Orders of the Day — Finance Bill.

Part of the debate – in the House of Commons on 20th May 1936.

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Photo of Mr Alfred Barnes Mr Alfred Barnes , East Ham South

Not at all. The policy of the Government in this country should take into consideration the total revenue and trade of the country. If the Government pursue a policy which does not facilitate the restoration of world trade, upon which these incomes, which play an important part in our internal economy, depend, one is not justified in ignoring those factors when an attempt is made to convey to the public that we have entered into a period of prosperity. The only point I am making is that statements such as that which the Chancellor made in introducing his Budget, and which hon. Members to-night have supported, are misleading the country. They are producing a state of criminal complacency and the country is not facing the hard facts of the situation. It is when we ignore factors of this character and are hit by a crisis which arises from world conditions—as was the case in 1930—that the country is in a correspondingly weak and panicky situation. I think it is desirable that hon. Members on these benches should endeavour to take the gilt out of the Budget by stating the facts on the Floor of the House.

If we turn to the export position of the country, we find that in 1932 the value of exports was £275,000,000, whereas in 1935 it was £329,000,000. Here I admit an improvement of £54,000,000 in the export trade as a result of four years of so-called National government, but that leaves out of account entirely the improvement in the prices of primary commodities to which I have referred. These commodities come into this country as raw materials, they pass into the costs of production and the increased prices are reflected in the value of our subsequent exports. The figure of £329,000,000 over which the Chancellor gloats, is, as a matter of fact, £246,000,000 below the value of our exports in 1928–29.

I would like now to deal with the problem of employment, and to refer to a phase of that problem which I feel has too little consideration in this House. The Chancellor claimed that from 1932 to 1935 1,250,000 additional persons were absorbed into employment in this country. If one takes the average through the whole year, there was an increase of 1,023,000 persons, so that the Chancellor's statement represents an exaggeration of 225,000 persons. That, however, is not the most material point involved. The point I would like to stress is the steady and persistent decline in employment in the primary productive trades and an equally steady and persistent expansion of employment in what I might describe as the spending trades of the country. The period for which accurate statistics are available is from 1923 to 1935, but even if one takes the figures of insured persons for the years which the Chancellor has mentioned—1932–1935—I think I can prove that this process has continued. In coal-mining, cotton, woollens, shipbuilding and repairs, engineering and iron and steel, the great primary trades of this country, there has been since 1923 a decline of 839,340 persons. If one takes the two other groups of trades, distributive employment and employment in entertainments, sports, hotels and general recreational services, there has been an increase of 623,000 persons in distribution and an increase of 279,000 in general sports and recreation, a total increase of 902,000 persons. In the period 1st July, 1932, to 8th July, 1935, which we can deal with only on the basis of insured persons, the process continued. From 1st July, 1932, to 8th July, 1935, there has been a decrease of 245,000 insured persons employed in coalmining, cotton, woollens, shipbuilding and general engineering.

Again, if we take the distribution and general entertainment and recreation trades, the spending trades, we find that there has been an increase of 183,000 persons. I submit that a national system of finance ought not to overlook those facts. It is upon the primary trades that our industrial supremacy in the last resort must rest. Whether we view the matter from the standpoint of industry or of commercial supremacy throughout the world, or of military safety, the primary productive trades are the base of our existence and of the standard of life of our people. These figures prove conclusively that we are forcing a progressively greater output per man from a dwindling industrial population and that we do not reward them with a higher standard of existence. As wealth is created in these primary trades, it is drawn from the areas where it is created and spent through other channels and in other circumstances elsewhere in the community. That is a very unhealthy state of affairs.

It is in regard to the problem of the National Debt, however, that I think this Budget must come in for greatest criticism. The Chancellor of the Exchequer has been able to effect a reduction of only £70,000,000 in the period under review. That is a totally inadequate provision for reduction of the National Debt in the past four years. I would remind hon. Members that our dead-weight debt to-day is higher than it has been at any other period in the history of the country except the year 1920. The Colwyn Committee said that steps ought to be taken to increase the Sinking Fund, as early as possible, to £75,000,000 a year, yet the Chancellor of the Exchequer has effected a reduction of only £70,000,000 during the five years of National Government. The Colwyn Committee in its report added to that recommendation: The aim should be to increase by degrees this sum to 100,000,000 a year. The right hon. Gentleman's policy has been to increase the National Debt. He has suspended the Sinking Fund; he has flouted the opinion of the Colwyn Committee and he has repudiated the American debt, entered into by his own leader when Chancellor of the Exchequer. When one remembers the bitter, unscrupulous and unfair attacks made upon the Labour Government in 1930 and 1931, I do not think it says much for the standard of political honesty in this country to find that the Chancellor of the Exchequer should have foisted an unsound financial policy on the country during the last foul years and should have received nothing but congratulations for it.

The right hon. Gentleman will hardly expect me to conclude my remarks without referring to a matter with which I am specifically and intimately associated. In the 1933 Budget he broke through a very well-established financial tradition in this country. For 80 or 90 years the principle of mutuality in trade was recognised by successive Chancellors of the Exchequer. Reputable and well-known Chancellors like the late Lord Asquith, Mr. McKenna, the present Prime Minister, the right lion. Gentleman the Member for Epping (Mr. Churchill) and Lord Snowden all considered this problem from time to time and agreed on the principle that mutuality of trade did not disclose a taxable profit. Under the influence of private trading associations, however, and contrary to well-established case law—contrary also to the opinion of the ex-Chairman of the Board of Inland Revenue and representative Inland Revenue witnesses—the Chancellor succumbed to unfair political pressure and took advantage of the national crisis to cancel that principle of mutuality and inflict double taxation on a large section of the citizens of this country. Now, after two years of the administration of that taxation, and speaking on behalf of 7,000,000 organised consumers and co-operators, I address an appeal to the right hon. Gentleman. I ask him now to acknowledge the error which he committed in 1933. I ask him to realise that he made a mistake and that he was not justified in imposing on over 5,000,000 persons in this country, whose wages are below the Income Tax assessable figure, the necessity of paying a tax which they were not entitled in law to pay.

The hon. Member for Wood Green (Mr. Baxter) speaking during the debates on the Budget Resolutions, levelled a very unfair attack against the co-operative movement. When we were discussing the proposals for dealing with evasion, the hon. Member suggested, indeed stated, that the co-operative societies of this country had followed a policy of Income Tax evasion. That is a gross misstatement of the facts. Prior to the 1933 Budget we paid, as we always have paid, both as individuals and as societies whatever taxation the law imposed. Before 1933 our Income Tax position rested, as I say, on case law and on the opinion of the Inland Revenue supported by a long succession of British Chancellors of the Exchequer. When the present Chancellor of the Exchequer was dealing with that position he had to alter the law deliberately, to apply this tax specifically to the co-operative societies and to make them entities for the purpose, ignoring the fact that the co-operative societies are the members and the members are the co-operative societies and that you cannot establish an entity in respect of a co-operative society without affecting the whole body of the members.

Out of our membership over 85 per cent. receive wages so low that as individuals they are not taxable and cannot be made eligible for taxation. The remaining 15 per cent.—representing on a rough calculation those whose incomes bring them within the Income Tax law—are assessed and pay tax as individuals. Any investments they have in co-operative societies are disclosed to the Treasury and added to their total income and they pay taxation on that, as individuals, if they are liable. As 85 per cent. are below the limit, how can they be said to evade taxation when they are not liable to taxation; and how can the remaining 15 per cent. be said to evade taxation when they are already paying it as individuals? I earnestly appeal to the right hon. Gentleman to remove this injustice and to treat co-operators like other citizens of this country.

My final point relates to the war position. The right hon. Gentleman when dealing with employment generally did not refer to the fact that one form of prosperity created by the Government's policy has been an enormous improvement in the value of war investments. The share value of five great war groups in this country in 1932 was £6,672,000. The value of the same shares to-day, as a result of the Government's policy, is £29,624,000, an increase of £22,000,000 in four years. My summary of the Budget is this. During the past 12 months Customs and Excise and Inland Revenue increased by £22,000,000. It is all to be used for armaments. This year's proposals include a raid on the Road Fund representing £5,500,000; a tax on the consumer of tea representing £3,500,000, and additional burdens on the Income Tax payers representing £12,000,000. That is an additional £21,000,000, and all is to go for armaments. Next year the right hon. Gentleman expects indirect taxation to yield another £10,500,000 and direct taxation to yield a further £15,000,000. That additional £25,500,000 will be spent on armaments. Out of this Budget of £98,000,000 no less than £402,000,000, or over Ws. in the £, is to be utilised either in war debt redemption charges or in war maintenance charges. If the Government can present no better Budget, then we feel that this Finance Bill ought to be rejected and the Government defeated.