. As regards the 1,500,000, other considerations must be borne in mind, but the Government in this Budget have not attempted to deal with either nor have they indicated that they realise the magnitude and nature of the problem. With regard to this block of unemployed, 1,500,000, the hon. Member for Aberdeen East (Mr. Boothby) yesterday mentioned the shortage and maldistribution of gold throughout the world, and suggested a problem which certainly deserves the consideration of the Government. I am not a deep student of the question of the gold standard, but anyone coming down to this planet from outside and seeing our great industrial organisation and what we require for the production of food and industrial commodities would say, what a strange race is inhabiting this planet when a large part of its endeavour is devoted to a search for a metal which has no utility in industry except a purely artificial one, but upon which they regulate the whole of their exchanges and the whole of their industrial organisation, whether there have been recent discoveries of the mineral or not.
I would remind the President of the Board of Trade, though perhaps he will not agree with my deductions, that it was the discovery of gold in 1848 and 1851 which made possible the great period of prosperity which people of his persuasion usually attribute to the adoption of a Free Trade policy. Again, the discovery of gold in the Rand at the end of the last century gave us a period of about 20 years of comparatively stable prices in world commodities, and one of our main troubles at the present moment is that search haw we will we have failed to locate any great reserves of this precious metal, which we choose to regard as absolutely essential to the stability of international exchange. We have made great economies in the use of it. We no longer use it as the currency medium of the country; and one of the problems which the Government should consider is that if we are still to regard gold as the basis of exchange how we can further economise in the use of what is an inadequate medium for the great exchange of commodities throughout the world. It is from that paint of view that the Budget fails utterly. It fails to envisage the unemployment problem as it is because it regards it as a whole. When the right hon. Member for Darwen (Sir H. Samuel) and the right hon. Member for North Cornwall (Sir D. Maclean) utter the words "the United States of America," and get cheers from hon. Members because they have made a platform point, it is not good enough for the House of Commons. We want real hard thinking on this problem, and the first thing is to realise that it is not one problem but two.
There are two features in this Budget to which I must refer, and I can assure the Chancellor of the Exchequer that he is not going to get commendation from me on these proposals. I regard these features as more inexcusable, more unjust and more dishonest, than any in the Budget. The first is the collection from a limited section of Income Tax payers, generally referred to as the farmers and professional classes, but which includes a much larger class which has not been mentioned before, the small business people of the country who are earning their income by small businesses of all kinds, small builders and shopkeepers, who have to pay their Income Tax by two annual payments. It is not deducted at the source. To charge these people, as the Budget does, with Income Tax for this financial year at the rate of 5s. 7½d. in the £, while those who get their income from dividends deducted at the source are charged 4s. 6d., is one of the most unjust, unreasonable and unjustifiable proposals I have ever heard.
Why has the Chancellor of the Exchequer done this? From his point of view it is a clever proposal. He is putting this extra impost on a limited section of the community, of which nine out of every 10 would vote against him in any case, whether he treated them fairly or unfairly. In the second place, they are a limited body of voters. It is purely political considerations of this kind that has led him to adopt this proposal. On Monday the Chancellor of the Exchequer said:
I now propose that they should pay three-fourths on 1st January, 1932, and one-quarter on 1st July, 1932."—[OFFICIAL REPORT, 27th April, 1931; col. 1406, Vol. 251.]
That sounds very fair, but what really happens is this. We are dealing with the financial year which commences in April and ends in April next year, and these people are being asked to pay one-half of their Income Tax on the 1st July next and another three-quarters of their Income Tax on the 1st January in the present financial year, thus paying Income Tax and a quarter. I take the next words of the Chancellor of the Exchequer:
It is estimated that the gain on this year will be £10,000,000."—[OFFICIAL REPORT, 27th April, 1931; col. 1406, Vol. 251.]
Where is that £10,000,000 coming from? Someone is going to pay it, and who is going to pay it if it is not the people on whom this extra charge is placed? It is, of course, coming out of the pockets of Income Tax payers who can least afford it, and at a time of the year when they can least afford it. Then there is the question of the Dollar Exchange. The history of this fund has not been made quite clear to the Committee. I speak from memory and subject to correction, but I think it originated in 1915 when Mr. McKenna made an appeal to the country to provide him with all the dollar securities they held. I handed mine over. We were all given an option. We were asked to take War Loan, but we were told that if we insisted we could have cash. Very few people, I imagine, insisted. I took War Loan, quite a considerable lot, but that does not matter. [HON. MEMBERS: "Hear, hear!"] Hon. Members may say "Hear, hear." That has nothing to do with the argument. What matters is that when
I, with the rest of the community, handed over these dollar securities, War Loan, in the main, was given in exchange. That meant that an addition of that amount was made to the War debt of the country, and it is there now in the National Debt.
That was the original fund which has suffered, as the Chancellor of the Exchequer said, a diminution from £56,000,000 to £33,000,000. That £33,000,000 remains, and it came from the community who were willing to hand over to the Government their dollar securities. With it they created this fund in the United States. I ask any hon. Member who is familiar with these affairs if any business company, with a great debit capital item on the one side of the account and a credit capital item on the other aide, attempted to deal with this question as the Chancellor of the Exchequer is going to do, what would be thought of the finance of that company? If he is going to take out £20,000,000 of credit which is represented by a similar £20,000,000 of debit on the other side in the National Debt, which was actually paid in exchange for it to the nationals of this country, can it be said that that is going to cancel out a similar amount of our War debt or should be used for current expenditure?
This item of the Budget is one which I consider dishonest. There is no other word I can use for it. It is not only unsound finance, but absolutely dishonest finance, and a specimen of finance which comes very ill for the Government to show the country as the method by which they manage the national finance. There are many other features of the Budget I should like to have dealt with, but us time is short, I have dealt with only these two. One of them is an absolutely unjust proposal which is put before the House with the false argument that it is not a charge on income, as the Chancellor has attempted to make out, whereas it is a direct charge and an increase in Income Tax of 25 per cent. for this year on a limited number of taxpayers. That is utterly unjust. The other feature of the Budget is this utilisation of what is a capital credit belonging to the nation, so as to try to balance a Budget which, even with this amount, the Chancellor has been utterly unable to balance.
I would like to join with others in rejoicing that the Chancellor of the Exchequer has been restored to us unimpaired in health, and, apparently, re-fortified and re-invigorated. The right hon. Gentleman has taught the House many lessons, not the least important among them that criticism may be none the less genuine because it is severe. Had the right hon. Gentleman found it possible to be present, I venture to assume he would be the first to be astonished at the calmness of the atmosphere in this place, in view of the fact that elsewhere it would appear there is an economic blizzard. I have watched the right hon. Gentleman over a series of years making his merciless diagnoses of Conservative Budgets and not hesitating to put the probe into the most sensitive parts. But criticism is one thing, and practice is another. The right hon. Gentleman has now had his great opportunity. Opportunity is the friend of the famous, excluding as it does the Pharisee and rejecting the claims of those who set a higher standard than that which they are prepared to observe themselves.
My hon. Friend the Member for Bodmin (Mr. Foot) has demonstrated by speeches in this House on many occasions how much he owes to the inspiration of the great statesmen of the past. Recently, when I was privileged to stay with him, he took down from his bookshelves some volumes of Burke, and declaimed to me with an appropriate modulation of voice, and the most convincing gestures, some of the sentiments of his master. If I were to learn anything from that privilege it would be, that a politician must go to great authority. My youth has precluded me from having so deep an acquaintance with such remote statesmen. When I wanted to know the principles by which I should judge a Budget, I went to the more modern persons. I took down the volumes of the OFFICIAL REPORT that are supplied to us free of cost, because we are Members of this House and are, therefore, supposed to study them. I turned to the speeches of the right hon. Gentleman the Chancellor of the Exchequer in order to find the specific for forming an opinion. I detected among them many great principles, and one principle was that, no matter how grave the crisis with which a Chancellor of the Exchequer may be confronted, he should never depart from his convictions. Whether that crisis be a general strike or a general blizzard, he should hold firm.
Therefore, I find myself in this dilemma. When it comes to voting upon the details of this Measure, am I to allow myself to be persuaded by the arguments that the right hon. Gentleman has used on previous occasions, or am I to support his actions which depart from them so freely? One of the axioms that the right hon. Gentleman laid down was that no capital sums should be used for the purpose of current expenditure. He described such a proceeding as immoral. And yet by some lapse or some forgetfulness he appears to have fallen into that error. I supplied myself liberally, in the year 1928, with taxed handkerchiefs in order to mop up the tears which the right hon. Gentleman bid me shed out of pity for the victims of Schedule A. What is the difference between the victims of Schedule A and the victims of Schedules D and E, except that the latter are more numerous, and that whereas the right hon. Member for Epping (Mr. Churchill) ventured to attack only the execrated landlords, it has been left to the present Chancellor of the Exchequer to apply his excruciating torture to those who are so misguided as to derive their incomes from trade and industry.
Does not the Committee recall also the language in which the right hon. Gentleman anathematised the Petrol Duty? He told us that it would encumber every branch of commerce in the land, that its incidence would fall with particular velocity upon the poor and the defenceless, and that it contained every one of the vices of an indirect tax. Well, the right hon. Gentleman recited the day before yesterday the Free Trade creed, the only creed apparently left to him to recite. He told us that on Free Trade he stood firm. Yet he was increasing the Petrol Duty—it had not encumbered industry sufficiently or weighed with enough weight on the poor. This great Free Trader, so universally lauded, increases the impost which has all the vices of indirect taxation and has not to commend it even those advantages which Protectionists claim for the policy of placing imposts, if indirect, upon a commodity which is produced in some great measure within the United Kingdom. Where is the consistency of the right hon. Gentleman, who said that the Petrol Duty, using a phrase which he had since employed more menacingly, was the last straw upon industry? A Petrol Tax of 4d. was the last straw. How can the camel which cannot bear 4d. bear 6d., except on the assumption that the weight of four black pennies is heavier than the weight of a deft sixpence?
On all these matters the right hon. Gentleman lectured us and laid down the principles by which future Chancellors of the Exchequer are to be judged. He complained of all these items in the Budgets of his predecessors. He offered the poisoned food to us; and the Committee lapped it up, apparently with gratitude, or, as, the City described it—the City is a great friend of the Chancellor of the Exchequer—"with relief." "But," says the Chancellor, "if I do not give poisoned food, what is there to offer?" Does not the right hon. Gentleman remember his denunciation of the De-rating Act, how he told us on an antecedent Budget that the poor householder and the petty shopkeeper were being taxed in order to put millions of pounds into the luxury industries, such as gramophones, chemicals and breweries? In the excess of his indignation the Chancellor, using a metaphor that I agree is hardly suitable to one of his austere character, offered the right hon. Member for Epping what he called a tip—he would get the money back that was being squandered out of the resources of the poor and of the retail merchants. The test of the tipster is that he backs the horses which he advises others to back. The right hon. Gentleman has left the course before the decision of the race.
No, the scales with which the right hon. Gentleman weighed his predecessor have been found wanting. That reminds me again that my hon. Friend the Member for Bodmin not only has a library of books, but a fund of stories to suit every occasion. My hon. Friend told me recently of an episode of 80 years ago, in the small village of St. Germans, in Cornwall. In that village there was a small Methodist community that desired to build itself a chapel, but all the land was owned by the Earl of St. Germans, who lived at Port Eliot. The leader of these Methodists was one Geake, a butcher, and he supplied Port Eliot with meat. The butler of the Earl of St. Germans came to the butcher and said, "On the meat which you supply to the Noble Lord's household you must give me a commission." "Not so," said the butcher, "I am an honest man." In the fullness of time the noble lord sent for Geake, the butcher, and said, "Here are the weights of the meat for which you have charged me, and here are the weights which you have delivered, I have taken great pains to test the accuracy of your accounts, and I find that you have defrauded me." Geake said, "There must be something wrong!" "Indeed," said the noble lord, "you are that something which is wrong. You shall no longer supply me with meat." The crestfallen butcher returned to his shop, and the news spread that he was a fraudulent trader. Someone hurled a stone through his shop window, and others hurled stones through the windows of his house; and he was ruined.
But in the middle of the night Mrs. Geake said, "I wonder if there is anything wrong with the noble lord's scales?" Geake, as if he had received a revelation jumped up, proceeded to Port Eliot, and asked to see Lord St. Germans. With same difficulty he was given access to the Earl. "Will you allow me to test your scales?" says the butcher. "That is a just request," replied the noble lord, and he put his scales upon a cart and fetched the scales of the butcher, and they were taken to Liskeard; and the Inspector of Weights and Measures, having applied the test, said, "There is something wrong with the scales of the noble lord. Someone has tricked them." The noble lord sent for his cook. The conk was gone. He sent for his butler, and the butler had departed. He sent for Geake and said, "What reparation can I make to you?" Geake replied, "You can give me a piece of land on which to build a chapel." The noble lord took the butcher arm in arm, and said, "Take what land you like."
Well, the scales of the Chancellor of the Exchequer, in which he judged his predecessor, have been found to be faulty. He accused his predecessor of giving wrong measure and inaccurate weight, but it is his own scales which are wrong. What reparation is the Chancellor of the Exchequer going to make to his forerunner? Perhaps the Budget which he has introduced is the best reparation he could make. So much for what is in the Budget of the right hon. Gentleman. But there are omissions. It has brought relief, we are told, to the City. What has it brought to the unemployed? They were not found deserving of honourable mention in the speech of the Chancellor of the Exchequer. Not only does the right hon. Gentleman omit from the balance-sheet the debt due on the Unemployment Insurance Fund, but no reference whatever is made to the greatest debit of the nation at this moment. Yet I remember when the right hon. Gentleman and the Prime Minister criticised the Budgets of the right hon. Gentleman the Member for Epping. Then, they recalled that in the forties of the last century, as a result of the industrial revolution, money was borrowed, and railways, docks and harbours were built, which not only gave temporary relief, as they reminded us, to the unemployed, but permanently created new industries.
We are in the throes of another industrial revolution to-day. Either you must distribute leisure better or you must distribute work better. [HON. MEMBERS: "Wealth."] The right hon. Gentleman was elected to this House to distribute wealth better, and, whether we agree with him or not, it will be agreed that the test of a great statesman is that he espouses some great cause and sticks to it through thick and thin. If he ceases to believe in it or finds it impossible of fulfilment, then under the traditions of our Constitution, it is his duty to make way for another. You cannot make the best of all worlds under this Parliament. There are those who believe one thing, and those who believe another. What shall we say of those who have been elected to Parliament to do one thing, and then carry out so slavishly the policy of the opponents whom they have attacked? The right hon. Gentleman said that his Budget would be a landmark in the history of Budgets. Posterity allows no one to stake out a claim in advance. It knows nothing of squatters. Posterity will judge, but this the right hon. Gentleman's contemporaries can judge—that it is a landmark in his own career. He promised the people of Plymouth when he spoke there in the year 1928, to raise £250,000,000 worth of revenue—he said he could do it easily—to readjust the inequalities of wealth. The right hon. Gentleman up to this moment has had a consistent career. The aspirations of the people have been centred in him. They have made him what he is. It is a landmark in the right hon. Gentleman's career that now, having the opportunity, he who might have won a warm place in the hearts of the masses, prefers a cold niche in the halls of the City of London.
I feel some embarrassment in rising to speak at this stage of the Debate, when everything that can be said about this Budget has already been said, in much better language than I can command—particularly by the last speaker—but there have been two prominent features in the proceedings of the last three days to which I would allude. One is a sentimental matter, namely, the demonstration which we have seen of the affectionate regard in which the Chancellor of the Exchequer is held in every part of the House—a feeling which perhaps we did not all realise until we knew that he was suffering. That stage of his illness happily is over, and we are now, I imagine, permitted to use our feeble efforts in hitting back at him as shrewdly as he hits at us. The other distinguishing feature of these proceedings is the complete metamorphosis which has been exhibited by the Chancellor of the Exchequer. The stern, unbending, rigid, financial purist has displayed the qualifications of the speculator, with an added touch of the rake. There is a very old Latin tag,
Corruptio optimi pessima.
which may be freely, yet accurately, translated as meaning that when a righteous man takes to going to the dogs, he goes faster and further than any ordinary person. Indeed, the Chancellor of the Exchequer made a most unexpected speech when he introduced his Budget. He has destroyed every principle upon which he previously stood, except one, and that the only one which was not worth preserving. He has introduced a Budget in which he has palpably underestimated expenditure and has equally obviously over-stated his possible revenue. He takes capital in order to defray current charges which ought to be met out of revenue. He pays off Debt
with one hand while he borrows with the other, and, finally, in attempting to meet charges which certainly are not transitory, he only makes a provision which will be exhausted by the mere process of the effluxion of time during the current year.
I shall venture, as briefly as I can, to make good each of the heads of the indictment which I have laid against the Chancellor of the Exchequer, but, by way of preliminary, may I say this. It will no doubt be urged against us, as it has been urged against others, that we are exhibiting a gloomy picture to the world and that at a time such as the present, that is somewhat unpatriotic. If I could believe that any good purpose would be served by silently accepting the plausible account which the Chancellor of the Exchequer has given of the nation's finances, I should be the last to break into any utterance, but I am convinced that that is the wrong course to follow at the present time. To begin with, those whose view of our credit is of importance in the world, are not in any way deceived by the account which the Chancellor of the Exchequer has given, and their contempt for us will only increase and their distrust of us be magnified if we show that we are foolish enough to be taken in by what has been presented to us in the shape of this Budget. Again, with regard to the people of this country, there is nothing to be achieved by lulling them into a fool's paradise. It is necessary that the people should be fully informed, and accurately, of the condition of the country's finances; otherwise, it will be quite impossible to get from them that effort which is urgently necessary if this country is ever to regain its lost prosperity.
With these preliminary remarks, let me devote myself for a moment to the Budget. I do not think anything startled most of the Members of this Committee so much as the optimistic estimate which the Chancellor of the Exchequer put before the Committee with regard to the revenue which he expects to obtain in the course of the year. The Controller of Finance at the Treasury said, only a very few weeks ago, that the revenue of 1931 must fail, and yet the Chancellor's estimate only shows a failure in the revenue of £1,250,000 all told. How does he come to that result? He estimates a large increase in the Surtax, in spite of the fact that the Surtax is now going to be charged, so far as this year is concerned, upon a year which proved disastrous in regard to Income Tax. With regard to Stamp Duties, he makes an estimate that I cannot find anybody in the City of London to agree with. Everybody knows that these things depend upon the state of trade, and at the present time there is nothing in the City of London to justify the idea that you will have any large increase of Stamp Duties, or indeed that you will not have a decrease.
Then, in regard to Estate Duties, the Chancellor of the Exchequer has means of estimating these things which are not open to the rest of us, but it seems to me to be fantastic that, at a time when the people who are going to die in the course of this year have in their portfolios securities which are at a lower ebb than they have ever been in our experience, these should be capable of yielding an increase of £8,000,000 in the present year. This estimate looks to me to partake of a degree of optimism which I am afraid will not, in the course of the year, be found to be justified.
I get equally little comfort when I turn to the expenditure which the Chancellor of the Exchequer expects during the year. The margin which he leaves for himself is only £134,000 all told. I do not know whether there has ever been presented to the Committee of Ways and Means in this House so small a balance of revenue over expenditure, but at any rate it obviously puts upon us the duty of scrutinising with very special care what the expenditure consists of. The very first item that attracts my attention is one in which £30,000,000 only is allotted to the expenditure on transitional benefit under unemployment insurance. There immediately comes to my mind the statement made by the Controller of Finance to the Unemployment Insurance Commission, in which he stated that transitional benefit in 1931, it was estimated, would cost £35,000,000 to £40,000,000 or even more, and yet the item in these accounts is put at the figure of £30,000,000.
I have been puzzled to account for this, and I can only come to this conclusion, that under the present scheme transi- tional benefit begins to run off from September this year, and by September of next year all those who have been enjoying transitional benefit will be deprived of what they have been getting; and it may be that the estimate is placed at £30,000,000 on the basis that people who at present are drawing benefit will begin to go off the scheme in September. But does anybody imagine that these people are to be left derelict and that no provision is to be found by the Exchequer for them? If that provision cannot be made under transitional benefit, at least it ought to have found its way into some other part of the Exchequer account, and, if we are proceeding on the basis that nothing is to be found for these people, obviously we are in for one of those things which the right hon. Gentleman the Member for Darwen (Sir H. Samuel) so much deprecated to-day—a Supplementary Estimate, which may run into a very considerable sum.
But all this optimistic view of expenditure is based upon the chance of better times. It is based also upon the hope that the Committee which has been set up to inquire into expenditure will find some means of reducing the cost which the nation is incurring for this year. I had some acquaintance with a committee of a similar character, and it was my good luck to be able, with the very powerful assistance of my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George), who was then Prime Minister, to achieve a pretty considerable reduction in expenditure. But of course that was at a time when we were not so near the bone as we are now, and, while I think that something may be achieved in the way of cutting off something from administration expenses, there is going to be no reduction of any moment achieved unless by cutting down some of the Government policies, and I do not see very much prospect of the committee which has been set up being able to induce the Government to do that.
Accordingly I do not look for much from the activities of this committee, and no more does the Chancellor of the Exchequer. I never heard so much derision poured upon a scheme, especially one from the Liberal benches, as upon the occasion when he made his acrid, acid comments on the proposal that he should accept this committee; and in the end what he virtually said, after stating that he himself could at that moment write the report—indicating that he had done everything which was already possible—was that he went on—[An HON. MEMBER: "You voted for it."] Certainly. I think something could be achieved, but nothing like what the Chancellor of the Exchequer now says can be achieved to meet possible increases of expenditure. In the end, what it came to was this, that some sop had to be thrown to the Liberal party, and he was not unwilling for them to have that. It is quite clear that very little is going to be obtained, in the Chancellor's own view, from the exertions of that committee.
What is the other relief that he expects? He looks forward to the possibilities of some conversion scheme which will reduce the amount of interest due upon our Debt. But no conversion scheme is possible in this country so long as we go on spending money at the rate at which we are spending it to-day. Every conversion scheme depends upon economies and doing something to pay off a large portion of our Debt. Without these economies, it will be impossible to bring forward any conversion at all, and what are we doing now in the way of economy? During the last year we spent £51,000,000 more than we had spent the year before, and there is an addition again this year of another £8,000,000 or £9,000,000. To-day we are in a position, if these estimates are warranted, of spending £100,000,000 in the year more than we were spending in 1924. In such circumstances, it is impossible that any conversion scheme can be brought forward. Nobody is going to find it possible to obtain money to create such a conversion, because so long as the country is burdened with expenditure of that kind it is quite impossible for the money to be found for conversion.
I turn now to my next point in the Chancellor's Budget. As the Committee will remember, last year he instituted a system for paying off automatically any deficit that had occurred in the previous year, and £23,500,000 is the deficit which he found upon his last Budget. We knew that there was a considerable sum lying in America which might be set free for some of the purposes of the Budget at the present time, and an interesting difference of opinion took place between a right hon. Friend who sits near me and myself. I said that I was perfectly certain upon the Chancellor's record that he could not do anything else with this money than devote it to the paying off of that Debt. My right hon. Friend took the other view, and said: "I tell you he will use it for dealing with current expenditure." I said that he could not do that with his principles, and he said, "Anyway he will," and he turned out to be right. Now the Chancellor of the Exchequer will have to have a special Clause put into the Finance Bill, to annul the obligations which he imposed upon himself and disrobe himself of the virtuous cloak which he assumed.
The most serious element of this Budget, as I see it, arises upon the amount of money that is owing by the Unemployment Insurance Fund. The Chancellor presented to the Committee and to the country an account of our State finance at the present time which was entirely fallacious. He said that last year we had really achieved a surplus of £43,500,000. That statement was entirely incorrect. He had borrowed £36,500,000 to pay the Unemployment Insurance Fund in order to meet the claims of the unemployed. Nobody ever expects that money to be repaid. Is there anybody present in this Committee who thinks that the Fund will ever be able to pay that money back to the Exchequer? Accordingly, that sum which he has borrowed for the purpose that I have described ought to have entered into his accounts. The Controller of Finance had no doubt about that in giving his evidence before the Unemployment Insurance Commission. He said then,
It, in substance, obliterates the Sinking Fund.
That is to say, he pointed out what was made very clear this evening by my right hon. Friend the Member for Seven-oaks (Sir H. Young), that, in effect, there was practically nothing paid to the Sinking Fund last year. It amounted to the beggarly sum of £7,000,000, while the Chancellor prided himself on devoting £43,500,000 to that purpose. A matter of this kind is serious. I venture to say that no auditor could be found in this
country who would have certified a balance-sheet, upon the facts that we now know, such as the Chancellor of the Exchequer presented on Monday. He would be bound to draw attention to the fact that this borrowed sum ought to be put into the accounts as a debit, and he would be bound also to point to the fact that these borrowings were carried on at £1,000,000 a week, and that in the course of the present year,, before the present account was finished, we should be due for a further sum of £40,000,000 to £50,000,000. That would have put an entirely different face on the Budget as presented by the Chancellor of the Exchequer. I make no apology for reading again to the Committee of Ways and Means the words which were used by the controller of finance upon this question because it is important that the country should thoroughly understand where we are going in this process of keeping this account. He said:
These vast Treasury loans are coming to represent, in effect, State borrowings to relieve current State obligations at the expense of the future, and this is the ordinary and well recognised sign of an unbalanced Budget.
We have sufficient examples in the world in recent times—
I am obliged to my hon. Friend for reminding me of that point, because the great difference is this, that whereas previously these borrowings were within very narrow margins, which it was possible for the Unemployment Insurance Fund to pay back, they have now reached dimensions which everybody recognises make it impossible for repayment ever to be made. That is the very point which was made by the representatives of the Treasury to the Unemployment Insurance Commission. A fund which now owes £72,000,000, and is steadily borrowing at the rate of £1,000,000 a week, can never be expected to recoup the Treasury in that money.
The whole burden of the talk for economy is economy on the unemployed, and I want to ask why it was necessary for the Controller of Finance, an official holding a responsible position in the Civil Service, first to point this out to a Royal Commission instead of pointing it out to the Chancellor of the Exchequer in previous Governments?
It has always been kept quite clearly before previous Governments, but there is all the difference between a solvent debtor and an insolvent debtor. What you have now is an insolvent debtor. We have no hope of this money being repaid, and it is necessary that our accounts should so state it. I pass from that very important matter to the last of the counts that I have made, and it is to the effect that the Chancellor of the Exchequer, while having definite obligations in front of him, is making a provision which will meet them for only one year, by sums which can never recur. What is the situation? The expenditure which he is meeting this year is expenditure which he must expect to recur next year, and for many years afterwards. Although it is an old maxim in the management of the finances of this country that you must always, in making your provision, at least be able to look forward two years, what the right hon. Gentleman does is to provide a sum of £30,000,000 from two funds which are completely exhausted by what he does. Accordingly, no provision is envisaged at all for next year to meet that expenditure which he must necessarily expect. That is bad finance. In the second place, half of the sum which he takes is capital which he derives from the fund which has been lying in America, and which he devotes—a thing which he has hitherto condemned—to meet current expenditure. [Interruption.]
I am not saying anything that is provocative. I am doing my best to explain the financial problem as I see it. What I am now endeavouring to show is that, so far as this capital expenditure is concerned, it is greatly aggravated by what we are doing in other directions. This year, for example, the estimate for Estate Duties is put at £90,000,000. That is capital, and it is quite proper to use it for the reduction of Debt, but only £52,000,000 is being devoted to the reduction of Debt, so that this year alone £40,000,000 of the country's capital is being used for our ordinary current liabilities. More than that, if we look back over a period of years we shall find that while we have raised £508,000,000 from Estate Duties in the last eight years the nominal amount of our Debt has come down by only £172,000,000. More than £200,000,000 of capital has been applied in that short space of time to meeting ordinary current liabilities. If any business in this country were conducted on that basis it would not last very long. The fact that we are a rich country, with piled up resources, no doubt enables us to meet these obligations over a longer period than could other countries—for example, Australia, a young country with few resources; but the day of reckoning will come, and Nemesis awaits this attack upon the capital resources of this country; it destroys the very funds which are necessary for the purpose of supplying the industrial population of our country with employment.
The question has been asked from time to time in these Debates: "What are you prepared to do? What would be your way of dealing with this problem?" I do not think there is any difficulty about knowing what one should do in the present circumstances of the world. It would be easy. Instead of resorting to all the shifts that the Chancellor has adopted, it would be easy, by the use of a tariff, as is done by every other country, to raise the necessary funds. I am glad to think that that is a device which has been increasingly recognised in this country in recent years. Some of the most ardent opponents of such a system have now become convinced of its absolute necessity. Very notable names in all parties can be adduced in support of it. The old shibboleths to which we have been accustomed do not apply to the present position. The Chancellor of the Exchequer put forward the objection that this was a method for reducing wages. I venture to say that there is no other way by which wages and the standard of living in this country can be kept up. I ask hon. Members opposite, "How will it be possible for us to sustain competition in the making of our goods against people whose hours of work are longer and whose standard of wages is lower than is the case in our own country?" Obviously, competition cannot be maintained upon those lines.
If we inquire in any country where the standard of wages is higher than in our own we shall find that the workmen there would never hear of lowering the tariff, because they realise that it provides the only way of defending their wage scale against our cheaper wages. Ask the question of men in the trade unions of America, or in the great labour organisations of Canada, or the labour people of Australia, and they will tell you at once that they are not going to open their market to our goods, made under cheaper conditions and lower rates of wages. So far from a tariff being a method of lowering wages, it is the only method by which the wage scale can be sustained. Another argument advanced by the Chancellor of the Exchequer caused me surprise. It was the old dilemma that you cannot have the benefits of Protection and at the same time raise a revenue. We have had some experience in this matter; we have been living under certain import duties. Let me remind the Committee of the Safeguarding Duties, of the Key Industry Duties and of the McKenna Duties. Do we derive revenue from them? Look at the accounts, and it will be found that we got £12,500,000 out of those duties last year. Are they Protectionist? If they are not, what is your objection to them?
It is perfectly obvious that those are admirable illustrations of what can be done by such a system. What do manufacturers in our country do when a tariff is put up against them in another country? They cut their prices as low as possible in order to get into that market. Some of them cut their prices low enough to get in at considerable sacrifice, but others are unable to do so. Those who do go in pay the tariff, and those who do not go in are kept out of the market. Accordingly, the country which puts on the tariff gets the revenue from those who come in. On the other hand, there is protection by reason of the fact that many are kept out. This system is universal throughout the world now, and it appears to be understood by the people in every country except our own.
The whole of this dispute has really become farcical. I have looked up a list of the revenues that we get in this country from import duties. I find that the second highest result achieved by import duties is in the case of sugar. We get £12,000,000 a year out of import duties on sugar. Where are the food taxers? I listened to the speech of the Financial Secretary last night, and he told the House that sugar was the next most important article of food in this country to bread, and yet we are told that we must not tax lace, we must not tax buttons, and we must not tax cutlery, but we must tax she people's food in the shape of sugar. Free Traders used to give us this answer: "Ah, yes, but we are still faithful to the principles of Free Trade, because we put an Excise Duty upon anybody who produces sugar in this country!" What are we doing to-day? We have reduced the Excise Duty in order to encourage the growing of sugar in this country. We derive a revenue from the Sugar Duties, but at the same time we afford a considerable amount of protection to those who grow sugar in our own country. We have put a duty on petrol, but do we put an Excise Duty on those who produce petrol in Scotland? Not at all. You leave them entirely free of the Excise Duty, and consequently the duty on petrol is a protectionist duty.
It is fantastic to say that we are still adhering in this country to the doctrine of Free Trade. The Liberals are in a worse case than anybody, because every project they have advanced in regard to the solution of the unemployment problem involves this doctrine: "We do not allow competition between foreign goods and those we are using in the development of unemployment schemes." If bad times and depressing times are such that we must throw over Free Trade, it is perfectly obvious that we have arrived at a condition of things in which our best chance of creating employment in this country is to take means by which we can protect our own industries. The whole matter has now gone beyond controversy. Mr. Keynes is a very distinguished economist, and is of great importance in the Liberal party. He was the man, if I remember aright, who helped the Leader of the Liberal party to concoct the pamphlet upon "How to Conquer Unemployment." There is another
adviser who is very influential in the Liberal party, namely, Sir Josiah Stamp. Both of these distinguished economists have entirely departed from the theories which the Liberal party alone are advancing in all their obfuscated antiquity in this House. I remember Mr. Keynes long ago writing a book in which he said that the Leader of the Liberal party had succeeded in bamboozling a certain statesman, but that he could not de-bamboozle him. I do not know whether Mr. Keynes himself has been bamboozled in his talks with the Leader of the Liberal party over unemployment, but he has certainly succeeded in de-bamboozling himself. If I may take up two or three more minutes, I should like to quote his exact words. He says:
An advocate of expansion in the interests of domestic employment has cause, therefore, to think twice.
The expansion was, "How to Conquer Unemployment." He proceeds:—
I have thought twice, and the following are my conclusions. I am of opinion that a policy of expansion, though desirable is not safe or practicable to-day unless it is accompanied by other measures which would neutralise its dangers. The main decision which seems to me to be absolutely forced on any wise Chancellor of the Exchequer, whatever his beliefs about Protection, is the introduction of a substantial revenue tariff. It is certain that there is no other measure all the immediate consequences of which will be favourable and appropriate.
Can we hope that for once the Liberal party might think twice and come to a correct conclusion? We have heard today from leading representatives of the Liberal party that they are anxious about economy, and that they are going to take care to see that Supplementary Estimates are not passed by the House. But can we trust them? My greatest desire since I have been in this Parliament has been to find myself in the same Lobby on some occasion as the right hon. Gentleman the Member for Darwen (Sir H. Samuel); but he is too agile for me. I have heard from him many brave speeches, but have never seen them carried out in the Lobby. Always, when the vote comes, the native hue of his resolution is
sicklied o'er with the pale cast,
not of thought, as the poet says, but of fright; and I am afraid that we cannot rely upon him to see that economy is observed in this House, any more than
we could trust him upon the other great matters with which he has dealt before. But, whatever be the decision of the Liberal party, it is quite certain that the country has gone far ahead of the theories which they have been accustomed to expound. I agree with Mr. Keynes that 90 per cent. of the people of this country are now convinced upon a tariff policy, and, if only the Chancellor of the Exchequer would be wise and adopt these measures at the present time, I have the greatest possible confidence that we should restore, not only courage and hope to this country, but an amount of business and industry which would entirely retrieve our lost prosperity.
My right hon. Friend the Chancellor of the Exchequer had hoped to intervene again in this Debate, and to reply to certain points which have been raised by hon. Members in different parts of the Committee; but I think all Members, irrespective of party, will agree that it is eminently desirable that he should safeguard his health in the existing conditions, and, accordingly, he has asked me to-night to deal, not with the wide range of this Debate, but with one or two points, on the understanding that during the Committee stage of the Finance Bill he and the Financial Secretary will deal with the other details which have been raised. I should like to acknowledge on his behalf the very kindly personal references that have been made during the three days of Parliamentary discussion. It is, of course, very difficult in less than half an hour to touch on more than one or two points in this discussion. I should like first of all to notice the question that was raised by the right hon. Baronet the Member for Antrim (Sir H. O'Neill) regarding the £9,000,000 proceeds of the German Mobilisation Loan. He was in doubt as to what was meant by the use of the phrase "outside the Budget." The House will probably recall that that arose from certain arrangements that were made at the reparations settlement at The Hague, and that during 1930 there was presented to the House a White Paper which showed that that had not gone through the ordinary Budget procedure but had been paid direct to the Commissioners of National Debt and had, in fact, been applied by them to the redemption of 5 per cent. War Loan. That was clearly stated in the Command Paper at the time and also made plain in reply which the Chancellor or the Financial Secretary to the Treasury gave at some later date.
I pass to two questions which have been raised both bearing upon Income Tax, first of all the point put by the right hon. Gentleman the Member for Darwen (Sir H. Samuel) regarding the taxation of company reserves and the other, which has been raised by many Members, regarding the accelerated collection of Income Tax under certain of the Income Tax schedules. As regards the taxation of company reserves, that, of course, is an old and familiar problem. I remember a considerable analysis of it during our proceedings in the Royal Commission on Income Tax in 1919, and I think there has been hardly a year in our recent financial Debates in which it has not been proposed in some shape or form and, I am afraid, almost uniformly resisted by successive Chancellors of the Exchequer. No one disputes the difficulty of the proposition. There is, of course, a strong prima facie case, more particularly when we are interested in schemes of industrial reorganisation, when we are pleading for industrial development and when it would appear that the use of these reserves would strengthen the competitive power of this country in the home market and in the market abroad and also stimulate the employment of larger numbers of people, and it might be plausibly argued that that would be indeed a good investment if it led to a saving in the expenditure under the Unemployment Insurance Fund.
But all Chancellors of the Exchequer have observed that there is, first of all, the difficulty of drawing a distinction between sums put to reserve in ordinary company practice and other sums put to reserve, very often for purposes of development, by private individuals or by other bodies clearly not entitled to this proposed exemption, but whose saving is on all fours with that for which this concession is sought. In the second place, it has never been denied that even on a very modest scale, such as I think would quite fail to give the stimulus which hon. Members have in mind, any concession would involve a very large sum, and that becomes difficult and even of greater importance in a year of severe financial distress with which the Chancellor has just had to deal. But he authorises me to say to-night that he has had this question under very serious consideration for some time, and he would not be prepared to suggest that the difficulties are insurmountable. At a later stage in our Budget proceedings—while it is clear and plain that I am giving no pledge of performance on his part—he himself will refer to this proposal, and give a more complete reply.
As to the question of the accelerated collection of Income Tax under Schedules B, D and E, there is not the least doubt that there is a good deal of misapprehension on the matter. Quite apart from the precedent of the right hon. Gentleman the Member for Epping (Mr. Churchill) in accelerating the collection under Schedule A, there was at least the precedent of Mr. Gladstone in 1860. At that time it was collected, if I remember aright, by quarterly instalments, and he succeeded in getting five instalments into that financial year.
The rate of Income Tax was, no doubt, very low. Then there came in 1869, by Mr. Lowe, a re-arrangement in the tax which was based upon one collection applicable to the financial year when, I think, he also succeeded in bringing an additional quarter into that period. It is worth while remembering that from that date right up to 1915 it remained on the basis of one annual collection, and it was only in 1915 that the concession which it is now sought to modify was made and the collection was divided into two parts, one part of it at 1st January in each year, and the other part at 1st July. It will be observed, in passing, that when the right hon. Gentleman the Member for Epping made his change in Schedule A he estimated, I think, for over £14,000,000 at that time, and he actually obtained either £16,000,000 or more nearly £17,000,000, so that as regards the aggregate amount of tax collected it was at least about £7,000,000 better in practice than the plan of my right hon. Friend, who only proposes by this accelerated collection to get an extra sum this year of approximately £10,000,000. It is also irrelevant to suggest, as was suggested in the introductory speech of the right hon. Gentleman, that this is something which is unfair and even may unjustly affect a great body of deserving taxpayers.
When the right hon. Member for Epping made the change for the acceleration of collection under Schedule A there can be not the least doubt that he attacked a very large number of people of comparatively small resources. There has been an enormous development of building society enterprise, in which we all thoroughly rejoice, in this country since the War, and the great body of small owner-occupiers were affected by that change. There is, therefore, nothing new in this proposal of the Chancellor of the Exchequer. No doubt to some extent the same people may often be affected, but as the right hon. Gentleman supported the plan on Schedule A when our predecessors were in office, I do not think that the charge can carry very much weight in existing conditions. Moreover, the Committee will observe that the Chancellor of the Exchequer is not taking away the whole of the concession. He is changing the one-half payment which is applicable to the 1st of July in each year and is collecting three-quarters of the sum due on the 1st January, leaving one-quarter to be paid on the 1st July. He is giving very ample notice of the change.
It is perfectly relevant to point out, in a year of very deep industrial and financial stress, that it is better to adopt what the Chancellor of the Exchequer frankly describes as a device, rather than raise the standard rate of Income Tax, when we bear in mind the influence of any increase in taxation on our industrial position. Moreover, when we compare the conditions of 1915 and of the present day there are certain very important points. When we come to a proper analysis of the standard rate of Income Tax in the two periods we must bear in mind that substantial concessions have been made within recent years. We have to remember the allowances which have been imported into the Income Tax system, many of them following the report of the Royal Commission on the Income Tax in 1919. In comparing 1915 with the present day we find that on incomes up to £500 per annum a single man pays less now than he did in 1915, while on incomes up to £800 the married man pays less than he did in that year. These are relevant and perfectly fair considerations when we have to meet the charge of an attack upon any section of Income Tax payers by what is a necessary and an unavoidable withdrawal of only part of a concession which they have enjoyed during the past 15 or 16 years.
I turn to deal very briefly, because of the short time at my disposal, to two large issues which have been raised in the Debates on the Budget. They were raised particularly in the introductory speech of the right hon. Gentleman the Member for Edgbaston (Mr. Chamberlain) and certainly in the speech delivered this afternoon by the Chancellor of the Exchequer's predecessor in office. The right hon. Member for Epping is once again an isolated figure. He made it perfectly clear that he spoke for himself. Although I have very rarely troubled the House with any literary reference, I confess that one occurred to me this afternoon as I listened to the right hon. Gentleman's speech. In his volume on the life of Lord Randolph Churchill he gave us a wonderful description of the Parliament of 1880, when the Tories were in opposition, and he described the Front Opposition Bench as "being encumbered by the dreary wreckage of the late administration." I wondered whether there was any desire on his part to separate himself from colleagues to whom without offence a similar criticism might be applied in existing conditions, but, at all events, we had a spectacular performance in which the right hon. Gentleman dissociated himself from other hon. Members opposite and agreed with most of the steps which have been taken by the Chancellor of the Exchequer, and in which he also descended in the last resort upon the tariff device as an alternative to the plan in which the Government are now engaged.
More and more he comes into the open on that subject and I make no apology for devoting the main part of the remainder of my reply to a frank analysis of the situation, as I see it in our trade relations at the present time and the mass of information before us and to the manner in which any tariff would affect industry and employment in this country. A word about a revenue tariff. What is the real object, what are the grounds upon which it is defended in existing conditions? I pay a tribute to the sincerity of those who take that view; I make no charge against them, sufficient for us is the ground upon which they base their case. They claim a desire to see an artificial rise in the price level. They look to world conditions during the last 10 years and to the collapse in commodity prices since the Autumn of 1929, and they see no immediate prospect of a rise in prices having regard to accumulated stocks and the world position in gold distribution
Quite frankly and openly they say: Here is one step, a revenue tariff, which will artificially raise the price level to some extent, give to industry and commerce, what they call, a psychological encouragement, and pave the way for an improvement in our trade.
But they associate with that claim the argument that it would be one method of dealing with our wage processes in Great Britain. They make no secret of that. Some of them have said in my hearing that they do not believe that they can make a frontal attack on wages in existing conditions. Here is a method by which, they say, the purchasing power or real wages of the workers can be reduced. They propose to get at the costs of production by that indirect route, side by side with the so-called stimulus which they think would follow from a device of that kind. That is a perfectly fair statement of the argument they employ; but they have not defended it on fundamental economic considerations. They have put it forward quite bluntly as a temporary step and something to be withdrawn later. But the Whole history of devices of that kind is that once they are fastened on the community they do not come off. In any event, it is true that it would be immediately employed for building a much larger structure of tariffism in this country, and that has been made plain in many speeches delivered this afternoon.
We on this side of the House have never felt that we should find a solution of our industrial problems either under Protec- tion or Free Trade, but we have always said a system of fiscal freedom is a sounder policy for the industrial troubles of this country than can be enjoyed under any other method. What was the ground for the statement of the right hon. Gentleman the Member for Epping at the conclusion of his speech? I was frankly surprised that he should have taken the argument of retaliation which, speaking for myself, I have always regarded as about the worst argument that could be advanced, and the most dangerous from the point of view of a great exporting country. We do not belittle our home market for a moment, but if we make an analysis of the unemployment problem and examine the distress, we find that a large part of it is due to the falling off in the exports of coal, iron and steel, textiles, in the terrible decline in shipbuilding, which is lower than for a very long period in the history of this country, and the collapse of our shipping and many indirect services on which we depend.
How are hon. Members going to improve that situation by a tariff policy? What contribution could this make to the plight of the cotton industry at present. There is no suggestion of a tax on raw material, but a tax on imported manufactured goods. But it is beyond dispute that the moment we embark on any device of that kind, we shall be exposed to powerful retaliation in some of our most important markets. I make bold to 'say you would do less trade under those conditions than you are doing now. There is one important consideration which hon. Members constantly ignore in the tariffist arguments they use. I believe it to be true to-day that those other countries are less interested in our market than we are in theirs, and they possess very great powers of attack on our export trade.
I have heard references to iron and steel. That is a very difficult problem. No one disputes the plight of that industry under existing conditions, but we have a particular difficulty with which we are confronted. During 1929 we exported £68,000,000 worth of iron and steel goods. We imported about £25,000,000 on the other side, but a very large part of that £25,000,000 of imports were imports which were worked up in other processes in this country in leading industries of great importance. In other words, the whole problem was one of net advantage to Great Britain. I make bold to say that if hon. Members opposite were on these benches to-night, they could not, in regard to iron and steel, deliver more than a fraction of the tariffs which they have promised under exisiting conditions. They would be confronted by a whole series of drawbacks, exemptions and concessions of almost every description, and there would be nothing like that virtual prohibition of the imports of 3,000,000 tons which have figured in some parts of the arguments of the iron and steel industry on this matter. No, there is not a remedy along that line, and, accordingly, I am proud of the fact that the Chancellor of the Exchequer has put that beyond all manner of doubt in his Budget statement.
Now one word on one of the charges made by the right hon. Gentleman the Member for Epping, addressed not only to the Rouse of Commons but to friends and colleagues on the Labour benches. The right hon. Gentleman said that this Budget marked the end of direct taxation. He said we had reached the limits, and added that it was also the end of Socialist principles or Socialist dreams in Britain. I cannot understand the economic reasoning which arrives at a conclusion of that kind. We have never placed more than a certain limited importance on the contributions which could be made through taxation in establishing what we regard as a new and better industrial world. The Chancellor of the Exchequer has said he must depend, quite frankly, upon certain emergency measures, and he has based his Budget on that principle.
But all that is quite without prejudice to the faith which my right hon. Friend has held throughout his public career. He has not made any change in his belief that, more particularly as trusts and combines develop, there must be transition through public utility and public operation to the application of Socialist principles. Even in this Parliament we had an illustration the other day in the proposals for dealing with London traffic. So it will be in any other great monopoly. The right hon. Member for Epping brings a charge which is not substantiated in any shape or form by reference to strict economic principles or great industrial changes. It is just one of the vague and descriptive and spectacular charges which are pressed into duty in the peroration of what purported to be a powerful Parliamentary performance. From every point of view in existing conditions the Budget can be justified, and if one word of personal tribute in conclusion may be permitted—
The right hon. Gentleman has not said one word about the borrowing in respect of the Unemployment Insurance Fund, a point which has been repeatedly pressed upon him from this part of the House. I think he might give us an answer.
On that a full statement will be made during the later stages of our Budget proceedings. The right hon. Gentleman knows exactly the position and the controversy—the appointment of the Royal Commission, the question of what may emerge from that Commission and any action the Government may take upon it—but there is not the least doubt that a statement will be made during our later proceedings. I am confining myself strictly to the points that the Chancellor had in mind. I would end upon this note: I think in all seriousness that the Chancellor of the Exchequer has taken the proper line, certainly from the point of view of trade and industry, in framing his Budget on emergency principles, and I am very glad to have been associated in supporting one for whom we have such a high regard in public work, and such private affection.
It is due to the Committee that the point raised by the right hon. Member for Edgbaston (Mr. Chamberlain) should have a satisfactory answer. The President of the Board of Trade has given us a long and detailed speech about points which have no relation whatever to the discussion that has taken place. The right hon. Gentleman talked about perorations. His speech has been one long peroration and has not dealt with one of the practical points raised. It really is disgraceful that the Committee should be treated in this way. I know that right hon. and hon. Gentlemen opposite are very anxious to burke discussion on this issue. The Chancellor's Budget is absolutely hollow and rotten. It has not provided for an enormous amount of money which really will have to be raised—[Interruption.] We must ask the President of the Board of Trade, or whosoever speaks for the Government to reply to this point—