Amendment as to Relief in Respect Oflife Insurance Premiums.

Orders of the Day — Ways and Means. – in the House of Commons on 1st May 1935.

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11. "That—

  1. (a) on a claim under Section thirty-two of the Income Tax Act, 1918, as amended by any subsequent enactment, for an allowance of tax in respect of life insurance premiums or other payments, no allowance shall be given at a rate of tax greater than one-third of the standard rate—
    1. (i) if the taxable income of the claimant does not exceed one hundred and thirty-five pounds; or
    2. (ii) in respect of the amount, if any, by which the premiums or payments exceed the amount by which the claimant's taxable income exceeds one hundred and thirty-five pounds;
  2. (b) for the purposes of this Resolution the expression "taxable income" in relation to a claimant means his total income less any amount on which he is, by virtue of Sub-section (1) of Section forty of the Finance Act, 1927, entitled to relief by way of a deduction of tax.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

6.29 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I beg to move, in line 5, after "repaid," to insert "to the extent of fifty per cent. thereof."

I assume, Mr. Speaker, that you will take together this Amendment and the second one which stands in my name—in line 11, to leave out "no rebate," and to insert "a rebate of three pence halfpenny." We now return to the discussion which we had on the day following the opening of the Budget. The Chancellor of the Exchequer's proposal in regard to heavy oils was the one surprise which was presented to the House. I must confess to the right hon. Gentleman that, after having had a fortnight to examine his proposal in better perspective, it does not strike me in quite the same way as it did when I considered it first. I tried quite honestly to look at it from the point of view of the Chancellor of the Exchequer, and, having tried to do that, I admit at once that from his point of view as Chancellor of the Exchequer there is some case for his proposal. Naturally, as Chancellor of the Exchequer, he has to keep his eye upon his revenue, and as the guardian of the revenue he told the Committee that unless he took some active steps, such as are embodied in this Resolution, he would lose something like £1,200,000 a year. It was a loss, a growing loss, which he could not contemplate with equanimity. Therefore, he was not prepared to remain quiescent, and in order to safeguard his revenue he proposed the tax with which we are now concerned. I understand that by reasons of the regulations of this House he is not able to make the change he desires before 1st August, and, therefore, he will only get in the current year something like £100,000.

I want to approach this problem as fairly as I can, and to do so one has to keep in view not only the difficulty of the Chancellor of the Exchequer, which I admit, but also the point of view of all those who are concerned in the imposition of the tax, those who will have to pay this tax into the Exchequer. I must in fairness say that sound arguments can be advanced on both sides. It is fair to recognise that the Chancellor of the Exchequer is not proposing to do as heinous a thing, if I may use that adjective in respect of his action, as I feared at first he was doing, and, having regard to the fact that he has equalised the licence duty, he is making quite an honest attempt to try to balance the thing as fairly as possible. It is an attempt to put the Diesel-driven vehicle and the petrol-driven vehicle on all fours from the point of view of taxation. From the short view of temporary revenue considerations it is an arguable proposition that the Chancellor of the Exchequer may seem to be right, but on the longer view I think he may conceivably be shown to be wrong. Indeed, I rather sensed that the Chancellor himself feared the possibility—I do not say he admitted it—and wanted to reassure us that certain consequences were not the consequences he desired to supervene, for he told us: I certainly have no desire to cramp the development of the Diesel engine."—[OFFICIAL REPORT, 15th April, 1935; col. 1629, Vol. 300.] He indicated that he, too, had turned over in his mind the possibility that this imposition might in some way interfere with the development of the Diesel engine generally. There are three interests which are or may be indirectly involved in the Chancellor of the Exchequer's decision. There is, first, the trade with which I am personally associated as the representative in this House of a coal mining area. The coal trade might be indirectly involved in the consequences of this decision. When the penny tax was first imposed, it proved beneficial immediately to the coal trade as certain hotels and buildings of that sort, which up to that time had been using oil for the generation of heat, at once reconverted to the use of coal. It is fair to argue that if you add a slightly heavier tax a similar result might supervene, and that a larger return might be seen in the use of coal. That is a possibility, but I doubt very much whether it is logically tenable on that ground, because with an extra tax of 7d. you may reach a point where the extra 7d. may so damage the prospective development of the Diesel engine that you might in the end impede the increasing use of heavy oil. The Diesel engine depends very largely at the moment upon the use of imported oil, and although it may sound to many people heterodox as coming from this side of the House I am prepared to say—I want to be fair in the matter℄that if the Chancellor of the Exchequer had devised some system whereby he could have given some special encouragement to the use of home-produced heavy oil in conjunction with the Diesel engine as distinct from the use of imported oil, there might have been something to be said in favour of the proposition, because he would be doing something to improve the development of the Diesel engine, and, at the same time, might be encouraging the production of heavy oil from our own natural resources of coal. In that way he would help both activities. That is not what has been done. Speaking as the representative in this House of a coal mining area I admit that if a proposition like that had been put before us it would have been very hard indeed to oppose it, because the Chancellor of the Exchequer knows as well as I do that so desperate is the condition of the coal producing areas that they would snatch at any straw which might give them a chance of saving themselves from further decay.

Mr. CHAMBERLAIN:

The hon. Member appears to be under the impression that this is an Excise duty as well as a Customs duty. If so, he is under a misapprehension. It is only a Customs duty.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I appreciate that—

Mr. CHAMBERLAIN:

And there is a preference on home-produced oil.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I feel that if instead of imposing a tax upon imported oil the Chancellor of the Exchequer had done something by way of assisting the direct production of heavy oil from our own natural resources, he would have done the two things—stimulated the production of heavy oil in our own country, and avoided the deleterious effect which may result from this proposal on the Diesel engine itself. The other interest is the road interest. We were told by the right hon. Gentleman that he is going to apply this imposition only in respect of vehicles which use the roads. Why? His interest in approaching this matter originally was a revenue interest; his only justification as Chancellor of the Exchequer is to safeguard his revenue. I submit that his revenue is just as much jeopardised by the use of the Diesel engine on the railways as it is upon the roads, yet the right hon. Gentleman specifically excludes the Diesel-driven vehicle which runs on the railway from the operation of this tax. Why? Everybody knows that railway authorities, like municipal authorities, are making big experiments with the Diesel engine. There is a train running now between Cardiff and Birmingham which is driven by a Diesel engine, and I presume it depends on heavy oil. Why is that Diesel engine excluded from the imposition of this taxation, whereas a similarly driven engine on the roads is to be taxed? Perhaps in the course of years this experiment, which is now being tried by the railways on certain lengths of their lines, may be considerably extended, and the more it is extended the greater will be the loss of revenue to the Chancellor of the Exchequer. I still await any justification for singling out the Diesel-driven vehicle on the roads from those on the railways.

Take air transport. We are now in the presence of developments the end of which no one can tell. Already they are competing for passenger traffic with steamboats across the seas, and if present indications are anything to go by, we are going to see a development on a considerable scale of aerial passenger transport inside the confines of our own country. If the Chancellor of the Exchequer is going to allow air transport to compete with other forms of transport, and is going to excuse them the payment of this tax, then the terms imposed on the road are unfair conditions. Why is air transport to be excused? What is the case for it? The Chancellor of the Exchequer's argument must be based on loss of revenue. That is his whole case; that was the justification given in his Budget speech. Therefore, if he excuses the Diesel engine on the railways or in the air, he is thereby encouraging a form of transport which, the more it is encouraged and developed, deprives him the more of the revenue that he so much requires.

I understand that those who are responsible for building this type of vehicle with Diesel engines anticipate that one of the more dire results of the Chancellor's proposals will be in respect of the small vehicle, the vehicle of three tons or thereabouts. The grounds for that apprehension I frankly confess as a layman I do not understand. If it be true that the small three-ton vehicle stands mainly to be hit by this provision, what is the kind of person who uses such a vehicle chiefly? He is the small trader who cannot afford a big vehicle but feels that some sort of mechanically-propelled vehicle is essential to his business. I suggest that if that be true, the Chancellor may, perhaps unwittingly, be adding another burden to the shoulders of those who find it sufficiently hard now to hold their own in business.

Let me turn to another side of this matter. I have an unhappy feeling that this policy does not entirely arise from the consideration of revenue. I rather have the feeling that there are other interests in the background. Of course I cannot say so categorically, but it looks like that. We must all agree that the British engineering industry in recent years has made stupendous advances. I believe that there is about £300,000,000 of capital involved in the industry. If we speak in terms of workers there are about 1,250,000 employed. We can see then what a vast place the industry is taking in our national activities. According to the returns of the Traffic Commissioners to the Ministry of Transport for 1933–34 the colossal total of 5,418,000,000 passengers were carried by motor vehicles of one sort or another in that year, and the revenue was about £58.2 millions. If we contrast that with the railways, we find that the railways carried 1,579,000,000 passengers, and that their revenue was about £57.8 millions. In the short space of time which is within the recollection of all of us we have substantially changed the travelling habits of the people, largely through the coming of one form or another of mechanically-propelled vehicle. It is becoming, therefore, an important element in our industrial and commercial life. It seems to me that the Chancellor is taking upon himself a very big responsibility indeed, and, though he does safeguard himself against additional loss of revenue, he may unwittingly deal a blow at the development of an industry which is responsible for the employment of very many people.

One other observation on this matter, though it does not concern the Chancellor, I admit. There are two new elements that have entered since the Chancellor presented his statement to the House. One of them he cannot control. I am referring to the effect of this proposal on local authorities. Large numbers of local authorities have gone in for mechanically-propelled vehicles, and very many of those vehicles have Diesel engines. If the authorities are to find themselves in the position that they must either run their ventures at a loss or, to save themselves from loss, increase passenger fares, the burden on people in those areas is going to be rather heavier than the Chancellor of the Exchequer seemed to anticipate. In addition to this extra burden which may—I do not say it will—fall upon local authorities through the possible change from the Diesel engine to the petrol engine, and the consequential extra financial outlay, let us remember this new element to which I now direct attention. There has come an adjudication upon the question of the assessment of railways, and I gather that the position so far is a nil assessment for railways throughout the country. That is going to be a very big handicap in favour of the railways and against the people who have to pay heavy rates for road transport. If the Chancellor is going to use artificial means to force more people and more goods on to the railways and to handicap those who run big transport systems, and if in addition to that there is this new handicap of a complete removal of rateable assessment for railways through the new judgment, I suggest that the handicap in favour of the railways and against motor transport is going to be unfair in the extreme.

Another feature has developed to-day. I am not sure that it has not a direct association with the Chancellor's proposals. We hear to-day that the price of petrol is to be increased by a penny a gallon. I venture to assert that that announcement has more than a close relationship with the Chancellor's policy. I do not say that the Chancellor is responsible for it—far from it. He has responsibility enough already. But I do say that it is a direct consequence of his policy that other people have availed themselves of the decision which he announced in his Budget speech.

I have tried not to cover grounds which I have previously traversed. I do not recede from my previous argument regarding the somewhat unfavourable and inhospitable attitude which the Chancellor takes in respect of the researches of scientists and so on. I have to-day tried to cover new ground, keeping in mind that the Chancellor must safeguard himself against inevitable or avoidable loss, but I do submit that while that may on the short view be justifiable, and may be a policy which will be acceptable or favourable to railway or other interests, taking the long view I think it will prove to be inimical to the development of the new form of transport in this country, and will hamper it by adding an unfair handicap compared with its railway competitors.

Photo of Sir Basil Peto Sir Basil Peto , Barnstaple

Would the hon. Member explain the connection between the rise in the price of petrol by a penny a gallon to-day, and the withdrawal of the duty on heavy oils? I cannot see any connection between the two.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

In a sentence I cannot give an adequate answer, but shortly I may say that it is surely clear when you limit competition, as is the obvious effect of this proposal, that it is possible for those who control the commodity concerned to raise its price.

6.57 p.m.

Photo of Lieut-Colonel John Moore-Brabazon Lieut-Colonel John Moore-Brabazon , Wallasey

I do not think that the Chancellor of the Exchequer will be frightened very much by the attack that has been made by the Opposition upon this particular duty; but the speech made by my hon. Friend the Member for Caerphilly (Mr. Morgan Jones) was interesting, and certainly it was comprehensive and wide. I thought he was quite ingenious in the way he brought in the assessment of railways and associated it with a tax upon heavy oils. We ought to be perfectly clear in our mind that it is a Customs duty and not an Excise duty. Because of that it is a direct incentive to the treatment of coal for conversion into oil. It is practically a gift of 7d. a gallon. Everyone knows that in the turning of coal into oil it is easier to turn it into the heavier oils than into the lighter ones. Consequently it will be easier for those people who follow that kind of enterprise to produce the Diesel type than to produce the petrol type, and therefore it may be of very great benefit to the coal mines of the country. I hope it will be. I have said before that I was weaned on petrol. Now I am a Diesel enthusiast. I think that in these Debates one should state what interests one has. I am a Director of the Associated Equipment Company, which makes the omnibuses of London. Lately that company has been making practically 90 per cent. with Diesel engines. You see these buses on the streets of London, and you smell them on the streets. Although the smell is unpleasant it is much healthier than petrol.

I wish to congratulate the Chancellor on one point. In this tax he does not penalise aviation. In a struggling young industry, which really is not a competitor with road transport, to impose a heavy tax on its petrol is a very severe handicap, because nothing is more important from the point of view of aviation than to get it to pay by itself. As the right hon. Member for Epping (Mr. Churchill) once said, civil aviation must fly by itself. It is only on that basis that it will be of any use to the world. What is going to be the effect of the high tax on the Diesel compression ignition engine, an engine which is more difficult to build, costs more to build, and consequently a man who buys it buys it on the basis of whether he can save on his extra capital costs by his running costs. Even with the present tax if an operator is running on a basis of 35,000 miles a year, it will be to his advantage still to run a Diesel engine. On the other hand, it will penalise that lighter type of delivery van which does not run on a basis of 100 per cent. It seems that operators will have to keep their huge vans running night and day in order to pay, but that is probably happening to-day. It is quite incredible the distances which these heavy lorries now travel.

The hon. Member for Caerphilly, I think, missed one very considerable point which he might have made—the statement by the Chancellor that he was doing this because of loss of revenue. Where can be say that he is losing revenue? He says it on the basis that he wants this money put into Imperial funds, whereas on the present basis, with the high licence duty, that licence duty is going into the Road Fund; and, jealous of that money which was going into the Road Fund, he upsets the whole system of taxation on this new form of industry in order to get his share into the Exchequer. That is very disturbing to an industry. It would have been much better to say that there is certainly a case that the Exchequer should have a certain amount of money out of the oil tax, and it would have been much better if, instead of making a raid on the Road Fund, he had said to the Minister of Transport that a part of this increased licence duty should go to the Exchequer and not to the Road Fund. I think that there is a case for that. But we have had the whole system of taxation upset, which is very disturbing to the industry. Once having granted a system of taxation, however high it is, let us work to it. It is only two years ago that the Government raised the licence duty on the Diesel engine cars on purpose to make them pay for the fact that they were not paying tax on fuel. For no other reason than to get that money into the Exchequer instead of the Road Fund, the whole of this development is to be upset.

I very much doubt whether the relationship between the Treasury and the Road Fund can go on very much longer. The Treasury were always jealous of the Road Fund. It was a thing to which they objected from the very start. They said: "Taxation must go into the general pool; it shall not be reserved for any special fund." And the Road Fund, like a child by itself, has been attacked all along the line by the Treasury. Here is another attack. This is not increasing revenue; it is to get the revenue that would otherwise go to the Road Fund. These commitments which are undertaken by the Government through the Ministry of Transport for the development of our roads, once they are made, should be guaranteed now by the Treasury. Then there could be no postponement, no delay, in the building of these great works which are wanted from every point of view. But at present we have these periodical pinpricks against this fund which was made for the roads, and although I would hate to see it go, because I think it is so essentially sound, it is so defenceless, it has not got a Cabinet Minister behind it, and year after year we have a raid on it; and, in a way, this change of taxation to which we are agreeing is another attack on that fund.

7.7 p.m.

Photo of Mr Maurice Petherick Mr Maurice Petherick , Penryn and Falmouth

The House has just listened to a speech by an expert. I do not profess to be an expert, and will speak for only a few minutes. The hon. and gallant Gentleman professed to think that the Chancellor of the Exchequer had some Jesuitical motives behind him in putting forward this proposition. He seems to think it a disguised attack on the Road Fund. I believe that the object of the alteration in the tax on heavy oil is two-fold: First, in order to gain more revenue, and, second, in order that the two sections of vehicles on the road should be put on an approximately comparable basis. The question I should like to ask my right hon. Friend is this: How has he assessed the figure? The two sections will be paying a tax of 8d. per gallon. That is a very large rise for these owners of heavy oil-burning vehicles. How did the right hon. Gentleman arrive at that figure of 8d. in the case of both? I shall be particularly interested to hear how he got that figure, because there is undoubtedly a great deal of unrest and anxiety in the country on the part of those owners of the Diesel burning vehicles who think that the rise is far too sudden and rapid, and that some figure nearer approaching the previous figure would have been the right one to adopt.

7.9 p.m.

Photo of Mr Arthur Molson Mr Arthur Molson , Doncaster

I am sure that the Chancellor of the Exchequer is entitled to congratulate himself on the reception that has been given to the tax this year, after the very different reception given to the somewhat similar tax imposed on fuel oil some few years ago. When I saw the Amendment on the Order Paper I imagined that there was going to be a strong denunciation of this tax similar to that which was launched by the Opposition two years ago. I am very glad that those Members of the Socialist party who represent coal mining constituences have recognised the very material benefit which my right hon. Friend conferred on the coal industry by the imposition of that duty.

It has been estimated by the Coal Utilisation Council that, adding together the actual reconversions from oil to coal, and the consumption of coal in works and public buildings, which otherwise were on the point of being converted to oil, the coal mining industry now disposes of 1,203,000 tons of coal more than if my right hon. Friend had not imposed that duty two years ago, which at the time was so strongly criticised by the Socialist party. Now, two years after, I should like to express, as a Member for a coal mining constituency, my gratitude to the Chancellor for having taken this further step in one of the few directions in which it is possible for him to give protection to the British coal mining industry. The figures recently issued by the Ministry of Transport show that during the last year or so there has been a quite extraordinary increase in the number of vehicles of different kinds which use Diesel oil instead of petrol. In the year 1934–35 the increase in the number of hackney carriages driven by Diesel oil was no less than 151 per cent., and of goods there was an increase of 56 per cent. No wonder that in circumstances of that kind the Chancellor should be concerned as to a protective revenue, and I am glad to think also that he should desire to discourage an excessive use of the Diesel engine. The hon. and gallant Member for Wallasey (Lieut.-Colonel Moore-Brabazon) rather suggested that in imposing this duty on heavy oil my right hon. Friend was in some way giving undue preference to the petrol engine; but, in view of the fact that the duty upon the two oils is exactly the same per gallon, and that at the same time the licence duty of the Diesel engine has been reduced to that of the petrol engine, it seems to me that there is complete and absolute fairness in the policy which the Chancellor of the Exchequer has pursued.

The fact that the energy in a gallon of Diesel oil is one and a half times as much as that in petrol seems to show that where there is a legitimate advantage in the use of the Diesel engine, that has been left to the Diesel engine. I have some figures here which show that the increased use of the Diesel engine has not been due to the greater efficiency of that engine. Costs of running have been greater. The only reason for the remarkable increase in the use of Diesel engines is that, owing to taxation policy in the past, fuel has been so much cheaper. I hope that the effect of this duty will be to encourage the use of coal and its derivatives. There has been a most disastrous reduction in the number of heavy wagons on the roads which are driven by steam or coal gas, a reduction of no fewer than 4,000 wagons in four years; and it is estimated that each 1,000 wagons when in use consume enough coal to keep 650 miners employed for one year. That is a reduction of something like 450,000 tons of coal or nearly as much as the exports from this country to Finland under the trade agreement with that country. At the same time trams are gradually being superseded, and it is a question whether they are going to be replaced by trolley omnibuses which use electricity or by motor omnibuses driven by Diesel oil. I therefore feel that while my right hon. Friend is safeguarding the revenue, he is also giving the coal-mining industry, as far as possible, the benefit of the protective policy which this country has followed with regard to other industries. I only wish that he could have gone a little further. I support the plea of the hon. Member for Caerphilly (Mr. M. Jones) that the railways should be discouraged from undue experimentation in Diesel engines.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I did not make such a plea.

Photo of Mr Arthur Molson Mr Arthur Molson , Doncaster

I beg the hon. Member's pardon, but, even if I am mistaken in that, I am not unwilling to put forward a plea on my own responsibility to the Chancellor of the Exchequer on those lines. At the present time the consumption of coal on the British railways is 17,000,000 tons and the depression in the coal-mining industry would obviously be appallingly increased if there were any general transference from coal to oil in the case of the railways.

7.18 p.m.

Mr. CHAMBERLAIN:

The hon. Member for Caerphilly (Mr. Morgan Jones) did not attempt to offer any justification for the particular figure which he advocates in his Amendment, a figure which I understand to be 4½d. instead of 8d. As a matter of fact if he goes into these two Amendments carefully, he will see that one destroys the other, but I take it that the figure I have mentioned indicates the intention which he has in mind. I should like to pay some acknowledgement to him for the very fair manner in which he has treated this subject. I am glad that he has treated it in that way because it has been a somewhat difficult question to deal with and I have had by no means an easy task in making up my mind as to the right course to take. The situation with which I was faced, as, I think, the hon. Member himself recognises, was one which I could not allow to remain. There was a hole in the wall surrounding my revenue which was rapidly increasing in size, and if something had not been done I should undoubtedly have been put to a very severe loss which I was not prepared to face.

Although in the course of this Debate I have been credited with mixed motives, I frankly state to the House that my primary object in this matter has been the safeguarding of the revenue. I believe it to be true that the duty which is here proposed will help the railways, not because goods which are now being conveyed by road will be transferred to the railways, but because goods now being carried on the railways will continue to be carried on the railways, whereas had the tax been left where it was, those goods might well have gone on to the roads. In either event it will help the railways, and as the railways are run by steam which is generated by the burning of coal, it must also help the coal industry. Nevertheless my primary object has been to see that in the hothouse atmosphere in which the Diesel engine is being developed, owing to the difference in taxation between heavy oil and light oil, I am not robbed of any of my revenue.

An hon. Member opposite asked me how was it, if I was honest in saying that the protection of the revenue was my primary concern, that I was not taxing the oil used in Diesel engines on the railways. I should have thought that the answer was obvious. It is because the Diesel engines on the railways are not competing with petrol engines on the railways. So far as I know the railways are not at present running petrol engines in competition with their steam engines. Therefore, there is no loss of revenue by reason of the adoption of the Diesel engine on the railways. When we come to air transport the case is different. There, indeed, it is true that if the Diesel engine supersedes the petrol engine I am going to lose revenue. But it has not done so yet and the fact that I have not attempted to apply this tax to air transport is a proof of what I say, that I do not desire to cramp the development of the Diesel engine. I consider that if I had applied it to Diesel engines for air transport it would have been tantamount to cramping the development of the Diesel engine which at present suffers from certain disadvantages for air purposes in comparison with the petrol engine. It is for the designers and makers of the Diesel engine to develop their engine so as to adapt it for use in air transport and if they are successful and if the Diesel engine shows signs of superseding the petrol engine for use in aeroplanes, no doubt some successor of mine will put some further tax upon Diesel oil used in aeroplanes. But that is not in contemplation now.

An hon. Member opposite said he was given to understand that the effect of the tax was peculiarly onerous in the case of three-ton vehicles and my hon. and gallant Friend the Member for Wallasey (Lieut.-Colonel Moore Brabazon) who is an expert upon these subjects, said something which tended to confirm that view. Figures have been given to me of the actual effect of the taxation of goods vehicles of three to four tons which I take to be the class of vehicles indicated. These are figures extracted from the report of the Conference on Road and Rail Transport in 1932. Taking the average annual mileage of such vehicles as 15,250 the existing total taxation—with the discriminatory licence duty in the case of the Diesel vehicles℃is £125 on the petrol vehicle and £70 on the Diesel vehicle. The taxation is, therefore, in favour of the Diesel vehicle to the extent of £55. Under my proposal by which the oil duty is raised to 8d. and the licence duty equated, the taxation on the Diesel vehicle is raised from £70 to £93 but as the taxation on the petrol vehicle remains at £125, there is still a very large margin of £32 in favour of the Diesel engine. I suggest that in view of those facts it can hardly be said that there is unfair discrimination against the Diesel engine which still retains that considerable advantage over its rival. The fact is that it is the petrol engine which is unfairly treated on account of the special favour in taxation given to this increasingly dangerous competitor, and although this proposal does not by any means go the whole way to putting things on a level, yet it goes some distance in that direction, and I think it will do something to remove this grievance and to safeguard my revenue.

My hon. Friend the Member for Penryn and Falmouth (Mr. Petherick) asked how I arrived at the figure of 8d. To be candid I took the same figure for the Diesel oil engine as for the petrol engine and there is no more scientific justification than that for the figure. I thought it sounded pretty fair to have the same rate of taxation on both, provided that at the same time the licence duty was equated.

Photo of Mr Maurice Petherick Mr Maurice Petherick , Penryn and Falmouth

What I was trying to convey was that in the case of the heavy oil-burning engine—the Diesel engine—the costs of construction and running are much higher than they are in the case of the petrol engine, and I thought it was not unreasonable to expect some difference in the incidence of the tax on that account. I was wondering if that factor had been taken into consideration.

Mr. CHAMBERLAIN:

I did take that into consideration in putting the tax at 8d. instead of at 1s. 2d., which would have been the actual equivalent, taking into account the extra mileage which heavy oil will produce. I had to try to strike a balance between all these various factors and it seems to me that the balance which I have struck is not unfair.

My hon. and gallant Friend the Member for Wallasey has, he thinks, discovered that I am not really trying to save the revenue, because, he says, there will be no difference in the number of Diesel engines which will be put into use in consequence of the raising of the tax. If he is right, then that at once wipes out any grievance which has been expressed by those who say that it will adversely affect the Diesel engine industry. But I would point out to him that as regards the Diesel oil engine, as well as the petrol oil engine, I am safeguarding my revenue. Whether it is the Diesel engine or the petrol engine, I am still going to take my 8d. tax, and therefore I am safeguarding the revenue.

I can assure my hon. and gallant Friend that he is mistaken if he thinks that under a cover of this proposal to equate the licence duty I am making a concealed attack on the Road Fund. If I want to make an attack on the Road Fund I can assure him there will be no concealment about it. But in the present instance let me point out to him that the difference in licence duty upon the Diesel engine vehicle and upon the petrol engine vehicle ought not to go to the Road Fund at all because the roads are not worn any more by the Diesel engine vehicles than by the other vehicles. There is no real justification in equity for that increase going to the Road Fund. But that is not the reason why I equated the licence duty. The difference in the licence duty was made because it was recognised that something ought to be done to equalise the oil duty. My hon. and gallant Friend says we ought not to make these periodic pin-pricks; that we ought to decide what our taxation is going to be and stick to it. You cannot do that when conditions are continually changing. It is the changing conditions which have caused the change in the duty. As long as the Diesel engine was in the merely experimental stage, it was not worth making a change in the taxation. It is now entirely beyond the experimental stage, and, that being so, there is no justification in postponing the putting of the duty on a more satisfactory basis.

One of my hon. Friends—I think it was the hon. Member for Penryn and Falmouth—said that engine makers thought the tax was rather sudden, and it would have been better to have imposed it a step at a time. That is, of course, a possibility. I could have made one step now and another step in a year's time, but I do not think that would have helped the situation. If there be anything in the argument, which I do not admit, that the development of the Diesel engine would be injured by the tax, it would be just as much injured by the knowledge that the tax was coming in steps as that it was coming all at once.

I think I have replied to the various points that have been raised. I do not know whether I shall have satisfied the hon. Member opposite, but I do assure him that this is not an artificial means of forcing people off the roads. It is a defensive measure taken by a hard-pressed Chancellor of the Exchequer to preserve his revenue, and, incidentally, it does benefit some of his constituents, and, if it does, I am sure nobody will be better pleased than he or I.

7.32 p.m.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

I want to draw attention to a very important consideration that has not received the attention it deserves in this discussion on which I was interested to hear the hon. Member for Doncaster (Mr. Molson). I believe he belongs to the progressive section of the Conservative party, or the reformist or "reconstruction" group, or whatever it may be called. I listened to his argument that he is very glad that this kind of principle has been adopted by taxation. If the Chancellor is encouraged to proceed in this matter, it means that railways will not be allowed to use a better form of engine. They will still have to be put back to the older forms of fuel used. I can hear him congratulating the Chancellor of the Exchequer because he finds a parallel with the case of Mrs. Partington if she had been successful in keeping the ocean back with her mop. He would then have said, "Put a tax on mops, and do not allow Mrs. Partington to use a mop successfully."

Photo of Mr Arthur Molson Mr Arthur Molson , Doncaster

One indication that I belong to a progressive party is that I believe in protection for home industries and home products.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

That is very interesting, but it is no reply to the argument that the Diesel Oil Tax is a penalty on improvement. It is placing obstacles deliberately in the way of the development of an improved type of engine. Even if what the hon. and gallant Member for Wallasey (Lieut. - Colonel Moore-Brabazon) said proves to be correct with regard to the heavier engine, it still must be true that if the engine has to pay an extra 7d. a gallon on its fuel it must be prejudiced to that extent more than it was before. Now we have the right hon. Gentleman with his accustomed candour—and I honour him for it—saying that some day or other, when the development of the engine has reached such a state of perfection that heavy oil may be used in aeroplanes, then some Chancellor of the Exchequer will come along and say, "Let us penalise this improvement. Let us penalise the application of the Diesel engine to aeroplanes. Let us increase the tax." I honour him for his frankness.

Mr. CHAMBERLAIN:

I leave it to a Labour Chancellor of the Exchequer.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

He will be imitating his own great example. Seriously, I can understand the right hon. Gentleman's case when he says, "I am losing revenue and, therefore, I must do something or other to get more revenue." But you would not expect him to design the reinforcement of his revenue in such a way as deliberately to penalise an improvement. It may be, and I hope it will be, that the Diesel engine will encourage the development of low temperature carbonisation, or whatever the process is, for the distillation of coal in order to get heavy oil from home-produced coal. But what guarantee will the producers have in the example set by the Chancellor? He holds a veiled threat over the head of the Diesel engine maker which might equally well apply to the man who manages to distil oil from our own coal. He will say, "A day has arrived when you are competing with my revenue. I will put the clock back; I will tax you." The fate of the man who applies the utilisation of our own coal for producing oil will be the same as he somewhat sketchily indicated will be the fate of somebody in connection with the development of the Diesel engine for aeroplanes.

Those of us who have taken any interest in the history of our canal system know perfectly well how legislation helped the railways to choke the canals. We have a very lively recollection of that. We are told quite frankly that one of the purposes behind this tax is to enable the railways to carry goods which otherwise would have been carried on the road through the improvement of the Diesel engine. The Chancellor of the Exchequer told us that. In other words, it is another way of assisting the railways to block another form of improvement just as they blocked the improvement of the canals by destroying them. When the old-fashioned four-horse coaches were on the road, there was no movement to bolster up coach proprietors and prevent railways using locomotives which ran on a steel line instead of on the road. There was no suggestion that the incidence of taxation was to be used in that fashion. Entirely apart from the question of safeguarding his revenue, which I can well understand, the Chancellor of the Exchequer has deliberately designed this tax and the method of its application so as to penalise the improvement of a new type of engine. That must be the result, and I think we ought not to allow this to pass. We cannot allow this new principle in the application of taxation to go unchallenged in this House.

7.41 p.m.

CHORLTON:

Mr.

I wish to confine my remarks to the technical side of this question. The unfortunate nature of this increase is really in its extent. That is to say, if it had pot been done to the extent of a change from 1d. to 8d., I think the effect would not have been so material as it is going to be. The engine of which we are speaking is not a new engine. It is an old engine, but in the last few years it has been applied to road transport and this country has taken a lead greater than any other country. At any rate, it has achieved that lead in the end. The light-weight high-speed Diesel engine as now made over here is in advance of anything in the world. That is greatly to the credit of the motor engineers and of all concerned who developed it. The risk arising out of this sudden and violent change is that it will be repressive to their development and the research work which is necessary to maintain and continue our lead.

We have, I think, got into a position in which we are leading the world and can count upon an increasing foreign trade arising out of that. I am not speaking of the use of the engine on the road because that is an £ s. d. question, but I am speaking of the use of the engine as expanding our foreign trade. If this increase had been very much less, or had been kept back to some future time, we should have got such a lead in the manufacture of this engine and in the cost and design and all things which would have helped foreign trade, that it would have put us in front, of any other nation to an extent that I do not think those concerned realise. Years ago, when the engine was first brought out by Diesel in Germany, it was very much helped by its local associations, by the people of that country. They designed and developed the engine for marine purposes in front of everybody else in the world. We found its economy so great that we had to use it ourselves. That meant that we had to go to Germany, and we must have spent in royalties alone hundreds of thousands of pounds. Now we have got the lead over Germany, or any other Continental country, or America.

Although, perhaps, I ought not to say it here, I know more about those engines than almost anybody associated with this particular industry because of the time I have spent on them and the different countries I have visited in order to determine where they stand. I was in Prague three weeks ago and saw the development of the engine there for railway purposes. I would like to press this point very strongly. We are going to run the risk of losing a very considerable foreign trade which we need so much to-day if we persist with an impost to this extent, and I do beg the Chancellor of the Exchequer that, even though in the end he intends to raise the tax to this level, he will not do it to-day, but do it in steps and give us our opportunity. We have the lead in the air. Another hon. Member mentioned the possibility of a heavy oil engine being designed for the air. They were designed for airships, and we have still in this country retained a certain lead arising out of that. If, however, such engines are to be saddled by the heavy cost of fuel, they will not be used at all. There are two reasons why this fuel should be used—economy for long-distance flights and the reduced cost of fuel. If the duty upon air services is to be at this rate, it will be the death blow—

Mr. CHAMBERLAIN:

The hon. Member was not in the House when I said that it will not be at this rate.

Photo of Mr Alan Chorlton Mr Alan Chorlton , Manchester Platting

I am delighted to hear that.

7.46 p.m.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

The charges put on road transport are far too high, and it is simply done to stimulate the railways. How would railways like to be charged £1 a ton? We ought to have developed more roads and left the railways to fight their own battles. The tremendously high rates they have charged have done more to hamstring the trade of this country than anything else. This duty will indirectly affect the aerial service, because, in discouraging the development of the Diesel engine for road use, it will affect the development of this engine for use in the air. We want to get rid of the use of petrol, because it is far too dear, and do all we can to encourage the development of engines which can use the cheaper form of fuel.

Amendment negatived.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

7.49 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

May I ask the Financial Secretary to explain the case for this Resolution. He will agree, I think, that the Chancellor of the Exchequer, in presenting his Budget statement, did not dwell upon this point nor upon one or two other subsequent points which we must presently discuss.

Photo of Mr Duff Cooper Mr Duff Cooper , Westminster St George's

I must ask my hon. Friend to excuse me on this occasion from explaining this particular tax, which falls under the Board of Trade rather than under my Department. My hon. Friend has not given me any notice, and I am not complaining of that, but I am not in a position to give the explanation for which he asks.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I appreciate the difficulty of the Financial Secretary, and I do not complain of his failure to respond, but it is not our business when we are discussing Budget Resolutions to give notice that we are going to raise any particular point.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I appreciate that, and I am not complaining of the hon. Gentleman's inability to give the information, but I think that the Minister concerned ought to be here to give the necessary explanation in case the House asks for it. Perhaps we have gone more hurriedly over the business than was anticipated in Government circles, but I shall be glad, none the less, for some statement of the case.

Photo of Mr Duff Cooper Mr Duff Cooper , Westminster St George's

I have now received some information, and I am only too glad to comply with the hon. Gentleman's request. The position is that at the present time rice in the husk is imported subject to an ad valorem duty of 10 per cent. under the Import Duties Act. The Resolution which the House is being asked to pass increases that duty to two-thirds of a penny a lb. as from the 16th April. One of the aims of the Government of India at the Ottawa Conference was to increase the trade of India with the United Kingdom in rice. The United Kingdom supplies of rice for human consumption had been imported up to that time in the form of husked or cleaned whole rice of which India sent us about 500,000 cwt. and other countries over 1,000,000 cwt. in 1932. One of the provisions of the Agreement concluded with India at Ottawa was an undertaking on our part to increase the duty on "rice, husked, including cargo rice and cleaned rice whole, but not including broken rice" to 1d. a lb., and this duty was imposed as from the 1st January, 1933, under the Ottawa Agreements Act.

At the same time, and in order to encourage the more general use of broken rice as a feeding stuff throughout the world India asked that it should be imported free of duty from all sources. A provision to this effect was also included in the Ottawa Agreement. Since that time the trade in the importation of rice in the husk after being dehusked and cleaned in the United Kingdom has increased. No such imports are recorded in any of the years 1929–31, but they amounted to 2 cwt. in 1932; 19,000 cwt. in 1933; and 333,000 cwt. in 1934. These imports came almost wholly from foreign countries. The possibility of this change in the nature of the trade was not in the minds of the negotiators at Ottawa, and as the imports of "paddy" seriously threaten to undermine the preference which India obtained in this market for husked rice the Government of India asked that the appropriate duty should be imposed on "paddy" to safeguard their trade. That, roughly speaking, is the reason we are proposing to increase the duty.

7.54 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I hope the Financial Secretary will not take it as personal when I say that a protest ought to be made against the way in which this Resolution has been presented to the House. I am not reflecting on him in any way, because I rather gather that this subject belongs to the Board of Trade rather than to the Treasury. It is a little too much to ask the House to be content with such a perfunctory statement. We ought to have a defence of this proposition made by the Minister responsible, and it is rather taking advantage of the rights of the Opposition to treat us so summarily. I hope that steps will be taken to get the Board of Trade represented in this discussion, and in order to enable a representative to have time to come, I propose to say a word or two.

What is the effect of this proposal, which I have tried to understand as best I can from the reading of the document which the hon. Gentleman gave to the House? The obvious effect is that a very essential element in working-class homes is to cost more. To ask us on the mere ipse dixit of the Government to accept it without question and without making any inquiry is a little too much. In the course of the Budget Debate it has fallen to my lot and that of many of my hon. Friends to protest emphatically against the habit which has grown in the lifetime of this Government of increasing the share of indirect taxation as compared with direct taxation, and we are again to-night presented with a proposal which must necessarily have a substantial bearing upon working-class families. It amounts to nearly 1d. per pound on rice. If the wage-earning capacity of the working classes were increasing at a substantial pace there might be a case in justification for this proposal. But there is no such prospect before the working moment. Therefore, to ask them with their meagre earnings to contemplate with equanimity this extra imposition by means of indirect taxation is a proposition against which we must raise our voices in protest. I still see no sign of the representative of the Board of Trade, and since there is no such Minister present I propose to ask your permission, Mr. Deputy-Speaker, to move to report Progress, to call attention to this matter. This is a matter of supreme importance to the House of Commons.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

If the hon. Member will put his Motion in the form of moving the adjournment of the Debate, I will accept it.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I beg to move, "That the Debate be now adjourned."

I do so in order that we may have an opportunity of calling attention to the absence of the responsible Minister while we are discussing this very important subject. We are not making an undue tax upon the time allowed to us by the Government. It is only once a year that we are able to review the financial provisions of the Government, and it is usual for us to have two or three or even more days alloted for the discussion of the Financial Resolutions. But Ministers now apparently find it impossible to sit beyond 7 o'clock to listen to a financial discussion. They cannot arrange their business sufficiently well to provide for a rota of Ministers to defend the Government's policy. What is this Parliament really coming to? We are entitled to an answer from the Government, and we insist upon an answer from the appropriate Minister, and a defence of the financial policy as put before us on the Order Paper to-day. I think it would be a staggering piece of information for the people outside if the Motion I have now submitted were suddenly put and carried and the country learned that we had had to adjourn because there was no Member of the Ministry sufficiently interested to come and defend the Government's policy. I hope that I have in not too exaggerated language made my protest on behalf of my hon. Friends against the absence of the Minister concerned with this matter. I can only leave it to other Members to express their resentment against this studied neglect on the part of the Ministry of the Opposition's rights and the interests of the country at large.

8.3 p.m.

Photo of Mr Duff Cooper Mr Duff Cooper , Westminster St George's

The hon. Member who has just sat down has made a surprisingly violent speech and has declared that there is nobody here prepared to defend the Government's policy. Well, I am here, and to the best of my ability I have defended the Government's policy. The hon. Member has declared himself unsatisfied with that defence, but if he cares to read to-morrow the defence I have made of this proposal I think he will find that it was a perfectly sufficient and adequate defence. The representatives of the Board of Trade do not happen to be in their places at the moment. They are attending to their duties as the hon. Member opposite knows. I understand that the Ministers are attending at the present moment a Chamber of Commerce function. The hon. Member has suggested that this is a very important matter and that the country would be astonished if it were passed over without debate. But I would remind the House that we have had three days in which to discuss the Budget proposals and that during that time this particular proposition has not been referred to by a single Member. Not a single question has been asked and no Amendment has been put down with regard to it. Therefore, I would absolve the Ministers representing the Board of Trade from all responsibility in this matter; the responsibility is entirely mine. My hon. Friend the Parliamentary Secretary to the Board of Trade told me that he hoped I would be present when this matter was discussed and the hon. Member knows that I was present. As he also knows, the discussion of all the other resolutions has been got through with excessive rapidity, and I express my regret that at the moment—having just returned to the Chamber—I had not the papers in my hand which would have enabled me to give him the adequate reply to which I naturally thought he was entitled. Two minutes afterwards I had the papers placed in my hand, and I gave such a reply as I could—which I thought was not an inadequate reply. With this explanation, and with the regret that I express if I was not able to intervene at the moment that the hon. Member asked me to do so, and in view of the information I have given, I would suggest to the hon. Member that he should withdraw his Motion.

8.6 p.m.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

I would like to support my hon. Friend's Motion, because this, I think, really is an unprecedented Debate. The chief function of the House of Commons is finance—that is the key to all our power—here is a proposal to levy a tax on a common article of food which finds its way into the poorest homes, and the House is not accorded the elementary politness and courtesy of the presence of a Minister belonging to the Department responsible to defend or explain the Government's proposal. I am sure every one of us is sorry for the Financial Secretary to the Treasury in the position in which he unfortunately finds himself. He did the best he could with the brief that an enterprising Private Secretary thrust into his hands after he had got on to his feet, and I admire the ingenuity and readiness with which he adjusted himself to the brief, about which he appeared to know nothing at all. He did it, on the whole, very well, but that is not good enough when the House of Commons is asked to tax the food of the people. It is proposed to put a tax of two-thirds of a penny a pound on rice, which is a very common article of diet, and we are asked to impose this tax without any Minister being here to explain what it is or to defend it, or to give the House of Commons any information as to the circumstances which gave rise to this proposal.

I have read the Resolution, and I hope that other Members have read it too. If they have read it and can understand it, they are a jolly sight cleverer than I am. The Resolution says the the tax is to be charged, not under Part I of the Import Duties Act, 1932, but under Section I of the Ottawa Agreements Act, 1932. We ought to have had someone to tell us what this Ottawa Agreements Act of 1932 means and what it involves. It may be a very good Act, but personally I do not carry the details of it in my head; and it was perfectly evident that the Financial Secretary to the Treasury did not carry them in his head either, for he glossed rapidly over this portion of his brief. He has not the faintest idea of what it is about and neither have I. Neither, in fact, has anybody else in the House. It is not right that we should be asked to pass a Resolution and to impose a tax on the poorest families in the land when the Minister in charge of it has not the faintest idea of what it, is about. It is an affront to the House of Commons, and I hope my hon. Friend will press his Motion.

8.10 p.m.

Photo of Mr David Mason Mr David Mason , Edinburgh East

I entirely support the Motion submitted by the hon. Gentleman. The Financial Secretary to the Treasury comes down here and makes apologies for his colleague of the Board of Trade not being present. We should have been delighted to see him, but we hear that he is engaged at a Chamber of Commerce function. After all, the House of Commons takes predecence over a Chamber of Commerce. But that is not the point. All Ministers are responsible for attending here, but the real responsibility rests with the Treasury. They are responsible for the Bill, and yet the Financial Secretary comes here and has to commence his speech by stating that he knows nothing about the subject. We are asked to pass a Resolution dealing with the imposition of a tax, and when a perfectly proper request is made by the Opposition for an explanation of the tax, the representative of the Government has the effrontery to say to my hon. Friend that he is unable to give an answer. Let us examine this Resolution. [Interruption.] Pardon me, this is not a joke. Because you happen to have a large majority, we of the Opposition may be able to teach you a lesson.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

On a Motion to report Progress and adjourn the Debate, the hon. Member is expected to confine himself to that subject. The Resolution is not now before the House.

Photo of Mr David Mason Mr David Mason , Edinburgh East

I am sorry if I have transgressed, but my object in supporting the Motion was to point out the inability of the representative of the Treasury to explain the Resolution. Incidentally, the Resolution does mention that it is proposed in the public interest, and I think that is a very good reason for supporting the Motion to adjourn the Debate. If we are asked to pass a Resolution authorising the Government to impose a tax which is in the public interest, the Treasury ought to be able to show whether in fact it is in the public interest.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

That would not be in order on the Motion for the adjournment of the Debate. That will apply when the Debate is resumed.

Photo of Mr David Mason Mr David Mason , Edinburgh East

In the circumstances, I will content myself with saying that I entirely support the Motion, and I hope that many others in the House, whatever their views may be in regard to the tax, will also support it on the general principle and in the interests of the dignity and responsibility of the House of Commons. Many of us must feel most indignant that we should be asked to come here and be unable to express our views. The Motion for the adjournment of the Debate seems to be a proper Motion, entirely in accordance with the high dignity of the House of Commons.

8.13 p.m.

Photo of Mr Edward Burgin Mr Edward Burgin , Luton

I apologise to the House at once if I have been at all at fault in this matter. Members who have spoken on this subject, however, cannot be aware that elaborate precautions had been taken to make inquiries through the usual channels as to whether there was any question to be raised on this Resolution. If by any misunderstanding any Member wanted to raise a question and I was not here to answer at once, I apologise profusely to the House for not being in my place at the moment. But I had taken elaborate precautions by inquiry through all the usual channels to find out whether there was any question likely to be raised on this Resolution, and I had received an assurance that such was not the case. That is not given as an answer, but as an explanation to satisfy the House as to why I was not present. Immediately I was told that anybody desired a word of explanation—and every Member is entitled to such explanation as he requires—I came to my place. I regret that the House should be put to any inconvenience, and I hope with that explanation the hon. Member will see fit to withdraw the Motion.

8.14 p.m.

Photo of Mr George Lansbury Mr George Lansbury , Poplar Bow and Bromley

Of course, we accept the hon. Gentleman's statement, but it does not meet the point. I understand that through the usual channels he was informed that there was no opposition on the Paper to this particular Resolution. That is true. But I want to say, on behalf of the House generally, that some Minister should be here to answer questions on all these points irrespective of anything that a Chief Whip or anyone else may say. I think the hon. Gentleman realises that now, and I am sorry that he did not realise it before, because when there are three Ministers at the Board of Trade the hon. Gentleman, if he personally found it inconvenient to be here, could have arranged for one of his colleagues to answer the questions. Up to the present we have refrained from attacking each other personally, and most certainly we shall not do that to-night, but the question here is that of the right of the House of Commons to have Ministers present when matters of this kind are being discussed. I should hope that my hon. Friend will now withdraw the Motion.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I was responsible for the Motion, and I now beg to ask leave to withdraw it in view of the explanation which has been given.

Motion, by leave, withdrawn.

Original Question again proposed, "That this House doth agree with the Committee in the said Resolution."

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

This impasse arose—

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

The hon. Member has already exhausted his right to speak.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I was only asking a question.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

I hope I may be allowed to ask the Parliamentary Secretary to the Board of Trade to explain to us the circumstances which gave rise to this proposal and the character of the proposal itself.

8.17 p.m.

Photo of Mr Edward Burgin Mr Edward Burgin , Luton

I very readily respond to a request for information about a Resolution which, by itself and without explanation, may be difficult to follow. Rice in the husk is called paddy. At present it is subject to a 10 per cent. duty under the Import Duties Act. This Resolution increases that duty to two-thirds of a penny a pound as from the 16th April of this year for this year. One of the objects of the Government of India at the Ottawa Conference was to increase the trade between India and the United Kingdom in rice. The United Kingdom's supplies of lice for human consumption had been imported in the form of husked, or clean, whole rice. India sent, roughly, 500,000 cwts. and other countries a little over 1,000,000. One of the provisions of the agreement concluded with India at Ottawa was an undertaking on our part to increase the duty on rice that was husked to 1d. per pound. That duty was imposed. Since 1932 there has grown up a trade in importing paddy, which is then husked and cleaned in this country. No such import at all existed in 1929, 1930 or 1931. In 1932 they were two cwt., in 1933 20,000 cwt., and in 1934 333,000 cwt. India saw that a trade in foreign paddy was growing up, those imports coming from foreign countries. The possibility of that trade was not contemplated at Ottawa at all. As the imports of paddy threatened to undermine the preference which India had obtained for husked rice India suggested to us that the matter might be put right by a small increase of that duty.

This is a demand made by the Government of India. It is in the spirit of Ottawa. Since Ottawa this importation of foreign paddy has arisen. The rate of duty of two-thirds of a penny per lb. has been calculated to give India a preference on paddy corresponding to the preference of 1d. on cleaned rice, after allowance is made for the loss of weight. The intention of the duty is to discourage the importation of foreign paddy. The yield of the duty, therefore, will be very small. That is the whole explanation of the matter. A trade sprang up which threatened the preference and an adjustment is being made in order to give the same preference to India as was afforded by the Ottawa Agreement. It is perfectly straightforward. I will add to this explanation in any detail that anybody likes, because I have the figures and details, but I think the principle is right. This House has time and again said that if Ottawa gave a particular preference it was not going to stand by and see that preference frustrated by other means, and this is merely an attempt to frustrate the evasion of this particular preference caused by the growing importation of paddy from foreign sources.

8.22 p.m.

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

Having listened to this Debate on the interesting subject of rice, I think the answer read by the Financial Secretary to the Treasury just as interesting as the answer given by the Parliamentary Secretary to the Board of Trade. There was a considerable likeness between the two answers, and it would not surprise me to know that they were given from the same document. The only variation really lay in the difference in the timbre and tone of voice of the two hon. Gentlemen, and I do not think it was worth the while of my hon. Friends below the Gangway "kicking up such a fuss," if I may say so, in order to get the Parliamentary Secretary of the Board of Trade here to give us the same, no doubt, extremely ingenious, and even satisfactory explanation, provided by the Department. But this point occurs to me. Is it to be the practice to call upon other Departments than the Treasury to explain the Finance Bill Clause by Clause and Resolution by Resolution? I do not think that is a wholesome or, indeed, a necessary proceeding. I believe that my hon. Friend the Financial Secretary to the Treasury could, with a few minutes' work this morning, have mastered the admirable brief expounded by the Parliamentary Secretary, and have presented it to the House with all the dexterity and wit for which he is so well known, and I earnestly hope that during the further course of these discussions we shall not have to send for the Minister of Transport or the Minister of Labour or the President of the Board of Trade.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

The hon. Member is getting away from the subject of the Resolution.

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

I think that even if I have strayed a little from the path it is relevant to this difficult and technical subject of rice to ask why it should be necessary to have to send for the Parliamentary Secretary to the Board of Trade to support the duty when the case could perfectly well have been expounded by the Financial Secretary to the Treasury. There is nothing in what the Parliamentary Secretary has said that would seem to make it necessary for a particularly technical individual like himself

self to have to come here to give the explanation. When set down by the very able permanent officials whom he has at his command it is a perfectly simple explanation. Although I and my friends do not agree with the principle which lies behind the duty, I can well understand that if the Government are pursuing a policy of Imperial Preference arising out of the Ottawa resolutions they should find it necessary to maintain the preference which they have agreed with India to give. I hope that even with such simple points as this it will not be necessary on future occasions to have to send for all kinds of Departmental Secretaries in order that they may explain points which the representatives of the Treasury on that bench can perfectly well do, and ought to do.

Question put, "That this House doth agree with the Committee in the said Resolution."

The House divided: Ayes, 168; Noes, 44.

Division No. 162.]AYES.[8.27 p.m.
Acland-Troyte, Lieut.-ColonelEdge, Sir WilliamLyons, Abraham Montagu
Adams, Samuel Vyvyan T. (Leeds, W.)Elmley, ViscountMacAndrew, Capt. J. O. (Ayr)
Albery, Irving JamesEmmott, Charles E. G. C.McCorquodale, M. S.
Allen, Lt.-Col. J. Sandeman (B'k'nh'd)Essenhigh, Reginald ClareMcKie, John Hamilton
Applin, Lieut.-Col. Reginald V. K.Everard, W. LindsayMaclay, Hon. Joseph Paton
Aske, Sir Robert WilliamFleming, Edward LascellesMcLean, Major Sir Alan
Assheton, RalphGanzoni, Sir JohnMacmillan, Maurice Harold
Atholl, Duchess ofGillett, Sir George MastermanMacquisten, Frederick Alexander
Balfour, George (Hampstead)Glyn, Major Sir Ralph G. C.Manningham-Buller, Lt.-Col. Sir M.
Balfour, Capt. Harold (I. of Thanet)Goff, Sir ParkMargesson, Capt. Rt. Hon. H. D. R.
Barclay-Harvey, C. M.Graham, Sir F. Fergus (C'mb'rl'd, N.)Marsden, Commander Arthur
Bevan, Stuart James (Holborn)Greene, William P. C.Martin, Thomas B.
Birchall, Major Sir John DearmanGrenfell, E. C. (City of London)Mills, Major J. D. (New Forest)
Blaker, Sir ReginaldGrigg, Sir EdwardMilne, Charles
Blindell, JamesGritten, W. G. HowardMonsell, Rt. Hon. Sir B. Eyres
Bossom, A. C.Gunston, Captain D. W.Moreing, Adrian C.
Boulton, W. W.Hamilton, Sir George (Ilford)Morgan, Robert H.
Bowyer, Capt. Sir George E. W.Hannon, Patrick Joseph HenryMorris-Jones, Dr. J. H. (Denbigh)
Braithwaite, J. G. (Hillsborough)Harbord, ArthurMorrison, G. A. (Scottish Univer'ties)
Brass, Captain Sir WilliamHarvey, George (Lambeth, Kenningt'n)Morrison, William Shephard
Broadbent, Colonel JohnHaslam, Henry (Horncastle)Munro, Patrick
Brown, Col. D. C. (N'th'l'd., Hexham)Headlam, Lieut.-Col. Cuthbert M.Nation, Brigadier-General J. J. H.
Browne, Captain A. C.Heilgers, Captain F. F. A.Nicholson, Godfrey (Morpeth)
Buchan-Hepburn, P. G. T.Herbert, Capt. S. (Abbey Division)Nunn, William
Burghley, LordHills, Major Rt. Hon. John WallerO'Donovan, Dr. William James
Burgin, Dr. Edward LeslieHope, Capt. Hon. A. O. J. (Aston)Oman, Sir Charles William C.
Cadogan, Hon. EdwardHore-Belisha, LeslieO'Neill, Rt. Hon. Sir Hugh
Carver, Major William H.Howard, Tom ForrestOrmsby-Gore, Rt. Hn. William G. A.
Chamberlain, Rt. Hon. N. (Edgbaston)Hudson, Robert Spear (Southport)Orr Ewing, I. L.
Chorlton, Alan Ernest LeofricHume, Sir George HopwoodPearson, William G.
Christie, James ArchibaldJamieson, DouglasPeat, Charles U.
Cobb, Sir CyrilJones, Sir G. W. H. (Stoke New'gton)Penny, Sir George
Colfox, Major William PhilipJones, Lewis (Swansea, West)Percy, Lord Eustace
Cook, Thomas A.Ker, J. CampbellPerkins, Walter R. D.
Cooper, A. DuffKerr, Hamilton W.Petherick, M.
Crooke, J. SmedleyLamb, Sir Joseph QuintonPotter, John
Crookshank, Col. C. de Windt (Bootle)Law, Richard K. (Hull, S. W.)Powell, Lieut.-Col. Evelyn G. H.
Crookshank, Capt. H. C. (Gainsb'ro)Leech, Dr. J. W.Pownall, Sir Assheton
Croom-Johnson, R. P.Lister, Rt. Hon. Sir Philip Cunliffe-Procter, Major Henry Adam
Cruddas, Lieut.-Colonel BernardLittle, Graham-, Sir ErnestRamsay, T. B. W. (Western Isles)
Denman, Hon. R. D.Llewellin, Major John J.Ramsbotham, Herwald
Denville, AlfredLockwood, John C. (Hackney, C.)Ramsden, Sir Eugene
Dugdale, Captain Thomas LionelLovat-Fraser, James AlexanderRankin, Robert
Duncan, James A. L. (Kensington, N.)Lumley, Captain Lawrence R.Reid, James S. C.(Stirling)
Reid, William Allan (Derby)Shepperson, Sir Ernest W.Todd, A. L. S. (Kingswinford)
Remer, John R.Smiles, Lieut.-Col. Sir Walter D.Turton, Robert Hugh
Rickards, George WilliamSmith, Sir J. Walker- (Barrow-In-F.)Wallace, Captain D. E. (Hornsey)
Roberts, Sir Samuel (Ecclesall)Smith, Louis W. (Sheffield, Hallam)Ward, Irene Mary Bewick (Wallsend)
Ropner, Colonel L.Somerville, D. G. (Willesden, East)Ward, Sarah Adelaide (Cannock)
Rosbotham, Sir ThomasSotheron-Estcourt, Captain T. E.Warrender, Sir Victor A. G.
Ross Taylor, Walter (Woodbridge)Southby, Commander Archibald R. J.Wedderburn, Henry James Scrymgeour.
Ruggles-Brise, Colonel Sir EdwardSpears, Brigadier-General Edward L.Williams, Herbert G. (Croydon, S.)
Russell, R. J. (Eddisbury)Spender-Clay, Rt. Hon. Herbert H.Wills, Wilfrid D.
Rutherford, John (Edmonton)Stanley, Rt. Hon. Oliver (W'morland)
Rutherford, Sir John Hugo (Liverp'l)Stevenson, JamesTELLERS FOR THE AYES.—
Samuel, M. R. A. (W'ds'wth, Putney).Storey, SamuelSir Walter Womersley and Major
Sanderson, Sir Frank BarnardStrauss, Edward A.George Davies.
Savery, Samuel ServingtonSutcliffe, Harold
NOES.
Adams, D. M. (Poplar, South)Griffith, F. Kingsley (Middlesbro', W.)Mason, David M. (Edinburgh, E.)
Addison, Rt. Hon. Dr. ChristopherGriffiths, George A. (Yorks, W. Riding)Milner, Major James
Attlee, Clement RichardGrundy, Thomas W.Parkinson, John Allen
Banfield, John WilliamHall, George H. (Merthyr Tydvil)Salter, Dr. Alfred
Batey, JosephHarris, Sir PercySamuel, Rt. Hon. Sir H. (Darwen)
Bernays, RobertHoldsworth, HerbertSmith, Tom (Normanton)
Bevan, Aneurin (Ebbw Vale)Janner, BarnettThorne, William James
Brown, C. W. E. (Notts., Mansfield)Jenkins, Sir WilliamWest, F. R.
Buchanan, GeorgeJohn, WilliamWhite, Henry Graham
Cocks, Frederick SeymourJohnstone, Harcourt (S. Shields)Williams, David (Swansea, East)
Daggar, GeorgeJones, Morgan (Caerphilly)Williams, Edward John (Ogmore)
Davies, David L. (Pontypridd)Lansbury, Rt. Hon. GeorgeWilliams, Thomas (York, Don Valley)
Edwards, CharlesLawson, John James
Gardner, Benjamin WalterLeonard, WilliamTELLERS FOR THE NOES.—
Greenwood, Rt. Hon. ArthurLogan, David GilbertMr. Groves and Mr. Tinker.
Grenfell, David Rees (Glamorgan)Macdonald, Gordon (Ince)

Sixth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

8.34 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

Earlier in the afternoon I gave notice to the Chancellor of the Exchequer that, inasmuch as this matter was somewhat briefly discussed by the Chancellor of the Exchequer in introducing his Budget, we should ask for an explanation of the proposal at an early stage of our discussions. Perhaps as the Secretary of State for the Colonies is here, he will deal with the point.

8.35 p.m.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I am very glad of the opportunity to explain this Resolution, which is to remove the soya bean from what is known as the Free List, in order to give effect to the established principle, which I think everyone in this House accepts, of Imperial preference. The importance of giving this preference to a very large number of Colonies in different parts of the world nobody will deny. It has been asked for by a great number of Colonies, although not primarily or principally in order to stimulate the production of soya beans in the territories concerned. I hope, however, that a preference may stimulate that production. One of the most interesting results that have followed from the policy of preference has been the development in many Colonial and Imperial territories of products which had been little or not at all cultivated, but which, given a modest preference, have been cultivated on an increasing commercial scale. While one cannot say with certainty what will be the prospects for the cultivation of soya beans within the British Empire, there is certainly ground for hope that there may be commercial production. Experiments have already been made in Nyasaland, in Tanganyika, in Kenya, in some of the West Indian territories, and in British Guiana. To take one example, the experiments in Nyasaland look very promising indeed.

But it is not primarily or chiefly in order to stimulate the production of soya beans in the Empire that this preference has been so keenly sought. It is because soya beans are a competitor, and an increasing competitor, of the different oil-yielding substances which the Colonial Empire can produce—palm kernels in West Africa, ground nuts also in West Africa, and, I hope, to be produced in East Africa also, copra produced in different parts of the Empire like Fiji and Ceylon, and so on. And every single Colony which is producing any of these commodities has asked, even begged, that this preference may be given.

I know it has been suggested that there is not any very serious competition between soya beans and these other oil-yielding substances. I am not going to pose as an expert in this matter, and I am not going to challenge the right of people who are interested in soya beans to speak from their knowledge of that commodity; but I do say to the House that, if you find every single country which is producing ground nuts, copra or palm kernels saying most emphatically that this is a serious, and an increasingly serious, competitor, these people, after all, know their own business quite as well as anyone else does. Moreover, this demand comes, not only from the producers in those countries, but from the people dealing in those commodities here. There is the Liverpool Chamber of Commerce. Nobody is going to say that the Liverpool Chamber of Commerce does not know its business, and the Liverpool Chamber of Commerce has most emphatically petitioned the Board of Trade, in the interests of the West African trade and of the mutual trade between West Africa and this country, that soya beans should no longer be included in the free list; and they have quoted in their published documents, not only their opinion—and I do not think anyone would venture to challenge their opinion as an authoritative commercial opinion—as to the real commercial position, but they have quoted facts and figures which show the seriousness of this competition. I may add that the position has become more serious in this regard since linseed has enjoyed a tariff and a preference. On those facts there can, I think, be no doubt that it is tremendously in the interests of the Empire producers in all these many territories that this article should no longer remain on the free list. Of course, Imperial production will be completely free.

These Colonies are asking for this action at a time of very great depression in their production. It is a time of low prices. I am glad to say that prices have risen a little. I wish I could think that that rise, which is modest indeed compared with the general price level, was likely to be permanent. I hope that prices will not ever go back as low as they were last year—40 per cent. below the pre-war level. That is a very serious figure at which to have to produce. But I am bound to say that, although I am, as the House knows, an optimist by nature, I do not think we can count on prices remaining indefinitely even at the modest increase which has taken place, because, as everyone knows, owing to the great drought of last year there is a shortage of feeding stuffs in different countries of the world, and there has been a temporary demand for certain oil products in America. I think we should be unwise to reckon on prices remaining even at their present modest level. At the same time, it is becoming more and more difficult for these Colonies to sell in the markets of the world. Great sales used to take place to Germany. After all, this is a great Imperial interest. These people are the best customers we have. If this matter is to be treated as a purely insular proposition, if we are to go in for a policy of isolation, with this country, with its population of 40,000,000, standing by itself and caring for no other market, we shall not see a weekly improvement of 130,000 in the numbers that we have employed. This policy of Imperial trade is a great industrial policy for this country.

What are the circumstances which render this policy necessary? We see Germany trying to make herself self-supporting and, with exchange restrictions, only agreeing to buy here and there on a barter basis, and for one reason or another very limited in any exchange which she has. Evidently we cannot rely on that German market. The American market is largely closed, except when, as at the present time, a temporary need exists. The deliberate policy of the United States of America is to put a high processing tax on these Imperial products of the British Empire in the interests of their own soya bean production. We see France trying, not unnaturally, to follow our example in developing the resources of her own Colonial Empire. We see these other markets closing, so that this market has become more important than ever. That is not the only need, but after all, even if it were the only need, I should not hesitate to make an appeal to the House, because we are the trustees of these great Colonial possessions, and we have discharged our trust pretty well.

I am making an appeal to the House to-night at a time when these very Colonies, hard pressed, and at a time of low prices and diminishing trade, have given to Lancashire and to the textile industry of this country the greatest benefits that have been given, I think, under any fiscal arrangement. I am glad to be able to come to the House to-night and to state publicly what has been the result of the quota policy which the West African and other Colonies have adopted in the interests of the great textile trade of this country of cotton and of artificial silk. If one could see an increase in exports of 10, 20 or 30 per cent., one would say that one was doing good business. What has been the effect in these very Colonies which are asking for this preference of the quota which they have put on in respect of foreign goods in the interests of Lancashire? This House has been discussing in the last two days the interests of Lancashire trade with a great and natural anxiety. If other markets for Lancashire trade shrink, is it not tremendously important to develop these Colonial markets? I think that the House will be surprised, if they do not know, when I give them some figures. The quota policy was adopted in the course of last summer. The legislation went through in the different places in June, July and August. There was naturally, as always, anticipation. Japanese imports came in rapidly and increasingly during the time when these new measures were passing through the legislatures of the different Colonies, and one, therefore, cannot expect as yet to see the full benefit for Lancashire and the textile trade of these measures, but they are already remarkable.

Let me take a few examples. I will take the first quarter of last year and compare it with the last quarter of 1934—a typical quarter before the quota was in force, and the first quarter in which the quota was in full force. Nigeria is one of the Colonies asking for this preference. The exports of Lancashire cotton piece goods to that Colony were 9,000,000 yards in the first quarter, and in the last quarter of last year the figure had risen to very nearly 14,000,000 yards. In regard to the Gold Coast, which is greatly interested in this matter, the figure is more remarkable. In the first quarter of 1934 the exports of British textiles to the Gold Coast amounted to 3,370,000 yards, and in the last quarter of 1934 to 10,650,000 yards. To Ceylon, which is very anxious to get this preference, the exports in the first quarter were under 1,800,000 yards, but in the fourth quarter they were nearly 6,000,000 yards.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

Will my right hon. Friend tell the House what this has to do with soya beans, because none of the countries referred to grow them, and consequently they do not export them?

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I am aware of that fact. I have been invited, quite properly, by the Leader of the Opposition, to explain to the House why, with complete unanimity, His Majesty's Government, are proposing this course, and I am telling the hon. Gentleman, and I am very glad of the opportunity to tell him, that we are commending it with complete confidence to the House as a great piece of Imperial policy in return for the tremendous benefit which has been given by the Colonies to the textile trade of this country. I propose to make my case in all fairness to His Majesty's Government for this preference. I could go on giving example after example. Perhaps my hon. Friend opposes the policy of preference, and, if so, I cannot expect him to support me, but, if he believes that in this mutuality of trade in a great Imperial trade partnership lies the best interests and the progress of this country, I hope that, in spite of any interests he may advocate, he may yet be found in support of this proposal. I will give the House the approximate total figures for all the Colonies. Twenty-eight million yards of piece goods were sent from the textile industries of this country into these Colonies in the first quarter of last year, and in the last quarter of last year that 28,000,000 had grown to 63,000,000 yards.

If the Chancellor of the Exchequer and the President of the Board of Trade came to the House to-morrow with a proposal of this sort as a trade agreement and said, "We have made this as part of the Ottawa Agreement, and we look to see the Lancashire exports go up, not by 30 per cent., but by 150 and in some cases, something like 300 per cent. or even more, would they not have made a good deal?" I have not the least doubt that the whole House, with unanimity, would say: "This indeed is a wise deal which you have made, and we endorse it." I am sure that the House will be no less ready to endorse this proposal, because it is not a case of waiting for the ratification of an agreement. Here is a case where these Colonies, in a vital necessity of life as things are to-day, have readily come forward in order to help a great industry in this country in the interests of a great Imperial trade partnership. Already they have done their part, and I am certain that the House of Commons is not going to be behind in giving this very modest measure of reciprocity in return for so great and so growing a gain. There is the merit of the case. I put it frankly to the House as a really big piece of Imperial policy, and as certainly a concession, if you will, that this House, rightly anxious about its great textile trade, is certainly going to be ready to give to these Colonies which have given so great an evidence of their desire to help this industry.

Photo of Mr David Logan Mr David Logan , Liverpool Scotland

Is the right hon. Gentleman able to give any figures in regard to the exports from the Colonies of palm kernels and such like products which have been displaced by the soya bean?

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I could certainly give figures about those products. They have already been published by the Liverpool Chamber of Commerce, and there is no doubt at all that the increasing import of soya beans into this country has run parallel with the very remarkable diminishing imports into this country of both palm kernels and ground nuts.

Photo of Mr Henry White Mr Henry White , Birkenhead East

Is the right hon. Gentleman speaking of ground nuts or of palm kernels when he says there are diminishing imports?

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I am speaking of the two together. There have been variations, but the diminution in respect of ground nuts has not been anything like as great as that of palm kernels. If you take the average during recent years, ground nuts have perhaps remained steady, but in regard to palm kernels the diminution has been very considerable indeed. In 1919 the imports of palm kernels into this country were 317,000 tons and in 1934, 134,000 tons. If you take palm kernels and ground nuts together, the imports in 1919 were 424,000 tons and in 1934, 246,000 tons. During that time the imports of soya beans has grown from something like 61,000 or 62,000 tons to about 178,000 tons. These figures show that side by side with the increased importation of soya beans has come the decreased importation of the other commodities, and that is why both the producers of these commodities all over the Colonial Empire and the Liverpool Chamber of Commerce say that it is so important that they should compete on equal terms.

Let me take the objections which may conceivably be raised, because I believe in meeting both sides of a case. Even if the objections were serious ones, I should say that, weighed in the balance against this tremendous increase of imports to which I have referred, we ought to carry out our proposal. What is the objection that can be taken to the proposal? It was said originally that there is a large export trade in soya meal and that you must not prejudice that. That export trade to-day is negligible. I could give figures to the House to show how it has shrunk, not due to any action of this Government but due to restrictions put on in foreign countries. If, however, there is a substance in this argument, then, seeing that we know how to work a tariff, there is always the possibilities of a drawback. I remember discussing this matter some years ago with my hon. Friend the Member for Ealing opposite, and he said: "If we can have a drawback it will be all right." I have a very vivid recollection of that conversation, but I will not go into it. He does not stand by that now, but that was a thing to which he attached importance at that time.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

The conversation to which my right hon. Friend refers took place some years ago. What I said on that occasion was that if a tariff or a duty were placed on soya beans it would be some assistance if a duty were placed upon soya oil and soya meal coming into this country.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I do not want to bind my hon. Friend to anything which he may not have said.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

The principle is the same. My hon. Friend is a very good free trader. He likes to have protection for his own commodities and free entry for his raw materials—a very good principle of Free Trade. But my hon. Friend need have no anxiety in this matter. He has enjoyed protection for the cake which he manufactures and for the oil which he has manufactured in the past, and it will be perfectly open to him in a proper case to go to the Import Duties Advisory Committee in order to show whether any increase is desirable, on merits, in the range of his oil protection or in the range of the cake protection which he now enjoys. That course will be open to him and he will have ample time to take it, because we have not rushed this duty. It is not to come into force until the 1st August. Therefore, there will be ample time for my hon. Friend to make his case for increased protection for his oil or his cake before the Tariff Advisory Committee, who are very expert on the subject.

Let me turn from that point to another anxiety which there may be in the minds of any of my hon. Friends who are more interested in agriculture. Here I think the matter of price is of importance. I am not going to pose as an expert in regard to the rival kinds of cake, although I have the authority of the Ministry of Agriculture for stating that they hold to-day the same view that they held two years ago, that the nutritive value of ground nut cake and soya cake is equal, and that they would not advise anybody to buy ground nut cake rather than soya cake, or soya cake rather than ground nut cake on the point of nutritive value.

Photo of Mr Douglas Clifton Brown Mr Douglas Clifton Brown , Hexham

It is a question of price.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

Exactly. They are of equal nutritive quality and therefore it depends upon price. Let us look at the prices. My prices are taken from the publication of Mr. Frank Fehr, who publishes a very authoritative statement every year on the prices of oil seed cake and so on. The price of soya cake is £6 13s. 9d., palm kernel cake £5 10s. and ground nut cake £6. Therefore, the nutritive value being equal my hon. and gallant Friend will be able to buy admirable Empire ground nut cake at £6, although my hon. Friend opposite is going to ask £6 13s. 9d. for soya cake. Buy the Empire cake and be a happy family. Even if there be a preference—I do not mean Imperial preference but a prejudice—in favour of soya cake, let us see how the prices work out. Last year the price of soya beans fell considerably, but the price of soya cake did not. I found certain facts in the manifesto of the Liverpool Chamber of Commerce and I was pretty sure that they must be right, although I thought that they might be coloured. I had the matter looked up for me in the authoritative tables of Mr. Frank Fehr, which everybody will accept.

I want the House to observe these figures from Mr. Frank Fehr's tables. The average price of soya beans in 1933 was £6 7s. 7½d. per ton. In 1934 the average price fell to £5 16s. 4½d., a fall of 11s. 3d. a ton in the price of the raw material. There might have been a fall in the price of soya cake, which might have come down more because there is a pretty big profit, I understand, on oil. I am not, however, an expert in these matters. Did the price of soya cake fall with the fall in the price of the raw material? It did nothing of the sort. Here are Mr. Fehr's figures. The price of soya cake in 1933 averaged £6 15s. The average price in 1934 was £6 13s. 9d.; that is only 1s. 3d. less.

Photo of Mr William Thorne Mr William Thorne , West Ham Plaistow

That is commercial morality.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I do not know anything about the morality; I am concerned at the moment with the facts. There was a fall of 11s. 3d. in the price of the raw material and a fall of only 1s. 3d. in the price of the cake.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

I am sorry to interrupt again, but I think we all really want to get the facts. The reason why the soya cakes and oil was reduced by 7½ per cent., compared with a reduction of 9 per cent. in the price of the beans, was because in the process of crushing and extracting the price of the oil went down by no less than 20 per cent., so that you had a reduction of 20 per cent. in the oil and 7½ per cent. in the meal and the cake.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

What apparently the hon. Member for Ealing (Sir F. Sanderson) did was to sell a great deal of his oil oversea and import other oil upon which he made a satisfactory profit, I suppose that on £1,000 of this imported material a profit of £200 or £300 was made. I am not an expert in this business.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

I really cannot allow the right hon. Member to make these statements.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

I must remind the hon. Member that we are not in Committee.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

Statements have been made which are grossly unfair.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

The hon. Member will have a chance to make his reply later.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I am being quite frank with the House, and the figures which I have given are not my own, but the figures supplied by Frank Fehr and Company. There may be excellent reasons why the hon. Member should not pass the difference in price on to his farmer clients. I am pointing out to my farmer friends that the price of the raw material fell by 11s. 3d., but that the price of the cake only fell by 1s. 3d. As a simple, ordinary, common sense person I can only say, that if that difference did not find its way into the pockets of the farmers who bought the cake in the course of last year then, assuming—and it is an improbable assumption—that if you put this duty on the price will rise by anything like the full amount of the duty, there is still somewhere a margin between the price of the raw material and the price to the farmer of the finished article, and I feel that some part of it should be shared with the farmer who buys. If not then the hon. and gallant Member for Newbury (Brigadier-General Brown) can get good Empire ground nut cake at £6, and if he does so he will be a good Empire producer in every sense of the word.

I have endeavoured, at rather greater length than I intended, to explain to the House why the Government, very unanimously, are making this proposal. We are making it because we regard it as a just and an essential part of the great policy of Imperial preference. We believe that these Colonies, which have given this tremendous benefit to Lancashire and given it in advance, have a reasonable claim to this preference. I would not hesitate to come to the House, nor would the Chancellor of the Exchequer or the President of the Board of Trade, and ask that this should be done even if it involved some sacrifice on our part, but the fact is that it does not involve, or should not involve, if the business is properly done, any material sacrifice on the part of anybody. I commend it to the House as an essential piece of our great Imperial trade policy.

9.11 p.m.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

I make no apology for rising to oppose the duty on soya beans, because I appreciate the grave results it will have upon the seed crushing and extracting industry of the country. I had intended to make my position quite clear at the outset, but, in view of the remarks of the Colonial Secretary, it is even more essential that I should do so. I am a director of a company which imports a large quantity of soya beans, and to that extent I am interested. I always feel that any Member speaking on industrial matters in this House is between Scylla and Charybdis, because if he speaks as an expert and therefore an interested party, he may be regarded as biased, but if he does not speak as an expert his opinion is without value. I should like to have devoted my speech to a reply to the Colonial Secretary, but if I did so I should not give the House the information which I feel it is essential it should have. When the duty was first introduced it surprised me that the Chancellor of the Exchequer made no reference whatever to it; indeed, it was merely sandwiched in with other Resolutions, and I do not believe that there were many Members who appreciated the fact that this was one of the Resolutions before the House.

I have asked myself what branch of the Government was in fact responsible for the introduction of this tax. I could not believe that the Chancellor of the Exchequer was responsible, because be, like myself, is an ardent Protectionist, and I have yet to learn that he or any other member of the Government is in favour of taxing essential raw materials. I cast my eye along the Government Front Bench and I think of the President of the Board of Trade. I find it difficult to believe that the President of the Board of Trade was in favour of placing a duty upon a raw material, particularly a raw material which comes solely from Manchuria. The President of the Board of Trade well knows that soya beans are the chief product which cargo vessels going out to China are able to bring back. Were it not for soya beans being exported from China, there is no doubt that all goods which are sent from this country to China would have to pay a considerably increased freightage.

Finally, my eye rested on the Colonial Secretary. I did not know until now that my right hon. Friend was to give his version of this tax before any debate had taken place. I must ask myself what has he in mind, for what purpose is the tax being imposed? He has told us quite frankly that it is being imposed in order to assist the Colonies in the production of other classes of oil-bearing seeds and nuts. He could not make the case that was made with reference to linseed, that he was placing this tax upon soya beans in order to assist the Colonies. It is not a question of Empire preference, because soya beans are not grown in any part of the Empire. They have been grown experimentally, but never to the point at which they could be exported. Indeed, the beans are not grown commercially in any part of the world other than Manchukuo, and therefore the case for a preference to our Colonies falls to the ground.

We then come to the second point which my right hon. Friend made, which was that he wished, by placing a duty upon soya beans, to throw the demand upon Empire products, namely, ground-nuts, copra, and palm kernels. I can assure the House that that is quite impracticable for the reasons I will explain. The soya bean is not in any way on a parallel with the three products that are produced in the Empire. For the enlightenment of the House let me explain briefly what the soya bean is and what its special properties are. I have some knowledge of the soya bean, because I can claim to be one of the first, if not the first, to introduce the soya bean to this country. The soya bean is a small round seed very much like the ordinary pea, and its great value is its high percentage of albuminous content. It contains 45 per cent. of albuminoids, whereas the percentage of albuminoids in copra is only 20 and in palm kernels only 18.

The soya beans are subject to a process of crushing, whereby the oil is expressed from the bean. The beans are also subject to an extraction process by solvents. The resultant products being soya meal and soya oil. But the soya bean, unlike the palm kernel and copra, is imported into this country solely on account of its value as a feeding stuff, and not for the oil. That should be clear to the House when I say that the amount of oil extracted from 100 tons of soya beans is under 15 per cent., whereas in the case of 100 tons of palm kernels or copra 45 per cent. of the bulk is oil. If, therefore, quite apart from the feeding value point of view, we were to import the high oil-bearing seeds in place of the soya bean, it would mean that we should have a large volume of oil for which it would not be possible to find a ready market. Soya meal is the basis of all compound feeding cakes and meals. There is nothing which can take its place. If, as the Colonial Secretary would wish, we restricted or prohibited the importation of the soya bean, that would mean that the farmer would have to put up with a lower quality of compound feeding cakes and meal, because of the lower albuminous content of other meals which would take its place. I am sorry that the Minister of Agriculture is not here, because I am sure he would appreciate the point that I am making.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

I do not want to interrupt, but I spoke with the authority of the Ministry of Agriculture when I said that they regarded the comparative nutritive values as equal. I thought it desirable to make that statement. I knew it was a statement made by the Ministry of Agriculture two years ago, and I was at great pains to find out whether the Ministry of Agriculture still adhered to that view. They do adhere to that view, and I so stated to the House.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

Of course I fully accept what my right hon. Friend says. But figures will speak. I am merely giving information which is beyond dispute when I say that soya meal contains 1 per cent. of oil and 45 per cent. of albuminoids, whereas copra cake contains 6 per cent. of oil and 20 per cent. of albuminoids, and palm kernels contain 5½ per cent. of oil and 18 per cent. of albuminoids. Members who represent agricultural districts will appreciate that with every delivery of feeding stuffs a guarantee is given. It is compulsory to give that guarantee under the Fertilisers and Feeding-stuffs Act. The percentage of oil and albuminoids is guaranteed. It must be obvious that if a meal with a lower percentage of albuminoids is delivered it is an inferior article. With reference to the guarantee of oil and albuminoids, in point of fact the whole range of analysis is frequently given. That is to say the oil, albuminoids, carbohydrates, woody fibre and the nitrogen content.

There is no doubt that a result of this tax will be an increase in the cost of soya meal and cake to the British farmer, or alternatively be will have to content himself with a lower grade article. What will be its result from the industrial point of view? My right hon. Friend referred to linseed. The position with regard to soya beans will be exactly the same as has been the result of the imposition of a duty upon linseed, and perhaps I may venture to read one extract from my speech in the House with reference to linseed when discussing the Ottawa Agreements Bill of 31st October, 1932, in which I showed what would be the result of placing a 10 per cent. duty on foreign linseed coming into this country. I said: What will be the result of the 10 per cent. import duty in this country? It will mean that the Continent, and in particular I would refer to Belgium and Holland, will be in a position to purchase linseed at the lowest world price, and having, as they have at their doors, a market for their linseed cakes, they will be able to dump their linseed oil on our shores which they did before the 10 per cent. duty was imposed. If we are to pay 10 per cent. above the world price for linseed, how is it possible for this industry to remain on our shores? Obviously, we shall become an importing nation for manufactured linseed oil and linseed cake. The linseed crushing industry which employs thousands of hands and has a considerable bearing upon many other industries will be severely handicapped."—[OFFICIAL REPORT, 31st October, 1932; col. 1491, Vol. 269.] Anyone who has followed what has since taken place will bear me out when I say that every word I then expressed has proved to be true and is borne out by facts. If any proof of that were required, I would point out to the House what in fact has been the position. In 1932, before the 10 per cent. duty was imposed, 362,000 tons of linseed were imported into this country. In 1933 the figure fell to 248,000 tons and in 1934 to 184,000 tons. If one requires any further proof of the deleterious effect of that duty on the industry, I would ask hon. Members to read the speech by the Chairman of the British Oil and Cake Mills, at the annual meeting held on 27th March last. I reiterate that the effect of the 10 per cent. duty on soya beans will be exactly parallel in every respect. He said: The only dark spot has been the linseed crushing industry in this country. He went on to say that an application was made for a duty and he referred to a point made by my right hon. Friend that if a tax upon soya beans has any serious effect upon the industry we shall be able to go to the Import Duties Advisory Committee and secure an import tax upon the products of the soya beans, namely, meal and oil. He continued: I pointed out to you a year ago that the importation of linseed, which was 362,000 tons in 1932, had already fallen to 246,000 tons in 1933. It has further decreased during 1934 to the poor figure of 187,000 tons. That is to say, in two years half the trade has been lost. An application for the adjustment of Import Duties on linseed oil was made to the Import Duties Advisory Committee on the 5th March, 1934, through The National Seed Crushers' Association, an organisation which includes practically all the seed crushers in this country. For twelve months we have been urging rectification of the duty, but so far have been unable to get any satisfaction, or even to obtain a meeting. It seems almost incredible that in a business country like this it should be possible for an important industry to be allowed to suffer to this extent without any apparent attempt to save the position. These are the words of the most eminent man in the industry. He controls some 70 per cent. of the whole of the seed-crushing mills in the United Kingdom, and he is, beside being chairman of British Oil and Cake Mills, a director of Unilevers, so that it will be appreciated that he is not speaking without very seriously and very carefully weighing every word he uses, and without full knowledge of the whole facts of the case.

I have only one more point I wish to make, namely that to which I referred in the early part of my speech, the effect which the duty will have on the shipping industry, which to a great extent is dependent on soya beans for return freights from China; it will have the effect of increasing freights on goods shipped to China. As my right hon. Friend pointed out the tax will not be imposed until 1st August, and I am not without hope the Chancellor of the Exchequer will see his way to withdraw this duty.

9.32 p.m.

Photo of Mr Henry White Mr Henry White , Birkenhead East

I was very glad indeed to have heard the very interesting and informative speech from my right hon. Friend the Secretary of State far the Colonies, because the origin of this new duty and the reason for imposing it have hitherto been, at any rate so far as I am concerned, a complete mystery. At least, I know now what the object of placing the duty is, although I must go on further to say that, having heard his speech, I am unable to relate the picture which he drew to the practical reasons for the imposition of the tax. I will give some of the few reasons why I am unable to share his optimistic picture. Before I do so I should like, because I have been specially asked to do it, to refer to the complaint made as to the way this duty has been brought to the House.

Representations have been made from a very important trade association whose members are not only manufacturers, crushers, and millers but also distributors, that they feel very strongly indeed that if a tax of this kind is to be introduced, it should be done by means of the Import Duties Advisory Committee. Here is a proposition brought to the House that a duty is to be levied, and certain claims are made for it which, I think, are wholly problematic, and are not likely to be realised, but whether that is the case, it is quite clear that certain people are going to be injured. Of that there is no doubt whatever, and my friends feel that they ought to have had due notice of a tax of this kind being brought forward in order that they might at least be heard and their case might be stated, and all the facts taken into full consideration. It would be highly improper to suggest that the Chancellor of the Exchequer, or Parliament, should abandon the right of levying duties in the Budget. That is not a contention that can be made for a moment. Parliament should retain the right of levying or removing duties in the Budget. But I think in a case of this kind where there are obviously two sides to the question and many interests are involved, it would be better that the matter should be dealt with by some machinery which would enable all these interests to be heard. My right hon. Friend made the assumption which I think is the main argument for imposing the tax, that the importation of soya beans directly competes with and injuriously affects the importation of palm kernels and ground nuts from West Africa. That is the main contention. It was not present to the minds of the Government when they omitted soya beans from the Import Duties, but it is the argument brought forward today.

I have examined carefully the series of figures from which my right hon. Friend has quoted, and, as far as ground nuts are concerned, there is no justification whatever for founding any argument upon them that the soya bean competes with ground nuts in any degree whatever. I doubt whether any scientific argument can be adduced from this set of figures at all. There are many other elements which have to be taken into account. There is the interplay of price, and there are other products such as rape seed which is to some extent interchangeable with ground nuts, soya beans and palm kernels. When it comes to the case of the palm kernels, if you choose your year you can prove anything you like from these figures. My right hon. Friend said that in 1919 the actual importation of soya beans was 62,000 tons and that this year it was 172,000 tons. Had he taken the next year 1920, he would have found that the actual importation then was only 7,000 tons.

Photo of Mr Philip Lloyd-Greame Mr Philip Lloyd-Greame , Hendon

That is because I was so fair.

Photo of Mr Henry White Mr Henry White , Birkenhead East

If my right hon. Friend had only gone back a few years, however, he would have found an importation of over 400,000 tons.

Photo of Mr Henry White Mr Henry White , Birkenhead East

The conclusion to which I have come on looking through these figures is that there is no scientific argument of a statistical kind to be founded on them and even if there were, there is no argument on the qualitative basis, because palm kernels are not interchangeable in every respect with soya beans. My hon. Friend who spoke before me interested the House with an intellectual survey of the albuminoids and carbohydrates and other factors in the chemical content of the soya bean but I have no wish to follow him in that field. There is, however, another important aspect of the matter which I do not think has been fully developed and which I think destroys the argument of my right hon. Friend. My hon. Friend behind me pointed out the great disparity between the oil content of soya beans and that of ground nuts. The soya bean contains 16 per cent. of oil and 80 per cent. of meal, the proportions in the case of the ground nuts being almost but not quite fifty-fifty. I would like to apply those facts to the argument as to the actual importation of soya beans in relation to the crushing industry in the current year.

Assuming that the crushers were to substitute the 170,000 tons of soya beans imported this year by a like amount of ground nuts they would then have to dispose of 73,000 tons of oil and 95,000 tons of cake or meal instead of 27,000 tons of oil and 136,000 tons of meal or cake. A man who is engaged in the crushing industry has to dispose of these products not in the proportions which he wishes, but in the proportions in which they are produced and according to the material in which he is dealing and the crushers would have upon their hands 46,000 tons of extra oil. If we are to have 46,000 additional tons of oil for which there is no market at the moment, what will be the result? My right hon. Friend attaches great importance to the West African problem and to getting not only a fair share of trade for West Africa but also a reasonable price for West African products. I hope that someone in the further course of this Debate will explain to me how the production of 46,000 additional tons of oil when the market does not want it, is going to help either the marketing or the price of West African products.

I pass from that point to carry the argument a stage further. Let us assume that the ground nut oil can be used to substitute the 27,000 tons of soya bean oil. Then the crusher would have to deal with 63,000 tons of ground nuts and 36,000 tons of meal. The result from, the point of view of the crushing industry would be that the total "crush" would be reduced by 110,000 tons, and there would be a shortage of meal of the order of 100,000 tons. That would have to be made up and I should be glad to know how it is to be made up. I am advised that it would have to be made up by materials other than the West African materials and it is very doubtful whether it could be made up without further importation into this country. These are arguments which compel me to take a view very different from that of my right hon. Friend and they are arguments which ought to be met before the House is asked finally to pass this duty.

My right hon. Friend referred to a statement by the Liverpool Chamber of Commerce. I have nothing to say against that body; in fact, I am a member of it, but I was surprised to hear him quote the Chamber of Commerce as the authority for that statement. If I remember aright it was not the Chamber of Commerce itself but the West African trade section which made itself responsible for this statement or manifesto, and I may add that the statement is hotly contested by other sections of trade in Liverpool. I do not wish to take up time by dealing with any of the higher flights in my right hon. Friend's speech but, having listened to that speech with great attention, it leaves me of the same mind on this matter. I am still of the opinion that the arguments upon which the soya bean was left out of the general taxation scheme of the country are as intact to-day as they were when the system was introduced.

9.44 p.m.

Photo of Sir Joseph Lamb Sir Joseph Lamb , Stone

I thank the Minister for the explanation which he has given of this tax and for the facts which he has presented in the House. Undoubtedly, there was some fear in the minds of agriculturists as to what the effect would be, but after the statement of my right hon. Friend I shall have no hesitation in supporting this Resolution. The two last speeches to which we have listened appear to proceed upon a wrong assumption. As I take it this is a duty of 10 per cent. and not the total exclusion of the soya bean. All the speeches to which we have listened have almost entirely assumed that the bean was going to be excluded from the market. That is not so. I have no doubt myself whether, if there is any increase at all in the price of the bean by the imposition of the tax, there will be any question of it being excluded.

Photo of Sir Frank Sanderson Sir Frank Sanderson , Ealing

The 10 per cent. duty which was imposed on linseed has resulted in the amount of linseed imported in the last three years being exactly half of what it was. We maintain that the 10 per cent. tax upon soya beans will have precisely the same effect.

Photo of Sir Joseph Lamb Sir Joseph Lamb , Stone

Apparently, the hon. Gentleman is stating a fact, and if it is a fact I do not deny it, but previously he gave us another fact, namely, that where there was a decrease in the price of cake it was not the farmer who got the advantage; it was other users of the oil. The last speaker said he objected to the duty being put on in this form. He thought that it should have been imposed through the Import Tariff Board. My impression is that that board is not available for the purpose. It is available for British manufacturers to make application, and I do not see how those interested in the growing of these other competitive seeds could go to the board for protection. One hon. Member has already given out a threat. He said undoubtedly the price would go up. I hope he is not going to make up his mind before the facts have shown themselves, and before they have shown what the rise is going to be. Let the increase come if it is necessary after it has been found to be necessary, but do not threaten the farmers with an increase before that. Individuals cannot live their lives by themselves. They have to live in relationship to others, and we have found the same thing entirely with regard to industries as with individuals. One industry cannot possibly live without reference to other industries. The remarks of my right hon. Friend as to the effect this is hoped to have on the trade of Lancashire has very great weight with me, and I think it will with agriculturists also. The industrialists of this country are the customers of the agriculturists. We are prepared to give fair play to them in return for the fair play we receive from them.

9.49 p.m.

Photo of Mr William Leonard Mr William Leonard , Glasgow St Rollox

It will not be necessary for me to occupy more than a few minutes as much I intended to say has been admirably stated by the speeches made by the hon. Members for Ealing (Sir F. Sanderson) and East Birkenhead (Mr. G. White) whose attitude conforms to that I wish to adopt towards the Resolution. I am also indebted to the Secretary of State for the Colonies for the complete statement that he has made. It is not generally that we have such a comprehensive statement and I fully appreciate the point made. I was particularly interested in and appreciative of his statement to the effect that this action is not looked upon as something that will strengthen production, although he held out some hopes as to the production of this commodity in a number of the Colonies. The greatest hope was that in the most favourable place the results of the experiments were promising. It is right to be cautious in making his estimate as to what might apply in the future. While I am prepared to accept the attitude adopted by hon. Members opposite, representing farming interests, I did take note that when they were receiving the assurances of the Secretary for the Colonies they were very keen to get to know which was going to, be the cheapest of the commodities. They accepted the assurances with regard to the qualities of the commodities as foodstuffs, but they were as farmers eager to get the cheapest thing for their cattle.

Photo of Sir Joseph Lamb Sir Joseph Lamb , Stone

We are prepared to produce as cheaply as possible for the benefit of the general public.

Photo of Mr William Leonard Mr William Leonard , Glasgow St Rollox

I am afraid the cows will have different views as to the qualities of the cheap products, but the feeding commodities themselves will show the results in the products. I want to deal with the question of co-operative societies. The Wholesale Co-operative. Society deal with the crushing of seed for the requirements of farmers. The products of the meal are supplied to 86 agricultural co-operative societies that have farmers as members. They are also in direct trading contact with individual farmers who find it an easy medium of interchange of their commodities, such as eggs, poultry, etc., in return for meal products. I am advised that investigations have been made as to the opinions of farmers, and any fears or hopes they may have as to the effect of the Budget Resolution. They are of opinion that the farmers are keenly desirous of keeping close to the food product that is produced from the soya bean. They are also anxious as to the cost of that desirable commodity. To refer to the argument of the hon. Member for West Ealing (Sir F. Sanderson) with regard to linseed, in 1932 the importation was 360,000 tons, and in 1934, it dropped to 180,000 tons. The duty there has made it possible for continental crushers to enter into competition with us with the result indicated. In view of the fact that these points have definitely been referred to the farmers through the medium of the organisation to which I have referred I think the Chancellor of the Exchequer should reconsider this matter. I agree that the ideal is to apply the principle of Imperial preference, but that principle must not be allowed to injure the organisations already catering for local requirements and bear adversely on the farmer and the crushing interests.

9.54 p.m.

Photo of Brigadier-General John Nation Brigadier-General John Nation , Kingston upon Hull East

I am the Member representing Hull to whom the right hon. Gentleman addressed the greater part of his remarks in his opening speech. The Member for West Ealing (Sir P. Sanderson) is not the Member for Hull. I, as representative of the city of Hull, have to regard this question of the duty on soya beans from an entirely different point of view from any other Member. We in Hull have, perhaps, the largest factory for crushing soya beans in the United Kingdom. We are employing hundreds of men not only in that factory but also in the carrying trade and on the docks. The point that troubles us is the effect it will have on employment. We have seen the example of the linseed duty. Hon. Members have already said that in the short space of two or three years there has been a fall of 50 per cent. in the import of foreign linseed to this country, and we are afraid that there will be a similar fall in the import of soya beans if this 10 per cent. duty is conferred. We also believe that the imposition of this duty will raise the price of the cake and will encourage the importation of foreign cattle feeds to this country. We in Hull import no less than two-thirds of the soya beans imported into this country. These beans are made into cake in Hull. If we are to get an increased importation of foreign cake it will inevitably mean that there will be less manufactured in our city and more men will be put out of work.

Until to-night, when the right hon. Gentleman the Secretary of State for the Colonies made his statement, we were at a loss to find out what was the reason at the back of the Chancellor's mind when he proposed this duty. Several questions have been put in the House, but we have not been able to ascertain the reason. Now we know it is because the colonies wish to be given the opportunity of growing soya beans. We would have no objection to that whatever; in fact, I would gladly support the right hon. Gentleman in that proposal, provided always that the quantity can be furnished by the colonies at the prices we can afford to pay. Until it can be said with truth that the colonies can do that, it will be premature to impose a duty which will put many of our people out of work. If we could have the assurance that the colonies can do that, I would not be standing on my feet making this protest. We have suffered in the city which I represent a good deal through the general policy of the Government. [HON. MEMBERS: "Oh!"] I do not mean that in any deprecating sense. We do not complain at all, but where the rest of the country has benefited we have not benefited to the same extent in Hull. The tariff and anti-dumping policy has naturally hit the ports, for if there is less stuff coming in there is less work at the docks. Then again, the shipping policy and the attitude that has been taken up towards foreign and coloured sailors on our ships has put a lot of our own people out of work. The unfortunate postponement of the second appointed day has created further difficulties. Lastly, I am sorry to say we have had a very severe strike. All these things have created a good deal of feeling in Hull. We feel that a duty on soya beans will create further unemployment and hardship in the city.

I can assure the Government that the question of unemployment in our city transcends any other subject with which we have to deal. Compared with the question of unemployment, the India Bill, our foreign policy, and matters of that kind are of comparatively small moment. There is only one thing before the people of Hull at the present time, and that is the question of getting more work. For that reason I am standing here to make this protest against this new imposition. The Chancellor of the Exchequer told the House when making his Budget speech that he expected to get £75,000 in a complete year from the duty. In the total revenue of the country £75,000 is an infinitesimal amount, but when the greater part of the hardship that the collecting of that small sum will impose falls to a large extent on one city, we have a right to make some protest. In view of that, I hope the Chancellor will give this matter further consideration. I do not know who has advised him in this matter, but I hope he will reconsider it and take off the duty al together, or, at any rate, put it on in steps and not impose it in one amount. I regret that I shall have to carry my opinion as far as possible unless we get some assurance that it will be further considered.

10.1 p.m.

Photo of Mr Robin Turton Mr Robin Turton , Thirsk and Malton

I approach this matter purely from the point of view of the incidence of this duty upon agriculture. I have no interest, financial or mental, in seed importing or crushing. I believe that the business men of both Liverpool and Hull are not entirely philanthropists. In justice to the importers of soya beans, however, I should say that I was interested in the speech made by the hon. Member for the West Derby Division of Liverpool (Sir J. Sandeman Allen) a fortnight ago when he said that, although the price of the raw product had fallen by 9 per cent., the price of soya bean cake was the same as in the previous year. That has not been the experience of my constituents, and I took it upon myself to find out the authenticity of those figures. My right hon. Friend the Colonial Secretary has repeated them to-day, although he has given them with greater detail, and has also told us the source of the figures. The source are statistics compiled by a Mr. Fehr. I have inquired from the sellers of soya bean cake their prices last year and this year, and I find that the average dropped from £7 to £6 15s. I am told by the importers that it is impossible in their view for Mr. Fehr to have had access to the accounts from which the proper average could be struck. I give that to the House for what it is worth, but I think it is only in justice that one should point out that the farmers have in fact been given 5s. of the 11s. that the oil crushers received.

I should like to turn to the position of the agriculturists in regard to soya bean cake, in which I am more interested, and of which I have greater knowledge. My constituents use it extensively for the fattening of both pigs and beef, and in their experience the soya bean cake has considerable advantage in nutritive value over the ground nut and palm kernel. The Ministry of Agriculture officials, I understand, take a different view. Still, the centres at Patrington and Amesbury which are conducted by the Ministry of Agriculture have not been very successful; perhaps because they take a theoretical as opposed to the practical view. If you ground nuts as sold at £5 and soya beans at £6 13s., it is quite clear that there must be some greater advantage in soya beans which makes the farmers pay £1 13s. more. Of course, farmers also are not philanthropists. We have had some experience of these different foods, and we have come to the conclusion that soya beans are a far more desirable food. If that be so, the effect of this 10 per cent. duty will be the same as that about which the hon. Baronet the Member for Ealing (Sir F. Sanderson) spoke in regard to the linseed duty. It will mean that farmers will have to pay more and that less will come in, and it will be another burden on the stock-raising industry.

I have taken a peculiar and special interest in this Debate, because two years ago in February, 1932, I moved an Amendment to the Import Duties Bill asking that soya beans should be put on the Free List, and I am very glad that the Chancellor of the Exchequer is here in his place to-day. I put three arguments forward, and, after I had spoken, the Chancellor of the Exchequer got up and said that, in view of the reasonableness of my argument, he was prepared to accept the Amendment. I hope that the House will allow me to remind them what my three arguments were. My first was that when you had not put a duty on the finished product, meat, of the stock raiser, who thought he ought to have that duty, it would be very unfair to put it on his raw product, soya beans. My > second argument was that soya beans could not be grown to any degree in our Empire. And from that I concluded that we have some ground for asking that this raw product should be exempted from the 10 per cent. duty. I pointed out also the low effect of the price of beef at that time. May I ask the Chancellor in what way have those arguments been changed in the course of two years?

The Colonial Secretary has told us today that he does not for one moment argue that soya beans can be grown commercially in the Colonies. His argument is entirely protective. It is to encourage the ground nut and the palm kernel; he quite properly wishes to encourage these industries. The day I was speaking the price of beef was 43s. 3d. a cwt.; to-day it is 38s. a cwt. The farmer still has not got protection for his finished product. Even with the 5s. subsidy, he is getting less to-day than he got at the time when the Chancellor of the Exchequer exempted this raw product. For that reason, I would ask that we should not have this duty put on our industry. The Colonial Secretary is, as he admitted, by nature an optimist. He is also by office a colonist, and I would not for one moment fail to pay tribute to his enthusiasm for our great Colonial Empire. But let us not forget the Ottawa principle, that we must regard our own industry first, the Empire second, and last the foreign countries.

I do not ask for the exemption of soya beans in the interest of any foreign country, but purely of our own industry, agriculture. It is quite proper that the Colonies should have some advantage. They have got it already in the difference in price between soya beans and ground nuts. But, further, since the Chancellor introduced his Budget there has been a great change in this important question. The price of silver, owing to the machinations of the Americans, has risen to 3s. an ounce. As a result the product of Manchukuo and China has risen in value. Soya bean raw material is coming in to-day at a higher price because of that rise of silver. The very 10 per cent. which the Chancellor of the Exchequer asked for has been put on, not by him, but by Mr. Roosevelt in America; and, if we pass this Resolution, we are going to put on a super-tax, another 10 per cent. As a result of the rise in silver soya bean cake has risen by 5s. a ton in the last fortnight. It has risen from £6 15s. to £7. If this Resolution is passed, it will be more than £7 per ton. It is, I know, in the view of some hon. Members, not a large amount, 5s. a ton on the cost of foodstuff; but when you are facing bankruptcy, when you are not producing your pigs and beef at a profit, it is an extra burden which is driving men off the land. The Chancellor of the Exchequer will remember that it was the last straw which broke the camel's back. Let him beware lest this duty break the broad but bowed back of the livestock farmer.

10.11 p.m.

Photo of Major Frank Heilgers Major Frank Heilgers , Bury St Edmunds

I am sorry not to find myself in complete agreement with my fellow agriculturists in this matter, but whatever doubts I might have had were dispelled when I heard the speech of the right hon. Gentleman who moved the Resolution. I cannot help feeling that in this case Imperial considerations must come first, and the wonderful effects of the quotas which he detailed to us must persuade us to view this duty in the most favourable light possible. Looking at it from the agricultural point of view, I want to make this point. I am a large user of soya bean meal myself, and it would not be such a very serious blow to agriculture if something did go wrong as regards soya bean meal, because having such a high albuminoid content the bean can only be used in a limited amount. The use of more than a certain percentage would be dangerous to the animal you were feeding. Therefore, I do not think that agriculture is going to suffer to the extent that has been pointed out in one or two quarters to-night. I do not think that the price need go up.

I was very surprised to hear what the hon. Baronet the Member for Ealing (Sir F. Sanderson) prophesied, that the price would go up. It is undoubtedly true, as the right hon. Gentleman said, that the fall in price of soya beans has not been passed on. It went down early this spring, I believe, possibly when this duty was envisaged, and it has now gone up slightly, I think, perhaps, with the idea in mind that it will not be raised when this duty comes on. Though awful things were prophesied as regards linseed, and we have heard of the fall in imports, which I agree is a serious thing for Hull and the other ports, yet looking at it purely from the agricultural point of view, possibly because of the oil in the linseed, there has not been a rise in the price of feedings-stuffs to agriculturists. Looking through my books the other day I find the price of linseed cake to-day is less than when the duty was put on. I will conclude by endorsing what was said by the hon. Member for Stone (Sir J. Lamb), that we who are agriculturists must look further a field. We must realise that if this is going to bring prosperity to some parts of our Empire and they can buy more Lancashire cotton that will give us the key to prosperity in agriculture.

10.15 p.m.

Lieut.-Colonel SANDEMAN ALLEN:

I was interested to hear the hon. Member for East Birkenhead (Mr. White) standing up for the interests of farming, and I want to stand up for the interests of West Africa. East and West do occasionally agree to differ. His arguments were most interesting. It was a case of "Heads I win and tails you lose," because he championed the high prices for oil but stood very strongly against high prices for the beans. What was good for the goose was obviously not good for the gander in that case. Among other things he tried to make the point that the Liverpool Chamber of Commerce have not advocated this tax. They have advocated it most strongly. To suggest that it was only the West African section of the chamber which advocated it is to take away the responsibility of the whole chamber for what one section or committee has done. The chamber endorsed the recommendations of the West African section. He might just as well say that this House is not responsible for what one of its Committees does. The chamber stands very strongly for the maintenance of this tax.

The hon. Member for Ealing (Sir F. Sanderson) made a point about shipping, and said it would be detrimental to British shipping if we stopped bringing soya beans from the Far East. I would like to ask him how many soya beans are carried in British ships and how many in Japanese ships? I can assure him that if some of the trade was diverted into palm kernels and nuts from West Africa much more carrying would be done in British than in Japanese ships. There is nothing much more that I can add without repeating the arguments already put forward, but I do want to endorse the view that if we can divert any of this trade to our Colonies we shall increase the purchasing power of the natives there and they will buy more British goods. I have been fortunate enough to visit parts of Africa and I find that the native is very discriminating. He likes to buy British goods when he can afford to do so, but when he cannot sell his own products and has very little money he is forced into the cheaper market and buys Japanese goods. The more we can improve the purchasing power of those who are in our own Empire the more employment we shall provide for the British working man.

10.19 p.m.

Photo of Mr David Logan Mr David Logan , Liverpool Scotland

I have been very much interested by the Debate to-night, more especially in the speeches of the hon. Member for East Birkenhead (Mr. White) and my hon. Friend opposite. About 18 months ago I introduced a deputation of the West African trade to the Chamber of Commerce, and I had to produce figures and a careful analysis was made of them. I am not concerned about the soya bean or the palm kernel except to the extent that I know that less West African produce is coming into the port of Liverpool, and when I remember the great carrying trade that used to be done with the West coast of Africa and the great amount of revenue that Lancashire received from the East and West coasts of Africa I think that a market which was a good market in the past ought to be maintained as a good market. This is not a matter that concerns the Labour party from the point of view of whether palm kernels or soya beans are the better. We are concerned about what will give work to our people and make our ports prosperous. There is no difference in that respect between the port of Liverpool, the port of Hull or any other port.

I want to be honest in giving opinions in this House. There is another competitor in the market. When the Colonial Secretary spoke this afternoon he did not mention another factor in regard to the distribution of the goods of the Empire, one which is of great moment to those in the business. Norwegian shipping is engaged in carrying whale oil, which has had a very detrimental effect upon our trade with the West coast of Africa. I have received a letter from Liverpool to-day, and the Chancellor of the Exchequer may be pleased to know that those engaged in West African industries look upon all this as a domestic matter. They say that it is a question of opinion, and that the value of various oils must be determined by the trade. Those who are engaged in this trade in the City of Liverpool are afraid to give any expression of opinion, because they think that the dispute ought to be settled between the parties concerned.

From the point of view of revenue, a wonderful opportunity was afforded to the Chancellor of the Exchequer. He has had many critics and I have criticised him on minor points, but in the interests of shipping and the amount of production that went out of Lancashire, some protection ought to be given to the West coast trade. I believe there are over a million people there now who are likely to go into the bush because of the decrease in trade, due to the foreign trade in oil. We might have been able to revive the carrying trade to the Port of Liverpool and other ports in this country, and bring back a great deal of our shipping business, which might have been beneficial all round. To gain trade in one part while you lose trade in another, is not good business, and seems idiotic. The maintenance of our West African trade should be worth something to this country. I would draw the attention of the Chancellor of the Exchequer to the figures that were produced through the Liverpool Chamber of Commerce, because they indicate definitely that we are losing the trade of the West coast of Africa. The cotton mills of Lancashire derive a great deal from the West coast of Africa. Speaking to the people round about Leyland, Preston, Blackburn and Burnley, I was informed that they had lost a great deal of that trade. Merchants in Liverpool used to make a good thing out of it, but on account of the dearth and their not getting goods from West Africa, there has been no question of buying by the natives who are out there. That is a market which in my opinion ought to be resuscitated and cultivated. It used to bring great prosperity to the port of Liverpool, and I am convinced that, if the West African trade can be protected, it will be to the advantage of the whole nation.

This is not a question of a rise of 5s. or 10s. for one man; it is a national matter; the whole Empire is concerned in devising some means of improving our trade. I think it lies in the direction of our home markets being protected and seeing that we get the best out of them. I do not think that this 10 per cent. duty will achieve what the Chancellor expects; I do not think it gives that protection which is essential when you have another product, not under British control, capturing markets which we are not able to control, and which we are not attempting to control. I think that if the Chancellor would pay a little attention to that point of view it would be beneficial. Liverpool is not doing too well, and if by this method the condition of Liverpool and our other ports can be improved, I shall be pleased to see it. The soya bean was not the difficulty when the case was presented 12 months ago on behalf of the Chamber of Commerce of Liverpool. The difficulty was a form of competition which was hitting Liverpool very severely, not the soya bean trade, but the trade in oil, which was of very great benefit to the city of Liverpool. While the soya bean may relieve the situation, the Chancellor might pay some attention to the question of oil which is not being carried in British ships.

10.28 p.m.

Photo of Mr Ernest Shepperson Mr Ernest Shepperson , Leominster

I approach this matter as an agriculturist, concerned for the interest of agriculture. I would like to express my gratitude, as others have done, for the frank and generous statement of the Colonial Secretary. The concern of agriculture with regard to this tax is simply a fear that there may be an increase in the price of a feeding stuff which has a large albumoid content. Possibly it may not be generally know throughout the House that a balanced ration of foods must contain a certain definite proportion of albuminoids to carbohydrates. A large proportion of the feeding stuffs which are easily obtained are rich in carbohydrates but poor in albuminoids. The soya bean differs from these other food products in being rich in albuminoids, and therefore soya meal, rich in albuminoids, is essential for mixing with other carbohydrate foods. It is for that reason that agriculture is concerned in this matter, and I have simply risen to bring that point of view to the notice of the Secretary of State for the Colonies.

10.30 p.m.

Photo of Major Henry Procter Major Henry Procter , Accrington

I am sure that the whole House, and especially hon. Members from Lancashire, listened with great pleasure to the announcement of the Secretary of State for the Colonies of the result of the policy which the Government put into effect concerning the quotas in respect of foreign goods entering our Colonies. Lancashire has gained 68,000,000 yards of cotton goods, and therefore it is only right that we should do all that is possible for the British Colonies. I am certain that the duty of 10 per cent. on soya beans will at least help the great market for Lancashire goods. Manchukuo, from which the soya bean comes, buys no goods at all from Lancashire. [An HON. MEMBER: "If not, why not?"] The reason is that its great protector who supplies Japanese goods pays very low wages, and the prices obtained from soya beans help the Imperialistic enterprise which is now taking place. West Africa has been a great market for Lancashire goods, but I am sorry to say to the Secretary of State for the Colonies that the year 1934 was a most disastrous year from the point of view of West African trade. The price of oil seeds has fallen by 40 per cent., and the average price of West African products has fallen by 70 per cent. There-fore, if the West African native does not receive money for his goods, and if his income falls by 70 per cent. his purchasing power in respect of Lancashire goods must fall in a corresponding degree.

The result is not only reflected in our Lancashire cotton areas, but it is seen in Liverpool, which is my native city. I remember as a boy seeing those great lumbering horses going along the dock road in Liverpool with great cargoes from West Africa. Now, as far as those docks are concerned6, it seems as if there has been decay, and the trade of Liverpool has been so badly hit by the policy by running our Colonies on the Dr. Barnardo principle of the ever open door for the other nations of the world, that over 40 firms in Liverpool who were engaged in the West African trade have had to go bankrupt. Whereas the soya bean hitherto has paid on duty in this country, palm kernels from West Africa have had to pay an export duty of, say, from 10s. to £1 a ton. Therefore, the policy of the Government hitherto has been to give the Manchukuo soya bean ingress to the British market, and to penalise the products of West Africa. I hope the Government will consider whether this 10 per cent. duty is really sufficient. The Colonial Secretary said that the price of the raw material, the soya bean, had fallen by 9 per cent., but the consumer had received no advantage whatever. Therefore, if we put a duty of 10 per cent. on the soya bean the manufacturers are still able to get along with that 10 per cent., having 9 per cent. in hand, and all that it will mean will be an increase in the revenue and not the forwarding of that policy which we on this side of the House desire, namely, to divert trade from foreign countries and to bring our Colonies and this country into closer co-operation, so that the people in this country and in West Africa and other Colonies will receive preference or benefit from that inter-Imperial trade. It is no good saying, as one hon. Member said, that because soya beans are not produced in the British Empire we should not put a duty on them. We must recognise that the soya bean is a serious competitor with a Colonial product, and it is our duty as trustees to assist the policy of the Government, which has excluded Japanese textile goods from the Colonies, and say to the people concerned: "We will do all that we can to see that the British market is retained for Colonial products." We shall in that way help our great Colonial Empire and Lancashire trade.

10.38 p.m.

Photo of Mr James Christie Mr James Christie , Norfolk Southern

The opposition to the duty is based on the supposition that the duty of 10 per cent. on linseed has diminished the importation of linseed by one-half. Nobody will say that it has decreased the amount of cake that has been consumed by the British farmers. All that has happened is that the farmers are better educated now and they realise that there are other proteins besides linseed cake which they can obtain at a more reasonable price. The reduction in the amount of linseed cake used is due to the fact that the farmers have turned to other sources of protein which are cheaper. I welcome this duty because it seems to me that the Government are prepared to assist our Colonies by making it more difficult for one part of China to send their products here. Having taken that initial step perhaps they will go a little further and do something to make it more difficult for Chinese eggs to come in, not for the benefit of the Colonies but for the benefit

of the people at home. This duty is a very promising sign and I hope the Colonial Secretary will go on with his good work and induce the Chancellor of the Exchequer to go a step further.

Question put, "That this House doth agree with the Committee in the said Resolution."

The House divided: Ayes, 157; Noes, 44.

Division No. 163.]AYES.[10.40 p.m.
Acland-Troyte, Lieut.-ColonelGower, Sir RobertO'Donovan, Dr. William James
Albery, Irving JamesGreene, William P. C.O'Neill, Rt. Hon. Sir Hugh
Allen, Lt.-Col. J. Sandeman (B'k'nh'd)Grenfell, E. C. (City of London)Ormsby-Gore, Rt. Hon. William G. A.
Applin, Lieut.-Col. Reginald V. K.Grigg, Sir EdwardPearson, William G.
Aske, Sir Robert WilliamGrimston, R. V.Penny, Sir George
Astor, Maj. Hn. John J. (Kent, Dover)Gritten, W. G. HowardPercy, Lord Eustace
Atholl, Duchess ofGunston, Captain D. W.Perkins, Walter R. D.
Balfour, George (Hempstead)Hamilton, Sir George (Ilford)Powell, Lieut.-Col. Evelyn G. H.
Balfour, Capt. Harold (I. of Thanet)Hammersley, Samuel S.Pownall, Sir Assheton
Barclay-Harvey, C. M.Hanbury, CecilProcter, Major Henry Adam
Beaumont, Hon. R. E. B. (Portsm'th, C.)Hannon, Patrick Joseph HenryRamsay, T. B. W. (Western Isles)
Birchall, Major Sir John DearmanHarbord, ArthurRamsbotham, Herwald
Blindell, JamesHarvey, George (Lambeth, Kenningt'n)Ramsden, Sir Eugene
Boulton, W. W.Heilgers, Captain F. F. A.Rankin, Robert
Bowyer, Capt. Sir George E. W.Hills, Major Rt. Hon. John WallerReid, James S. C. (Stirling)
Boyce, H. LeslieHore-Belisha, LeslieReid, William Allan (Derby)
Braithwaite, J. G.(Hillsborough)Howard, Tom ForrestRemer, John R.
Broadbent, Colonel JohnHewitt, Dr. Alfred B.Rickards, George William
Brown, Brig. -Gen. H. C. (Berks., Newb'y)Hudson, Capt. A. U. M. (Hackney, N.)Roberts, Sir Samuel (Ecclesall)
Browne, Captain A. C.Hudson, Robert Spear (Southport)Ropner, Colonel L.
Buchan-Hepburn, P. G. T.Hume, Sir George HopwoodRosbotham, Sir Thomas
Burghley LordJamieson, DouglasRoss, Ronald D.
Burgin Dr. Edward LeslieJennings, RolandRoss Taylor, Walter (Woodbridge)
Cadogan, Hon. EdwardJones, Lewis (Swansea, West)Rutherford, John (Edmonton)
Castlereagh, ViscountKer, J. CampbellRutherford, Sir John Hugo (Liverp'l)
Chamberlain, Rt. Hon. N. (Edgbaston)Kerr, Hamilton W.Samuel, M. R. A. (W'ds'wth, Putney)
Chorlton, Alan Ernest LeofricLamb, Sir Joseph QuintonSmiles, Lieut.-Col. Sir Walter D.
Christie, James ArchibaldLaw, Sir AlfredSmith, Sir J. Walker- (Barrow-in-F.)
Colfox, Major William PhilipLeech, Dr. J.Southby, Commander Archibald R. J.
Conant, R. J. E.Leighton, Major B. E. P.Spears, Brigadier-General Edward L.
Cook, Thomas A.Liddall, Walter S.Spencer, Captain Richard A.
Cooper, A. DuffLister, Rt. Hon. Sir Philip Cunliffe-Spender-Clay, Rt. Hon. Herbert H.
Cranborne, ViscountLlewellin, Major John J.Stevenson, James
Crooke, J. SmedleyLloyd, GeoffreyStorey, Samuel
Crookshank, Col. C. de Windt (Bootle)Lockwood, John C. (Hackney, C.)Stourton, Hon. John J.
Crookshank, Capt. H. C. (Gainsb'ro)Lovat-Fraser. James AlexanderStrauss, Edward A.
Croom-Johnson, R. P.Lumley, Captain Lawrence R.Strickland, Captain W. F.
Cruddas, Lieut.-Colonel BernardLyons, Abraham MontaguSugden, Sir Wilfrid Hart
Davies, Maj. Geo. F. (Somerset, Yeovil)MacAndrew, Lieut.-Col. C. G. (Partick)Sutcliffe, Harold
Denville, AlfredMacAndrew, Capt. J. O. (Ayr)Thompson, Sir Luke
Dickle, John P.McCorquodale, M. S.Todd, Lt.-Col. A. J. K. (B'wick-on-T.)
Dugdale, Captain Thomas LlonelMacdonald, Sir Murdoch (Inverness)Wallace, Captain D. E. (Hornsey)
Eastwood, John FrancisMacmillan, Maurice HaroldWallace, Sir John (Dunfermline)
Edge, Sir WilliamMargesson, Capt. Rt. Hon. H. D. R.Ward, Irene Mary Bewick (Wallsend)
Elliot, Rt. Hon. WalterMarsden, Commander ArthurWedderburn, Henry James Scrymgeour
Entwistle, Cyril FullardMartin, Thomas B.Williams, Herbert G. (Croydon, S.)
Essenhigh, Reginald ClareMayhew, Lieut.-Colonel JohnWindsor-Clive, Lieut.-Colonel George
Fleming, Edward LasceliesMills, Major J. D. (New Forest)Winterton, Rt. Hon. Earl
Fox, Sir GiffordMitchell, Sir W. Lane (Streatham)Womersley, Sir Walter
Fraser, Captain Sir IanMonsell, Rt. Hon. Sir B. Eyres
Gillett, Sir George MastermanMorgan, Robert H.TELLERS FOR THE AYES—
Gledhill, GilbertMorris-Jones, Dr. J. H. (Denbigh)Sir Victor Warrender and Captain
Goff, Sir ParkMuirhead, Lieut.-Colonel A. J.Hope.
Goodman, Colonel Albert W.Nunn, William
NOES.
Addison, Rt. Hon. Dr. ChristopherDaggar, GeorgeGrundy, Thomas W.
Attlee, Clement RichardDavies, David L. (Pontypridd)Hall, George H. (Merthyr Tydvil)
Banfield, John WilliamDavies, Rhys John (Westhoughton)Harris, Sir Percy
Batey, JosephEdwards, CharlesHoldsworth, Herbert
Brown, C. W. E. (Notts., Mansfield)Foot, Dingle (Dundee)Janner, Barnett
Carver, Major William H.Gardner, Benjamin WalterJenkins, Sir William
Cocks, Frederick SeymourGreenwood, Rt. Hon. ArthurJohn, William
Curry, A. C.Grenfell, David Rees (Glamorgan)Jones, Morgan (Caerphilly)
Lansbury, Rt. Hon. GeorgeNation, Brigadier General J. J. H.White, Henry Graham
Lawson, John JamesParkinson, John AllenWilliams, David (Swansea, East)
Leonard, WilliamPickering, Ernest H.Williams, Edward John (Ogmore)
Logan, David GilbertSanderson, Sir Frank BarnardWilliams, Thomas (York, Don Valley)
Maclay, Hon. Joseph PatonSmith, Tom (Normanton)
Mason, David M. (Edinburgh, E.)Tinker, John JosephTELLERS FOR THE NOES.—
Milner, Major JamesWest, F. R.Mr. Walter Rea and Mr. Harcourt
Johnstone,

Question put, and agreed to.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

10.48 p.m.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

I want to congratulate the Chancellor of the Exchequer on this Budget Resolution. From the widely drawn text we cannot appreciate quite the exact significance of it. We can do that only when the Finance Bill has been printed and we see the Clause. I was one of those who took some part, when the Import Duties Bill was passing through Parliament, in supporting and in criticising in a friendly way some of its provisions. The valuation Clause in the Import Duties Act contemplates valuation in a variety of ways. The primary valuation is based on the assmption that the goods are to be valued for import duty purposes at the value at which they were sold to the importer. I think it is manifest to all of us, whether we happen to be Protectionists or Free Traders, that from time to time goods enter this country declared at values which have not much relation to the cost of production in the country of origin, and have not much relation to the cost at which similar goods are produced in this country. In other words, dumping is, in fact, taking place; and I hope that this Clause, when we see it in the Finance Bill, will be of such a character that importers will be compelled to pay duty on a value which is the real sale value of the goods—in other words, on an honesty basis. I have no doubt that in a number of cases unfair competition has taken place in this country owing to the fact that goods come in at a value which is not really the true value, and that the duty of 10, 15 or 33⅓ per cent. is levied on a value which is not the real value. That means that the effective duty is not paid. When duties are specific, based on some unit of quantity, this problem does not arise. I would like to ask the Chancellor of the Exchequer one or two questions on this, because under the Import Duties Act duties now levied by value can be changed, I think, to duties by quantity.

Therefore, though this Resolution relates only to duties by value, we cannot entirely shut out of consideration duties levied by quantity, whether on weight, length, or any other unitary standard. It is evident that specific duties by quantity are a more effective instrument for dealing with what is called dumping, that is, selling in a foreign country at a cost lower than the goods are sold in the country of production. On the other hand, ad valorem duties have certain advantages. I am one of those who take the view that mixed duties, partly by value and partly by quantity, have certain outstanding advantages. Here we are providing for some change in the system of valuation, but what it is I do not know. That is the disability under which I am labouring at the moment. But some of the goods concerned will be imported from foreign countries, and some exactly identical goods will be imported from Empire countries. Ever since I took an interest in this subject I have been a fervent Imperialist, but I have never taken the view that this country should not be protected, where necessary, against competition from Empire countries. Lord Beaverbrook, for whom I have the greatest personal respect, calls himself an Empire Free Trader. I call myself a Preferentialist. There are cases in which if I had had my way the Import Duties Act would have provided duties on Empire products instead of allowing all Empire products in duty free. In two or three years' time that problem has got to be reviewed, and I am very definitely of the opinion that we ought not to have Empire Free Trade, but Imperial Preference.

In the meantime we shall have goods coming in from foreign countries, to which this valuation Clause will apply. Presumably it will apply equally to goods from Empire countries, though in fact they do not pay the ad valorem duty. If goods are of a kind liable to ad valorem duty they pay it if they come in from foreign countries but they do not pay it if they come from an Empire country. I hope the principles of valuation under this Clause will apply equally to foreign and Empire goods. I can think of goods now coming from an Empire country which are competing with goods produced in the constituency of the hon. Member for East Edinburgh (Mr. D. Mason) at prices which are totally unfair to the employment of labour in this country. If I had my way I would impose a duty on these Empire goods. I want to know what is their fair valuation as compared with British goods, and I hope we shall have made clear not the valuation at which the transaction takes place but the fair valuation in relation to the production of similar goods in this country, having regard to the fact that there is not one of us who does not want to see the British workman paid the highest wage that the industry will stand. The valuation of the goods ought to be related to the conditions in this country and not to the conditions in a country overseas, say an Eastern country, whether it happens to be an Empire country or a foreign country. Let us know the truth about our import trade.

I pass to the case of a commodity which is liable to a specific duty but which I hope before long will be liable to an ad valorem duty. I refer to cinema films. At the moment they pay a duty of 5d. a foot of the standard width, if they are negatives, and 1d. if they are positives-that is the film which goes through the apparatus in the cinema theatre. These films are valued at the cost of taking the photograph and developing the film. Not a penny piece is charged in that valuation in respect of the cost of artists and so forth. The film comes in here at a valuation representing merely the mechanical cost of the photograph. It does not include a penny of the cost of the pageant or story which has been filmed. I look forward to the day when the Chancellor of the Exchequer will change all that and let us have an ad valorem duty on the real value. Last year we imported £320,000 worth of films which had pictures on them. That is the amount of the retained imposts and the duty collected was £150,000. There, you will say, is a duty of nearly 50 per cent. But a friend of mine who happens to be a distinguished economist and who is now successful in the film industry read a paper on this subject before the Royal Statistical Society and he came to the conclusion that the films imported from abroad were let out to cinemas in this country at sums which produced about £6,000,000 for the people abroad. But the valuation in the Customs returns here is only about £320,000.

True, this is a specific duty but it may before long be an ad valorem duty and that is why I am raising the point now. A film will come in here and it will be declared to be worth £1,000. The renter gets hold of it and lets it out and ultimately raises £100,000 on it. The renter may be and frequently is the agent of the foreign producer. Whether the renter pays Income Tax on the profits represented by a rental of £100,000, nobody knows. It is conceivable that an American producer, say, has charged £90,000 for something which is entered in our Customs return at £100,000. It escapes Income Tax in this country and it escapes any effective import duty. If we had an ad valorem duty such as, I hope, the Chancellor will agree to, the value can be used later for the purpose of the assessment of Income Tax and what the importer misses then on Customs duty he will pay later on in Income Tax. I see no reason why we should pay tribute to the extent of nearly £6,000,000 to foreign producers of films while those people do not pay a penny of Income Tax, as far as I can find out, on these profits. I think it is a first class scandal. I know it is not easy to deal with this matter, and I am not criticising the Chancellor, but I think it is a problem which must be solved. I do not see why the production of labour in this country ultimately reflected in the profits of renters and exhibitors should pay Income Tax in full when in the case of foreign films the bulk of the value escapes Income Tax. That seems to me entirely indefensible.

I do not know exactly what this Clause is going to be, and I hope the Chancellor of the Exchequer will tell us. I hope it will deal with dumping and will enable us to know far more about the nature of imports into this country than we do at present. Our information is very inadequate, and I want to have fuller information. I want to see an instrument which later on will enable my right hon. Friend to deal with some of these problems. I am going to ask my right hon. Friend to give more indication of what he has in his mind. I know from certain conversations I have had with people that he has had a great many representations on valuation. Many people think particularly of our protectionist policy, and I am certain hon. Gentlemen on the Liberal benches, whether they agree with it or not, whether they are free traders, as I imagine they all are or not, will desire that so long as we are running a protectionist policy, duty should be paid on a fair valution. I believe it is one of the most important Resolutions in the Budget from many points of view. It has an important bearing on the future well being and employment of our people. I shall be grateful if my right hon. Friend will give some indication of his precise intentions.

11.2 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I merely rise to say, on behalf of my hon. Friends on this side of the House, that we agree that the words on the Order Paper only contain the general proposition. It may be a sound or an unsound proposition, but I do not wish to discuss that now. We shall wait and see the principle enunciated in this Resolution applied in the Finance Bill before we arrive at our final conclusions.

11.3 p.m.

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

I hope the Chancellor of the Exchequer will not pay too much attention to the hon. Member for South Croydon (Mr. H. Williams).

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

I will tell you why not. The argument which the hon. Gentleman put forward was, so far as I can gather, that the basis on which a tax on imported goods should be levied in this country was that the value of any goods should be calculated in accordance with goods of a similar character produced in this country. But in fact a genuine valuation is not, as he seems to think, the amount of cost or labour put into goods, but what you can get for them. If the hon. Gentleman has ever tried to sell anything which he thought was valuable, he will know that that is true. The value of goods produced either in this country or coming into it from elsewhere is not the amount of their cost, but the amount the purchaser will give for them.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

Do I understand that the hon. Member approves of the principle whereby foreigners sell in this country at pries lower than prices at which they sell in their own country?

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

Yes, certainly I do, and if the hon. Gentleman has followed the course of protectionist and free trade polemics in the last 20 years he will know that is the view held by those holding free trade views. In fact, the benefit to the country as a whole in obtaining goods cheaply is greater than buying them dearly even though they are bought at home. It would be irrelevant and out of order to go into the general argument whether imports from foreign countries bought cheaply were to the advantage of the country as a whole or not, but the only true valuation must obviously be the price at which the purchaser is willing to give, and not the price which the seller would demand after calculating the whole of the costs. I have little doubt that the Chancellor, when he produces the Clause in the Finance Bill, will not take the basis suggested by the hon. Member for South Croydon. If he did, any kind of goods, however desirable their entry was—and even the hon. Member will admit that there are certain classes of goods the entry of which from abroad is desirable which are dutiable at this moment—would pay on the basis of similar goods produced in this country at a necessarily high cost. If that be the view he holds, that would be the result. Let us imagine that there are in this country individuals or companies endeavouring to produce a certain class of goods and not succeeding in producing them at an economic price. The hon. Member would then contend that the price of goods entering this country for duty should be the same as the price of those goods produced in this country uneconomically and inefficiently.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

Would the hon. Gentleman apply that doctrine if the higher cost was due only to the fact that higher wages were paid in this country than in the competing foreign country?

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

Certainly. There is no reason, if we take the case of Ford cars, why high wages are necessarily productive of high costs.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

If the only cause of the higher cost was the higher wages paid in this country, would the hon. Gentleman still apply his principle?

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

The hon. Member puts me in what he thinks is a dilemma, but there is no dilemma, because there is, as far as my observation goes, no proved case in which wages have been the sole cause of high costs

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

The hon. Gentleman makes an exclamation, but I notice that he does not give me an example. We on this side will be delighted to examine any example he gives. Even if he could produce such an example—and he makes no attempt to do so—I should still hold that it was to the advantage of the country as a whole to import the goods, provided persons here wished to import them and were willing to pay for them. But that is not the point of this Resolution. The point of it is the question of valuation, and I desire to ask the Chancellor of the Exchequer not to pay any attention to the contention of the hon. Member for South Croydon that the proper way to value goods coming into this country is by the cost of production here. The proper valuation is what the purchaser in this country is willing to give, and that can only be the proper basis of valuation for any goods anywhere.

11.9 p.m.

Photo of Major Abraham Lyons Major Abraham Lyons , Leicester East

I should like, on behalf of many interests in my constituency, to support what has been said by my hon. Friend the Member for South Croydon (Mr. H. Williams) in giving a general welcome to this Resolution. There is no doubt that we did turn over in this country from a system of free imports to a system of control of imports with remarkable smoothness. Most of us who are Protectionists always thought that the system would be introduced with smoothness, but I think the whole House will agree, even those who object to the principle of controlled imports, so far as they can, that now we have a system of import control that import control should be given a fair chance and made free from loopholes that are found to exist, and that are bound to be discovered by a vigilant Chancellor of the Exchequer from time to time. There is no doubt—and I speak from very considerable observation in my constituency with its diverse industrial interests—that this question of valuation has been a serious matter, and on behalf of those industries I desire to welcome the change which the Chancellor of the Exchequer indicates in this regard.

One particular trade I know suffered for a long time through false undervaluation by foreign competitors of their product coming into this country at a time when the only duty was an ad valorem duty. The difference of price was so substantial as to make the imports almost as high as ever, and the amount of revenue collected by the Treasury negligible. It is true that by the machinery which has been built up by this Government in its wisdom the specific duty now operating puts an end to that, but it is not everybody that has a specific duty, and it takes time to alter an ad valorem duty to a specific duty; in the meantime, by forestalling and manipulation of values, a good deal of harm is done to British industry. I believe that by this new system of valuation there can be done in this country a real valuation which will make unavailing for all time any manipulation which is engineered by our foreign competitors against the interests of British industry.

The hon. Member for South Croydon presents an unanswerable case when he says value must be considered in relation to the cost of production in this country. Once you ignore that principle you give rise to all kinds of dumping and selling in this country far under cost so as to be a very great menace to the workers in any British industry. The hon. Member opposite spoke to the effect that he had no regard to the differences of wages paid in other countries as compared with what are paid here. We learned only the other day that the Japanese worker in the hosiery trade gets a wage of about 15 pence a day. Our worker in the same trade gets a wage of about £4 a week. Are we to take it that this is now the policy of the free trade Liberals, to try to force down wages in this country, and bring down the standard of life to that in the East? If that is the truth to-day, the sooner we come to an end of all the shibboleths of free trade and its low wages the better. The whole country will stand behind the Government and the Chancellor of the Exchequer in putting an end to what is an obvious game that is going on to interfere with the standard of life of the workers in our own industries.

I am sure we all welcome the Resolution. We welcome the position which is adumbrated, and we wish to do all we can to give our support to the Chancellor of the Exchequer in any effort he makes to see that the trade of this country is properly protected and the standard of life of the workers in these industries is upheld. Of the industries I have the honour to represent, one in particular has suffered for a long time from faked, manipulated values. I venture to think there will be complete satisfaction in what is being done to put a stop to the continuance of this ramp.

11.15 p.m.

Photo of Mr Duff Cooper Mr Duff Cooper , Westminster St George's

I think the hon. Member for Caerphilly (Mr. M. Jones) was very wise in saying on behalf of his party that they would await the Clause in the Finance Bill before delivering their final opinion on this subject, and in the meantime would not commit themselves in any direction. The Government feel that is the right point of view to take on this Resolution, which is in general terms. My hon. Friend the Member for South Croydon (Mr. H. Williams) realised, as he said, that he was speaking under a disadvantage in not knowing exactly what the terms of the Clause would be, but that did not prevent him from covering a great deal of ground and introducing a variety of topics. It nearly led to a full dress debate on the whole financial policy of the Government, the issue of Free Trade and Protection, between him and the hon. Member for South Shields (Mr. H. Johnstone). We were also privileged to hear of the details of fiscal policy in which he differs from Lord Beaverbrook. He also went so far as to suggest that duties that are now specific should be made ad valorem, and foreseeing the difficulties that might arise he explained how those difficulties might be overcome. He also asked the Chancellor whether this Resolution would deal effectively with dumping. That is a question which I think we may pass over, because this Resolution has nothing to do with dumping. He asked, further, whether it would deal with goods from the Empire which are now paying no duty at all. Of course, an ad valorem duty would not have to be assessed on the value of goods which are not paying duty.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

My point was this: If an article from a foreign country is liable to duty it will come under this Resolution. If a similar article is coming in from Empire countries and is valued for the purpose of the trade returns, will the same principle of valuation apply to the Empire article as applies to the foreign article which is valued for the purposes of duty. In other words, will an article coming in from a foreign country be valued on one basis and that from an Empire country on another basis?

Photo of Mr Duff Cooper Mr Duff Cooper , Westminster St George's

No, certainly not. The same principle will apply to both. The hon. Member for Caerphilly asked for some short explanation of the object of the Resolution. It is designed to deal with the endeavours to get round the ad valorem duty as it is imposed to-day; to defeat measures which are now being taken whereby goods pay duty on a declared value which is not their real value. It is designed to ensure that goods shall pay duty on the value at which they will be sold in the open markets of this country to buyers in this country. I hope and believe that when the Clause is framed it will meet with the approval of the House.

Photo of Mr Harcourt Johnstone Mr Harcourt Johnstone , South Shields

Will the value be the price to the retailer or to the importer?

Photo of Mr Duff Cooper Mr Duff Cooper , Westminster St George's

The price in the open market in this country, not the price to the importer, that is the whole point.

11.26 p.m.

Photo of Mr John Hills Mr John Hills , Ripon

I beg to move, in line 3, to leave out "and sixpence."

I will put my case quite shortly. I move the reduction, not mainly with the object of helping the taxpayer, but to assist the recovery of the country, to reduce unemployment and, incidentally, to do something for the distressed areas. How much money will be wanted? How do I suggest that the Chancellor of the Exchequer should get the money? I make the amount something like £20,000,000. If all taxpayers paid at the standard rate, it would be £26,000,000, but many of them pay at a lower rate. No advantage would be gained in Income Tax itself by reducing the rate; there would be a loss, for the income under assessment is already fixed, as the House knows. Certain taxes depend, however, upon prosperity, and the spending of money in the country might be increased. Last year, the Chancellor told us, we drank 270,000,000 more pints of beer. We might increase that by the amount which is technically called one over the eight. He said also that we drank 700,000,000 more cups of tea; that might also be increased. Immense sums are raised by the taxes on beer and tobacco, £60,000,000 in one case, and about £70,000,000 in the other. A percentage increase in consumption might produce a very large sum of money. The stamp duties depend entirely upon business activity. In 1928, they produced £30,000,000. The Chancellor only estimates £25,000,000 this year, so there is a margin. I believe he has underestimated on Income Tax. I believe that 1934, on which that tax will be paid this year, was so much better than 1933 that the amount upon which the Chancellor reckons will, I believe, be largely exceeded. Thus can the money be found.

I come to unemployment. I am very glad to see the hon. Member for Leigh (Mr. Tinker) in his place because he challenged my statement that there was a connection between the rate of Income Tax and unemployment. I have gone to the trouble of getting out a few figures. I have taken unemployment in each January, after the standard rate has been either raised or lowered. I have started with 1923. In the Budget before, the standard rate was lowered from 6s. to 5s. in the pound. In January, 1923, there were 1,525,000 people out of work. The next change of tax took place the next year, and in January, 1924, when the standard rate was 4s. 6d., unemployment fell to 1,374,000. The next figure is that for January, 1926, when the tax was at 4s. in the pound, and then the unemployment figure had fallen to 1,318,000. There was, therefore, a steady fall corresponding to the fall in the standard rate of tax. From 1926 to 1930 there was no change in the standard rate. In January, 1931, the tax stood at 4s. 6d. in the pound—an increase from 4s.; and, compared with the time when the tax first stood at 4s., unemployment had exactly doubled. In place of 1,318,000, the figure was 2,663,000. The next figure is that for January, 1932. At that time the tax stood at 5s. in the pound, and the unemployment figure was 2,855,000. Lastly, in January of this year, the tax stood at 4s. 6d., and the unemployment figure had fallen to 2,325,000.

I do not say that the only thing that affects the unemployment figures is the standard rate of Income Tax. There are all sorts of factors which come in, and no one can quote one figure in a complicated problem like this and say that it represents the only solution. All that I was saying, when I interrupted the hon. Member for Leigh the other day, was that there was a close connection between the standard rate of tax and the figures of unemployment. It may be that the one reacts on the other in an opposite way. It may be that unemployment increases the necessity for raising the standard rate. I daresay it does. But I am quite sure, and I think these figures go a long way to prove it, that high taxation does throw men out of work.

I am afraid my plea is rather a forlorn hope. I do not think it will be received with enthusiasm from the Treasury Bench, and I believe it will be received with no enthusiasm from hon. Members opposite; but I do feel that we could start a real recovery of trade and industry if we lifted off this burden. I believe that to do so is by far the best way to get men back to work. The only way in which that can be done is by increasing the industrial employment that is open to men and women. Men are out of work because it does not pay an employer to employ them. If trade and industry could be made more profitable, it would pay to employ them, and therefore they would go back to work.

I could say a good deal more, but I will conclude by asking the Chancellor of the Exchequer if he does not think that there is a very strong case. I am afraid that he will say that the money could not be found and that he could not budget for a deficit. I do not know what will happen at the end of March, 1936, but I do not think that it is a very bold prophecy to make that when we come to that date we shall see a balance in the Exchequer which will be quite sufficient to enable sixpence to be taken off the standard rate.

11.31 p.m.

Photo of Mr John Tinker Mr John Tinker , Leigh

I wish that the right hon. and gallant Gentleman the Member for Ripon (Major Hills) had been able to introduce this matter a little earlier to-night. He has been waiting for the opportunity to raise the subject, and I have been waiting, because on these occasions we oppose each other. He advocates more indirect taxation as against direct taxation. We have to meet the expenses of the State from somewhere, and unless he is desirous of cutting down the expenses, either of the social services or of some other concerns, he must advocate indirect as against direct taxation. The taxes of the country have to come from somewhere. The huge bills have to be met in one way or another, and therefore, when the right hon. Gentleman speaks in that way, he must mean that the burden must be transferred to somewhere else. Last year he praised the Chancellor of the Exchequer because he took sixpence off the Income Tax, but he hinted that at the first opportunity he would try to get a little more taken off. The right hon. Gentleman knows very well that in the present Budget he cannot get anything taken off, but he is putting his case forward now because he thinks that the position may be favourable next year. I hope that the Chancellor of the Exchequer will not take any notice of that appeal.

At the present time under this Government indirect taxation is increasing. That is known to everybody. I have figures here to prove the point which I am making. The "Economist," in the issue published on 13th April, dealt with the question of direct and indirect taxation. It pointed out that in 1933–34 direct taxation was 54.3, and that in 1934–35 it had fallen to 52.2, and that, correspondingly, indirect taxation had gone up. I was not satisfied with figures of this kind so I asked the Financial Secretary to the Treasury for a statement showing how the figures had gone up with regard to indirect taxation. It is worth while the House knowing how indirect taxation has increased in recent years. In the year 1924–5 direct taxation was 66.93 as against indirect taxation of 83.07; in 1931–2 direct taxation was 65.77 as against indirect taxation of 34.23; in 1932–3 direct taxation had fallen to 60.97 and indirect taxation had increased to 39.03; in 1933–4 direct taxation had fallen to 59.86 and indirect taxation had increased to 40.14; and in 1934–5 direct taxation was 59.77 and indirect taxation 40.23. It shows a tendency all along the line for an increase of indirect taxation. We on these benches are against that policy. We claim that all taxes ought to be direct and then everybody would know what they are paying. We think that it is wrong to cover up the amount that people have to pay. Many poor people do not know the burden that they have to meet. They are paying indirect taxation in various forms and do not realise that it is taxation. If taxation were direct everybody would know what they have to pay. Therefore, we are against the reduction of direct taxation in the form of Income Tax and against the suggestion that there should be an increase in indirect taxation.

Photo of Mr John Hills Mr John Hills , Ripon

The hon. Member must realise that while indirect taxes have risen unemployment has fallen and the real value of wages has gone up.

Photo of Mr John Tinker Mr John Tinker , Leigh

I am not able to follow the right hon. Member. If his point of view could be accepted as correct, then if we were to abolish Income Tax there would be no unemployment. If the Chancellor of the Exchequer could say to us that he would guarantee in twelve months time that there would be no unemployment if we took off direct taxation in the form on Income Tax, I should be with him, but I do not believe that it works in that way. Will any hon. Member tell us that there is any shortage of money as a result of the Income Tax. I understand that the banks are full of money and are wanting to let it out at cheap rates of interest if anybody wants it. Great fortunes are being made. In "Reynolds Newspaper" of 14th April, 1935, I find that Mr. Arthur Stanley Wills left estate of the gross value of £3,099,779.

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

The hon. Member had better direct that argument to the subject of the Death Duties.

Photo of Mr John Tinker Mr John Tinker , Leigh

I realise that it is very difficult at this time of night to keep strictly in order, when everybody wants to get away. Therefore, I will not pursue the point further. I was going to observe that very large fortunes are being made, which show that Income Tax has not prevented these big money men from going on making money. If there was any need for reduction in Income Tax it would be shown. The right hon. Gentleman did not cover the whole of the ground. He did not tell the House what would be the full extent of his proposal. To take off one-ninth of the present Income Tax would be to reduce the amount of revenue by £26,750,000. That money would have to be found somewhere. I understand that he would find it by increasing the Tobacco Duty, the Beer Duty—

Photo of Mr John Hills Mr John Hills , Ripon

There would be no increase in the rate of duty.

Photo of Mr John Tinker Mr John Tinker , Leigh

Where would the money be found?

Photo of Mr John Hills Mr John Hills , Ripon

From increased consumption.

Photo of Mr John Tinker Mr John Tinker , Leigh

That is exactly the point that I want to press upon the House. If we could find money for some of the poorer families so that there could be increased consumption, we could recover our trade and have more employment. I have pointed out on previous occasions that there are 200,000 people in receipt of old age pensions who have to go to the Poor Law for relief. If these people were provided with more of the means to buy the necessaries of life we should increase the consuming power of the people and help to provide more employment. If you relieve the rich you are not helping the poor. The real way to increase employment is to increase the purchasing power of the poor people, and that will not be done by reducing the Income Tax. I am on this occasion supporting the Chancellor of the Exchequer in resisting this claim made by the right hon. Gentleman.

11.41 p.m.

Photo of Mr David Mason Mr David Mason , Edinburgh East

I also desire to support the Chancellor of the Exchequer in his refusal to accept the proposal. It is very true that any large increase in indirect taxation presses hardest on the poor. There is no question about the figures, I gave them during the Budget Debate, and they show that the average of Income Tax and Surtax had declined whereas there has been a large increase in Customs and other indirect taxation. If any reduction could be brought about in the Income Tax I should certainly support it because it would undoubtedly stimulate employment, but you must balance your Budget. The argument of the right hon. and gallant Member for Ripon (Major Hills) was that by an arbitrary reduction of Income Tax you would stimulate the consumption of beer and tea and that by some means or other you would recover your revenue by increased consumption. If that be carried to its logical conclusion, why have Income Tax at all? It does not work out in that way. I am all for a reduction of the Income Tax if it be justified.

The Chancellor of the Exchequer has been able to effect a large saving through the conversion loan, amounting to several millions of pounds, and it is a dreadful reflection on his finances that so much of this huge sum has been frittered away in subsidies and that he has not been able to give us the relief which the right hon. Gentleman desires. I hope that when the time comes and there is a more progressive Government in power that whoever is at the Treasury, and there is an expanding revenue, will do what Mr. Gladstone did in his Budgets of 1860 and 1863, and gradually reduce indirect taxation and secure the revenue by stimulating trade and commerce. I agree that a reduction in taxation does stimulate trade, but any such reduction must be well founded. I do not agree with the right hon. and gallant Gentleman. If every country adopted free trade—

Photo of Mr Robert Bourne Mr Robert Bourne , Oxford

The hon. Member must not link Income Tax with free trade.

Photo of Mr David Mason Mr David Mason , Edinburgh East

I am hoping for the day when we shall be able to reduce Income Tax to a reasonable figure.

11.46 p.m.

Mr. CHAMBERLAIN:

The line of argument adopted by my right hon. and gallant Friend the Member for Ripon (Major Hills) will be familiar to those who have heard him speak on this subject on previous occasions. He told us tonight, no doubt bearing past experience in mind, that be hardly expected to get much support from any quarter of the House. I think his anticipations have been fully justified. I do not propose to detain the House by any lengthy observations now. I would merely say that I think, with my right hon. Friend, that a reduction of the rate of Income Tax is a good thing. I would like to see more of it. My right hon. Friend's speech was a justification of the action I took last year. It is not a thing we can do without any reference to the amount of money available for the relief of taxation. To take another sixpence off the Income Tax would cost £25,000,000 to £26,000,000 in a full year. We shall have to wait until some new Mr. Gladstone arises. Where he is to be found I do not say. Perhaps hon. Members will find some mason who will be able to lay the foundation of that structure which was begun by Mr. Gladstone. Until those times come we must make the best of our present circumstances.

11.48 p.m.

Photo of Mr Irving Albery Mr Irving Albery , Gravesend

I have only risen because my right hon. Friend said he did not expect much support for a reduction of the Income Tax by sixpence, and also because the Chancellor of the Exchequer has rather anticipated that that support was not forthcoming. As a matter of fact I rose to speak at the same time as the Chancellor. I make no complaint that I was not called. But I want to say now that I think it quite undesirable that it should go out from this House in any way that there is not a large body of opinion entirely in favour of a reduction of the Income Tax whenever it can be achieved. There is also a considerable body of opinion on these benches that think, perhaps with some slight risk, Income Tax could have been reduced in this Budget. Many of us believe that the Chancellor has framed a very cautious Budget and that many of his estimates will be largely exceeded. I would like to remind him that the best arguments in favour of a reduction of Income Tax were given by himself in his Budget speech. He started his speech by saying that he made a reduction of sixpence in the Income Tax last year solely because he believed it would give such an impetus and encouragement to trade and enterprise that it was worth doing, and, I understood him to say, worth any slight risk there may have been at that time. He went on later to congratulate himself and the House, that his views on that matter had been justified, and that there had been that improvement in trade and industry. Income Tax is still much too high, and is undoubtedly a very powerful cause in impeding speedier recovery.

Amendment negatived.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

11.51 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I intimated earlier through the usual channels that we might perhaps invite the Chancellor of the Exchequer to say a word on the implications of this Resolution. I think perhaps he will agree that this is a section of his Budget Resolutions to which he made no reference at all in his Budget statement. If it is not convenient for the right hon. Gentleman at this late hour to say anything, we shall not complain, but, if he can do it in a very few minutes, we should be very glad.

11.53 p.m.

Mr. CHAMBERLAIN:

I think I can make the matter plain in a sentence almost. This is a consequential Resolution following upon the proposal that the tax on the first £135 of taxable income shall be charged at one-third the standard rate instead of at one-half. The rebate on insurance premiums is now at the rate of 2s. 3d., but you cannot give a rebate at a higher rate than the tax which is payable on the income.

Bill ordered to be brought in upon the said Resolutions by the Chairman of Ways and Means, the Chancellor of the Exchequer, and Mr. Duff Cooper.