I beg to move, "That the Bill be now read the Third time."
In addressing the House on the Second Reading of the Finance Bill, I commented upon the generally favourable acceptance that the proposals of the Budget had met with, and I offered hon. and right hon. Gentlemen opposite, in terms which I am sure they very much appreciated, my distress at the embarrassment that I had caused them by providing them with so little material for criticism. Now that we have arrived at the last stage, I think I must pay a tribute to the ingenuity and resource that they have displayed in fulfilling their rôle of His Majesty's Opposition. They have skilfully avoided any eulogies upon the virtues of the Bill and have sought diligently for its defects, and, if the bricks that they have cast upon it have failed to make any impression upon its surface, they can fairly say that they had no straw with which to make them. I remember that on the Second Reading the hon. Member for Wentworth (Mr. Paling) condemned the Bill on the ground that it was merely a parcel of presents which the Chancellor of the Exchequer was dealing out to his Tory friends. Since then he and he friends have sought very persistently to show, in the first place, that those so-called presents are quite worthless, and, secondly, that if they had been in our place they would have made each one of them bigger and better. I cannot applaud this inconsistency, but I feel bound to applaud the anxiety to reward good Tories for their Toryism.
From other quarters of the House there have come the usual applications for the usual concessions, and the speeches in support of them have been as eloquent and no more effective than on previous occasions. I am sure my hon. Friends realise that, if I have not been able to accept more of their suggestions, that is principally because my resources were limited, and no man, not even a Chancellor of the Exchequer, can get a, quart out of a pint pot. I do not think I have really any further comments to make upon the discussions during the Committee and Report stages of the Bill, but I should like to acknowledge very gratefully the help that I received from my hon Friend the Financial Secretary to the Treasury. This is the first occasion on which it has fallen to his lot to share in piloting a Finance Bill through the House of Commons, and he has certainly greatly helped me and, I think, the House, by his easy command over the material and the pleasant wit with which he has seasoned his comments upon the Bill.
In the absence of any serious or major criticism of the Bill, I do not think I need detain the House for any long period, but there are one or two observations that I should like to make on this occasion, because this, the fourth Budget that I have introduced, brings me very near the completion of one of the aims that I set before myself when I first took office. The aim of which I speak was so to conduct the finances of the country that it would be possible safely to remove from the shoulders of the people those burdens which were imposed upon them in 1931 and which were the price that we had to pay for the recovery of our equilibrium and the restoration of the national credit. The task his not been an easy one, and I do not think it could have been carried through without the co-operation of all classes of the community. It had to be undertaken by stages, there was a considerable time to wait—it seemed a very long time—before I felt it prudent to begin the first stage, but to have anticipated recovery before it was really secured would have been like erecting a building on foundations before they were dry. It would have been bound to be followed by cracks and subsidences which we might have found it difficult, if not impossible, subsequently to make good.
In 1933 I was vehemently pressed to take my courage in both hands and to reduce the standard rate of Income Tax in the hope of stimulating trade and industry, but I believed then, and I still believe, that the then condition of the national finances would not on orthodox lines have justified such a step, and to have attempted it would have had the very opposite effect. It would have undermined confidence and hampered enterprise. That which I thought inopportune in 1933, in 1934 was both possible and desirable, and the expansion of trade which followed in my opinion fully justified the step that I then took. I have always had before my mind the necessity of maintaining public confidence. That consideration has governed not merely the extent of the advances that I have tried to make, but also the choice of priority. In 1934, in choosing a reduction of the standard rate of Income Tax, I chose that which in fact proved most capable of helping industry and the general recovery of the country. Its effect percolated to every section, and a great number received indirect benefits in the shape of increased remuneration or of fuller employment although they have not been direct recipients of any substantial advantages.
I did not say that nor did I say that reduction in. Income Tax was the only factor bringing about the expansion of trade. That would be to put too much weight upon a single one of the many influences which are brought to bear upon trade and commerce, but I do think that in the conditions of 1934 the alteration in the standard rate of Income Tax was a definite stimulus and help towards the enterprise and expansion of industries generally. This year I have had a much smaller sum available for distribution, and my purpose in dealing with that sum has been to direct it as far as possible to those parts of the field which have benefited least by previous remissions, and that is, of course, to the Income Taxpayers on the lower scale of income. The reliefs themselves do not come into effect until next year, but they will be fairly substantial, amounting to over £18,000,000; £10,500,000 is what they cost me in the current year, and they are spread over a very large number of people. Over 2,250,000 taxpayers will be directly affected by the increase in the Income Tax allowance. In addition to that, on Monday last there came into enjoyment of the full restoration of the cuts some 65,000 police, 30,000 insurance doctors and chemists, 230,000 teachers, 430,000 soldiers, sailors and airmen, and 420,000 civil servants in the Post Office and other departments.
They are included in the rough total. Altogether about 1,200,000 persons are sharing in this part of the benefits of the Budget this year, and, finally, of course, there is that great section of the community, the entertainers and the entertained, the musicians, the performers, the people who frequent the cheap seats of cinemas and other performances, all of whom have got their bit of sunshine. But one cannot frame any reliable estimate of the numbers who are thus affected.
No doubt it is the consciousness of this large number of beneficiaries which has caused the Opposition to describe this as an election Budget. If that is a tribute to its general popularity, I am not sure that I ought not to take it as a compliment to myself that I have been credited with this Machiavellian design. But I am not a believer myself in election Budgets. It is not that I claim any more virtue than any other people, but I am profoundly sceptical as to the value of Budgets if they are designed purely for the purpose of catching votes. So this has not been framed as an election Budget. At the same time I confess to a very lively sense of satisfaction that it has been possible for me to make life a little easier and happier for so many of our people, but that satisfaction would be dimmed if I did not feel tolerably conscious that the people who are enjoying these benefits recognise that they carry a moral with them. The fact that, while in other countries statesmen are to-day having to contemplate fresh economies and fresh taxation, we here are seeing our Burdens grow lighter year by year is not a fortuitous contrast. These results have come about as the fruit of our own earlier efforts and sacrifices, and, if we want to maintain them, if we want to progress further along the same road, we must avoid sharp reversals of policy and rash experiments calculated to undermine and dislocate public confidence. Fortunately, in spite of the efforts of the Liberal party to damp down the spirits of the country, the outlook remains persistently and doggedly cheerful.
I suppose that the industry which is most fruitful in providing employment is the building industry. The indications of the progress of the building industry could hardly be more satisfactory. Taking the index of plans approved as 100 in the year 1930, last May it rose to 181, the highest figure ever recorded, and actually one-third higher than it was last year. A clearer indication of the prospects may be given by taking the value of these approved plans. I have not the figures for the whole of the country and those which are available to me do not cover quite half, but they show an increase during the last three months of no less than 25 per cent. compared with the same three months last year—over £31,000,000 against about £25,000,000. That clearly points to the even further activity ahead of us. Then railway traffics, bank clearings retail trade all show a steady rise. Exports are up by £16,000,000 for the first five months of this year as compared with last year and, once again looking ahead, perhaps the best barometer you can have is the imports of raw materials, and in May the imports of raw materials were £1,000,000 more than they were in May last year. All these figures that I have been quoting are signs only. They are pointers which show the direction of the wind, but happily they all point in the same direction. They are all hopeful, and in my view they confirm and justify the spirit of reasonable optimism in which this Finance Bill has been framed.
The right hon. Gentleman opened his speech by saying that he had caused the Opposition a great deal of embarrassment because the Budget left no room for criticisms. If that were true, he has left me in a very embarrassing position this morning in that a very serious minded person like myself has to follow one of the most humorous Chancellors of the Exchequer we have ever produced. He was indeed in a very happy mood. He spoke of the growth and expansion of the building and retail trades, but I notice that he did not refer to the textile, the coal, the shipping and the ship building industries. When he uses his political paint brush the next time I wish he would pay a visit to Lancashire and see the silent docks of Liverpool and the derelict textile mills and weaving sheds all over that County.
The right hon. Gentleman is a very skilful politician and I suppose his statement this morning was just a rehearsal of his speech for the next general election. I should not be surprised if it were made the election manifesto of the Tory party. The right hon. Gentleman has hardly done justice to himself, because he said that the Government had removed a great deal of the burden from the backs of the people. He indicated that they had restored all the cuts in respect of the people who enjoyed certain benefits in 1931, but I am under the impression that I have heard a reply given in this House recently that this Government have already saved £40,000,000 by the imposition of the Means Test. That fact indicates that they have not restored all the benefits to the poorest section of the community. The right hon. Gentleman has every reason to be very sceptical therefore of what the people will think of this Finance Bill when they find out exactly what it contains.
We are disposing to-day of what is probably the final balance-sheet of this Government, reflecting as it does the administration for the past 12 months of the most diverse conglomeration of men that has ever adorned a government front bench. I do not like to be personal, but I look sometimes at the Members of the Government, and the diversity of their political outlook is nothing short of a marvel; the strange thing is that they continue to call themselves a National Government. But this Finance Bill proves conclusively that such little Liberalism as entered the Government and the tiny piece of Socialism that dared to intrude itself on it in 1931 have all been smothered. I suppose that they now adopt the gospel that all are for the State and none for a party. In my public experience I have come across this extraordinary phenomena that when a man calls himself either an independent or a national candidate he invariably votes Tory. You can write Tory over his name as soon as he becomes independent or national. That is certainly true of this Government.
This Finance Bill balances the Budget, but it does not balance the nation's conscience. It conforms with a variety of political theories represented by the Government. It is designedly Conservative, and what Liberal tendencies entered the Administration have already been thrown to the winds. The latest reshuffle of the Government is a fair index of how the political wind blows and how the Tory party is swallowing up the Liberals who joined them at the last General Election. There is one thing that the Government have done, they have reduced the Entertainments Duty on lower priced seats. The right hon. Gentleman thinks that that is a great gain; the greatest gain of all, I suppose, in this Finance Bill. The Chancellor of the Exchequer who represents the mightiest Government in the centre of the greatest Empire in the world, provides a reduction of Entertainments Duty on all seats below 6d. That is indeed a great achievement. It is the beginning, I suppose, of the Government's policy to deal with the living stage, and although it is a very small beginning we can all of us say that the living side of the stage ought to have preference in taxation over what I would call canned goods of the film variety.
Incidentally, I should like to deal with other canned goods, because the other night we were dealing with one of the items recommended by the Import Duties Advisory Committee which, I suppose, are helping the Government to balance the Budget. The Government accept all the recommendations of the Import Duties Advisory Committee, and the other night we dealt with a proposal to put a duty on every wire key that opens a, tin can. I said then that here we were in this House, banking magnates, railway directors, great financiers and astonishingly clever politicians coming down to such tiny, petty things as putting on a duty on every wire key attached to a tin can. To make it perfectly clear that the Budget was to be balanced by such means there was an addendum that the packet to be taxed must not contain more than one key per can. This is the balance sheet that emerges from all such tricks of the Government.
Let me pass to one point of criticism which is genuinely and seriously made, and that is the duty on heavy oils. Some of us feel, and I do not now speak as a party politician. [Laughter.] The hon. Member opposite would seem to suggest that I cannot dissociate myself from party politics. Well, I did not go to the Council of Action conference at the Central Hall the other night. Therefore, I did thereby dissociate myself entirely from party politics. It is felt on all hands that this duty on heavy oils is a very good indication of the tussle that is going on between road and rail transport. We shall watch with keen interest which of these two great forces emerges from the struggle successfully. It seems to me that whatever the Government may do there can be no stopping the increase of road transport in this country. The increase of road transport is inevitable.
There is one other point with which I should like to deal, and perhaps the Financial Secretary to the Treasury will reply to it. I notice that in Clause 16, for the first time, documents are required in connection with the importation of goods into this country for the purpose of assessing duties. I am told by those who understand these questions that the Government propose to go still further, and that in assessing the value of the article for duty there is to be included the amount paid to the agent who buys and sells it. I should like some explanation as to how the Government intend to operate this proposal, because, in effect, it means the imposition of a duty on salaries and wages. I suppose that accountants will be brought in to deal with these intricate problems, but I am assured by those who are connected with the auditing of accounts of companies importing and exporting commodities that serious difficulties will be found in getting at the facts which are necessary for such audits. Perhaps the Financial Secretary will tell us how it is going to operate.
The Bill provides for certain reductions and remissions of income tax. Those who have been in politics for a number of years know quite well that these are just sprats to catch mackerel at the next general election. But they are such small sprats that I am not quite sure they will catch the required number of mackerel at the next general election. We shall see. The policy of the Government is to reduce direct taxation in the belief that it will encourage trade and industry. It is clear, however, that reliefs of income tax which have been granted have been granted to men of the professional class, who have little or nothing to do with industry. It only shows that the Tory mind always assumes that, providing you relieve the taxpayer at the top and encourage industry by a relief of taxation, the benefits of that relief must automatically percolate down to the lower strata of society. I cannot believe that that is the case at all. I have been looking at the Annual Abstract of Accounts. I admit gladly that the standard of life of our people as compared with a quarter of a century ago has improved, but I am sure that the improvement in the standard of life of the common people has not kept pace with the more luxurious living enjoyed by the rich. Poverty, after all, is only relative. It is no use saying that we are better off than the people on the banks of the Nile; of course, we are. A British working man who is unemployed here at home is a gentleman in comparison with men who I have seen working on the banks of the Nile, but that is not saying much. The poverty problem in this country must be measured not by how the poor live but by how much better off they could be if they had a square deal from the Government of the day. That is the way to measure poverty. It is not a new deal the people want, but a square deal.
There is a new proposal in this Finance Bill. We had an interesting debate on Clause 26 relative to rationalisation, and I think that members of all parties in the House will watch with great interest the effect of the incentive given in this Clause towards rationalisation. It is a comment on private enterprise that unless it is given an inducement of this kind it will apparently do nothing to modernise itself or to eliminate waste. Clause 26, in the first place, will be applied in connection with the textile industry of Lancashire, the redundant spindle problem, and I would ask the Chancellor of the Exchequer to be good enough to settle in his mind, after giving this inducement, how the finances of the new Board are going to operate. I am not at all sure that the right hon. Gentleman has secured powers to analyse the accounts of the Board when it operates in connection with the sale of redundant spindles. Once you begin this rationalisation process in textiles, there is bleaching and dyeing to follow, and we shall be very interested to see how far this process will carry the industries concerned. It is unfortunate that there is a grave doubt already in the minds of those who want to rationalise the textile industry on the machinery side as to its success, and, irrespective of my view of rationalisation, I shall be very interested to see what will happen.
There is no stopping there. There is shipping and coal. I suppose we are, by Clause 26, beginning an era of inducement by the Government towards the rationalisation of all industry. We on this side do not mind the elimination of waste, but in the elimination of waste there is always the elimination of the human being; and, so far, no Government seems to have had any regard at all to the human problem in connection with the processes of rationalisation. There is another point which the right hon. Gentleman touched upon. It is very easy to say that the Bill will remove the burdens from the backs of the people, and, of course, the common people. I see that the hon. Member for Bolton (Sir J. Haslam) nods assent. Let me remind him of what the Government have been doing to increase the burdens on the common people and relieve the burdens on the better to do. These are facts. The Bill does nothing to redress the growing anomaly between direct and indirect taxation. The hon. Member for Wentworth (Mr. Paling) analysed the figures and put the case very well indeed on the Second Reading. He pointed out that in 1924–25, direct taxation was 66.9 per cent. and indirect taxation 33.1 per cent., and that this Bill as far as he could calculate, meant that direct taxation was now 57.3 per cent. and indirect taxation 42.7 per cent. If the Tory party remains in power much longer we shall probably reach a stage when we shall get a 50–50 basis for direct and indirect taxation, that is 50 per cent. taxation on the food of the people and 50 per cent. on the income of the rich. Apparently, the Government think that the working classes of this country are too dull to know how taxation is being imposed. They will have a shock some day.
Let me return for a moment to the question of rationalisation. I do not know what is going to happen to the great municipalities of the country. I live in Manchester and I see what is happening there. Industry has been encouraged in all manner of ways by the Tory party, because they believe that if you reduce rates and lower taxation on industry you will thereby encourage that industry to expand. Industry has been derated to such an extent that small shopkeepers and cottage property owners are being harassed beyond measure by increased rates. If the Chancellor would walk through Oxford Street, Manchester, he would find in that street, with its mile of shops, that more than half of them were closed.
If they were closed by the "Co-ops" I would not complain, for at any rate there would be someone to pay the rates; but the problem now is that the increased rates imposed by the municipality are making it difficult for the "Co-ops" as well. This further inducement to industry by reduction of taxation, to encourage rationalisation, is a very strange process. Let me now touch upon a subject with which I am a little more familiar. Nearly every Government before it decides upon a general election does one thing, but this Government is too stupid for that. It has done nothing at all for the social services. If right hon. Members opposite had wanted to catch mackerel with sprats he would have done something for old age and widows' pensions and health insurance. No; he is just returning to the unemployed what was "pinched" from them in 1932. If this Government is to be stamped with one thing above everything else it is that it has cried a halt in the social services of the country. It has done more than that. It has actually taken money out of the social services. And now the Chancellor wants us to rejoice because he is putting back 3d. out of every shilling taken away in 1926.
The right hon. Gentleman rather prided himself that the Government could show an increase in trade, commerce, traffic, building and retailing and all the rest of it. I have been looking this week at the most authoritative journal on the problem, "The Economist." I have an impression that its articles are not written by Socialists, and I am almost sure that they do not emanate from Liberals. If the articles are not from Liberals or Socialists they must come from friends of the Government. Let us see what they say. That very responsible journal says that there is a very definite slowing down in the last 18 months in the rate of improvement in trade in this country. Let me repeat that because the right hon. Gentleman the Home Secretary is now present.
It is the current issue, I believe. Let me repeat what it says. It states that there has been a definite slowing down in the last 18 months in the rate of improvement in trade in this country, that our activities are almost back to the 1929 level, and that part of our recovery is in fact artificial and neither permanent nor healthy. It says that because part of our improvement in trade is consequent upon the manufacture of armaments. The manufacture of armaments does not add a penny piece to the wealth of any country. Paying wages to manufacture arms is only another way of paying doles and calling them wages. Consequently, the Chancellor cannot get it all his own way by claiming that the Government has increased the trade of the country.
I was sorry for the hon. Member for East Edinburgh (Mr. D. Mason) when he did not succeed in getting the Government to reveal the secrets of the Exchange Equalisation Account. This is about the only Government fund that we know nothing at all about. I sat for some years on the Public Accounts Committee. In that Committee we scrutinised every farthing spent by the State. Apparently we are to know nothing about this Equalisation Fund, which seems to me to be a sort of financial diplomacy on behalf of the Government, used in trying to give a knock out blow to the currencies of other countries when we do not like them. At any rate, we ought to know something about its operations.
A few words about the National Debt. I think Members of every party are feeling that the burden of the National Debt ought to be reduced. It seems to me that part of the proceeds of the successful conversions that the Government made during the last year or so ought to be used definitely to wipe away some of the debt. It is monstrous that we are paying this interest on this enormous National Debt from year to year and are making no attempt to reduce the Debt itself. The right hon. Gentleman was wrong about the great, growing and expanding trade consequent upon the work of the National Government. I have been looking up one of the indications which show whether trade is improving or not. I have been studying the capital issues, which are a fairly good indication of how industry is carried on and whether it is expanding or not. During the first half of 1933 new capital issues were £110,000,000; in 1934 for the same period they were £96,000,000; and in the first half of 1935 they were £65,000,000. That does not give much indication of confidence in the Government, of expanding trade and commerce and all the rest of it.
This Bill is the final throw of a Tory regime masquerading under the guise of a National Government. The passing of this Bill is happily not the final stage in our proceedings. The general election which is coming will provide us with a grand audit of the accounts now presented to Parliament. We shall watch with interest the results of that grand audit. I have no hesitation in saying that the report of the grand auditor which will appear at the foot of the balance-sheet will read "Audited and found totally incorrect."
I do not desire to follow my hon. Friend the Member for Westhoughton (Mr. Rhys Davies) to any extent, but I think that probably he unconsciously paid a compliment to the Government when he said that they were not doing what he thought would be the best thing to catch votes. He was probably right in thinking that there are other and better means of catching votes than a Budget or any constructive work of that character. Rather the Government's strength lies in the weakness and the conflicting policy of hon. Members of the Labour party. So long as they constitute the regular Opposition to which the country has to look for an alternative Government, I think the strength of the Government's position is due, not to their own merits but rather to the demerits of those who sit opposite to them. I do not agree with my hon. Friend in his excursion into the question of the incidence of taxation, particularly direct taxation and its results on the trade and industry and general prosperity of the country. I think it is now agreed by all economists and by all who have given any study to the question that high taxation and a high National Debt are detrimental to progress and reconstruction. When we say that these factors are detrimental to a real policy of reconstruction, we do not mean that only a certain class of the population is affected.
My hon. Friend referred to the National Debt and said that it ought to be reduced. For precisely the same reasons, taxation ought to be reduced at the earliest possible opportunity. We know that those who conduct industries in this country, especially those who have not taken any part in great rationalisation schemes and great combinations of industry—private individuals who have carried on industries in our large cities with success and who are still to some extent successful—are being hampered, prejudiced and injured by the fact that Income tax and Super-tax remain at their present level. Taking an extreme case, if it were possible, by some means or other, to reduce Income tax to the pre-War standard, it would be an immense aid to reconstruction and to the return of prosperity throughout this country, not only among industrialists but among workmen, affecting not only profits but also wages.
I do not often intervene in the Debates in this House, and I have no intention of speaking at length, but I should like to say something about the present situation as I see it. There is one aspect of the Government's taxation which calls for attention and that is what amounts almost to discriminatory taxation in respect of certain commodities as against another commodity, a form of taxation which penalises certain industries and those very often the most progressive. It will be agreed that it is an unwise policy to levy a tax upon the raw material of an industry if it can be avoided by any means at all. I agree with the Chancellor when he says that he is prevented from doing certain things because the means are not at his disposal. We all understand that, but there are many ways of raising money. I think, however, that the worst of all ways is to tax a commodity which is vital to a progressive industry in order that that industry may compete against foreign producers.
I refer to one tax which has been discussed in this House many times. The right hon. Gentleman has closed his ears to all the appeals made to him from various quarters in regard to that tax. I understand that that is not so much because he wants the money which is derived from it, but because he thinks that by penalising a certain type of fuel he is going to give a better chance to fuel derived from coal. I have some personal knowledge of the result of that tax upon one industry with which I am familiar. I am not, however, dealing with this matter from any personal point of view, because I know other industries which are less able to compete against, this handicap than the industry to which I refer. In the case of the industry which I have in mind the tax has not driven us back to the use of coal or any fuel derived from coal. In that case the tax does not help the coal industry directly or indirectly, because we will not go back—we cannot afford to go back—to coal. But the tax does mean that we are less able to compete with foreign producers. In one particular plant or factory it adds £1 to the cost of production of every ton of metal. That is one type of taxation which I suggest ought to be avoided and it is a tax which ought to be removed as soon as the Chancellor can see his way to do so. I refer to the tax on fuel oil.
Another form of taxation to which I wish to refer is the taxation on the motor car industry. I have considerable experience in other countries, including the United States and Canada, and I have been struck by the position of the motor car industry in this country compared with motor car industry abroad. I know that the right hon. Gentleman will point to the protection which has been given to the motor car industry in this country, but I submit that the whole system of the taxation of the motor industry in this country is not conducive to the expansion of that trade. We have failed to secure for this country what I consider to be a fair share of the export market in that industry. I know that things have been considerably better during the last few years, but, even so, in 1934 the number of cars exported from this country, including commercial cars, was only 37,000 as against 237,000 exported from the United States. That is to say that America, admittedly with a larger population and a larger production, exported seven times as many cars as we exported. If we go back to the year 1929 the proportion is ridiculous. In fact, the United States have captured a modern industry. They could to-day in my submission if they had less tariffs, if they adopted a freer system of trade, have a grip and hold upon the export trade of the world in motor cars against which the motor ear industry of this country could not, in present circumstances, possibly compete.
Then take the case of other countries. Italy in 1934 exempted all new cars from taxation for six months, and in 1935, in order to stimulate the production of cars—thereby reducing costs and enabling manufacturers to compete in foreign markets—they extended that exemption for nine months, while the maximum horse-power tax in Italy is far less than the maximum in this country. In Germany in 1933 all new ears were exempted from horse-power tax. Of course, that was the act of a dictator, and it seems to me that sometimes a dictator is able to act very rapidly. When he wanted to stimulate the production of cars in Germany, he exempted all new cars completely from horse-power tax, and, as we know, in America the horse-power tax is negligible, with the results that I have pointed out, not because of any greater engineering ability than we have in this country, but because of a policy which stimulated an infant and comparatively new industry as compared with the policy adopted here, which was penal in its character.
Then there is that feature of this Budget, the taxation on heavy oil. If I may, I will quote from an address by Sir John Cadman on this matter. Referring to the promises made by the right hon. Gentleman in this matter, he said, speaking at the Institution of Petroleum Technologists:
The general policy of placing high taxes on the raw material of transport appears to me to be one of doubtful wisdom in view of the very substantial percentage of overhead costs represented by transport charges. High taxes on motor fuel must inevitably handicap the industrialist in his efforts to capture foreign markets, and perhaps the position will be clearer if I state that every time a petrol-driven lorry of 6–7 tons un-laden weight travels seven miles the Government takes 8d. in fuel tax alone. It is perhaps of little value to point out"—
I want the right hon. Gentleman to pay particular attention to this—
that, when the last two increases in the petrol tax were made in 1931 the Chancellor of the day gave a pledge that they would be removed when the financial crisis was past.
We gather that the financial crisis has passed, and indeed, in the right hon. Gentleman's speech to-day, he said he was aiming at returning to the taxpayer those extra taxes which were imposed as a, result of the financial crisis. When is the right hon. Gentleman intending to complete that aim? If the financial crisis is past, why not do it now? The aim of the right hon. Gentleman seems to me to be somewhat on the modest side, because I gathered that his aim was to return to the 1931 position, and that he had no aim beyond that, but surely—
Well, it was the principal aim, the first aim. This House must be convinced that there is not going to be any real revival of trade or any reconstruction of world trade unless this country, and other countries as well, for that matter, can be relieved of the taxation which is now imposed to so large an extent. I agree with what my hon. Friend said on the proportion of indirect taxation which is left under this Budget, and that the proportion of indirect to direct taxation is still on the increase. I do not say, as my hon. Friend said, that it is taxation on food, because it is not taxation on food, but it is taxation on consumable commodities in the main. It is true that it applies to manufactured goods, machinery, and so on as well, but in the main it is taxation on consumable commodities, and that must mean that if this ratio is disturbed more and more to the disadvantage of indirect taxation, the burden of taxation will be transferred more and more to those least able to bear it.
The figures for the first three months of this current financial year show that this ratio is being widened and is getting more and more unfavourable to the indirect taxpayer. In the first three months of the year there were increased Customs and Excise receipts of £3,000,000, as compared with the same period last year. It may be said that this has not resulted in an increase in cost to the consumer. I entirely agree that so far that has not appeared, but it is because, as we all know, there is a large number of factors which at the moment vitiate the true and only effect in the long run of tariffs, and these factors will not, in my submission, operate indefinitely. They are bound to lead to some difficulties, not only as between this country and the Dominions, but between sections of the population of this country and particularly between the urban and the rural areas.
Having regard to the fact that the Government have such an enormous majority in this House—and I think it may be rightly termed an extremely docile majority—one would have thought that occasionally some Members who nominally support the National Government would pluck up their courage and, on some essential question, vote against the Government. But unfortunately that has not been so, and there cannot be any excuse for the Government, with their enormous majority, not going ahead very much more quickly than they do. It seems to me that the only thing to do, with a National Government with this enormous majority, is to put up some form of Council of Action. There is a possibility of Councils of Action being considered for all manner of purposes, and Members are not unfamiliar with such bodies from outside.
I am old enough to remember that very distinguished statesman, the right hon. Gentleman's own father, leaving the Government of the day in about the year 1903. He was the leading spirit behind what was in fact, although not in name, a Council of Action in those days. Why was the Tariff Reform League established, why was it inspired, by that great statesman, who sacrificed his distinguished post in the Government and went out into the wilderness to act in the way in which he sincerely and honestly believed? It was a Council of Action. What else was it? It was hailed and announced at that time as a nonparty organisation; and we have had a number of such bodies. There was the Anti-Corn Law League. It is not at all unusual. I am saying nothing about the so-called Council of Action which has just been set up. I do not know very much about it, whether it is non-party or not; but I say that when there is a Government in power commanding a majority of this magnitude, it may be necessary, in so far as their own Members will not act independently in this House, to set up bodies outside to stimulate and ginger up the Government now and again. They need not act in exactly the same way as the right hon. Gentleman's distinguished relative established and advocated the policy which, with great and with natural pride, the right hon. Gentleman himself consummated some two or three years ago.
I am quite willing that the Liberal party should do its utmost in that direction. I know that the Government pride themselves and the Chancellor prides himself upon the improvement in trade. I think he said there was an improvement in exports last year of £30,000,000. But may I remind the House that since 1929 there has been a decrease of £360,000,000 in exports, and that we have got a long way to go before we can get back even to 1929. I am entirely in agreement with the expression which the Chancellor used, that there should be no rash experiments, and so on. Of course, there must be no rash experiments or sudden reversal of policy. Everyone realises that; but I do not think that hon. Gentlemen above the Gangway will ever be guilty of doing anything very rashly. But I want to point out to the right hon. Gentleman that, as has been said, there are districts in the country which certainly have not benefited by Protection; in fact, they have suffered greatly, and will continue, of necessity, to suffer greatly so long as we have tariffs in this country.
The curious thing about Protection is that, exactly like currency, the more universal the Protection is, the less effective it is for the purpose. It is quite true that if you have one or two countries in the world establishing a system of Protective duties to protect their own markets, those countries may get away with it; but if you have all the world under a system of tariffs, restrictions and such things, no one gets away with it. The fact is then, that there is a total diminution of international trade. It is exactly the same with going off the Gold Standard. If one country goes off it, that country may get away with it but if other countries do the same, all countries lose whatever gain they got out of it. Similarly with regard to Protection. Of course, we have been told that you cannot have Free Trade, because other countries do not have it, but Free Trade, at any rate, when it is universal, is the best thing for the whole world. Free imports and free exchanges of goods are the best thing for the world, but Protection, when it is universal, is the worst thing for the world.
I do not want to follow my hon. Friend who cited some observations in the very careful analysis of the situation by the "Economist", which are very important. I submit that it is a sad thing that at this stage, 17 years after the end of the War, there is still no peace. There is no economic peace. My right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George), in a speech the other day, said he did not think there could be peace without reconstruction, and that there could not be reconstruction without peace. I say, with great diffidence, that you cannot have a real revival of trade and prosperity in this country, or in any other country, unless the policy of this Government and the other governments lead to economic peace.
Sir JOHN MELLOR:
As this is the first occasion on which I have the honour of addressing the House, I ask for the usual indulgence. I do not propose to follow the hon. Member for Cardigan (Mr. D. Evans) into any discussion of councils of action, although I can assure him that my views are opposite to his, but I should like to take up the short time in which I propose to detain the House with a discussion of the Bill now before the House. It is generally re-cognised that there is nothing sensational in this Bill, but I do say that it is a landmark in a period of three and a half years during which this Government has restored the health of our national finances, and I feel that in any criticism of this Measure, if it is to be balanced criticism, full recognition must be given to the work of the Government during the past three and a half years, and I trust that, in any observations I may make with regard to the provisions of this Bill, it will be taken that such recognition from me is implicit.
I turn to Clauses 19 and 20, in which the Chancellor of the Exchequer has given very welcome increases in the personal allowances both to married and to unmarried persons. I should like, however, to make this comment. I am rather surprised that the Chancellor of the Exchequer in these two Clauses should have gone out of his way to emphasise the disparity in the treatment between married and unmarried persons, greatly to the disfavour of the married. Discrimination to the disadvantage of the married has existed ever since I can remember, and I have always wondered why people have taken it quite so calmly. In Clause 19, the personal allowance to an unmarried person is increased from the existing amount of £100 to £125—an increase of £25. In Clause 20, for a married couple the personal allowance is to be £170, as against the existing allowance of 2150—an increase of £20 only for the two, or £10 for each person. I have never been able to understand why, for purposes of taxation, married people ought not to be treated each as though they were unmarried, and when we find a situation in which they are already placed at a great disadvantage, I am very disappointed to find that, at a time when the Chancellor of the Exchequer is in a position to give some concession, and has given some concession, he has not gone all the way and devoted what he is able to devote in order to correct the present injustice to married persons.
When we come to the question of the surtax, the joint assessment of husband and wife has, of course, more onerous consequences. They are entitled to apply for separate assessments, it is true, but it is expressly provided that they shall not gain anything by so doing, and the total amount which they pay shall not be less than they would pay if they were jointly assessed. The fact that these injustices to married persons have persisted for a long period is no answer to my case. The fact that an injustice is persisted in makes it no less unjust. I know that we cannot expect the Chancellor of the Exchequer during these difficult times to remedy all injustices, for he has not the means at his disposal, but, at least, one would like to have the injustice recognised and would like him to do all he can in this direction. The fact that it is impossible to go the whole way at the present time makes the case no less urgent. I hope very much that my right hon. Friend will give it his careful future consideration.
Probably the Clause which has aroused as much discussion as any in the country has been Clause 32 dealing with the raiding of the Road Fund. Of course, there is no special sanctity about the Road Fund. It has been raided before, and will probably be raided again. It is obvious that statements made 15 years ago cannot be binding in any way upon the present Government, but undoubtedly, although there has been no special sanctity, there has been an odour of sanctity pervading the Road Fund; and I have tried to discover how it arose. Looking at the OFFICIAL REPORT I discovered in 1920, in the Debate on the Second Reading of the Road Bill of that year, a page which, judging by its wear and tear, had been closely examined by hon. Members. This is the statement made by the then Parliamentary Secretary to the Ministry of Transport:
This Fund is very much in the nature of voluntary taxation of a particular kind. The motorists have consented to raise money by this particular tax on the definite undertaking that the money shall be expended on the improvement of roads."—[OFFICIAL REPORT, 2nd December, 1920; col. 1529, Vol. 135.]
A little while ago I received a letter from a village cricket club in which I was described as an honorary subscriber. Whatever position that was intended to be, it was certainly not honorary, and whatever the position of the motorists as taxpayers was intended to be in 1920, it was not intended to be voluntary, and, in any case, was not voluntary. I feel that, in view of the tradition that there is some special character in the Road Fund, it is most desirable that the Fund should be for that reason, if not for others, abolished in order to clear up all doubts, and that other machinery should be substituted whereby a share of the general taxation should pass through the Treasury to the Ministry of Transport, then to the local authorities, and so to the roads. I feel that the situation would be cleared up far more satisfactorily in that way.
The next matter on which I should like to touch is contained in Clause 33, in which the Chancellor has made a very welcome concession in a measure of further relief from death duties to small annuities. I welcome that, although the amount is very small, particularly because I regard the ravages of this tax, which I look upon as a capital levy on the wealth of the country, as being extremely dangerous. Any mitigation, however small, is to be warmly welcomed. I will not now proceed to dilate upon what harm I consider estate duties do in the case of individuals and their families. I will not discuss what has been so freely discussed, namely, the serious question of the displacement of labour from private estates, but I want to consider this matter from a national point of view. Estate duties are undoubtedly a chronic capital levy. It would not perhaps be so serious a matter if it were treated as capital in the hands of the State, but it is, and has been as long as I can remember, treated as income. Again, I think, this is a thing which, because people have grown accustomed to it, they continue to take quite calmly. I am certainly not suggesting that this year the Chancellor should entirely revolutionise the present system, but I think that we ought to recognise its dangers. I feel that national taxes should be conducted in just as scrupulous fashion as private finance.
May I take a case which I do not consider to be an extravagant parallel. Suppose there is a company which awns a subsidiary company, and the subsidiary reduces its capital and makes a repayment of capital to its shareholders. The parent company would receive a certain sum of money. Suppose that company proposed to pay the money out as dividends, certainly no auditor would consent to it. Obviously, it would have to be treated as capital. I suggest that that is what is being done by the State in taking capital from private individuals and spending it as if it were income. Even if the system is to continue, a great deal can be done to encourage private individuals to make good the damage on their own account. Suggestions were made during the previous stages of this Bill which were designed to encourage individuals to do that by insuring against the probable amount of the duties. The Chancellor of the Exchequer was asked to give some encouragement in that direction by providing that the money paid in discharge of estate duties under such a policy should not be aggregated with the estate of the deceased, but should form a separate estate so as not to attract the higher rate of duty which would result if both the ordinary estate and the proceeds of the policy of insurance were aggregated together. Unfortunately, that proposal did not commend itself to the Chancellor, largely for various administrative reasons, but I hope that it will not be forgotten and will be revived until some means are found of giving it effect.
There is one other direction in which I feel that the burden of estate duties is doing a great deal of harm to the trade of the country. It is extraordinarily difficult now to get anyone to invest in small concerns. People will invest only in concerns in whose securities there is a very free market, and I believe the principal reason for that is that people do not like to lock up their capital for very long, do not like to lock it up in any concern in which they will not be able to realise it fairly easily. If a man does invest his money in a small concern and then dies, and the revenue authorities make a large demand upon him for estate duty, his successors are in a very difficult position. They either have to realise at a negligible value securities in which there is no free market or to borrow upon them, and obviously such securities are not easy to borrow upon.
While discussing the relationship in such matters between capital and income I would like to refer briefly to the taxation of wasting assets, more especially because this concerns the constituency, the Tamworth Division of Warwickshire, which I have the honour to represent and in which there are coal mines. Let me take a coal mine as an instance. At the present moment the proprietors of the mine have to pay Income Tax upon what is, very largely, a return of capital. Profits from the sale of coal are only partly income. They are partly the return of capital, because when the coal has all been drawn from the pit the mine becomes worthless. I feel that if some concession could be made in that respect, so that if a proprietor set aside a certain proportion of his profits for replacing capital, Income Tax should not be levied on it, that would be a very helpful thing.
In Committee the Chancellor largely resisted the proposal on the ground that he did not see what effective check there could be to prevent such an amount as had been relieved of taxation being treated ultimately as profits. I think it would be a fairly easy way round that difficulty if the proprietor were to take out a sinking fund policy in the name of a nominee of the Chancellor of the Exchequer or the Board of Trade. Such nominee would hold that policy in trust for the proprietor of the mine, and before any amount could be paid out to him the sanction of the Chancellor of the Exchequer would be required. I feel that it is in cases like this where there is a speculative enterprise rather specially burdened by taxation, not only on its income but also, in a large measure, on its capital, that we find the trade of the country being unnecessarily and unduly discouraged.
In concluding, I should like to remark that I think we can all agree, without any undue complacency, that we do enjoy some advantages in this country. I am told that in a far distant country an honest official is defined as one who once bought stays bought. Here we can congratulate ourselves not only upon a clean administration but also, I feel, upon having a body of men in the public service who are not only helpful and polite but extremely efficient. But while that is so I feel that the difficulties of the taxpayers are still not entirely solved. The Chancellor has frequently, in the course of the discussions on this Bill, referred to administrative difficulties as being overwhelming. Those difficulties may be great, but I feel they are nothing to the difficulties which taxpayers very often have to face in discovering what is due from them and what is due to them. I feel that a great deal more assistance would be afforded to the general public if the Income Tax laws were further simplified. I am very glad to assume from the appearance of something like the holy war started by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) against the Government that we are not going to be faced with grandiose schemes involving enormous expenditure. The real problem to be solved is how to reduce taxation. If we can reduce taxation business will go ahead, and I hope very much that the Chancellor of the Exchequer will continue upon the path along which he has so far proceeded so successfully. Perhaps I may describe it as the path of rectitude without prudery, and I am sure that it is the only path which will lead to success.
I am sure the House will wish me to pay a compliment to the hon. Member for Tamworth (Sir J. Mellor) on his maiden effort. All of us here have gone through the same ordeal, and we all know what it means. The hon. Member has done extremely well. The Finance Bill does not allow a new member wide scope, but he has shown that he has paid close attention to its details. I agree with him about Clause 19 and married men's relief, and I think the Chancellor of the Exchequer might very well pay close attention to the case as it was put by the hon. Member. I hope we shall hear him more often now that he has made his maiden speech. Turning to the other speakers, I would like first to refer to the representative of the Liberal party who addressed us. When listening to Liberal Members I am always in a difficulty as to where they stand on various matters. First of all the hon. Member said that he wanted the Income Tax reduced, and thought it was necessary to bring it down to the 1913 level. That is a very good idea, in its way. He went on to criticise the taxing of foodstuffs, and then wanted relief from the taxation on raw materials. Listening to him, I began to wonder what it was that should be taxed and where we were to find our revenue.
After all, Members here have a duty to perform. We all, on both sides, realise that money has to be found from somewhere, and hon. members cannot sit for ever on the fence, they must at some time come down on one side or the other. The British electorate wants something definite, and we cannot keep dodging about, as do the Liberal party. The national expenditure is estimated to be £733,000,000. That sum has to be found, and, if the Liberal party say that the expenditure should be not met by Income Tax nor by taxation on foodstuffs, they must tell us what part of the social services or what part of the expenditure must be cut. They do not say that; they will not let the public know what must be done. Let us know exactly where we are, and let us regulate taxation accordingly. I hope that the next hon. Member who rises to speak from the Liberal benches will not wander away and talk platitudes, telling us nothing at all.
The Chancellor's speech was one of complacency and satisfaction. One felt that he was enjoying the sunshine. I was reminded of his Second Reading speech when he said that his Budget had lost none of its plumage and not a single feather had been taken away from him. I tried to add another feather to his plumage by urging him to accept a small amendment, but he refused to do it. He made an excellent speech in point of argument, but he did not do justice to the case. Since then I have had several letters from people who would have benefited. One case is that of a schoolmaster with £300 a year. His son is qualifying to be a chemist and the schoolmaster is paying a premium, but he cannot get any relief from taxation on account of it. The Chancellor did not get hold of the real position when he spoke about benefiting the rates, because that case is not one of benefiting the rates. The man is an ordinary taxpayer who is spending money in trying to train his son. Perhaps this time the Chancellor had no opportunity to examine my proposal, but I hope that he will do so by next time, and that he will be able to go more carefully into the matter to see if he can give some relief to the people about whom I am speaking.
The Chancellor to-day was indiscreet. He said that it was because Income Tax had been reduced in the year 1934, that there has been a great extension of trade. The Government state on the hoardings that they have given stability to the country and have brought about an expansion of trade. There was no reduction of Income Tax until 1934; why did trade expand during the previous years? If that was not due to reduction of Income Tax, to what was it due? If it was due to other causes, why do those who advocate a reduction of Income Tax always say that expansion of trade is due to reduction of Income Tax? The Chancellor cannot have it two ways. One of the two things must be true; either there there was no expansion of trade before 1934, or it is due now to the reduction of Income Tax.
The Chancellor in his speech this morning was very pleased that he had been able to restore the cuts. On looking into the matter, I find that some £4,000,000 represents the cost to the Exchequer of restoration of cuts this year. I put this to the representatives of the Government; was there any need to make these cuts at the onset? When they were put on, in 1931, I questioned whether there was any need for them. I argued at that time that the Government were imposing cuts upon a body of people which could ill afford them. What credit can the Government take for restoring the cuts if there was no need to make the cuts in the first instance? It is like taking things from someone, and then handing back only a part of what has been taken away and saying: "How good I I am to you! I have given you something back." I want the Government to put on the hoardings: "We put on these cuts; we took from the unemployed and from the teachers and many other people this amount of money". Let the Government, when they are telling what they have done, balance the account by telling all that they did. That would be only fair to the people reading the poster. They would then know exactly what had taken place.
I want to mention the case of people who, after suffering a reduction of salary, have gone on pension under a superannuation scheme. They have suffered also a reduction of their pension rights. It is not fair for the Government to put a burden on those people, and I appeal to the Government to see to it that nobody suffers in his pension rights because of the cuts which took place in 1931. The pension rights which they would have had if there had been no cuts should remain now that the cuts are restored. I hope the Government will pay attention to this point. I would also ask the Chancellor whether there is any intention to restore in full what was taken from the unemployed. No mention is made of that in the Finance Bill and, strickly speaking, my reference to it is out of Order. The Chancellor has given money to almost everybody. He has given to Members of Parliament, by restoring their cuts. There are thousands of people, however, who are not in the same position as they were in 1931, and I feel my position acutely. It it too much for human nature, to say, when someone wants to give you something, "I shall not have it." Members of Parliament should not accept anything until every cut has been given back to everybody who suffered in 1931. I hope that the Chancellor will bear this in mind and will do all that he can to give to the unemployed the rates to which they are entitled. I cannot criticise the Bill as keenly as I might others, because it is an easy Budget. It is an attempt to meet a certain difficult situation. I originally thought it was for the purposes of a general election, and there is still the idea in the air whether that will prove to be so or not. If it is not an election Budget, perhaps the Chancellor may be prepared to restore some of the other things when the time comes round so that he may be ready for the election. If that be so, whether it serves our purpose or the purpose of the Government, let the unemployed be dealt with as they ought to be dealt with, and then I feel that the Government will receive the gratitude of the people to a greater extent than is the case at the present time.
The hon. Member for Leigh (Mr. Tinker) to whose speeches on these occasions the House always listens with pleasure, said that he hoped that the next Liberal who spoke would not indulge in platitudes, and would indicate quite clearly where he stood. As the next Liberal to be called, I shall do my best to avoid platitudes, and I do not think the hon. Member will accuse me of not indicating quite clearly on which side of the fence I am.
I rather expected that the hon. Member would make that interjection, and it gives me the opportunity of taking the Chancellor to task in a very mild way for saying in his speech that the Liberal party spent a good deal of their time in depressing the spirits of the country. I would ask the Chancellor, in referring to the Liberal party, to remember that by far the greater part of the Liberal party in this House are supporters of his Government and of himself, and that there is a difference between the Liberal party and the Opposition Liberal party.
The hon. Member for Leigh knows perfectly well that I have, in opposition to him, been a persistent advocate of the reduction of direct taxation. I was very glad to hear him express the view that it was the duty of Members of this House to find means of raising revenue, and, I take it, equally to find some means whereby expenditure could be cut down, because it has appeared to me in these debates, and particularly in this Parliament, that a new difference is beginning to evidence itself between those who occupy the Government benches and the Opposition. If we were to look back a generation or so, it would be true to say that the difference between those who occupied the Government benches and those who occupied the Opposition benches lay in the fact that those who occupied the Opposition benches would urge that the Government were spending too much and were taxing the people too heavily. Now there is a tendency for that to be changed, so that, whereas those who support the Government are in favour of lower taxes and economy, the Opposition seem to take it as the particular duty of the House to discover means whereby more of the taxpayers' money can be spent.
The hon. Member for Westhoughton (Mr. Rhys Davies) indicated that view very plainly at the end of his speech. He asked, with peculiar naiveté, why, if the Chancellor really wanted to produce an election Budget, he did not distribute money to all sorts of people who have no claim upon public money. That is a point of view which, I think, cannot be sufficiently emphasised before the electors of this country, because the Opposition will never be able to claim the attention of serious men and women in this country so long as they continue to adopt the point of view that it is the job of this House to spend, and not to save, public money. I was very glad to hear my hon. Friend the Member for Cardigan (Mr. D. Evans) make a plea for reduced taxation in this Parliament. It has been difficult for those of us who sit on the government side of the House to secure support from those Liberals who sit on the other side for our view that taxation should be reduced. Surely, if the Liberal party have had one consistent theme throughout their history during the last two or three generations, it is that they have been advocates of economy and of the reduction of taxation.
I do not propose this morning to devote any more time to developing the plea, that I have made on previous occasions for a reduction of the Income Tax, but I should like to say that the Chancellor surely has no reason to be dismayed when he looks back upon the past four years. He said that he had given himself a certain task to perform, and no reasonable man or woman can quarrel with the point of view that he has very successfully discharged that task. My hon. Friend the Member for Cardigan seemed to understand from the Chancellor's speech that the right hon. Gentleman had thought of nothing more than restoring the 1931 position, but the Chancellor said nothing of the sort. He said that he had set out at the beginning of this Parliament with a certain task before him—a task which, I am sure, in the view of many members of this House, was not likely to be successfully achieved. It has been successfully achieved, and I think it has been successfully achieved in no small degree because the Chancellor has not attempted any spectacular methods. There are some in this House who have persistently, throughout the debates on the Finance Bill in successive years, taken upon themselves the role of goads for the Chancellor of the Exchequer. We have tried to persuade him to reduce taxation here and there. He has resisted at the moment, but we sincerely hope that the influence which we in our humble way have been able to bring to bear upon him has had its results in subsequent years, and we hope that any views which we express today will have their influence next year.
In that connection I wish specifically to refer to Part III of the Bill, which deals with the National Debt. In Clause 27, provision is made for the service of the National Debt, and it is laid down that the sum of £224,000,000 shall be provided for the service of the National Debt in the present year. I have previously, in these debates, asked the Chancellor to justify that figure. The National Debt cost £211,000,000 last year, and, as things are now going, there is every prospect that it will only cost about £210,000,000 this year, so that there will be a surplus on that one item of £14,000,000. In the ordinary way, that surplus goes to the Sinking Fund, and, in his speeches both this year and last year, the Chancellor indicated that the time must surely come when provision must be made for the Sinking Fund. It is well known to the House that, not so many years ago, a substantial amount was set aside every year for the Sinking Fund, but I suggest that to-day there is far less justification for making any provision for the Sinking Fund than there used to be in the past.
I base that view not a little on the size of the National Debt. The National Debt this year—the internal debt—stands in the financial statement at about £6,885,000,000, and it is inconceivable that any sum should be set aside for the Sinking Fund sufficiently large to make any material alteration in that figure. If £50,000,000 were set aside every year, it would take 140 years to extinguish a debt of that figure. I suggest that what is really important in this matter of the National Debt is not the gross amount, but the cost of its service, and that, by reducing taxation rather than applying revenue to the Sinking Fund, the prospects of reducing the cost of the National Debt are brightened. The House, if it examines the figures, will find that the cost of serving the National Debt of £6,885,000,000 is now at the very low percentage figure of 3.1. The House knows very well that, not so many years ago, the cost of serving the National Debt was more nearly round about 5 per cent., and I think the Chancellor can take considerable credit to himself for being responsible for the reduction of that figure from about 5 per cent. to something like 3.1 per cent. The benefit to the nation from a reduction in the cost of serving the National Debt from a 5 per cent. basis to a 3.1 per cent. basis is far greater than could possibly be achieved by setting aside large sums every year for the Sinking Fund.
If you were to put the question to every Income Taxpayer, "Which would you rather, that your Income Tax should be reduced from a standard rate of 4s. 6d. to a standard rate of 4s. or that £25,000,000 should be set aside for a Sinking Fund?"—I am suggesting that the question be seriously considered—every taxpayer would say that he would prefer a reduction of the standard rate, not merely because it would give him more money to spend, but because he would believe such an alteration more likely to contribute to the general well-being of the country. The Chancellor of the Exchequer smiles, but I hope he will consider, before he applies large sums of money to the Sinking Fund, the advantage of not taking such a step, but of doing all he can to pursue the course advocated by the hon. Member for Cardigan, the hon. Member for Tamworth (Sir J. Mellor) and the hon. Member for Leigh (Mr. Tinker) and applying what he has to the relief of direct taxation. There have been really no serious criticisms of the Bill. The hon. Member for Cardigan found it very difficult to oppose the Government, and he found the same difficulty speaking on the Third Reading last year. The hon. Member for Leigh was in the same difficulty. I think at the end of the Debate the Chancellor can surely be satisfied that the Bill has been received well, not merely by his own supporters, but really, in their own hearts, by every Member of the House.
There was only one passage in the speech of the hon. Member for Tamworth (Sir J. Mellor), which so greatly interested the House, in which I could not find myself in complete agreement with him—and I think I am not altogether orthodox in this matter—and that was in reference to the incidence of the Estate Duties. I would much rather have capital active, in so far as it can be done, than passive. I think, on the whole, that the man who makes money is worth more to the country and the State than the man who merely inherits it; and I should regret, on social, political and economic grounds, the building up of an hereditary plutocracy such as would occur if Death Duties and Estate Duties were treated in the manner the hon. Member indicated. I am not even sure that the increasing fluidity of capital, which has been caused by the tendency of people nowadays to invest their money in the stocks of companies which have a comparatively free market, is not in the long run more advantageous than to have capital locked up year after year in some small undertaking which may gradually become more and more obsolete. I know that formidable arguments in favour of a reduction of the Death Duties are continually brought forward in the House and by orthodox economists and no one answers them; nevertheless the Death Duties remain, in spite of all the arguments brought against them; and I am not convinced that they are an undesirable feature of the taxation system of the country.
There can be no doubt at all that this is one of the most popular all-round Budgets that have ever been produced. Any point that you can make against it as a Budget must be essentially of a quibbling nature. I think the Diesel Oil Duty is suspect, not on the ground of the money that is raised, but on the ground that it is no part of the duty of any Government to attempt to bolster up obsolescent industries at the expense of new and expanding industries, upon which the real economic hope for the future depends. On previous occasions the Chancellor has assured us that that was not his intention; and we must really do everything in our power to expand and foster new industries, and not attempt, as has been done so frequently, to bolster up inefficient or obsolescent industries by State action and try to maintain at all cost established capital values, which has been one of the most pernicious features of State activity in almost every country in the world.
There is one point that I must make once again, and that is in the matter of the Whisky Duty. It is the only penal duty on the Statute Book. It is savage, it is unconscionable, and it is unwarranted. The Chancellor of the Exchequer has in previous Debates practically admitted this, and yet he does nothing about it. The whisky industry is one of the national industries of Scotland, and we ought to treat it with the same indulgence and consideration that the wine industry is treated in France and the beer industry in England. It is becoming something in the nature of an international scandal the way whisky is singled out for this savage imposition, and all other forms of indirect taxation are alleviated from time to time. I am no advocate of intemperance, but I once heard a distinguished right hon. Gentleman observe to an appreciative audience that there was nothing in the world that brought to suffering humanity so much consolation in so short a space of time as whisky; and I commend that saying to the attention of my right hon. Friend. But there is more in it than that, because, as he knows, the farmers in the North East of Scotland have the greatest difficulty in making any money out of the growing of cereals. They are now agitating for a deficiency payment on oats. So far they have not been successful in persuading him to accede to that request. The alternative crop is certainly not wheat or beet-sugar. It is barley; and I am going to ask him between now and the next Budget, which I have now doubt he will introduce, whether a general election intervenes or not, to take consultation with the distilling industry in Scotland and see if he cannot come to some arrangement whereby, in return for a moderate reduction of the duty, they would give him, as I believe they are prepared to do, some guarantee to buy a certain percentage of home-grown Scotch barley for the purpose of distilling whisky. That would help the Scottish farmers; and would help the British Empire as a whole. I could not help being a little amused at the demand of the hon. Member for Cardigan (Mr. D. Evans) for a reduction of the Income Tax, if possible, to the pre-War level.
It is, of course, quite impossible. We have to leave it at that, because we must defend the country, and we must have a few social services. As it is impossible, and the hon. Member has admitted it now, I will not pursue the subject any further. But I do not think the capitalist system is as bad as all that. If you give it a chance, and above all, if you give it confidence, which my hight hon. Friend has done, the capitalist system can sustain a pretty heavy burden of direct taxation and a pretty large number of social services. In fact, it is an essential condition of the survival of the capitalist system. It has to sustain a heavy burden of direct taxation and a good system of social services; and, if it does not do that in the future, there will grow up a great social discontent against it. I believe it can, if it is given a chance; and I maintain that it has not in recent years been given that chance.
This is a Bill of rigid economic orthodoxy; and that has been throughout the distinguishing feature of the policy of the Chancellor of the Exchequer. He has pursued that policy with great courage, with great consistency, and with great success. I know that all over the world it has made people think very hard, especially those who, like myself, are inclined to delve in the paths and by-ways of economic unorthodoxy. They are even rather impressed in the United States by the success that has attended the policy of economic orthodoxy. But I would remind my hon. Friend the Financial Secretary and the Government that they are not working under the conditions which caused the 1924–29 Government to fail, and the 1929–31 Government to crash. In other words, they are not working on a gold standard at a wholly artificial exchange rate. Some of us protested for years in the House against our adhesion to the Gold Standard at the old rate of 4.86 dollars to the pound, and maintained that we should never get a revival of prosperity in this country as long as that went on. Successive Governments were extraordinarily pigheaded about this, and no one more so than the present Lord Snowden, who would probably have saved the 1929–31 Government if he had departed from the Gold Standard in time. Luckily he did not, because I do not think that that was a Government very well worth saving. Nevertheless, it was extraordinary to see the tenacity with which the Treasury and the Bank clung to the Gold Standard at that rate of exchange; because now the most orthodox economists, and even Professor Robbins himself, admit that that was one of the main causes of the financial crisis of 1931. It seems almost incredible nowadays that the National Government in the first instance was formed to keep us on the Gold Standard at that rate of exchange. Luckily it failed to do so. And from the very second we were forced off gold, the industrial revival of the country started, and has continued without check ever since.
Another feature represented in the Finance Bill, and the economic policy of the Chancellor of the Exchequer, has been the extraordinary success of tariffs, as such, and their efficacy both as a means of producing revenue, and also of protecting the industries of this country. There is also the successful operation of the Exchange Equalisation Fund which represents a, gesture of justified confidence in the Government, the Chancellor of the Exchequer, and the Treasury, on the part of this House. But I think that, perhaps above all else, what has brought about the remarkable measure of industrial recovery, and the success which has attended the policy of the Chancellor of the Exchequer, is the fact that he has injected into the economic system of this country confidence, which is more important than anything else, in the capitalist system at any rate. If they could only have done the same thing in recent months in the United States of America, I am certain that over there they would have enjoyed a trade and industrial revival very similar to that which we are enjoying in this country.
But that does not get away from the fact, of which we must never lose sight for a moment in any debate in this House, that we still have the depressed areas, and 2,000,000 people out of work; and that thoughtful people in this country, and in other countries, are pondering and turning over in their minds day and night what is the cause of it, and what can be the remedy. I believe that the ordinary economic cause of this tragic situation is to be found in the fact that world demand has been steadily falling during the last three or four years; and that it has so far proved impossible, or, at any rate, extremely difficult, to adjust the economic machinery of the world to a stationary or declining demand. The success in industry and business in this country and other great industrial countries in the last century was due to the fact that you had a continuous rising demand, arising out of increasing populations and expansion all over the world. You have not got that situation to-day. You have not the same increase of population, at any rate in Europe, and it is going to be a serious factor in the future in limiting demand. I believe that the fall in demand, which is at the root of our economic troubles, especially in the distressed areas, which depend primarily upon exports for their prosperity, has been caused by industrial depression all over the world, rather than by over-production or by high taxation as such.
What is the remedy for this industrial depression? How can we get a revival of the trade upon which the prosperity of this country and the whole world must ultimately depend? The attempts to plan industry and to restrict production on a purely national scale have so far failed completely, and they have been very costly. The hon. Member for Cardigan demanded a council of action. I do not know what the N.R.A. is, if it is not a council of action. I have just watched the demise of the N.R.A. in the United States of America, and it was accompanied by a sigh of profound relief front the whole business world. Certainly the N.R.A. as a council of action has done very little in the last two years to stimulate trade or business recovery in the United States of America.
Clause 25 of this Bill is designed to assist schemes of rationalisation, and I hope that such schemes will be carried out. Rationalisation is a word which is very much abused. I interpret rationalisation to mean, not merely the creation of enormous top-heavy, unwieldy and over-capitalised industrial combines, which may do infinite harm; but the technical increase of efficiency in every industry by the elimination of waste, and the judicious pooling of interests wherever desirable. There is a great difference between the enormous trusts such as we used to see in the United States and Germany and a wise technical rationalisation which is solely designed to achieve greater efficiency, and to lower the costs of production. The latter to my mind is wholly desirable. If it be true that consumption, which is effective demand, ultimately depends upon production, the more you increase your production and the cheaper you make your goods, the sooner you will get back to prosperity. I remember the Noble Lord the Member for Oxford University (Lord H. Cecil) once made a speech in this House in which he said that hon. Members should remember that in the Prayer Book in times of distress we prayed for cheapness and plenty, but everybody in the world to-day seemed to be struggling to restrict production, and to raise prices. Ultimately the way back to prosperity was to do the exact reverse. There is a great deal more truth in this than some of us have been inclined to believe in the past. But, there is no doubt that by rationalisation and cheapening the cost of production, increasing technical efficiency, and introducing modern machinery and scientific methods of production, you will have considerable temporary deplacements of labour and disorganisation in the labour market which are bound to cause human distress.
I think it is in the interests of the community and of this country in the long run that this process should be carried through. But what are you going to do with the men in the meantime? This at once brings one face to face with the question of public works and the Road Fund. This subject has been discussed all through the successive processes of the Finance Bill. I was able the other day to make some study of public works and of putting men to work on public works in the United States, and the results there have certainly been extremely disappointing. It is very expensive. You can, I think, take it as axiomatic that in any circumstances it is much cheaper to pay men even more money than the unemployed are getting now than to put them to work upon public works simply designed for the purpose of putting them to work at low wages. The time factor is another thing. It takes a long time to get schemes going. I do not think that the creation of public works merely to employ people is of any use at all.
I agree that there is a psychological factor which must never be lost sight of, and it is very important; but I should be inclined to seek the solution of this particular problem on the human side, particularly with regard to young men, much more in the direction of vocational training and voluntary camps, than in putting them to work on enormous and costly schemes of municipal expenditure of a kind that is not economically justified. At the same time, I am a little alarmed by the proposal to raid the Road Fund again, because the road system in this country is grossly inadequate for the traffic which it has to carry; and that is, in my opinion, the primary and most potent cause of the appalling fatalities and accidents on the roads. I should like to see the Government embark upon a bigger scheme of road construction and expansion. There is, for example, in Scotland a scheme for building a road bridge across the Firth of Forth, long overdue, which I am certain would be economically justified, and would ultimately pay for itself. What I should not like to see is the Government embarking upon the kind of policy which they are pursuing in the United States of America, simply going to the local authorities and saying: "Come along and sit down and think out schemes, whether you want them or not, so that we can put people to work."
In considering these underlying economic problems in relation to the Finance Bill and the policy of the Government, it is of course difficult to see any light on the long view, because the problems are so frightfully intricate; and we in the House of Commons, engrossed as we are in ordinary routine business, cannot be expected to keep ourselves up to date with all the abstruse conclusions of professional economists. Even if we did, it would not do us much good, because there are scarcely two people who agree about a solution of our present economic difficulties.
For my part, I incline to the view that ultimately we shall have to choose in this country between the operation of the price system in comparatively free markets—as free as you can make them—which must also involve bankruptcy in case of failure, or the writing off of losses in the case of those industrial concerns that incur them, on the one hand; or an absolute iron economic dictatorship from the centre, on the other—in other words, Communism. There is no half-way house between the two. If you are going to keep what is known as the capitalist system, you must stop using the machinery of the State simply for the purpose of stabilising existing capital values. You must allow private concerns either to go into bankruptcy or to have capital reorganisations as necessary. There must be wholesale writings off of watered capital as, for instance, in connection with the cotton industry in Lancashire. Largely due to the action of one Government or another, or the policy of the banks in the past, we have artificially maintained the value of existing capital investments, and that has prevented any healthy growth in many industries. I have only taken the cotton industry as one example. You must let out the water which is necessary, by the painful process of bankruptcy, if you are to recover.
We have also to expand our markets; I believe the success of this Government and the success of the Chancellor of the Exchequer's policy has been brought about by giving business people in this country confidence, by the policy of Protection, and by fostering efficiency in every way. These things have undoubtedly enormously expanded home demand; but the saturation point is bound to come, so far as home consumption is concerned. When that point is reached, what are we going to do?
What plans have the Government for expanding overseas trade? This question is closely relevant to the Finance Bill, because we are continuing the Exchange Equalisation Fund. And I feel that until we get a little more order in the chaotic currency systems of the world, there is little chance of a considerable expansion of international trade, upon which our depressed areas must in the long run primarily depend. I would ask the Financial Secretary to the Treasury whether it would not be better, even now, to see whether we cannot get some co-operation with the United States of America, if only in an attempt temporarily to stabilise the dollar—sterling rate rather than conduct a sort of secret economic war between the two Exchange Equalisation Funds. I know from personal experience that our Treasury and our Exchange Equalisation Fund is greatly suspect at Washington; and it may be that here we suspect Washington. As a first step it would be infinitely better if these two Funds were to be used for the common objective of trying to see whether we cannot get a temporary stabilisation between the dollar rate and the sterling rate, using the two Funds together in co-operation for the purpose, instead of their being used against each other in semi-concealed secrecy, which arouses hostility and suspicion on both sides of the Atlantic. So far as foreign affairs are concerned, both economically and politically, our first line of advance should be in the direction of closer co-operation with the United States of America.
One is also inclined to ask why in this Finance Bill no provision is made for any sort of constructive loan expenditure overseas. So far as there is any loan expenditure, it has, on the whole, been cut down. The tendency is contraction. Yet there is an enormous field for expansion in the Crown Colonies, which the Government are not really tapping; above all in East Africa—in Kenya and Tanganyika. If we want expansion of our markets overseas, we should also look to countries where there are still populations which are large and expanding, and where the potential demand for goods is, therefore, far greater in proportion than in the countries of Europe.
The two great examples to which I would draw attention are China and Russia. I am glad that the Government have taken the preliminary step of sending out Sir Frederick Leith Ross to China. There is also a great field of opportunity for expansion of our trade with Russia of which we have not yet taken full advantage. When I was over there two or three years ago Mr. Meshlauk made the statement that in exchange for a loan from us the Russian Government would very seriously consider the possibility of making interest payments in gold, and making all the purchases of materials on which they expended the loan in this country. There is a chance of very considerable expansion of overseas trade with both China and Russia if the Government will only act with initiative and, above all, with imagination.
One aim which I should like to see pursued is the elimination of these accursed prohibitions and quotas, which can do no good, and do nothing but harm to international trade and international politics; and their substitution, as the next phase in the economic development of the world, by tariffs which are at least flexible, and which can be made much more easily the subject of international negotiations. It is no good talking about world Free Trade, because that cannot come for many years, if it ever does come. The point is what to do next; and, in my opinion, we must substitute for quotas and prohibitions, which are wholly bad from the economic point of view, tariffs which are flexible and efficacious, and can be made the subject of international negotiation.
I do not believe that purely national action to restrict the production of wheat is going to do any good. In Canada, for instance, they are going back to the wheat pool, and to national elevators, and the effect surely will be the accumulation of great quantities of wheat there, with temporarily increased production, and ultimately the de-moralisation of the wheat market. The only permanent solution for the wheat problem is to be found in international action and control. And this principle can be applied to certain other basic commodities as well. Planned restriction on a purely national basis is not likely to be successful.
Both from the national and the imperial point of view, and from the world point of view, the greatest hope for our depressed areas, for our unemployment problems, and ultimately for peace, is to endeavour to bring about international economic co-operation; and to do everything we can to put a stop to the international economic war which is going on at the present time. And the most hopeful immediate step that we can take is in the direction of the United States of America.
The hon. Member for East Aberdeen (Mr. Boothby) always makes an interesting speech, and we have just listened to one of the most interesting contributions he has made to these Debates. He confessed that owing to the successful policy of the Chancellor of the Exchequer he had changed some if his economic views, and as Government spokesmen are making so many claims for success in various fields they can now make another claim that they have so succeeded in their policy that they have brought back to the paths of economic rectitude the hon. Member for East Aberdeen. At any rate, the hon. Member is not afraid to confess that some of the criticisms which he has advanced on former occasions were perhaps not deserved, and he is not afraid to consider the future and the problems which still face us. I appreciate what he said about the depressed areas and the continued large volume of unemployment in the country, and the situation of those industries which depend mainly for their prosperity on the export trade. The Chancellor of the Exchequer made a very attractive and disarming speech this morning. He reminded us that the Finance Bill is the fourth essay in financial reconstruction he has undertaken. On a former occasion he pointed out that this fourth essay in financial reconstruction coincides with the restoration of 80 per cent. of our national prosperity. The two things can be taken together.
The hon. Member for Huddersfield (Mr. Mabane) made some comparisons of the Opposition in bygone days and the Opposition to-day. He said that in bygone days the function of the Opposition was to insist that the Government should be as economical as possible, but that this had all been changed and that now the Opposition were invariably pressing on the Government to spend more money. I wonder where we shall find the hon. Member next week when we discuss the Vote for £5,000,000 for the Air Force. We shall probably find him giving it his whole-hearted support. He poses as an advocate of economy, but when expenditure is asked for by the Government we invariably find him in the Government lobby supporting what I consider to be the most extravagant expenditure. Therefore, I do not attach much importance to his speech. He expressed great satisfaction with the Chancellor of the Exchequer. Undoubtedly the majority of hon. Members of the National Government are satisfied with the Chancellor of the Exchequer, and the Chancellor of the Exchequer is certainly satisfied with himself. It is obvious in those circumstances that the Chancellor of the Exchequer would this morning make a complacent speech. Ever since he has assumed office the right hon. Gentleman has been laboriously trying to convince the country of one thing. Since 1931 he has been trying to make them believe—I have no doubt that the Financial Secretary will do something of the same kind this afternoon—that he inherited a situation so precarious, so serious and so delicate, that he dared not breathe lest the whole financial structure of capitalism should fall to pieces. There is no doubt that he has succeeded in making large numbers of people believe that, but he has not made me believe it.
Ever since he came into office he has been trying to create the impression that he has been struggling like a titan to lift the country out of a terrible morass, and he claims a large measure of success. The right hon. Member for Epping (Mr. Churchill) on one occasion said that the financial crisis of 1931 had been greatly exaggerated. That was rather a mild way of putting it. I prefer to put it much more strongly and to say that it was conveniently arranged for the Conservative party by the financial lords in the City of London. I have not the slightest doubt that they could arrange another one if occasion demanded, and that they would if circumstances necessitated it from an electoral point of view. I do not believe in the idea that the Chancellor of the Exchequer has been laboriously trying to build up and strengthen the financial position of the country, that he is a financial giant who has lifted the country out of a financial morass and on to firm ground. It is true he said that there are certain other things which he would like to do.
Having made these general observations, I want to make a few remarks about particular clauses in the Bill. There are really some very strange clauses in the measure. Take Clauses 8 and 9 which deal with the tax on soya beans and the tax on rice in husk. Both these clauses have been put forward mainly on the ground that they would be instrumental in strengthening the bonds of Empire. The tax on soya beans has been imposed, so we are told, to encourage in this country the use of ground nuts, palm kernels and other substances coming from the Colonial Empire in the production of cattle food which is now made to a considerable extent from the soya bean which comes from Manchukuo—I do not like the new name; I prefer to call it Manchuria. At all events, we were told that this was done in the interests of the Colonial Empire. The same argument is advanced to support the duty on rice in husk. It is said that this is done in the interests of the Indian Empire. During the whole time I have been in the House I have never heard such a feeble defence of a proposal as that of the Ministers concerned in defence of the duty on soya beans and rice in husk. I am certain that this Empire sentiment has run away entirely with economic sense, so far as both those proposals are concerned. I was astonished at an earlier stage of this Bill when the hon. and gallant Member for Bournemouth (Sir H. Croft) intervened in a debate because we were remarking that one of the purposes in putting on tariffs was that behind tariff walls you would be able to build up new industries. The result of the tariff on rice—not rice in husk—has been to establish a new industry in this country. Here is one of the strange contradictions that we find in the actions of the Government. They now proceed in this Bill to take steps to destroy an industry which by previous action they helped to create. I cannot reconcile their actions in regard to some of these proposals.
But I want specially this afternoon to say something about Clause 25. It has already been referred to by my hon. Friend the Member for Westhoughton (Mr. Rhys Davies) and by the hon. Member for East Aberdeen. This is the Clause which allows a deduction from profits of contributions paid to rationalise industry. We may take it that this is the Government's latest effort to help industry. I do not want in any way to take any credit from the Government for anything that they have done to help industry in this country. I am prepared to give them all the credit to which they are entitled. Here is their latest attempt to assist industry. The Government pride themselves on a series of such efforts—tariffs, subsidies, exchange manipulations and cheap money, and now Clause 25.
Of course, the Government herald their successes in these efforts to a thousand audiences. I listened last night to the new Lord President of the Council broadcasting. In sonorous tones he sought to reinforce the appeal of the screaming posters that we have on the hoardings. Here are a couple of sentences he used: "Britain is employing more people than ever before." I do not dispute that for a moment. Then this sentence followed: "The unemployed number a bare 2,000,000." The emphasis was on the word "bare," as if that did not matter very much. But are the whole facts of unemployment summed up in the 2,000,000 of registered unemployed? We all know that they are not. We all know that there are 1,000,000 or more on Poor Law relief. We know that a large number of unemployed do not come within the 2,000,000 registered. The Lord President of the Council knows well enough that that figure of 2,000,000 does not properly represent the extent of our unemployment problem. The hon. Member for East Aberdeen told us, and I agree with him, that any process of rationalisation necessarily in its first phases creates unemployment, and he asked the Financial Secretary to the Treasury to say what is to be done with the human material that is displaced by the processes of rationalisation. The argument used in support of rationalisation, which Clause 25 is to stimulate, is that in the long run rationalisation will result in more employment being given than ever before. But is that so? How is it that four or five years ago we merely had in this country 1,000,000 or 1,250,000 people, more or less unemployed?
I will go back to 1929. The hon. Member wants to call attention to the fact, and he is entitled to do it, that unemployment rose after 1929 with the advent of a Labour Government. That is really what he wants to say. I call attention to 1929 for one reason. I have heard over and over again in this House from the right hon. Member for Hillhead (Sir R. Horne) the statement that if only we could get back to 1929 conditions, things would not be so bad in this country. We are now told that we are slightly better than we were in 1929. But in 1929 we had 1,000,000 or 1,500,000 unemployed, more or less. I know that so far as personnel of the unemployed is concerned it is fluid; it is not the same people who are unemployed all the time. That figure is 2,000,000 or more now.
It is more than four years ago since the unemployment figure was 1,000,000, and since 1929 there are at least 1,000,000 more people available for employment than there were in 1929.
I have called attention to the fact that the new Lord President stated in a broadcast speech last night that we were employing in this country now more people than ever before. I do not dispute that statement. The argument at the moment is this: Those who advocate rationalisation tell us that although in the initial stages there will be considerable displacement of labour, in the long run that labour will be reabsorbed. I am sceptical about that contention that in the long run all the displaced labour will be absorbed, for the facts do not seem to bear out that contention at all. Perhaps the hon. Member will tell me whether, if emigration had gone on as it did before the War, we should have anything like the unemployed that we have? Why does not emigration go on? Because the countries to which emigrants normally went have to face the same economic problems as we have here; economic problems largely arising out of this process of rationalisation. It does not seem to me that we are going to find a way out of the difficulty along those lines.
As I say, I do not wish to detract from any of the Government's achievements. I give them credit for every accomplishment, their claim to which can be substantiated by facts and figures. But that does not invalidate the indictment which is brought against the Government from these Benches. The hon. Member for East Aberdeen in his interesting speech frequently referred to what had to be done within the capitalist system to preserve that system intact and foster further processes of development—to sustain it as the hon. Member for Leigh (Mr. Tinker) has said. This Finance Bill is claimed as a triumph for the Government. The right hon. Gentleman has said that there has been little point in the criticisms made from the Opposition Benches. We have criticised it in certain details, and I propose now to refer to the Clause which deals with Income Tax and to follow up a point which has been made by more than one speaker in this Debate. Behind the Income Tax provisions of this Bill lies a set of social facts which we cannot ignore. The right hon. Gentleman told us that as a, result of the reliefs granted this year 2,250,000 people will benefit. I think that 8,000,000 people, in all, come within the Income Tax field, that is to say, their incomes are surveyed for Income Tax purposes by the revenue officials. But after that survey only about 2,250,000 have to pay.
That is a striking social fact which is brought before us by the provisions of this Bill. In other words, the great majority of people in this country do not pay any Income Tax, because their incomes are not large enough. These provisions in the Bill reveal a maldistribution of wealth to which we cannot close our eyes on an occasion like this. This Bill does nothing to readjust that maldistribution. It does nothing to solve the difficulty and because it fails to deal with that outstanding social fact, it is justifiable for us to urge, with all the force with which it has ever been urged in the past, our indictment of the economic system in this country, on the ground that it fails to return, in anything like the proper proportion, to the great mass of the people the wealth which their labours create. Nothing that the right hon. Gentleman has said about our detailed criticisms on the Clauses of the Bill being without force or without point, can alter the main indictment which we bring against the social system in Great Britain to-day.
Clause 25 with its rationalisation proposals will only aggravate the problem. Some of those who are displaced may be re-absorbed, but all will not be reabsorbed. What this Clause is intended to do in the long run is to place the burden of work more and more on the machine and eliminate more and more human labour. If, concurrently, with that process, we do not adopt methods to ensure for those who produce wealth a fairer proportion of what they produce, we shall in the long run intensify our problem. The Chancellor tried to create the impression when he took office that he had inherited a situation so precarious that he hardly dared breathe until he had first restored some sort of financial equilibrium. During his whole period of office he has worshipped at the shrine of the great god "money." The money lords still rule us and until they are displaced, until there is some sort of social control over all the means of production and exchange, the indictment which we bring against this regime must stand.
I feel sure that I express the view of almost every hon. Member when I say that the whole country is thankful to the Chancellor of the Exchequer for this Finance Bill and congratulates him in a Measure which reasserts to the world that confidence which this country has enjoyed in the past and will enjoy in the future. I do not think there has ever been introduced a Finance Bill which has received less criticism or against which so little criticism can lie, even from the most partisan opponent. The hon. Member for Mansfield (Mr. C. Brown) said he did not grudge the Government any credit to which they were entitled, and after that very fair statement from a very fair-minded man, perhaps I might ask him why he did not offer one or two further observations to complete his statement of the facts concerning the present position compared with the position inherited by the Chancellor of the Exchequer in 1931. Not only did this Government four years ago inherit a position which was almost catastrophic, but they had to encounter financial difficulties, national and international, such as no other Government has had to face in the past. By sane, strong, stable financial policy the Government have brought, confidence out of chaos. They have re-established a confidence in this country which is the envy of the world.
When the hon. Member for Mansfield criticises the social system in this country I would ask him to remember that we have in this country a greater and more comprehensive scheme of social services than is known anywhere else in the world. Throughout the greatest financial crisis which the country has every known, those social services were maintained practically unimpaired and to-day we rejoice in the fact that there is not a cut or a diminution or a sacrifice which was called for by that crisis, which has not been restored under my right hon. Friend's wise direction of the country's finances. I would ask the hon. Member for Mansfield to join with me in saying that that is an outstanding achievement and one on which the right hon. Gentleman deserves hearty congratulations.
I want now to put the situation as I think it appears to the ordinary, impartial man in the street. It is true that we have an unemployment figure of some 2,000,000, but I tremble to think what that figure would have been if the rot of 1931 had continued. It is an open secret that it was mounting to gigantic figures, not merely because the colour of the Government then in office was red—I want to be quite fair about it—but because of the complete break-up of confidence that followed the mischief done by the Government of that day. Every attempt was being made to spend more money than the country could afford, on schemes which were obviously wasteful, in order to try to arrest the figure of unemployment, which then seemed to be almost beyond conception. The figure went on mounting, however, and what it would have reached if that state of government had continued, we tremble to contemplate. The National Government came in, pledged to keep the financial security of the country. Unemployment has been substantially arrested, and not only was that figure in itself arrested, but the figure of 3,000,000 has gone down to a figure of some 2,000,000, which, as the hon. Member said, is never a static figure; of that 2,000,000, something like 400,000 is the basic unemployment figure, and the rest is a floating group.
When we have said that, let us see the corollary of it. There is to-day a greater number of people in more secure employment than has ever been known in this country, and the National Government can take credit for this, that by the security of trade and the promotion they have given to confidence in industry, there are something like 1,000,000 people in safeguarded employment now who were not in work when the Government came into office. During all these times we have never sacrificed one whit of our freedom, we have never experimented with any of the spectacular contraptions of foreign countries, we have maintained our ordinary liberties, our ordinary freedom, and our ordinary rights, and we have seen today every one of the sacrifices that were necessarily imposed, restored by the Government. Looking at this quite clearly and, I hope, free from any party bias, I feel it right to say that the whole country is behind the Chancellor of the Exchequer and this Finance Bill.
My hon. Friend opposite said there was something wrong with the present policy of the banks and that our financial system could never reach a proper position in relation to the welfare of the people until there was a different control of the financial institutions. The hon. and learned Member for East Bristol (Sir S. Cripps) is not in his place to-day, but I suppose my hon. Friend accepts his policy of some "boldness with the banks." I think my hon. Friends opposite do not realise, when they bring out the red herring of boldness with the banks, that the banks are nothing more or less than joint and several custodians of savings of the people of this country, who have put into the banks whatever they have desired to place in safe custody. Whatever faults there may be with the banking system in this country and with those who control it—and I suppose somebody can find fault with the control of any institution in the world—I cannot imagine the confidence of the people being any greater if my hon. Friend who spoke last or any other member of the Socialist party was in complete control of the savings of the people, to dispense them whenever he wanted, without any reference to the persons who had deposited that money in the banks.
Let not my hon. Friends forget that the hon. and learned Member for East Bristol himself said that if a Socialist Government came into power, there would be a first-rate financial crisis. Of course there would. There cannot be any doubt about that. Once having had experience of the wild-cat schemes of the party of my hon. Friend and his colleagues, and of its methods of playing fast and loose with the people's money in the banks, without reference to the owners of that money, of course the whole of the depositors would go to the banks and try to draw out what they had in them in order to save it from the campaign of dissipation of a Socialist Government. But a first-rate financial crisis, if repeated, might not be forgotten so quickly and might not be disposed of with the same safety as the National Government have disposed of the crisis of 1931. A crisis like that cannot happen twice with the same amount of salvage work done in the same amount of time. When there comes a financial crisis again, let hon. Members realise that it is reflected cruelly and bitterly in every home in the land, because the whole of the social services of this country depend upon the safe and proper security of the financial institutions. If you have not got your trade, your industry, and your finances safe, the social services upon which millions of people are dependent are all put in the melting pot.
My hon. Friend said he had an indictment against the Government. Whatever that indictment may be, he has to concede this, that the present Government have maintained unimpaired the greatest scheme of social welfare than any civilised community has ever known. He referred to a statement of the Chancellor of the Exchequer as to what he had inherited, and then he said the right hon. Gentleman had been in the hands of money kings. I do not quite appreciate what that means, but if it means that the Government say that the people who have small deposits in the savings banks shall alone be masters of their own deposits, if it means that those people who have deposits in co-operative societies shall alone be masters of their own deposits, without Government confiscation, I think it is the only policy that can be adopted in a country that is going to preserve its liberties, its security, and its freedom. I believe I am right in saying that the number of depositors in the Post Office Savings Bank to-day, limited in amounts as they must be, is higher than ever before, and that the number of small investors is higher than ever before, and every one of those people knows that with a Government in power whose policy was one of confiscation, those savings would be placed in danger.
I believe industry will appreciate the contributions that have been made by the Chancellor of the Exchequer in this Bill for a fair valuation of imported products. The imposition of control over imports has, I believe, been the saviour of the manufacturing industries of this country. In my own constituency, I say frankly, there are thousands of people who work in safeguarded conditions which are due alone to the control of industry and to the protection of trade which have been given by the Import Duties Act. I am happy to think that a better means has been introduced of assessment for the purpose of valuation in respect of goods imported into this country, which, I think, will put an end to what we know has been a ramp. That policy, given full protection to the manufacturers in the home market, means safeguarding the British worker as against the foreign worker, and I hope that that policy and the policy of cheap money, the policy of confidence, which can spring only from safe financial and trading institutions, will continue.
We rejoice in the fact that this year has seen the restoration wholly and completely of the cuts which the country had to accept in 1931. The people of this country in the face of danger do not mind sharing a common burden. They want to be told the truth. They want no wildcat schemes and promises of confiscation. They want to be told the truth, so that they may meet the danger. This country has been rescued from a situation of great gravity. The whole of the people, I think, are behind the Government in offering congratulations to the Chancellor of the Exchequer of the day on what is, without question, one of the greatest financial achievements of the age.
It is rather hard that the hon. and learned Member for East Leicester (Mr. Lyons), in the hot days of July, should seek to wring our withers on a Friday afternoon with this sort of lurid financial melodrama. He seems to have invented a policy for the Labour party, and, having invented it and admired it, proceeded to demolish it. I can assure him it has no relation to realities, or to the facts of the case at all. I am, however, quite sure that he believes what he says, and I would like, for a few minutes, to discuss the attitude which he takes and the attitude which the Chancellor takes, not with a view to making any party capital out of it, but in order to present what, I believe, is another point of view. The point of view of the Chancellor, and, I believe, that of the hon. and learned Member, is that the policy of the Government in this matter has been wise, because it has economised all round and because it has sought to reduce taxation—direct taxation of income tax—since they believe that that is the best way of securing a trade revival. I always admire the lucidity and the charm with which the Chancellor presents his case. It is so well done as to be almost convincing. Sitting here and listening to him one has almost felt that really the people of this country were enjoying the sunshine of prosperity, that during the last three years a complete change has come over the scene; where there was once poverty, now there are contentment and prosperity.
There has been a change. Let us look at its nature. The hon. and learned Member said that there has been no cut which has not been restored. That is not true. If it were true, the present Budget would not balance. It is only balancing now because the biggest cut of all has not been restored. The Budget is only being balanced by various devious means, and principally by the Government refusing to restore the cut which was made on the maintenance of the unemployed. Those facts are beyond question. Let me point to another aspect of the present policy. There are 500,000 more people in receipt of poor law relief than there were in 1931. All over the country is written large for anyone, who will look with unprejudiced eyes, to see, that there is poverty, deep, wide and terrible.
Is it not a fact that of the number the hon. Member has just quoted as being the additional number on poor law relief, all but about 10,000 are already counted as receiving unemployment benefit, and that it is a false and misleading statement to say that 500,000 more people are on poor law relief? The hon. Member has counted in the total at least 90 per cent. of the people who are getting unemployment benefit.
I am grateful to the hon. and learned Member for interrupting me, but I think when I examine what he says he will be rather sorry that he has interrupted. If it be true, which I do not admit, that of these 500,000 people, so poor, so destitute—because destitution is the test for this purpose—that the public assistance authority, which is forbidden by law to render any aid unless there is proven not poverty but destitution, has to come to their aid, 90 per cent. are already receiving unemployment benefit, what an admission it is. It gives me my whole case.
It is what the hon. and learned Member said. He said that 90 per cent. of these poor law cases were already counted at the Employment Exchanges because they were in receipt of unemployment benefit. If that be true, it means that so terrible was the cut imposed by the Government on the unemployed, so grossly inadequate is the unemployment benefit which they are paid to maintain even life itself, that the public assistance committee are bound to come to the aid of people who, notwithstanding the fact that they are getting their unemployment benefit, are nevertheless destitute. If these figures mean what the hon. and learned Member said, how can he contend that the cuts have been restored, and that the Government has brought prosperity to the country, if, at the same time, he admits that the level to which the unemployment have been driven down by the operation of the means test and the cuts has had the result that nearly 500,000 have to have their unemployment benefit supplemented by public assistance because they are still destitute? I daresay it is true that a large proportion of these people do get some sort of out-relief, but the relieving officer must be satisfied that there is destitution; even a cupboard full of food makes it illegal for the relieving officer to relieve that destitution. If he did so, the public assistance authority responsible for relieving distress which was not actual destitution would be liable to be surcharged for the amount which they had disbursed.
I think the Chancellor believes he has been dispensing prosperity because he believes that if the well-to-do sections of the community are enabled to carry on their business with a lighter load of taxation, their improvement in position will filter down to various classes of society until it gets to the bottom, when everybody will share in the benefit. But that is not true. In my view reasonable taxation does not impair business activity and the production of wealth. What impairs and stagnates the production of wealth is the absence of customers. It is the poverty of our own people which is responsible for the depression in trade. The best way to secure an improvement in business turnover is to see by some means that the person who is spending 1s. to-day is able to spend 1s. 3d. to-morrow. That is why we have consistently argued that to relieve the well-to-do income taxpayer does not do that The well-to-do among the income taxpayers have had the major consideration from this Government. Even the allowances to the small income taxpayers have not been restored. People with £300, £400 and £500 a year are still paying far more in income tax than they were paying in 1930 and in early 1931, but the large income taxpayer, so far as the standard rate is concerned, has had restoration in full.
I agree, but I would not have mentioned it had not the Chancellor referred to it. In writing the testimonial for himself, which he did at the end of his speech, he reviewed not only this Finance Bill but the course of his policy during the whole period of his office; and it is proper to point out that he admitted that the principal concession had been made on the standard rate, which had been restored in full. We do not like taxation for its own sake. We believe that if you want to improve the industrial position the best way is to lighten the burden of the poorest first. As regards the substitution of indirect taxation for direct taxation, the result of all the quotas, tariffs and subsidies has been to put a burden on the prices of the articles which people buy.
I saw the other day a calculation which I am endeavouring to check up. It was made by responsible people and was to the effect that every time the ordinary working-class housewife goes out to fill her market basket with £1 worth of goods she gets only 16s. worth, and that 4s. of her pound is spent in paying the taxes, duties, quotas, levies and other impositions by way of direct taxation which the Government have imposed. The taxation of necessities is the worst of all taxation, because the poorer you are the more you pay proportionately. I discovered the other day that the cost of the wheat scheme amounts to ½d. on a loaf. The poorer you are the more of your income is spent upon bread. It is well known to the bakery trade that more bread per family is eaten by the poor than by the well-to-do. The larger your income the less bread you eat. It naturally follows that if there is a tax upon bread—and it is true of all other necessities—the poorer you are the more you pay, because the larger the proportion of your income is spent in buying those necessities.
The hon. Member for East Leicester disagreed with my hon. Friend the Member for Mansfield (Mr. C. Brown), but I would point out that the claim that the Government have restored public confidence is another claim which is rather ill-founded. Which public's confidence? Is the measure of public confidence to be the gilt-edged rate? Is it to be the money market pointers? I heard the Chancellor make a statement to the effect that the cheap money that is so plentiful is the result of the sound financial administration of this Government. Surely, the present low prices of money is an index to industrial stagnation. [Laughter.] Surely, hon. Members will agree that if industry were booming, if customers were plentiful, and if capital could be profitably employed in manufacturing and selling goods, there would immediately be a rise in money rates; and that it is because money is unusable in trade that it is unwanted in industry. For that reason the price of Government bills and the gilt-edged price has fallen and we have a cheap money period. It is extraordinary that the Government should be proud that money is unusable and at the same time should take steps to restrict the output of production of one set of goods after another, while in between these two circumstances we have between 2,000,000 and 3,000,000 people out of work. The policy of the Government should have been to get money employed, providing work for the unemployed and turning the unusable materials into the goods which make the difference between poverty and comfort.
I suppose that the hon. Member realises that investors are prepared to take under 4 per cent. on investments in ordinary shares of our leading industries? Does he take that as an indication of lack of confidence?
I do not take it as an indication of lack of confidence, but of a lack of business expansion. At a time such as this we have the curious phenomena of unusable money, materials and labour, and a tremendous ineffective demand for goods—because most people are still very poor. Most people need another pair of boots, another suit of clothes, some new furniture and more food. If these demands were satisfied the interest rate would rise, the unemployment and Poor Law figures would fall, and it would be unnecessary artificially to restrict output and artificially to raise prices.
It is on this broad question of policy that we on these benches believe that the Government are wrong. We think they are utterly wrong when the operations of what, for want of a better word, we are bound to call the capitalist system produce, as they inevitably do, a series of booms and slumps due to the fact that there is no attempt to control and to regulate consciously the amount of goods produced in accordance with the unsatisfied demand. The Chancellor of the Exchequer said that since he commenced his administration there had been a great sweep forward in prosperity. He quoted the building trade figures, the export figures and other trade pointers to show that as a result of this economic policy of the Government trade had greatly improved, and then my hon. and learned Friend the Member for East Leicester (Mr. Lyons) filled in the high spots in the picture by pointing to the terrible financial disaster which the country escaped only by the skin of its teeth in 1931. That is all very well for street corner meetings, but when we come to examine it soberly in the House of Commons on a Friday afternoon surely it is rather wide of the mark.
What was the terrible catastrophe from which we escaped in 1931? The catastrophe was a belief by the city that it was essential for this nation to remain on the Gold Standard. The awful predictions of the banks and of the financial advisers of the Government at that time was entirely directed to that point. Unless you cut down, they said, the allowance to the unemployed we cannot remain on the Gold Standard, because we cannot get foreign credit. Why did that situation arise? Why was there that drain on sterling, driving us off the Gold Standard in 1931? The drain on sterling was entirely due to the German lendings of the city finance houses; everybody knows that it was the pressure of the withdrawal of foreign funds from London, as the result of the collapse of the German debtors, which to the pressure on sterling and led the city to say to the Government "Unless we can get foreign advances we must face disaster." But what was disaster? Disaster was going off gold, and yet very shortly afterwards the same people who advised us that we must remain on gold also advised us that if we borrowed this, that and the other credit from abroad it would keep us on gold. They were wrong again. Notwithstanding that the advice they gave on the first and second occasions was taken, the country was pushed off the Gold Standard, with very good results for our export trade.
Oh, yes. Does the hon. and learned Member deny that the Budget was balanced by the method of reducing the payments to the unemployed? That was the whole issue. [HON MEMBERS: "And by increasing taxation".] The Chancellor of the Exchequer has admitted that he has saved £45,000,000 by that means alone. The "disaster" was going off the Gold Standard, but I do not suppose there is a single Member of this House, if I except my hon. Friend the Member for East Edinburgh (Mr. D. Mason), who will not agree that a departure from the Gold Standard afforded the best possible revival to our export trade. A very large part of the industrial improvement which has followed 1931 is due to the fact that we have, by going off the Gold Standard, ceased to handicap our export trade. The mistake that was, made by the Labour Government was not the mistake a paying to the unemployed an allowance upon which they could live. The mistake that was made by those who were formerly with the Labour party, but now enjoy the sweets of office on the benches opposite, was that they listened to the city, that they believed that it would be a disaster to go off gold, and were prepared to do anything to prevent it.
If there was a financial disaster in 1931 the disaster was that the Government should have taken that advice, because it proved to be unsound. It proved to be unsound on three separate occasions within that year. Was it a wise thing, apart from the sentimental considerations, to reduce the payment to the unemployed by £45,000,000? They are the people who spend money, the people who most quickly turn over what money they receive, and that 45,000,000, taken out of the pockets of the unemployed, meant £45,000,000 less spent over the counters in the shops, and £45,000,000 less in orders passed on to factories, and £45,000,000 less distributed in wages to those who work in those factories. That was the disaster of 1931, and it was that misunderstanding of the need to increase the market in a time of industrial depression which, to my mind, constitutes the main indictment of the Government's policy.
I must say one word before I close in regard to the terrible picture drawn by the hon. and learned Member for East Leicester of what was going to happen to the banks in certain eventualities. There is not a single person on the opposite benches who is more concerned than we are to see to it that the savings of the people are properly safeguarded. I only wish we could induce the present Government to use their huge majority and their great opportunities to do something to that end, and to make one or two very obvious amendments in the Companies' Acts, which are long overdue, to prevent the continual process of robbery of people's savings by unscrupulous persons. But can anyone imagine that those who sit on these benches, who are closely concerned with and responsible to poor people, would pay heed to any policy which would endanger the savings so hardly accumulated and come by? [HON. MEMBERS: "Certainly."] I am speaking for myself, and I may add that I am speaking for the policy for which this Party stands. I believe it is stated that there are in the banks nearly 20,000,000 separate accounts, that there are nearly 20,000,000 deposits, which means that perhaps some 30,000,000 families have got some interest in a bank account. Are the banks really doing those depositors a service if they watch their interests as depositors and destroy their interests as citizens? That is a very interesting speculation. I noticed in the monthly returns of the joint stock banks that the ratio of cash continues to rise. It used to be under 10 per cent., but in one of the banks it has arisen, I believe, to nearly 15 per cent.
Is it? The deposit rate has fallen to a mere fraction, and the deposits are almost unusable. The banks are finding it impossible to discover what they would regard as solvent borrowers. Their would-be borrowers are handicapped by the general stagnation of trade, which itself is a reflection of the lack of purchasing ability of those who most need goods. We have, in fact, reached the stage when those who can afford to buy goods do not need goods, and those who need goods cannot afford to buy them. When you reach that position, you have stagnation. Mr. Keynes puts it, I think, that we are lying on our backs in a harvest of plenty, and refusing to eat and starving.
The depositors in the banks are not only depositors; they are citizens, workers and unemployed as well as people who will be unemployed. The figure used by one hon. Member in regard to a turnover of 2,000,000 unemployed really means that there are 6,000,000 or 7,000,000 people who every year suffer periods of unemployment. It is not a laughing matter, because one of the most terrible consequences of unemployment is continued insecurity, when you never know from week to week whether the job is going to last out, and are never able to plan your life or to know whether you will be able to afford a holiday, a book or even a pair of boots. There are several millions of people going through these periods of unemployment every year. That is the figure which you arrive at when you say that unemployment is only temporary. Such things are the essence of the matter. Is it good, in a period of slump, to pursue a policy which leads to further stagnation? Should we not endeavour to iron out the peaks and valleys, the booms and slumps, so that when we find ourselves dropping into a trough we could set on foot a policy of invigoration which would drive money into businesses, drive industry into employing labour and improve the purchasing power of the community so that they could buy the goods which the unemployed ought to be making? That is the reason why the policy of the right hon. Gentleman seems to us to be all wrong.
I understood from the hon. and learned Member for East Leicester that tariffs were the salvation of the country. He applauded them as virtuous and excellent things. That was not the policy which the Government said they were pursuing. I see the Home Secretary sitting on the Government Front Bench. I am sure he would agree that he only tolerated a policy of tariffs because he believed that, by instituting tariffs here, we had a weapon which could be used to force down tariffs all over the world. They were a means of securing Free Trade. I remember that very distinctly. It is the basic case of the ex-Liberal Members of the present Government. They believed it was necessary to use that weapon to drive away the tariff curse upon the trade of the world. When Conservative hon. Members make important statements in the House, in view of the fact that the Conservative party really control the Government, that tariffs are good things in themselves and in no case could be abolished, I would remind them that they only secured consent to their imposition on the firm understanding that the policy to be pursued was to use tariffs as a means of bargaining for the removal of trade barriers. I do not believe that we can go back to old-fashioned Free Trade. I am not sure that it would be desirable if it were possible; but I believe there is a better method of regulating import and export trade than the somewhat awkward and automatic way of purely arbitrary tariffs.
It is too late in the day to speak of that. Our opposition to the policy embodied in the Finance Bill and to the policy which the Chancellor of the Exchequer has followed is not based upon a purely factious desire to carp and cripple and destroy. We believe that the Chancellor of the Exchequer, holding the views which he does, but which we believe to be fallacious, has pursued the policy which those views dictate with courage, skill and success. On the other hand, we think we are right in saying, looking the facts in the face and at the nation—not at the more fortunate section of it—that the policy which this Government has pursued has been wrong and disastrous; and we look forward to the time when the great resources of our race in material, money and men can be harnessed for the good of the nation as a whole.
I find myself in agreement with some of the statements and some of the sentiments of the hon. Member for East Fulham (Mr. Wilmot), but I am afraid I differ in regard to others. He made considerable reference to the question of taxation, and spoke at great length defending what he called reasonable taxation. If we are to have taxation it should, of course, be reasonable and just. There is no merit in taxation as such. Abraham Lincoln said that there were only two things certain in life, death and taxation. Probably we shall have taxation in this country for many years to come. All of us would rejoice if we could achieve an economy which would reduce taxation, which must add to the charges and the cost of industry. The hon. Member for Leigh (Mr. Tinker) made a very interesting survey of the situation, and pleaded for the reduction of taxation upon oil and income tax as well as in many other directions. He said he did not know how we could obtain the money. Quite apart from increasing taxation, one way is by reducing your expenditure. That was what my hon. Friend argued, and that is what I argue. This is the heaviest taxed country in the world. It is taxed at something like £15 per head as against £5 in the United States of America.
The comparison which I offer to the House is the very carefully drawn comparison based upon the central Government taxation only. This country to-day is the heaviest taxed country in the world. No one will deny that heavy taxation must be, in the nature of the case, a burden upon our manufacturing industries, and I am sure that nothing would give the Chancellor greater pleasure and satisfaction than to be able to reduce this most terrible burden on the industries of the country.
I desire now to refer to a most amazing statement made by the Chancellor of the Exchequer in the debate last Monday. He twitted me with a lack of proper study of finance. I have said that I do not by any means regard myself as an authority, though it is true that I have tried to master the various problems.
The right hon. Gentleman, apparently, did not think I had quite mastered this problem, because he said he was afraid I must have stopped my studies some years ago, and that I had failed to acquaint myself with the alteration in conditions which had arisen during recent years. He went on to say:
Surely no one with any acquaintance, however indirect, with trade conditions today can fail to realise that there has come into operation a new factor of overwhelming importance, and that is the enormous supply of loose and unanchored capital, which is free to move about rapidly from one capital to another, from one exchange to another, and which can be, and is, used by speculators to alter the rates of exchange."—[OFFICIAL REPORT, 1st July, 1935; Col. 1595, Vol. 303.]
That was on a new Clause which I had moved in relation to the Exchange Equalisation Account, and I rejoice that in moving that Clause a distinguished Member of the party above the Gangway, the right hon. Gentleman the Member for Swindon (Dr. Addison) was associated with me, and that his party voted almost to a man for that Clause, which asked that an abstract of the Account should be submitted to the House. I was very pleased that my hon. Friends here also supported me in the Lobby, and I think we mustered quite a respectable number of votes in favour of the Clause. I was trying to argue that the Exchange Equalisation Account was fundamentally unsound, and removed the only indicator of which I am aware by which traders could judge the state of trade. The right hon. Gentleman tried to ridicule my argument, and said that a new factor which I had ignored had come into being, namely, this enormous sum of movable capital. I admit that, as has already been pointed out, there is an enormous accumulation of capital in all the main centres of the world, but I hope to show how fanciful is the picture which the right hon. Gentleman drew, and how little basis there is for his argument.
It is almost impossible to find out what these movements of capital are from one centre to another, but I think I shall be able to show that they are comparatively small. Obviously, if there were, as there used to be in pre-war days, a rise in the rate of discount and money became more valuable, say in London, that would tend to draw money from other parts of the world; but now, when we are glutted with unlendable capital, that cannot happen. It is true that a certain movement resulted from the recent rise in the Paris Bank Rate, but on the whole the world to-day is suffering from a plethora of unlendable capital, and there is no inducement for these movements of capital from one centre to another to take place.
As a result of the right hon. Gentleman's attack, I looked up the League of Nations World Economic Survey for the year 1933–34, in which I find this statement:
The extremely low levels to which new capital issues fell in 1933 are emphasised by the compilers of these estimates in various countries. For the United Kingdom, where the signs of incipient recovery were clearest, it was stated that there was little industrial activity in the new capital market during 1933.' The compilers of the statistics for the United States remarked that the slimness of the new financing in 1932 was hardly a circumstance to what happened in 1933,' while in the Netherlands it was stated that 'capital issues did not constitute an exception to the general lethargy which characterised the year 1933. Here also a new low record was registered.' … Reference is also made later to the unofficial embargo upon foreign issues in the London market since the first great conversion operations were begun in the middle of 1932, to the Johnson Act passed in May, 1933, by which Governments which have defaulted on their war debts are barred from the United States markets, and to developments of a similar character in other countries.
This means that it is impossible to float foreign loans, and there is no basis whatever for the right hon. Gentleman's conclusion that there are vast sums moving from one centre to another. I very much doubt whether, as the right hon. Gentleman seems to think, speculators are standing ready to move these large sums about. Speculators do not have the command of these huge sums, and there is no evidence whatever to show that this vast movement takes place. On the contrary, there has been much gold hoarding, and owing to lack of confidence in many parts of the world, there has been little or no movement of capital from one part of the world to another. In fact, what we are suffering from to-day is stagnation in the foreign exchange market. The League of Nations Economic Survey further goes on to state that:
The demoralisation of investment in most countries is further demonstrated by
the fall—except in a few countries, e.g., Denmark and Switzerland—in the value of new mortgages registered.
That is another factor which used to cause the movement of vast sums of money, particularly across the Atlantic, where there are very large investments on mortgage.
Is not the hon. Member losing sight of the fact that vast sums are moved about without any physical movement whatever taking place, but merely by entries in books? There are large debit and credit movements between different countries by means of entries in bankers' books, no money being moved at all. Further, is not the hon. Member overlooking the fact that it is now quite possible, apart from this practice of bankers, to shift backwards and forwards what are known as inter-bourse securities? By this means large amounts of shares can be shifted about, although these movements are never seen in the exchange market. When the hon. Member talks about the levelling out of the exchange of which the Chancellor of the Exchequer has spoken, may I ask him whether he knows that, besides the direct exchange between two countries, there are triangular exchanges, and that now there are even what are called polygonal exchanges, which are never seen?
I can assure the hon. Baronet that I have not lost sight of that fact. I am quite aware of those movements, but I am trying to argue that there is comparatively very small movement of these shares. We have no statistics, and we can only use our common sense. When we know that there is little or no foreign investment, that there is an embargo on the flotation of foreign loans, and that there is comparatively small movement in foreign securities on the Stock Exchange, we can conclude that the movement of capital from one centre to another is comparatively small. I admit that the enormous sums are there, unfortunately, because there is so little development throughout the world. Foreign trade has shrunk to an almost infinitesimal amount. The right hon. Gentleman prides himself on some tiny increase in our exports, but the fact that our export trade has halved in the last few years is the most important point to bear in mind. A £25,000,000 increase is very satisfactory as far as it goes, but in judging the situation you must have regard to what you were formerly able to do, and you still have 2,000,000 unemployed and this stagnation, which is traced by his impartial authority to the lack of currency stabilisation. I am pleading for currency stabilisation and the abolition of these ridiculous exchange equalisation accounts, and a free market in exchange.
If the right hon. Gentleman desires stabilisation, why does he not get on with it? America has stated that she would throw no obstacles in the way. I. have often argued that it is not necessary to ask leave of any other countries, but there seems to be a belief that, owing to timidity on our part, we dare not stabilise unless we get other countries to agree. Then for God's sake ask them. They are anxious to be asked. The right hon. Gentleman talks about speculators, but speculators do not create conditions; they take advantage of them. The right hon. Gentleman will never admit the three causes governing the depreciated pound and the adverse exchange. They are the state of your trade, the balance of payments between this country and other countries, and there is, what he will never admit, the state of your currency. I have been trying to point to the facts. My right hon. Friend the Member for Darwen (Sir H. Samuel) came to the rescue the other day and referred to the fact that the pound had fallen 10 per cent. last year and is now at a discount of 42 per cent. That is going on all the time and it is one of the contributing factors leading to the adverse exchange. If the right hon. Gentleman would show that he had made some study of this problem and that he appreciates the contributing factors, there would be some encouragement for us who are fighting for a return to a stable and sound currency. I do not believe you will ever get a return to a sound state of affairs and the restoration of your foreign trade until you have faced this problem.
The right hon. Gentleman said the pound still purchases the same as it did some years ago. Take a simple illustration. If we were off gold while America remained on, and the pound was worth only 3.50, it would purchase only 3.50 dollar's worth of raw cotton. But America has cut the dollar 40 per cent., which brought the pound approximately where it was before. It is approaching parity again through no action on the part of our Government, but owing to the fact that the Americans have cut their dollar. Are we to go on like this? Someone said that it is a reflection upon our common civilisation and that it is a resort to barbarism. Do we not wish to restore the position of former days when the exchange hardly varied one-sixteenth or one thirty-second in the various countries? How are you to restore foreign trade and create employment? As far as they are desirable, I support reasonable public works, but in this little island there is no scope. This is a great mercantile, shipping and export country. We live by our foreign trade, and unless we restore the exchanges we cannot develop our trade.
The Chancellor of the Exchequer to-day made a very delightful speech. I was very sorry—though in one sense I was glad—that there was a smaller audience present than is present now. It seemed so absurd complacently to try and persuade us that all was well, that we were prospering, and were doing more trade in every possible direction. Many of us who are in the habit of visiting the great shipping centres of Glasgow, the Tyne, Durham, and the people who are unemployed, know that this is not so. We see starving women carrying on hoping against hope for the return of employment, and it is useless to delude the unemployed, or to imagine that you can put them on to the land. They do not want to go on to the land. They want to see more trade created. They have been brought up as skilled tradesmen and craftsmen and as shipbuilders. There are 25,000 unemployed in. Durham, and they are anxiously awaiting the revival of trade. How are you to bring about a revival of trade? The only solution of the problem of the restoration of foreign trade is the restoration of the exchanges. I would ask the Financial Secretary to make a request to his chief, the Chancellor of the Exchequer, that the Government shall take some initiative in this matter in conjunction with the other nations, if they do not feel inclined to make the initial move themselves. I have no official position in this matter, but I have been in touch with high authorities in Washington and in France. I have had something to do with the stabilisa- tion of the franc, and the restoration of the federal reserve system in America, and perhaps I may claim with all modesty to be in touch with these authorities. If the British Government would only take the initiative I believe that other nations would be be glad to follow.
Lieut.-Colonel Sir ARNOLD WILSON:
I hope that I shall be in order if I revert briefly to the text of the Bill. There are three points to which I wish to draw attention. The Clause which deals with repairs to buildings and continues the allowances for another 12 months. The matter was last considered by the Royal Commission on Income Tax, 1920. The present procedure is that one-sixth of the rateable value is allowed for repairs. I believe that we might stimulate building activity all over the country at all times of the year if this allowance was not automatic, but was granted only against vouchers. I hope that the Chancellor of the Exchequer will consider the possibility of a serious inquiry into its operation.
The second point is the medicine stamp duty which has fallen by nearly 50 per cent. in the past five years. It amounted to £1,250,000 in 1929, and it is now about £750,000, and is, I believe, still falling, not, unfortunately, because fewer patent medicines are consumed, but because avoidance is being very widely practised by means with which the Chancellor of the Exchequer is far more familiar than I. Very serious inroads are being made into the receipts from a perfectly legitimate and proper tax, which dates from 1784. The time has come when we should seriously consider amending and consolidating the law and bringing all medicines and related commodities within the ambit of the Excise. It is quite indefensible that one patent medicine should be completely free because it is described as a cough mixture and another should be taxable because it is described as a lung tonic.
The third point, which has been referred to already, is that of the male servant tax. I gathered last year from the Chancellor of the Exchequer that two counties out of five have expressed their willingness to forgo the tax to which they are entitled and which they receive year by year. The remaining three either did not reply or said that they were not willing. I cannot but think that if the Chancellor of the Exchequer would make a fresh public appeal to the county councils to discuss the matter afresh and let it be known that he has done so, there might be a very different response from those councils who have hitherto refused. I know that there in a demand for male servants and that small people find difficulty in paying for the licence for a year, although the male servant may be required only for a short period. I submit that the Chancellor could by bringing public pressure to bear upon the recalcitrant county councils, who benefit yearly more and more from his bounty, do something tangible in connection with the matter.
The hon. Member for East Fulham (Mr. Wilmot) made some reference to the price of bread and the halfpenny on the loaf which the wheat subsidy is said to cost. He said that the poorer people eat more bread than other food in proportion to their income. That is true, but every year for the past 10 years the people of this country have been eating less and less bread. At the present time we are eating 10 per cent. less bread than we did in 1924, so that if the amount of bread eaten in proportion to other foodstuffs is an index of poverty, there is little doubt that real poverty is decreasing absolutely and relatively. The hon. Member also made reference to the housewife going out with her basket and a pound note, of which only 16s. went to buy food, the remainder being devoted to taxation. It will suffice to remind the hon. Member that in no European country could the housewife go out with the equivalent of a pound note and receive anything like so many goods in exchange. The housewife in 1935 in this country will have her basket, in exchange for her pound note, filled with about 10 per cent. more goods than would the corresponding housewife in 1924 and nearly 10 per cent. more goods than in 1929. That is not a bad record. As I listened to the prophets of woe below me and on the benches of the Opposition, I was reminded of the words of Ralph Waldo Emerson, addressed to the people of England in the Free Trade Hall, Manchester, in 1845:
I see England pressed upon by competing populations and trades, I see her not dispirited, not distressed, but remembering that she has seen dark days before, and indeed with a kind of instinct that she
can see a little clearer on a cloudy day and that in storm and stress, calmly she has a secret vigour and a pulse like cannon. I see her in her old age, not feeble, not weak, but daring to believe in her powers of endurance and expansion and with a strength equal to the times.
The policy we are pursuing to-day is a proof that those powers of endurance and expansion of strength are in fact equal to these difficult times.
I only desire to put a question about Clauses 28 to 31—I will confine myself to these Clauses. They give new powers to the Chancellor of the Exchequer with regard to Local Loans. We are rather in the dark as to what is exactly meant by these Clauses. It seems to me, that hon. Members opposite are under the impression that the interest paid on Local Loans Stock is paid only to the capitalists, the bankers and to the rentier. As a matter of fact, although I cannot vouch for the accuracy of the figures because none are available since 1915, I believe that out of the £430,000,000 of Local Loans issued, £3 out of every £4, that is, about £300,000,000, are not in the hands of the general public at all. As far as I can analyse the figures, about £300,000,000 are in the hands of public departments, the National Debt Commissioners, the Ecclesiastical Commissioners and the national health insurance fund and so on. About £75,000,000 were issued before the War at par, and since the War £355,000,000 have been issued, of which only £80,000,000 have been issued to the general public. The other £275,000,000 have been taken by public departments, the National Debt Commissioners, the Ecclesiastical Commissioners and the national health insurance fund.
The consequence is that if there is a reduction in the interest a nett benefit will not accrue to the Treasury, that is the State, as hon. Members opposite think. They are quite in error in thinking that the reduction in interest will punish the rentier. They are under the impression that the interest which is paid on 3 per cent. Local Loans all goes to those rascals the capitalists. In reality most of the interest is being received already, for, or by the State. If the interest is reduced the difference on £300,000,000 will have to be found somehow, and if it has to be found for Government depart- ments, the National Debt Commissioners or the national health insurance fund, it will have to come out of the taxpayer in some way. Local Loans are held for the most part by departments and organisations for the benefit of the public and by great institutions like the universities of Oxford and Cambridge, by schools, hospitals, religious bodies and charitable institutions. They are held because they are looked upon, quite rightly, as one of the finest securities we have, although they are not a direct obligation of Parliament. That leads me to the question I want to ask. The interest is secured upon the rates of various local authorities all over the country, it is perfectly safe, indeed there is nothing safer, and on the top of that you have the guarantee of the House of Commons that the interest will be paid. But there is no guarantee by Parliament that the capital will be repaid. It is what is technically known as a perpetual annuity repayable only at the option of the borrower. There is no obligation on the borrower, that is the State which has borrowed on behalf of Local authorities, to repay, except at its own option.
Now we get these Clauses. The Government apparently are to take power to redeem, or to convert, to a lower rate of interest existing Local Loans, though I do not see how it can be practicable now to reduce the present rate, by a conversion of existing Local Loans as perpetual annuities. The Government are proposing to alter the conditions under which, on behalf of the Local Loans Fund, they are going to borrow in future. Here I am quite in the dark, and thus am brought to the question I ask. Does the Treasury propose, if it makes a fresh issue or if it converts the existing £430,000,000, to issue a fresh Local Loans stock repayable at a fixed date, and does it propose, as I read one of the Clauses, to make the Consolidated Fund liable for the repayment of the new securities when the time comes? If so, I think the Treasury and the Government are foolishly departing from what I consider a first-class principle, by trying to get all these obligations, whether direct or indirect, at any rate obligations for which the Treasury is responsible, away from a principle by which the Treasury says, "We prefer to have long-dated stock with no definite date of repayment so that we shall be under no obligation to repay when it may be inconvenient". That is the condition in which Local Loans are now in issue. Are we to suppose that the Treasury are to depart from that and are saying that they will take power to issue fresh Local Loans Stock, which will have a fixed date of repayment at par or otherwise, with a charge to that effect upon the Consolidated Fund? Are the Government departing from the principle of perpetual annuities repayable only at option of the Treasury? If so, I think they have not been wise. I am not sure whether that is the case. If it is not the case I ask the Financial Secretary to tell us exactly what is the meaning of this Clause about redemption, and whether any new obligation will as a result fall upon the Consolidated Fund. If it is to be a new obligation without option to the Treasury, I think the House ought not to pass the Bill without being perfectly alive to the fact that the conditions of future Local Loans issues, or of old ones if converted, are changed and what was an indirect obligation of Parliament may become a direct obligation, not only of interest, but of repayment of capital at a fixed future date.
It seems rather ungracious to begin by complaining that the speeches this afternoon have erred in two different directions. Some have been too general and some too particular; a great many have not dealt with the Bill at all, and perhaps the last two have dealt with points that might have been discussed better in. Committee. However, in case I should forget, I will deal first with the question just put to me by the last speaker. The object of these Clauses is simply that the Government, should the occasion arise when the conversion of Local Loan stock may be possible, shall have a free hand. There are occasions when it is easier to raise money on redeemable stock than by perpetual annuities, and the Treasury feel that they should have unfettered discretion to raise money in the cheapest way possible in the market, if the time ever arrives when it will be desirable to do so.
With regard to the points made in the eloquent speech of the hon. and gallant Member for Hitchin (Sir A. Wilson), the question of the male servants' tax is, as he stated, bound up with the local authorities, and it is extremely impracticable, if not impossible, to obtain the consent of or to bring the necessary pressure to bear upon the local authorities in order to achieve the reform which he desires. It is considered that the time to do that will be when the block grants are reconsidered, which will be in 1937. The other point with regard to patent medicines I will look into, but it is too late now to make any alteration in the Bill. His third point concerns building allowances. That also is a point Worthy of consideration, but probably my hon. and gallant Friend is aware that it was considered by the Royal Commission on Income Tax in 1920, and on the whole their decision was not favourable to his suggestion.
It is just a year since I first stood at this Box in the capacity of Financial Secretary to the Treasury. On that occasion, a few days after taking office, I had to take part in a Debate on the monetary system of this country which I approached with considerable trepidation but which turned out to be much less formidable than I had feared. During to-day I have been vividly reminded of that Debate, because some of the speeches to which we have listened might have been made in a general discussion on monetary policy and bore no relation to the Bill. I notice that while my critics, both the friendly critics and the hostile critics, have not changed either their views or their places, they have adopted on the whole a more favourable and a kinder note this afternoon than they did a year ago. Their praises were more heartfelt and their criticisms far milder. The hon. Member for East Aberdeen (Mr. Boothby) still reminds us that he was right about the Gold Standard when everybody else was wrong. The hon. Member for Huddersfield (Mr. Mabane) continues to point out that we might adopt a more daring policy and reduce the income tax and thereby confer great benefits. The hon. Member for East Edinburgh (Mr. D. Mason)—who, we are confident, will never change—continues to hold the same views, I think almost alone in the House—
At any rate, he is the only Member who expresses himself in the House in favour of the Gold Standard with the same devotion. In so far as he referred at all to the Finance Bill this afternoon, he did so only in order to deal with the statement made by the Chanceller of the Exchequer with regard to the Exchange Equalisation Account. I think perhaps the interruption of the hon. Member who sits behind me demolished to a large extent his argument. He argued that there could not be this great speculation in exchanges without the movement of colossal sums of capital from one country to another, but, as my hon. Friend behind me pointed out, such movement of capital is quite unnecessary, and speculation of the kind indicated can take place without any movement of capital at all. It is to deal with that speculation that the Fund exists—to iron out sudden changes in rates of exchange—and the success of the Fund is written in the history of the last four years. During that period we have been spared any of those sudden and terrible changes which had such disastrous effects in the period after the War.
The hon. Member who opened the debate this morning said that this was an Election Budget—than which there could be no higher praise, because that means that it is so popular that it will appeal to the whole people. I thought the speech of my hon. Friend was a rehearsal of what his speech would be on the platform when we come to the next general election. The hon. Member for East Fulham (Mr. Wilmot) repeated the statement that the balanced Budget was the result of the introduction of the means test, but he must be as well aware as I am that that is not the case. The means test was never introduced as an economy or as a cut. It is a part of the Government policy, and I could not imagine for a moment that if it were to be changed, it would be changed in a Finance Bill. It is part of the policy that is carried out by the Ministry of Labour. It is the considered view of the Government that there ought to be some limit at which people who are possessed of private means should not receive unemployment relief. That has, therefore, nothing whatever to do with the cuts which we made in 1931, and practically the whole of which are now being restored by the present Finance Bill.
The hon. Member criticised very bitterly some of our import duties, and particularly the one on the openers of tins. He drew a picture of the power and wealth of this country and of this great Government, with a huge majority descending to so unimportant and so trivial a matter as the imposing of a duty upon tin-openers, but surely that shows the vigilance and the attention to detail of the Government, how nothing escapes us, how, just as the elephant with its delicate trunk is enabled to distinguish between even the minutest objects and reject those of whch it disapproves and gratefully accept those which it desires, so also the Government are able to pay attention even to matters which are so comparatively unimportant in the hon. Member's eyes as the openers of tins. With regard to some other small points, he referred to the inclusion of commission in the valuation made by the Customs on goods imported into this country. There is nothing new about that. It has always been a Customs principle, in attempting to ascertain the true value of goods which are imported into this country and which are destined to be sold here, to include commission. Freight, insurance, and the payment of commission must all come into the value at which they can be sold, and there has been no change of policy with regard to that matter.
The hon. Member for Cardigan (Mr. D. Evans) comes to us this afternoon apparently as the apostle of the Council of Action. He is the first, I think, who has raised his voice on behalf of that body, but I must say that I think he has done nothing to increase its repute. Conceived as it was in discredit, its parents or some of them having already denied responsibility, it has gathered contempt as it has grown. But why should we want a Council of Action?
I am sorry to interrupt the hon. Gentleman. The hon. Member for Carnarvon (Mr. D. Evans) is not here, but he did not say that he was in favour of the Council of Action. He said he favoured a Council of Action.
If, when there is in existence a Labour party in this country, and someone gets up and says, "What we really need now is a Labour party," people are apt to think that it is the existing Labour party of which he is speaking. When there has been called into existence a Council of Action, and the hon. Member for Cardigan said that a Council of Action was what was wanted, I think I was fully justified in thinking that it was that particular Council of Action to which he was referring. He put forward one of the most extraordinary views I have ever heard. He said the Government had a large majority, and he asked why, with their huge majority, they could not do things more rapidly. That is an extraordinary thing to come from a Liberal speaker. Does he mean that, as we have a large majority, we should prevent discussion, alter procedure, do away with, say, the Report stage of Bills and apply the guillotine I think there never has been in Parliament—certainly not in my recollection—a time in which the guillotine has been so rarely applied, in which discussion has been so free, and in which the Opposition, small as it is, has been given every opportunity of voicing its views. Yet here is an hon. Member, speaking with all the authority of the Liberal party, saying, "Why do you not get a move on? Why should you not, with your big majority, put through your business more rapidly than a party with a small majority?"
The hon. Member, this apostle of action, went on to suggest that taxation should be cut down in every direction. All Income Tax, and all indirect taxation, should be cut down. The hon. Member for Leigh (Mr. Tinker) very rightly asked him where he was going to get the money, and the hon. Member for East Edinburgh (Mr. D. Mason) came to his rescue and proposed getting the money by reducing expenditure. Might I ask him in what direction? There are only two main Departments in which you can reduce expenditure—national defence and social services. Is the hon. Member prepared to say at this moment in international affairs that he and his party are strongly in favour of the reduction of expenditure on national defence; or, equally, are they in favour of drastic reductions in the expenditure on social services?
The hon. Member entered into a very interesting disquisition on the rival theories of Free Trade and Protection, and said that if we had universal Free Trade it would be a desirable thing. All people are inclined to agree with that view. He also said that when a few countries have Protection they may be able to get a away with it, which, I gather, means that it may be very profitable for those countries, and that the rest suffer, but that if you have universal Protection that is the worst thing of all. That seems a very strange view from a Free Trader. It is our duty to keep on with Free Trade and if we profit by adopting Protection ourselves, we are only doing the same thing as they. It is exactly the same argument as saying that it would be much better to have no armaments in the world, and that a country completely disarmed would be in no worse position than a country now armed. Of course, we know that if there were complete Free Trade everyone would benefit, but those countries which adopted Protection found it very well to stick to it, and it took us 80 years to realise that it was hitting us very badly. During that period not a single other country adopted Free Trade. Tariffs went up and we were unable to reduce; them because we had no weapon with which to meet them. But since introducing Protection ourselves, we have been able to bring down trade barriers, and by trade agreements have opened markets previously closed to us. The hon. Member for Cardigan complained bitterly about our motor trade, and, if I understood his argument, it was that the industry was not receiving sufficient protection, and he was claiming more protection. The motor trade of Italy and America was forging ahead, whereas we, in spite of Protection, were being handicapped. The fact is that those countries are far more highly protected, and this apostle of Free Trade comes forward with his only practical proposal, namely, increased duties and protection for this particular industry.
The hon. Member for East Aberdeen raised one or two points connected with the Bill, but as he has not been here during the earlier stages he has probably not heard the answers to them, and as he is not in his place now it is not necessary from the point of view of the House to give the answers again. The hon. Member for Mansfield (Mr. C. Brown), who made a powerful, sincere and interesting speech, really, I think stated the opposition to this Bill, so far as any opposition can be said to exist. Like other hon. Members, including the hon. Member for East Fulham, he had to go back some years into history in order to introduce any heat into the discussion. He had to go back to 1931. He said he did not believe that there had been a crisis in 1931. The difficulty between the hon. Member and myself is that we believe in different things. I do believe that there was a crisis, and, looking back to the pages of history and reading what happened in 1931, I should be persuaded that there was. When the Government, at a time when Parliament is not even sitting, are obliged to call a special session and are obliged to resign, I call that a crisis.
The hon. Member believes in certain beings, whom he calls money lords, who rule this country. Lots of people believe in them, but that does not prove that they exist. I have moved about in this city and this country for many years, and I have never met one, and I do not know who they are. They are a sinister influence, the power behind the throne who pull the strings, but when you ask people to say particularly who they are, whether Sir So-and-so and Lord So-and-so are money-lords, the answer is, "No, not them." I should be interested on another occasion to hear these portentous creatures given a greater amount of flesh and blood so that I can perhaps recognise them and be able to defend them from the charges that are brought against them, because, apparently, they are people, if they do exist, who have no love for their country, who care only for their own purses, and who are capable of doing anything to bring about the changes in politics which they desire. I do not believe that they exist, and I have never seen any sign of them. I believe, however, that the crisis did exist in 1931. The hon. Member for East Fulham and other hon. Members tried to argue what the causes of that crisis were. I think, without going deeply into international finance, that one can say simply what the cause was. It was because this country was living beyond its means and had lost its credit. No nation, any more than any man, can continue for long to live beyond its means once it has lost its credit. It is easy to live for a long time by borrowing, but the moment credit goes the end comes very rapidly. That is why it came so rapidly in August, 1931; the crisis took place, the Government fell, and the special session of Parliament was called.
The hon. Member for Mansfield and others referred to the Clause in which we give some remission of taxation to those industries which seek to put their houses in order and which improve their general equipment—a process that has been called rationalisation. I think most hon. Members opposite are ready to admit that there was need for some such reform, that many industries were in need of reform, and that they are as anxious as we are to see waste eliminated and industry made efficient. But, they said, how about the people who are thrown out of work. I have argued this case before, and it seems to me that the more I think about it the more obvious it is that although cases of hardship may arise one must be prepared, and the people in the industries should be prepared, for that sacrifice if they are persuaded that it is in the interests of the industry and of the nation as a whole. Why we should make any special provision for people thrown out of work in such cases I cannot understand.
An industry may break down, like the lace industry, because people wear less lace, and people who have been earning good wages may be thrown out of work. Another industry is being reorganised after careful thought for its own good, and temporarily, production is reduced and people are thrown out of work. Why should the people thrown out of work owing to reorganisation be given preferential treatment over the people thrown out of work by what we may call natural causes? I cannot see that one has a claim against the other. It is the duty of the Government, and we think that to the best of our ability, and so far as our means will allow, it is a duty which we are fulfilling, to look after people who fall out of work and to maintain them, but I cannot see that there is any special duty towards one section of the unemployed more than towards another, and that those who fall out of work owing to useful reforms which are going, in the long run, to prove beneficial to their own industry should be better treated than those who fall out of work owing to a change in fashion or a loss of markets.
The hon. Member said that the real criticism of this Bill, and it is from his point of view, is that it does nothing to readjust the maldistribution of wealth in this country. That wealth is not equally distributed is patent, but' I would remind him in contradiction to the theory, the expectation and the prophecies of that philosopher in whom he should believe, Karl Marx, the whole trend of industry and of economics during the last 60 or 70 years has been to improve the distribution of wealth, that there are not fewer people growing rich, and more people growing poor, as Karl Marx predicted with confidence, but that, on the other hand, wealth is being continually and gradually distributed more evenly, and that this tendency has occurred under the system which he and his friends are out to destroy.
I do not know whether they intend this afternoon to vote against this Measure. It is very seldom that the Third Reading of the Finance Bill has been passed without opposition, as it were by general acclamation, and I am not sure that it will not be a record if it does take place. If they do vote against it they will go into the Lobby with little conviction and with no enthusiasm, because each one of them knows in his heart that he could not make a better Finance Bill, given the conditions that exist, indeed, could not make so good a Finance Bill. It is only because they are wedded to this cry of Socialism. The hon. Member shook his head just now when I mentioned the name of Karl Marx. I do not know who is his prophet of the gospel of Socialism. It is only because they still see that there is much wrong in the world—and do not we see it too?—and believe that it can be cured in some strange manner by the application of a system which in the mouths of most of them has become little more than a shibboleth, which in the minds of many of them remains a mystery and which, if they only knew it, was out of date before they had even heard of it.
The hon. Member for East Fulham (Mr. Wilmot) was very pleased the other day when he thought he had trapped me into saying that it was our object to prop up the capitalist system. He argued that if I had said it had to be propped up I acknowledged that it had fallen down. It was a great admission from the Front Bench that the capitalist system was falling down. I am happy to leave him to his verbal triumph. A private Bill which is on the Paper of the House to-day is the City of London (St. Paul's Cathedral Preservation) Bill. No doubt the hon. Member would tell us that St. Paul's Cathedral is falling down, but it is doing nothing of the sort. It was discovered that it was necessary to make certain alterations, improvements and repairs to the Cathedral in order to preserve it for many centuries. The hon. Member knows as well as I do that all works of man are liable to the laws of mortality. They suffer from change and decay, and political systems, just as great buildings, may collapse, and the security which they give to millions of people who live under them may be destroyed. It is the duty of those who are responsible for administering them to look after them and repair them, and to introduce improvements or to prop them up—I am prepared to allow the hon. Member that useful word. I prefer to call it preservation of the State, which is the duty of every Government.
Hon. Members opposite think that the people of this country have short memories. They remember well enough the State that we got into only four years ago, and they have imagination enough to realise what would be the result to the poor people if another financial crisis arrived such as is promised them by the hon. and learned Member for East Bristol (Sir S. Cripps), if they vote for him in sufficient strength. We have travelled a long way in these four years and, looking
back upon the road, I believe that nobody in this House has greater claim to a measure of self-satisfaction than has my right hon. Friend the Chancellor of the Exchequer. It irritates me considerably when hon. Members accuse him of complacency. I read the other day that it was the duty of people to advertise; I suppose that includes self-advertisement. Unfortunately, that is an art in which my right hon. Friend is not good. What he has done in the last four years has been accomplished without the blowing of trumpets or the waving of flags.
In this Bill there is nothing spectacular and nothing to catch the eye. There is no 9d. for 4d., and no sensational finance. The more closely it is studied the more clearly there appear the real reforms and the real benefits which it is conferring upon millions of people. I am confident that those people will be grateful for the benefits, when they realise them, and that they will be grateful to my right hon. Friend, in whose career the Bill represents one further step in the great achievement which he is accomplishing, which is, in a period of profound international and economic disturbance and of grave political unrest throughout the world, to rescue the finances of this nation from the very brink of the abyss and to re-establish them upon a solid and sound foundation.
|Division No. 261.]||AYES.||[4.0 p.m.|
|Ainsworth, Lieut.-Colonel Charles||Campbell-Johnston, Malcolm||Emmott, Charles E. G. C.|
|Allen, William (Stoke-on-Trent)||Caporn, Arthur Cecil||Entwistle, Cyril Fullard|
|Anderson, Sir Alan Garrett||Cayzer, Sir Charles (Chester, City)||Evans, Capt. Arthur (Cardiff, S.)|
|Apsley, Lord||Chamberlain, Rt. Hn. N. (Edgbaston)||Fermoy, Lord|
|Astor, Maj. Hn. John J. (Kent, Dover)||Chapman, Col. R. (Houghton-le-Spring)||Ford, Sir Patrick J.|
|Baldwin, Rt. Hon. Stanley||Chorlton, Alan Ernest Leofric||Fremantle, Sir Francis|
|Barrie, Sir Charles Coupar||Clarke, Frank||Gault, Lieut.-Col. A. Hamilton|
|Beauchamp, Sir Brograve Campbell||Clarry, Reginald George||Glossop, C. W. H.|
|Benn, Sir Arthur Shirley||Clayton, Sir Christopher||Gluckstein, Louis Halle|
|Bennett, Capt. Sir Ernest Nathaniel||Cobb, Sir Cyril||Goff, Sir Park|
|Bernays, Robert||Cochrane, Commander Hon. A. D.||Goldie, Noel B.|
|Birchall, Major Sir John Dearman||Colville, Lieut.-Colonel J.||Gower, Sir Robert|
|Boothby, Robert John Graham||Cooke, Douglas||Grigg, Sir Edward|
|Boulton, W. W.||Cooper, A. Duff||Grimston, R. V.|
|Bowater, Col. Sir T. Vansittart||Craddock, Sir Reginald Henry||Guinness, Thomas L. E. B.|
|Bower, Commander Robert Tatton||Craven-Ellis, William||Gunston, Captain D. W.|
|Braithwaite, Maj. A. N. (Yorks, E. R.)||Crookshank, Col. C. de Windt (Bootle)||Hamilton, Sir George (Ilford)|
|Brass, Captain Sir William||Cross, R. H.||Hannon, Patrick Joseph Henry|
|Broadbent, Colonel John||Crossley, A. C.||Harvey, Major Sir Samuel (Totnes)|
|Brocklebank, C. E. R.||Davison, Sir William Henry||Haslam, Henry (Horncastle)|
|Brown, Rt. Hon. Ernest (Leith)||Dawson, Sir Philip||Haslam, Sir John (Bolton)|
|Brown, Brig.-Gen. H. C. (Berks., Newb'y)||Denville, Alfred||Headlam, Lieut.-Col. Sir Cuthbert|
|Buchan-Hepburn, P. G. T.||Dickie, John P.||Heneage, Lieut.-Colonel Arthur P.|
|Bullock, Captain Malcolm||Donner, P. W.||Herbert, Major J. A. (Monmouth)|
|Burnett, John George||Duckworth, George A. V.||Hills, Major Rt. Hon. John Waller|
|Burton, Colonel Henry Walter||Duggan, Hubert John||Hope, Capt. Hon. A. O. J. (Aston)|
|Campbell, Vice-Admiral G. (Burnley)||Duncan, James A. L. (Kensington, N.)||Horsbrugh, Florence|
|Howitt, Dr. Alfred B.||Mitchell, Sir W. Lane (Streatham)||Storey, Samuel|
|Hudson, Capt. A. U. M. (Hackney, N.)||Molson, A. Hugh Elsdale||Stourton, Hon. John J.|
|Hudson, Robert Spear (Southport)||Moore, Lt.-Col. Thomas C. R. (Ayr)||Strauss, Edward A.|
|Hunter, Dr. Joseph (Dumfries)||Morrison, G. A. (Scottish Univer'ties)||Strickland, Captain W. F.|
|Hunter-Weston, Lt.-Gen. Sir Aylmer||Nation, Brigadier-General J. J. H.||Stuart, Hon. J. (Moray and Nairn)|
|Jackson, Sir Henry (Wandsworth, C.)||Norle-Miller, Francis||Sugden, Sir Wilfrid Hart|
|Kerr, Hamilton W.||Patrick, Colin M.||Sutcliffe, Harold|
|Kimball, Lawrence||Percy, Lord Eustace||Thomas, Rt. Hon. J. H. (Derby)|
|Knox, Sir Alfred||Petherick, M.||Thomson, Sir James D. W.|
|Latham, Sir Herbert Paul||Peto, Sir Basil E. (Devon, Barnstaple)||Todd, Lt.-Col. A. J. K. (B'wick-on-T.)|
|Leech, Dr. J. W.||Power, Sir John Cecil||Todd, A. L. S. (Kingswinford)|
|Lennox-Boyd, A. T.||Raikes, Henry V. A. M.||Touche, Gordon Cosmo|
|Levy, Thomas||Ramsay, T. B. W. (Western Isles)||Tree, Ronald|
|Llewellin, Major John J.||Ramsbotham, Herwald||Tryon, Rt. Hon. George Clement|
|Lloyd, Geoffrey||Rhys, Hon. Charles Arthur U.||Wallace, Captain D. E. (Hornsey)|
|Lockwood, John C. (Hackney, C.)||Rickards, George William||Ward, Sarah Adelaide (Cannock)|
|Loder, Captain J. de Vere||Rosbotham, Sir Thomas||Wardlaw-Milne, Sir John S.|
|Loftus, Pierce C.||Ross Taylor, Walter (Woodbridge)||Wedderburn, Henry James Scrymgeour.|
|Lyons, Abraham Montagu||Russell, Alexander West (Tynemouth)||Williams, Charles (Devon, Torquay)|
|Mabane, William||Samuel, Sir Arthur Michael (F'nham)||Williams, Herbert G. (Croydon, S.)|
|MacAndrew, Major J. O. (Ayr)||Samuel, M. R. A. (W'ds'wth, Putney).||Willoughby de Eresby, Lord|
|Macdonald, Sir Murdoch (Inverness)||Sandys, Duncan||Wilson, Lt.-Col. Sir Arnold (Hertf'd)|
|McLean, Major Sir Alan||Savery, Servington||Winterton, Rt. Hon. Earl|
|Macmillan, Maurice Harold||Shaw, Captain William T. (Forfar)||Wise, Alfred R.|
|Macquisten, Frederick Alexander||Simon, Rt. Hon. Sir John|
|Making, Brigadier-General Ernest||Sotheron-Estcourt, Captain T. E.||TELLERS FOR THE AYES.—|
|Margesson, Capt. Rt. Hon. H. D. R.||Southby, Commander Archibald R. J.||Major George Davies and Dr.|
|Mason, Col. Glyn K. (Croydon, N.)||Spears, Brigadier-General Edward L.||Morris-Jones.|
|Mellor, Sir J. S. P.||Spens, William Patrick|
|Cocks, Frederick Seymour||Jenkins, Sir William||Wilmot, John|
|Davies, Rhys John (Westhoughton)||Lawson, John James|
|Gardner, Benjamin Walter||Mason, David M. (Edinburgh, E.)||TELLERS FOR THE NOES.—|
|George, Megan A. Lloyd (Anglesea)||Maxton, James||Mr. C. Brown and Mr. Groves.|
|Greenwood, Rt. Hon. Arthur||Strauss, G. R. (Lambeth, North)|