National and Local Government Expenditure.

– in the House of Commons on 9th February 1938.

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7.39 p.m.

Photo of Mr Harold Balfour Mr Harold Balfour , Isle of Thanet

I beg to move, That this House, while recognising the great measure of economic recovery and social progress achieved during the last five years and the exceptional expenditure entailed by the necessity for rearmament, views with concern the continued growth of expenditure by the central Government and by local authorities, and is of opinion that His Majesty's Government should do everything in their power to lighten the burdens imposed upon all classes of taxpayers and ratepayers. In moving this Motion I should like to make two things clear. The first is that I do not move it in any spirit of gloom or depression, and the second is that I have endeavoured to draft the Motion, and shall endeavour to explain it, in no party spirit, because I do not wish to attempt to comment upon the justice or the incidence of the burdens of taxation as between different sections and classes of the taxpayers and ratepayers. There is on the Order Paper an Amendment in the names of two hon. Members of the Labour party. I have read it with care, but I cannot make out what it really means, and I do not propose to comment upon it except to say that the words realising that the burden of national and local expenditure must be judged by the equity of its incidence and by the purposes for which it is imposed indicate to my mind an entirely new theory. I thought every burden had to be judged by its weight. You cannot judge a burden by its incidence to something. It is either a great weight or a light weight, according to one's point of view. However, I do not propose to go any further into the Amendment but leave it to other hon. Members.

Any hon. Member who moves among the taxpayers and ratepayers of the country will find an increasing body of well-informed and authoritative opinion, of all political views, which regards with gravity the present and prospective financial outlook for the country; and there is also an increasing number of ratepayers and taxpayers all over the country who are asking how long they must carry the present heavy burden upon their shoulders which when their circumstances vary—downwards, perhaps, sometimes very little; perhaps sometimes owing to circumstances outside their own control—creates a load under which they buckle, having no resources left with which to meet the demands made upon them. If these feelings are admitted, the country has a right to look to this Legislature for a review of the situation and, if possible, for some form of relief. For a private Member to attempt to review the national income and expenditure, with many figures to deal with, is so formidable a problem that it is impossible for me to attempt to submit my case except in the broadest outline, bearing in mind the warning of the Chancellor of the Exchequer on 16th July when he said: I think we talk of these matters with a great deal more confidence, and proclaim our views with a degree of certainty and authority greater than the circumstances permit, and greater than that to which most of us can safely attain."—[OFFICIAL REPORT, 6th July, 1937; col. 1746, Vol. I can claim no authority, and the only fortune I have had is the fortune of being successful in the ballot, and, therefore, I take to heart the warning of the Chancellor of the Exchequer, and would ask the House to excuse the presentation of grave financial problems by one who has not got the experience of those hon. and right hon. Gentlemen on the Government benches.

I wish, first, to picture in the broadest outline the national expenditure to-day as compared with pre-war standards, when the social conscience was not developed, so rightly, as it is to-day, and then to look at the trade position at that time as compared with the position to-day. To-day the annual expenditure budgeted for by Parliament is some five rimes greater than it was pre-war, and the expenditure of the local authorities is some three times greater. The rate per head of the population before the War, in 1914, was £1 18s. 11d., and in 1937 it was £4 4s. 5d. The National Debt has increased twelvefold. The capital debt burden is now double the national income, and before the War it was one-third of it. The debt of the local authorities has increased threefold, but the population which has to carry these burdens has increased only by one-tenth and now has a diminishing tendency.

Now I want to turn to the picture presented when we contrast the year 1928–29 with to-day. I select that year for two reasons. First, we had overcome the post-war budget phase, and overcome the industrial setback of 1926, and, secondly, 1928–29 was really the last year before the world slump and even in that year many people were saying that our expenditure as a nation was far too great. In that year we budgeted for a national expenditure of £770,000,000, and in 1937–38 the expenditure was £862,000,000, an increase of £92,000,000. In order to arrive at the total national expenditure I have taken the total rates paid and collected which, over a series of years, give a fairly good average year by year, because in the budgetary total the grants to local authorities have been allowed for. Therefore, to get the total national expenditure we want to add the rates collected in those two years to the total expenditure of those two years. In 1928–29 we collected £188,000,000 of rates by local authorities. For 1937–38 the total is not available, but on a reasonable estimate of the increases in the past years the figure for 1937–38 can be taken at £200,000,000, giving an increase of £12,000,000. So now we come to the final figure showing that, in 1928–29, our total national expenditure was £959,000,000, compared with the figure for 1937–38 of £1,062,000,000, or an increase of £103,000,000. We cannot end there, because in 1928–29 we were collecting War debts from the Allies and paying out to America, and were left with a balance in our favour in that year of £33,000,000. Therefore, any comparison between the total expenditures of those years requires that we allow for this £33,000,000. In 1928–29 the provision for the reduction of debt was £52,000,000. This year the provision will probably be £13,000,000, so when making any comparison in national expenditure between the two years, we must allow that extra £13,000,000. This year's expenditure must allow also for the amount borrowed on loan for Defence, a further £80,000,000. The result of this calculation is that the grand total of national expenditure of 1937–38 is greater than that for 1928–29 by no less a sum than £254,000,000, in spite of the savings of approximately £140,000,000 on Debt services.

In order to raise this terrific, this colossal sum, direct taxation is standing at a war-time level, but the estimate of Surtax for 1937–38 is taken on a lower figure than it. was in 1928–29. I think that is a clear sign that what has been often stressed by Ministers is commencing to operate, namely, that there comes a time in all forms of taxation when the law of diminishing yields commences to operate. You come to the position that the more you tax the less you get, and this is proved by the estimate of Surtax being lower to-day than before for I do not think the Financial Secretary to the Treasury, or the Treasury in general, could be accused of wishing to underestimate the yield in these days of any tax. The serious aspect of the present position is the lack of taxable resources in this country as between the maximum to be extracted from the taxpayers and the sum which it is planned shall be spent annually. I hesitate to think where would be the reserve of taxation suppose that this country were involved in a war, never mind what caused the war, or how the circumstances arose. If we had to face the gigantic expenditure which we had to meet between 1914 and 1918 I hesitate to think, with direct and indirect taxation at their present level, how we should be able to finance hostilities on any vast scale for very long.

I want now to examine the position whence, in the main, comes the wherewithal for the provision of this enormous expenditure and without which our social life cannot be maintained at its present standard. Examination of the statistical tables—a weary job for most of us—gives us some means of comparison between the pre-war and the post-war levels of trade wealth and give small ground for any feeling that any great increases of substance have been taking place to make the expenditure at our present levels safe in relation to the trade position. There is an increase, it is true, in the total turnover of our domestic trade, but our flocks and herds are about the same as before the War. Our agricultural land is rather less. The money volume of our foreign trade in 1937 has recovered, after the slump, to only approximately its pre-war level, while the visible excess of imports over exports which was in the neighbourhood of £3 per head in 1913, has averaged between £5 and £10 per head ever since. The tonnage of our merchant fleet to-day is about 15 per cent. less than in pre-war days and our foreign investments, as is generally known, are less productive and less valuable.

A League of Nations publication gives some interesting figures, and a sharp picture of the shrinkage in international world trade. In 1913 this was 37,000,000 gold dollars in round figures, and in 1936 it was 25,000,000 gold dollars, a decrease of 32 per cent. These facts and figures must shake our faith, which we have often declared, in the restorative force of that elusive factor of invisible trade balance and make it less secure, and must make us wonder whether if we are not eating into our national capital, we are living right up to the hilt of our national income.

We must remember in studying the position, that without any increase in the social services of the country the present existing social services have certain automatic increases and expenditures which will fall upon taxpayers in future years. With pensions at their present scale under the present Act, the £60,000,000 now expended will automatically rise to £80,000,000 by 1948. Various other social services will have automatic increases, and coupled with them is the fact that the population is diminishing all the time, and therefore there is a less number of people to bear the burdens, and a greater percentage to become pensionable subjects.

If this living up to the maximum of our taxable limits is admitted, and if the House will admit the operation of the law of diminishing returns, there is reason for all parties in this House to be disturbed. Whether we have a capitalist or a Socialist regime, and whether industry is under private enterprise or is owned by the nation, eventually the same law applies; you cannot get more than a pint of liquid out of a pint jug, whether the liquid is the ordinary wine of capitalism or the alleged nectar of Socialism. Hon. Gentlemen above the Gangway and ourselves, capitalists and Socialists alike, must depend upon the proceeds of industry for the wherewithal to put into operation our political beliefs.

It is clear to me that we have got ourselves as a country so involved in this whirl of obligations and complications in this capitalist system, that if we are to maintain our standard of life, our hope lies in keeping the wheels of capitalism turning at all costs and ever faster, but, as the Chancellor of the Exchequer admitted in this House a short time ago as regards trade fluctuations: That possibility is one which must be always borne in mind."—[OFFICIAL REPORT, 16th July, 1937; col. 1746, Vol. 326.] Trade may fluctuate either upwards or downwards, and should it be in a downward direction, the Chancellor of the Exchequer and the Government of the day would be faced with the position that the level of expenditure is higher than the level of taxable extraction, and then we may be faced with the same situation which we have seen twice in our time since 1921. As we have no cushion between the taxes levied and the taxable capacity at the present time, it will need but a comparatively small trade depression, and not a world slump, for us to be faced in this country with the fact that taxation will not meet the level of expenditure. The practice of taxing up to the limits is itself part of a vicious circle. Trade falls, from some cause quite outside our control. World markets are affected by some political cause and our trade in a certain market diminishes. The trade falls and so the revenue falls, and the Chancellor of the Exchequer of the day has to impose a new tax to meet the expenditure. The very imposition of that taxation has a discouraging and depressing effect upon trade, which makes the revenue even less, and the taxation has in turn to go up; so on, in a vicious circle.

Turning to the methods of remedying the situation, I think the House will agree that achievement of economy by administration on any large scale is impossible. You can prevent overlapping by increasing efficiency in the social services and co-ordinating insurance, possibly in the future under a minister of insurance, and it will save a little of your budgetary expenditure, but only a very little. Other administrative economies will help, but I believe that in policy alone will be found the way to alter, and in great sums, the difference between expenditure and revenue, [interruption.] I am trying to make the point that in policy alone can we do anything to ensure that there shall be large differences between income and expenditure.

The future is so uncertain, and unfortunately we see all around symptoms—largely they are emanating from America—that trade is not at the high level that it has been hitherto. There is a new word. We are always coining new words. America is calling this phenomenon a recession. In 1929 it was called a slump in Wall Street but, under the Roosevelt administration, they have to use a rather more gentle word; but the fact is the same. It is because of this American situation that the future is uncertain and that I suggest that we must be prepared to face the fact that from causes outside control of our own country we may be forced to adjust our relationship to world trade. With the present level of extraction so high I believe, also, we must tell the taxpayers and the ratepayers of this country that an Income Tax of 5s. in the £ and rates at their present level, and other forms of direct and indirect taxation, are not the static, normal, peace-time level, and that there is some hope for them in the future. Otherwise there will remain an increasing tendency of discouragement to enterprise and initiative.

I would like to put forward the alternatives before us, as I see them, if the situation changes for the worse. Firstly, we can go on as at present, believing that trade will surely revive and that arms expenditure will come down, and with the general hope that things will be all right. As regards the hope for economising on arms expenditure, as far as I can see, it will be in 1942 that we shall reach the peak of the burden in arms expenditure. To-day we can borrow with decency for capital equipment but once we have provided the capital equipment we have to maintain those arms, and the maintenance cost cannot be charged to capital, but will have to come on to revenue. Therefore I see little hope for the taxpayers as regards the limitation of expenditure in respect of armaments, even when our capital programme of armaments is completed.

The second way is to bank heavily on some belief in a great world trade revival and a great relief from expenditure on armaments by an international arms limitation agreement. That is the second alternative which we should aim at and hope for. But, when these events come about, we should put by, as it were, a taxable reserve by not spending up to the hilt immediately the benefits in revenue which accrue to the Exchequer from such a revival of international trade and such a saving upon arms expenditure. I believe we shall have to tell the electors of the country that, in order to safeguard the present level of our social standards and ensure that they shall not be cut down, we shall have to build up these reserves and so be patient in the extension of reforms. Only by such means shall we be able to ensure the future development of our social services and safe guard their present level. It may not be a popular or an easy cry at a general election, particularly for Members on the Government side of the House, but I think we shall be doing our duty to the electors of the country——

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

You will have to coin a new word.

Photo of Mr Harold Balfour Mr Harold Balfour , Isle of Thanet

Yes, truth and honesty, to which hon. Members on those benches have paid too little heed in the past. I am trying to put forward, as a second alternative to prevent the social standards of this country being diminished, that we should be honest about limitations on future developments until we have some margin in our taxable capacity as compared with our expenditure. The third and last way would be some form of inflation, upon which matter I am as a child compared with my hon. Friend who is to second this Motion. I have endeavoured to put before the House the situation and the alternatives as I see them, without drawing any conclusions, in order that we may hear from the Government, first, their views on the situation to-day; and, secondly, what course the Government propose to follow in the future, whether it be one of the alternatives which I have put forward or perhaps another if they have one; and, most important of all, in order that in these few short hours the House may have an opportunity of focusing its attention on this question of living within our means and ensuring that we shall never be taken unawares by any change in the international situation, either upwards or downwards. I have no wish to be pessimistic. Although the world cannot be increased in size, although new countries cannot be created, history shows that there are enormous possibilities in the world. If one looks at the state of progress to-day, one sees that the riches of 100 years ago are really the poverty of to-day, and I believe that the riches of to-day may be the poverty of 100 years hence. The world is developing all the time. But, just because we want to take advantage of the progress which is possible, we must have a sane national outlook, and that very largely depends upon Parliament, whose duty it is to grant and control expenditure, facing the realities of any and every situation frankly and without hesitation.

8.5 p.m.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

I beg to second the Motion.

My hon. and gallant Friend has given us figures of expenditure, and I do not think there is very much more to be said about them, except that hon. Members in all quarters of the House will admit that they are pretty startling, and rather worse than many of us expected. It is high time that the House and the country faced up to them, and I venture to suggest that my hon. and gallant Friend has rendered a great service in bringing this matter before the House, because we do not often get an opportunity of a general debate on this subject apart from the Budget debates.

On the subject of expenditure I want to add a few words with reference to expenditure by local authorities, and I shall be very interested to see the attitude of hon. Members on the Labour benches with regard to this matter. We have to face up to the fact that the debt of the local authorities has increased from £550,000,000 to£1,400,000,000 between the years 1920 and 1935. I have no objection in principle to local authorities borrowing while money is cheap. It is only a way of carrying out work in five years and paying for it in 20 years, which is, on the whole, a good plan if you can manage it, and if you can borrow the money at reasonable rates of interest. But we ought not to forget that the local authorities have been able to borrow money cheaply during the last few years largely as a result of the policy of cheap money deliberately pursued by the Government.

I find myself in increasing agreement with those who advocate some greater measure of control by the central Government over the timing of expenditure by local authorities. At present it is much too haphazard. Local authorities spend money when they feel prosperous, and, when they begin to feel the pinch, they are inclined to cut down expenditure on capital works. Of course it is natural, but from an economic point of view it is entirely wrong. We want much more information on this subject than we possess at the present time. We want to know what kind of schemes local authorities are carrying out or holding up, and why; and we want greater co-operation between the central Government on the one hand and the main body of local authorities throughout the country on the other, in order to obtain a more coherent national economic policy than we have or can put into operation at the present time.

This is the real answer to the economists, who are always advocating what they call "planning for depression." I have never believed that you can spend your way out of a major trade recession by expenditure on public works, but I do believe it is possible, by a judicious public expenditure, both on the part of the central Government and on the part of the local authorities, to mitigate the effects of it. I think it is idiotic to spend upon schemes that are not essential in a time of boom. At the moment, we have not the machinery to direct this expenditure. As I have said, it is far too haphazard, and we must get a greater measure of control in order to secure a more coherent national economic policy. I would like to see some form of central authority to act as a liaison between the Minister of Health, as representing the Government, on the one hand, and the local authorities on the other, first to obtain statistical information, which Mr. Keynes asked for in a letter to the "Times" the other day, and which we simply do not possess, with regard to what local authorities are doing and why; and, secondly, to co-ordinate the economic policy of the Government and the local authorities.

There is in connection with expenditure another point that I would like to make. I believe that at the present time there is a certain amount of waste due to overlapping in social services. So much is that so that I think a case could be made out for the appointment of a Royal Commission to examine the whole range of our social services and recommend, not only possible methods of obtaining greater economy, but also possible methods of obtaining greater efficiency. Our social services have grown up to some extent piecemeal, as a result of successive Acts of Parliament, and there is bound to be, after all these years, a good deal of overlapping in their administration. Therefore, I venture to suggest that the Government might consider examining, either by a Royal Commission or in some other way, this particular aspect of the situation.

I come now to the budgetary position itself, the figures of which have been so clearly given by my hon. and gallant Friend. They are reasonably satisfactory this year, and we all notice that revenue is coming in very nicely; but the position is going to be a good deal more difficult next year, and the prospects for 1940 give cause for the very gravest anxiety. There are, in my opinion, only two ways in which a financial crisis of the greatest magnitude can be avoided. We have either to cut down national expenditure ruthlessly, or we have to achieve a rapid and substantial increase in the revenue. These are the only two alternatives. For my part, I dismiss the first. I think it is impossible, it is impracticable, it is cruel. If the general expenditure were really cut down, it would subject this country to social stresses of such severity that we might have a very unpleasant situation. Moreover, what a retrograde step it would be ruthlessly to cut down health insurance, unemployment benefit, and all the social services that have been built up in the last 30 or 40 years. I do not believe for a moment that the opinion or conscience of this House, or any part of it, would tolerate such a method of dealing with what is admittedly a very difficult financial problem.

Therefore, I come to the second alternative. How are we to get more money? The prospects for the moment are not altogether encouraging, as I am sure the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) will admit. So far as direct taxation is concerned, as my hon. and gallant Friend has pointed out, the law of diminishing returns is beginning to apply. I do not see how we can substantially increase direct taxation of any kind with any hope of substantially increasing the revenue. Nine months ago, unfortunately, when things were beginning to look pretty good, we entered a further period of deflation. When the first N.D.C. proposals were made in this House, I ventured to point out the enormous dangers which must inevitably attach to a deflationary movement. The Prime Minister thought, and said in his speech at the time, that I took an unduly alarmist view, but, as a matter of fact, the results of the deflation have been far worse than I anticipated. I am not saying for a moment that the N.D.C. proposals were the sole cause of the downward trend. They were a contributory factor in the start of the downward trend; that is all. What we are dealing with to-night are the consequences of that, and they have been disastrous, though not, I believe, irretrievable.

Meanwhile whatever Cabinet Ministers, or Under-Secretaries of State, or the chairmen of our great banks may say, we have now a moderate trade recession, and it is very much better that we should face up to it. Look at the unemployment figures. They do not come about by accident. Look at the fall in capital values. That does not apply to gilt-edged securities, which are kept up to some extent artificially by "hot money" at home and abroad; but if you take the capital value of equities, you see a fall of at least 20 per cent. That is a very serious and quite unnecessary diminution of our capital reserves, of our capital strength, which was referred to so pointedly by my hon. and gallant Friend.

Lastly, we have wholesale commodity prices, or many of them, down to a level which is no longer remunerative to the producer. Is it to be said that that is not going to have an effect on our overseas trade? Of course, there is bound to be a shrinkage of trade and of revenue. Take, for example, Stamp Duties. If the Chancellor of the Exchequer displays his well known intellectual honesty and integrity, he must cut his Estimates, so far as revenue from Stamp Duties is concerned, by about 50 per cent. in his next Budget; and, as I have said, if the downward trend continues, it will not be possible for us to avoid a first-class financial crisis—just the sort of thing which the hon. and learned Member for East Bristol (Sir S. Cripps) dreams about in his happier moments, but which we are particularly anxious to avoid.

What is the way out? If we reject the remedy of ruthless cuts in expenditure, there is only one way, and that is the way in which my hon. and gallant Friend said I was an expert. It is inflation. Why should we frightened of that word? There is no reason to be. It is the necessary consequence of a deflationary move in order to restore prosperity to the primary producers of the world. Can it be carried out without undermining our whole economic and social structure? Yes, if confidence is maintained; and there is no reason why confidence should not be maintained. The Prime Minister said at Birmingham the other day that the greatest gift that any Government could bestow upon the people was confidence. There is a great deal of truth in that, and I hope that the President of the United States will read, mark and learn and inwardly digest that remark. There is no reason why we should not carry out reasonable inflation, because we are no longer tied to a fixed Gold Standard, and, therefore, as Mr. Keynes has said, "We are no longer under a compulsion to do what is ruinous."

If we set about it in the right way, we can inflate with absolute safety, and without any undue rise in the cost of living. It is always necessary to distinguish sharply between wholesale and retail commodity prices. I am ready to support any measure which the Government may see fit to take from time to time in order that the gap between wholesale and retail prices is not unnecessarily widened in any way. What are the immediate steps the Government can take to deal with the present situation? One of the first steps is to see that the cash reserves at the banks are ample for all occasions. That can be done by the Bank of England. The Bank must buy enough securities to maintain, and, if necessary, increase, the cash reserves of the joint stock banks, and, therefore, bank deposits. Secondly, is there any reason why we should not write up the value of the gold held by the Bank of England from the fictitious figure of 85s. to the real figure of 139s., and use it? Thirdly, we can afford to borrow for all expenditure on rearmament which can be described as capital expenditure, and, when hard pressed, there is a lot of expenditure which we can describe as capital expenditure. For that reason, I would borrow while the going is good. It is a very good time for borrowing at present.

But the last way, and the best way I submit, would be to obtain the co-operation of the United States in whatever economic policy we decide to pursue, because together we can do in half the time whatever we want to do. We can raise world commodity prices to a level at which it will pay primary producers all over the world to produce. Without this, it is difficult to see how we can get that revival of trade upon which we must ultimately depend, especially in the British Empire, because the markets of the Empire depend on the purchasing power of the people who live in the Empire, and that depends on the prices received by primary producers If necessary, we ought to open up these markets and extend them by credit. And I would say at this stage how much I think hon. Members on all sides welcome the decision of the Chancellor the other day to provide greater facilities or rather to restore some of the facilities which once existed for lending money overseas. We cannot get on without exports, however much Sir Oswald Mosley—I think he is the only one who thinks so—assures us that we can.

It is sometimes said that our markets are too much dependent on the United States, and move too much according to whether the trend there is up or down; but the explanation is simple. At present, the United States are the marginal consumers of commodities. If the United States are in the market buying commodities, producers make a profit; if not, they make a loss. It is not surprising when you come to think that in Russia and Germany and many of the small countries of Europe there is a closed economy, while in the Far East there is more or less paralysis. I want to ask hon. Members, and particularly those on the Liberal benches, who are always talking so much about this trade agreement with America, what they think that a mere agreement to reduce a few tariffs is going to do, unless we get a wide agreement on fundamentals between this country and the United States, if you have prices gyrating as madly as they have been doing in the last six months. The word "tariffs" goes to the heads of hon. Members on the Liberal benches like wine. Whenever you mention the word "tariff," you see them getting flushed. Let them not be carried away by that. We are all in favour of tariff reduction, but let us get down to essentials first, and then I believe there will be nothing that will do more good than a trade agreement of the kind hon. Members are so keen on. To get it, I would go to great lengths. I would even go to the length of endeavouring to get a debt settlement with the United States; and I believe that, with good will on both sides, we could get it.

I would, therefore, urge His Majesty's Government to enter into negotiations with the Government of the United States with this object in view. It is by far the most constructive step that could be taken to-day. The alternative is a dire one. It is to turn the British Empire into a closed economic system of the same kind as prevails to-day in Russia, Germany and other countries. It would mean high tariff walls, quotas, possibly exchange control, intensive development inside and barter trade only with countries outside. I believe some hon. Members on the Labour benches would look with some favour on a development of this kind, because it would mean a certain Socialism, but it would also mean a lower standard of life all round. If we have to do this, we can; but I hope we shall not have to, because the doctrine of a closed economy is a dangerous one, and it is by the other road that the greater prosperity and the greater hope of peace lies. The burden of debts presses on us all, but it has been proved all through history that there is only one way of lightening the burden of debts fairly, and without imposing unnecessary hardships, and that is by adapting monetary values to the new conditions. I am sure I will carry my right hon. Friend the Member for East Edinburgh on this. The tripartite currency agreement between the United States, France and ourselves must shortly come to be reconsidered and renewed, and I hope that the Government will not hesitate to take steps to lighten the crushing burden of debts should they deem it necessary by raising the price of gold.

There is only one thing that will make another world war inevitable and that is, another world slump. Hon. Members on both sides of the House know full well that most of the troubles confronting us to-day and the difficulties of Europe, including the rise of Hitlerism and the Nazi party, and the civil war in Spain, can be traced back in origin to the economic slump of 1929–30 far more than to any specific political cause. If you want to avoid another world slump, and, therefore, another world war, which the world in its present position cannot resist if much greater economic pressure is put upon it, you will have to substitute an inflationary for a deflationary trend. The greatest asset of the democracies of the world to-day is their economic strength. Some of this strength has been unnecessarily dissipated during the past nine months. We cannot afford to dissipate any more of our strength at so critical a moment of history. We have to husband our resources and concentrate all our energies upon rebuilding our strength through prosperity.

8.26 p.m.

Photo of Mr George Ridley Mr George Ridley , Clay Cross

I beg to move, in line 1, to leave out from "House," to the end of the Question, and to add instead thereof: realising that the burden of national and local expenditure must be judged by the equity of its incidence and by the purposes for which it is imposed, is of opinion that the maintenance and extension of the social services are an essential part of the national well-being, and is therefore convinced that it is the duty of the State to develop the national resources to the full and utilise them for the common good. The whole House will be grateful to the hon. and gallant Member for the Isle of Thanet (Captain Balfour) for having provided it with the opportunity of discussing this matter, even though he may now be beginning to feel the weight of gloom which has fallen upon him after the speech of his hon. Friend. The Amendment is to be seconded by my hon. Friend the Member for Brightside (Mr. Marshall), who intends specially to deal with questions of local rating and will address himself, no doubt, to that portion of the hon. and gallant Gentleman's subject. I also believe that the whole House will await with impatience the reply of the Financial Secretary to the inflationary proposals of the hon. Gentleman. I do not see occasion for the excessively sombre outlook which the hon. and gallant Member for the Isle of Thanet appeared to take. Sir Josiah Stamp a few months ago defined a pessimist as a man whose glass was half empty and an optimist as a man whose glass was half full. There is no more justification for the sombre outlook which the hon. Member takes than there has been for the sombre outlook which has always been taken at recurring periods when people have addressed themselves to this problem. The hon. Member said that we should be involved in the law of diminishing yields, that we were in danger of lacking taxable reserves and were living up to our national income. That has always been the view on this matter from the other side of the House when the Conservative party has been in office. They seem to suffer from some sort of "Bourbonic" plague.

In 1901 the late Sir Austen Chamberlain said that Income Tax as high as one shilling reacted directly upon the amount of employment for the people of this country, and Sir Evelyn Cecil in the same Debate described the tax as a very dangerous departure, only to be defended as an emergency tax. Two years later Mr. Joynson-Hicks said that an Income Tax of one shilling abolishes the reserve fund of the country and affects both profits and wages. Mr. J. F. Mason, who was always interested in these currency matters, said that to increase Estate Duty would lead to a very considerable depletion of capital and could only be accompanied by scarcity of employment growing greater from year to year. The increase of the Income Tax from one shilling to five shillings in the £ has not been accompanied by the gloomy consequences which were prophesied some 30 years ago, and, therefore, the gloomy prophecies of the hon. Member are not likely to be any more accurate than they were then.

What is meant by the so-called burden of taxation? I make a very modest contribution to the State twice a year in the form of Income Tax. I cannot regard my Income Tax payment as a burden, for when I have made that payment I am still left, modest though it may be, with an income sufficient to enjoy a tolerable existence. People whose Income Tax contribution is greater than mine is are obviously left with a larger income with which they may enjoy an even more tolerable life. There is no such thing as the burden of taxation upon an individual, so long as he is left with an income to enable him to enjoy a tolerable existence. There is a burden of taxation which has been weighted more heavily by the financial and trade policy of the present Government, and that is the burden of indirect taxation.

The whole process of taxation in the immediate post-war years was in the direction of increasing the weight of direct taxation and decreasing the weight of indirect taxation. Indirect taxation in the immediate post-war years was 54 per cent. of the total national revenue, and it fell in the last financial year of the second Labour administration to less than 40 per cent. of the total national revenue. In the last 12 months or so it has risen to somewhere between 47 and 48 per cent. of the total national revenue. The weight of indirect taxation has been increased at the expense of working-class standards of life in the last three or four years by the financial and trade policy of the present Government. In that sense there is, therefore, a very serious burden of taxation, since out of an income of less than £150 a year, something like 15 per cent. is required for indirect taxation purposes. The weight of taxation, whether it be direct or indirect, can only be reduced in one or two ways.

There are three major items of budgetary expenditure all of which deserve a little attention in order that the House may inquire whether, in any or all of them, some financial economy might be made. First of all, there is the National Debt. Hon. Friends on this side of the House would join with anybody else in any other quarter of the House who sought to find a way of relieving society of the burden of the rentier class. That can only be done either by further conversion arrangements, which seem unlikely, or by lowering the total capital burden of the debt itself. I do not wish to be accused of being hypercritical in this matter, except that I will inquire whether anybody in this House now believes that the astronomical figure of £8,000,000,000 can really ever be liquidated, either completely or substantially. If it cannot be liquidated completely or partially, how is the National Debt problem to be faced in order that the weight of the annual interest charge may be reduced?

Photo of Sir Adam Maitland Sir Adam Maitland , Faversham

Is the hon. Member content with the suggestion he is making, that the National Debt should be repudiated, together with the savings invested by friendly societies and co-operative societies?

Photo of Mr George Ridley Mr George Ridley , Clay Cross

The hon. Member is not entitled to interrupt me and to misrepresent what I have said. I made no suggestion of National Debt repudiation, nor does the party with which I am associated do so. I am merely submitting a very serious and weighty problem to the consideration of the House. We have to-day a capital debt burden of £8,000,000,000, on which there is an annual interest charge of £200,000,000 to £300,000,000. I am asking whether there is any way of economising on the annual National Debt charge. If there is, how can it be done? There are only two ways and one is by liquidation, complete or partial, by repayment. There is little chance of that being done, because in each successive year the National Debt burden has been added to by the financial policy of the Government. If the National Debt cannot be liquidated by repayment, completely or partially, what are we to do? Is the debt to go on being added to year by year with a consequential increase of the annual debt charge, or is there some other method that we can apply to it?

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

In so far as you raise the price of gold, pro tanto you reduce the National Debt.

Photo of Mr George Ridley Mr George Ridley , Clay Cross

But you leave the figure in a Budgetry sense, and it will not stand still. It will continue to grow. I do not want to be regarded as to heterodox, but I would say that the Government must regret that 15 years ago they rejected the capital levy suggestions of our party. There seems to be no possibility of any substantial economy in the annual National Debt charge.

In discussing the expenditure on the Armed Forces I do not want to make a cheap party point when I say that that expenditure is an expression of foreign policy. In the six or seven years since the Labour Government were in office there has been added to the annual expenditure on the Armed Forces £100,000,000 or more a year, if the borrowing charges are taken into consideration. When we left office six or seven years ago the League of Nations was an instrument of authority, Europe was a peaceful Continent, looking forward hopefully to disarmament and social expenditure. Although the present Government cannot be accused of the whole responsibility for the grave deterioration in international affairs and international security, yet it must bear a very heavy burden of responsibility. I am afraid that the deterioration in the authority of the League and international security is interpreted in the tremendously heavier expenditure that we have been required to make in connection with the Armed Forces of the Crown. In the last year that my friends were in office we were spending £107,000,000 on the Armed Forces, and in 1936–37 the figure was £186,000,000. Hon. Members who endorse with enthusiasm the policy of the Government in this matter must grin and bear the position until there is a return to an international policy which will change the trend towards world arms and the present world policy.

The hon. Members who moved and seconded the Motion repudiated the idea that they seek any economy in the social services. There will not be one hon. Member who would not accept their personal denial, but I wish they could speak with the same authority and the same emphasis for every member of the political party with which they are associated. Many hon. Members will recollect that six or seven months ago a series of articles appeared in the "Evening Standard," written by its city editor, Mr. S. W. Alexander, in which a fairly weighty attack was made on several branches of expenditure in the social services, and severe economies were called for. It is not, therefore, for the hon. and gallant Member who moved the Motion but for other members of his party to tell us specifically that they do not approach this subject with a desire to cut down the social services. There must be no economy in the social services but rather development and expansion.

In what direction could there be economy? Educationally, we compare very unfavourably with a considerable number of European countries and some of our own Dominions. So far from its being possible to assume that there can be any contraction in the expenditure on education, it is known that every educationist worthy of the name and even the Board of Education itself are clamouring for an expansion of educational expenditure. Secondary education for all up to 16 years of age and the establishment of nursery schools, are demanded. With regard to the health services, does any one suggest that maternity service, infant welfare, and school feeding services lend themselves to any kind of economy? Of course they do not. These and other social services call to the country for considerable expansion, even if that expansion calls for new revenue from new taxable sources. We are compelling 2,000,000 of our people who are unemployed to live a sub-standard life, a standard of life which denies to them physical efficiency, which impairs their capacity to resist disease and is creating a new social problem of a very grave kind for the next 20 or 25 years. Our social service system has been wrung by the work propaganda of my hon. Friends out of a succession of reluctant capitalist Governments. There will be no economy in these services except by bitter political conflict. Some economists on the other side of the House may tell us how far the wider distribution of income and purchasing power through the medium of the social services has contributed in a very substantial degree to providing us with economic stability in the very difficult position of the last 10 years.

Taxation must be justified by the purposes for which that taxation is imposed. If a heavy burden is imposed upon our people and the revenue derived is used in an extravagant fashion, then it may be called a burden of taxation, but if, as is the case in our social services, it is used for urgently-needed and desirable social purposes, then in no sense can it be ascribed as the burden of taxation. We shall continue to strive for economic equality. It may be said with truth that the political equality and the political democracy of the last 25 years have been largely built up as a result of the work of my hon. Friends on these benches. We stand for economic democracy and economic equality, which can only come from an expansion of those services which I fear many hon. Members opposite would desire to contract.

8.45 p.m.

Photo of Mr Fred Marshall Mr Fred Marshall , Sheffield, Brightside

I beg to second the Amendment.

We shall all agree that it has been moved in a very clear and cogent speech which makes it unnecessary for me to extend my remarks to any great length. I feel that the speeches of the mover and seconder of the Motion can be described in a phrase used by the right hon. Member for Wakefield (Mr. Greenwood) as presenting an outlook of inspissated gloom. I do not think the picture is quite as bad as that. Frankly, I do not quite understand what the Motion means. It starts with recognising the great measure of economic recovery and social progress which have been achieved during the last five years. We all recognise that some improvement has taken place, and we can all pay a tribute to the social progress that has taken place during the last five years. Then it talks about the exceptional expenditure entailed by the necessity for rearmament. Are hon. Members so much concerned about rearmament that they are prepared to tell the Government that they are not going to vote for it? They do not say that. The sting of the Motion is in the tail. There is rather more than a hint that they are really concerned about the increasing expenditure on the social services. That is what I feel about the Motion, and I propose to devote my remarks to that particular matter.

The Amendment, I think, is quite clear. It says that expenditure must be judged by the equity of its incidence and the purposes for which it is imposed. That is a statement with which everyone will agree. The Amendment says, further, that the maitenance and extension of the social services are absolutely vital to the national well-being. We shall all agree with that. Then it says that the resources of the nation should be used for the nation's good. That is a principle with which 20 years ago every thinker and social reformer would have agreed, but I rather imagine that there is a school of thought to-day who would not subscribe to it and, therefore, it is well that we should assert it on every possible occasion. If the political fights of the future are going to be staged on that battleground, there can be no more worthy battleground, and we shall enter into the fray with very high spirits.

It is difficult to understand why the Motion has been brought forward unless hon. Members desire to advocate a reduction in local expenditure. There are two classes of expenditure, one the expenditure on weapons of war and the other expenditure on things relating to peace. I am not going into the question of war expenditure and discuss its merits or de merits, but we shall all agree that expenditure on weapons of war is an enormous burden on the taxpayer. The Mover and Seconder of the Motion did not say that they were prepared to see this expenditure reduced, but talked sweetly about inflation and deflation. They did not get to the very roots of the matter. There is also the expenditure on the social services, the benefits from which go directly into the homes of the people and become translated into food, shelter, clothes and comfort. If it is intended to cut down that expenditure— we got a hint from the Mover when he said that the people must have patience as far as social reform is concerned—

Photo of Mr Harold Balfour Mr Harold Balfour , Isle of Thanet

I said as far as extension is concerned.

Photo of Mr Fred Marshall Mr Fred Marshall , Sheffield, Brightside

The hon. and gallant Member must know that the nation is committed to an extension of the social services. It is impossible to avoid it. In nearly all avenues of social service the Government are committed to an extension, and if there is any reduction in the amount spent on social services it means that someone is going to suffer in comfort, food, clothing and housing. I think it was the Prime Minister who remarked about the colossal expenditure on the fighting services. It is indeed a strange commentary on modern civilisation that the nations of the earth should pour untold wealth into the manufacture of these things at a time when the populations have an unrivalled mastery over production. I heard a speaker say that we have such a power over production that we are veritably standing on the threshold of a millennium, but that we have not the wit to open the door. If the Prime Minister could eliminate national jealousies and bring the nations of the earth to a state of sanity in which they would cease to spend these colossal sums on these things, he would confer a blessing on the human race which would pass all human imagination. The £400,000,000 which we spend on our social services would be a mere fleabite. If that could be done there would be a release of wealth which would enable us to build up our social state to the condition which the greatest minds of the past ages dreamt about. But until we get to that age of sanity we are going to experience withered hopes, frustrated efforts, shattered ideals and crushing taxation.

National expenditure has been dealt with, and I want to say a few words about local government. I say that it is the most democratic government on the face of the earth, probably more democratic than Parliament itself. The ratepayers have it in their hands whom they shall send to the councils, and they have an opportunity every year to change the complexion of their councils. The responsibility rests upon them. There has been an increase in the total indebtedness of local authorities. I cannot confirm the figures given by the hon. Member for East Aberdeen (Mr. Boothby), but I know there has been an actual increase in their indebtedness. Those who have been in local government for 20 years know that the pace has been very fast, but that is something which I do not regret, but rather glory in.

Many hon. Members were acquainted with pre-war industrial towns. They will remember the 25,000 or 30,000 back-to-back-houses, 50 or 60 to the acre. Those houses were inextricably mixed up with both heavy and light factories and industries. When the tenants looked out of their windows they had nothing to look upon except filthy streets, or the backs of other houses. Until recent times there was no modern sanitation; there were privy middens and disease-spreading ash middens. There were no bathrooms in the houses and sometimes the tenants had to fetch their water from stand pipes which served as many as 20 houses in a street. There were no open spaces, and children had to play in the streets. If one looked at the figures of infantile mortality associated with those places, one would find that they were enormously high, probably from 150 to 200 per thousand. To-day it has been stated from the benches opposite, with justifiable pride that infantile mortality has gone down to 57 per thousand.

Consider the children who lived in those old pre-war industrial towns. In those days there was no school feeding, no school medical service and no dental service. The education which the children received was apt to be given in very old, grim and cold schools. I have seen children from those places going to the factories, and almost without exception they look starved in body and mind. They were ill-clad and under-fed. There were no maternity and child welfare clinics, and very little was done to help the mother or the prospective mother in one of the greatest crises of her life. The blind went about the streets begging for bread, for no Blind Persons Act was on the Statute Book. Everybody knows about the Poor Law. Its administration was characterised by a repressiveness which was a disgrace to the country. There was no Unemployment Act, and as soon as a slump came upon those cities, soup kitchens were set up everywhere in the industrial areas. The poverty and destitution was terrible. There was no Health Insurance Act. Those were the social conditions in the pre-War industrial towns. They provided thousands of social reformers with food for agitation, and it is because so many entered into the fray and agitated for better conditions that an improvement has been brought about.

There has been a marvellous improvement, and we ought to pay a tribute to it. Sometimes I describe it as a peaceful revolution, for it is nothing less. I will not go into the statistics, but will say briefly that we feed school children, we have taken the blind off the streets, we have instituted medical services for school children, we have passed the Health Insurance Act and the Unemployment Insurance Act, and we have built new schools. If anybody who received his education in one of the old schools goes into one of the new ones, he will be surprised by the beautiful classrooms, in practically all of which there is sunshine. I think that any hon. Member who says that he wants to put a stop to this kind of social progress is doing something of which he does not know the effect.

I have taken some figures from one of the Blue Books with regard to school medical inspections. In 1935, routine inspections amounted to 1,729,493, special inspections to 1,257,790, and children re-inspected to 1,998,894; that is to say, there were 3,366,818 children inspected in 1935 for dental treatment alone, and 68 per cent. of those children required treatment of some kind or another. We cannot mention the school medical service without paying a tribute to Sir George Newman, a wonderful educationist. In the Blue Book to which I have referred, it is stated: It was due to his enthusiasm largely that we have built up a system of vigilant care for the health of the children in our schools, and the younger generation of to-day owes much to the skill that he devoted to the task of freeing them from the handicaps of disease and of physical and nutritional defects. The benefits they have derived cannot be revealed by statistics, but it is true that at no previous time in our history has the health and general condition of the children in our schools been as good as it is to-day. Sometimes we build monuments to very distinguished citizens, but I think that is the best monument that could be given to any man. The health of the school children has been increased to the extent it has owing to the enthusiastic and disinterested efforts of a man like Sir George Newman. I am retailing these things in order to show that local authorities have been compelled to increase their expenditure as a consequence of the social services, in which these matters are very important. There are to-day 225 education authorities which provide free meals, and in 1935 the total number of individual free meals provided, excluding milk, was 25,250,000. Free milk meals amounted to above 42,000,000 during the year. I think that represents a very fine contribution to the health of our school children.

I agree with the hon. Member that local authorities' expenditure has gone up all over the country, and that their debt has increased; but we can easily get a wrong impression in this matter. I think the first cause of it is housing; the second, trading undertakings; the third, education costs; and the fourth, public assistance costs. It may be said that those four heads, while they may not quite include every increase in local authority expenditure, account for a great deal of it. From those four heads, one can immediately eliminate one—trading undertakings—in which there has been a very great outlay of capital during the last 10 years. Let me give the House an illustration of what I mean. I am intimately associated with local government in Sheffield, and I know some of its institutions pretty well. I have taken the trouble to get out some figures. The Sheffield transport undertaking is one of the finest in the country; I am not giving it a free advertisement; it is reckoned to be so. The debt outstanding on the undertaking is £647,000, but when I tell hon. Members that that undertaking is worth £3,000,000, they will agree, I think, that instead of being a liability, it is a fine businesslike asset. We have a market undertaking in Sheffield, the outstanding debt on which—I exclude the abattoir—is £318,000. But there is one site comprised in that market undertaking which is worth £300,000. There, again, the assets offset the liability.

Photo of Sir Louis Smith Sir Louis Smith , Sheffield, Hallam

Will the hon. Member tell the House from what source he derives the figure of £3,000,000 which he gives as the value of the transport undertaking in Sheffield? Who would give £3,000,000 for that system?

Photo of Mr Fred Marshall Mr Fred Marshall , Sheffield, Brightside

I should say that if the Sheffield Corporation were to put their transport undertaking up for sale to-morrow there are many private individuals in this country who would give £3,000,000 for it. I am not speaking without authority. I have taken the trouble to get the figures from the city treasurer of Sheffield who is one of the cleverest city treasurers in the country, and whose figures can be accepted. The total debt on the city is £26,000,000 of which £10,000,000 is reproductive, being invested in trading undertakings. Nearly £10,000,000 is for housing alone. In other words, the corporation owns £10,000,000 worth of property. Of that total debt £5,000,000 is for non-reproductive undertakings. It is estimated that the city's assets exceed the amount of the total debt by no less than £14,000,000.

In other great industrial cities of the country one can find the same state of affairs. It is inevitable that local authorities' expenditure will increase. The housing programme of this country since the Armistice, has meant that one-third of the total population of England and Wales has been moved from the centres to the suburbs of our cities. Take the case of any one city in the country and it will be found that that proportion is not far wrong. If you transfer 10,000 people from the centre of a city and re-house them a mile or two miles away, what does it involve? First, it is necessary to build schools, and a school cannot be built for less than about £60,000. Then sewers, water supply, electricity supply and all kinds of building work become necessary. The local authority has to provide all the services which go to the creation of a separate town and that cannot be done without expenditure.

I have figures here to show how this affects the other services of the city. I leave out for the moment public assistance. I take the year 1928, because that is the year from which the Mover of the Motion dated his comparisons. In 1928, our figure for the net cost of education, elementary and higher, was £377,000. To-day that has increased to £506,000. The increase has not been due merely to the fact that teachers are being paid higher salaries or that there is a greater number of children in the schools. It is largely due to the fact that we have had to go out to the new housing estates and build many new schools. In 1928 the city was paying £9,000 a year for free meals for school children. To-day we are paying £17,000 for that service. Is it suggested that that service should be cut down in the interests of national economy? Medical inspection 10 years ago was costing the city £24,000. To-day it is costing £33,000 a year.

Ten years ago the interest and sinking fund on money borrowed for housing represented £23,000. To-day it has reached the figure of £67,000 and we cannot draw a line after that figure yet; in fact, the job is not yet half done. Probably no nobler or more precious work has ever been done by a local authority than the provision of these houses. People have been taken away from congested city centres and rehoused in places where the dwellings are 12 to the acre instead of 50 or 60 to the acre, where they have gardens and views over the open country. Who can tell what effect this will have on the minds and the character of the people as the years pass? Is it suggested that we should put a stop to such work as that in the interests of national economy? I say, a thousand times "No." To do so would disappoint every social reformer in the country.

It may be that we here shall not see the full effects of this great new development but as those who are children now grow up in the beautiful surroundings of these housing estates, the new generation will have better ideals and better ideas of life than their fathers. I think I have said enough to show the wonderful work that is being done by local authorities. It would be, I submit, a disaster if in the interests of some idea of national economy, we were to check the expansion of these social services. My view is that we ought to continue to develop them, and give greater opportunities to local authorities to carry on this great work which will ultimately redound to the welfare of the poorest part of the community.

9.15 p.m.

Photo of Mr Richard Russell Mr Richard Russell , Eddisbury

The Seconder of the Amendment has drawn for us a wonderful and true picture of the development of our social services during the last 10 years, and in doing so he has made me become reminiscent, for before there was any such thing as a Labour party I remember standing on the tailboard of an illuminated furniture van, having taken a picture of the slums on Mersey side, and talking to the electors of the necessity for starting that very campaign of housing which has continued to this day. That is something like 40 years ago. Not only that, but some of us remember the experiences which we had in the old days when we commenced this work of medical treatment in the schools and all the other varied social services, and with that record behind us I have no hesitation in saying how glad I am that this Motion has been brought forward to-day and that we are having a discussion on the vexed question of economy in regard to expenditure.

This House is responsible, and takes its responsibility seriously, for the supply of money by taxation, but if there is one thing more than another that has struck me since I have been a Member of this House it has been the almost complete absence of any real oversight of the expenditure of the money which is supplied. The Seconder of the Motion spoke of the need for a closer connection between the central and local services for this purpose, and I believe that we could, without entrenching on social services at all, do very much in the way of reduction of expenditure by a more complete system of investigation as to how the money is spent. Not only is that the case in regard to our national services, but it is also the case in regard to our civic services. There is no doubt about it that the civic stride is a very expensive thing in this country, and it is that civic stride which from time to time needs to be investigated and corrected with a view to seeing how far we are getting value for our money. Let us not forget that to-day, as compared with the old days of 30 or 40 years ago, we have a vast expenditure, and if we could, by a careful investigation of expenditure, curtail that cost by, say, 5 or 10 per cent., we should have the money to increase our social services and to make them more effective than they are to-day.

I think it is the experience of all those who have had anything to do with administration that economy and efficiency go hand in hand, and it is for that economy and efficiency that I welcome this discussion. Take as an example of what can happen that much abused and very interesting episode in our national life called the Addison housing scheme. I simply use it as an illustration. I happened to be responsible for much municipal work at that time. We started to provide houses fit for heroes to dwell in, and what was the result? My hon. Friend who has just spoken about Sheffield, if he would carry his mind back, would remember what happened at that time. The cost of housing rose until it became impossible to build. It went up from the neighbourhood of £250 per house to £900 and even as high as £1,200. It fell to my lot at that time to visit the housing schemes that were being developed, and I saw what was going on. I saw the easy way with which the workers went about their work, I saw what the small castings trust did with prices, I saw what happened in every phase of that housing campaign at that time, until at last we had to call the job off and stop the work. There was an outcry, but what happened? In 12 or 18 months' time we made a further attempt, and we found that what had cost £900 when we stopped the work had suddenly and definitely come down to the neighbourhood of £300 or £350. We were enabled then to go on.

If we in this House could develop some system of more careful supervision of the expenditure of money, we should be able to develop a considerable degree of economy and at the same time get better conditions for our people. I do not want to labour the point too much. We are supposed to have some supervision from the Ministry of Health in this matter of local expenditure, but I am not impressed with that supervision. I think we need a closer collaboration between central and local government, and as I look round this House sometimes and realise the amount of ability and energy which might be tapped in this House if we could get together, I think that if the Treasury or some other Department of the Government would work out a system whereby we could co-operate more together, we could, without entrenching on social services at all, bring about a better state of economy in spending than we have at the present time. With that object in view, I welcome the discussion to-night.

9.24 p.m.

Photo of Mr Frank Griffith Mr Frank Griffith , Middlesbrough West

It has been extraordinarily pleasant to listen to the hon. Member for Eddisbury (Mr. R. J. Russell) telling us his reminiscences of the old Liberal days. Of course, boys will be boys, and it has been good to hear the hon. Member recapturing his old enthusiasm. I was glad also to listen to the eloquence of the hon. Member for Brightside (Mr. Marshall) in describing our social services, by which I was very much moved. I could not help thinking, as he rolled out measure after measure and Act after Act, how much of that took its origin from that Government between 1906 and 1914 in which Liberals and hon. Members above the Gangway were co-operating together. It was indeed a time which, I think, has not been equalled or approached ever since. I am glad that this Motion has been brought before the House, and I think that the hon. Member for Thanet was quite right, and quite justified, in reminding this House of its original function, because I suppose it was the original function of this House to be a guardian of expenditure, to scrutinise all the money for which His Majesty asks with the greatest care, and to see that all grievances are remedied before the grants of money are made. Having read the Motion and the Amendment with great care, I had at first a wild hope that I might be able to support both of them. That, of course, was a position which was agreeable to my Liberal mind—we are always seeking to find good in unlikely places. I "view with concern the continued growth of expenditure." That is an expression that is quite Gladstonian. I do not think that even in 1892 the Grand Old Man said anything more orthodox than that. But the seconder did not quite live up to that high standard when he said, "Borrow while the going is good." I came to the conclusion then that Mr. Gladstone would not have been as enthusiastic about Aberdeen as he would have been about Thanet.

What does this Motion mean? We heard a great deal from the hon. Member for East Aberdeen (Mr. Boothby) about inflation, but I looked in vain for any sort of mention of that in the Motion.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

The hon. Member will forgive me. It speaks of "lightening the burdens."

Photo of Mr Frank Griffith Mr Frank Griffith , Middlesbrough West

I see. That which is inflated is lighter; so, from the verbal point of view, the hon. Member has scored his point. Apart from that, if he says we should do everything in our power to lighten the burdens imposed upon taxpayers and ratepayers, any ordinary citizen—I mean someone living in a rather less rarified atmosphere than that of Aberdeen—would have thought he meant the reduction of expenditure. And I think that is how the hon. Member who proposed the Motion took it, as did everybody else in the House. If you are going to lighten burdens in that way it means an axe of some kind. I take it that the hon. and gallant Member for Thanet (Captain Balfour) was, like George Washington, proposing to do it with his little axe, and I wanted to see where that axe was going to fall, because that is the all-important point for us. There are really only three classes of expenditure on which it can fall. The first is armaments, the second is subsidies, and the third is social services. With regard to armaments, I may be rash, but I should be prepared to bet a life's salary in this House that the Proposer did not mean that we should reduce expenditure on armaments; and, provided the expenditure is wisely directed, I do not think that I should demand it myself in the present circumstances of the world. As for subsidies, I should indeed myself be anxious for a reduction, but I know from experience of subsidies that these daughters of the horseleech have a marvellous power of self-preservation. For, whatever axe may be wielded, their heads, in the words of the poet, will be "bloody but unbowed."

Therefore, we are really left with the social services, and I think that for that reason the hon. Members who proposed and seconded this Motion were fully justified in giving us a historical survey and an account of what the social services mean to us, because it is really quite useless coming before this House and proposing vague Motions in favour of economy unless you say what you are prepared to cut down. It is so easy to say, in Gladstonian phrase, that the money fructifies in the pockets of the people, but, if it is to do that, from where are you going to take the money? We have had no clear indication about that to-night, except the suggestion about inflation, which was probably clear to some hon. Members, but was not altogether clear to me.

Photo of Mr Frank Griffith Mr Frank Griffith , Middlesbrough West

But it does seem to me that if we are to carry out this Motion in the sense in which any ordinary person would understand it, there have to be victims of the axe, and the social services are a predestined sacrifice. Of course that would mean sapping the vitality of the nation. It would take effect perhaps gradually. I mean, if you cut down education there might be a few school teachers who would jump over a bridge into the Thames, but a Government with so many preoccupations and responsibilities might not notice that. But tragedies of that kind are gradual and not immediate. It is only perhaps when we are fighting the next war, and after the next war, that we should find how much of the lifeblood of the country had been taken out of us by that kind of economy. I cannot forget also that we have seen these specimens of economy campaigns before, which have taken the wrong direction. I cannot help remembering the old London County Council elections in the days of the Moderates and the Progressives. There was a horrible picture of a man pointing his finger and saying, "It's your money we want." Well, everybody knows now that that poster was the sign and propaganda of a most reactionary administration. It is not denied. Nobody would go back to it to-day, and I am afraid that if this Motion, the actual phraseology of which is almost unexceptionable, became the order of the day what it would actually do would be to start a campaign against the social services, because that is the only way in which it would be carried out at the present time. It is for that reason that I want to support the Amendment.

We have heard upon some of these occasions ingenious arguments that by taxation and rating you are so diminishing the purchasing power of the people that you are causing unemployment. I am glad we did not have that suggestion to-night. I am rather surprised, because it is heard only on these occasions, and it seems rather inexplicable on the consuming side. Imagine an entirely wasteful form of expenditure. If you employed an entirely redundant civil servant—which the National Government would never think of doing, I am sure—and if you were to get a man of the very highest character at an even higher salary, and set him to do nothing all day except draw pictures on his blotting paper, as a producer he would be a failure, but as a consumer he would probably be a brilliant success. I mean, human nature being what it is, he would probably have a wife and several children. and the children would need boots, and the wife would need clothes, while he himself would need cigarettes and beer, and all the rest of the comforts of civilised life. Thus as a consumer he would be a great success. I am not defending the institution of such employment as an economic proposition. But where it breaks down is solely on one point, on the production point; the man is doing nothing.

It seems to me that the function of the House of Commons with regard to that civil servant, whom I regard as a symbol of all kinds of Government expenditure, is to see that we get value for our money. That is what we are sent here for. It is no good merely trying to terrify us with astronomical figures of what is spent. That is only presenting one side of the balance sheet, and you have to look at both sides. Even these enormous figures for armaments, much as I regret the occasion for them, are supposed to produce for us an asset, the most priceless asset in the world, that of national safety. I am not at all sure that they are producing that, I wish I were, but that is what they are aiming at. All the social services, in their turn, are represented by priceless assets, which do in fact preserve the fabric of this nation, and anybody who is presenting a balance sheet ought to put forward both sides of it.

Our task now, as superintendents of the national finance, is that which I have just stated—to see that for every penny that we collect from the taxpayer or the ratepayer a pennyworth of value is given to the nation. I would apply that impartially to every kind of expenditure. With regard to armaments expenditure, I would say, let us be perfectly certain that profiteering is not taking advantage of the national emergency; let us be sure that the Minister for the Co-ordination of Defence is really co-ordinating something and getting on with his job. With regard to subsidies, which I regret in principle, I would say, at least let us see that when the nation's money is handed over to private individuals it is being spent to some account on national purposes. When we come to social services, too, I would say, by all means let us superintend with the greatest exactitude and care the expenditure of that money so as to see that the money, which is the people's, is not spent entirely in the maintenance of bureaucracy.

I was a little surprised that supporters of the Government, which has introduced so many boards and other new bodies, should come forward now and ask us to scrutinise expenditure on the administration. If, however, they are ready to economise on those lines they will have the support of my hon. Friends and me. If I thought that the Motion meant that and nothing more, I would be glad to support it, but it is because, for the reasons I have endeavoured to put before the House, I can only see in it a threat to the social services, which I regard as of the utmost value and whose preservation and extension I desire to see carried on, that I must heartily support the Amendment.

9.37 p.m.

Photo of Sir Adam Maitland Sir Adam Maitland , Faversham

The House is always interested in the observations of the hon. Gentleman who has just spoken, but at least one section of it will be disappointed in the attitude he has taken. This is a Motion which I expected the Liberal party to support. I do not know whether the hon. Gentleman supports the Amendment to the extent of the Mover of the Amendment in enunciating a strange doctrine in regard to the burden of taxation. He said there was no such thing as a burden of taxation on the individual so long as the individual can enjoy a tolerable existence. If that is the basis on which the Liberal party supports the Amendment I am disappointed. I had hoped the hon. Member for West Middlesbrough (Mr. K. Griffith) would pay greater regard to the speeches of my hon. Friends who brought forward the Motion, for they made it plain that no attack on the social services was intended. The hon. Members have clone a service to the House and to the social services by bringing to the notice of the House the position of the country, particularly in view of the fact that we have so seldom an opportunity of reviewing matters which are of great concern to a section of the community whom we all desire to help.

Like my hon. and gallant Friend the Member for Thanet (Captain Balfour) I also made a few comparisons between expenditure this year and that of 1928–29. The second largest increase has been in respect of Defence charges, the amount being £85,000,000. That disregards the additional expenditure arising out of the issue of moneys under the Defence Loan Act, which, I think, was about £70,000,000. One would be very happy if circumstances made it possible for the Government to alter the policy they have been forced to adopt. The hon. Gentleman who moved the Amendment said that this expenditure represented the armed expression of our foreign policy. The real truth is that it is this country's answer to the armed activities of other countries. The hon. Gentleman and those who sit with him would be bound to agree that in the circumstances of the world as they are the Government have had no alternative but to embark on a huge expenditure in arms, which we all regret.

Photo of Mr George Ridley Mr George Ridley , Clay Cross

That is what other countries say.

Photo of Sir Adam Maitland Sir Adam Maitland , Faversham

As a private Member defending the policy of the Government which I support, I have no hesitation in saying that it is not a fair view to take that rearmaments began with us. They are the answer to the activities of other countries, and the truth is that this Government and preceding Governments of this country have taken grave risks in the cause of peace. Our example was not followed by other nations, and it would be a good thing indeed if it were realised throughout the world that there is a hopeless and useless waste of money on armaments. If it is any benefit to the hon. Gentleman to have that as my personal opinion, I say it without the slightest hesitation. I have never believed that armed forces themselves would prevent war. At the same time, I am bound to say that in view of the position of the world the Government had no alternative but to embark on the policy which they have adopted.

Let me get back to the comparison of expenditure I was making. The greatest increase. between 1929 and 1938 is on the social services, which have gone up from £241,000,000 to £383,000,000. It is interesting that in those years £145,000,000 was saved in respect of the charges on the National Debt. It is perhaps a coincidence that the whole of that saving has gone in increased expenditure on the social services. I am not complaining about that. The hon. Gentleman was unfair in his assertion that we on these benches are not concerned in developing and extending the best social services which are possible. Even the hon. Member for West Middlesbrough cannot claim that it was in the hey-day of Liberalism that there was the greatest expansion in the expenditure on social services. An interesting document—Cmd. Paper 5609—gives an informative account of expenditure upon public social services under certain Acts of Parliament, covering a period of 35 years at five given periods up to 1935. He who runs can read, and it is a document which I can recommend to any hon. Member interested in this matter. Those five years were 1900, 1910, 1920, 1930 and 1935. I will summarise the totals, which are a practical demonstration in pounds, shilling and pence of the help which has been given by Governments in the past, not always Liberal or Labour Governments but, on the contrary, by Governments largely composed of gentlemen of the Conservative party. In 1900 the cost was £32,000,000. In 1910 it had risen to £55,000,000, and in 1920 to £271,000,000, though it has to be remembered that a good deal of this rise was accounted for by war pensions. Between 1920 and 1930 the expenditure rose to £413,000,000, and in 1935 it had reached £440,500,000. These figures will prove that those Members who are now being charged with wishing to reduce the social services are the very Members who in fact increased them up to the totals I have given.

Photo of Mr Frank Griffith Mr Frank Griffith , Middlesbrough West

The hon. Member spoke of "hon. Members who are trying to reduce these social services." May I take it that that is the intention of this Motion?

Photo of Sir Adam Maitland Sir Adam Maitland , Faversham

I said those who are accused of attempting to interfere with these services. Old age pensions did not exist in 1900. In 1910 only the modest sum of £6,000,000 was paid. In 1935 expenditure on pensions had increased, by reason of the introduction of new schemes, to £79,000,000. The expenditure on education was £17,000,000 in 1900 and £97,000,000 in 1935. On housing we spent in 1900 only £400,000, and by 1935 the expenditure was £42,000,000. Payments in respect of poor relief amounted in 1900 to £12,500,000 and in 1935 to £47,500,000.

We are apt in this House to make general statements without real regard to the figures, and I am surprised that a Liberal with the persuasive powers of the hon. Member for West Middlesbrough saying there is no value in pointing out these astronomical figures. What the House ought to do is to sit down and study the figures, and if they do they will agree that my hon. and gallant Friend the Member for Thanet was only doing a wise thing in drawing attention to this very important question, because in it is involved the very standard of life of our people. What my hon. and gallant Friend and those who think with him are concerned about is that nothing shall be done which will in any way diminish the standard of life which is enjoyed by our people. Therefore, however hon. Gentlemen on the Liberal and Opposition benches may criticise the precise terms of the Motion, it is only right that the attention of the House should be drawn to these progressively increasing figures of our expenditure on social services.

Further, whatever hon. Members who sit above the Gangway may say, there is in my judgment no one in this House who desires to do one solitary thing to diminish those services in any way whatever. On the contrary, we are just as anxious as any Member of the Labour party to maintain, expand and develop those services, and it is because we know that in the last resort the maintenance of those services is so entirely dependent upon the prosperity of our industries that we feel that it is wise for the House to consider the position which has been put before us to-day.

In the realm of local government expenditure we find the same story. Here I would say that I agree with the hon. Member for Brightside (Mr. Marshall) that we should not be too critical of local authorities respecting their expenditure. A great deal of it has been embarked upon either at the direct instance of the central government or subsidised by the central government. Let us look at the directions in which this local government expenditure goes. Twenty per cent. of it goes upon education, 25 per cent. on public, health services, 16 per cent. on poor relief and over 18 per cent. on highways and bridges. I am informed that during the last five or six years more than one-half of the net increase can be attributed to the expenditure on those four main services. The total amount of local authorities rate-borne expenditure in 1934–35 was no less than £340,000,000. Our pre-War Budget in this House was £200,000,000. Of that £340,000,000 expenditure rates contributed £158,000,000, Government grants £124,000,000 and miscellaneous revenue £58,000,000. Further, in that year another £78,000,000 was spent on capital works by local authorities. As has been pointed out by the hon. Member for East Aberdeen (Mr. Boothby) and the hon. Member for Brightside, there has been an enormous increase in the loan debt of local authorities since 1920. The total has risen from £495,000,000 to £1,321,000,000. As to the soundness of the securities behind those loans there is not the slightest doubt. That money is more than covered by very valuable assets; nobody need have any anxiety that the local authorities have engaged in capital expenditure which is not represented by assets; but I think hon. Members can usefully devote some thought to this point: that from time to time, indeed almost regularly, very large expenditure on capital account is undertaken by local authorities throughout the country. That expenditure is in some degree apart from the expenditure on their every-day work, and the question which naturally comes to one's mind is, What is to happen supposing we should be passing from a relative degree of prosperity to the time when trade is not so good?

I agree with the hon. Member for East Aberdeen that capital expenditure by local authorities is not an instrument which we can use in order to deal with a major slump, but I think the attention of the competent authorities could very well be directed to this consideration: Is this expenditure of say £78,000,000 a year on capital account a reasonable instrument to be put into operation at times which trade and industry are less favourable in the country? I believe that the competent authorities, taking consultation together, can work out a plan which will be of real benefit not only to the local authorities themselves but to the country as a whole. I recognise that if we say we are not going to spend money when times are good, because it is then that prices are high, that we have to face the alternative that the local authorities should spend the money when conditions are depressed, and one of the difficulties there is that that is a proceeding which is rather against human nature.

Another aspect of the question on which I should like to say a word is the basis of local taxation. Nothing has been said on the subject of the way in which either National or local revenue is raised. I have ventured to make suggestions to the Government before on this question, and I suppose I can go on doing so, and that it will not have much effect. I do not say that unkindly, because I know what the difficulties are [HON. MEMBERS: "Hear, hear."] I do not suppose hon. Gentlemen will cheer so much when they hear what my conclusions are. In this country we raise anything from £75,000,000 to £80,000,000 a year in respect of estate duties. That is a capital sum. It has been going on for a good many years, yet comparatively nothing of that capital sum has been devoted to capital purposes. Year by year we spend, for ordinary expenditure purposes, money which really represents capital income. In the years to come there will, I believe, inevitably be a reduction in regard to those items. This is a matter directly of interest to the House of Commons rather than outside. Whatever the virtues of a Government Department may be, they are not earners; they never earn money, but are very good spenders.

Local authorities asked the Minister of Health last December to consider the whole question of the basis of local taxation, and I think that matter can very properly be raised in this Debate. It is a very long time since there was any inquiry as to the basis of local taxation. True, the 1929 Derating Act made certain alterations, but there has been ample opportunity for information to be collected to show what the precise facts are as to how that Act has operated. That is another reason for examination. Alterations have been suggested from time to time with regard to the basis upon which local rates should be levied, and I think the local authorities are now entitled to receive the consideration of His Majesty's Government in asking for a departmental committee or a Royal Commission to investigate the whole of this question. If my right hon. and gallant Friend can say anything regarding it I shall be much obliged and I shall be glad if he will pass on the suggestions for the appointment of such a Commission or Committee to the proper quarter.

9.58 p.m.

Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Edinburgh East

Almost exactly seven years ago to-day there was another Debate upon economy in this House, initiated not by back bench Members but by Members of what was then the Front bench opposition, consisting of the Conservative party who now adorn the benches opposite. The Motion was not couched in the gentle language in which the hon. and gallant Member for the Isle of Thanet (Captain Balfour) has expressed himself to-day. It took the form of a definite Motion of Censure upon the Government of the day which was, as older Members of the House will recollect, the Labour Government. The indictment which hon. Gentlemen made was very severe and, more in sorrow than in anger, they told us of the dire straits in which the country then was and of the grave consequences which would follow from a continuance of the policy of that Government.

I have taken the trouble to look up some of the speeches which were made on that occasion in order to see the gravamen of the charges that were brought against my colleagues in the Labour Government. Sir Laming Worthington-Evans, who was then a Member of this House, opened the attack, and his criticism of the Chancellor of the Exchequer of that day was that he was borrowing as much as £1,000,000 a week which upset and offset the Sinking Fund which the Chancellor of the Exchequer had professed to create. He said that the Chancellor of the Exchequer had been borrowing £1,000,000 a week and was using it for current obligations which ought to be met out of revenue, and he shamelessly proposes to continue that course."—[OFFICIAL REPORT, 11th February, 1931; col. 431, Vol. 248.] Sir Hilton Young, as he then was, who now graces another place under the title of Lord Kennet, said: The first count in our indictment is that for the first time in the history of British finance the financial policy which the Chancellor of the Exchequer permits … is the policy of a Budget which does not balance."—[OFFICIAL REPORT, 11th February, 1931; col. 458, Vol. 248.] If we examine what the present Government are doing, we find that they have abolished the Sinking Fund, and, instead of borrowing at the rate of £1,000,000 a week, are borrowing over £1,500,000 a week in order to meet current expenditure. If the indictment was framed with any justice against the Labour Government of that day, surely it ought to be brought against the present Government in far stronger language, because they are doing infinitely more the things for which the Conservative party attacked so violently the Labour Government. Sir Robert Home, who is now a Noble Viscount, made, as his great accusation, this statement: Whereas in 1913 we paid for our imports by visible exports to the extent of 82 per cent.,"— in the year of the disgraceful Labour Government we were paying— only 71 per cent. by visible exports."—[OFFICIAL REPORT, 11th February, 1931; col. 526; Vol. 248.] I took the trouble to look up the proportion of the payments for imports by visible export at the present time. For the year 1937 the figure of imports was £1,029,000,000 and for exports £597,000,000, and when I worked that sum out it did not make 82 per cent., or 71 per cent., but only 58 per cent. That is the great improvement that the present Government have effected in the position of our foreign trade. Other speakers showed how the position of the country with regard to unemployment is getting worse. I have turned up the figures for the growth of unemployment between September last and January of this year, and I find that the increase was no less than 500,000 in the number of the unemployed. That is the largest increase between September and January that has ever taken place in the history of unemployment insurance in this country, and it is certainly larger than any increase which took place during a similar period in the existence of the Labour Government.

Another charge which was made at that time was that there might be some rise in the price of gilt-edged securities, but that that was taking place owing to the drop in the price of equities, which had fallen very considerably in recent months. I do not think that any Member who has studied the Stock Exchange can deny that these facts are precisely paralleled at the present time. Indeed, the hon. Member for East Aberdeen (Mr. Boothby) himself pointed out that there has been a fall of something like 20 per cent. in the value of equity shares. We must remember that at that time the Labour Government were tied to the Gold Standard, which made it much more difficult for them to extricate themselves from this difficulty. The present National Government came into office for the express purpose of preserving the Gold Standard, and the very first thing they did was to go off the Gold Standard, to the great benefit of the industry of the country, but against the precise object and intention with which they came into office.

It would have been very easy for my hon. Friends on these benches to have strongly supported the Motion of the hon. and gallant Member for Thanet, and have given the present Government the tu quoque argument that they were taking the same line that was taken up in 1931. I am very glad that my hon. Friends have taken an entirely different course. Their reason for doing so was that they saw that very much larger issues were involved than the mere chance of a party score against the Government of the day. They know, and I believe that every Member of the House realises, that economy Motions in the past have finally resulted in the axe, and the axe has been used to cut down the social services of this country. It was the case with the Geddes Axe, and it was the case with the axe that was employed in 1931. My hon. Friend the Member for Clay Cross (Mr. Ridley) resisted the temptation, therefore, to adopt the tu quoque argument, and chose the better course of explaining why we are not going to be jockeyed into voting for a further axe to destroy the great social services of this country.

The fact is that we have gone a long way from pure Gladstonian finance. Lord Snowden was, perhaps, the last believer in the strict principles of Gladstonian finance, but, even so far as he was concerned, the facts were too strong for him. He started with the intention of pursuing the principles of Gladstonian finance firmly to the end, but he departed from them root and branch, and though, at the instigation of hon. Members opposite, he came back to them afterwards, it was only to rue the day, when he discovered that he had been the means of putting in power the National Government who, when it suited their purposes, threw over all the principles that he cherished, and adopted courses, which we know only too well.

Why is it that to-day we cannot pursue exactly the lines which were thought so magnificent by this House in the days of Mr. Gladstone? The real reason is that the prime interest of the country is not solely concerned with its annual expenditure and revenue, but is also concerned with the building up of its capital. The great object of sound politics is to develop the capital resources of the country to the greatest extent that is possible. My hon. Friend the Member for Brightside (Mr. Marshall) showed how large a part of the municipal debt consists of real assets that are, from the ordinary business point of view, part of the great capital wealth of this country; and even a part of the National Debt, exists in consequence of the various enterprises in connection with roads, housing and so on, which have been carried out by national expenditure. But even more important than the capital which can be measured in pounds, shillings and pence is the human capital which is really the source of everything in this country to-day. The fatal defect of the economics of the nineteenth century was that they failed entirely to take account of that wealth of human capital. They were willing in the nineteenth century, when they had the industrial revolution, to develop the material capital of the country, not only with the aid, but actually at the expense, of the life and blood of the people of this country, which were an asset far more important than the mere material capital which they thought they were increasing so greatly.

My hon. Friend the Member for Bright-side has enlarged considerably on that point, and I only desire to refer to one or two matters. Take the case of education—the education of the whole people, the increased education of the nation's children, and the further extended education of those who are going to be of special assistance to the nation. Can any Member of the House deny that the building up of that capital is of the very greatest importance? What private individual who has children is not prepared, if necessary, to borrow money in order that the education of his children may be carried out fully, and that they may be given the very best chance to develop their brains for the future? The building up of the education system of this country is of the utmost importance when we realise that in the days that are to come we are to face problems still more complicated and intricate than those which we have to solve at the present time.

Again, even to-day, after much has been done that was not done in days gone by, there is still very considerable under-nourishment of the people of this country. The children in the poorer schools are often as much as three inches shorter than the average, and their whole physique is equivalently inferior, owing to the fact that they do not obtain full nourishment and physical development. Can anyone properly deny that the increase of capital wealth by improving the physical condition of the people is of the utmost importance to the nation? Even taking merely the point of view of developing the bodies of those who are able to go as soldiers and fight in defence of this country. A great proportion of our would-be recruits are rejected to-day because they are unfit. From that point of view alone, it is of fundamental importance that the bulk of our people should be strong and physically well-equipped.

But I would go a great deal further, and carry the matter into the field of sickness and disability, and argue that, in all those matters, the human capital development is of an importance compared with which other things must take a minor place. I cannot see why the great wealth which is in the country, the great inheritance built up by the invention, skill and wisdom of our forefathers, should be utilised merely for one section of the community and should not be available for the nation as a whole. It is our responsibility to see that these great assets of the past should be utilised for strengthening the sinew and developing the brain of our people, and giving to them those amenities of life to which those who are born citizens of this country are fully entitled.

In saying that, I do not rule out the necessity for adequate defence of this country, but I say that that adequate defence must be based on a sound foreign policy. We on these benches would disagree with a great deal of what has been done in the course of the years during which the National Government have been in office, and we believe that a very much smaller burden would have had to be borne if a better foreign policy had been adopted. I do not want to get away from the financial aspect, but I must make that point when saying that a certain amount must be spent on Defence. I and other hon. Members on these benches, and I think many hon. Members opposite, grudge the great amount that has to be spent on weapons of war that ought to be spent on making life better for our people as a whole.

That brings me to the question of the National Debt. Twenty-one years ago, I was standing as a candidate in a part of the country not far from the constituency which is represented by the hon. Member who seconded the Motion tonight, and I stood as a "Peace by Conciliation" candidate. I secured, as was to be expected, a very small proportion of the votes, and the policy I advocated was, of course, turned down. But I suggest that had peace by conciliation been made in the year 1917, as it could have been made, on the mere monetary side, we should have stopped the War before a very large part of the debt had been incurred, and, also, we should have had a Europe that was much more peacefully inclined than the Europe of to-day. We should have had an opportunity of pursuing, in common with other nations, the peace of the world, instead of the enmity which is apparent in so many of the proceedings of nations at the present time. Therefore, I grudge a great part of the National Debt, and every penny of the expenditure upon rearmament, though I recognise that, on account of the mistaken policies which have gone on up to the present time, this country cannot remain defenceless in a world where other nations have adopted armaments upon a great scale.

I want to say a word or two about the monetary policy advocated by the hon. Member for East Aberdeen who seconded the Motion. He said frankly that there could be no reduction in expense, no additional taxation, and that the Bill could easily be met by a process of inflation, and I rather think he imagined that I should agree with him and say what a splendid speech he made in that respect. I certainly cannot take that view. I wonder what the hon. Member really envisages. He sympathises with the Government for borrowing, at a time when the Government said that there was no sign of slump whatever, £80,000,000 to unbalance the Budget. He proposes that any further divergence between expenditure and taxation should be met by further borrowing and inflation, but where is that process to end? If the difficulties created by inflation are to be met by more inflation, the hon. Member really must know that that merely means the debasement of money altogether.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

I think that what we are suffering from now is a direct consequence of a very sharp period of deflation, and I want inflation to take us back to a point at which commodity prices can be stabilised at a remunerative, and not an unremunerative level.

Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Edinburgh East

I am quite willing to agree with the hon. Member that a certain measure of inflation was desirable in order to counteract the terribly mistaken policy of deflation which was pursued in years gone by. But when the hon. Member said that it is perfectly simple to go on inflating and incurring expenditure without additional taxation, he is going a great deal beyond what can be supported.

What is the real trouble with these periods of booms and slumps, or advances and recessions, as they are called? It is that, under our present system, private enterprise, while the production of what are called consumption goods goes on at a fairly even pace, consumption of capital goods proceeds in jerks. When the business community think that there is going to be a profit, they produce capital goods far and above the normal. When they think that there is a recession coming, they shut down the production of capital goods and thereby create unemployment. The trouble is not a financial, but an economic one. The economic apparatus does not work, because, when we should be producing to the full extent of our capacity, our capital is lying idle and our human capital is being unemployed. The real object of inflation, apart from liquidation of liabilities, is to give this extra means for profit to private enterprise so that will make it continue to produce capital goods when it otherwise would not do so. We on these Benches do not think that that is the right method to adopt. We think that it is to the interests of the community as a whole to take control of the flow of production, so that instead of moving in fits and starts and producing things at one time in such a way that we are overworked and at another time having no work, with consequent unemployment for our people, we ought to have a continuous, regular production, based on a planned system of public economy. That is the view that we take.

The Amendment says that the real course to adopt is for the nation to develop to the full the resources of the country and to utilise them for the common good. That includes the idea that a change is required in the fundamental basis of our industrial system. As long as our system only works when there is a scarcity, we get an unsatisfactory balance. If we are to have a system which is going to produce steadily and produce for the public good, it must work not only in scarcity but in abundance. The great trouble in civilised life to-day is that we can produce so easily. In days gone by in the history of the world the trouble was that we produced with such great difficulty. To-day, our trouble is not the failure to produce but the failure to sell the produce when it is made. That is not a natural but an artificial failure, and it is due to the system under which we live.

On these benches we believe that the people have a right to the social services and that the social services create a purchasing power which keeps trade going. My hon. Friend the Member for Claycross, in his excellent speech, referred to that point. I would reinforce his argument by an illustration from the United States. When I was there, 10 or 15 years ago, before they had tasted the slump, they jeered at our social services and at what they called our dole, and said that they knew a much better way, which was to refuse the dole. But when they were faced with the real slump they found that it was greater there than here, because they had no social services, and consequently they had nothing with which to keep up the purchasing power of the people. There was, therefore, a much greater recession of trade there than there has been in this country.

Social services are, of course, only a palliative. Unemployment benefit is only a necessary palliative, but it will continue to be necessary so long as we exist under a system which works only in scarcity, and which moves forward by fits and starts. When we are able to replan our industrial life, we can look forward to a better system of finance, and that better economic system will be reflected in better budgets for the national well being.

10.29 p.m.

Photo of Mr John Colville Mr John Colville , Midlothian and Peeblesshire Northern

The right hon. Gentleman rather contradicted the Seconder of the Amendment when he spoke about our present system as one which works only in scarcity. I think that all those who were present were moved by the vivid picture which the hon. Member for Brightside (Mr. Marshall) drew of the great improvement which our social services have brought about in the lives of the people in the industrial towns. That is due not to one party but the growing consciousness of the people of this country as to the value of social services, and it has happened under a system which the right hon. Gentleman roundly condemned in his closing words. I should have liked to have followed the right hon. Gentleman and disputed his assertion that the cause of the present heavy Defence expenditure is the failure of the Government's foreign policy, but if I did so I should be led away from the central subject of the Motion. I can only say that I entirely disagree with his assertion in that respect and should be prepared on another occasion to argue the point. Probably had the advice of his party on foreign affairs been listened to we should have been engaged in hostilities by this time.

The right hon. Gentleman referred to a Debate which took place some years ago when his party was in office. I should like to refer to an occasion on a Wednesday evening eight years ago, when a private Member put down an economy Motion. He was a member of the Conservative party and put down a Motion calling on the Government of the day to exercise economy and bring about, if possible, a reduction in taxation. That Motion was ill-starred, because a member of the Labour party called for a count, and I regret very much that members of the Conservative party were not present in sufficient numbers to keep a House. The Motion was counted out at 16 minutes after eight o'clock. Even the Liberal party were not in sufficient numbers to keep a House. However, we have learnt from experience, and I am sure the Motion is going to have a better fate to-night. I hope it is a Motion which the House will pass because that would show a proper concern as to national and local finance.

There is need for such a question to be discussed. Any call for economy is like music in the ears of a Treasury Minister. I should like to dispel any notion that this is a spendthrift Government which is barely held in check by a cautious and frugal House of Commons. Under our system no money can be got or spent without the authority of Parliament. The Financial Secretary to the Treasury, as the right hon. Gentleman will know, has important functions, and among them he has the task of meeting the first shock when there is a demand for fresh expenditure. To use an Army simile, the defence is conducted in depth. The Financial Secretary may be overthrown by the attack which then rushes on to the Chancellor of the Exchequer. But the Financial Secretary has to meet the first charge. Hon. Members may be interested to know that in the last Session I answered 452 Parliamentary questions, and spoke 132 columns of the OFFICIAL REPORT. I have tried to analyse the questions I have been answering and what I have been talking about, and I find that a very large proportion of the answers were made in resisting demands for fresh expenditure. There is, I repeat, no question of this being a spendthrift Government barely held in check by a wise and sagacious House of Commons. These demands for fresh expenditure came from more than one quarter of the House, but I must say that the majority of the demands came from the Labour party.

This brings me to an examination of the Amendment, and in doing so I sincerely congratulate the Mover and Seconder of the Amendment on their interesting speeches. At first sight, the Amendment seems to be innocuous and even attractive. Like the hon. Member for West Middlesbrough (Mr. K. Griffith), I looked at it to see whether I could not swallow it; but on looking at it carefully—and it is the duty of those on this Bench to look any horse that comes from that stable very carefully in the mouth—I found certain defects. Let me examine the Amendment. Most people will agree with the central part of it, which says that the maintenance and extension of the social services are an essential part of the national wellbeing. I express my personal opinion that we get good value for our present social services. However, when we examine the first and last parts of the Amendment, we see that defects appear. The last part may not appear unreasonable, for it reads: It is the duty of the State to develop the national resources to the full and utilise them for the common good, but when it is coupled with the Labour party's programme as they openly urge it, we realise that is means a degree of interference with private initiative, to which we cannot assent. It means, in fact, the direct State management and control of the means of production and distribution.

Photo of Mr John Colville Mr John Colville , Midlothian and Peeblesshire Northern

It is clearly in the Amendment when it is coupled with the Socialist programme. If the hon. Member intends to support the Amendment, I ask him whether he wishes to support the Socialist conception of developing the national resources to the full?

Photo of Mr Frank Griffith Mr Frank Griffith , Middlesbrough West

I am supporting the Amendment on the Paper, which I have examined with great care, and so far I have not found one word in the Amendment with which I disagree.

Photo of Mr John Colville Mr John Colville , Midlothian and Peeblesshire Northern

I have in mind the declared policy of the Socialist party in regard to their method of developing the national resources. When I turn to the first part of the Amendment, I think hon. Members will find it more difficult to disagree with me. Their assertion there is— that the burden of national and local expenditure must be judged by the equity of its incidence and by the purposes for which it is imposed. This implies that the straw would not have broken the camel's back if it had been explained to the camel why it was being put on, or if it had been placed in a different part of its back. Although the purpose of taxation may be good and the distribution fair, yet the burden may be crushing. I ask hon. Members to read the Amendment again, and if they do so, I shall be surprised if they do not agree with my interpretation, which is that hon. Members opposite are asking us to disregard the weight of the burden and to look only at its incidence and the purpose for which it is imposed. To illustrate my remarks, let me give as an example one recent demand for fresh expenditure which has come from the benches opposite. I refer to the Labour party's pensions scheme. I analysed that scheme in some detail on another occasion, and I will not do so again tonight, but I will mention that the effect of the scheme, together with the automatic increase in the costs of the existing scheme, would be to increase the total cost of old age, widows' and orphans' pensions steadily from the present £92,000,000 to £259,000,000 in 40 years time; and the immediate increase which the scheme would bring about is no less than £75,000,000.

Photo of Mr Stephen Davies Mr Stephen Davies , Merthyr Tydfil Merthyr

You have £62,000,000 m the Unemployment Fund to start off with.

Photo of Mr John Colville Mr John Colville , Midlothian and Peeblesshire Northern

That increase is the type of increase which I characterise as crushing. I want it clearly to be understood that that is a proposal openly made by the Labour party, and one which I have to resist. It is a good thing that the House should call for economy and that we should discuss a Motion of this kind. The hon. Member for Clay Cross (Mr. Ridley) was in error when he spoke of the direction of the change in recent years as between direct and indirect taxation. Taking the most recent years, the fact is not as he stated. The percentage of total revenue raised by indirect taxation has actually been reduced in the last three years and is less than it was before the War. In 1937, the percentage raised by direct taxation is 60.7 and by indirect taxation 39.3. In 1935, the corresponding figures were 59.57 and 40.43. So, it will be seen that the tendency is in the opposite direction to that indicated by the hon. Member. The comparable figures for 1913 are interesting. The percentage raised by direct taxation in that year was 57.5 and by indirect taxation 42.5. We see that at that time, before the War, when the total burden was less and when we were living under a Free Trade system, the percentage of direct taxation was 57.5 as against 60.7 to-day. Then, the hon. Member for Clay Cross made the rather extravagant assertion that his political friends had been responsible for all the social progress that had been made. I think he has overlooked important Measures passed by Governments of other complexions, notably the Pensions Act of 1925 which was passed by a Conservative Government and which I believe to be, possibly, the biggest Measure of social reform ever placed on the Statute Book.

Photo of Mr George Ridley Mr George Ridley , Clay Cross

The party opposite has only approved of social reform when it has been politically dangerous to oppose it. [HON. MEMBERS: "Oh!"] Perhaps I may have the attention of the House for what may be to some hon. Members an unpalatable statement. Any social reform on the Statute Book passed by the party opposite was passed only when it became politically inexpedient not to do so.

Photo of Mr John Colville Mr John Colville , Midlothian and Peeblesshire Northern

I did not interrupt the hon. Gentleman when he was making his speech, but I suggest that before he makes an assertion of that nature he ought to study the facts. When the Labour party have carried into effect anything that compares with the Measures which have been carried out by other parties in the way of social reform, then they may be able to speak with more authority.

Many valuable contributions have been made by various speakers in support both of the Motion and of the Amendment, but they will forgive me if I do not follow all the points which have been raised, because there are certain statements which I wish to make while I have this opportunity. The hon. Member for East Aberdeen (Mr. Boothby) in particular will not expect from me either a forecast of the budgetary position for next year or a pronouncement on the value of inflation. To him I would say: In vain is the net spread in the sight of the bird. But he will expect a statement on one thing, and I can say that the Government will welcome close and friendly co-operation with the United States on economic matters. The hon. Member for Faversham (Mr. Maitland) asked about local authorities' representations to the Ministry of Health. I cannot give him any information about that subject, but I have noted his question carefully and it will be examined.

There are two views about taxation. The one is that it is essentially bad, that it diverts money from normal channels and interferes with saving and enterprise. The other view, held apparently by most hon. Members opposite, is that it is a good thing in itself as a means of redistributing income. I think the truth lies somewhere between those two views. The conception of the functions of the State has completely altered in the last generation and I can best illustrate this change by a comparison of the Gladstone Budget of 1881 with the Chamberlain Budget of 1937. There have been several Gladstonian allusions to-night and another one may be permitted to me, as I represent Gladstone's old constituency. I have on my committee a gentleman who was also on Gladstone's committee during his campaign. That gentleman reminded me that the watchword of those days was "Peace, Retrenchment and Reform," and he claimed that the National Government have all those virtues. I think the Grand Old Man would have turned in his grave if he could have foreseen the minority Liberal party in the House of Commons opposing a Motion which called on the Government to reduce the taxation burden as and when possible.

Let me illustrate the changes which have taken place. Education in 1881, in England and Scotland, cost a little over £3,000,000, as compared with a total of over £57,000,000 in 1937. There was no provision in 1881 for widows' and old age pensions, which required over £61,000,000 in 1937. Nor was there anything in 1881 to compare with the great total of £82,000,000 provided in the 1937 Estimates for the Ministry of Labour, the Unemployment Assistance Board and the various unemployment assistance schemes. Again, whereas the Local Government Board in 1881 required considerably less than £500,000, the Health Departments to-day account for estimates of over £25,600,000, and the Exchequer in 1937 provides over £54,000,000 in contributions to local revenues. These are interesting figures illustrating the growth of expenditure on these important services. The cause, of course, is this, that there has been a complete change in the conception of the duty of the State, which in those days was called on to provide only those essential services which the individual could not possibly provide for himself.

Interesting though this ancient history may be, the House will perhaps be more concerned with increases in recent years. The House will, I hope, excuse me if I speak mainly on national expenditure. I have not time to speak of local expenditure as well, although we all heard with much interest what the hon. Member opposite said about his local authority's work. I take 1932 as a convenient year of comparison for two reasons. It was the first complete year in which unemployment expenditure was borne entirely on Votes and in which the economies resulting from the report of the May Committee had effect. I hope to show that the increase since then has been almost entirely due to two things—Defence and social services. The 1937 Estimates for Supply Services show an increase over 1932 of £150,000,000, of which £93,900,000 is for Defence. That is excluding the amount which may be borrowed under the Defence Loans Act. The Civil Services show an increase of £54,800,000 in that period, but one must make an adjustment by discounting £22,500,000 of this increase which is due to the transfer to Votes of the Road Fund Grant, which previously appeared as self-balancing expenditure and was not included in the Supply Estimates.

I agree with the hon. and gallant Member for Thanet (Captain Balfour) that there is general recognition of the fact that only small and insignificant reductions could be secured by an overhaul of administrative expenses. The great bulk of the expenditure arises out of decisions of policy which have been specifically approved by Parliament, either by legislation or otherwise. It should be noted that in the first place not only is most of the expenditure statutory in character, but a certain amount of the increase is purely automatic under the provisions of the relevant Statutes. That automatic increase amounts to a considerable sum each year. In this category there falls the provision for old-age and widows' pensions, which in 1937 shows an increase of £10,500,000 over 1932. The Estimates for the Health Departments, which bear the cost of health and housing services, show a total increase over the same period of £3,700,000; the Education Estimates show a corresponding increase of £8,000,000, and expenditure in connection with unemployment, including assistance to Special Areas, shows an increase of £15,000,000, in spite of the fact that there has been a lesser number of unemployed to deal with. The Government have also given assistance to certain industries in the form of subsidies. I would say to the hon. Member for West Middlesbrough that he was in error about one subsidy. He said that a feature common to all subsidies was that their heads remained "bloody, but unbowed." The tramp shipping subsidy has gone, and, although he might apply the first epithet to it it would hardly be correct to apply the second. Finally, there is an entirely new item of £4,600,000 in respect of air-raid precautions, which must clearly be regarded as an item of the Defence programme.

These are illustrations of the various items which go to make up the total net increase in Supply expenditure over the last five years. They all represent services which at one time or another Parliament has specifically approved, and the only authority which can reduce or restrict the expenditure upon them is Parliament itself. I think it is hardly necessary to add that, whatever differing views may be held as to the relative value of most of the various services which I have mentioned, there is always considerable support for each; and, to illustrate the consistent demand for fresh expenditure, I have only to mention the Debate which took place during the earlier part of today, when a demand was made for very heavy expenditure for food storage.

But while the increase in expenditure can be explained, and that I think without difficulty, and while the great bulk of it has been shown to be on services which the House agrees are necessary, it would be wrong to leave the impression that it is viewed with equanimity by the Government. An increase of this magnitude—the figures which I have given tonight show an enormous increase in the past few years—such an increase over a relatively short period cannot but be a source of grave concern, and it is realised that the burden of taxation now resting on the community makes it imperative that no fresh commitments should be entered into unless they are justified on the clearest possible ground of public interest. The Prime Minister in October last, in a speech at Scarborough, said this: It would be a mere hiding of our heads in the sand to imagine that when we have committed ourselves to the vast programme of expenditure on armaments which has been forced upon us, we can at the same time have just as much to spend on other things as if we lived in a peaceful world, free from all anxiety and care about the intentions and ambitions of other countries. He went on to say this: I cannot see any prospect of our being able in the near future to introduce reforms which would add to the present enormous annual expenditure of the country. These are grave words. I would remind the House of the automatic increases that are bound to take place as a result of our existing commitments on our very valuable social services. The general financial position of the country is much sounder than it was in 1932, and I would be wrong if I gave the impression that there is any cause for alarm. At the same time, it is but right that the House and the country should face the facts squarely.

This Debate gives me the opportunity to say this. The Government are alive to the danger of the effect of high taxes. They are also alive to the very real and universal—I use that word deliberately, because it transcends all party bounds—desire to save on armaments as soon as is humanly possible. Disarmament cannot be unilateral on our part, but it is the firm intention of His Majesty's Government to effect reductions by agreement at the earliest possible time when it can safely be done, and in our foreign policy we shall do all we can to hasten that end. The Government are alive to the necessity of maintaining the sound financial position of the country in the interests of everyone in the community,

not least in the interests of the many millions who derive such immense benefits from the social services. I hope the House will pass this Motion, and I hope it will have wide publicity, because I believe that not only in the House but in the country it will have the effect of bringing a rather more realistic attitude to bear upon what in these days is the heaviest task the Government have to shoulder, namely, the wise stewardship of the nation's finances.

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

The House divided: Ayes, 134; Noes, 102.

Division No. 91.]AYES.[10.57 p.m.
Acland-Troyte, Lt.-Col. G. J.Fildes, Sir H.Palmer, G. E. H.
Apsley, LordFox, Sir G. W. G.Patrick, C. M.
Aske, Sir R. W.Fremantle, Sir F. E.Plugge, Capt. L. F.
Astor, Hon. W. W. (Fulham, E.)Furness, S. N.Procter, Major H. A.
Baillie, Sir A. W. M.Fyfe, D. P. M.Radford, E. A.
Baldwin-Webb, Col. J.Gluckstein, L. H.Raikes, H. V. A. M.
Beaumont, Hon. R. E. B. (Portsm'h)Grant-Ferris, R.Ramsbotham, H.
Beechman, N. A.Greene, W. P. C. (Worcester)Rathbone, J. R. (Bodmin)
Barnays, R. H.Gridley, Sir A. B.Rayner, Major R. H.
Birchall, Sir J. D.Grimston, R. V.Reed, A. C. (Exeter)
Boulton, W. W.Guest, Hon. I. (Brecon and Radnor)Rickards, G. W. (Skipton)
Bracken, B.Hambro, A. V.Ropner, Colonel L.
Briscoe, Capt. R. G.Hannon, Sir P. J. H.Rowlands, G.
Bull, B. B.Harbord, A.Royds, Admiral Sir P. M. R.
Burghley, LordHaslam, H. C. (Horncastle)Ruggles-Brise, Colonel Sir E. A.
Butcher, H. W.Heilgers, Captain F. F. A.Russell, R. J. (Eddisbury)
Campbell, Sir E. T.Hely-Hutchinson, M. R.Russell, S. H. M. (Darwen)
Cartland, J. R. H.Heneage, Lieut.-Colonel A. P.Salmon, Sir I.
Carver, Major W. H.Hepworth, J.Sanderson, Sir F. B.
Cazalet, Thelma (Islington, E.)Herbert, Major J. A. (Monmouth)Scott, Lord William
Channon, H.Higgs, W. F.Shaw, Major P. S. (Wavertree)
Chapman, A. (Rutherglen)Hope, Captain Hon. A. O. J.Smith, L. W. (Hallam)
Clydesdale, Marquess ofHorsbrugh, FlorenceSmith, Sir R. W. (Aberdeen)
Colman, N. C. D.Hunter, T.Spens, W. P.
Colville, Lt.-Col. Rt. Hon. D. J.Keeling, E. H.Sueter, Rear-Admiral Sir M. F.
Conant, Captain R. J. E.Kerr, Colonel C. I. (Montrose)Sutcliffe, H.
Cooke, J. D. (Hammersmith, S.)Kerr, H. W. (Oldham)Tasker, Sir R. I.
Cox, H. B. TrevorLamb, Sir J. Q.Thomson, Sir J. D. W.
Crookshank, Capt. H. F. C.Leech, Sir J. W.Touche, G. C.
Cross, R. H.Lees-Jones, J.Tryon, Major Rt. Hon. G. C.
Crowder, J. F. E.Lindsay, K. M.Turton, R. H.
Cruddas, Col. B.MacDonald, Rt. Hon. M. (Ross)Wakefield, W. W.
Davison, Sir W. H.McKie, J. H.Walker-Smith, Sir J.
Denville, AlfredMaclay, Hon. J. P.Ward, Lieut.-Col. Sir A. L. (Hull)
Duckworth. W. R. (Moss Side)Macnamara, Capt. J. R. J.Waterhouse, Captain C.
Dugdale, Captain T. L.Magnay, T.Wedderburn, H. J. S.
Duggan, H. J.Maitland, A.Whiteley, Major J. P. (Buckingham)
Duncan, J. A. L.Makins, Brig.-Gen. E.Windsor-Clive, Lieut.-Colonel G.
Eastwood, J. F.Margesson, Capt. Rt. Hon. H. D. R.Womersley, Sir W. J.
Edmondson, Major Sir J.Mayhew, Lt.-Col. J.Wood, Hon. C. I. C.
Elliot, Rt. Hon. W. E.Mills, Major J. D. (New Forest)Wright, Wing-Commander J. A. C.
Elliston, Capt. G. S.Moore, Lieut.-Col. Sir T. C. R.Young, A. S. L. (Partick)
Elmley, ViscountMorgan, R. H.
Emery, J. F.Morrison, Rt. Hon. W. S. (Cirencester)TELLERS FOR THE AYES.—
Emmott, C. E. G. C.Muirhead, Lt.-Col. A. J.Captain Balfour and Mr. Boothby.
Everard, W. L.Neven-Spence, Major B. H. H.
NOES.
Adams, D. (Consett)Batey, J.Cluse, W. S.
Adams, D. M. (Poplar, S.)Benn, Rt. Hon. W. W.Cocks, F. S.
Alexander, Rt. Hon. A. V. (H'lsbr.)Benson, G.Cove, W. G.
Ammon, C. G.Brown, C. (Mansfield)Daggar, G.
Banfield, J. W.Burke, W. A.Davidson, J. J. (Maryhill)
Barnes, A. J.Charleton, H. C.Davies, R. J. (Westhoughton)
Barr, J.Chater, D.Davies, S. O. (Merthyr)
Day, H.Johnston, Rt. Hon. T.Pritt, D. N.
Dobbie, W.Jones, A. C. (Shipley)Ritson, J.
Dunn, E. (Rother Valley)Jones, Sir H. Haydn (Merioneth)Robinson, W. A. (St. Helens)
Ede, J. C.Jones, Morgan (Caerphilly)Seely, Sir H. M.
Edwards, Sir C. (Bedwellty)Kelly, W. T.Sexton, T. M.
Evans, D. O. (Cardigan)Kirby, B. V.Shinwell, E.
Frankel, D.Kirkwood, D.Simpson, F. B.
Gallacher, W.Lansbury, Rt. Hon. G.Sinclair, Rt. Hon. Sir A. (C'thn's)
Gardner, B. W.Lathan, G.Smith, Ben (Rotherhithe)
Garro Jones, G. M.Leach, W.Smith, E. (Stoke)
George, Major G. Lloyd (Pembroke)Leonard, W.Smith, T. (Normanton)
George, Megan Lloyd (Anglesey)Leslie, J. R.Sorensen, R. W.
Graham D. M. (Hamilton)Logan, D. G.Stewart, W. J. (H'ght'n-le-Sp'ng)
Green, W. H. (Deptford)Lunn, W.Taylor, R. J. (Morpeth)
Grenfell, D. R.McEntee, V. La T.Tinker, J. J.
Griffith, F. Kingsley (M'ddl'sbro, W.)McGhee, H. G.Viant, S. P.
Griffiths, G. A. (Hemsworth)Maclean, N.Walkden, A. G.
Griffiths, J. (Llanelly)Macmillan, H. (Stockton-on-Tees)Watkins, F. C.
Groves, T. E.Marklew, E.Watson, W. McL.
Guest, Dr. L. H. (Islington, N.)Mathers, G.Westwood, J.
Hall, J. H. (Whitechapel)Messer, F.Williams, T. (Don Valley)
Harris, Sir P. A.Morrison, Rt. Hon. H. (Hackney, S.)Wilson, C. H. (Attercliffe)
Harvey, T. E. (Eng. Univ's.)Morrison, R. C. (Tottenham, N.)Windsor, W. (Hull, C.)
Hayday, A.Naylor, T. E.Woods, G. S. (Finsbury)
Hills, A. (Pontefract)Noel-Baker, P. J.Young, Sir R. (Newton)
Haldsworth, H.Parker, J.
Hopkin, D.Parkinson, J. A.TELLERS FOR THE NOES.—
Jenkins, Sir W. (Neath)Pethick-Lawrence, Rt. Hon. F. W.Mr. Ridley and Mr. Marshall.

Question, "That this House do now adjourn," put, and agreed to.

Main Question again proposed.

It being after Eleven o'clock, the Debate stood adjourned.

The remaining Orders were read, and postponed.