Orders of the Day — Finance Bill.

– in the House of Commons on 16th May 1934.

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

3.57 p.m.

Photo of Mr David Grenfell Mr David Grenfell , Gower

I beg to move to leave out from "That" to the end of the Question, and to add instead thereof : this House, realising the hardships resulting from the operation of the National Economy Act, the drastic reductions in Income Tax family allowances, and the heavy burden of indirect taxation, is of opinion that those whose need is greatest have the prior claim to benefit from any prospective Budget surplus, and this House, therefore, declines to assent to the Second Reading of a Bill which, instead of restoring in full the cuts imposed upon the unemployed and those in receipt of lower incomes, intensifies the evils of mal-distribution of purchasing power by lightening the taxation upon the rich, and, in addition, makes a further concession to priviliged interests by the repeal of the Land Value Tax with the consequent abandonment of a fruitful source of revenue. I move this Amendment with no hesitation but with some embarrassment, because I am to oppose a Bill with which the House is not acquainted. The Amendment states in general terms the grounds of our opposition. The House will appreciate the difficulty in which I find myself in initiating a Debate on the first appearance of an important Government Measure. My responsibility is rather more onerous because I shall be making a speech against a Bill which has not been previously explained. But I shall do what I can to justify the terms of the Amendment and the opinion behind it. The Bill is the usual annual instrument by which the Government obtains its authority to impose taxation. It is to be added to the code already existing for the purpose, which it amends in the various particulars stated herein. Parliament has a very great responsibility in this matter and one would hesitate to criticise too closely a Bill of this kind were there not involved in it and in the policy underlying it a very vital difference of principle to which the Amendment refers. The House of Commons itself has a very great responsibility in the matter and Members of the House have their individual responsibility, too, which they must be prepared to sustain whether they are on that side or on this.

On this occasion we are moving a general Amendment which is not likely to find agreement on the other side. It divides the House on party lines. Amendments on later stages of the Bill will probably find support among those who in ordinary matters support the Government. The Chancellor of the Exchequer explained in his Budget statement the main reasons which induced him to bring forward the Bill in this form. He came before the House with pride, pardonable in some respects, for the successful result, from his own standpoint, of recent Budgets of his. Indeed he has preened himself with evident satisfaction on the possession of a surplus and apparently looks forward to next year with the anticipation of an equal if not a greater surplus. He is, therefore, prepared to show in the Bill some measure of generosity. It is because that generosity is not directed in the best way that we criticise the Chancellor and his Bill this afternoon.

We would like to examine, if possible, the general lines of policy upon which this House must be divided, upon which this House has more or less always been divided, and upon which this House, until there is some drastic change of a nature which has disturbed the hon. and gallant Gentleman who has just addressed the House, will be divided on Budgets and financial statements from time to time. The Amendment refers to our dissatisfaction, and I will refer to one or two points in the Amendment without wearying the House with a full recital. We recall the hardships resulting from the National Economy Act, the drastic reductions in Income Tax family allowances and the heavy burden of indirect taxation, and then, having referred in detail to a number of other points in the Bill, we say that it makes : a further concession to privileged interests by the repeal of the Land Value Tax with the consequent abandonment of a fruitful source of revenue. It is because the Chancellor is too generous, too sympathetic in giving concessions to those who are already well off, that we bring forward this Amendment to-day. Perhaps I may be allowed to make a general reference to what appears to be the task which the Chancellor has to discharge in his office. He has the responsibility of raising a large sum of money from all classes of people in this country. The only people he has to tax, the only people he can approach are the 50,000,000 people who inhabit these islands. They are divided into a variety of employments, a variety of social grades and standing, and he has to endeavour, to the best of his ability, to impose a taxable responsibility upon each and everyone, and upon the aggregate, in accordance with their individual capacity and their capacity as a whole. Our national annual income is now estimated to be in the neighbourhood of £3,500,000,000, more or less. That national income is admittedly less than it was 10 or 12 years ago, when it was said to have reached the high figure of £4,000,000,000. It is derived from people engaged in thousands of kinds of occupations, men who work with their hands, men who draw incomes from professions of all kinds, and in the aggregate have command, year by year, of a sum not very far short of £4,000,000,000. It is said that the weekly wage-earners receive of that total less than one-half. At the present time it is estimated that the aggregate wages of all workers employed in weekly wage-earning occupations in this country run to a total of about £1,300,000,000.

The Chancellor of the Exchequer has to gauge and to assess the taxpaying capacities of all these people, and there is no one in this country immune from the responsibility of making some contribution towards the annual Budget which the Chancellor brings before the House. This, too, should be noted, that while there has been a change in the method of presenting the annual statement, certain large sources of revenue—the Post Office, for example—produced by national services are now being left out. One will find, in going back year by year over the financial statements of the last 50 years, that there has not been an addition of 5 per cent. in the extreme range of collection from the people of this country. We have spent a rough average of £800,000,000 each year. It is slightly more, I think, on an average, than 20 per cent. of the national income. Chancellors of the Exchequer, one by one, have come before the House and, with Parliamentary sanction, have made demands upon the people of this country to the extent, on an average, of 20 per cent. of their income. It is true that certain fortunate classes and individuals have to pay very much more than 20 per cent. of their income, but when they have made their contribution they have very much more left than is left to those people who pay a smaller proportion of their wages and salaries.

The Amendment complains that the Bill perpetuates the unfair incidence of indirect taxation, upon which there was certainly some improvement, and from which there was some departure, in the days when Lord Snowden was Chancellor of the Exchequer, and made some concessions. They appeared to be too generous in the view of some Members who sit on the opposite side of the House. On the whole, while the proportion of the nation's income year by year has remained almost stationary, there have been deviations in the incidence of the burden upon citizens; there have been changes in the allocation of the money. The burden of £800,000,000—now reduced to just over £700,000,000, because of the change in the method of presenting the financial statement—has to be collected from a variety of sources for our various national services. The Chancellor of the Exchequer, in his Budget speech, showed manifest satisfaction with the position, but said that we were not free from future difficulties, that we were now passing through a difficult period in world trade, upon which we depend so very largely and from which our income is so very largely derived. The wages of the ironworkers, the textile workers, and others, and those who have investments in foreign countries, depend very much indeed upon the maintenance of our trade with other parts of the world. The Chancellor said that the prospects for the resumption of foreign trade were not too bright, that obstacles had been thrown into trade channels which were not as easily accessible as they were. He said that that process of putting more obstacles in the way was going on.

We may agree with the right hon. Gentleman that both he and all those responsible for the conduct of the financial affairs of this country have to share the embarrassment through which the world is passing. We complain that in this Bill the right hon. Gentleman is adding to those obstacles, that he and the Government he represents are carrying forward a policy which has a provocative effect upon the conduct of other nations, as expressed in this House on more than one or two occasions—a policy of retaliation where it is not a policy of initiation. We say that that is wrong. We do not believe that our country can develop alone; we do not believe that a Finance Bill which goes in the direction of placing further obstacles in the path of trade can be good for the nation. We all remember how often it used to be said in this House, "Make the foreigner pay." It was said that the foreigner would pay for any duties we imposed, and that it was not a matter of concern to us. Nobody talks in that silly way now. No one would dare get up on the other side of the House and say it today. Indeed, they are making themselves ridiculous by going to the other extreme. They now say, "We will ourselves take steps," and, in face of our financial difficulties, we are to raise prices and compel our people to make contributions towards the raising of prices in order that we may subsidise production in other countries.

Part of that policy, of which there is here an instalment, and there have been other instalments in previous financial statements, is a policy to raise prices of commodities outside this country. We are adopting a policy of regulation, restriction and quotas in order that the price of goods outside this country may be made higher. We are putting on some of these duties not solely with the intention of raising revenue. The Chancellor of the Exchequer himself can be quoted in confirmation of it. It is not for the purpose of raising revenue, but for the purpose of assisting those who are producers in other parts of the world, at our expense, and in order that they may become prosperous and the wave of prosperity may wash back to us. There is no indication in this Bill that there is any departure from that policy, and there is no indication that there is anything which tends towards a return of general prosperity, the kind of general prosperity for which we all hope, which will give increased purchasing power to our people. That is the only national prosperity of which we can take note, or of which we approve, or which will have any chance of permanent advantage for the people of this country.

Because the Bill does not help towards the increase of purchasing power, we move its rejection in the terms of the Amendment. Those are our general principles, and we believe that the Amendment does indicate a sounder line of policy. In the miscellaneous collection of proposals in the Bill, one finds duties, taxes, drawbacks, exemptions and reliefs, but all of them are a shifting of burdens from one shoulder to another, from the shoulder of one class to the shoulder of another class, from the shoulder of one set of individuals to the shoulder of another set of individuals. There is no radical—and I make no apology for using the word—no deeply conceived plan of national reconstruction, no fundamental policy for the improvement of our trade and our financial position. This Budget, far from being a constructive Budget, is one of destruction of the foreign trade of this country by the adding to the very formidable spread of obstacles in all parts of the world to which the right hon. Gentleman has referred.

The financial statement does make concessions, and the right hon. Gentleman claims support in this House and outside for the concessions he has made, but he will be the first to admit that the Bill adds to the volume of indirect taxation. No one will claim that there is a reduction in the amount of indirect taxation. There is a reduction in the volume of direct taxation, but indirect taxes have been put on in a hundred different ways on all classes of people in this country. The people are not yet aware of the exact incidence. I doubt whether anybody, apart from the Chancellor himself, could say at this moment what is the exact amount of new import duties and the value, year by year, of those duties which have been imposed in this country in the last two years. Nobody knows exactly where the incidence bears, but the duties have to be paid. It is an undeniable fact that somebody pays them, and it is somebody inside this country and nobody outside. Lord Snowden, who was a very great favourite on the opposite side of the House not very long ago, in the Budget of 1931 made this statement. We sat with him then and cheered him as he made it. I well remember it. He was quoting Mr. Pitt, a revered name in this House, as follows : There is a way in which you can tax the last rag from the back, and the last bite from the mouth, without causing a murmur against heavy taxation and that is by taxing a large number of articles in general use. The tax will pass into the price of the article. The people will grumble about high prices and hard times, but they will never know that the hard times are caused by heavy taxation."—[OFFICIAL REPORT, 27th April, 1931, col. 1403, Vol. 251.]

I am afraid that politicians know least of all about these things. Our wives and those who go to market on our behalf know most about the effects of the Import Duties, and no one can question the fact that there are very few kinds of commodities upon which the general duty is not borne at the present time. An ever-growing number of commodities are bearing the additional duty, and we find that, slipped into this House by stealth after 11 o'clock at night, almost without giving Mr. Speaker time to adjourn the House, fresh Orders are being scheduled. Nobody knows how much taxation is being imposed upon the country by this means, but it has to be paid, and the cost has to be added to the price of the article. So we have additional taxation which is not seen but which is felt, and which cannot be assessed by the average person, but some day its total will stagger the people of this country when perhaps it will be too late to reverse the process. The concession which the right hon. Gentleman is making to the Income Tax payer undeniably goes into the pockets of the people who already are fairly comfortably off. The right hon. Gentleman will argue by a process of financial reasoning, which he finds easy to adopt but which we find exceedingly difficult to follow, that the person who has more money than he usually requires is to be given more at the fiat of the Chancellor of the Exchequer because by some abstruse, occult reasoning this money, which the person does not want, is going to flow back into industry and be of some service in that indirect way. We prefer the direct way, and that concessions should be made to those in need and to those who are prepared to spend the money in their own and in the national interest.

This money business is almost getting beyond everybody in the world at the present time, I have made modest attempts to understand why money fluctuates in value from time to time. I have spent many hours trying to understand the Gold Standard and why we remained on it for so long when we should have gone off, and why there are some ominous signs that we have not definitely forsaken the idea that we should go back to the Gold Standard again. Nobody actually understands this money business. It is the problem of the age. It is not, as imputed in a recent Debate in this House, the individual's own property. I think it was the hon. and learned Member for Argyllshire (Mr. Macquisten) who said that a man can do what he likes with his own money. What fatuous nonsense this is. What is a person's own money? What individual person can give value to his own money? What gives value to money? It is the credit of the country as a whole which gives value to money. It is the relation of this country to other countries, the stock of products found on the markets all over the world, and the political conditions in this country and all over the world. If I hear a man speaking these days of his own money and saying that he can do as he likes with it, I blush for him. It is a pity that so much elementary school education is allowed to run waste in this country. The Chancellor of the Exchequer is dealing with this question as if individuals own their own money, and we must try and follow him on those grounds. The Government are showing much too tender a regard for those who claim to possess money in their own right and the people who are deemed to be well-to-do. It is because the Government, in this Bill as in previous Bills in years past, are adding to the riches of those who already possess large bank balances that we protest against this abuse of the national surplus for which the Chancellor of the Exchequer is responsible.

In America they are very much concerned about money. One need only read the history of America in the last 12 months to dispose of the idea that money value is something which is fixed. It has a population of two and a-half times that of our own, and the finest industrial equipment the world has even known. Nothing like this has ever happened before in the history of mankind. No country in the world, no Empire of ancient days has anything like the productive capacity of America, and yet 15 months ago all their money and all their paper which represented money claims became almost valueless. Nearly all their banks have been compelled to close by reason of lack of confidence in the institutions which control money and the financial institution which has been built up in that great country. They are now carrying forward a financial policy entirely contrary to the one contained in this Bill. They are trying to assist the purchasing power of the masses of the people in America. We do not know whether they will succeed. Let us hope they will. Their chief desire at the present moment seems to be to help the "little fellow" in America, and not the great combines, trusts and financial corporations. They despise these very much in America. They are very much concerned with the small business man and the private company. They are concerned that the little chap shall be given a chance to live, work, and produce. I think that they are right; they are perfectly sound. The great corporations and amalgamations, with money in the hands of a few people, have not been an advantage to any country in the world.

We complain that the "little fellow" here is not the concern of the Government Benches. Our little fellows have no friends over there. The interests of the "little man" should have been watched and preserved, but, instead of this, the right hon. Gentleman, loyally assisted by the Financial Secretary, makes a direct attack upon him, as he did in 1931. By the reduction of allowances on Income Tax (No. 1), by reducing his salary (No. 2), and by the addition of Import Duties (No. 3), they have lowered the standard of living of the "little man." There is not a man in this country who has less than £1,000 a year at his disposal, whether he be a small merchant in a village store or in a town, or a small professional man, whatever he does to enable him to clear an income of £1,000 a year, but who is worse off than he was before the National Government came into being. His interest has been neglected.

Photo of Mr David Grenfell Mr David Grenfell , Gower

If the hon. Member denies it, I would advise him to look up the figures. It is an undeniable fact that figures have been given in this House in a recent Debate showing that enormous additions have been made to the taxation of the small man with £200, £500, or up to £1,000 a year. I will trouble the House with one or two figures to show that that is so. Lord Snowden said in 1931 that the reduction of the allowances plus the additional Income Tax would yield him £51,500,000 in a full year. He was almost exactly right in his estimate. The Chancellor of the Exchequer this year has restored £24,000,000 a year to the small man, whose allowances and salary were reduced. The Chancellor of the Exchequer has not restored half the amount which was taken away by Lord Snowden in 1931. He has at least £25,000,000 a year in respect of the reduction of allowances. Some hon. Members behind the Chancellor of the Exchequer will say, "There are other people too. It is not the small man with £200 or £500. There are other people who had certain allowances." The proportion of the amount in respect of the man above £1,000 a year is insignificant. Ninety-five per cent. of the £51,000,000 of the incidence of the allowances falls on people with less than £1,000 a year. Therefore, it is the problem of the small man, and not of the large man.

With regard to import duties, I make the admission at once that it is difficult to prove whether the small man pays his proportion, the working man his proportion, and the well-to-do man his proportion. That is a difficulty which will take some time to solve. It is difficult to determine exactly how these import duties affect the lives of our people. If they create more employment and wages, that fact has to be discounted against the cost of the import duties. We readily make that concession. We have to be quite fair. We have to resolve these problems even if we sit upon this side of the House and the right hon. Gentleman's supporters sit on that side of the House. But these additional duties have to be paid. In the last Financial Statement these figures are given. Custom Duties for 1933 actually reached the figure of £179,000,000, and the right hon. Gentleman has estimated for 1934–35 a sum of £183,000,000. He expects to get £4,000,000 more from import duties next year. Indirect taxes are rising higher and higher. Direct taxation is being reduced, and we should like to know from the right hon. Gentleman how far this is to go? Are we to carry all the ordinary taxation in vogue in this country, and bear the additional burden of the import duties as they are bearing upon the ordinary work-a-day people of this country? How far are we to go before a new determination is made which will really restore to the small man that which he has lost in the last few years.

The hon. Gentleman said in his Budget speech that his intention was to build up a strong home market. In our Amendment we say that the way to build up a strong home market is to increase the purchasing power of the people; those people who spend their money in the shops, who receive the money to-day and spend it to-morrow, and who next week go again for another instalment of wages and spend them. They have no other use for the -money. The money is really used as money by the mass of the people, but it is often not used as money by the people who have allowed £1,800,000,000 to remain unused as bank balances in our central banks. If the Government wish to build up a strong home market they must add to the purchasing power of the people.

The right hon. Gentleman has claimed credit for a surplus which is fairly substantial. That surplus is in part due to the conversions and a reduction of the interest on the National Debt. The right hon. Gentleman is entitled to the credit that is due to him for the confidence reposed in him by the people who were responsible for making the conversion and who have come forward at his invitation to do so. We do not deny him whatever credit is due to him, but we say that the surplus is in large part due to the immense reduction in the amount now allocated to the service of the National Debt. It has been laid down as a strong financial axiom from which we should not depart that we should pay no less than £355,000,000 a year to debt reduction—that went on in 1921, 1922, 1923—and for the American debt redemption £40,000,000. About 1926, if I remember rightly, it was intended that the figure should be fixed at £355,000,000. This year the right hon. Gentleman is allowing for only £224,000,000, or £131,000,000 less than was allowed for the service of the debt a few years ago. The National Government have not done as much as hon. Members opposite assume. They have got their surplus by conversion and by cutting off the payment toward debt redemption and by making only a token payment last year in respect of the debt to America. Hon. Members who support the National Government and who believe that they do really represent the honour and dignity of this country must remember that when the country was governed by the Labour Government we paid our debts. We paid our national debts and we made a generous contribution of £40,000,000 towards relieving the weight of our national debt to America.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

You received payments of your debts.

Photo of Mr David Grenfell Mr David Grenfell , Gower

We never received as much as we paid. £131,000,000 never came from abroad. There was only part payment to us. I am not blaming the right hon. Gentleman because we are not now paying our debt. I do not want to pay it. I think that it would be folly to attempt to pay, and I think that statement should have been made long ago. I do not wish to embarrass the right hon. Gentleman in his work by using extreme words, but I do say that we have carried this debt payment on too long. The reduction of the interest on our National Debt is a vital point and one which no Government could ignore. We welcome the long-delayed reduction, which means a decrease in the national burden.

In addition to our National Debt we have a very large municipal debt, which bears very heavly upon certain areas, those which we term necessitous, depressed, or derelict areas. The municipalities have the obligation of a floating debt of nearly £1,200,000,000, which means an annual charge of about £85,500,000. True, a large part of the assets represented by that debt are self-supporting, but there are other objects with which the debt is concerned such as health services, schools, parks, and institutions of all kinds which mean an annual charge of not less than £27,500,000. Ranging over the whole country they represent a rate of 2s. 6d. in the £, and a very much higher rate in the depressed areas. I think the right hon. Gentleman might take this matter into consideration and begin a policy of conversion to assist the local authorities. The Minister of Health knows how frequent are the applications from the local authorities for assistance in this regard. Of the £1,150,000 of municipal debt more than half has been incurred in connection with water supply, highways, housing and the Small Dwellings Acquisition Act. I should like the right hon. Gentleman to consider whether this year he could take some action which would enable the municipalities, the derelict and necessitous areas in particular, to convert the loans which they have contracted at 6 to 6¼ per cent. and bring them down by some process of conversion to 3 or 3½ per cent. That would be of direct assistance, because these burdens are paid by the mass of the people. In regard to housing alone there is a municipal debt of more than £400,000,000, and the loan charges fall upon the tenant. If the rate of interest could be reduced it would be a great help to the tenants, many of whom find it difficult to make both ends meet.

I come to the most controversial part of what I have to say, namely, the proposal to repeal the land taxes. One wonders why this is to be done. One looks across the House and finds no inveterate, uncompromising enemy of land taxation in his place. The Chancellor of the Exchequer was not hostile to the principle of land taxation, if I am rightly informed. What of the Prime Minister? He happens to be the same person who was Prime Minister in the Government which passed the land taxation legislation, and he has been very definitely a champion of the taxation of land values. He has made stirring speeches on the subject. If anyone was responsible more than another for the appearance of the land taxation Clauses in the Finance Act it was the present Prime Minister. This is what he said in a chapter in "The Socialist Movement" : When a London railway company laid its lines through Buckingham and opened out wide fields upon which part of the population of London might spread itself, it put fortune after fortune into the pockets of the landowners and speculators. That was not done by the expenditure of the railway company's capital, because the company might have tunnelled Bon Nevis instead of the Finchley Hills and no new values would have been created. It was caused by the fact that there was a community ready to use the capital in the form of a railway and put itself in the power of the landowners who lay in wait for the exodus beyond Finchley and Harrow. The only just repository for such values is the communal exchequer. They are the natural sources from which the cost of government and the development of communal action ought to be met. The community has created the values, and it needs them in order to continue its free existence. But to-day they are handed over to private individuals who are parasitical sharers in the national wealth. He also made a speech in this House on 24th July, 1928, when he said : Come with me for a fortnight and we will start a walk across country. We will use neither high roads nor by-roads, but will make a bee-line. We will take a map in our hands and we will go straight, and we will defy every piece of landlords' legislation we come across, but we will see our own country. We will see what our country is. We will see its capacity; we will see its neglect; we will see where it is developed, and we will see the use to which thousands and thousands of acres are put. When we have beheld with our eyes, we will lay our heads together and see if there is very much disagreement between us in the proposition that our country's resources are not being properly developed and are not being used in the way that they should be used."—[OFFICIAL REPORT, 24th July, 1928; col. 1112, Vol. 220.] I will refrain from further quotation from the Prime Minister. The Lord President of the Council, in the laconic fashion we sometimes expect from him, said : I can say one thing about it—that if we get back to power that tax will never see daylight. He made that statement in June, 1931, and later in that same month of 1931 he said : I am not alarmed about the Land Value Tax, because I do not believe that tax will ever come into existence. If we come in, it certainly will not. The Chancellor of the Exchequer, speaking at Manchester on 18th October, 1927, said : Everyone who has been concerned in the administration of a great town knows how, when you want to cut a little bit off the side of one of your busy streets to give a little bit of ease to your congested traffic, you have to pour out money by the thousands of pounds for every yard that you snatch for the need of the community. The right hon. Gentleman did not commit himself and we acknowledge his discretion, but he was certainly speaking from his great experience of municipal work. Who has won? It would appear that the only person who can claim to have won is the Lord President of the Council and those associated with him, the back benchers more or less, 300 of whom made the demand as published in the "Times" of Thursday of last week and who have called the tune and insisted that the repeal of the land value taxes should come as soon as it was convenient.

I want the House to realise what it is asked to do in this proposal. There is a great deal of land the value of which has been created by the community, and the Government are making it impossible for land tax to be collected by the community. They are proposing to repeal in the present Finance Bill 25 or 26 Sections of the Act of 1931. Let me give one or two facts to show how the increment of land values at the present time is affecting the corporate life of many cities and towns in the country. I start with Swansea, where I live. A scheme of public improvement is to cost £135,000, and compensation for land is £35,000. In Liverpool the cost of a scheme is £166,697, and compensation £16,887; Hampton Court, £445,000, compensation £80,000; the Bath Road scheme £171,500, compensation for land, £42,000; the Lambeth Bridge scheme, £839,000, compensation £102,000; Manchester and Stockport Road scheme, £667,000 and compensation £117,000. On schemes which are to cost £2,424,197 landowners are to receive in compensation £393,387 in immediate payments, and also take the value of the improvements to their land.

That is a process of fining the community; it is permitting landlords to fine the community for improving public property, and for putting unemployed men to work. And it is to be still allowed! The Chancellor of the Exchequer says, "I do not want any money from you"; the landlords are to carry on as they have in the past, the Government do not want their money. I suppose we shall be told that although landowners take a great deal of money in this way the Chancellor of the Exchequer will get it back in the way of Income Tax and later on in the form of Death Duties. I shall not be "surprised if that argument is heard from the Treasury Bench. We are simply allowing people who represent what the present Prime Minister calls a parasite class to wait until the community wants the land and then to receive large sums by way of compensation. The Chancellor of the Exchequer's policy is that the man who works must pay, the man who risks his capital must pay, even if he has made losses, for the maintenance of public services, but the man who owns land shall be allowed to reap the harvest for himself without sharing it with anyone. The land system of this country is utterly indefensible. The burdens imposed on local authorities should not be allowed to exist for a day longer, and we protest most strongly against the repeal of the land taxes.

I come to what may be a small concession but one which is of great significance, the concession in regard to the duty on insulin. A large number of people in this country, perhaps a quarter of a million, will be very grateful to the Chancellor of the Exchequer for the gesture he has made, even if the actual amount of the concession is not large. I see more than a gesture or a concession in this. I see a recognition of a principle which we can apply to ourselves, and which the Chancellor on reflection will acknowledge should have a much wider bearing. There is the diabetic person with disordered circulation, who must have injected into his body, one, twice and three times a day, insulin, which is a special preparation to vitalise and improve the quality of his blood and which neutralises a diseased condition. I urge the right hon. Gentleman not to forget insulin. In this country there is undoubtedly a form of disease which is playing havoc with our aggregate and individual life and I urge the Chancellor of the Exchequer, when he is making this concession to those who are suffering, to remember also the needs of a large number of people who are suffering from a disordered economic blood stream and inject into the economic life of this country a little "insulin" which will improve the tone and financial health of the whole community.

4.51 p.m.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

The speech with which the Chancellor of the Exchequer opened the Budget last month has been hailed by public opinion as marking the beginning of the harvest which was sown at the cost of heavy sacrifices by the unemployed, by public servants and by the taxpayers in 1931. It was a speech of remarkable power, clearness and artistry. It proved to the public that their sacrifices during the past two and a-half years have not been in vain; it vindicated the financial policy of the National Government in 1931, and it justified confidence in the firm and dextrous handling by the Chancellor of the Exchequer of many problems of public finance during the past few years. On the other hand, it threw a searching and unflattering light on some of the fundamental weaknesses and inconsistencies in the Government's policy. It revealed not one single new constructive idea for the relief of the burdens on industry or for the reduction of unemployment and, now that we have before us the definite proposals of the Finance Bill, we feel bound to dissent from some of them, to indicate objectives other than—and as we think more important than—those which are aimed at in the Bill, and to offer strenuous opposition to Clause 25, which deals with the repeal of the land taxes.

There can be no doubt in the mind of any reasonable man who studies the available evidence that a real recovery in business activity has taken place in this country during the pst two years, but what is important is that its causes and extent should, as far as possible, be accurately appreciated. The extent is not such as to justify complacency, nor indeed great optimism. There are 2,000,000 still unemployed, that is registered unemployed, and, if you take the registered and unregistered unemployed and their dependants, there are 5,000,000 people in this country still living on a subsistence level. It is no good talking as though we were out of the wood. When I hear Ministers and their supporters speaking I sometimes think that they are a little misled by conditions in London and the Home Counties, where we see most of the evidences of prosperity. Everywhere else the prevailing sentiment ranges from hopelessness in Durham and Glamorganshire, through despondency in the case of farmers, fishermen, miners, textile workers and men engaged on public works contracts, where unemployment has actually increased during the last year, to the anxiety of parents and children, especially at this time when children are coming on to the still glutted labour market in unusual numbers, and of heads of families, and young men and women leaving our schools and universities, who realise on what a slender thread hang their chances of regular employment.

Looking as a politician at the results of recent by-elections, I believe the explanation of the figures very largely is this, that people are bewildered at the contrast between Ministers' acclamations of their own performances and jubilation over the prosperity Budget, the emphasis-injudicious as I believe it to be—laid by the Ministerial Press, upon the rosy aspects of employment and trade figures on the one hand, and the disagreeable facts of the actual insecurity of social and economic life in this country, and of the growing hard core, of unemployment—the growing numbers on transitional payment—on the other hand. That contrast is one which they find it difficult to understand. The extent, then of the recovery is greatly and, in my contention dangerously, exaggerated but it does exist; and I would ask, to what is it due?

Fundamentally it is due to the confidence which the formation of the National Government gave to the country in 1931. Then came our release from the Gold Standard, to which we had prematurely been attached at the old rate of exchange in 1925. That gave an impetus to our export trade and released us from that vicious downward spiral of deflation in which we were, and other countries on the Gold Standard still seem to be, involved. Then the running sore of unsound, unemployment insurance finance was cauterised and the Budget was balanced, by which confidence was still further strengthened and the whole world convinced that we were going to pay our way and meet our obligations. Consequently the huge conversions of War Debt, to which the hon. Member for Gower (Mr. D. Grenfell) has referred, became practicable. I was a little surprised when he insisted on the value of the precedent set by the right hon. Member for Epping (Mr. Churchill) when he fixed the Debt charge as high as £355,000,000. A good many hon. Members had grave doubts then whether future Chancellors of the Exchequer would in fact hold to that figure, and our doubts have been justified by our experience. The Chancellor of the Exchequer well deserves the tribute paid to him by the hon. Member for his handling of these conversion operations, because, as a result, the inestimable boon of cheap money has been secured for industry, an achievement partly due to the policy of the Government and to the factors which I have already mentioned and also in no small part due to the confidence felt by the public in the banks of the country, a phenomenon which is indeed almost peculiar to this country.

In this way national credit was restored and these developments were followed—or to some degree accompanied—by a solution—the de facto solution at any rate—of the War Debts and Reparations problem. I was a little surprised when the hon. Member for Gower declared so proudly that the Government of which he was a Member had, in contrast to the National Government, paid these debts in full, although he hastened to add that he thought it was great folly to have done so. I do not quite agree with that statement, and I do not think he would apply it quite as it stands to the action of his own Government. Still, I am indeed glad, and I am sure every hon. Member is glad, that for the time being at any rate these payments, which have placed a strain on the monetary system of the world under which it almost collapsed, have at last been stopped. The result of making these one-way payments has been greatly to multiply the economic barriers to trade in order to protect currencies and therefore to stimulate economic nationalism, and if any effort were made to restore these payments it would be quickly found that this is at least one instance where it is no more blessed to receive than it is to give.

Lastly, of these very powerful factors making for recovery, there is the change of mood throughout the world. Everywhere throughout the world you see it, and the reports of the League of Nations Economic Committee make it plain that in nearly every country the revival is going on. During the depression everybody, under the harsh need of personal, private economy, put off expenditure of every kind. The industrialist put off the renewal of his machinery, the shipowner put off the painting of his ship, the ordinary man in the street put off buying a new suit of clothes; and one reason why they did it was that under the influence of the accumulated stocks and the falling off in demand prices were constantly spiraling downward, and everybody felt that they had only to put off making their purchases and they would get them cheaper a few months later. Then the time came when these accumulated stocks began at last to be be depleted, when people could no longer postpone necessary work or necessary replacements. Then prices began to rise, and everywhere the circle began to turn in the opposite direction. Everywhere the mood changed, and everywhere, in spite of all the hindrances to trade, there was the natural urge of supply to meet demand. Now that we are able to sum up these blessings, the well-designed acts of policy and the favourable tendencies which have begun to operate in the last two years, the astonishing thing is not that there has been some recovery, but that it is so slow and takes so long to reach the masses of the people.

Why is it? What is holding it up? The Chancellor of the Exchequer supplied the answer in the opening passages of his Budget speech. It is economic nationalism, which the present Government, by their own policy, have intensified and provoked to ever more active and extreme manifestations in other countries, and is intensifying further in this Bill. "King Charles' head," exclaimed the right hon. Member for Hill-head (Sir R. Horne), when my right hon. Friend the Member for Darwen (Sir H. Samuel) raised this point; and he went on to say that exports had increased. But only if they are compared with the immediately preceding year, which was the worst year for British exports since 1905, and only then by £2,000,000, or by two-thirds of 1 per cent. "The only country," declared the right hon. Member for Hillhead, "to have increased its exports last year." How does he know? The figures of a great many countries are not out yet, and surely he must for the moment have forgotten Japan. He said that tariffs had reduced prices. It is true that the adoption of tariffs in this country gave the final downward spin to world prices in 1932, but that is what the right hon. Gentleman does not want, nor do any of us. Nevertheless, it is equally true that they have raised prices in the home market above world prices. There can be no doubt whatever about that. I am astonished that some Conservative Members of Parliament are still challenging that simple fact. On one day they challenge it, but on another day one after another, Members like the right hon. Member for Sparkbrook (Mr. Amery), the right hon. Member for West Birmingham (Sir A. Chamberlain), the hon. Baronet the Member for Bournemouth (Sir H. Croft), and many others, come down to this House of Commons and demand that things in which their constituents are interested, raw materials for industries in their constituencies, should be put on the Free List. Why waste their time doing that, if the effect of these duties is not to raise prices above world level?

The right hon. Member for Hillhead twitted us with saying that we should give the world a lead, and he said that we had done it for 70 years, but that they had refused to follow. The truth is that, in the famous phrase of Sir Robert Peel, during those 70 years we have fought foreign tariffs with free imports, and fought them successfully, and we accumulated such wealth and built up such a high standard of living in this country as no other country could match; and even now, according to the contention of hon. and right hon. Members opposite, we, who only departed from Free Trade two years ago, are weathering the storm better than all the great countries which have enjoyed the alleged blessings of Protection for generations past.

The astonishing thing, the dismal and almost incredible thing, is that the Government are uncertain whether economic nationalism is good or bad. The Chancellor of the Exchequer deplores it, but the Minister of Agriculture acclaims it and chides those who regard it as some sort of a disease. The Minister of Agriculture wants to seal us up in our tight little island. The Secretary of State for the Dominions bids us look to the Empire. The President of the Board of Trade makes little Treaties, called by some of the supporters of the Government black pacts, with foreign countries. Tariffs for revenue, tariffs for protection, tariffs for Imperial preference, tariffs for retaliation, and for entering foreign markets. The Government, as the right hon. Member for Sparkbrook said in the Debate on the Estimates for the Dominions Office the other day, have no clear, settled policy and are trying to move in four different directions simultaneously, while the leaders of commerce, banking, and industry in this country clamour increasingly for a policy of freer trade as the most effective contribution that could be made to the revival of our industries and the employment of our people.

But now, if that line of advance is barred by the Protectionist prejudices of the Chancellor of the Exchequer and the bulk of his supporters, there are surely other fields of action in which he can operate to relieve the burden upon industry and stimulate employment. I would suggest three lines of progress, along any or all of which, to the limit of his disposable resources, the Chancellor might advance. In the first place, there is the policy of reducing the rate of contributions to the Unemployment Insurance Fund. Not only is the increase in the burden of contributions a heavy additional burden upon industry, but it is part of the sacrifices which were imposed at the time of the crisis in 1931. The contributions of the employers were then increased from 8d. to 10d. and of the workmen from 7d. to 10d. Therefore, that brings this concession within the range of the Chancellor's benevolence, as he defined it in his Budget speech. The hon. and gallant Member for North Leeds (Captain Peake), in a striking speech on the Unemployment Bill the other day, showed by careful calculations that the contributions of employers alone to unemployment and health insurance amounted to a tax of 86s. a year on every man employed, or, on a capitalised basis, to a fine of £100 on every employer who takes a man into his works. Only three days ago the Minister of Labour, in moving the Third Reading of the Unemployment Bill, said : No one who knows anything about this matter can for a moment be oblivious of the great burden which the existing rate of contribution imposes on both industry and the contributors, and I have no doubt that the Statutory Committee, should they find themselves in the position of having to deal with a surplus, will consider the possibility of a reduction in the rate of contributions."—[OFFICIAL REPORT, 14th May, 1934; col. 1473, Vol. 289.] But we on these benches would urge the Chancellor of the Exchequer even now to put the matter beyond all doubt. The case for this concession has been argued in the Debates on the Budget Resolutions very largely on the basis of the report of the Royal Commission on Unemployment Insurance, but as that argument has already been frequently used in the House and has made no impression upon the Chancellor of the Exchequer, although I must confess it seemed a good argument to me, I will not use it again, but I will address myself to the argument which the Chancellor of the Exchequer used in opposing this proposal. It is significant that in winding up the Debate on the Budget Resolutions and opposing this proposal, he devoted himself almost entirely to dealing with that argument, which was based on the Report of the Royal Commission on Unemployment Insurance, and he rode off on it without giving more than one answer to the demand on its merits for this relief to industry. His one answer was : On the other hand, do not let the Committee forget that, if you are relieving the fund at the expense of the Exchequer, you are reducing the amount that is available for the general relief of the taxpayer or for people whom you wish to relieve by the Budget next year."—[OFFICIAL REPORT, 19th April, 1934; col. 1261, Vol. 288.] It is very natural for the Chancellor of the Exchequer to be looking forward to giving some popular reliefs in his Budget next year, but surely the more important consideration is that this direct and valuable relief should be given to industry forthwith, and I would appeal to the right hon. Gentleman not to hesitate between relief next year to the taxpayer and the perhaps more indirect but very substantial relief which would be given to the taxpayer if this immediate stimulus could be given to employment and direct relief to industry.

The second line of advance that I would recommend to the Chancellor of the Exchequer is in relation to the depreciation allowances. I have listened to successive Chancellors of the Exchequer promising to give consideration to this subject, and I cannot help expressing disappointment that there are not yet any definite proposals before us. Having tried, with such expert advice as is open to a private Member, to frame Amendments on this subject in past years, I know how real the difficulties are, but they cannot be incapable of solution. Now is the time for such a reform—now, when trade is beginning to improve, when foreign countries are making immense strides in the modernisation of their industrial equipment, and when it is of urgent importance for British industry to get a good start in the race. Employment in the modernisation of equipment would be given in this country, and the competitive power of British industry would be increased. Only a few days ago the hon. Member for Cheltenham (Sir W. Preston) made a remarkable speech, in which he said : It is only because I am Chairman of Platts that I have been enabled to visit mills in Japan to see what England's rival is doing—how far she is ahead of us. And, having this knowledge, am I to be silent and see the cotton trade of England slowly perish? …. Since the War not more than £5,000,000 have been spent on textile machinery installed in this country. In the rest of the world during the same period, the expenditure on new textile machinery has been at least £95,000,000 …. Given up-to-date preparation machinery, modern high-draft ring spinning and automatic looms, Lancashire can produce grey cloth and market it at a profit in India and China at prices lower than Japan is charging. But new machinery means new capital …. If only the money can be found to enable Lancashire to re-equip its mills with the most modern kinds of machinery, such as have been supplied elsewhere, Lancashire can beat any one of its foreign rivals on price. Re-equipment and re-organisation, towards which some relief from Income Tax to company reserves would go some way, would in the long run be a more effective reply to Japanese competition than Colonial quotas.

Nor should the Government continue to neglect as a means of stimulating industry and employment, that policy of national development which the Prime Minister declared a year ago should be followed. The Prime Minister's words were : The development of appropriate programmes of capital expenditure is an important contribution which Governments can make to the stimulation of enterprise. I will not say that they are doing nothing. There are slum clearance, rural water supplies, a small scheme of land settlement in Scotland, and abroad the Government are guaranteeing a loan to Palestine. That is not nothing, but it is pitifully small and ineffective, and there is ample scope here as well as in Palestine for constructive enterprise. We still await the second instalment of the Government housing plan. We understand that there is a second instalment coming. But roads—the unfinished exits from London itself—are a reproach to the Government, and yet the Road Fund is being raided to meet the concession that is to be made to motorists in respect of the Horse Power Tax in this Finance Bill. Then there are bridges like the Charing Cross Bridge and the Forth Bridge; transport and electrification; and land settlement.

When land settlement is mentioned Ministerialists are apt to exclaim that without Protection it would be impossible. The truth is that land settlement forms an indispensable part of any Free Trade policy for agriculture, but unhappily for this country and for the world it is idle to discuss the policy of this Government in terms of Free Trade. The Government have a policy which they think more effective for agriculture. It has not done any good yet, and the position of the farmers to-day is as bad as it was two or three years ago. But let them use it, and if it is effective in connection with agriculture let them use it for land settlement, and let them plant out—there is an instrument rusting on the Statute Book in the Land Utilisation Act—let them plant out a thriving peasantry once more on the land of Britain.

There is one thing in connection with those questions of public works and national development, to which I wish to refer. That is the very important question of leisure. It was referred to by the Minister of Agriculture in his remarkable broadcast speech the other day. He scoffed at those who do not approve of economic nationalism. He said it was bound to come, that it was a symptom of the state of the future, the Leisure State. What are the Government doing to prepare for the problems of the Leisure State? Here is one of their most influential Ministers speaking over the wireless to the nation on this problem and telling the nation to wake up to it. But are the Government alive to it? The fringe of the problem is being touched in the Unemployment Bill. But take education? We see that the Estimates for education are down, except for the increase in the teachers' pensions. Today we have had a Bill introduced which was aimed at the wearing of uniforms by political parties, aimed at subversive movements in this country. I am glad it was knocked out, that is not the way to tackle the problem. The way is to tackle the cause of subversive movements and discontent in this country. Unless work can be provided, unless facilities for sport, travel and education are planned in this country, certainly the young men and women leaving our schools and the universities will fall the more easily under the influence of violent and subversive but dynamic movements like Fascism and Communism.

Now I have dealt with these three main proposals and a Finance Bill which makes no provision for any of these objects and which does not use every available resource for the immediate and direct relief of industry and the stimulation of employment, stands in our eyes condemned. It may be asked, where are the resources which could be applied to these purposes? I think there are three which are not being used or are being inadequately used in the Budget. In the first place there is last year's surplus. "Ah," but the Chancellor of the Exchequer says, "that is earmarked for the repayment of debt. We are going to save 12s. 6d. per cent. per annum by applying that sum to the repayment of debt. We can make many better investments than that, but that is the orthodox thing to do, it will give solid satisfaction to the city penguins and we shall be using the surplus of £30,000,000 this year to offset the deficit of £30,000,000 last year." It is our contention that the Chancellor of the Exchequer is sacrificing to financial orthodoxy and symmetry the resources which should be used constructively to help industry and employment now, and this surplus on last year's account is the first of the available resources to which I would direct attention.

The second is a much smaller one. I am now on less well tested ground, because it is a point that has not been raised in these Debates before. The financial statement shows a remarkable short fall in revenue of nearly £8,000,000 under the heading "Miscellaneous Receipts." The Chancellor of the Exchequer skated very lightly over this surprising feature in his Budget statement. He gave to it only a sentence and a half. He said : Sundry loans"— which incidentally were up by £885,000— and Miscellaneous Receipts showed a shortage of £7,000,000. This, however, was mainly due to the fact that certain items of miscellaneous revenue for which I had estimated in the Budget did not actually fall into the year's receipts."—[OFFICIAL REPORT, 17th April, 1934; col. 908, Vol. 288.] Are we to condole with the Chancellor of the Exchequer upon an unfortunate accident as a result of which this £8,000,000 of revenue slipped through his hands into the current year, or are we witnessing a feat of financial conjuring by which the taxpayers and industry are deprived of this relief this year in order to swell next year's surplus?

The third resource to which I would draw attention is the deliberate underestimating of the revenue for next year. This case has been cogently argued by several speakers in the Debate on the Budget resolutions, and in reply the Chancellor of the Exchequer made the very remarkable admission to the right hon. Gentleman the Member for Hillhead (Sir R. Home) that he might have underestimated by as much as £10,000,000. He said : You may take the Death Duties, or the Stamp Duties, or Customs, and you may say that on any of these items you take a pessimistic view, or an optimistic view, or something between the two. … I am quite ready to believe that he might have put the figure higher than I have done, but that is where these differences of temperament come in. What I want to point out is that, even making allowance for differences of that kind, one can still hardly expect that the £29,000,000 of surplus for which I have provided could be increased to double or treble that amount. There might well be a difference of, perhaps, £10,000,000."—[OFFICIAL REPORT, 19th April, 1934; col. 1258, Vol. 288.] In arguing, as many speakers in all parts of the House have done, that in fact the revenue has been under-estimated, comparison has generally been made between the Estimates for the current year on the basis of last year's taxation, and those for last year, but it seems to me that the comparison is still more striking if we make it with the figures for the year 1932–33. For example, the Chancellor of the Exchequer estimated, on the basis of the existing taxation, that Income Tax this year would yield £240,000,000. The year 1932–33 was not a boom year, and the estimate for Income Tax was based on the year 1931–32, the year of crisis. Yet in that year the right hon. Gentleman anticipated £11,000,000 more from Income Tax than in the current year, or no less than a total of £251,000,000. Surtax—he estimated for £1,000,000 more in the year 1932–33 than in the coming year on the existing basis of taxation. Estate Duties—he estimated for £1,000,000 more in 1932–33 than in the present year. It is true that for Stamps he estimated for £8,000,000 less. But on the total of Inland Revenue he estimated for £18,000,000 more in 1932–33 than he estimates for 1933–34, the year of "great expectations." If we turn to Customs and Excise the figures are still more remarkable, because now, with higher duties and more numerous duties, he only estimates that we shall get £2,000,000 more than we got in 1932–33. With more prosperous trade he estimates for only £2,000,000 more than in that year, which was the worst of all years for British trade.

I suggest that quite clearly there is an under estimate here. When some other speakers wre criticising the Chancellor of the Exchequer for his under estimate I heard one or two hon. Members ejaculate, "Why not?" The present condition of British industry and the appalling evils of unemployment supply the answer to that question. To lift the burdens now weighing upon industry and to stimulate employment are objectives which ought to take precedence of political expediency and the wish to prepare for a series of popular Budgets before the next General Election. I have shown three directions in which progress might be made in alleviating the burdens of industry and stimulating employment, and three instruments for those purposes which have been neglected. They are the £30,000,000 surplus, the £8,000,000 of revenue which was allowed to slip into this year, and the under budgeting which in my view is more than the £10,000,000 mentioned by the Chancellor of the Exchequer. That is a total of £30,000,000 of capital and £20,000,000 of revenue, or upwards of £50,000,000.

As for the distribution of such relief as the Chancellor of the Exchequer has afforded, we welcome the restoration of the cuts in unemployment benefit, but deplore the right hon. Gentleman's failure to reform the means test in the direction of greater recognition of the individual rights and needs of members of the same household. Nor do we think it right that the small Income Tax payers from whom the sharpest sacrifices were exacted in 1931, should have received so trivial a relief as compared with the taxpayers enjoying larger incomes. It cannot be denied, however it may be explained, that this Budget accentuates the recent tendency to relieve the burdens of the wealthier taxpayer at the expense of the poorest. When we draw attention to the rising rates of indirect taxation compared with direct taxation it is irrelevant for the Financial Secretary to the Treasury to make a contrast with pre-War years. The position then was wholly different. The National Debt was less than one-tenth of its present size. The proportion of revenue now being repaid in dividends to holders of the National Debt is ten times what it was before the War. We protest strongly—and one of my hon. Friends will speak later on that point, and elaborate it—against the failure to concede the just claims of the less well-to-do who made the greatest proportionate sacrifices in 1931.

Now I come to what is in size one of the smallest but the most remarkable feature of the Bill, Clause 25, for the repeal of the land taxes. I have already paid my humble tribute to the memorable speech in which the Chancellor of the Exchequer opened his Budget—it may not have been quite flawless—there was, for example, the failure to explain the fall in miscellaneous receipts, and the slightly confusing amalgamation of a surplus on Sundry Loans with a deficit on Miscellaneous Receipts. But the speech was a masterly achievement, clear, terse and yet quite remarkably comprehensive. Nothing was omitted. There was a little flaw in the statutory machinery for the collection of tax on mineral rents which was to be put right. There was a technical point which had arisen in connection with the Estate Duty. There was a matter which did not require a Financial Resolution, namely, a proposal to take power to guarantee new loans raised to convert existing guaranteed loans. Nothing omitted, did I say? Well, just one thing was overlooked, and that was the repeal of Sections 10 to 35, or the whole of Part III of the Finance Act, 1931—more than half of that Act of Parliament.

Of course it is so easy to forget a point when one is speaking and no doubt the Chancellor of the Exchequer when he sat down was very vexed with himself. He may even have turned to the Financial Secretary of the Treasury and blamed himself for that omission. The astonishing thing is—so extraordinary are the coincidences which sometimes occur in real life—that it kept slipping from the minds of the Financial Secretary and the Chancellor of the Exchequer when they were replying to the Debates at all the subsequent stages of the discussions on the Budget. Nothing was said till it appeared in the Finance Bill. They did this deed in the dark, and they did it in the dark because they were ashamed of it. Not that the Chancellor of the Exchequer need be ashamed of his opposition to the Land Taxes which has always been an open, frank and reasoned opposition and obviously based upon sincere conviction. They were ashamed because this action exposes the sham and humbug of the National Government, and because of the humiliation which it inflicts upon the Prime Minister and those Members and supporters of the Government who have not yet formally adhered to the Conservative party.

We shall have other opportunities of discussing the merits of land valuation and taxation and I do not wish to go deeply into them to-day in a speech which necessarily has had to cover a great deal of other ground. Nor do I think that any supporter of the principle of valuation and taxation is wedded to the particular form which it assumed in the 1931 Act. If the Government had said, "We do not altogether like these provisions; we are going to amend them," no one could have gainsaid their action, whatever opinions we might hold and express about the actual amendments when they were proposed. But repeal—this futile effort to sink them without trace, at the bidding of the landed interest in the Tory party—is an outrageous use, for party purposes, of a majority obtained on national issues.

No one will deny that these Land Taxes were fought out as a party issue in the last Parliament, nor do I wish to disclaim the fact that the principle underlying them, that of taking taxes off improvements and putting them on site values, is one of the chief principles and aims of the Liberal party. But support for that principle comes not only from Liberals and Socialists but from large numbers of men and women in all parts of the country who on other counts would call themselves Conservatives. The principle of land values taxation has always been in this House a party issue, but outside the House it has received increasing support from men and women of all parties—in short national support. The editor of that great Conservative paper the "Observer" declared : No one can oppose the taxation, within reason, of land values largely enhanced by improvements at the public cost. In the last ten years scores of municipalities have passed resolutions in favour of the principle including Glasgow when it had a non-Socialist majority, Newcastle, Sheffield, Leeds, Bradford, Manchester, Cardiff, Swansea and many other great cities as well as several county councils. During the past 12 years the Middlesex County Council has spent £5,000,000 on buying land and making arterial roads and has increased the value of adjoining land by no less than £15,000,000. The taxation of land values would put this vast increase of value created by public activity under levy for public purposes. One enters the cities of the United States through magnificent parkways, the money for which has been found by levies on the increased values made by those improvements. Here the land monopoly holds London in a ring, through which dribble little streams of houses, dangerously sited on main roads. The taxation of land values would liberate enterprise from the crushing burden of rent, rates and taxes which it now carries, and make possible sweeping measures of town and country planning and national development. Here is a powerful weapon of national recovery and the Government instead of using it are breaking it. In repealing these taxes the so-called National Government is flouting public opinion on a great national issue.

What justification is there for this action which did not exist last year and the year before? Last year the Lord President of the Council said in reply to the agitation and to the pressure brought to bear upon him to repeal these taxes that "this, however, was a National Government." Perhaps that is the difference. At any rate then the right hon. Gentleman said that this was a National Government and that he and his Conservative colleagues felt the ungrudging loyalty with which their Labour colleagues had supported other features of the policy of the National Government—has there been any falling off in that ungrudging loyalty? The right hon. Gentleman said it called for mutual consideration and he laid stress on the great public advantages of retaining a National Government. That was last year. In the year before—on 26th May, 1932—the Lord President of the Council used these words : Had I been a private Member I should very likely have put my name to the Amendment to which hon. Members from Devonshire have put their names but I occupy a more responsible position and I have to remember that this is a National Government.… Would any one of you who had been a member of a National Government, who had gone through the fight we went through last autumn, who had taken part in the discussions on finance, on the first construction of the National Government with men who fought during that Election, like Lord Snowden …. when they expressed to you their reluctance to see the Act finally taken off the Statute Book, do you think that I, going about the country as I did, and knowing the force of Lord Snowden's speeches and broadcasts in helping to win seats which we should never have won, was going to say to them, 'Oh, no. Now we have got a big Tory majority much bigger than I expected out you go?" Not much. That is why we stand for the Clause as it is in the Bill. We can accept neither a repeal of the Act nor the insertion of the Amendments.—[OFFICIAL REPORT, 26th May, 1932, cols. 583–5, Vol. 266.] The Secretary of State for War said : Would it be wise for the Government to ask them to accept the humiliation, for it would be nothing else, of having this year solemnly to repeal what last year they had solemnly enacted? Why is the Prime Minister now submitting and forcing his followers to submit to that humiliation? Why is he submitting his National Labour colleagues in the Government, his supporters in this House, such as the hon. and learned Member for Montgomeryshire (Mr. Clement Davies)—who played a foremost part on behalf of the Liberal party in supporting these taxes in the last Parliament—why is he submitting them to this humiliation? When does a humiliation cease to be a humiliation? How long a lapse of time is necessary. I would venture an answer. Long enough for the Tory party to make up its mind that it does not matter whether those to whom I have referred submit and stay in the Government or go. Successive by-elections have made it plain that the National Liberal and National Labour Members are not bringing them one single vote more than the Conservative candidates received in 1929, the year of their defeat. So now their opinions are ignored, and those speeches and broadcasts in 1931 are forgotten. Does the Prime Minister remember the message he sent to the Scottish Liberal Federation in December, 1931? Lord Stonehaven had declared that the National Government had a mandate to carry out Tory policy, and the Prime Minister replied : I am the head of a Government which was elected on a national issue embodied in a national appeal, and so long as I remain in the Government that will be its policy. Was repeal of the land taxes embodied in that national appeal? The obligations of the Government on this issue have been defined by the Lord President of the Council and the Secretary of State for War, extracts from whose speeches I have read. Those obligations are being broken. Does the Prime Minister know? Was he consulted? Will he explain? Is he coming to the House of Commons to give to the House of Commons and to the men who were elected in considerable part by the votes of land taxers—which in some constituencies, I have no doubt, were decisive—an explanation of why he has now consented to the repeal of these enactments Why is the right hon. Gentleman not here? I hope he will be here at future stages of the discussions on this Bill. Those Members of Parliament who won seats on the basis of that national appeal, those supporters of land taxation who relied on the national appeal at the last election have the right to look to the Prime Minister to make good the assurance which he gave, through the Scottish Liberal Federation, to the country as a whole that he would see that the policy of the Government remained within the ambit of the national appeal. Therefore, because the Chancellor of the Exchequer has failed to make the best use of his financial resources to assist industry and to stimulate employment; because the tendency to shift the burden of taxation from the broader backs to those which are less able to bear it, is accentuated in this Measure; because those who made greater sacrifices in proportion to their income in 1931 have received less relief than those more fortunately situated and because the repeal of the law for the valuation and taxation of land, that great instrument of social reform and national development, is intended, I feel bound to oppose the passage of this Bill.

5.43 p.m.

Photo of Sir George Gillett Sir George Gillett , Finsbury

I have listened with much interest to the criticisms which have been made from the Opposition Benches on the Budget proposals of the Chancellor of the Exchequer. I cannot help feeling that apart from the criticism dealing with the new protective tariffs there have not been any very definite suggestions or criticisms of which the Chancellor need be very much afraid. I was amazed at the statement that the Press of the Government had led the country to believe that we were enjoying a greater measure of prosperity than was actually the case. I thought it was a well-recognised fact that there was never a Government in the history of this country with such a large majority in the House of Commons as the present Government and worse supplied with a Press than the present Government. The papers with large circulations are either supporters of one or other of the two Oppositions, or offer such doubtful support to the National Government that I think the National Government would sooner dispense with that distinction than have the kind of criticism which is made of them. In the circumstances I cannot imagine how the right hon. Gentleman opposite can say that people have been deluded into believing in a non-existent prosperity by the newspaper Press, apart from the "Times" and one or two other papers which are read, if I may put it in that way, in selective circles rather than among the mass of the people.

What amazes me on the question of tariffs, especially in regard to the leaders of the Liberal party, is the position which they really occupy to-day. The right hon. Gentleman has based much of his criticism of the Budget upon the tariffs which have been imposed by this Government. I thought I read in the papers the other day, in one of the manifestoes which his leader issues at times, that it had to be clearly understood that if the Liberal party came into office we could not expect them to reimpose Free Trade on the country at the present time. When I saw this interesting announcement I realised that Free Trade could not be re-imposed—

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

We did not say we should not begin to return to Free Trade. We should start at once.

Photo of Sir George Gillett Sir George Gillett , Finsbury

I think the leader of the right hon Gentleman seemed to be much more definite. I should like to put it to my hon. Friend the Member for Gower (Mr. D. Grenfell), who has been talking about these protective duties, that he would not dare to repeal most of them if he were in office in the next few months. If he did, the workers in the steel industry and in the numerous industries which to-day are increasing and finding fresh occupation, would sweep him and his friends out of existence in a few months.

Photo of Mr Isaac Foot Mr Isaac Foot , Bodmin

Does not the hon. Member remember that during the Debate on the Import Duties Act we contended that if tariffs were put on they would create vested interests, and that they would sweat blood before they were removed?

Photo of Sir George Gillett Sir George Gillett , Finsbury

I am pointing out to my hon. Friend on the Labour benches that the vested interests behind him—not those who own industries, but those who work in them—would soon object if he began to propose these duties should be removed.

Photo of Mr David Grenfell Mr David Grenfell , Gower

The largest group of organised people in my division are steel and tin-plate workers and I represent them fully in this House.

Photo of Sir George Gillett Sir George Gillett , Finsbury

When duties were given in the last Parliament under the Safeguarding Act to the lace industry, there were representatives of the workers on those benches who refused to agree to the duties being removed. At any rate, I am satisfied that to whatever certain groups of men under the leadership of my hon. Friend may agree, he would find it impossible to go back to Free Trade. For most of my life I have been a Free Trader, but I have been fully convinced that we must consider the world as it is organised to-day. We talk about economic nationalism. It is no use contending that that is not in existence, and it is no use trying to build up our industrial system and thinking that the world is going to take our manufactured goods, as it did in the last century, and that therefore we can take their food. During and since the War other countries have said that they wished to have their own factories and to make their own goods and export them. While that remains a great factor in the industries of the world to-day, it seems to me that the only wise policy is to adapt our system to those circumstances. Would my hon. Friend opposite throw the markets of this country open for all the goods that are coming from Japan to-day? He knows perfectly well that it is impossible.

While the right hon. Gentleman who spoke from the Liberal benches referred to that side of the difficulties of trade to-day, he made no reference whatever to what, to my mind, are the far greater difficulties connected with the exchange conditions of these countries. The other day, when I was in the office of a gentleman who is interested in the export of tea to Europe, a telegram came in. He opened it, and said, "This is what is happening with us. Here is a perfectly good order. The purchaser in the other country is perfectly sound, but I know that if I accept this order the money will be paid into my account in some bank or Government department of that country, and I cannot get the money back because of the exchange difficulties." He said that that is happening over and over again. That is a greater problem than any of the protective tariffs we are placing on foreign imports. I do not believe that, as we are placed in this country at the present time, anything can be done except to adopt the general principle that this Government has adopted in regard to tariffs, and to follow out the policy the President of the Board of Trade has instituted in regard to negotiations between us and other countries.

The right hon. Gentleman referred to the cotton industry and used it as an argument when urging that the Government might have done more to assist industry by making allowances for depreciation and putting money to reserve. I think the right hon. Gentleman lost the point of the quotation that he made, because it has to be borne in mind that in the early days after the War the cotton industry made an enormous fortune. If the amount that was put into new machinery was as small as was stated in the quotation, it was not because the money was lacking, but because it was expended in dividends and other ways instead of being wisely used for the purpose of new machinery. Now that the times of difficulty have come, I agree that the cotton industry is not making the money and is therefore unable to place money to reserve or to put it in new machinery. The reduction of the Income Tax by 6d. is one of the chief ways in which the Chancellor of the Exchequer is helping industry. In this way he is helping the very money in which the right hon. Gentleman was interested, that is to say, he is reducing the Income Tax which is charged upon reserves and depreciation.

That is my answer to my hon. Friend on the Front Bench opposite. He and his colleagues give endless illustrations of the hardship which is imposed upon A and B. This House could spend days and weeks in discussing various oases of how a man gave up such a percentage or had to pay so much more in the way of taxation and to-day is not getting as much as another man who made a somewhat similar contribution in the hour of the nation's need. I think the main justification for the policy of the Chancellor of the Exchequer in taking off 6d. rather than in giving back what, I fully agree, are the much-needed alleviations to the smaller man, is that the right hon. Gentleman is looking at the needs of industry as we have it to-day. I was very much interested in the figures which my hon. Friend gave as to what he was informed was the national income of this country. What struck me was the large fall in the figures compared with a few years ago. He said it stood at £4,000,000,000, but I have seen it stated that it was £4,200,000,000.

It is obvious that what is wanted in this country is an improvement in trade. My own opinion is that the ordinary man in-the-street has a fairly correct idea of exactly how far industry has improved. If we take imports or exports, especially imports, we see a certain amount of improvement. We see it also if we take the railway returns. As interesting a factor as anything else is the amount of advances which are made by the banks, and these are now beginning to increase. When there was so much frozen credit held in the banks there was no increase in these advances. It was only being gradually paid off as trade began to improve and the improvement on the stock market gave the industrialists the opportunity of getting money by which they could pay off these overdrafts. Until that was done there could not be this increase in the bankers' advances. That is a very important indication of an improvement in trade, especially as I have been informed that it is not simply due to lending money to the Stock Exchange or to those interested in stock transactions, but that a very considerable amount of it is advances by banks because of increased trade.

If you take all these different points, I think they indicate correctly that this country has a trade that is improving. We have, of course, the important increase of employment. If we take the worst figures of the number of people employed, and then take the figures today, we find that in a period of 18 months 1,000,000 more persons are at work. That reminds me of an interesting reference which my hon. Friend made to the United States. He is a brave man; anyone who speaks about the United States is a brave person because it is certain that, sooner or later, he will find he has been mistaken in what he has prophesied. There is one thing that amazes me about the hon. Member's statement. It was that the United States Government are all in favour of the small man. I do not know why he argued in that way. He then said that all the large capitalist concerns were bad. I should like to take this opportunity of pointing out to him—it is a point of which he and his friends may well take note, because it is a subject in which they are interested—that in the United States large numbers of the banks were swept out of existence because they were little concerns, and that the banking system of this country, which is the finest in the world, has existed during this storm and stress because it has been amalgamated, and consists of the very large concerns of which my hon. Friend has been complaining.

Photo of Mr David Grenfell Mr David Grenfell , Gower

Has the hon. Member read the account of the trial of a large American bank before a committee of inquiry, and the pronouncement in regard to banking methods?

Photo of Sir George Gillett Sir George Gillett , Finsbury

I am not discussing the ethics of the banks in America or in this country. I am pointing out that if you have a large number of these small people, in which he said the President of the United States was so interested, they are not an advantage in the banking system of America, but rather the reverse. This is an indication of how a highly organised industry is better able to stand up to the stresses and storms of times like these than the small industries in which the hon. Member seems to take such a great interest. I was not quite able to adjust his speech to the usual Socialistic idea in which the party to which he belongs believes. At any rate, I throw out these suggestions to him in order that he may consider them when he is considering the whole problem.

The point I am making is that I think the Chancellor of the Exchequer was wise, when giving relief, to apply that relief in the way which would be most likely to prove an incentive to industry. Whether a reduction of 6d. in Income Tax really has the effect that many people think it has or whether it has not, there is no doubt that in the industrial world it is implicity believed that it has that effect. It was hoped that the reduction of 6d. was coming, and one has only to think of the effect that would have been produced if 6d. had not been taken off the Income Tax to realise how much the business world gains by a relief of that kind. That, I think, is the answer to the whole of the arguments of those who are critical of the action taken by the Chancellor. I quite agree that if we gave the money to those who are more in want of it they would put it back at once into circulation, and that it can be argued that when relief is given to the taxpayer possibly the money goes into investments instead of into the consuming industries of the country, but even if we give weight to that consideration I still believe that in this case the policy of the right hon. Gentleman was a very sound one.

I agree with the observations of the right hon. Gentleman who spoke from the Liberal benches on the action of the Chancellor in allowing the surplus to go to the redemption of debt. In normal times that custom is a very sound one, but I would remind the Chancellor that when he drew up his Budget he did not deliberately estimate for the usual Sinking Fund, because he thought it was not advisable to raise money from the people for that purpose. Fate has given him a surplus which in normal times would almost have provided for that Sinking Fund, and he has allowed it to go in redemption of debt. In normal times the Sinking Fund is an important part of our financial system, because it is to the advantage of Government stocks that a certain amount of money should be employed in purchasing them. It helps to hold up prices, which is an advantage to the Government if they wish to issue loans. But nothing of that kind is required at the present time. The money market is glutted with money, and the Chancellor cannot have any great desire to raise the price of Government stocks to-day. Therefore, that argument for the Sinking Fund has gone.

It is a serious thing to take £30,000,000 from industry and the taxpayer simply for that purpose, and I agree with the right hon. Gentleman that I should like to have seen the Chancellor put that money back in some way, either by alleviating the position of the unemployed or by giving special relief to those distressed areas whose problems the Government have under consideration at the present time. They are considering schemes to deal with the problems of the distressed areas, and if the Chancellor had used the money in that direction I should have felt it was a far wiser proceeding than allowing it to go to redemption of debt. I do not know whether he will get the reports from those who have been appointed to look into the state of affairs in the distressed areas before this Bill has gone through the House, but, if so, he might see ways in which this money could be used there, and in that case I can only hope that he will not hesitate to come to the House and say that he thinks some of this money, or the whole of it, could be used at once in that way, and propose to add a new Clause to the Finance Bill.

Apart from these consideration I cannot help feeling that this Budget is the hallmark of the success of the financial policy of the National Government. Take the financial condition of the country two years ago and take this Budget, and note what has been done. The unemployed cut has been restored, half the cuts have been given back to the teachers, police and others who had to make sacrifices. Industry is reviving; there is a better feeling and a larger hope in industry in spite of all the difficulties still facing it. I think the Government can congratulate themselves that a great work has been accomplished, and feel that the country is now ready for a further step forward towards some of the wider schemes which have been suggested by earlier speakers.

6.6 p.m.

Mr. WEST:

There is no doubt on this side of the House that as a result of the action taken by the Chancellor of the Exchequer in 1931 the greatest burden had to be borne by the poorest people in this country. The increased rate of effective taxation upon the income of a man with £5,000 a year amounted to only 4 per cent., but the cut on the unemployed was a minimum of 10 per cent. In hundreds of thousands of cases married men who were unemployed and were paying a large part of their income in rent, which left them with a living allowance of only 15s., had to suffer a cut ranging from 2s. to 3s. per week. That is a cut of from 15 to 20 per cent. The cry of "equality of sacrifice" in 1931 was a hollow mockery from the point of view of most workers, and the same observation applies to the present-day restorations. Again, the richest people are given the most favourable treatment, and the poor are left with the heaviest burden. A single man with £200 a year had his tax doubled in 1931, and to-day he has been relieved only of, roughly, 12½ per cent. of that burden; but a single man with £2,000 a year, who had his Income Tax increased by 20 per cent., has been relieved of 75 per cent. of his burden. A married man with £500 a year income, who had an addition of 100 per cent. to his taxation in 1931, is relieved to-day of only 25 per cent. of his burden. A married man with £2,000 a year has been relieved of 60 per cent. of the burden he had to bear in 1931.

The case of the unemployed and of the poor is very much worse. It is true that in a few weeks time the unemployed man will have his cut restored, but the increased insurance contributions still remain, and the poor still have to suffer the miseries and meannesses of the means test. It has been admitted in this House that the unemployed have suffered economies of more than £20,000,000 a year, and less than £8,000,000 a year is being restored to them. In other words, more than two-thirds of the additional burden imposed upon the unemployed will remain after this Budget has been carried through. The sacrifices of the rich in 1931 were fairly easy to bear. They did not entail any loss of health or general well-being in those days or since, but the economies suffered by the poor in 1931 generally led to increased poverty and destitution, and in very many cases to increased infantile mortality. A restoration of £5, £50 or even £500 to a well-to-do man makes very little difference to his life or to hi" general well-being, but the restoration of 5s. to an unemployed man and his family may mean the difference between health and strength and malnutrition. If the cry of "equality of sacrifice" was a mockery in 1931, the cry of "equality of restoration" in 1934 is an even more fraudulent mockery from the workers' point of view.

I think the Chancellor of the Exchequer had an idea that this was so when he spoke a few weeks ago, because he tried to make out a special defence of what I believe to be the preferential treatment which the well-to-do have received. He said : I thought I ought to consider the effect of any remission not merely upon the individual taxpayer, but upon the country as a whole. Looking at it from that point of view, I had no hesitation in coming to the conclusion that the relief which would confer most direct benefit on the country, which would have the greatest psychological effect, and which would impart the most immediate and vigorous stimulus to the expansion of trade and employment would be a reduction in the standard rate of Income Tax."—[OFFICIAL REPORT, 17th April, 1934; cols. 924–5, Vol. 288.] The hon. Member for Finsbury (Sir G-Gillett) has a similar philosophy, but it amounts to the old Tory argument that money spent by the rich is more beneficial to trade and employment than money spent by the poor. That is an argument which has been laughed out of every market place in Great Britain in the last 20 years. Not a single Tory orator dares to use it at the street corner, because it is laughed at by the average crowd anywhere. The hon. Member for South Salford (Mr. Stourton) went even further than the Chancellor of the Exchequer, and said this about the Death Duties : Does he realise to what a vast extent these duties contribute indirectly to the unemployment problem? … The effect upon the countryside is even more devastating. Hundreds of country houses are shut throughout the country; for each one that is closed anything from 20 to 100' employês, indoor and outdoor, are thrown out of work, and there people flock to the towns to swell the figures at the Employment Exchanges."—[OFFICIAL REPORT, 18th April, 1934; col. 1071, Vol. 288.] That is the same argument. The hon. Member for Finsbury used it in a more subtle way. That argument is an elementary fallacy. Increased purchasing power in the hands of the rich may be applied to making investments abroad—in the Argentine, in India, in China or Japan—which will stimulate the employment of cheap labour there. There are few hon. Members who would claim that such investments are beneficial to employment and trade in this country, because they spend much of their time in deploring the fact that we are unable to compete with the cheap labour of foreign countries, countries to which, by the way, much of the unearned increment of this country has been sent by Members of the party opposite in days gone by. Sometimes the increased purchasing power of the rich may be used in investments at home, used to provide more working capital for productive purposes, but few would argue that what we need is more production. There is a far greater need of increased consumption than of increased production. Hon. Members opposite may say that the money may be spent directly. It is very doubtful whether the rich man whose purchasing power is increased will eat more food or wear more boots and clothing. His increased demand will probably result in an increase in the luxury trades, which are least in need of encouragement. It is not the Rolls Royce trade which is depressed, but coal, cotton and wool, and what might be termed the basic industries. Those need more encouragement.

Increased buying power in the hands of the poorer classes would not be invested abroad, but would be spent at home directly and quickly. There would be a less demand for luxuries, but there would be an increased demand for necessities. There would be less employment for chauffeurs, game-keepers, butlers and footmen, but there would be more employment for boot-makers and textile workers. The argument that increased buying power in the hands of the rich is more beneficial than in the pockets of the poor is an absolute fallacy, and is groundless. The Colwyn Committee passed judgment upon this matter and, if I may quote from the Report of the Committee upon National Debt and Taxation, this is what they said : For many social objects wise collective expenditure is clearly more economic than expenditure left to the individual …. The distribution of wealth in this country is very uneven, and social expenditure is not only highly necessary as a matter of humanity and social justice, but is also, up to a point, essential to the promotion of industrial efficiency. It makes for physical and mental well-being, for happiness and for energy. Moreover, it supports and steadies the purchasing power over consumption goods, which is unreservedly beneficial to industry. On the special point of employment, the Committee said : We conclude, with regard to enterprise, that the effects of high income taxation have been almost negligible in the field of employments. That is the very contrary point of view to that which has been expressed by hon. Members and by the Chancellor from that side of the House.

The Chancellor of the Exchequer was very pleased with his Budget. He was very pleased with his Government, but I am not sure that he is pleased with his Cabinet. He talked about the great change that was taking place from "Bleak House," and said : We are sitting down this afternoon to enjoy the first chapters of 'Great Expectations.' "—[OFFICIAL REPORT, 17th April, 1934; col. 905, Vol. 288.] I am not sure who "we" are, Some, I have no doubt, are going to enjoy great expectations. The Chancellor has received congratulations from many quarters. I know of some. The hon. Member for South Kensington (Sir W. Davison) sent congratulations on behalf of the Income Taxpayers' Society. They ought to send congratulations because they always will receive sympathetic treatment and consideration from the National Government. A Noble Lord has also returned thanks, and has told the world that he sold timber for £10,000, for which he had only expected to get £3,500. He assured his audience that they would pay higher prices for houses, and that they were also going to pay his Death Duties for him.

There are other societies and groups who ought to send congratulations to the Chancellor. Among them are the armament makers, whose shares are now so prosperous. They might pass a vote of thanks to the present Government. The motor manufacturers ought to send a message of congratulation to the Government for the generous treatment that has been given to them. Their shares have increased in value, and they should be very pleased. The great landlords should send a message of congratulation. They have long dodged their share of taxation, and they have now been promised a repeal of the land taxes. The brewers should send another special message of congratulation. Brewers, of course, always expect, and generally receive, most-favoured treatment from a Tory Government. The brewers in the last few years have not been very unfortunate in this respect, because they find that the Chancellor is very kindly disposed towards the brewing trade. He said that he was sanguine enough to anticipate increased consumption again this year. He had thought that if he could not increase the consumption of beer he could at any rate stop the decline, and his anticipation had been more that fulfilled. The consumption of beer had increased by about one-sixth. The mining industry may be depressed, iron and steel may not be doing very well and the textile trade may be in a very bad way, but, thank goodness, the brewers of England are doing jolly well; the crisis is now over. There used to be a slogan on the hoardings of London with which hon. Members will be familiar, "Guinness is good for you."

Mr. WEST:

I am not so sure that it is. I do not know. I am quite sure that is is good for Guinness. A new and more truthful slogan ought to be put upon the hoardings. May I suggest to the brewers, through the Chancellor of the Exchequer, that they might put on the hoardings this new slogan, "National Government is good for Guinness, and good for Bass and for Worthington, too"? The "Daily Express" has just been reporting that investment shares in this country in the last 18 months have increased in value by over £2,500,000,000, and a Sunday newspaper said recently that the country is at last being made safe for investors to live in. All those people ought to send messages of congratulation to the Chancellor. I would inform him that there is a great deal more joy outside the Stock Exchange over this Budget than there is outside the Employment Exchanges.

The hon. Member for Kidderminster (Sir J. Wardlaw-Milne) went rather too far when he said in a speech in this House the other day that the whole country was receiving this Budget with great enthusiasm. Some classes ought to be enthusiastic, but to say that the whole country is so is slightly exaggerating. The North Hammersmith by-election did not give much evidence of enthusiasm for the Government, neither did Upton or East Fulham, nor will future by-elections. The "Morning Post" said during the North Hammersmith by-election that the Budget would give the National Government candidate 6,000 more votes than he was going to get. He only got 10,000, and if that statement were true the Government stock must have been lower than it appeared before the Budget was introduced, for the National Government candidate would have lost his deposit by having only 4,000 votes but for the Budget. I believe from the evidence of recent by-elections, that the majority of thinking people regard the Budget and the National Government as antagonistic to the best interests of this nation, and that they are anxiously awaiting the opportunity of an early general election so that they may have a chance to give notice to quit to the Government. I hope that that day will not long be delayed.

6.25 p.m.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

I am inclined to agree with my hon. Friend the Member for Finsbury (Sir G. Gillett) that there has been very little in the Debate this afternoon of serious criticism for me to answer, and it is not necessary for me to take up a very great amount of time of the House. I will make a few comments upon some of the speeches to which we have been listening. The Finance Bill, to which we are asking the House to give a Second Reading, is an unusually short one. There are no more than 27 Clauses in it, and I think that one may say that of those 27 Clauses not more than half-a-dozen are of major importance; yet the Bill is regarded, and I think rightly, not only in this House but in the country, as a notable landmark, and as indicating that, in the opinion of the Government, the tide has turned, and that the change is in a direction as to which we need have no fear that it is going to be reversed. The moment that one alludes to any improvement in the country, there always will be somebody, like the right hon. and gallant Gentleman the Member for Caithness and Sutherland (Sir A. Sinclair), who accuses one of complacency. The right (hon. and gallant Gentleman reserved his own complacency for one brief period of a few months when he was the most coruscating Member of the National Government. Since he left us, nothing has gone right, and it is only occasionally that he can get means of consolation from the thought that possibly the optimistic utterances of the right hon. Gentleman the Member for Hillhead (Sir ft. Home) may have been a little exaggerated.

The Bill is, in form, so far as it changes the taxation of the country, only a remission of the Motor Licence Duty and of the Income Tax. Of course, in substance, the Bill, as has been pointed out by the hon. Member who began the discussion, raises the money which is necessary, or authorises the raising of the money, to carry out the whole scheme of proposals in the Budget, and that is recognised in the Amendment of the party opposite. They speak in it of their view that the Bill, instead of restoring in full the cuts imposed upon the unemployed and those in receipt of lower incomes, lightens the taxation upon the rich. Hon. Members know perfectly well that the restoration of the cuts in unemployment pay does not require a Clause in the Finance Bill, because they are dealt with elsewhere. Therefore, the insertion of these words in the Amendment is an indication of the recognition on the part of hon. Members opposite—and quite rightly—that the whole structure of the Budget, and the proposals which I described in my statement, are in question. Further, they know that a vote against this Bill is a vote against the restoration of the cuts in the pay of the unemployed. If you destroy the Bill, you destroy the whole basis. The principal feature of the Budget was the restoration of the cuts, and, therefore, it is perfectly true to say that what the Opposition are really doing is exploiting their own weakness, for, if they had had the slightest idea that an Amendment of this kind would be carried, they would never have ventured to put it on the Paper. They are relying upon their opponents "to save them from the logical consequences of their own Amendment.

The Amendment, of course, completely and wholly ignores the two principles which I laid down in my Budget statement as those which have guided me in the distribution of the surplus, and I would like to ask the hon. Gentleman who is going to speak later on behalf of the party opposite to tell us definitely and officially whether it is the fact that the Opposition have thrown over the whole idea that the burdens imposed in 1931 were imposed for a special purpose to meet an emergency, and ought to be removed when that emergency has disappeared. I ask that we may have an official statement of the official attitude of the Opposition on that point. Of course it will be seen that, if their position is that we should pay no attention to those considerations—that we should entirely neglect the views which I expressed in laying down that principle—and should set about the redistribution of the wealth of the country through the Budget without any regard for the special circumstances of 1931, then if we had adopted that view and had been governed by the sort of considerations which the hon. Member who last addressed the House attributes to us, we should have produced a very different Budget.

I would remind hon. Members of what they entirely forget, namely, that there are not only the remainder of the cuts to be restored, but there are other parts of the legislation of 1931 to be considered. There are the Income Tax allowances, and there is also the addition to the Surtax; and there is the question of the Entertainments Duly. In fact, there is involved in this question a whole series of the special taxes and cuts which were imposed in 1931; and, if the principle which I laid down in the Budget speech is not accepted, then, of course, those who are looking forward, when a surplus may again put into the hands of the Chancellor of the Exchequer an opportunity of distributing something, to some restoration of the remainder of the cuts or a removal of the remainder of the burden, will find their whole prospect completely and entirely altered. I certainly think we ought to have some definite assurance as to the position of hon. Members opposite on that point.

If, on the other hand, the principle which I have laid down be accepted, that these particular special measures which were taken in 1931 must be dealt with first, before we consider any further redress of grievances, then the whole of the argument about whether we are or are not altering, or whether we should or should not alter, the distribution between direct and indirect taxation, is irrelevant. I do not profess that this Budget represents my final ideas of what the proportions of taxation should be as between different classes of the community. I have expressed no opinion as to whether they are right or wrong at this particular time. What I have said is that I am not now concerned to rectify any inequalities which I consider to exist in that system. I have felt it my duty to use my surplus, first of all, to make, I do not say an exact equality, but some rough equality with what was the case before the special burdens were imposed; and then, and then only, if there is something over, we can begin to consider other measures.

I am not, therefore, going to enter into what seems to me to be an entirely academic discussion about what part of the indirect taxation is borne by this or that class in the country. But when I see this Amendment, which says that we are further lightening the taxation upon the rich, I think it is pertinent to remark that even to-day, after the remission of Income Tax embodied in the Finance Bill, the position of the Income Tax payer will still be worse than it was before 1931, and worse right throughout the scale. If I may give an example, I would point out that whereas the peak of taxation—Income Tax and Sur-tax—upon the Income Tax payer was previously 12s. in the £, it is now 12s. 9d. That is after the remission of the 6d.

It is not true, therefore, to say that the rich are being unduly favoured by this Budget, and, indeed, I think it must be obvious on any consideration of the figures of revenue that the position of the so-called rich, of the wealthier class, has enormously deteriorated in recent years. Taking, for example, the revenue from Income Tax and Surtax, the income on which Income Tax under Schedule D is paid as compared with 1929 has been reduced by about £300,000,000, a reduction of 30 per cent.; while, taking the income on which Surtax is paid, that also has been reduced in the same period by £180,000,000, which again is a reduction of something like 30 per cent. I frequently hear it remarked that the poor have not only had all the burden upon them of increased taxation, but also the cuts, whereas the rich have only had the increased Income Tax, but that, again, leaves out of account altogether the fact that the enormous saving in interest, to which the hon. Member opposite alluded at the beginning of his speech, has come out of the pockets of those whom hon. Members opposite call the rich. Therefore, they have made their contribution there as well as in actual increase of taxation. When we are told, as we were told by the hon. Member who spoke last, that this Budget is a fraudulent mockery—

Mr. WEST:

I said that the slogan of equality of restoration was a fraudulent mockery, not the Budget.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

We will say it is the slogan of equality of restoration. Of course, I have never pretended that there was exact equality of restoration. Everyone must recognise that you cannot possibly get nearer than a sort of rough approximation. But, when the hon. Member speaks of the slogan being a fraudulent mockery, he means, of course, a fraudulent mockery of the poorer classes. That is the whole point of his argument. But that, of course, is simply flying in the face of the facts. He entirely omitted any reference to the restoration of the cuts in the case of the unemployed, and let me tell him that, when he was giving us a long catalogue of people who might send votes of thanks or congratulations to the Government, he quite omitted one class, from whom I am glad to say we got a gracious acknowledgment through the hon. Member for Bridgeton (Mr. Maxton). I have had plenty of communications, as the hon. Member anticipated, from different parts of the country, and I can assure him that it is not only landowners, brewers, Income Tax payers and wealthy people generally who have shown gratitude for and appreciation of this Budget, but many also among the unemployed have felt that at any rate they have not merely got half the cuts back, but the whole of them, and in that respect are better treated than any other class.

The Liberal party have felt it necessary to put down an Amendment of their own. I can only suppose that it must have been drafted after the departure of the right hon. Gentleman the Member for Darwen (Sir H. Samuel), for I can hardly suppose that he would have put his name to such a ridiculous—I might almost call it fatuous—collection of suggestions. We have heard another of those delightful rhetorical speeches, which seem to echo those of my right hon. Friend the Member for Epping (Mr. Churchill), but somehow do not seem to contain anything like the same variety of matter which I have always found in the speeches of my right hon. Friend. The right hon. and gallant Gentleman the Member for Caithness (Sir A. Sinclair) can never help going back again to his old story of Free Trade, but it is not the slightest use to-day to talk about the benefits of Free Trade or the disadvantages of Protection, because, for good or ill, this country has now become a protected country. Whatever the right hon. Gentleman and his friends may say, it is absolutely certain that he will never see the country go back again to the condition in which it was before. There are, of course, several reasons for that. One is that it would be necessary to find a fresh source of revenue—[HON. MEMBERS : "Land taxes!"] Another reason is that all those who have been restored to employment during the time that this Government has been in office would never for one moment tolerate the taking away of the protection which has given them back the home market and the opportunity to earn wages instead of being dependent upon unemployment relief. Therefore, so far as the right hon. Gentleman is attempting to argue that we should return to former times, he is flogging a dead horse. We shall not see any election in our time fought upon these old and, by this time, completely putrefying considerations.

The right hon. Gentleman finds fault with the Budget because, he says, it makes no provision for a policy of national development to combat the grave evil of unemployment; but I should have thought that a policy which has succeeded in reducing the number of unemployed by 550,000 in the last year might well have attracted some attention from the right hon. Gentleman. The fact is that what he wants is something spectacular. He does not quite know what it is to be, but there is to be some expenditure of vast sums of money. He thinks that by spending enormous sums of money he can bring back prosperity to the country. He has learned nothing in all that painful period of years which has elapsed since the War. He has forgotten entirely our experience of public relief works—for that is really what he is after. He omits any mention of anything the Government have done to assist any sound economic proposition. Indeed, the position of the Liberal party is that, every time we do anything in the way of Government assistance for the purpose of stimulating or developing industry, they find that it is the wrong thing to do, or, if they do not go quite as far as that, at any rate they are perfectly certain that it is the right thing done in the wrong way.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

The right hon. Gentleman forgets that in this matter of national development I stood on the declarations of his own Prime Minister.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

Precisely, and we are carrying out the declarations of the Prime Minister. We are continually stimulating the development of industry in one way or another and we are delivering the goods.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

Have we not a large programme of telephone development and road development? Have we not done something to start a new industry in hydrogenation? There is also the merger of the North Atlantic lines and the completion of the great Cunarder. These constitute a programme of national development but I suppose, after all, the right hon. Baronet will come back to the same old story of roads, afforestation and land drainage. Although our methods may not be spectacular, at any rate they are effective. We can point to a reduction of the figures of unemployment, and the increase in the number of those who are actually at work is proof that we are on the right lines. May I remind the right hon. Baronet of the words used in the Debate on the Finance Bill last year by the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris). I do not always agree with him but on this particular point I think he can teach a lesson to his leader. He said : My view is that the only hope of maintaining our standard of living is in trade recovery. That is the only real way to bring back employment. Everything else is a palliative. Reconstruction schemes are not cures. They are just palliatives to ease the situation. That is precisely my position. I can claim that we have done, and are still doing, all that I believe any Government can do to assist in the stimulation of trade, and in that alone is to be found the real solution of our problem. The right hon. Baronet made several suggestions about the Budget surplus of last year. In his hands it is capable of extraordinary things. In his Amendment he takes a non-recurring asset and proposes to use it for a recurring expenditure, namely, of course, the reduction of contributions to the Unemployment Insurance Fund.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

By reducing the debt on the fund.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

I wonder how much the right hon. Baronet thinks that would help him. He wants to take this £30,000,000 off the £106,000,000. That brings it to £76,000,000. That would bring down the annuity that is necessary from £5,000,000 to £3,500,000 and that would reduce the contributions by a farthing a week all round. That would be the effect of that use of the surplus. But he is also going to use the same surplus for developing the national resources of the country. I wonder how many other uses it is to be put to.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

It is like the widows' cruse which, when you empty it, fills itself up.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

The right hon. Gentleman misunderstands me. I said two other sources from which money could be found—not two other uses.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

Does the right hon. Baronet deny that he suggested that the surplus should be used to develop national resources?

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

I said there were three uses to which the money could be put and there were two sources from which it could be obtained. This was one and under-budgeting was a second.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

The surplus 1s to be used for the specific purpose of reducing contributions. I have shown by how much it would reduce contributions. In his speech, the right hon. Baronet said it was one of various sources which could be used for a great number of other purposes. That is exactly what I said. He wants to use non-recurring assets for a great number of recurring uses. Another suggestion was that there was some financial jugglery over an amount of £8,000,000 which had passed from last year's accounts into this. There is nothing mysterious about it. I said in my speech that the reason the figure was down was that certain items which I had expected to come into last year did not actually fall into the year's receipts and, therefore, came into this year. The effect was that I had to take account of them in this year. What he does not seem to appreciate is that Miscellaneous Revenue is a dwindling item. It largely consists of arrears and, in the nature of things, must go on diminishing from year to year. There is no financial jugglery about that. As to under-budgeting, it is true that in taking an item of the revenue like Estate Duty, no one can say for certain how many people are going to die during the ensuing year or how much they will be worth when they die. It must be more or less of a guess. What I said was that, while some people might guess higher than I have guessed, in any case I do not think it would be possible for anyone with any prudence to put the estimated revenue so high that it would produce a large sum which could be used for some of the purposes that have been suggested. Apparently the right hon. Baronet does not disagree with that and, therefore, I do not quite understand to what purpose he suggested that I have under estimated the revenue in the coming year.

May I say one word of a general character? I have given it as my view, fortified, I am glad to think, by the hon. Baronet the Member for South-West Bethnal Green, that it is in trade recovery that the greatest hope of the country lies. We have instituted a scientific system of tariffs constructed not by politicians, but under an independent and impartial committee. The result is, as the hon. Member for Gower so truly said, that no one has ever noticed the difference. He said over and over again that he would defy anyone to say how much tax there was upon any article or how much it had increased the price of it, although as a matter of fact there is hardly any article that is not taxed. That is absolutely true. That is what we always said would happen. Everyone knows that, when you look at the cost of living index, so far from the cost of living having risen since the duties were imposed, it has come down. So much for the home market.

Then the right hon. Gentleman repeated what I said myself on a previous occasion, that formerly we had a very much larger export trade than we have to-day, and he and others complain that we are throwing obstruction into the channels of international trade and are, I gather, in their view responsible very largely for the difficulty of restoring the old flow. That is the sort of thing on which one might argue almost indefinitely, but I lay down this proposition, that in a world in which economic nationalism appears to be gaining force we should be committing suicide if we did not take account of that fact and protect our own home market. On the other hand, the very fact that we have a tariff has enabled us for the first time to make commercial agreements with other countries under which we have been able to induce them to lower their tariffs. That is a process of which we have not by any means yet seen the end and, so far as that process is concerned, not only are we not obstructing the flow of international trade, but we are using our own tariffs as a lever in order to free the channels. That is a doctrine which ought to have the support of hon. Members opposite, and which I imagine would have their support if it were not for the unfortunate fact that it happens to be the policy of His Majesty's Government.

It is a very interesting and important problem for the future what is going to be the trend of international trade and how far this idea of economic nationalism is going to spread. I would point out to the right hon. Gentleman who made the point that the difficulties of exchange, from which international trade is suffering so much to-day, arise from fear of the stability of the currencies of the countries in which these exchange restrictions are imposed, and those, again, arise very largely from the fact that the wholesale prices of commodities, and particularly of primary commodities, have fallen so low. The result of the fall in price of those commodities has been to restrict the value of the production of agricultural countries. Those agricultural countries are the great customers of the industrialised countries and, therefore, it seems to me that any policy which has the effect, or is likely to have the effect, of raising the wholesale prices of these primary commodities is one which in the long run must be productive of the most direct benefit to a country like ourselves, which in the past lived so largely upon international trade and has done so much to develop international trade, by its financial policy, with other countries.

It seems to me that for a long time to come we shall have to face a world in which the process of trying to develop secondary industries to replace to some extent the agricultural industries whose value has so much decreased will continue, and we shall have to adapt ourselves to new conditions and shall probably have to make up our minds to the fact that, although we can still increase our export trade, while we still hold the foremost position as an exporting country in the world, we cannot expect in any time that we can foresee at the present that international trade is going to assume the same proportions that it did only recently, and therefore we cannot assume that we shall be able to export either that quantity or that value of goods which we did only a very short time ago.

If that be so, two alternatives are still open to us. One is the continued expansion of the home market. In my opinion, we have not by any means reached at present the limit of expansion of the home market. The other is to be found in the development of inter-Imperial trade. It is a striking fact that, while our exports to other foreign countries have decreased, our exports to the Dominions and the countries of the Empire have increased. Some people find fault with the fact that the increase of the imports from the Dominions here has been greater than the increase of our exports to them. I do not take that view. I think that the Dominions were in a worse position than we were at the time of the Ottawa Agreements; they are now beginning to show great improvement in their conditions, especially Australia and South Africa. The first thing they had to do was to find a better market for their own products, but the result of that is already beginning to show, and it will continue to increase as they feel more confidence and therefore a greater ability to find that market. In those two directions—in the maintenance and expansion of the home market and in the further development of those inter-Imperial agreements which were begun, and only begun, at Ottawa—I believe that this country will have to find its compensation for the loss of so much of its foreign trade, which we probably shall not be able to recover in the lifetime of many of those present.

Towards that end the policy of His Majesty's Government is directed. It is indeed gratifying to us to think that in the short period of time that has elapsed since we came into office the results of our efforts have been such that we are able to present to the House a Finance Bill of this character, which, as I said, is the first advance towards a restoration of better times, and which we feel will only be a stepping-stone to further advances in the same direction.

7.3 p.m.

Photo of Mr Edward Mallalieu Mr Edward Mallalieu , Colne Valley

We have just listened to a very remarkable speech from the right hon. Member, considering the fact that the speech is made upon the Second Reading of the Finance Bill. It is remarkable for a number of reasons, but it interested me more particularly for his announcement that, whatever anyone else may do, whatever other countries of the world may do, we in this country shall remain a Protectionist country throughout the lives of all those present. I wonder if the right hon. Gentleman had been in consultation with his right hon. Friend the President of the Board of Trade before he made that statement prophecying with utter certainty—the certainty, one might almost say, of complete blindness—that an Election would never again be fought on the issues of restriction or Protection. I know that he has previously done his best to prevent any movement in the world towards freer trade. Before the World Economic Conference he said that, whatever all the other nations of the world did, we should remain Protectionist, and recently, when this kite was flown from New Zealand, he and his Government chose to ride away on a mere statement that what had been made by the New Zealand Government had not been an offer. What does it matter if it was an offer or not? If it were the merest inquiry, they could have gone out to meet it and say that, whatever would be done in that direction, they would do likewise and more also.

The right hon. Gentleman ended up his speech somewhat as he began it, by saying something about this Finance Bill being a landmark on the road towards prosperity. I did not notice very loud cheers when he said that. Perhaps they will appear in brackets in the OFFICIAL REPORT. There was a mere bleat of "Hear, hear," at intervals through his speech. I venture to say that all over the country, be there never so many posters displayed by the Conservative party for the Government, people will still use their own judgment on these matters and not regard statements as absolute gospel because they come from Ministers of the Crown.

I was interested also to hear the speech of the hon. Member for Finsbury (Sir G. Gillett). He also said something about this Budget being a hall mark, or a land mark, of the financial policy of the National Government. I wonder to which National Government he was referring. So far as the slight return towards prosperity—for which we are all extremely thankful—has been due to financial policy at all, my own humble observation would lead me to think that it was due to the financial policy adopted by the first National Government, which did all the financial dirty work for which this Government claims so much credit. I think it was perhaps the most remarkable thing of all in the speech to which we have just listened that the right hon. Gentleman again forgot to say anything at all about the land taxes. It has been pointed out by my right hon. Friend that he omitted all mention of this very important step from his Budget speech. I have no doubt that the House will be delighted to hear him make any such statement later on.

Photo of Mr Isaac Foot Mr Isaac Foot , Bodmin

Perhaps the Prime Minister will make the explanation.

Photo of Mr Edward Mallalieu Mr Edward Mallalieu , Colne Valley

My hon. Friend reminds me that perhaps the Prime Minister will make the explanation himself. I had expected to hear something from the hon. Member for Finsbury, but we were all disappointed, because he never so much as mentioned the deep humiliation through which he has passed, though some of us thought we suspected it from his tone. I do not propose to weary the House by going over all the various details of the Finance Bill, but I do wish to say a word or two about this most important matter of the complete repeal of the Land Value Tax provisions of the Budget of 1931. I do not think that anybody will deny that the Chancellor of the Exchequer of that time, Lord Snowden, with extraordinary courage and perseverance, managed to get that provision on to the Statute Book with very great difficulty. There was not only the implacable opposition of the Conservative party to this beneficent proposal, but there was also a distinctly difficult Parliamentary situation. I do not deny for one minute that my hon. Friends who then represented my party in this House did not make things frightfully easy. That was a matter of common knowledge. All the more credit to the Chancellor of the Exchequer of that time for having achieved that remarkable result and for having put on the Statute Book that remarkable piece of legislation. Now those 30 pages on the Statute Book are to be thrown on one side by a four line Clause in this Finance Bill, which the Financial Secretary or the Chancellor of the Exchequer never so much as mentioned by a single word. That seems to be a complete surrender to the Tory land supporters of the Government at the expense of anything in it which might still be described as National.

Not only have the actual tax provisions been repealed, but also the valuation proposals, which, of course, are the most important part. Whether or not hon. Members agree with the particular tax which was imposed in 1931, at least I think they will have to agree that any system of land value taxation would have to be based upon a valuation such as that contained in the 1931 Finance Act. Therefore the only possible justification for sweeping away the whole of the valuation proposals in that Act could be that you believed that any unearned increment in land, no matter how little the landlord had done to earn it, no matter how much the community had done to create it, should go straight into the landlord's pocket. Unless you are prepared to admit that, you cannot possibly justify the sweeping away of the valuation proposals of the 1931 Finance Act. That, of course, may be Tory policy, but I do not think that anyone would suggest that it is progressive policy, and I should never have thought that anyone would hace been so bold as to suggest that it was national policy. As I understand the principles of Tory taxation, one of them seems to be to tax consumable articles—indirect taxation—with the result—although I do not say the intention—that the poor man has to pay more in proportion to his income than the rich man. That policy has been carried out consistently by the National Government.

Photo of Commander Sir Peter Agnew Commander Sir Peter Agnew , Camborne

Has not the cost of living fallen?

Photo of Mr Edward Mallalieu Mr Edward Mallalieu , Colne Valley

Of course the cost of living has fallen, but the cost of living in the whole world has fallen, and in some other countries it has fallen much more than it has done in this country. The result is that everything that the poor man or woman buys in this country is taxed up to the hilt. We have now travelled a considerable distance since the Lord President of the Council was able to make a confident prophecy like that made by the Chancellor to-day, that the Conservative party was and would continue to be pledged to resist food taxes. Of course, there was a little shouting by the millionaire Press, and the Lord President of the Council and his friends gave in. I have no doubt that it was a convenient consequence of that change of policy that large sums of money would flow automatically into the coffers of the Conservative party from interested persons who hoped to be able to exploit the situation, and be favoured in their exploitation by the Government.

We have heard from the right hon. Member for Caithness and Sutherland (Sir A. Sinclair) and the hon. Member for Gower (Mr. D. Grenfell) that it is not only in these respects that the poor man has come off badly in the financial arrangements for this year. The emergency scales for the lower Income Tax payers, the allowances which were fixed in 1931, still remain, whereas the 6d. cut was returned in toto. It is not surprising, if this be a Tory Government, that they should wish to repeal the Land Tax, because almost daily they are legislating for special favours for their privileged friends, provided that these privileged friends are wealthy enough to make expensive clamour, or unscrupulous enough to hold up the Government to ransom. It is not very surprising that the Government in those circumstances should have surrendered to the land monopolists any more than it was surprising in 1923 that the Conservative party should prevent the continuation of the valuation started in 1909 by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George). It is all of a piece, and true to type that this Conservative Government is now sweeping away one of the fairest methods of taxation that has yet been conceived, taxation by taking back to the community some of the wealth that has been put by the workers and the community into the land, instead of allowing the landlord to snatch the whole benefit for himself.

I do not see what conceivable argument there can be for a repeal of the valuation. We have not heard any argument from any of the Ministers responsible for the Government. It has just been done absolutely quietly, at the behest, I suppose, of the landed interests. It would be wise for us to consider for one moment the extraordinary proportion of the expenditure which is made upon national development of all sorts which in fact goes to the landed interests. There 1s, for instance, an estimate which I have never seen questioned, about Charing Cross Bridge. The figures there are most illuminating. The total cost of the scheme was to be £16,865,000, and of that £16,865,000 no less than £11,000,000 was to go in buying out the land and all the rights necessary to erect that bridge. One would not expect that bridge building would occupy a tremendous amount of land. That was the case for Charing Cross Bridge. I agree that there were the approaches, and a great deal of work in rehousing and so forth, but a bridge is not the sort of thing in regard to which one would expect the immense cost of land to enter into the expenditure. In the case of another bridge I propose to inflict upon the House—the case of Lambeth Bridge—the cost of land is not so great, but still outrageous in amount. The cost of the total work was £839,000, of which over £102,000 had to be expended for the purpose of buying out the landowners and the various rights needed for the bridge. That is by no means the whole story. Not only does one compensate the landowners for certain rights one takes over from them, but one makes an absolutely gratuitous present of increased value to all the surrounding land when the work is done. In the particular case of Lambeth Bridge it was not surprising to see very shortly afterwards that the small amount of eight acres on the Grosvenor Estate was sold by the Duke of Westminster for no less than £1,000,000. Just after that sale the "Times," on 19th March, 1930, made this very true statement : … it is the building of Lambeth Bridge which has stimulated this development and has so enormously increased neighbouring values. A tax on the value of land would have taken some of that increased value of the land back to the community which had expended the money on the works. It is rather amusing that this Government, who profess to have induced foreign industrialists to set up factories in this country, should have repealed this tax, and for this reason. I have not seen a tremendous number of foreign factories established in this country as a result of the protectionist policy of the Government, and I have noticed that those which have come here have been extraordinarily unwelcome to many of the industrialists who clamour for Protection because they are regarded as potential competitors in the home market. It is interesting to know that it was the last Conservative Government which enabled those same factories to work while paying exceedingly low rates. Now the Government are allowing "the wicked foreigner" to escape without recouping something from him in Land Value Tax.

The Chancellor of the Exchequer poured a great deal of ridicule upon the party which occupies this bench because of its devotion to schemes of National development. We have been told again and again by representatives of the Government that these schemes are too expensive. Indeed they are very much more expensive than they need be. If the Government did not purposely do such things as this, if they did not repeal such a tax, it might make those schemes very much cheaper, and ensure that a large part of the benefit of the schemes would come back to the community. I am not going to weary the House any longer about the Land Tax proposals except to make my protest as to the way in which the Government have done this thing. Here is the great effort of 1931 entirely thrown away by the present Government in spite of the fact that only a year or two ago they were stating that it would be wrong, and not at all the right thing to do, to repeal that Measure.

Photo of Sir James Henderson-Stewart Sir James Henderson-Stewart , Fife Eastern

Does the hon. Gentleman now express approval of the Land Tax in question, of its form, function and purpose?

Photo of Mr Edward Mallalieu Mr Edward Mallalieu , Colne Valley

My hon. Friend has not caught one of the things which I think I said, namely, that it was not a question of the particular tax. I was saying that you could not justify the removal of the valuation because any system of land value taxation, whatever you may think about the particular tax of 1931, must be based on a valuation such as the one now repealed.

Photo of Mr William Stewart Mr William Stewart , Belfast South

The hon. Member's last few words were about the Land Tax. I ask him, does he favour the Land Tax which Mr. Snowden introduced?

Photo of Mr Edward Mallalieu Mr Edward Mallalieu , Colne Valley

My opinion about the Land Tax is that it is not quite the tax which I should have chosen, but I think it is very much better than none. [Laughter.] I cannot for the life of me see why it should cause merriment even on the Front Bench, when I say that this would not have been the particular tax dearest to my heart. It is a jolly sight better tax than I have seen the Government produce. It is the repeal of the provisions as to valuation which was absolutely uncalled for and indeed iniquitous.

I wish to refer to another matter which deserves some attention. Whatever one may think about the salaries paid to teachers in this country or about their size—I am not one of those who think that teachers are over-paid—the teachers do exceedingly hard work very well indeed. As a result of various visits to elementary and secondary schools, I have been astonished at the way the teachers control enormous classes, when in the ordinary public schools classes of a dozen are the order. Whatever one may think about the salaries that are paid, most people will regard it as an injustice that a teacher who happens to retire in the period of years through which we are passing should permanently suffer by reason of the pension being fixed in relation to the salary paid during the emergency years. Obviously the cuts of 1931 were intended to be temporary, but here we have permanent injustice going on, and the Government should at the earliest opportunity take steps to remedy the matter. There is another effect of that same evil, teachers are at present refraining from retiring because they feel that in some way they will be kept out of the pension to which they are entitled. That has a very obvious effect on unemployment at the younger end of the profession, which, I think, everybody would prefer to have removed.

I am going to take the risk referred to by the Chancellor of the Exchequer, namely, that anybody voting against this Bill would be considered as voting against the restoration of the cuts. I am going to take the risk. I do not think such a vote will be misconstrued. If we succeeded in defeating this Bill another Bill could be introduced without its defects. However that may be, I am going to take the risk. It is the work of a completely Conservative and Tory Government, a put-back-the-clock Government. I do not think the country will take any different view in spite of all the vast propaganda which is being put about. The Bill will have one very good effect. It will at least awaken the country to something which we on these benches have known for some time, namely, that this Government is a purely Conservative affair trying to masquerade with some sort of cloak of national well-being about it.

7.23 p.m.

Lieut.-Colonel Sir WILLIAM ALLEN:

Ever since I have sat as a Member of this House I have always been amused more than anything else by a Member of a particular party twitting the Leaders of another party for having changed their political opinions, or perhaps having changed their expression of them. No party in this House has the monopoly of ability to change their political opinion, least of all the Liberals. If I started to quote changes of opinion I should not end my speech to-night. It is a political game, and very amusing. I sympathise with one thing that has been said concerning the functions of the National Government. Extraneous objects and subjects have been introduced by the National Government for which they have no mandate from the country. I hope, in passing, that the right hon. Gentleman and his friends will see that they carry out that idea with regard to the Indian question and the White Paper. I rise to say how very disappointed I am because there has been no reference to-day, and very little reference at any other time, either on the part of the Chancellor of the Exchequer or of the Financial Secretary, with regard to the poorer people. There was no mention whatever in the speech of the Chancellor of the Exchequer to-day of allowances in respect of the poorer people. I am very much disappointed. I notice that there is a reference to it in the Amendment of the Labour party. When I spoke during the Budget Debate I mentioned this subject, and said that it was very important and that I hoped the Chancellor of the Exchequer would see his way to make some concession. I have received a number of letters from people since then expressing the hope that something would be done. What kind of people are they? They cannot help themselves. They have no trade union. Very often they are people who have an unearned income and cannot do anything. This may be very surprising to the House. In Clause 17, the Income Tax is put at 4s. 6d. in the £. Do these people get the benefit of the drop of 6d. in the Income Tax? The House may be surprised to learn that they do not. A man with unearned income of £325 is allowed threepence, while the individual with £2,000 a year is allowed the full 6d. Is that fair play to those who cannot help themselves? A married man with an earned income of £400 a year is not allowed the 6d. but only threepence. Is that fair, when a man with £2,000 a year is allowed the full 6d.?

These people have no one to fight for them. They never kick. Whenever the greatest sacrifices were to be made—and this ought to impress the House very seriously—they said to themselves, "It is to help the nation. A National Government has been formed in order to drag the country out of this morass of financial difficulty, and we are here to help them. We will do our bit of starvation in order that the Government may be assisted to restore the country to its original financial position." Now, when all that has been done by them, without a grumble in making sacrifices, they are not even to get the benefit of the 6d. in the £ which others with larger incomes are getting. Is that fair? Surely, the Chancellor of the Exchequer knows perfectly well that these people are not in a position to make any appeal. Then, why is there all this silence on his part? He may say to me : "I cannot do everything." I know that he cannot do everything but when in his Finance Bill he says that the Income Tax is to be reduced from 5s. to 4s. 6d. in the £, he ought to see to it that every individual who pays Income Tax gets the benefit of that sixpence reduction.

Two years ago I put a question to Viscount Snowden when he was Chancellor of the Exchequer, asking the amount of money that was collected from Income Tax payers who were not entitled to pay Income Tax, that is, money that had been deducted at the source from little dividends of £2 and £3 which dropped in monthly. Income Tax of 4s., 4s. 6d. or 5s., as the case may be, was deducted from these little dividends of £2 and upwards. The reply that I received was that the Government had in their possession in one year a sum of £47,000,000 that did not belong to them. To whom did it belong? To these small, uncomplaining people. It had to be returned to them eventually, but it was collected from them at the source. Their small incomes were depleted to that extent, and a considerable time elapsed before the money was repaid to them. In some cases the amount was deducted from a dividend in, say, April, 1933, a claim for repayment was made and it is perhaps 15 months later before they get back the amount deducted from their little dividends. The money is held by the Government for all these months. It is returnable to these small people and not to people with huge incomes, because they have no title to any return of Income Tax. The £47,000,000 belongs to these poor people. In addition to holding that sum for months and months, this Government cannot see their way to ensure that these poor people get the full value of the reduction of 6d. in the Income Tax.

There is a case for reconsideration of the restoration of, at any rate, part of the allowances. It would cost the Chancellor of the Exchequer some money, and he may not be able to see his way to do it. A great many hon. Members have said that the right hon. Gentleman has under-budgeted, and I am of the same opinion. Instead of there being a surplus next year of £30,000,000 I believe it will be nearer £50,000,000. An answer was given to a question the other day by the Chancellor of the Exchequer to the effect that it would cost the country £26,000,000 to restore the full allowances. Could we not have part of the allowances restored? Could the married man have his allowance restored, without allowance for the children, or say, where the former allowance was £160 and is now £100 for a single man, could not one-half be restored? It might cost £5,000,000 or £6,000,000, but it would be a step in the right direction and would help these poor people who have done so much for the good of the country. There was an opportunity this year to give them something and a little more next year. If the Chancellor of the Exchequer did that he would have the blessings and prayers of these poor people. It is extraordinary that they have been almost obliterated from consideration. I can only hope that the Chancellor of the Exchequer will reconsider the position and restore at least part of what has been taken from these people, and that he will see that when there is a Clause in the Finance Bill that reduces the Income Tax from 5s. to 4s. 6d. these poor people will get the same advantage as the rich.

7.37 p.m.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

The hon. and gallant Member has voiced what all of us are feeling. We all hold out our hands to the Chancellor of the Exchequer and say : "Give us something." The speech, which the hon. and gallant Member has just made is the sort of speech that is being made by the majority of the people in this country to-day. They want the allowances back. I will not, however, add to the demands. I will leave it to more eloquent tongues. I want to say that I think the Chancellor of the Exchequer is undoubtedly the ablest Chancellor of the Exchequer I have ever known. No other Chancellor of the Exchequer, no other member of this House could have been quite so sure, quite so satisfied with a Budget of his own imagination, quite so satisfied with the state of the country's finances, and quite so confident that the recovery of trade was all due to him. I am sure that he believes that, and I wish to congratulate him on the marvellous success of his being Chancellor of the Exchequer.

I would, however, give just a hint that a Budget is not merely a question of expediency. A Budget ought to be guided by some definite purpose, and that purpose should be the revival of trade. I feel, of course I may be wrong, that all through the Chancellor of the Exchequer has not said : "How will this Budget affect trade?" but "Will it be popular?" I am certain that if he and his successor look upon the Budget as a question of "Will it be popular, how can I satisfy the loudest noise?" the revival of trade will not be permanent, and democracy itself will go under.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

Did that apply to my last Budget?

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

The right hon. Gentleman's last Budget was on the same lines. It was a Budget to meet the loudest cry. There was the remission of the Beer Tax, because beer made the loudest noise. This time there is the repeal of the Land Values Tax, because the landlords make the biggest noise. I want the Chancellor of the Exchequer to realise that the country's position is not so rosy as he makes out and that it is not possible to contemplate the continuation of Budgets based upon 1,750,000 unemployed and trade as it is to-day. It is possible for the Chancellor of the Exchequer and the Government to make a change in the state of our trade by the way in which they tax or untax the various interests and the various people in the country. Take the first case. Several speeches have gone to show the Chancellor of the Exchequer that if he really wanted to help industry the best thing was to increase the amount that could be put for depreciation in business without there being any Income Tax upon it. The hon. Member for Finsbury (Sir G. Gillett) made an eloquent speech upon that point, as also did the right hon. Member for Caithness and Sutherland (Sir A. Sinclair).

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

Will the right hon. and gallant Member explain how that helps people who are not making profits?

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

It helps industry in that it tempts an industrial concern to put more money to reserve and to divide less in dividends. I did not think that it was a matter of doubt that that which has been argued in favour of by the Chancellor of the Exchequer in past years was not a definite way in which industry can be helped. To increase the amount that will be put to depreciation will allow of a greater amount of money being invested in business, and help us to get new machinery and to keep our industries up-to-date. We are told that the Chancellor of the Exchequer has done that in another way, that by taking sixpence off the Income Tax, including incomes from debenture shares and preference shares, as well as the profits of companies, he has helped industry in exactly the same way. That is not so, because the sixpence is a 10 per cent. reduction in the Income Tax, whereas what is urged is a complete remission of Income Tax in respect of the larger proportion of money laid by for the improvement of machinery and the depreciation of existing machinery. A 100 per cent. reduction there would be of infinitely greater assistance to the recovery of industry than sixpence off the Income Tax, whether it be a question of business profits or fixed incomes.

The Chancellor of the Exchequer knows perfectly well that the tax on heavy fuel oil in exactly the same way has a deterrent effect upon the recovery of British industry, because heavy fuel oil is used as a heating agent. It is not a question of how much revenue can be brought in, but the question ought to be whether a tax is a good one or a bad one for industry. The coastwise shipping traffic managed to get rid of the heavy fuel oil tax by making the loudest noise about it last year. They said that if the tax were imposed upon them it would put them out of business. It would have done nothing of the sort but it would have been a very heavy charge upon them. Any charge levied upon the raw material of industry must injure industry. If the Chancellor of the Exchequer looks at it simply from the point of view of how much finance he can get in, that is not the way to look at the collecting of revenue.

The most striking case is the question of the taxation and rating of land values. If you take the landlords' part of a value which the community not the landlords have created, you are being guided solely by justice not by expediency; you are recovering for the community part of a value which the community itself has created. The principle behind that is a principle of justice. If the Chancellor of the Exchequer takes something from me in Income Tax and Super-tax, he is not actuated by a principle of justice; he says, "The money is there and I can get it," and he goes for it. Income Tax and Super-tax may be justified on the grounds of expediency because you have to get the money from somewhere, but on grounds of justice they cannot be justified, whereas a tax on a value created by the community can be justified and ought to have the first call on the attention of the Chancellor of the Exchequer. You have only to go on a motor tour through the country to see how the value of private land is being piled up by Government expenditure. Millions of pounds have been put into the pockets of landlords, and to take that back is an act of justice, not an act of expediency. It would be worth while to pay more attention to justice and less to the question as to how we can best get the money irrespective of what the effect will be.

The Land Taxes are to be repealed. I do not suppose it matters very much, but it is an indication that the Conservative wing of the National party has got its way, or it may be an illustration of the contaminating effect of evil surroundings on men who used to belong to the other party. The Land Taxes have gone, they have never been raised, but it is far worse than that, the possibility of ever doing it again has gone. You are destroying a valuation which might have been a basis not merely for taxation but for local rating. Our present system of rating penalises improvements, checks development, interferes with industry and produces slums and overcrowding. If you de-rate improvements and levy the same rates on land values it not merely makes building cheaper but makes it more difficult to hold land out of the market; it increases the amount of land available for buildings and factories and reduces the charge levied by landlords on industry.

You are destroying the possibility of a valuation upon which any change in taxation and rating must absolutely depend. The Treasury have said, "We are sorry that the valuation which was carried by the Labour Government in 1931 is impossible, we cannot make it." I am certain that the proposal in that Act was such that no Department could possibly base a valuation upon it, and that was because it was emasculated and destroyed not only by members of the Conservative party but by some members of the Liberal party and a few members of the Labour party. That valuation was not worth much; it was not a practical valuation because it did not extend beyond the towns, it did not touch the country, and the Treasury when they came to work out a valuation on provisions which they themselves had dictated found that it could not be done. It is all very well to say that the traitors to land valuation are the Prime Minister and the Secretary of State for the Dominions, in my opinion Mr. Snowden, as he then was, destroyed land values by accepting dictation from the Treasury and permanent officials as to how the valuation of land should be worked out. It was a valuation of the land without anything underneath it. Of what value such a valuation can be I do not know. Then the machinery set up for the valuation of land not merely for taxation purposes but for Death Duties as well has been ruled out at the bidding of vested interests, and because that form of taxation is based on justice and not upon expediency.

Let me pass to the main reason why the valuation of 1931 and the valuation provided for in the Budget of 1909, and also that in the 15th century which I recently discovered, has been revoked, repealed and expunged. The main reason is that any method for the taxation of land values must inevitably reduce the value of land—

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Yes, destroy it in certain cases. Speculative values certainly would be destroyed. There is a very adequate reason why land taxes have been revoked by the National party—it is criminal to destroy the value of land.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Then I will explain to my hon. Friend why there is one solitary person who wishes to destroy the value of land. The real point in the question of the taxation and rating of land values comes from the inherent belief, which I think possesses everyone, that access to the land is the best and only permanent solution of the unemployment difficulty. Think what it means. What we want to increase is useful productive work. I do not want to grow tomatoes at 5s. each or bananas at 2s. 6d. each; I prefer to get them where they can be produced most economically and to pay for them with English goods. We want to increase opportunities for useful productive work. If that is so, then let hon. Members consider for a moment what is useful productive work. It is the conversion of land and raw materials into finished articles. Every piece of production you can imagine must begin by the application of labour, in the primary trades, to nature. Once these trades have a chance of getting their raw material they do their part of the job and pass it on to other trades and industries to complete the processes of manufacture. If the primary trades cannot start you dam the stream of production at the source. You stop people working in the mining, building and agricultural industries, you throw everybody else who should complete the process of manufacture out of work.

Every barrier you put between a man and his raw material throws out of work an increasing number of people in all other trades. Everything you can do to break down barriers and make it easier for an unemployed man to get his raw material improves his chane of work and, therefore, increases work throughout the country. What is the barrier which I want to remove in the interests of trade and employment? It is the price which has still to be paid, whether in rent or capital sum, before an unemployed man can get at his job. That is why I want land cheap, so that land which is not being used now shall be free for anybody to use. If land is below the margin of cultivation then let the people get at it, they will make the most of it, and no longer will you be able to put up your barriers and say that nobody shall have the right to use that land without paying for it."

Mr. McKIE:

Would the right hon. and gallant Member consider 10 years' purchase too high a figure to put on land?

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Of course I am against it. If you have a 10 years' purchase you have a barrier so high that a man cannot get the land. If he can get it for nothing he can start working, and other people will also be able to start work.

Mr. McKIE:

In other words, you would destroy any value at all.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I would destroy evey value in land except the competitive value between two people who want the same land. If it is land which is uncultivated let anybody use it.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

But if two people want the same land how are you going to settle the matter?

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Put it up for auction. That is what happens every time. When I have a farm vacant I get all the offers I can and having considered their characters I take the best offer I can get.

Photo of Mr Arthur Caporn Mr Arthur Caporn , Nottingham West

Is not that what happens now?

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Yes, but I want land put up for auction under different conditions. If you had to pay rates and taxes on your land whether it is used or not landlords like the hon. Member and myself would be much more ready to accept lower offers, and there would be much more land coming into the market—

Mr. McKIE:

There is plenty of land in the market now.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

You cannot get a farm for 10 years' purchase, at any rate, certainly not for five years' purchase. If there is anybody here who wants to give me land I will take it, but it must not be land with a heavy tithe upon it. I must not be distracted from my main argument by these interruptions. My argument is this, that the higher the value of land, whether for buildings or agriculture, the more unemployment you create, the more difficult you make it for your primary trades to get at their raw material. Years ago after the war, as we used to call it, in South Africa, before we knew what war really was, I was the Resident Magistrate of a district with an area as large as Wales. I was absolute ruler, a Sir Oswald Mosley and everything else. I was faced with an unemployment problem just as the Chancellor of the Exchequer is faced with an unemployment problem here. Discharged men from the Army came to me wanting jobs; there is no Poor Law or dole in South Africa. If you cannot get work there, you go to gaol.

Round their towns in South Africa they have a large area of what they call town lands, public lands, and on the town lands where I was there was a coal mine. You did not go down a shaft to get the coal, but dug it out on the surface. I said to these ex-service men, "As long as I rule here, you can have five acres of the town lands and get coal out of that seam, and nobody shall charge you any nonsense in the way of rates or royalties." They got barbed wire and put up fences, and they built themselves houses out of 40 lb. biscuit tins, with corrugated roofs on top. They borrowed pick and shovel after dark, and turned to and worked. They got over the barrier, because there was no barrier. They produced a poor crop of vegetables, it is true, and they produced coal and bricks, and all those men got themselves a full reward for their labour. If they worked hard, they got more; if they worked badly, they got less. I ask the House to observe that they were not robbed, either by landlord, by capitalist, or by the State. What they got was their own.

There we happened, by the fortunate accident of having those public lands and that coal mine, to solve the unemployment problem. There were bitter complaints from the employers, because the price of Labour rose. Directly you solve the unemployment problem and give the unemployed man the chance of working for himself, then the men in this country who have got jobs need no longer be afraid of having their wages undercut by the army of unemployed, as they are today. This question of unemployment is too often regarded simply as a matter affecting the unemployed, when it affects every man in work in this country. As long as you have something like 1,500,000 unemployed, the lives and the liberties of the people who are at work will be driven down and down by the competition of those people, who must have work or else live on public assistance.

The right hon. Gentleman the Chancellor of the Exchequer is satisfied with the country in its present condition. He hopes it will improve a little, and he believes that next year he will be able to produce a better Budget than this year—and indeed I hope he will—but he is content to go on looking at a world in which there will be an enormous army of unemployed permanently hanging round the necks of the employed people. I am not content with that, and I think that neither the Government nor, I may add, the Labour party, really consider this land question properly. It is a question, not of getting some money out of land, but of freeing the working-class from the tyranny of the competition of the unemployed. I believe that the taxation of land values has now vanished from the platforms of the Liberal party and of the Labour party, and that its place is now taken by some question of purchase, as though it were possible to purchase the land of England without a valuation, as though it were possible to purchase, not only the land, but all the buildings upon the land.

I am confident of this, that not until either the Labour party or the Conservative party wake up to the fact that the people of England are suffering now, not merely from unemployment, but from this deadly competition of the unemployed, and realise that they have got to put an end to that and not be satisfied with what they have got—that it is not a question of knocking the means test on the head or raising the keep of a child from 2s. to 2s. 6d.—until the two parties realise that, you will have the only alternative to Parliamentary government, namely, the Fascism of people like Beckett and Mosley calling to an increasing number of people in this country who are coming to believe that there is no hope in either party. We shall get that increasingly by this sort of Budget, by this sort of complacency, and by a Labour policy aimed merely at giving a little bit more to those who need it. Until we have some alternative to that, we shall have the danger in England that we have seen eventuate in Germany.

8.6 p.m.

Sir JOHN SANDEMAN ALLEN:

I have listened with considerable interest to the discussion this afternoon, which has mainly been taken up with criticising the National Government and this Budget, but I feel that one should look quietly at some of these criticisms and at what they are criticising. The arguments that have been used have been to a large extent comparisons with what happened before the crisis and what exists to-day, entirely overlooking the great crisis that occurred two-and-a-half years ago, when the National Government came into power and when the people of this country decided that the interests of the country and the nation were to be paramount to everything else. I am satisfied, after listening to this Debate, that there has been no fair statement of the true position of the National Government to-day. It is foolish for people to compare what is happening to-day with what happened three years ago. Where, in the name of Heaven, should we have been to-day if we had not had a National Government that faced the situation and dealt with it as this Government has done? I am glad to feel, in spite of what is said to the contrary, that the Government have been so successful as to have been able to produce this Budget. The achievement is so great, I feel, that people have not yet realised it. They are occupied with points, important in their own way, but quite small, which, like the trees, shut out the view of the whole wood from the people.

If you get away, you can see it. I have just come back from the other end of the world, and I found, wherever I went in the Empire, that there was a real grasp of what the National Government have done and the immense value to this country and to the Empire as a whole of having a Government prepared to face the situation as our National Government have done. All the platform talk that one hears from time to time, appealing to the people's prejudices or pockets, blinds the people to the true vision that they ought to have of what the Government have done, and prevents them thinking of where this country would have been but for the National Government. We can speak of it in that way, because in spite of what people say, in spite of the empty benches opposite, the Government are still the National Government, returned by the will of the people. I heard someone say that people were returned to do this, that, and the other. I see a whole bench of hon. Members opposite who were returned to support the National Government, and their one aim in life to-day seems to be to seek to destroy it. Who are they to say anything about what they were returned for, and what mandate they had when they were elected?

I come back to this, that if you view clearly, from a distance, the rise of this country from the state of disaster with which we were faced a little time ago, you can see how great is the advance that has been made. I have been at the other end of Europe, at international conferences, and let me say, without fear of denial, that whether in the European world or in the Empire people are filled with either admiration or envy for what our National Government have done for this country. I want to bring clearly before this House and the nation that they should look seriously at what has taken place. When we realise where we were and the disaster that was in front of us, with everything going to pieces, and remember that the Government stepped in and faced the situation, we can see what they have done. We were spending more than we were earning, in the most reckless way. We were borrowing without regard to how it could be repaid, and little chance we had of repaying at that time. We were buying more than we were selling, and our credit was falling so rapidly that the very nations which to-day are clamouring to get money from us would not lend us any.

If we look the thing fairly and squarely in the face, we see that it was a very serious position in which this country found itself. We have never been in such a position in the lifetime of anyone here. What happened? The country stepped in, and the Government took charge of these things, regardless of party. Everybody had to suffer for the time being, and instead of our credit falling, instead of our currency being depreciated, we stood the test, and today the credit of this country stands higher than it has done for very many years past. It is outstandingly the one country whose credit has risen, the one country which has the confidence of the whole world; and it is a miserable, paltry business to listen to these petty speeches about a Government that has done all that for the good of the country. Let us rally together and try to do everything we can. It is human to make mistakes, and I do not say for a minute that the Chancellor of the Exchequer has been perfect in all that he has done. I am not sure he does not think himself sometimes that it is possible he might have done differently, but that is not the point.

The point is, taking a broad view of this subject and of this Finance Bill, that we see a real recovery in the country. I agree that the country is not what it was a few years ago, but what country is? Look at the state of the world, and compare the state of this country with that of any other country in the world. I heard a very temperate speech from the hon. Member for Gower (Mr. D. Grenfell), and I was interested, among other things, in what he said about the United States of America. He said the United States were busy trying to help the little man, and he denounced our Government for doing their best to put up prices, but as far as I can understand—I am only a man of average intelligence, and I find it difficult to understand what is going on in America—one of the great aims there is to put up prices, so that I do not quite see the point of the hon. Member's argument in that connection. Be that as it may, my point is the triumph of the National Government over the obstacles that were in front of them, and that to-day we see the first fruits of their efforts. The results must be progressive, and we must have great patience, but we should remember that when the Government came in we had to face two Budgets and a deficit, roughly, of £170,000,000, we were told. What is the position to-day? We have this admirable Budget, and next year, if all goes well, we understand that all will be put right. Therefore, all these petty grievances that have been put forward to destroy the National Government are quite out of place.

A good deal has been said about the rich man and the benefits that the rich man gets. Some might like to be rich and some would like to be richer than they are, but the point is that people entirely overlook the fact that the great boon of the reduction of 6d. on the Income Tax is that it gives an opportunity for improving trade and so of benefiting employment. People always talk about the man with £2,000 or £3,000 a year. What the Chancellor must have in his mind, and what we have in our minds, is the vast business throughout the country by which every man lives, without which working men and clerks and all with small incomes would not be able to live. That is where the reduction of Income Tax really helps. I ask where all those little men who made great sacrifices a little while ago would be to-day if it had not been for the steps taken by this Government. We and they would to-day be in the same state as other countries of Europe, where Heaven knows how much suffering is being borne. We have emerged from the worst part of the crisis, but things cannot be quite right until the world and world trade are different. Meanwhile, we ought to be thankful for what has been done, for the courage with which difficulties have been faced, and for the statesmanship that has been shown; and instead of grumbling we ought to take our place beside other nations which tell us that we might well be proud to belong to an Empire that has saved itself amidst a welter of trouble and distress. I support most strongly the Second Beading of this Bill, which I believe is an excellent start for the future of this country.

8.18 p.m.

Photo of Mr Charles Brown Mr Charles Brown , Mansfield

It must have been indeed refreshing to the Chancellor of the Exchequer to have listened to at least one speech from an hon. Member who has retained for four weeks the enthusiasm that a lot of his colleagues shared on Budget day. The hon. Member is evidently as much elated to-day as many of his colleagues were four weeks ago. But the period which usually elapses between the Budget statement and the introduction of the Finance Bill does allow us to view the financial proposals of the Government with calmer judgment than we can exercise at the time of the Budget speech, because of all the expectancy and excitement that one finds on that occasion. It was difficult, at least for me, to understand the elation of the Government supporters on Budget day. For my part I do not grudge them any crumbs of comfort they found in the Chancellor's statement. Poor as the Budget was, from our point of view, it has been for supporters of the Government the only gleam of light in two and a-half years of dreary failure, consequently I can easily understand their great elation of a month ago.

Seen in proper perspective after the lapse of a month, the Budget appears to me to be but a trivial incident in that manipulation of State income and expenditure that is necessary to keep up the illusion of how extraordinarily difficult it has been to escape from the so-called crisis of 1931, and to create the impression that the National Government is responsible. The hon. Gentleman who has just spoken made reference to the crisis of 1931. He called attention to the fact that we are in vastly different circumstances to-day from those in which we were then. But many of us have come to believe—indeed many of us thought so at the time—that the crisis of 1931 was largely a faked crisis, an unreal crisis, an engineered crisis, or at least, in the words of the right hon. Member for Epping (Mr. Churchill), an "exaggerated crisis," That is a phrase that the right hon. Gentleman used in this House, and when an ex-Chancellor of the Exchequer, with wide experience of our public finances, makes a statement of that kind, we on these benches must pay some attention to it. If the hon. Member for St. Albans (Sir F. Fremantle) takes exception to our calling it a faked crisis, perhaps he will let the expression of the right hon. Member for Epping stand and regard it as a greatly exaggerated crisis.

Photo of Mr Charles Brown Mr Charles Brown , Mansfield

I am very pleased to know that the hon. Member completely repudiates the right hon. Member for Epping as to any authority which that-right hon. Gentleman may have had in the past on financial matters. I have not the slightest doubt that in days gone by the hon. Member has sat here and has cheered the right hon. Member for Epping when he was Chancellor of the Exchequer. In those circumstances the hon. Member undoubtedly had great admiration for his right hon. Friend. I cannot explain why he has since lost that admiration.

Photo of Sir Francis Fremantle Sir Francis Fremantle , St Albans

I have not in the least lost my great admiration for the right hon. Gentleman's picturesque but still exaggerated phrases.

Photo of Mr Charles Brown Mr Charles Brown , Mansfield

I am quite prepared to accept that correction. The hon. Member the Member for West Derby (Sir J. Sandeman Allen) called attention to the fact that in the changed circumstances in which we now find ourselves we may look forward to a period of surpluses so far as Budgets are concerned, as contrasted with the situation that faced the country in 1931. I recollect very well that just before the Budget statement was made a number of newspapers called attention to the fact that in the last 10 years we had had about as many surpluses as deficits, that surpluses and deficits seemed to follow one another in fairly regular fashion. I have come to the conclusion that surpluses and deficits within limits can easily be arranged by the Government of the day. What has been the design of the budgeting of the National Government, the latest phase of which is presented to us in this Finance Bill? In the first place they have attempted to create in the public mind the impression that they are embarking on the Herculean task of lifting the nation out of a great financial morass. That is the impression they try to create.

The Chancellor of the Exchequer said to-day that he regards it as his first duty to go back as soon as possible, if money is at his disposal, to the circumstances which prevailed before 1931. The Government supporters are trying to create the impression that they are meeting with some success, but that still the situation is difficult, that they have still to be very careful, that they have to go steady, and that there is a long uphill road ahead. "Only trust, and all will be well in the end." That is the phase which we have reached to-day. The early part of the Chancellor's speech was more or less fashioned along those lines. He made it quite clear that he regards it as one of his first obligations to get us back to the pre-1931 position before there can be any redress of what he called grievances. I gathered that he does not rule out the possibility at some time in the future of redressing what he calls grievances. This Finance Bill and the Budget statement with which it is associated bring up once again a matter which has occupied our attention in the past and must needs continue to do so for a considerable time in the future. There is a passage in the Amendment which deplores the proposals in the Bill, because they intensify the evil of the mal-distribution of purchasing power by lightening the taxation on the rich. We heard again to-day the argument which we have heard in the past, in support of the reduction of Income Tax, that such a reduction will give a much needed stimulus to industrial development; that it will create more work and will thus effect a further distribution of purchasing power.

There might be something in that argument if no money were available for investment now. But, on every hand, we are told that there are practically unlimited sums which cannot at the moment find profitable investments. We know there is surplus productive capacity in many industries which cannot be utilised profitably and that there is no need for expansion in those industries because the commodities which they now produce cannot be purchased. To some of us that argument in justification of a reduction of Income Tax seems singularly unconvincing. When we examine the national income, in so far as the facts concerning it have been collected, we find that a huge proportion of the national wealth is in the hands of a few people—far too few. The report of the Commissioners of Inland Revenue for the year ended 31st March, 1933, shows that the incomes of 8,000,000 people were reviewed, for the purposes of Income Tax, but as a result of that scrutiny, it was found that 4,500,000 people had incomes which did not warrant them paying any Income Tax at all. So that out of the 8,000,000 people who came into the field of Income Tax review only 3,500,000 actually paid Income Tax. The others were exempted by reasons of various allowances and factors of that kind.

That fact alone is a startling commentary on the maldistribution of wealth in Great Britain to-day. The actual income—not gross but actual—of Income Tax payers for the year ended 31st March, 1933, was £2,725,000,000. I do not know from what source the hon. Member for Gower (Mr. D. Grenfell) got his figures, but he estimated the total national income as being in the region of £3,500,000,000. I cannot help thinking that the real figure must be higher, because if we take £2,725,000,000 from the figure which he gave, £775,000,000 is all that is left. But it is obvious from these figures that the vast proportion of the community are people with very small incomes. The vast proportion of the people of this country are taking a relatively small proportion of the total national income.

The Chancellor of the Exchequer gave some figures which I did not quite catch in calling attention to the fact that there has been a fall in revenue from Income Tax. I was interested after the right hon. Gentleman had made those remarks, to look up the returns of Income Tax under the various schedules, contrasting the year 1925–26 with the year 1931–32. Under Schedule A which refers to the ownership of land and houses, in 1925–26 Income Tax was paid on £224,038,830 and for 1931–32 the amount was £290,484,512. Under Schedule B relating to the occupation of lands—which we are informed mainly deals with farmers' profits—for the year 1925–26 the amount was £28,178,388. It is true that in this case there has been not an increase but a tiny decrease, because in the year 1931–32 the figure is £28,098,973. I would point out, however, that immediately that section of Income Tax payers get into any sort of distress, urgent efforts are made to help them. We have the case of the assistance given to farmers by the beet-sugar subsidy, the wheat subsidy, the bacon quota and so forth. It is true the farmers' incomes fell in that year, but the Government came to their help as rapidly as possible.

Under Schedule C which relates to business concerns and professions, there is again a fall which I suppose is a reflection of the general trade depression. In 1925–26 the income dealt with under this Schedule was £1,033,000,000 and in 1931–32 it was £922,000,000. Under Schedule D relating to British Indian Colonial and Foreign Investments in 1925–26 Income Tax was levied on £133,143,373 and in 1931–32 the figure was £160,664,508. Under Schedule E referring to salaries of Government corporation and public company officials the amount in 1925–26 was £994,862,269 and in 1931–32 that had risen to £1,323,908,694. Thus it will be seen that under three of the Schedules income has considerably increased. One remains practically stationary, though, as I have pointed out, in that case speedy assistance has been given to the class concerned. In the remaining case it is suggested that by the steps which the Government are now taking there will be a considerable improvement in trade and industry and that the incomes derived from businesses and professions will consequently increase.

I contrast that state of things with what has happened in connection with the manual workers, the great mass of the people of the country. I will give some typical wage rates as an illustration of the point I want to make. The wages of agricultural labourers were 31s. 8d. in 1927 and 30s. 11d. in 1932. It is true that the fall is not much, but it matters very much to the class of the community concerned. The wages of boot and shoe operatives were 56s. in 1927 and 54s. in 1932; bricklayers, hourly rate, 1s. 8d. and 1s. 6d.; carpenters, 73s. 10d. and 67s. 2d.; road transport, 53s. 3d. and 51s. 11d.; dock labourers, 12s. 3d. and 11s. 6d. a day. We find, therefore, that the industrial wage earners are getting poorer. Somebody has remarked that prices have fallen and that the purchasing power of these wages is consequently higher, but the fall in prices affects every section of the community and the incomes of the other classes have been increasing concurrently with the fall in prices.

There is another way in which one can make some effective points about the maldistribution of wealth in this country. For instance, in 1932 there died in the United Kingdom 567,986 persons, and only 137,903 left any estates at all. The other 430,000 had practically no worldly possessions. Of those who left estates, a very large number left only small amounts, and I could quote figures to show how the numbers leaving large sums of money become less and less as the sums become higher. It does not need any more illustration to show that a very large proportion of the wealth of the country is concentrated in very few hands. Consequently, we are justified when we say that the way in which the Chancellor has decided to use his surplus by a reduction of the Income Tax gives considerable benefit to a relatively small proportion of the community. Sometimes we exult because there is a surplus in the Budget and sometimes we bemoan a deficit, but, surplus or deficit, the relative poverty of the masses of the people remains. I say "relative" I am not suggesting there is not, over periods of time, a considerable improvement in their conditions, but, relative to our powers to produce wealth, that poverty remains, and the gulf between the relatively few who have the great bulk of the wealth of the country and the masses of the people grows wider and deeper. I ask hon. Members to think, in view of this fact, of our amazing resources in technique, our wonderful tools and machinery, the ever-improving productive processes at our disposal, the latent powers of organisation that we have which we might utilise if we could act on entirely different lines from those we are pursuing at the moment.

I hope that no hon. Member will dissent from the proposition that anything which occasions needless suffering of body of mind to anybody is an evil, and if it is within our power as a community or as individuals to remove or eradicate the evils of which we are aware, we ought to leave no stone unturned to eradicate them. The question to which we ought to address ourselves when we consider the Finance Bill is whether it does to any considerable extent do anything to eradicate those evils arising from poverty of one kind or another which afflict the great masses of the people of this country. I think that the answer to that is generally in the negative. It may be said that something is done for a certain section of the unemployed because those on statutory benefit will have their cuts restored. There is not, however, to be very much done for the section which is on transitional payment. Therefore, we on these benches are entirely justified in putting down our Amendment, and I am certain that none of us will have the slightest hesitation in voting for it, in spite of the dialectical skill of the Chancellor of the Exchequer in trying to persuade us that if we vote against the Finance Bill we vote against the restoration of the cuts. He has not convinced us that that will be so, and we shall all feel justified in going into the Lobby in favour of our Amendment.

I am glad that the Lord President of the Council has come into the House, because I want to say a word or two about the repeal of the Land Tax and to refer to some things that he has said about it. At the moment he—I do not want to say poses, because I always feel the sincerity of the right hon. Gentleman whenever he speaks, but he is at the moment a sort of champion of our democratic institutions. No speech which he makes fails to contain some reference to the threatened dictatorship of the right or of the left, and he plods along the middle way desirous all the time of pursuing a policy which will ensure that the will of the people shall prevail. The Lord President made a speech in June, 1931. The National Government were on the horizon then and had not made their appearance, so that when the right hon. Gentleman went into the country at that time he was entitled to speak on behalf of his party and as Leader of the party. Speaking of the Land Tax at that time, he said : I can say one thing about it, that if we get back to power, that tax will never see daylight. Later on, he said : I am not alarmed by the Land Value Tax because I do not believe that tax will ever come into existence. If we come in, it certainly will not. When he was making those speeches he was speaking as the leader of the Conservative party and he was perfectly justified in making a statement like that, because he was appealing to the electors to return his party to power and was pledging his party, if returned, to repeal the Land Tax. He was saying, in effect, "If you give us your confidence, when we are returned to power we will see to it that this tax, which we do not like and think is unjust and inequitable, is repealed." He was quite entitled to do that as leader of the Conservative party. But the circumstances changed. We had no election in which the right hon. Gentleman could appeal to the electorate to return his party to power in order to repeal the land taxes. What we had was a financial crisis, so-called. A National Government was formed, and he became a member of it, and as a member of that Government he said in the House of Commons on 26th May, 1932: Had this been a Tory Government we should have repealed the Statute. That is, the land taxes. In the National Government there are five Members who were Members of the Labour Cabinet when this Act became law.… Would any one of you who had been a member of a National Government, who had gone through the fight we went through last autumn, who had taken part in the discussions on finance on the first construction of the National Government with men who fought during that election like Lord Snowden …. and when they expressed their reluctance to see the Act finally taken off the Statute Book; do you think that I, going about the country as I did, and knowing the force of Lord Snowden's speeches and broadcasts in helping to win seats which we should never have won, was going to say to them, 'Oh, no, now we have got a big Tory majority, much bigger than I expected, out you go.' Not much. That is why we stand for the Clause as it is in the Bill. We can accept neither a repeal of the Act nor the insertion of the Amendment."—[OFFICIAL REPORT, 26th May, 1932; cols. 583–5, Vol. 266.] May I ask the right hon. Gentleman what has occurred to cause him to change his opinion between May, 1932, and May, 1934? What has happened inside the National Government? Why should he throw overboard now the colleagues by whose side he so loyally stood on the occasion when he made that speech? Has the Prime Minister discarded entirely his views about the value of a Land Tax? Has the Secretary of State for the Dominions also thrown overboard his views on this subject? Surely the right hon. Gentleman ought to tell us before the Debate closes why he has changed his views, and why he is now a Member of a Government which proposes to repeal this tax? Surely he will tell us before the Debate closes. He is well known for his loyalty and his faithfulness to his colleagues. Why has he deserted them? Why has he thrown them overboard? In view of the general nature of this Finance Bill, and particularly of what we regard as an iniquitous proposal to repeal the land taxes, all of us on these benches will go without any hesitation whatever into the Lobby to support the Amendment.

8.48 p.m.

Photo of Mr Charles Emmott Mr Charles Emmott , Glasgow Springburn

The Financial Secretary to the Treasury, whom I am delighted to see in his place, has made many apt and apposite comments on Debates in this House, but I think he has seldom been more happy than when he remarked, in the course of the discussion on the Financial Resolution which prepared the way for this Finance Bill, that this Budget could not give rise to genuine controversy. Since that comment was made, however, the Government have announced their intention of repealing the Land Value Tax. This, I think, I might describe as a sort of Parliamentary windfall to His Majesty's Opposition and to the Members of the Liberal party. We will not grudge them their windfall; they have made the most of it to-day, which they are entitled to do : and yet I think the Financial Secretary might make the same comment to-day that he made upon the earlier occasion. The hon. Member for Limehouse (Mr. Attlee), describing the financial proposals of His Majesty's Government on the day on which they were brought before the House, spoke of them as "an insult to the unemployed," and said that the Budget was "quite the meanest Budget on record." We may, perhaps, dismiss these as unhappy first thoughts, but the hon. Member for Ebbw Vale (Mr. A. Bevan), speaking the next day, when he had had time for reflection, went so far as to describe the Budget as "a class Budget," and "a piece of class prejudice." These, of course, are not statements which were continuous with each other in the hon. Member's speech, but I have compiled a little anthology from it. He went on to describe the Budget as "leaving the poor worse off," and as "a mean and scandalous Budget." "Unstatesmanlike" was another epithet he applied to it. "Stupid" and "silly" were yet other epithets that he lavished upon the proposals of the right hon. Gentleman. Perhaps we may write off these criticisms as the fanciful imaginations of a fervent Celtic temperament. The House, at all events, may congratulate itself that there has been no repetition of such descriptions to-day, and that this kind of intemperate criticism has been altogether abandoned. However, there is upon the Order Paper an Amendment under the names of some hon. Members of His Majesty's Opposition which invites the House to reject this Bill upon certain grounds. One of those grounds is that it intensifies the evils of maldistribution of purchasing power by lightening the taxation upon the rich. The principle contained in this sentence has been much relied upon in the course of these Debates. It has formed a very important ground of the argument addressed to the House by various members of His Majesty's Opposition. The hon. Member for Mansfield (Mr. C. Brown) founded certainly a part of his argument upon it, and in view of its importance I hope the House will not think I waste time if I examine it in some detail.

The principle admits no limitation of the proportion of income which it is right for the State to take from one person and give to another. It may be that hon. Members do recognise a limit to the rate of direct taxation, but their principle does not assist anyone to discover where it is. Their whole argument depends upon the assumption that the use to which the less wealthy taxpayer puts the money available to him for spending is better, in the economic sense, than the use to which the more wealthy taxpayer will, in present circumstances, put it, and that therefore it is right to take from the second to give to the first. But why stop here? If the argument is sound, surely what the circumstances of our time require is not a diminution but an increase of direct taxation. Are they seriously prepared to argue that industry would derive benefit to-day from an increase of direct taxation? If they do, then my task in answering them is made the more easy, but if not, what becomes of the argument?

His Majesty's Opposition are always concerned—as though it were their peculiar province, which, of course, it is not—with the maintenance of the purchasing power of the people. It has become a kind of obsession with them. Strange, surely, that they concern themselves only with one section of the people—with what they describe as the poorer section of the people. However, the financial proposals of His Majesty's Government have had the interesting effect of extending the area of the fiscal sympathy of hon. Gentlemen. I must congratulate the Chancellor of the Exchequer on discovering a method of enlisting the sympathy of the Opposition on the side of any category whatever of direct taxpayers, though I could almost wish that he had used the resources which were available to him not to reduce the standard rate of Income Tax but to restore the former rate of family allowances, because I have no doubt that, if that had been done, we should have witnessed the interesting spectacle of the Socialist party arguing the case for a restoration of the standard rate of Income Tax—arguing the case of the rich man. I dare say that some of those who pay direct taxes this year will with pious gratitude ejaculate, "It is an ill wind that blows nobody any good," and will accept assistance from whatever quarter it comes.

Well what actually is this purchasing power of which we hear so much? It is money, or what passes for money—bank credit or whatever it may be. Is the problem then one of the provision of money? Of course not. You may print notes; you may create money, in that sense, to any extent you like, but can you ensure that it will be used? You may increase the means of payment, but unless you ensure the increase of goods to be exchanged therefor, all that you do is to diminish the value of your currency and consequently the purchasing power of your people.

It is therefore plain that the analysis must be carried further. The question to which we have to address ourselves is : From what is purchasing power derived? What is the origin of purchasing power? Purchasing power is derived simply from production. Let no one think to trip me up here by reminding me that we frequently assert an excess of production of some particular commodity, and hope to find an inconsistency between that assertion and this part of my argument. There is no inconsistency. There may be from time to time, and indeed there is, production of a commodity or commodities in excess of the capacity of the market at that particular time to absorb it, but that fact is perfectly consistent with the general principle which I lay down, that purchasing power is derived from nothing else than production. A man can only obtain purchasing power by producing something that passes into exchange. Members of a community can only provide themselves with purchasing power by producing things that other members of the community, or members of other communities, require. It is a gross fallacy to imagine that you can maintain or increase the purchasing power of a community by taking money from some members and distributing it among other members of it. And what of the justice of such a proceeding? The hon. Member for Gower (Mr. D. Grenfell) on an earlier occasion, during the discussion upon the Financial Resolution, asserted : The Chancellor of the Exchequer exercises an authority long ago given to him and to Parliament to make levy upon the incomes of individuals, with the fundamental recognition that the money of individuals belongs to the State and is made by the State—by the community."—[OFFICIAL REPORT, 19th April, 1934; col. 1134, Vol. 288.] To-day he mentioned that, on the occasion on which he made that statement, he was interrupted by the hon. and learned Member for Argyllshire (Mr. Macquisten) and he said that if anyone to-day ventured to controvert his assertion he would blush for such a man. I regret to inform the hon. Member for Gower that I must bring a blush to his damask cheek. I hope I shall make him blush deeply. I controvert his statement with all the force and precision at my command. Upon what principle does he think that the money of individuals belongs to the State? He repeated the assertion to-day, and sought to justify it by pointing out that certain general political and economic circumstances are necessary to the formation of wealth by the individual. That may be so and it is so, but it is not, for that reason, true to say that money made by individuals belongs to the State. To say that certain circumstances and conditions must be created by the State in order that wealth may be created by the individual, is not to alter the ownership of wealth, and it is surely a gross misuse of language to argue, because of the circumstances which the hon. Member mentioned, that that wealth therefore belongs to the State. It does not. By virtue of a right inherent in all Governments, Government taxes citizens in order to provide itself with the means necessary to the performance of its functions, but that does not establish in favour of Government any right of ownership of wealth. That wealth belongs to the individual who has made it, and to no one else.

Let me return to the point from which I digressed in order to consider the extraordinary position assumed by the hon. Member for Gower. There is only one way to increase the purchasing power of a nation, and that is to strengthen its productive power. Restore industrial activity, and in that very process you have increased purchasing power. It is no paradox, but literal truth that the problem of consumption is the problem of production. The whole question of the restoration of economic activity is one of the harmonious, rational development of production. Do the proposals of His Majesty's Government further that object? That is the criterion by which they have to be judged. In particular, does the reduction of the standard rate of Income Tax contribute to this result? I submit that those two questions must be answered in the affirmative. It is not my province to-night to examine the effect of high taxation upon industry. The Chancellor of the Exchequer, in justification of the reduction of the standard rate of Income Tax, may rely upon the formal and unanimous opinion of countless individuals and associations directly concerned with industry and commerce. I content myself with this simple proposition : that the State to-day takes from the direct taxpayer by direct taxation so high a proportion of his income as to diminish, and in many cases to destroy, both his incentive to enterprise and his capacity to set apart by saving that money which is necessary to the maintenance and continuance of industry. Because that proportion is diminished by the proposals of His Majesty's Government, I urge that they deserve the support of this House.

It is said, however, that if you follow this course all that you do is to increase the money available for investment, which is already ample and excessive. I believe that view to be profoundly mistaken. In the first place, I think it exaggerates the amount which the wealthy man of to-day does in fact save and hold off from consumption. Such a man has large commitments and responsibilities, all of which demand the continuous expenditure of money, and to-day, when the State has laid its greedy paw on his income, there is little left available to him for saving. In the second place, this view ignores the fact that variety of consumption springs largely from the use of incomes in the middle and higher ranges, and that that variety is of the greatest benefit to industry. In the third place, I suggest that those who hold this view are mistaken in another and even more important respect. They regard the large extent of deposits in banks, and seem to infer therefrom that there is already a superfluity of money available for capital investment, to which it is folly to make any addition. In point of fact, since last June, the deposits in the banks have shown a diminishing tendency; and the deposits in the London clearing banks last month showed a decline of about £80,000,000 from those of April, 1933. In any case, however, the only deduction proper to be drawn from these circumstances is that the financial resources of the banks to-day may be in excess of the requirements of a contracted industry. But that is not at all to say that they are excessive in relation to the requirements of industry in a period of expanding trade; and I have no doubt whatever that in such a period, upon which at last, by the grace of Providence and His Majesty's Government, we appear to have entered, the industrial demand for capital will register a great increase, and will in time fully occupy those resources which appear now to be superfluous. The cost of capital equipment is steadily increasing under technical development. The rate of obsolescence of industrial plant is increasing under invention and research. The wants of men are becoming more varied and more diverse with every passing year. Why a great cause of the present distress of agriculture is this very variety, which is in itself a good thing. Those who grow wheat are discovering that purchasing power today, even if it be increased, does not direct itself to an increased purchase of their product, but rather to new things—to the purchase of meat, or milk, or fruits, and other agricultural products. I hear an hon. Member say, "That is our case," but he does not draw from these circumstances the deduction that I draw. The same thing happens in the case of manufacturing industry. Demand to-day, both in regard to agriculture and in regard to manufacturing industry, is directing itself to an increasing variety of new things, which the beneficent system of capitalism supplies in ever-increasing quantities. Does not the satisfaction of these myriad, diversified wants of humankind demand an ever-increasing provision of capital? All these circumstances, I suggest, justify the policy of His Majesty's Government, a policy which is calculated to meet the requirements of expanding industry and to promote employment. I conclude, therefore, that in this matter also the criticism of the Bill by His Majesty's Opposition has neither substance nor justification. On the whole, the proposals of His Majesty's Government, cast as they are upon broad, simple lines, are calculated to make a most timely and valuable contribution to the recovery of agriculture and industry, and they deserve the approval of the House and of the country.

9.11 p.m.

Photo of Sir James Henderson-Stewart Sir James Henderson-Stewart , Fife Eastern

I am sure the House will have listened with much interest to the very thoughtful speech of the hon. Member for Spring-burn (Mr. Emmott). He has invited us to penetrate to the foundations of national prosperity. I would like to turn in another direction, following immediately upon some observations of the Chancellor of the Exchequer this afternoon. In the concluding part of his speech, he looked into the future with' regard to our international trade. He said that, as far as he could see with the facts at his disposal, it seemed that there would soon be a limit to the expansion of our export trade, and that that limit would be a good deal—perhaps a very great deal—lower than we were accustomed to in, say, 1929. Therefore, he said, it is necessary, if you are going to maintain your people in employment, to turn your attention either to the home market or to Empire development, or to both. I do not think that anyone will very greatly dispute that statement, but I want to put this point of difficulty which I myself feel, and I am not sure that the Chancellor himself does not occasionally experience it.

We are taking steps now, I believe, rightly, to protect the home market and encourage home production. We are concentrating our efforts upon home production in agriculture, as the hon. Member has just mentioned. By new methods and schemes we are producing vast quantities of products that would have been produced in no other circumstances. But is there not a danger that we may over-concentrate upon the home market? Is there not just the possibility that we may so improve the conditions for home manufacture, particularly in agriculture, that we reduce our imports too much, and, therefore, make it too difficult for other countries to take our exports? That is a very important point. I have not time to-night to develop it, but it is a point which perhaps on another occasion might be examined more carefully. That kind of problem makes me wonder whether we ought not to have some body, outside this House if necessary, examining the trend of trade. I do not mean the Import Duties Advisory Committee, which has its own work to do. I do not know what body could do this, but the kind of trend that I have mentioned is going to affect us very seriously in perhaps 10 years' time, and I would suggest that examination and research of that kind could usefully be carried out, and should be carried out, either by the Government or by some Department acting for it.

Last year I ventured to congratulate the Chancellor of the Exchequer upon maintaining his iron grip on the resources of the country. It was not a popular proposal at that time, but I think the result of this Budget has proved that that policy was sound, and that it was really the best policy for another year to retain taxation, to retain the cuts, and, in fact, to continue to proceed in the same rigorous fashion. There is ample justification for that, and it seems to me that this Budget is not only a justification of the Chancellor's firmness, but it is a magnificent justification of national cooperation. Part of it was due to financial measures taken while my hon. Friends opposite were in the Government and while there was the greatest possible unity, but there has followed since then the continuation, as I see it, of give and take which has made this recovery possible. A continuation of that is the best way to serve the country.

The Debate to-day has naturally brought forth a certain amount of criticism of the question of the abolition of the land taxes. Owing to the lateness of the hour I propose to reserve my comments on that matter till the debate on the Clause, but I cannot help being surprised and a little amused to hear my hon. Friends opposite making such heavy weather about the repeal of this land tax. I have had a good deal to do with the framing of Liberal policy in the last ten years, and it is entirely news to me that so vital a part of Liberal policy is the taxation of land values. I invite my hon. Friends to go back on the results of their own researches. It is true that a new policy was produced the other day, but that was merely a restatement of the old researches of four or five years ago. These reports did not ask for a Land Tax. My recollection—and it is very clear—is that the present leaders of the Opposition Liberals looked upon the League for the Taxation of Land Values as a body of cranks and their policy as quite impracticable. When I look through the Green Book for instance i find that, far from suggesting the taxation of land values, they say they did not intend to deal with the question : That is not because these questions are not important, but because they cannot be satisfactorily handled as long as the present system of tenure remains. It still remains, and, therefore, we are still in the same position as we were in then; in other words, opposed to the taxation of land values.

I look at the report on Liberal urban policy published five or six years ago, the Brown Book, and I invite hon. Members to go from the first page to the last and see whether there is a single mention of the taxation of land values as Liberal policy. There is the rating of land values, but that is a very different thing. In the Liberal Report, page 262, you find the whole thing set out with the rating of land values coming third or fourth in the list of their proposals, the first of which was the acquisition of land, which was considered vital, and the second of which was the betterment proposal, which was considered very important. The rating of land values was third, and nowhere was the taxation of land values mentioned.

Photo of Mr Edward Mallalieu Mr Edward Mallalieu , Colne Valley

Will the hon. Member explain how betterment or the rating of land values could be undertaken without a valuation such as is here being swept away?

Photo of Mr William Stewart Mr William Stewart , Belfast South

I think it can be done on the basis of the facts already available, but I am not going to be led off on that point. Hon. Members are not, therefore, justified in attacking the Budget because it contains a provision repealing something which is not their policy and which they have never put in the forefront of their programme. I have certain very definite views on the insertion of this new Clause. Time is not available to develop them to-night but I want the House to be aware just exactly how much foundation of justification and truth there is in the rather challenging remarks that we have heard. I congratulated the Chancellor a year ago on maintaining the iron grip, and I congratulate him and the Government now upon the success of that policy and upon the Budget which, despite all the criticism and all the rather far-fetched stories that one has heard, is accepted by all sections of the country as a real measure of hope and encouragement for the future.

9.23 p.m.

Mr. GURNEY BRAITHWAITE:

It happens not infrequently that, when a Budget is introduced amidst almost universal approbation, by the time the Resolutions have passed their Report stage and the Finance Bill is introduced, the ardour in favour of the proposals is somewhat cooled and the country as a whole regards them with less enthusiasm. But in this case I consider that the favourable reception which the Chancellor's proposals received when he introduced the Budget can very well stand the criticisms that have since been made and that their stolidity and stability have increased rather than declined in stature since then We have had very interesting discussions to-day of a somewhat theoretical character as to the incidence of direct taxation, of land values and kindred matters. I propose to try and put back the Finance Bill into its true perspective. Surely we must look back along the road that we have travelled since this House of Commons was brought together. If we do that we must be impressed by the roughness and the stiffness of the climb that we have made and by the amazing success of my right hon. Friend's policy at the Treasury. It is almost exactly two years ago that I made my first speech in the House in the Debate on the Budget Resolutions of 1932, and I then said it was my fervent hope, as an industrial Member, that the cuts in unemployment benefit would be restored before any relief was given to the Income Tax payer. Having said that, it is an even greater source of satisfaction to be able to support a Budget which does both those things.

I am not going to re-enter upon the discussions which we have had on the Unemployment Bill as to the position of the unemployed under the Chancellor's proposals, beyond remarking that if one compares the standard, in terms of purchasing value, of the benefit drawn by the unemployed in 1924, when Mr. Tom Shaw said that the rate was sufficient to keep any self-respecting man in the country, with the standard in 1931, and that standard again with the standard of this year, it is a source of the greatest satisfaction to us that the situation of the unemployed to-day in terms of purchasing value is infinitely superior to that which they enjoyed under either of the Socialist Administrations which this country has seen.

That brings me to a remark made by the hon. Member for Gower (Mr. D. Grenfell) in the course of this Debate. The hon. Gentleman said that political reasons very largely governed the situation of money and currency. I have not his exact words, but I think that I am quoting him more or less correctly. He said that what mattered really was national credit, which was to a very great extent a political matter. If my right hon. Friend is to be congratulated upon nothing else, surely he is to be congratulated upon the fact that our paper pound has retained its purchasing value through two and a half years of extremely rough weather. The situation of our unemployed—and, for that matter, of our employed—might have been grievous in the extreme had it not been for the insistence of my right hon. Friend upon the fact that two and two must inevitably make four, despite amendments moved from the benches opposite to the effect that they ought to make five, if not six or seven. The Chancellor has performed his greatest service for the country in retaining the purchasing value of our paper pound. The unemployed have now been extricated from the parlous position in which they were left by the Socialist party in 1931.

It is, however, my desire in what I have to say to-night to pass as rapidly as possible from 1931, always provided that the lesson of 1931 is not forgotten by the people of the country. My right hon. Friend has been criticised in an Amendment moved by hon. Members on the benches below the Gangway opposite for the fact that his realised surplus has not been used for reducing the debt upon the Unemployment Fund. That is one of the chief burdens of their Amendment. There again, in my view, that is one of the most admirable features of the right hon. Gentleman's Budget : that he has not allowed himself to stray down this by-path meadow, attractive as it may have seemed, and that he has kept to the straight and narrow path; that he has used the realised surplus for the redemption of debt. Quite apart from the fact that there was a previous deficit to meet, I would commend this proposal on other grounds. Had he used it for the purpose for which he was invited to use it, of reducing the debt on the Unemployment Fund, then, quite apart from his own argument to-day, this would only have been able to reduce contributions by about a farthing a week. It is true to say and sound to put forward that when a debt of such a kind is incurred on exceptional expenditure owing to mistakes made by one Government or another, that expenditure should be met at the earliest possible moment and should be met by those who have incurred it, and if a certain fund is in debt, that fund should make good that debt.

May I give one example of what I mean? Suppose that this debt had been transferred to the Exchequer, that it had been transferred to the taxpayer; equally true would it be that generations yet unborn would have had to carry it. I have in mind particularly in this connection—and I think it is a relevant parallel—the situation under the Irish Land Annuities, in which the provision was made for the paying off of that financial arrangement over a period of 67 years. It was felt that that was a suitable period during which to meet that liability. If, however, there had in those days been a Chancellor as rigid as my right hon. Friend, he would probably have made arrangements for that debt to be met in a period of some 30 years. If that had been done, how much trouble would have been saved to this country! Surely the present dispute with the Free State has arisen over that very issue of the Irish Land Annuity, which might well have been out of the way and done with before Mr. de Valera took office—although I think that that gentleman would have found other reasons for providing a dispute with this country.

May I, in passing, express my satisfaction that the Death Duties this year, owing to the circumstances in which we find ourselves, have in fact been applied to the reduction of Debt? I hope that in future we may be able to have some system under which Death Duties which are drawn from capital are ear-marked for Sinking Fund purposes. It is a very great disadvantage that these capital sums should be taken into the income for the year and spent as if they were not capital sums. Incidentally, when my right hon. Friend is criticised by hon. Members opposite for the fact that there was a realised surplus at all and, in fact, accused of inefficient budgeting, apparently it is suggested that he should have looked into some crystal and foreseen the decease of gentlemen of large means, for we find that one-third of this realised surplus has come from one very large estate. It is at least satisfactory to note that this sum has on this occaion been placed in the Sinking Fund.

For a minute or two I desire to say a word about the weight of the National Debt. It is a subject which hon. Members opposite have often stressed. I think they are quite right to stress it, for it is still the most formidable feature of our national expenditure. The fixed interest charges on the sinking fund arrangement for the National Debt. Hon. Members opposite even say that this is a burden which we cannot carry very much longer. I would, if I may, quote the remarks of the hon. Member for Caerphilly (Mr. Morgan Jones), when he was speaking on the Third Reading of the Finance Bill last year, for he put the case in language which I think represents the views of his party : You have converted the wages of the workers of this country compulsorily; you have converted their transitional payments from one figure to a lower figure; there has been compulsory conversion during the last ten or twelve years of the income of the workers of this country, and I am not exaggerating when I say that the value of the 4½ per cent. interest which war loan now produces is greater to-day than it was when the money was lent because of the decline in the cost of living."—[OFFICIAL REPORT, 23rd June, 1933: col. 1080, Vol. 279.] This complaint was put forward by hon. Members opposite. When that speech was made there was actually no 4½ per cent. War Loan outstanding, but I take it that what the hon. Gentleman had in mind was the 4½ per cent. Conversion Loan and the 5 per cent. Conversion Loan, which still remain to be dealt with. The 4½ per cent. Conversion Loan cannot be dealt with before the year 1940; there is some £375,003,000 of it, and it was issued in April, 1924, by the first Socialist Administration. The second millstone round the neck of my right hon. Friend, who has to deal with these outstanding securities, is the 5 per cent. Conversion issue, which cannot be dealt with before 1944; it was issued in November, 1929, by the second Socialist Administration, and there is outstanding of it £323,000,000. So grievous was the situation of the country even after six months of their activities, that they thought it advisable to convert a block of 5 per cent. War Loan on the same basis—5 per cent. with a longer period to run before it could be redeemed.

When, therefore, we are told by hon. Members opposite of the iniquity of paying those who invest their money in these safe, gilt-edged 5 per cent. securities, let them remember that there are no more difficult obstacles in the path of the Chancellor than those which have been placed there by themselves. The sound finance of my right hon. Friend, if he is allowed to continue, will enable these Socialist issues of stock to be converted or repaid when they fall due. Any return to the financial methods of the last Administration will make that process impossible and the burden even greater. Looking ahead, I agree with what was said by the hon. Gentleman opposite who has now left the House, the hon. Member for Springburn (Mr. Emmott) in his very thoughtful and interesting speech about the policy of the Government being fundamentally addressed to employment, and through employment to increased consuming power, of which an example may be given in the reduction of the horse power tax. Representing a Sheffield division, I am anxious and hopeful that another example may be given very shortly in an announcement of the extension of the duties upon steel, because imports have shown menacing signs of increase during the early months of this year. In Sheffield, under free imports, the skilled craftsman has had his implements snatched from his hands and the bread snatched from the mouths of his children. Hon. Members opposite, who this afternoon have been singing the virtues of unrestricted free imports, might find interesting evidence for their theories if they would address some open air meetings in the City of Sheffield. Sheffield has quite made up its mind that it is not going back to the bad old days of Free Trade, unemployment and poverty.

The Budget is a step in the direction in which the country desires to travel. A balanced Budget has been achieved and production in this country has largely been solved. The age of plentitude is with us. Man may be said to have conquered nature, and it is the duty of this House, irrespective of party, to see what we can do to build a bridge between this production and the consumption which is required to deal with the mass production of commodities. It is a matter upon which hon. Members, whatever their views, might well cooperate. The Chancellor of the Exchequer, in his opening speech on the Budget, told us that we had finished with "Bleak House" and were now entering upon "Great Expectations." May I suggest to him that there is another volume upon which we might start at the same time, while he is still in a Dickensian vein. I would suggest that "A Tale of Two Cities" is a work upon which we should now proceed—the City of London with its accumulation of capital seeking an outlet, and the City of Sheffield with idle hands and industries requiring finance. Something should be done to construct a pipe-line between the money in the City of London and the extension of credit for a rapidly developing industry such as we have in the industrial North.

Surely, the most significant lesson of the Bill, and, it seems to me, the fundamental point of all, is this. In other countries in which dictatorships are stalking the land, actual or potential, cuts at this moment are being compulsorily imposed by force upon the common people, but here the cuts were imposed by a popular vote under complete adult suffrage, and through that vote confidence and credit have been restored. The pound sterling now rests upon something far worthier than gold. It rests upon the appreciation by the world of the sterling character and courage of our British people. At a time when the people of Britain are being invited to parade in shirts of varying hues, surely they must realise at this moment of improvement and of hope that democratic government and Parliamentary institutions provide no unstable support upon which to lean in times of crisis and distress.

9.40 p.m.

Photo of Mr David Mason Mr David Mason , Edinburgh East

I should like to congratulate the hon. Gentleman the Member for Hillsborough (Mr. G. Braithwaite) upon his very thoughtful and interesting address. I do not agree with many of his arguments in favour of Protection, but I entirely agree with him as to the maintenance of sound currency. The right hon. Gentleman the Chancellor of the Exchequer's Budget must be described as a financial triumph rather than a triumph of finance, though no one would be ungracious enough to forget the results attained. The many speeches made to-night surely convince us that there are a vast number of unemployed in many of our industries, while the right hon. Gentleman apparently looks forward rather with despair to the future of our export trade. He thought that our local trade and our Imperial trade might be expected to recoup us for what he regarded as, apparently, the peak of our export trade. The great triumphs in the past of this country's foreign trade, which, before the War, was second to none in the history of the world, are not likely to be again attained, and, apparently, he looked forward somewhat with despair to our ever again achieving those great triumphs.

But are we really to imagine, or to be convinced by the statement that, for example, Canada with a population of 10,000,000 and the other Dominions with comparatively sparse populations, can recoup us for a foreign trade, say, with the United States of America with its 130,000,000 and with millions of others inhabiting the continent of Europe? We are the common carriers of the world, and, I believe, own something like one-third of the shipping and build something like one-half of the ships of the world. Are we to give up business as a great shipping country and as the common carriers of the world? Are we to imagine that we can recoup ourselves by protecting our local trade? I desire to see our trade with the Dominions and our local trade expand as much as possible. I am sorry that the right hon. Gentleman is not now present, but I notice that his very able representative is on the Front Bench opposite and is, I understand, to wind up the Debate. Does he imagine that the great foreign trade of this country is to be dismissed, and that we are to recoup ourselves, and make up in other directions for that immense trade by which we live, by cultivating our local trade and our trade with our Dominions, much as we desire to cultivate that trade? To imagine that this great shipping, banking, and exporting country cannot re-establish itself is, to my mind, impossible, and I dismiss it as not worthy of consideration by this House.

I may be asked, "What suggestion can you make by which we can recover our great position as a banking, exporting, carrying, and shipping country?" To that I propose to address myself. At the-outset I wish to refer to one or two matters connected with the Bill which is now before the House. On the Report stage of the Budget Resolutions the Chancellor of the Exchequer was good enough to reply to some criticisms I made with regard to the Sinking Fund provision. I had protested against what are called the Statutory Sinking Funds, and the Chancellor of the Exchequer said that in regard to the last loan of £150,000,000 unless he had had a Sinking Fund provision he would not have been able to borrow so cheaply. He was perfectly entitled to say that the loan was popular in the City. No doubt these Sinking Fund provisions are popular, because they mean profit for brokers, bankers and others, but the right hon. Gentleman's argument was by no means convincing.

Perhaps I might explain why I think that these Statutory Sinking Funds are illusory and unsound. They were condemned by the Report of the Colwyn Committee, which was composed of some of our most distinguished bankers and economists, arid presided over by Lord Colwyn. The Report of that admirable Committee showed that the idea that you can help or support or in any way do good through a Statutory Sinking Fund to the value of stock, is illusory. That was shown to be the case over 100 years ago by a man whose writings have become a classic on the subject. In connection with the 3 per cent. Funding Lean the prospectus provided that : His Majesty's Government undertake to set aside at the close of each half-year a sum equal to 2 per cent. on the nominal amount of the loan originally created. The loan was for £150,000,000 and the amount to be set aside would be £3,000,000 each six months or £6,000,000 per annum. The House will easily understand that in a time of surplus that would not be any heavy obligation, but when you have a deficit and you are tied by a statutory liability to maintain statutory Sinking Funds, you are frequently placed in the position that you have to borrow at a high rate of interest to pay off loans bearing a low rate of interest. The only real Sinking Fund is a Sinking Fund over and above the expenditure. It is unnecessary to put these Clauses into your prospectus. They may delude some ignorant people, but when you have a deficit and you have to borrow for the purpose of your Sinking Fund it means that your stock depreciates. The net result is that you add to your expenses.

There is one further question to which I should like to allude, and perhaps the Financial Secretary may say something about it in his reply. I refer to the position of the Exchange Equalisation Account. The Chancellor of the Exchequer told the House, and many hon. Members fell into the trap, that the Exchange Equalisation Account continued to show a profit. Many hon. Members congratulated the right hon. Gentleman upon the fact that the Exchange Equalisation Account had made a profit, but the right hon. Gentleman did not actually say that. He said that it continued to show a profit. We are continually told that this is a secret fund, which amounts to £350,000,000 of the taxpayers' money, and that we must not ask any questions about it, although the House has voted the money. When the Chancellor of the Exchequer takes credit that the fund continues to show a profit, we are entitled to ask how it is arrived at.

I have tried to make a study of the fund and it will be admitted by anyone who gives any attention to the matter that the fund works in this way. If, for example, we have to-day £190,000,000 of gold bullion, a large part of which has been bought according to contract entered into between the Bank of England and the Treasury, that gold bullion goes to the Bank of England at the old Mint price of £4 5s. per fine ounce, or £3 17s. 10½d. per standard ounce but the price which the Exchange Equalisation Account has to pay is anything from £5 to £6 or £7 per fine ounce. Therefore, it is evident that it does not need a very difficult calculation to discover that the difference between the £5, the £6 or the £7 per fine ounce which has to be paid for £50,000,000 or £60,000,000 of gold bullion by the Exchange Equalisation Account and the £4 5s. per fine ounce will mean a debit to the taxpayer, and will mean a loss of anything from £20,000,000 to £30,000,000 if we return to the old parity. Therefore, when the Chancellor of the Exchequer says that the Exchange Equalisation Account continues to show a profit it is sailing rather close to the wind. What we want to know is whether it has made a profit, and the real test of that would be in the final implication.

We are anxious to know what is the policy of His Majesty's Government with regard to monetary policy. I think we are entitled to ask that. The right hon. Member for Hillhead (Sir R. Home) in a very interesting speech on the Budget asked the Chancellor of the Exchequer if the Government would give some indication of their monetary policy. Do they intend to maintain the present position of the paper currency for ever and to reduce the purchasing power of every wage earner and of every dividend recipient? Do they intend to do that in perpetuity? We are entitled to ask for a declaration of policy from the Government in regard to that most important subject. With a view of eliciting an announcement I have consulted hon. Members from all parts of the House and I rejoice to find that I have received support from Members of all parties for a new Clause, which I propose to put on the Order Paper when the Bill receives a Second Reading, for a commission of inquiry on monetary policy, to make recommendations and to-report to this House.

My views are well known, but there are many different opinions in regard to this most important question and it is desirable that we should have some responsible body set up for the purpose of crystallising the present position in regard to monetary policy, which is perhaps the most important subject to which we can address our minds if we desire to restore our trade. After the Napoleonic Wars in 1823 it was the resumption of specie payments which marked the beginning of the great recovery in our trade, and in our foreign trade. Take the question of Germany. I visited Germany a few weeks ago and had the privilege of meeting some of their most distinguished Ministers, including Dr. Schacht, President of the Reichsbank, who perhaps next to Hitler is the most important man in Germany to-day. He said that Germany could pay her debt in bonds, but she is quite unable to transfer.

Take the question of our debt to the United States of America. We could pay, and no doubt we are willing to pay, but the difficulty is, transfer. The sooner we get rid of the debt, either by the payment of a lump sum and funding it, the better, but the question is always one of transfer. Germany cannot transfer because there is no means of exchange. Quotas, restrictions and other interferences reduce trade to a minimum both on the Continent and with the United States. Unless we can develop our foreign trade by means of an exchange of products, and create machinery by which that exchange can be carried out, it is impossible to conduct foreign trade. With a depreciated currency and an inconvertible paper money from which we are suffering we cannot build up an export trade. Our foreign trade fell by no less than £195,000,000 in 1932 as compared with the previous year, and the Chancellor of the Exchequer must not attempt to delude this nation of 49,000,000 people by pointing to a comparatively small increase last year as compared with that enormous decrease. Our ships are laid up and our tramp steamers are asking for a subsidy because trade is reduced to a minimum. We cannot live by taking in our own washing, that will not help us at all.

I desire to see our internal trade flourishing and prosperous, but unless we can develop and increase our foreign trade we shall sink into the abyss and cease to be a first-class Power. Therefore, I hope that if I have an opportunity to put forward my proposal on a later stage of the Bill that hon. Members will support me. We may differ as to what is the best thing to be done, but let us at least apply our minds to the problem. Let us turn this House into a Council of State. We may attack the Government, and probably shall, but we are anxious to do the best thing for the country and, therefore, I hope that the Chancellor of the Exchequer and the Financial Secretary will consider the proposal that I hope to put forward at a later stage. Let me quote the references to one or two former committee which have been appointed for this purpose. In 1810 there was the Bullion Committee, on the findings of which Sir Robert Peel founded his policy which led to great prosperity, carried on during the latter part of the century by Mr. Gladstone. The reference to the Bullion Committee was : The Select Committee appointed to inquire into the cause of the high price of gold bullion, and to take into consideration the state of the circulating medium, and of the exchanges between Great Britain and foreign parts, and to report the same with their observations thereupon, from time to time to the House, have, pursuant to the Orders of the House examined the matters to them referred, and have agreed to the following report. The reference to the Macmillan Committee which was appointed in 1929 was : We, the undersigned members of the Committee appointed by Treasury Minute of 5th November, 1929, to inquire into banking, finance and credit, paying regard to the factors both internal and international which govern their operation, and to make recommendations calculated to enable these agencies to promote the development of trade and commerce and the employment of labour, have now the honour to submit our report.

Photo of Mr Thomas Magnay Mr Thomas Magnay , Gateshead

That was before we went off the Gold Standard?

Photo of Mr David Mason Mr David Mason , Edinburgh East

It was in 1929, and they reported in 1931. The point I wish to drive home is that these Committees have all been of service. They have crystallised opinion, and I would ask the Chancellor of the Exchequer to be good enough to give the request I make—it is not made by myself alone but by Members in all parts of the House—his careful consideration. While we may differ as to what should be our monetary policy the appointment of a responsible committee drawn from Members in all parts of the House and outside would crystallise opinion as it exists to-day. Great Britain has always been a great financial Power, and it is only right that she should take the lead in this matter and try to show-how the difficulties of transfer might be overcome. The right hon. Gentleman has said that the difficulties of our export trade are not entirely due to tariffs or Free Trade but to currency and other difficulties. While we shall continue to differ on the question of Protection and Free Trade—I have never wavered in my views as to Free Trade—I recognise that this House desires to test tariffs for a period, and I have tried, therefore, to direct my mind to what I think may be useful. This seems to me to be useful work. We all believe in a sound financial system and, therefore, I appeal to the Chancellor of the Exchequer to give the plea I am making to him his most careful consideration.

10.3 p.m.

Photo of Sir Adrian Baillie Sir Adrian Baillie , Linlithgowshire

At this late hour the hon. Member for Edinburgh, East (Mr. D. Mason) will excuse me if I do not refer to his most forcible speech. There are one or two points in the Bill to which I desire to draw attention for a few moments, and they are sins of omission not of commission. Like other hon. Members I want to pay my tribute to the Chancellor of the Exchequer for his most successful handling of the finances of the country whereby all parties who had to endure some form of sacrifice in 1931 have been given a measure of relief. But there is one grave omission. Of all the taxes imposed in 1931 by the second Budget, relief has been granted in every case except in the case of the Entertainments Duty on the cheaper seats, 6d. and under. I know that the right hon. Gentleman will be sympathetic in this matter. When introducing the duty in 1931 the Chancellor of the Exchequer said : While I am no more enamoured of this tax than in the past I feel that in the present circumstances it is a ready instrument for affording all sections of the community an opportunity of making a contribution to our needs."—[OFFICIAL REPORT, 10th September, 1931; col. 309, Vol. 256.] I am sure the Chancellor of the Exchequer would not have omitted a relief in this direction had it not been for present exigencies of Budget balancing. It is clear to me, from the quotation which I have just read, that that tax was designed to be an indirect tax. In the beginning it was an indirect tax, and in so far as it was an indirect tax, it had comparatively little effect on the higher price seats, but it had a very serious and drastic effect on the lower price seats of the poorer cinema houses in the poorer areas. That was soon apparent, because the cinema proprietor, having at first put up the price of a seat from 6d. to 7d. and from 3d. to 4d., found that he had diminished audiences and, therefore, had to reduce the price once more from 7d. to 6d. and from 4d. to 3d. In that way it may be seen that the tax is no longer an indirect, but a direct tax, especially on the poorer cinema proprietors. May I repeat that, so far as I can see, this is the only 1931 impost that has not been dealt with by way of relief? [An HON. MEMBER : "And the Surtax."] I was taking that in the same breath as Income Tax, because the Surtax payer is also an Income Tax payer. I know that the industry itself is feeling very sore about it. It feels that it has been neglected, and knowing, as we do to-day, that the cinema industry is a very powerful instrument for education, culture, and even propaganda, I would say, without, I hope, giving any indication by word or deed of intimidation, that it might not be wise entirely to neglect that great industry.

Knowing, as we must do, that the Chancellor of the Exchequer is in entire sympathy with the complaint that I am voicing at the moment, I must believe that there is only one reason why he has omitted dealing with this tax, and that is that he could not find enough cash in the surplus to do it. I have indicated to the right hon. Gentleman and to the Financial Secretary to the Treasury a way in which I believe the Chancellor could recoup himself in regard to the Entertainments Duty, and that, without looking further than the industry itself and without putting any extra burden on any British taxpayer, but there is no occasion for me to develop that point at the moment. Perhaps I may have an opportunity later. I would merely, in conclusion, most seriously ask my right hon. Friend to reconsider this question of the Entertainments Duty, and, if he cannot do anything to-day, perhaps he can do it in October, and if he cannot do it all in October, possibly by giving half he may put the industry on the same basis as those who suffered in 1931. If he can do that the industry will be very grateful, and the poorer people in our distressed areas will be very grateful too.

10.9 p.m.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

The Chancellor of the Exchequer, replying earlier in the Debate to the criticisms that had been made by the speakers who had preceded him, took credit for having brought in what he said was a landmark in the way of Budgets, and he expected the House to agree with him that, in producing this Budget and in announcing a restoration of some of the cuts and the partial restoration of others, the country had at last, through the safe guidance of the National Government, turned the corner and was now on a fair way to prosperity. When you go for two years defaulting upon your American debt, declining to pay, roughly, each year a sum of £30,000,000, you can very soon be looked upon as a prosperous nation, and begin shovelling out what you have saved by your defaulting to people in your own country. You can claim to have balanced your Budget, which the previous Government, you can say, were unable to do, and you have got out of the difficulty in which the previous Government placed the country; but you forgot to remind the country that at least the previous Government had met its American obligations as they fell due, and that at no time during the life of that previous Government had America been able, either directly or indirectly, either through its politicians or in the columns of its Press, to accuse the British nation of defaulting in its payments on the American debt. Therefore, I submit that when the Chancellor of the Exchequer produces a Budget which he claims has a surplus of something like £29,000,000, and shows only a token payment of slightly over £3,000,000 on the American debt—

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

I am open to correction if I am misstating the figures.

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

I do not show any token payment at all.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

That makes the right hon. Gentleman's situation all the worse. I was giving him credit for doing something by way of token payment, but evidently he is not even doing that, and, therefore, the Chancellor of the Exchequer has now admitted that he is completely defaulting and not even—

Photo of Mr Neville Chamberlain Mr Neville Chamberlain , Birmingham, Edgbaston

I would remind the hon. Member—perhaps he has forgotten what I did say—that I simply said I was not making any provision for either receipts or payments on the question of war debts.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

That is a very evasive phrase by the right hon. Gentleman, similar to what the hon. Member for East Edinburgh (Mr. D. Mason) pointed out, when he said the Chancellor had stated that the Equalisation Fund was "showing a profit"—something out of which hon. Members can make anything they like; and very often Members make the wrong thing out of it, until brought up with a round turn when trying to pin the Chancellor of the Exchequer down to some definite statement. On the right hon. Gentleman's own admission, his Budget is not balanced, and, therefore, the approval which it has met from Members of the Tory party, Members of the National Labour party, and, I take it also, from Members of that little group of the Liberal party which is still associated with the National Government, is not justified, and all is not well with this country yet, in spite of what the Chancellor of the Exchequer and other speakers for the Government have been saying.

The right hon. Gentleman the Chancellor of the Exchequer, evidently slightly perturbed as to criticisms from this side, wanted to know what the Labour Government or any Labour Government in the future might be prepared to do in similar circumstances, leaving out of account any idea of a defaulting on the debt, provided they had a similar surplus, provided that it had been necessary, through some peculiar circumstances arising in the country, for cuts to be made in various services, and in the case of various classes of people who were in receipt of payments out of State funds or out of insurance funds. Surely the obvious reply to that would be that, supposing there were a surplus at a subsequent date but the surplus was insufficient to meet the whole of the cuts and restore them fully, any Government's duty would be to use that money in giving the largest amount of benefit to those who had suffered most by the original imposition of the cuts. We contend that that is not what the Government to-day are doing; they are not utilising the surplus which they claim to possess to the best possible advantage of those who have suffered the most. That is one of the strongest reasons for our Amendment. We object to this Bill because we consider that the Government have not used the surplus to the best advantage.

The Chancellor of the Exchequer in his Budget speech informed the House that he was going to restore the cuts to the unemployed who were on statutory benefit. The right hon. Gentleman had no right to make any such statement. The statement ought to have come from the Minister of Labour, because the restoration of the cut to those who were on standard benefit does not come out of any Budget surplus, but comes out of the accrued balance of the Unemployment Fund over which the Minister of Labour has control. The only sum which the Chancellor of the Exchequer is finding towards unemployment payment is the £3,600,000 which he is to pay to those who are on transitional payment and are subject to the means test. But in order to provide the Chancellor with an opportunity of appearing before the House in a dramatic situation, in which he can come forward as the great hero who restores unemployment benefit to those who had been paying for unemployment insurance, the Minister of Labour was precluded from making a statement which he had the right and privilege to make in regard to something that came within the control of his own Department.

It is the Chancellor of the Exchequer who makes the heroic pronouncement, in order to lead supporters behind him to believe that he is able to restore unemployment benefit because he has a surplus. It is a piece of what one might almost call political trickery, such as has seldom been played in this House on any body of politicians in any Parliament of which I have been a Member since 1918. It is imposing on the House by making it appear that the restored unemployment benefit is to be paid out of the surplus which the Chancellor has. In the statement which was posted to every Member of the House it is said that because the Unemployment Insurance Fund is now showing a balance the Chancellor is able—the right hon. Gentleman is able, not the Minister of Labour—to restore the unemployment benefit cut. As a matter of fact, it is because the workers of the country, owing to the increased contributions which they have paid, have now built up a balance in the Unemployment Insurance Fund, that the Government are able to restore the benefit which was cut down by 10 per cent. in 1931. It is playing and trifling with the House for the Chancellor to come forward and endeavour to mislead Members in the way he did in his Budget speech.

The right hon. Gentleman then told us that anyone who voted against this Bill was voting against the restoration of the cuts. I think I have shown the House that to vote against this Bill is not to vote against the restoration of unemployment benefit. It is only to vote against the reduction of the Income Tax. Even the increase in the transitional payments which, I take it, does come out of the Chancellor's surplus, is not mentioned in the Bill at all. Therefore, when the right hon. Gentleman threatens those who might be inclined to support our Amendment, that if they dare to vote against the Bill they will be voting against the restoration of the cuts imposed in 1931, he is uttering an empty threat. Neither his Government nor his party can issue a leaflet against any Member stating that he voted against the restoration of the cuts, because the Finance Bill does not restore any one of the cuts. Again, I say that this is playing with the House. It is trying to make the House believe that something is being done in this Bill which is not being done. Consequently, if Members have the courage to vote against it, they can do so with an easy mind, knowing, as I say, that the Chancellor's threat is an empty threat.

The Chancellor told us, in connection with certain loan conversions, that he had reduced the rate of interest on those loans and had saved money. By that saving we are told some of this surplus has been achieved. He suggested that the rich were receiving less income as a result of that reduction of interest. I have advocated a reduction of War Loan interest since 1921. I have put Amendments down to various Finance Bills to that effect. The last occasion on which I did so was in 1931, before the General Election, under the first National Government, when we had the Snowden Budget. I put an Amendment down to that Finance Bill. Every time I had the opportunity I put down Amendments for a reduction of War Loan interest. I was accused, even upon that last occasion, of seeking to repudiate the War debts of this country. Some hon. Members opposite issued a leaflet against me to that effect but a fortnight or three weeks after the issue of that leaflet denouncing me as an advocate of repudiation, their own Chancellor of the Exchequer came along with his conversion scheme and reduced the interest. They did not issue a leaflet against the right hon. Gentleman. They praised him for his sagacity in carrying out the conversion and saving the country so many millions. Apparently, it all depends upon the part of the House in which you sit as to how your proposals are dealt with by hon. Members. All that matters is the geography of the House and the place where you sit in it.

There is one point arising on this Bill which strikes me and must have struck other hon. Members as remarkable, and that is the proposal to destroy the Land Taxes. The National Labour Members of the Government have issued this week a little booklet called, "The Home Front : an account of the domestic record of the National Government," in which they state : The Members of Parliament who were returned at this election"— that is, the 1931 election— to support the National Government contained, as was inevitable under the conditions of an election so improvised, a vast majority of Conservatives but it should be noted that in this Parliament above all Parliaments it is the Cabinet which counts. It is the Cabinet which time and again has had to make swift decisions and subsequently to ask Parliament to ratify them. This being so, it is important to remember that in the Cabinet are men drawn in much more equal proportions from different parties and from different social backgrounds. The membership of the National Government is essentially a balanced National coalition, even if the membership of the House of Commons, judged by traditional party labels, were of a strongly Conservative complexion. They try to make it clear that there is loyalty between the various sections. They tell us that the Cabinet take the decisions which the Members in the House ratify. I would like to ask the Chancellor of the Exchequer, as one of the Members of the Cabinet and as the Member of the Cabinet responsible for the Finance Bill, whether the Prime Minister was present at the Cabinet when it was decided to delete the Land Tax. Am I probing for a Cabinet secret to be divulged? I am merely putting a straight question. I am willing to give way if the Chancellor wishes to reply. This is what the Prime Minister said on the eve of the poll at the General Election in 1931, when it was suggested that there might be some wangling done in the Cabinet if, through the fortunes of the election, there should be a majority of Conservatives in the new Government : If there is to be any partisan manoeuvring, then I am not their man. I want to ask the Chancellor of the Exchequer and the Lord President of the Council, Has the Prime Minister become their man now? Who is responsible for the deletion of the Land Tax? Even the Lord President of the Council made a statement that this was a Coalition Government. It was quoted by a right hon. Member below the Gangway earlier in the evening. He advised those in his party who were asking for the repeal of the Land Tax to bear in mind that it was a Coalition Government, and that they must have some consideration for those who were their colleagues in the Government and in that party who were supporting the Government. I give the Lord President of the Council credit for being honest and sincere in that statement. What has happened to change his opinion now? Has the Prime Minister climbed down? Has the Prime Minister thrown aside all the statements he made in 1931, not only about the Land Tax but about all the other taxes? Why are not he and the Secretary of State for the Dominions here? Has he ceased to be your man, and has he now—or have they now—decided to resign from the National Government? Is this a breach of faith on the part of the Tories, who have now taken possession of the National Government? Have the buccaneers, the piratical Tories, now taken possession of the Coalition barque? I see the First Lord of the Admiralty present. Is he sure that they have not got the Fleet? I should like to know what the Government have got to say about it now? The Prime Minister, the Secretary of State for the Dominions, the hon. Member for South Nottingham (Mr. Knight), all the Members of the National Labour party, are still retaining their membership, evidently, of this Government, after being flouted. The hon. Member for Leith (Mr. E. Brown), who is Secretary for Mines, used to be a very strong advocate of the taxation of land values.

Photo of Mr Ernest Brown Mr Ernest Brown , Leith

The hon. Member is wrong; I voted against it.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

The hon. Member says that he voted against it. At any Liberal conference he was at?

Photo of Mr Ernest Brown Mr Ernest Brown , Leith

If the hon. Member will study the brown and green books, of which I know something, he will find that he does not understand Liberal policy.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

No, I admit that I do not understand Liberal policy. We have some Liberals sitting on this side and some are over there, some are in oppostion and some are supporting the Government. What is their policy? [HON. MEMBERS : "The Green Book."] Surely they do not think the electorate is so green as to accept that. The Government were elected for a specific purpose; they appealed to the electorate to elect them in order to save the country from what they claimed to be a national crisis, telling the country that no party advantage was going to be taken, but that all three parties were going to work for the common weal of the country, and that when once the country was again in safety then the three" parties could dissolve and assume their separate existences once more. Here is a particular tax which has been for many years one of the most burning questions in party politics in this country.

In my membership of the House of Commons I have seen two Coalition Governments, and each of them has brought budgets before the House in which a land tax has been deleted from the Statute Book. History is repeating itself to-night in another Coalition Government, and the Prime Minister who was mainly responsible for the passage of the Land Tax in the Labour Government, as one of the planks upon which he pledged himself and upon which he placed great reliance, is assisting, as Prime Minister of this Coalition, in stripping it from the Statute Book. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) was the other Prime Minister. After fighting two general elections upon the Land Tax and having had it put upon the Statute Book, he saw, in the Finance Bill introduced when he was Prime Minister of the last Coalition Government, between 1918 and 1922, the Land Tax that he had placed upon the Statute Book torn from it. Curiously enough, to complete the coincidence, the Chancellor of the Exchequer who is responsible for the present Finance Bill is the brother of the Chancellor of the Exchequer who was responsible for the Finance Bill which destroyed the first Land Tax. These coincidences are becoming overwhelming.

In this Finance Bill hon. Members are asked to accept a national balance-sheet. Had such a balance sheet been produced before any public company in this country, and had any chairman of directors attempted to push it through a shareholders' meeting, that chairman of directors would find himself beside Hatry at the very earliest opportunity. The Chancellor of the Exchequer is attempting to pass a national balance-sheet of that character. I ask the House to reject the Finance Bill, and to turn down not only the Chancellor of the Exchequer with his Finance Bill but the Prime Minister for breaking faith with the country.

10.38 p.m.

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

The more forceful, I will not say the more coherent, portion of the speech of the hon. Member for Govan (Mr. Maclean) seemed to me to fall into two parts; the first part was directed to proving that there was no surplus, and the second part to telling us how we ought to distribute it. As a master of lurid language, the hon. Gentleman has one serious rival in the House who has displayed his histrionic ability to admiration this afternoon. Referring to one of the Clauses in the Finance Bill, that concerned with the repeal of the Land Value Tax provisions, he said that my right hon. Friend had "done this deed in the dark." We must be grateful to the right hon. Gentleman for having brought it to light. Let us be clear exactly what the Finance Bill is. The Finance Bill contains the practical proposals of the Government for providing the annual revenue. As a matter of course, in its preparation, the fiscal machinery of the State is brought under review. If the machinery is to be effective, it must be kept in constant use. The Inland Revenue is not a museum in which ancient pieces are kept. All the instruments in the armoury are sharp and in order, and ready to be used with effect. The machinery for the collection of the tax on land values was put into abeyance by the decision of the National Government when the right hon. Gentleman the Member for Caithness and Sutherland (Sir A. Sinclair) was still a member of it. I recognise, of course, the great difference in our fortunes that has occurred since his departure. That, after all, was the theme of his speech. It was not history without tears; it was history with histrionics.

In the ordinary course of events, the Land Values Tax would have come into operation this year. As three years must elapse between the necessary preparation and the exaction of the tax, it becomes plain that the tax could not become operative in the lifetime of the present Parliament. Accordingly, the Government have decided, having examined the whole matter, that some future Parliament should not be deprived of its right to examine the whole matter Afresh, in the light of the new conditions which will then prevail, and in detail. That, I think, is a practical proposal, and I do not think it can cause any undue regret. The right hon. Gentleman the Member for Caithness and Sutherland was careful to tell us that he did not approve of the tax itself—

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

Oh, no; I said I was not wedded to it.

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

He was not wedded to it, and, therefore, he will not experience any marital loss. He was fully expressing the attitude of all the Liberal parties when he said that he was not wedded to the tax; nor are we. It only remains to remove it. At any rate, the right hon. Gentleman will recognise this important modification in the situation, that the Labour party has since, I imagine, revised its opinion also, for one of the principal advocates of the tax in this House is going to Leeds at the week-end to recommend the entire confiscation of private property. It will, therefore, be a complete waste of time to go through the elaborate process of a valuation, and the machinery will cease to be of any use. It only remains to remove one misapprehension which occurs in one of these Amendments. The tax would not be a lucrative source of revenue. So much was it compromised and modified owing, not to the marriage of the Liberal party to the tax, but to the liaison of part of the Liberal party with the Government of the day, that the revenue that it could produce is infinitesimal. Therefore, no one loses anything.

As I have said, the Finance Bill is a practical, businesslike Measure. We are concerned, though it might be difficult to appreciate it from the speech to which we have just listened, not with measures to rectify a deficit, but with proposals for distributing a prospective surplus. No sacrifice is called for from anyone, no benefit enjoyed by anyone is modified, no salary is reduced and no direct tax is increased. On the contrary, the nation, emerging at last from its long period of self-denial and self-discipline, begins to reap the rewards of its forbearance, and there is a general alleviation of burdens. The situation of those who have so loyally and so ungrudgingly contributed towards this result was not made easier by the doubts that were instilled into their minds as to the efficacy of the measures that were being taken. Their fortitude must have been strained to the utmost when they wore told, as they were told repeatedly by hon. Members opposite, that they were the victims of a cruel deception and that the cuts were to become a permanent feature of our economy. When this charge was finally disproved, as it was by my right hon. Friend's Budget statement, the Deputy-Leader of the Opposition chose that moment—a moment incidentally in which the whole world was about to hail our achievement—to denounce the Measure as the meanest Budget on record. The hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) sitting on the Front Bench, the Members of which when the emergency was upon them questioned its existence and assured us that all would be safe in their hands, has issued a manifesto which says : We are moving inexorably towards an ever-deepening crisis, and the appalling situation cannot be remedied unless we are prepared to change the whole economic system. That is the higher Socialist criticism, and it will be plain that these two leaders have set their subordinates a very difficult task in living up to it. One observes that they are not here themselves. The hon. Gentleman who described this as the meanest Budget upon record, has not ventured to try to put his case before the House of Commons.

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

Those to whom has been entrusted the duty of debating this matter, torn between their loyalty to their leaders and their loyalty to the facts, have endeavoured to explain the surplus away. The hon. Gentleman the Member for Caerphilly (Mr. Morgan Jones), who interrupts me, said that it would be churlish of him to deny that the situation had improved, but, of course, the revival was enjoyed by other countries also. While that may seem to detract from the merit of those who made sacrifices, it leaves it upon the shoulders of the hon. Gentleman to show how it is that, at a time when we are remitting cuts and decreasing taxes, other nations, supposedly enjoying this revival, are increasing cuts and intensifying taxes. In Italy, for instance, they are increasing the cuts from 6 to 20 per cent., and in France, not only are they increasing the cuts, but they are diminishing the number of State employés by no less than 10 per cent., and they are actually making diminutions in war pensions. The incontrovertible fact remains that at this moment we are making a restoration, and the only difference between us can be as to the manner in which we are to make it.

We have proceeded upon the principle that those who made the contributions have the first claim upon the surplus. The Amendment, so far as I understand it, contests this principle, which was laid down first of all by Lord Snowden, who made the cuts, and reiterated by my right hon. Friend. An acceptance of this Amendment would involve breaking faith, and that is a course which my right hon. Friend is not prepared to pursue. The money having been given on a condition, it would be quite wrong to make this Finance Bill a vehicle for redistributing the national wealth. It is not our concern, as it is the concern of hon. Gentlemen opposite, to inquire how people will spend the moneys which are restored to them. It may be that some people will buy consumers' goods and that some will buy capital goods. I decline to assent to the theory which is embodied in this Amendment and which has been argued in so many speeches from the opposite side, that it is the working classes who are the spenders and the capitalists who are the savers. One has only to look at the course of savings deposits over the last three years to show how unsubstantial is the case which has been made by hon. Gentlemen opposite.

I take, at this late hour, a total of the deposits in the Post Office Savings Bank, the Trustee Savings Banks and the National Savings Certificates, and I find that these have increased from £811,000,000 in 1931–32 to £845,000,000 in 1932–33, and now stand at £900,000,000—an increase in what are mainly working-class savings of £90,000,000 in the last three years. If you add to these figures other savings which are usually considered to be working-class savings, such as the investments in railway savings banks, trade unions, industrial and provident societies, and so forth, you will find that the thrift of the people has increased from a total of £2,261,000,000 in 1930 to £2,492,000,000 on the latest available date, an increase of £231,000,000 in what are mainly working-class savings in the last three years. What then becomes of the argument that the working-classes are the spenders, and the capitalists are the savers?

When you come to the second principle, that the cuts should be restored in roughly the same proportion as they were given, I admit that there is a genuine difference, or that there might be a genuine difference, as to the application of this principle. As regards the amounts allotted, there can be no difference. Those who suffered salary reductions contributed £11,000,000 in a full year, and they get £5,500,000 back. Those who suflered reductions in direct taxation contributed £57,500,000 in a full "year, and they get £24,000,000 back. But there may be some dispute as to whether it would be better to restore the allowances to what they were rather than to reduce the standard rate of tax. I note, in passing, that while hon. Gentlemen opposite allege that we have not restored the cuts to the unemployed in full, they base that charge upon the ground that we have not abolished the means test. That, of course, is, with us, a matter of principle as defined in the language of the right hon. Gentleman the Member for Bow and Bromley (Mr. Lansbury). But in this Amendment they are advocating a means test, and a means test upon a family basis in regard to the distribution of the surplus, and they ask that this surplus should be distributed according to the means of a man with a family. There is nothing particularly novel about that. There is no new discovery involved. It is a consecrated principle of the Income Tax law, and if it be true that a man of small income with family responsibility would stand to gain more by a restoration of the allowances, I would ask hon. Gentlemen to realise why that is the case The standard rate of Income Tax is 4s. 6d. in the £, but a married man with three children enjoying an income of less than £400 a year, is exempt from taxation, or virtually exempt. He pays nothing either before this Bill or after this Bill, and if he has an income of £400 he pays an effective rate of tax not of 4s. 6d. in the £, but of 2½d. in the £. Therefore, it is quite obvious that a reduction in the standard rate of Tax cannot be as great to him as it would be to a man of £4,000 a year, in similar circumstances, who pays an effective rate of 4s. 7½d. in the £.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

Is the effective rate upon other people 4s. 6d. in the £?

Photo of Mr Leslie Hore-Belisha Mr Leslie Hore-Belisha , Plymouth, Devonport

In some cases it is over 12s. It depends upon the amount of income upon which you pay. I do not resent the hon. Gentleman's interruption, although my time is nearly up. The married man with £500 a year income having three children pays at the effective rate of 6½d. That is the favourite illustration of the hon. Member for East Fulham (Mr. Wilmot),

and that is why I mention it. That is the maximum rate at which the man with an income of £500 a year pays. It takes no account of other allowances to which he is entitled. I hope the House will observe that I am not in the least destroying the hope that these allowances may be restored. I am only trying to put them in perspective. A married man with three children and an earned income of £400 a year is exempt as to one-fifth of his income in respect of earned income allowance. Therefore, he deducts £80, leaving £320. He has a personal allowance of £150, also £50 for his first child, £40 for the second child and £40 for the third, making £130 in respect of the children. Therefore, there is a further £280 to be deducted, leaving him with an effective taxable income of £40. On that £40 he pays half the standard rate of tax, namely, 2s. 3d., leaving him with a maximum tax burden of £4 10s. If he has a life insurance policy he gets relief upon it at half the standard rate of tax. Suppose he has a life insurance policy with a premium of £20 per annum, then the man with £400 a year income and three children only pays £2 5s. in tax. The man with £500 income and three children who has a life insurance policy with a premium of £30 only pays £10 per year in tax.

I hope that these illustrations show that the burden is not unbearable and that, at any rate, the Opposition will give us credit for the fact that every direct taxpayer, except the super taxpayer, has his burden reduced by 10 per cent. That is something. The unemployed have their cuts restored in full and the State servants by one-half. That is something. If it cannot meet, for political reasons, with the gratitude of hon. Members opposite, it is some consolation to us to realise that the methods which have made this possible are the admiration of the world.

Question put, "That the words proposed to be left out stand part of the Question."

The House divided : Ayes, 290; Noes, 55.

Division No. 257.]AYES.[11.5 p.m.
Acland-Troyte, Lieut.-ColonelAllen, Lt.-Col. Sir William (Armagh)Baillie, Sir Adrian W. M.
Adams, Samuel Vyvyan T. (Leeds, W.)Amery, Rt. Hon. Leopold C. M. S.Baldwin, Rt. Hon. Stanley
Agnew, Lieut.-Com. P. G.Anstruther-Gray, W. J.Baldwin-Webb, Colonel J.
Albery, Irving JamesAstbury, Lieut.-Com. Frederick WolleBalfour, George (Hampstead)
Allen, Sir J. Sandeman (Liverp'l. W.)Astor, Viscountess (Plymouth, Sutton)Balfour, Capt. Harold (I. of Thanet)
Banks, Sir Reginald MitchellGuest, Capt. Rt. Hon. F. E.Moss, Captain H. J.
Barton, Capt. Basil KelseyGuinness, Thomas L. E. B.Mulrhead, Lieut.-Colonel A. J.
Bateman, A. L.Gunston, Captain D. W.Munro, Patrick
Beauchamp, Sir Brograve CampbellGuy, J. C. MorrisonNation, Brigadier-General J. J. H.
Beaumont, M. W. (Bucks., Aylesbury)Hall, Capt. W. D'Arcy (Brecon)Nicholson, Godfrey (Morpeth)
Beaumont, Hon. R. E. B. (Portsm'th, C.)Hamilton, Sir George (Ilford)North, Edward T.
Bernays, RobertHammersley, Samuel S.O'Donovan, Dr. William James
Bevan, Stuart James (Holborn)Hannon, Patrick Joseph HenryOman, Sir Charles William C.
Bossom, A. C.Harbord, ArthurO'Neill, Rt. Hon. Sir Hugh
Bowyer, Capt. Sir George E. W.Hartington, Marquess ofPatrick, Colin M.
Braithwaite, J. G. (Hillsborough)Harvey, George (Lambeth, Kenningt'n)Peake, Captain Osbert
Brocklebank, C. E. R.Harvey, Major S. E. (Devon, Totncs)Pearson, William G.
Brown, Col. D. C. (N'th'l'd., Hexham)Haslam, Henry (Horncastle)Percy, Lord Eustace
Brown, Ernest (Leith)Headlam, Lieut.-Col. Cuthbert M.Petherick, M.
Brown, Brig.-Gen. H. C. (Berks., Newb'y)Hellgers, Captain F. F. A.Peto, Sir Basil E. (Devon, B'nstaple)
Buchan-Hepburn, P. G. T.Hills, Major Rt. Hon. John WallerPowell, Lieut.-Col. Evelyn G. H.
Burghley, LordHope, Capt. Hon. A. O. J. (Aston)Pownall, Sir Assheton
Burnett, John GeorgeHore-Bellsha, LesliePybus, Sir Percy John
Butler, Richard AustenHornby, FrankRalkes, Henry V. A. M.
Cadogan, Hon. EdwardHorsbrugh, FlorenceRamsay, Alexander (W. Bromwich)
Calne, G. R. Hall-Howard, Tom ForrestRamsay, T. B. W. (Western Isles)
Campbell-Johnston, MalcolmHudson, Capt. A. U. M. (Hackney, N.)Ramsbotham, Herwald
Caporn, Arthur CecilHume, Sir George HopwoodRamsden, Sir Eugene
Carver, Major William H.Hunter, Dr. Joseph (Dumfries)Ray, Sir William
Castlereagh, ViscountHunter, Capt. M. J. (Brigg)Reid, Capt. A. Cunningham-
Cayzer, Sir Charles (Chester, City)Hunter-Weston, Lt.-Gen. Sir AylmerReid, David D. (County Down)
Cazalet, Thelma (Islington, E.)Hurst, Sir Gerald B.Reid, James S. C. (Stirling)
Cazalet, Capt. V. A. (Chippenham)Inskip, Rt. Hon. Sir Thomas W. H.Reid, William Allan (Derby)
Chamberlain, Rt. Hon. N.(Edgbaston)Jackson, Sir Henry (Wandsworth, C)Remer, John R.
Chapman, Col. R.(Houghton-le-Spring)James, Wing-Com. A. W. H.Renwick, Major Gustav A.
Cobb, Sir CyrilJamieson, DouglasRhys, Hon. Charles Arthur U.
Cochrane, Commander Hon. A. D.Jesson, Major Thomas E.Rlckards, George William
Colman, N. C. O.Joel, Dudley J. BarnatoRoberts, Sir Samuel (Ecclesall)
Colville, Lieut.-Colonel J.Jones, Henry Haydn (Merioneth)Robinson, John Roland
Conant, R. J. E.Jones, Lewis (Swansea, West)Ropner, Colonel L.
Cook, Thomas A.Ker, J. CampbellRoss, Ronald D.
Cooke, DouglasKerr, Lieut.-Col. Charles (Montrose)Ross Taylor, Walter (Woodbridge)
Cooper, A. DuffKerr, Hamilton W.Runge, Norah Cecil
Copeland, IdaKimball, LawrenceRussell, Alexander West (Tynemouth)
Courthope, Colonel Sir George L.Knight, HolfordRussell, Hamer Field (Sheffield, B'tslde)
Craddock, Sir Reginald HenryKnox, Sir AlfredRutherford, John (Edmonton)
Craven-Ellis, WilliamLamb, Sir Joseph QuintonRutherford, Sir John Hugo (Liverp'l)
Croft, Brigadier-General Sir H.Latham, Sir Herbert PaulSalmon, Sir Isidore
Crooke, J. SmedleyLaw, Richard K. (Hull, S. W.)Samuel, Sir Arthur Michael (F'nham)
Crookshank, Capt. H. C. (Galnsb'ro)Leckle, J. A.Sandeman, Sir A. N. Stewart
Croom-Johnson, R. P.Leech, Dr. J. W.Sassoon, Rt. Hon. Sir Philip A. G. D.
Cross, R. H.Lees-Jones, JohnSavery, Samuel Servington
Crossley, A. C.Leighton, Major B. E. P.Scone, Lord
Cruddas, Lieut.-Colonel BernardLennox-Boyd, A. T.Selley, Harry R.
Davison, Sir William HenryLlddall, Walter S.Shaw, Helen B. (Lanark, Bothwell)
Dickie, John P.Llewellin, Major John J.Shaw, Captain William T. (Forfar)
Drewe, CedricLloyd, GeoffreyShepperson, Sir Ernest W.
Duckworth, George A. V.Locker-Lampson, Rt. Hn. G.(Wd. Gr'n)Simmonds, Oliver Edwin
Duncan, James A. L. (Kensington, N.)Lockwood, John C. (Hackney, C.)Skelton, Archibald Noel
Dunglass, LordLoftus, Pierce C.Smiles, Lieut.-Col. Sir Walter D.
Edmondson, Major A. J.Lovat-Fraser, James AlexanderSmith, Bracewell (Dulwich)
Elmley, ViscountLyons, Abraham MontaguSmith, R. W. (Ab'rd'n & Kinc'dine, C.)
Emmott, Charles E. G. C.Mabane, WilliamSmithers, Waldron
Emrys-Evans, P. V.MacAndrew, Lieut.-Col. C. G. (Partick)Somervell, Sir Donald
Entwistle, Cyril FullardMacAndrew, Capt. J. O. (Ayr)Somerville, Annesley A. (Windsor)
Everard, W. LindsayMcCorquodale, M. S.Somerville, D. G. (Willesden, East)
Fermoy, LordMac Donald, Rt. Hon. J. R. (Seaham)Sotheron-Estcourt, Captain T. E.
Fleming, Edward LascellesMacdonald, Sir Murdoch (Inverness)Southby, Commander Archibald R. J.
Ford, Sir Patrick J.Macdonald, Capt. P. D. (I. of W.)Spears, Brigadier-General Edward L
Fraser, Captain IanMcKle, John HamiltonSpencer, Captain Richard A.
Fremantle, Sir FrancisMaclay, Hon. Joseph PatonSpender-Clay, Rt. Hon. Herbert H.
Fuller, Captain A. G.McLean, Major Sir AlanSpens, William Patrick
Ganzonl, Sir JohnMcLean, Dr. W. H. (Tradeston)Stanley, Rt. Hon. Lord (Fylde)
Gibson, Charles GranvilleMagnay, ThomasStanley, Hon. O. F. C. (Westmorland)
Gillett, Sir George MastermanMakins, Brigadier-General ErnestStewart, J. H. (Fife, E.)
Gilmour, Lt.-Col. Rt. Hon. Sir JohnMargesson, Capt. Rt. Hon. H. D. R.Stones, James
Gledhill, GilbertMarsden, Commander ArthurStorey, Samuel
Glossop, C. W. H.Mason, Col. Glyn K. (Croydon, N.)Stourton, Hon. John J.
Gluckstein, Louis HalleMayhew, Lieut.-Colonel JohnStrauss, Edward A.
Glyn, Major Sir Ralph G. C.Mills, Sir Frederick (Leyton, E.)Stuart, Hon. J. (Moray and Nairn)
Goff, Sir ParkMills, Major J. D. (New Forest)Stuart, Lord C. Crichton-
Goldle, Noel B.Milne, CharlesSueter, Rear-Admiral Sir Murray F.
Goodman, Colonel Albert W.Mitcheson, G. G.Sugden, Sir Wilfrid Hart
Gower, Sir RobertMonsell, Rt. Hon. Sir B. EyresTempteton, William P.
Graham, Sir F. Fergus (C'mb'rl'd. N.)Moore, Lt.-Col. Thomas C. R. (Ayr)Thomas, James P. L. (Hereford)
Granville, EdgarMoore-Brabazon, Lieut.-Col. J. T. C.Thompson, Sir Luke
Graves, MarjorleMorgan, Robert H.Titchfield, Major the Marquess of
Greene, William P. C.Morris, Owen Temple (Cardiff, E.)Touche, Gordon Cosmo
Grentell, E. C. (City of London)Morris-Jones, Dr. J. H. (Denbigh)Tree, Ronald
Grimston, R. V.Morrison, William ShephardTryon, Rt. Hon. George Clement
Tufnell, Lieut.-Commander R. L.Wedderburn, Henry James Scrymgeour-Winterton, Rt. Hon. Earl
Turton, Robert HughWells, Sidney RichardWise, Alfred R.
Wallace, Captain D. E. (Hornsey)Whiteside, Borras Noel H.Worthington, Dr. John V.
Wallace, John (Dunfermline)Whyte, Jardine BellYoung, Rt. Hon. Sir Hilton (S'v'oak[...])
Ward, Lt.-Col. Sir A. L. (Hull)Williams, Herbert G. (Croydon, S.)
Ward, Irene Mary Bewick (Wallsend)Wills, Wilfrid D.TELLERS FOR THE AYES.—
Waterhouse, Captain CharlesWilson, Clyde T. (West Toxteth)Lord Erskine and Mr. Blindell.
Wayland, Sir William A.Windsor-Clive, Lieut.-Colonel George
NOES.
Adams, D. M. (Poplar, South)Greenwood, Rt. Hon. ArthurMalialleu, Edward Lancelot
Attlee, Clement RichardGrenfell, David Rees (Glamorgan)Mander, Geoffrey le M.
Banfield, John WilliamGriffith, F. Kingsley (Middlesbro', W.)Mason, David M. (Edinburgh, E.)
Batey, JosephHall, George H. (Merthyr Tydvil)Milner, Major James
Brown, C. W. E. (Notts., Mansfield)Hamilton, Sir R. W. (Orkney & Zetl'nd)Nathan, Major H. L.
Buchanan, GeorgeHarris, Sir PercySalter, Dr. Alfred
Cape, ThomasHicks, Ernest GeorgeSinclair, Maj. Rt. Hn. Sir A.(C'thness)
Cocks, Frederick SeymourJenkins, Sir WilliamSmith, Tom (Normanton)
Cove, William G.John, WilliamThorns, William James
Cripps, Sir StaffordJones, Morgan (Caerphilly)Tinker, John Joseph
Curry, A. C.Kirkwood, DavidWedgwood, Rt. Hon. Josiah
Daggar, GeorgeLawson, John JamesWest, F. R.
Davies, David L. (Pontypridd)Leonard, WilliamWilliams, David (Swansea, East)
Davies, Rhys John (Westhoughton)Llewellyn-Jones, FrederickWilliams, Edward John (Ogmore)
Dobble, WilliamLogan, David GilbertWilliams, Dr. John H. (Llanelly)
Edwards, CharlesMacdonald, Gordon (Ince)Wilmot, John
Evans, R. T. (Carmarthen)McEntee, Valentine L.Wood, Sir Murdoch McKenzie (Banff)
Foot, Dingle (Dundee)Maclean, Nell (Glasgow, Govan)
Gardner, Benjamin WalterMainwaring, William HenryTELLERS FOR THE NOES.—
Mr. Groves and Mr. D. Graham.

Question put, and agreed to.