Amendment of Law.

Part of Orders of the Day — Ways and Means. – in the House of Commons on 23rd April 1936.

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Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

There is no demand now, except a feeble voice here and there, but officially there is no demand whatsoever. I would venture to say this, however, that once this luscious fruit that is garnered from the armaments harvest has passed, then there will be a demand for an inquiry. The hon. Members who, in isolated places in the House yesterday, were demanding an inquiry in a few years from now, get plenty of friends, and another sort of May Committee will undoubtedly be appointed and another demand made for cutting down the social services in order to meet the expenditure which we are now incurring upon armaments. Let those, therefore, who demanded an inquiry yesterday take courage. They have only to wait a very short time before they will find plenty of friends on their own side.

I want now to make one or two references to particular matters, and I want to join with the hon. Member for Huddersfield (Mr. Mabane) in the very strong and, I think, legitimate protest which he made yesterday against what has become the habit, on the part of the Treasury and the Chancellor of the Exchequer, of under-estimating revenue. The hon. Gentleman yesterday said that there has been under-estimating in the last three years to the tune of something like £74,000,000. The hon. Gentleman did not cavil at all at the fact that that money went in the end to the redemption of debt, but he did say—and I agree with him—that the point at issue is not whether it is right or wrong that this money should go, if it is available, to redemption of debt, but rather as to whether the Chancellor of the Exchequer is or is not guilty of under-estimating. The importance of it lies in this fact: I, personally, take the view that there was not the slightest need, for instance, for the right hon. Gentleman the day before yesterday to ask us to approve of the Tea Duty if his estimating were a little more close than in fact it is. I am convinced—and I believe the Chancellor of the Exchequer must be convinced too—that he stands to have at the end of this year a surplus again, and if that be so, it is clear that the Tea Duty is an unjustifiable tax and ought not to be imposed at all.

The hon. Member for Huddersfield spoke, I will not say with very great asperity, but strongly, upon the matter yesterday and he asked the Chancellor of the Exchequer if he would be good enough to-night to give some defence of the fact that the £74,000,000 has accrued, as we think, through the medium of under-estimating, to the Sinking Fund. The hon. Gentleman the Member for Huddersfield is not alone in this matter. I believe that other hon. Members last year and the year before, and I myself in a modest way ventured to express the same view. It is a matter of some importance because after all, to put it in a general way, people are being taxed too heavily if our contention is right that there has been under-estimating.

The other point I want to make is not so much a party point, but a Commons point. There is on the Order Paper this afternoon a Resolution dealing with the question of an advance to the Post Office Fund out of the Consolidated Fund. I do not want to make heavy weather about this, because I quite understand that it is only an advance and that there is no reason to anticipate that anything more than the total appropriate sum would be issued from the Consolidated Fund. But it is well known to Members of the House that issues from the Consolidated Fund have to be made with very considerable exactitude, and the Auditor-General has to assure himself that any calls upon the fund are, in fact, justified by the decision of Parliament itself. In due time the Public Accounts Committee will make it its business to look at this matter and to watch it with very great care, but at the moment I merely say that one expresses a little reluctance to agree to the extension of a principle which seems to have grown, not perhaps exactly in this form, in regard to some recent acts of the Government.

The Financial Secretary last night admitted that Defence gives this Budget its peculiar character, but it is also important to remind the Committee that not only does Defence give the Budget its peculiar character, but to some measure—I will not put it too highly—armaments give a peculiar character too to the industrial revival in the country. There are many towns and industrial areas in this country nowadays which are enjoying a temporary industrial boom simply because of the armaments campaign. If the right hon. Gentleman's anticipations are realised and hearts become melted and hands are clasped in friendship soon, it may well be that this armament boom will pass, and the artificial character which the armaments boom gives to the industrial situation will also pass to that degree. Therefore, it is very important that any calculations we may make in regard to the future shall not be based upon the fallacious assumption that this prosperity is something which has come to stay and is of a permanent character in so far as it rests upon armaments.

I do not propose to discuss the question of armaments policy any further, because its relation to foreign affairs has already been amply discussed by other speakers. But we must remind hon. Gentlemen who have already taken part in this Budget Debate, that they cannot have their cake and eat it. If they demand an armaments expenditure they must face up to the fact that the bill will come in, and when the bill is delivered the question that will arise in our politics will be, Who is to pay that bill? Though I am not a prophet, I venture to prophesy that in our internal discussions the problem as to who is to pay for armaments will speedily dominate our domestic policy.

This was raised in a discussion which was initiated by the hon. Gentleman the Member for South Kensington (Sir W. Davison) yesterday. I have been in this House since 1921, and I have heard, therefore, every succeeding Budget speech since that year. Whether the demands of the Chancellor of the Exchequer be higher or whether they be lower, every year hon. Members have raised the cry that Income Tax should be reduced in the interest of the country at large. The theory underlying that is that a high Income Tax is inimical to the national interests, and that a low Income Tax is conducive to the national interests. I do not deny that a financial crisis like the one we had in 1931 did in fact visit very serious consequences upon individual people. That is obvious to anybody who cares even to look at it in a summary way, but I deny, none the less, that the possessors of wealth generally suffered to the extent that has been suggested. I think that it has been grossly exaggerated.

If one wishes to have any proof of that one need only turn to the 78th Report of the Commissioners of Inland Revenue. If hon. Gentlemen will look at Table 18, on page 27 of that report, which is the last available report, they will find that the net capital values of estates liable to Estate Duty have shown practically little of the effects of the slump. They did, it is true, just in one year, but with the exception of that one year they have shown a very remarkable buoyancy. They recovered with extraordinary quickness. If hon. Gentlemen will look at it more closely, they will find that, if they take the year 1925–26 as their standard, we have never slipped back in that matter, even in the days of slump, to the 1925 basis. Mark you, in that time we have had heavy taxation, heavy Income Tax, heavy Super-tax—there is no doubt about that—but the total effect upon the capital value of estates liable to Estate Duty has been, I was almost going to say negligible, with the exception of one particular year. Not only is that true with regard to Estate Duty, but it is also true with regard to Income Tax as well.

I have frequently heard hon. Gentlemen in this House argue, "Oh, but this country is handicapped as compared with other countries, because its Income Tax is so much heavier than that of other countries." It depends how you make that comparison. If you take the figure of Income Tax imposed, 4s. 6d. or 4s. 9d. in the £, and compare some equivalent figure, say in France, of so much in the £ the foreign figure may, in point of fact, be less than ours. I submit that that is not the way to make a comparison. You have to take out of our 4s. 6d. or 4s. 9d., as the case may be, a calculation in respect of allowances, and hon. Gentlemen should note this point. If you take the year 1931–32, you will find, after taking out the allowances and such considerations from the nominal rate per pound, that the 5s. in the £ Income Tax imposed in that year was reduced to an effective rate of 24.1 pence—2s. That was the effective rate of Income Tax, and in the year 1932–33 the nominal rate was still 5s. in the £, but the effective rate, after allowances had been taken out, was 23 pence, that is, a penny less. Therefore, if you are to compare Income Taxes you can do so only after taking out the allowances in respect of remissions of taxation and so on. I pause to make this point, that the allowances given in this country are very considerable indeed, and therefore we are entitled to argue that it is fallacious for people to say that because there is an Income Tax of 4s. 6d. or 4s. 9d., therefore the burden is too staggering to bear.