Orders of the Day — Increase of Customs Duty on Hydrocarbon Oils.

– in the House of Commons on 26th April 1938.

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Motion made, and Question proposed, That as from six o'clock in the evening on the twenty-sixth day of April, nineteen hundred and thirty-eight, the customs duty on hydrocarbon oils shall be at the rate per gallon of ninepence instead of eightpence, and any rebate allowed on the delivery for home consumption of hydrocarbon oils, other than light oils, shall be at the rate per gallon of eightpence instead of sevenpence: And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913. —[Sir J. Simon.]

5.24 p.m.

Photo of Mr Clement Attlee Mr Clement Attlee , Stepney Limehouse

The Chancellor of the Exchequer has explained to us, with the lucidity which we expected from him, the figures of this year's Budget, and has laid before us his proposals for meeting a part of the deficit on this unbalanced Budget. I thought that he struck a somewhat quiet note throughout his speech. There was an absence of excitement in the Committee right through his statement. Perhaps the truth is that this was due not to any particular defect on the part of the Chancellor himself, but to the fact that the sport has gone out of the game of Budget-making. Now, any one, by a little manipulation, can bring out his Budget, because what he cannot reach, he puts across to be met out of loans. When one recalls the performance formerly put up by the right hon. Gentleman the Member for Epping (Mr. Churchill) in the careful balancing of a pound here and a pound there, one is struck by the difference. Now the Chancellor starts off with a huge sum of £90,000,000 to be met from loans, and it is merely a matter of choice on the part of the Chancellor, whether he puts on a little taxation or takes off a little taxation. There is no attempt to say that we must have a balanced Budget. It is right to call attention to that fact, because we are in for a series of unbalanced Budgets. What struck me most about the right hon. Gentleman's survey was how closely he kept to the mere consideration of figures, and how little he looked at the general position of trade or at world conditions. His mind was dominated by the question of armaments, and although he protested at the end that the piling up of armaments was not enough, it was obvious that his whole Budget was directed to that end.

Let me call attention to one or two features of this year's accounts. We are borrowing £90,000,000. That is the amount of the entire debt on the Unemployment Fund from 1920 to 1932, which called down the animadversions of the May Committee. If the present Government were to be weighed in the scales of the May Committee, they would come out of it pretty badly. The Chancellor of the Exchequer never mentioned this terrible burden in this unbalanced Budget, though he ought to be sitting there in sackcloth and ashes, according to the May Committee. Then the May Committee made great.play with the question of the balance of payments. We have heard nothing about that to-day, but there is a heavy balance of payments against us, and it is to be increased by large purchases of aircraft from the United States. Yet the right hon. Gentleman says nothing about the balance of payments. That is all left out of the picture. All we have is this enormous increase in armaments expenditure, and we have the ominous words that the peak is not yet. The peak may be reached next year or the year after. The huge figures already given, apparently, were only illustrations. They are to be increased more and more.

Then we get the surprising remark of the right hon. Gentleman that this does not stand alone, that it is linked with the wonderful foreign policy of the Government. We are getting the results to-day, in these Budgets, of the wonderful foreign policy of the Chancellor of the Exchequer himself. The people of this country are now paying for the National Government, and paying for the Foreign Secretary of a previous time and, so far from embarking on a policy of peace, the right hon. Gentleman indicated that these things must go on. The Prime Minister when he was Chancellor of the Exchequer used to talk about a certain time at which, when we had rearmed, there would come a halt. But the halt has disappeared entirely from the Chancellor's speech, and the reason is very clear. It is because in the foreign policy upon which we have now embarked, there is no question of disarmament. There is no question of achieving security. We are entering upon a race in armaments in a world of armed anarchy and we are doing it with an enormous National Debt. The Income Tax is now to be 5s. 6d. in the £—and this is only about the second of these war Budgets. The Chancellor of the Exchequer is at present carrying on because there has been a trade boom, but we are now getting towards what is called a recession. I understand that we have passed from the boom, that there is every sign of a recession, and that the Budget will be still more unbalanced next year if the recession of trade should grow. But that will not matter, because the right hon. Gentleman will only need to borrow some more.

I want to call attention to the serious position of this country as we face it today. I do not propose to argue on orthodox lines on the Budget and to consider all expenditure as an evil. A great many of the items in this Budget are merely different arrangements for redistributing the national wealth. It is not done in the way we would wish—it is a matter of mere redistribution—but we have the fact all this time that we are in the position, which we have never had before except in time of war, of huge borrowing with a tremendous Income Tax. The Chancellor has brought forward certain proposals. I do not know how far his attempt to stop what I should prefer to call tax dodging will really go—it seems to me that the tax dodgers are always a few moves ahead of any given Chancellor of the Exchequer—but I should like to have seen him looking after some of the rich people a great deal more. What he has actually done is that he has raised the Income Tax. I can see no reason why there should be special benefits for the people already benefiting so specially from the money that is being expended, as I think wastefully, on rearmament. They have already received great benefits from the derating of machinery, and they will now receive more.

You are going again to put an extra 2d. on tea. When it was put on before, I referred to the lyrical statement of the right hon. Member for Epping when he was taking it off. We know that it is going to hit unduly the people in the home. We say that this is expenditure which is in the main to follow a policy which is not the policy of the mass of the people of this country, but the policy of a privileged class. The Government are following out a policy which is not the policy on which they went to the country, but the policy of their own material interests. I think this Budget is a mark of the reckless finance, the reckless policy, of the National Government, but fundamentally it is just what one expected from 6½ years of a foreign policy that has been, in my view, both wicked and foolish. The man who is now going to make us pay the bill is the man who was mainly responsible for the circumstances which made the bill possible.

5.33 p.m.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

The Committee undoubtedly entertained, as it had a right to entertain, high expectations of the first Budget statement of the present Chancellor of the Exchequer, and it has not been disappointed. We have listened to the form of the statement with admiration, and when we read the statement over and ponder it at leisure, our admiration at the Chancellor's candour and the cogency of his arguments will, I think, tend to increase; but as we measure his proposals against the gravity of the financial and economic situation with which we are confronted, I am afraid that we are bound to feel serious anxiety. On the one hand, the international situation is imposing upon the taxpayers a burden of expenditure on armaments which is unprecedented in peace time. Indeed, the Chancellor himself made it clear that, as he said, nothing would contribute so much to the relief of this burden of expenditure as international good will. He went on from that to claim that the policy which the Prime Minister is now pursuing was meeting with a substantial measure of success and held out the best hope of a reduction in this armament expenditure. But I cannot help observing that, enthusiastically as the Government plume themselves on the success of their foreign policy in preventing war, and fervently as the Prime Minister's so-called successes are extolled in the Government Press, nobody, and least of all the Chancellor of the Exchequer in his Budget statement to-day, suggests that these demonstrations of satisfaction with the Prime Minister's policy are to be taken so seriously as to be reflected in a reduction of our armament expenditure.

On the other hand, the economic situation is now recognised as being extremely critical. When we on these benches warned the House last November of the approaching setback in trade, Ministers mounted their pedestals of complacency and denounced us as scaremongers. Now the existence of the trade recession is no longer denied. The Chancellor pointed out that the second six months of the last financial year were less prosperous than the previous six months, and he observed that this indicated a trend which was worthy of the serious attention of this Committee. The only question is how that trend is to be prevented from developing into a slump. So the Chancellor of the Exchequer seems to be confronted with the two secular enemies of the Treasury, mounting expenditure, and not perhaps this year, but next year, an inelastic revenue, and next year or the year after he will have to confront them both at the same time.

I think it is clear from the statement which the right hon. Gentleman has made to-day, and from the figures which we see in the Estimates for the coming year, that expenditure is getting out of control. I am not satisfied that the machinery for controlling this vast expenditure upon armaments is proving effective, and it seems to me that this question of expenditure will need the most careful attention of this I rouse. The Leader of the Opposition reminded up that expenditure is now far ahead of the level at the May Committee was appointed in 1931, and the fear that is working in the minds of some of us is that we may once more get into the kind of situation in which, as a panic measure, a wholly unsuitable kind of inquiry into expenditure is demanded, and an inquiry which wholly unsuitable kinds of individuals are appointed to conduct, who are incited not to prune carefully the various growths of expenditure which may be found in the annual budget, but to use ruthlessly the axe, cutting down the useful expenditure along with that which is wasteful. I hope the Government will consent, and that this Committee will insist, that a careful inquiry should be undertaken into this problem of expenditure before it is too late and that serious efforts should be made to check and control it.

I was very glad that the Chancellor made the Committee face up to the real necessities of the Fixed Debt Charge. I think his predecessor for some time let us off too lightly in not taking into account, for example, the accrued interest on the Savings Certificates, and I am very glad that this Chancellor has had the courage to make the demand and to increase this Fixed Debt Charge and bring it up to the level of £230,000,000. This is not a suitable occasion on which to go into the question of food storage, but in view of the part which I have played in the Debates on food storage and in supporting the demands of the hon. Member for Oxford University (Sir A. Salter), I would like to express to the Chancellor and the Government my gratification that some effective measures seem to have been taken to deal with that problem; but on a suitable occasion we shall want to have further particulars about those purchases.

I am sure we all welcome the outline which the Chancellor has given us of his measures for dealing with tax avoidance, and we regret that the measures taken by his predecessor have proved ineffective.

Photo of Mr John Simon Mr John Simon , Spen Valley

I really said exactly the opposite. The provisions of the Act of 1936–37 have been extremely effective, but it still remains the case that there are some loopholes.

Photo of Sir Archibald Sinclair Sir Archibald Sinclair , Caithness and Sutherland

I shall be able to maintain the proposition which I made, that the efforts made by the right hon. Gentleman's predecessor were ineffective. In 1936 he assured us that they would result in an increased yield from the Surtax of £2,000,000 in that year and £4,000,000 in the following year, and in spite of the increased prosperity of the country and of the fact that larger incomes must have been coming under charge, the Surtax fell short by £3,500,000 of the Prime Minister's estimate when he was Chancellor of the Exchequer the year before last and £1,000,000 last year. Therefore, I think I may repeat my assertion that the Prime Minister's efforts when he was Chancellor of the Exchequer proved ineffective to fulfil the expectations which he held out to this Committee in 1936.

I thought the Chancellor's arguments in favour of meeting by taxation the deficit which is arising this year were cogent and unanswerable, but they would have been equally strong last year. If the case for dealing with this deficit by taxation this year is strong, it was far stronger last year, and that was the time when it ought to have been done. The arguments which the Chancellor of the Exchequer used to-day justify the line which my hon. Friends and I took on the Defence Loan Act passed last year. As for the increase in the Tea Duty, that I very much regret. The fact is that when the Tea Duty is increased, the burden of the increase is alleviated to those who purchase the more expensive kinds of tea by the fact that the blend is altered and quantities of cheaper brands of tea are brought into the more expensive blends; but when you get to the cheapest qualities of tea, that cannot be done. Therefore, the effect of an increase in the Tea Duty is to increase disproportionately the burden on the poorest of the poor. To-morrow we shall come to closer grips with the Budget after an interval for study and reflection. In the meanwhile let me assure the Chancellor of the Exchequer that we realise to the full the difficulty and the delicacy of his task. I have already paid tribute to the courage with which he has faced it, and in my concluding sentence I would like to be allowed to congratulate him on the success of the speech which he has made.

5.46 p.m.

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

I know that it is customary to adjourn early after the Budget, but it is still extremely early and I hope that nobody will resent one or two of us getting up and saying a few words. I look upon it as a privilege to he able to congratulate my right hon. Friend on the way in which he has presented his case to-day. I have listenéd to many Budgets, and I think that everybody will agree that practically always the first three-quarters of an hour is immensely dull and most incomprehensible, whereas my right hon. Friend, a lawyer of great reputation and a great opener of cases, interested us even in that dull three-quarters of an hour when nothing must be said because it might disturb the Stock Exchange. I am proud to be the first from this side of the Committee to congratulate him on the way in which he dealt with that dull and perhaps sombre picture. Nobody was really expecting him to have to find £30,000,000 at the end, and certainly not in the way in which he has found it.

It seems to me that he has distributed that sum fairly evenly between direct and indirect taxation, but I want to point out to him that I think he will have trouble in one direction. He has taxed our income, he has taxed our food, and he has taxed our movement in the form of transport. I am sorry that he has fallen into what has always been the fetish of the Treasury, and that is to tax road transport as against rail transport. It will be resented up and down the country. If we move by omnibus or in other ways upon the roads we are to be taxed, whereas if we move upon the railways we shall go untaxed. If transport is to be taxed it should be done in the broader sense, and we should not fall into the Treasury trap of always penalising road transport as against rail transport. I am certain that now that road transport is getting organised along powerful lines, although not nearly as powerful as the railway companies, the Chancellor will find some trouble in passing the Budget.

5.49 p.m.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent Stoke

I listened to the Chancellor of the Exchequer's statement with great interest. After the last two Budget statements the Parliamentary Secretary to the Treasury moved the Adjournment about 6 o'clock and the House proceeded to consider foreign affairs. Then for two days we listened to orthodox analyses from both sides of the Committee of the nation's finances. I want to examine the nation's finances from the point of view of the working class in particular, and from the point of view of the people generally. The Chancellor rightly said that Budget day was the annual review of the nation's finances, and it is significant that he devoted 20 minutes to proposals to prevent wealthy people avoiding their legal payments to the State. Then he pointed out, what I had already noticed in the Blue Paper, that there was to be a saving of £8,500,000 on unemployment assistance. Yet the mean means test is still in existence. He went on to propose an additional duty on tea which would bring approximately £3,000,000. This additional tax will be paid by the old age pensioners, the widows and the unemployed. It is from the point of view of those people in particular that I want to speak.

I will not make an orthodox analysis of the State's finances, but will make an analysis from the point of view of the people to whom I belong. May I compliment the Civil Service on the clear picture of the State's finances which they yearly present to the House? I say that because I have had experience in big-scale industry and I realise that a tremendous amount takes place in all establishments which, if the board of directors or the managers knew about it, they would not allow to take place. What applies to industrial establishments applies equally to the nation, and if it were not for the fact that the House has presented to it a clear statement of this character, in addition to reports, such as the Inland Revenue report, which are presented from time to time, there is no knowing what would go on in the State. I have been thinking what must be the position in certain countries where they do not have clear statements prepared such as we have here year by year. I want to deal with the policy behind the Budget statement and to base my remarks upon an extract from the "Economist" of 10th April this year. I would like to ask the Chancellor or the Financial Secretary whether they are prepared to accept what the "Economist" says— The concept of the national income is one which has attracted statisticians almost since the birth of their science. Nor is the national income merely a statistician's plaything. It is of great importance for the formulation of economic policy to know the approximate dimensions of the national income and to measure its fluctuations. I should like to ask the Chancellor whether he accepts the following: It is also the criterion of the policy. The aim of all economic management "— I address these remarks also to my own party— should be to increase the aggregate incomes of the community's members. I accept that statement, and I would ask the Chancellor whether he also accepts it, because this is the financial position. The national income in 1911 was approximately £2,000,000,000; in 1924 it was £3,500,000,000; in 1931 it was £3,600,000,000; and in 1937 it was £4,400,000,000, or an increase since 1924 of £900,000,000. I take those figures from Lloyds Bank Review. I find that for each pound net profit made in 1932, industry is now making 35s. Where is this enormous increase in wealth going? Is it going to the workers, the old-age pensioners, and the widows? Is it going to the unemployed? Where has that increase come from? Has it come from the rich people and from those who are in the majority in this House. I have no hesitation in saying that it is no' coming from them, because they an spending more than ever and are living better than ever. Has it come from foreign investments? Pages 60 and 61 of the clear Inland Revenue Report prove that that is not the case.

Where then has this increase in national wealth come from? It has come in the main from the increased mechanisation in the mines, from the application of electrification to coal-cutting. What applies to the mines applies to the steel industry and to nearly every other industry. The American Government have recently issued a report proving what I am saying. They say that for every thousand workers employed to produce a certain number of commodities in 1910, only 537 were required in 1936. That is where the increase in national wealth has come from, and the people who are mainly responsible for the increase are relatively speaking no better off than they were. Who is receiving this increase in the national wealth? Sixty per cent. of the people—those who work for their living—receive less than £122 a year, the total being only one-third of the national income. According to Table 57 in the Inland Revenue Report, 88,951 people received in 1936, after all the manipulation of their financial experts and of the legal profession about which we heard in the statement made by the Chancellor this afternoon, a total of £446,525,000. We find on pages 50 and 51 of the report that, despite the enormous increase between 1928 and the present time in the gross incomes of these people of £399,000,000, the average effective rate of tax levied on each pound of actual income has decreased. In 1928 the average effective rate of tax was 22.67d.; in 1934, 20.88d.: and in 1936, 21.97d.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

Is the hon. Member aware that the reduction of the net effective rates is almost entirely due to the concessions allowed in respect of personal allowance to the small payers of tax?

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent Stoke

I had already armed myself against that interjection. Page 48 of the report is a reply to the hon. Gentleman. What I am saying is that having regard to the increase in national wealth which has been produced by the people who do not pay tax or Surtax, the relatively well-p laced people are better off than ever and they pay a smaller percentage in taxation. We find on page 67 that, despite the large numbers who have removed to the Channel Islands or to other countries, 88,951 persons received in the financial year 1935 £446,000,000. The time has arrived when there should be some plain speaking in Parliament. The party to which I belong was born out of the aspirations of the common people of this country. It has its roots in the struggles of the people. Some of us were born of the people who are responsible for the production of this enormous increase in wealth.

Along with that increase we find there has been an enormous reduction in the payments for war pensions. In 1924 the expenditure on War pensions—a debt which we owe to the cream of this country —was £69,600,000, but in 1938 it had been reduced to £39,600,000, yet every hon. Member, irrespective of party, knows the indictment which is made against the Ministry of Pensions with regard to its administration of War pensions. Therefore, there is something sadly wrong if we are prepared to sit in this House and to acquiesce in a state of affairs under which an enormous economy is made at the expense of those, and of their dependants and children, who sacrificed themselves for the country during the years 1914–1918. During the recess I have been reading "Sybil, or the Two Nations." Disraeli said that the two nations were the rich and the poor nations, and those words are as true today as when Disraeli wrote them. He said to Hyndman in the eve of his lifetime that he wanted the nation to have peace with comfort "but who will say that in our day the old age pensioners and the widows can have peace with comfort on a pension of 10s. a week? I have received three letters. The first one opens: Sir, God bless you all. We are wondering if you could please give us old age pensioners a little more. When we have paid 5s. lodgings, when we have paid our insurance, and a bit of shoe leather, we have nothing much to live on. We cannot work at 65, or we would be glad to get it. God bless you! When we have paid our lodgings they nearly tell us to go. We can hardly go to the fire; we have to go to the Library in order to get warmth. That is the life in the potteries. God only knows. That is typical of the way in which the old age pensioners are living. Here is another letter: Dear Sir,—Just a few lines to let you know that they are laving to rest to-day one more human being who has been brought to his grave earlier than he ought to have been through the means test. He was out in France with Major Attlee. Sixteen months ago his wife died and left him with grown up girls. They are like every person's children, they have not turned their money up as the Government says they should do and, Sir, they took his pay, of course, from him at the dole. Last Sunday night he almost severed his head from his body, and a smart end for any man to come to before they would find him a bit of work. Dear Sir, when you are fighting them M.Ps. remind them of what the ex-service men have done. Use this case of one among the batch I know you have got. His name is F. Cappe, South Terrace, Boothen, Stoke on Trent. To-day the Chancellor of the Exchequer has reminded us that the Exchequer receipts, amounting to £872,000,000, are five times greater than a quarter of a century ago, and yet the old age and widows' pensions are still 10s. a week. This is no party question but a humanitarian question. I have a copy of some proposals which are to be put before the Manchester City Council next week because local authorities are bubbling over with indignation at the way in which they are being treated. They have in many cases to increase the rates on account of the supplementary grants which have to be made to the poor people in their localities. In addition to that they are having to supplement the grants made to old age pensioners and widows. Therefore, I make no apology at all for having detained the House this evening in a most unorthodox fashion. Probably I may be charged with breaking down tradition, but I think the time has arrived when a certain amount of tradition ought to be broken down in view of these facts.

Then I would remind the House of a statement made by Lord Runciman's father. This is typical of those who have exploited our people for generations. In his will Lord Runciman, a Tyneside millionaire, made a bitter attack on the Death Duties and Super-tax and charged his heir, the present Lord Runciman, a former President of the Board of Trade, to crusade against them to the best of his ability; and then he left £2,250,000. That is a state of affairs in which we ought not to be prepared to acquiesce. Though the national income is going up in the way that I have shown, we seem to have reached stagnation in the development of the social services. Since 1931 there has been no concession whatever worth talking about to the people to whom we on this side belong. Therefore, on the occasion of this annual review of the nation's finances, we should have been lacking in our duty if we had not drawn attention to the present state of affairs, in order that our people may be represented in this House as they should be represented.

6.8 p.m.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

The hon. Member for Stoke-on-Trent (Mr. Ellis Smith) said that it might be thought that he was breaking traditions. I have no objection to people breaking traditions, but when you break them you should break them fairly. The hon. Member has quoted a great many statistics from the Annual Report of the Commissioners of Inland Revenue, a document with which I am very familiar. If this were the appropriate occasion many of the statements he made would call for quite long comment, because some of his conclusions were quite erroneous. He has made statements with regard to the social services which are quite unwarranted. The suggestion that there has been no improvement in the last six years has not the faintest justification.

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent Stoke

I did not say that. What I said was that there had been no concessions. There have been relative improvements, but no concessions worth talking about.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

There have been enormous concessions; as a matter of fact, concessions greater than we can afford if we are to preserve the employment of our people. That the Debate should be prolonged on Budget night might break tradition—probably it would be a good break—but what is unfair is to introduce a line of arguments not appropriate to this occasion, because things will be said which ought to be replied to and to which there is a very considerable reply. The hon. Member contrasted the wealth of the nation now with what it was 25 years ago, and said that the old age pensioner was still getting only 10s. But the old age pension was originally 5s., and just prior to 25 years ago there was no old age pension at all. The hon. Member totally ignored that fact, and therefore I charge him with an unfair presentation of a case. It is very easy to produce letters explaining hard cases; we all know of them.

He said the amount expended on pensions by the Ministry of Pensions has fallen by so many millions since a certain date. Why has the expenditure declined? The main reason is that children have grown beyond the pension age, that widows have died, that widows have remarried, and that some of the pensioners have died. All the economies or the harshness—if there has been any, which I deny—will not, even if the worst interpretation is placed upon the harshness, account for more than about r per cent. of the reduction. Therefore, it is not fair to introduce on this occasion considerations which are really out of place to-day. There are plenty of other opportunities. When we are reviewing the general expenditure of the nation, to bring in odd cases of complaint about the rate of old age pensioners is to take up an unfair position. The object of the debate on the Budget is that statements may be made in circumstances where, if there is a reply, the reply will probably be made. That is why I think the hon. Member's action has been unfair.

Having said that, I should like to congratulate the Chancellor of the Exchequer on what was really a lucid statement. It is always customary to congratulate the Chancellor upon a lucid statement; sometimes that is a true description and sometimes it is not, but to-day it was true. In one sense this is going to be acclaimed as a very good Budget. I will explain why. On the Third Reading of the Finance Bill last summer I took occasion, in common with one or two other Members, including, I think, the hon. and gallant Member for Thanet (Captain Balfour) to draw attention to the grave increase in public expenditure. I prophesied then that unless we were careful we should find ourselves heading for another disaster comparable to that of 1931. I have taken the view in recent months that this year's Budget would be all right but that next year's would be a disastrous one. In fact, we have got a very unpleasant Budget this year, and it is going to awaken people's minds to the grave realities of the financial situation. In that sense this Budget is a good one, although an unpleasant one.

I am afraid that the increase in the standard rate of Income Tax, even with the important concessions in respect of wear and tear, will have some adverse effect upon trade. The greatest social service we can render is to put people into employment, and anything that hinders that is bad. High taxation is one of the decisive reasons why the number of the unemployed in this country since the end of the War has never fallen below a million, except for a few months immediately after the War. To-day we contemplate quite calmly a level of unemployment during periods of good trade which is four times that which prevailed in pre-war days. We have all got used to that situation, and none of us will face up to the reasons for it. One of the main reasons is the excessive burden of taxation. People think that all this increase is due to rearmament. I have made a comparison of this year with 10 years ago. I have put it on a comparable basis, because then we were receiving reparations and receiving and making payments in respect of War debts. To make a fair comparison that must be left out of account. We were then repaying debt to the tune of £55,000,000 a year. I have made an adjustment for that. I have brought in local expenditure borne out of rates because, on account of the close connection between the National Exchequer and the local authorities, we do not get a proper picture unless it is brought in.

The total expenditure in 1928–29 was £874,000,000. This year it will be £1,234,000,000, including the part which will be met out of loan, an increase in 10 years of £360,000,000 and a sum which, in pre-war value is equal to the total of our pre-war Budget—after making an adjustment for the change in the value of money in the meantime. If we leave out of account all Defence expenditure, the increase in the 10 years has been from £762,000,000 to £892,000,000, about £130,000,000. All parties in this country cheerfully vote for subsidies to this and that industry and this or that social service, and for this or that advantage, and we encourage local authorities to increase their expenditure. The expenditure of local authorities is now so high that people are paying excessive sums in rent. Speaking roughly, on the rent of an ordinary house to-day, taking everything into account, the landlord retains about one-third, where rates are compounded with the rents, and the rest goes as repairs, rates, taxes and the rest of it. Rents are so high that poor people cannot afford to feed themselves properly. We have pushed up local expenditure to a level at which rates become difficult to pay.

Photo of Mr Arthur Pearson Mr Arthur Pearson , Pontypridd

We need rating reform.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

It does not matter what reform we have. If our expenditure is excessive, compared with our income, something has to suffer. You cannot blew your money in one direction without going short in another. That is the real hard lesson that we have to learn. I have been going round the country in the last few months giving lectures upon economy in public expenditure. I have found my small audiences interested, the Press, if they reported a lecture, not particularly interested, and public opinion indifferent. I am to speak in Leeds shortly; perhaps I might get more attention, now that we have this Budget. I am urging the necessity of greater care in public expenditure, and I am certain that the warnings in which I have been indulging will receive much more notice in the next few months than has been the case recently.

I rather regret that the Chancellor has not faced one grave economic problem. I would remind him that in 1931 we were faced with the twin problem of a Budget which we could not balance, and an adverse balance of external payments which ran up to £100,000,000, as far as it could be estimated. There was a certain element of speculation. Unless there is a drastic change in the current year, the adverse balance of payments in the next few months will be worse than in 1931, and the reason for it will be obvious. Any system of public works, whether designed to relieve unemployment or as a form of rearmament, which stimulates internal consumption without doing anything to help the export trade, leads to a large increase of goods. That is what is happening. Germany's complaint that she does not get foreign exchange is self-inflicted upon her by her gigantic scheme of public works and rearmament.

Our difficulties, which will grow, in financing our imports, are due to exactly the same cause. If you examine the trade figures you will find that we import a vast quantity of goods that could be made in this country. The hon. Member who asked at Question Time about German cars coming into this country unfortunately asked how many Opel cars were coming in, and was informed that the Board of Trade did not know. The Board of Trade were not too anxious to give him an answer. I offer him the suggestion that in framing his question next time he should work on different lines. He received a most disappointing answer from the President of the Board of Trade. We must do something to stimulate employment in this country and then our revenue will be more abundant and—

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent Stoke

I gladly accept the advice of the hon. Member, but if he will look at Question 7 he will find that I asked the President of the Board of Trade to state the value of the motor cars that had been imported.

Photo of Mr Herbert Williams Mr Herbert Williams , Croydon South

Unfortunately, the hon. Member asked for information only for 1937. If he had asked for figures for the first three months of this year and for the comparative figures of the first three months of last year he would have received some really interesting information.

We are up against a great problem. I shall not have the slightest hesitation in saying to my constituents that it is only right and just that even the poorest of them should make some contribution to the national emergency. I am rather ashamed of the Labour party to-day. We should regard it as improper, at a time of national emergency, that every person who believes in freedom and democracy should not pay some contribution towards it. It is typical of British people. They are willing to bear their share of the burden, but they require to be satisfied that it is not an unfair share of the total. I do not think any decent and reputable persons, of either small or moderate means, will object in principle to being asked to pay 2d. per pound extra on tea. They will not like it, but they will bear it far more cheerfully than the Labour party seemed to think when the Chancellor announced it to-day.

I am a little distressed, however, that the gentleman who has really imposed the increased Tea Duty is not a Member of this House. The President of the Council of Ministers in the Irish Free State—I think they call it Eire now—is taking the whole of the Tea Duty and one quarter of the Petrol Duty. Perhaps this is not the time to discuss the Irish Agreements, but he is getting away with £4,000,000 a year. It is, financially, the rottenest agreement I have ever seen. They are getting away with two years' payments, and the boodle looks like £130,000,000. I should never congratulate myself on negotiating on those lines. After all, we were getting on quite comfortably without the Agreements. We were much too anxious to negotiate. There is a great mistake which Members of the Government seem only too anxious to make. They do not seem ever to have got married. After all, if you rush at the lady you generally get a rebuff. When they go out after these people, Members of the Government are much too inclined to rush at them, and they have not got away too cleverly. I must not abuse my position by attempting to discuss the Agreements with the Irish Free State, but I would say that it represents nearly £5,000,000 of the deficit that we have to bear, and a substantial part of the new burden cast upon our people. I hope, when the time comes, that we shall have a much more satisfactory explanation than we have had of why these very large concessions have been given—concessions which represent a serious inroad into our financial resources.

I hope that my prediction which this Budget will have an adverse effect upon trade will not be realised, but I am satisfied that from now on all parties will have to agree to abstain from attempting to mass-bribe the electors by promising great concessions which our Budget can no longer afford to pay. The real enemies of Democracy are those who try to bribe the electors. Democracy crashes from mass bribery. The real enemy of the Democracies is the elected person who has not enough courage to tell his constituents the plain truth, even though it is unpleasant. That is the lesson which this Budget teaches us, and I hope that the lesson will be learnt on the side opposite as it has already been learnt on this side of the House.

6.24 p.m.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

We have been told that in the presentation of his Budget the Chancellor of the Exchequer has been very lucid. There is no doubt that his figures were presented as well as it was possible for anyone to read out a series of figures, to this or to any other audience, but when the Chancellor moved away from the presentation of figures and made a slight incursion into the realm of policy it could not be said then that there was evidence of lucidity; rather was there very considerable confusion. He told us that we should have to face and to bear a very heavy burden, and he specially emphasised that a considerable portion of it was due to increased armaments and to the maintenance associated with them. He informed us that pacification in Europe would bring about a situation in which armaments could be reduced and we could be relieved of the burden. Pacification in Europe was the path towards reduction of armaments.

We are all very concerned to get a reduction in armaments, to take off this heavy burden, and we are therefore all concerned in pacification in Europe. The Chancellor of the Exchequer went on to say that armaments in themselves were not sufficient, and that there must also be an active policy such as he said the Government were pursuing with very good results. So, the Government are pursuing a policy of pacification in Europe, with very good results. What is the first result? According to the Chancellor, the first result is the British-Italian pact. Is that a measure of pacification in Europe? [An HON. MEMBER: Yes."]

The Prime Minister has said that if he is fooled he will eat his hat. There is a test. The Chancellor has told us what everybody can understand, that pacification in Europe means a reduction in armaments. We have had the British-Italian pact: are we proposing to reduce armaments? No. The Chancellor told us that £1,500,000,000 was the estimate, but that much more than that sum would be required. So, instead of the British-Italian Pact bringing about a reduction in armaments we are actually faced with an increase in the expenditure. Is that not the clearest possible proof that the pact has nothing to do with peace or with pacification in Europe? I am afraid, if we take the test of armaments, that the Prime Minister will have to absorb a chunk of very indigestible felt. The one thing that we should get out of any measure of pacification should be a reduction in armaments, but we are not to get anywhere near that result. We are to have an increase instead of a decrease.

When it comes to the question of who is to bear the burden of armaments, I would ask who gets the profits out of armaments. The big financiers in the City of London and the big armament makers get all the profit. It is no use telling me or telling the people of this country that the big financiers and armament makers are to pay for armaments. Every day they are lining their pockets, making profits upon profits. The armament makers and financiers are profiting by this rearmament, and they should pay. Who is going to get the defence that the armaments provide? It is the great property owners, the wealthy people like the Cliveden gang, who are going to get all the defence, and therefore they should pay.

I may be told that some arrangements are being made for the protection of the people. We have heard of air-raid precautions, but the proposals that are made for the protection of the people of this country are the most utter rubbish. The talk that we hear about gummed paper round window sashes and the lintels of the doors, so that people may hermetically seal themselves up and be suffocated, is a measure of the air-raid precautions that are proposed. If an explosive bomb drops half a mile or a mile away, the gummed paper may be there, but there will be no windows there. It is those who get the profits and who get the defence that should pay. When we raise such questions, hon. Members opposite are inclined to think that we are talking rashly, that we are making propaganda with no basis in fact. There are traitors to the country and the community; the Chancellor has proved it this afternoon. How is it possible that we can tolerate them in our midst? The Chancellor has had to tell the House that food storage, on which the very life of the country will depend, has had to be arranged in secret, because, if what we were doing were allowed to be known, this gang that is only. concerned with piling up fortune at the expense of the people and of the country would have been enabled to take the fullest advantage of the urgent need of the people as a whole. There should be no compunction in dealing with these people. It is their burden, and it should not be laid on the masses of the people. If the responsibility were placed on them for maintaining armaments, there would be none of this holding up of social services.

It is true that a little over 25 years ago there were no old age pensions. At first they were 5s. a week; then they were increased to 10s. Are they never to be increased beyond that? Are they to stop there? We are told that it is not possible to advance because of this heavy burden of armaments. But for that, no Member of the House would have any excuse to raise against an increase of old age pensions for the people of this country. No section of the people have given greater service to the country as a whole than these old people. Some of them have served over 50 years in industry and in the home, building up the cities, the towns and the villages. But we cannot advance this social service which so urgently needs to be advanced. When the hon. Member for Rochdale (Mr. Kelly) put a question about the Association of Old Age Pensioners, the Financial Secretary to the Treasury asked what association he meant? The hon. Member meant the Scottish Old Age Pensioners' Association which has a branch in the constituency of the Financial Secretary, and I hope he will hear from them before very long. There is no demand for any social reform that meets with so much acceptance in every part of the country as this demand for increased old age pensions, but it cannot be met; everything must go to armaments. And yet the people who are profiting by armaments, and who will be protected by armaments, are not being forced to pay for them, as we say they should be, so as to leave the general finances of the country free for advances in social services.

Let me say just a word about tea. The hon. Member for South Croydon (Mr. H. G. Williams) who is always wrong no matter what he talks about, is wrong on this question of tea. He does not seem to understand the objection to taxation on tea. He said that in his constituency every home, even the poorest of the poor, has a responsibility for contributing towards the defence of the country, and that, while it is not a pleasure, they will all face up to it provided that the tax is fair. He gives that as a justification for an extra tax of 2d. per lb. on tea. I do not know how the Chancellor could allow himself to be persuaded to impose such an unjust tax. He is meticulously careful that the extra 6d. on the Income Tax should not weigh on industry, that it should not weigh on the small man. How does he square his careful consideration in that regard with the simple, blatant presentation of 2d. per lb. on tea?

As my hon. Friend the Member for Stoke-on-Trent (Mr. E. Smith) says, the old age pensioners will pay out of their 10s. a week. The only luxury they have is a cup of tea. I can understand those who spend a night swimming in champagne superciliously sneering at the elderly man or woman having a cup of tea, but this tax applies to a large number of poor families, because there are so many poorly paid workers in this country. The Unemployment Insurance Statutory Committee reported that they could not give a shilling a week for children of unemployed people because wages in some categories were so low that it would bring the unemployed above their level. These people have to buy the cheapest tea they can get—tea at is. a pound. Will any hon. Member opposite tell us what he pays for tea? Probably 5s. a pound would be the cheapest, if they use good tea. A pound of tea at 5s. will go more than five times as far as a pound of tea at Is. The cheap tea is just dust. The old age pensioner or poor working-class family, buying tea at 1s. a pound, is paying 3s. 4d. in the£in taxation, while the better-off family is paying 8d. in the£Is that a just tax? Would anyone here try to justify it? This is something that should not be tolerated, and I appeal to hon. Members opposite to force its withdrawal. It is the very people who cannot afford to pay that have to pay the tax, and the poorer they are, the more they pay. Can anyone justify that?

It is true that the burden of armaments is holding everything back, and the solution for the burden of armaments is the pacification of Europe. But the pacification of Europe will never be attained by making deals with the aggressors. That is the path of war. The only way to bring about the pacification of Europe is to get rid of the Government which the Chancellor of the Exchequer represents, and to substitute a Government that will pursue a real policy of pacification based on collective security. When you get the peace forces of Europe united, you can afford to remove the burden of armaments, so that no more will the resources of this or any nation be wasted in building up the forces of destruction. When true pacification in Europe comes about based on collective security, and we have overcome the destructive course we are now pursuing, then all our millions can be used in a good cause—to advance and expand all the much desired and very necessary social services.

6.44 p.m.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

This Debate has ranged over a very wide field. Whenever I hear about pacification and collective security, I wonder what happens if you are not able to put something handsome and strong in the collection. It is no use thinking that the other fellow is going to do it. No number of unarmed people will give you security. The wolf never cares how many sheep there are. The hon. Member for West Fife (Mr. Gallacher) would like us all to be sheep. That is what he would like to do, to let the wolves get at us. I thought the Chancellor, when he spoke of the three necessities and brought in Defence as last, erred. All that a man has he will give for his life. That is the first duty of government, and is what Governments and organised nations exist for, to defend the people. The hon. Member for West Fife and the right hon. Member for Caithness and Sutherland (Sir A. Sinclair) are singularly ignorant on the question of tea. The poorer classes do not drink cheap and dirty tea. It is in the West End that you will find that. You will find the best tea drunk by the peasants of Connaught. You will find the cheap tea drunk in the West End. It may be because they have maids, and do not like to give them good tea. I happen to live in a. district where there is a row of small shops supplying poor people, and I get better meat there than in the big shops, and get it cheaper. I was able to buy beautiful fresh English kidneys there for threepence. It is a good thing to have a tax on tea; you get a better quality tea. When the Tea Duty was taken off you could hardly buy decent tea in London. All the poor stuff was poured in from Java; but when the tax was restored this cheap Javanese stuff could not stand the tax. Tea is simply a drug that comes from the East.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

Better than whiskey, anyway.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

I do not think it is. It is a scandalous thing that that peculiar Scottish beverage should be so highly taxed. There is a diminishing revenue from whiskey, because the tax is too high. It is a good medicine.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

For those who take it regularly. I think it is a shocking thing that this particular Scottish industry should be selected for this peculiar tax; and it is not yielding the revenue it would yield if the tax was lowered.

Photo of Mr Frederick Montague Mr Frederick Montague , Islington West

The hon. and learned Member said that by increasing the tax on tea you get into consumption a better quality tea. Does the same principle apply to whiskey? If not, why not?

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

The tax on tea represents probably less than a quarter of its value.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

Yes. Tea would come into the market at about 4d. a lb. from abroad—that is the cheapest tea; what you call shilling tea; whereas the value of whiskey is about 4d. per bottle and the tax 8s. 5d., or 25 times its value. It has killed the barley industry. I admit that the Southern Scot should be careful in the use of the Highlander's drink. He cannot stand up to it. The Highlander distilled his own, but the English Parliament forbade this. That was one of the evils that followed the conquest of the Highlands after Culloden. They also took away his chief and gave him a landlord and deprived him of his clothing and his language. Another tax that might be desirable is a tax on advertisements, especially newspaper advertisements. The newspapers have had the benefit of all the money that has been spent on education. It has given them millions of readers. Why should we not get some of it back? It would be the simplest and most easily collected of all taxes, and all the big newspaper proprietors would willingly pay. You could easily get a 5 per cent. turnover tax. Let them take it out of their advertisers. They might have a few less advertisements, but the papers would be all the better if they had less advertisements. They would be much easier to read.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

Then there is the question of road transport. Here is a way in which we might relieve this country from its present state and make it better. I admit that it is infinitely better than when I was a boy, for I remember that in 1879 it was almost as bad as in the seventeenth century, when one-fifth of the population of Midlothian died of sheer hunger. There is an enormous improvement.

Photo of Mr Frederick Macquisten Mr Frederick Macquisten , Argyll

There was not malnutrition then; there was no nutrition at all. The railways have congregated the people into towns where they mostly live in tenements, crowded together under most unhealthy conditions. What is called slum clearance is really setting up gaols for people. If you release road transport, build the necessary roads and devote them entirely to motors, you will see the population disperse over the countryside very quickly. I cannot understand why some of the country landowners do not support it. They would get the new ground rents. It would break the land monopoly in the big towns at once. I have said before that this House is rotten with railway directors, and we do not have a Minister of transport at all; we have a Minister for preventing transport. Look at the taxes on motors. I wonder how the railways would like a tax on their motive power, say a tax of 5s. a ton on coal. Good roads and free transport on them would cheapen road transport, and the people would be living in the country, with gardens in which they could grow fresh vegetables. What is the use of having a "Keep Fit" campaign when you are going to drive people together to the cities, to live in these conditions? I wish the Labour party would take up this matter. Let them go in for a policy—I do not know whether it is German or not, but the Germans are building roads, and so are the Americans, and the result is that the population is being dispersed, and happiness is being created, and the working man can have a house of his own and a little ground attached to it. It makes all the difference between creating good citizens and bad citizens. There is three or four times more capital sunk in roads than in railways, and far more men employed, and they will yet unite and compel both parties to restore to the people the freedom of the roads, which they have taken from them.

6.55 p.m.

Photo of Mr John Tinker Mr John Tinker , Leigh

Probably we shall give the hon. and learned Member for Argyll (Mr. Macquisten) an opportunity to help us in resisting the tax on motor vehicles. We find that many hon. Members on that side criticise the Government, and when the time comes to face up to it they are absent, either by being paired or in some other way; but I trust that the hon. and learned Member will express his indignation by recording his vote on the Amendment, which we shall certainly move when the time comes, in respect of taxation of motor vehicles. The hon. Member for South Croydon (Mr. H. G. Williams) criticised hon. Members on this side for bringing in matters which cannot be replied to in a Debate of this kind. It is really remarkable how the hon. Member gets away with it. He then wandered all round himself, and I wonder who is to reply to his remarks. He spoke of taxation of local authorities. We all know the position of local authorities. Many of them are trying to meet the needs of the unemployed by giving them relief, and of old age pensioners by granting them further relief. Those things could be met by national taxation; but the hon. Member will not suggest that. He says that he goes out lecturing, and that he has not had such well-attended audiences. One can quite understand that.

The Chancellor's statement was clear and lucid, and he explained very well the things which he wanted to explain. Some of the other things, he said, would have to be explained later on. We agree with that. What I did not like was when he patted himself on the back in regard to the Italian Agreement. It was unfair for him to take credit for that, before the matter comes up for debate. Many of us on this side are entirely opposed to it. We think that the Government have gone in the wrong direction in treating with a man who has broken all agreements up to the present. But I will leave that matter until a time when it can be gone into properly. The Chancellor dealt with the need for increases in taxation. As his speech developed, one could see that there had to be an increase in Income Tax. I do not quarrel with that. When necessity calls, the people who have the money ought to pay. The returns show that there is plenty of money in the pockets of the Income Tax payers, in comparison with other sources. But I am sorry that the Chancellor has levied this tax on tea. Last year I advocated another method of finding additional money. I advocated reducing the limit for Supertax from £2,000 to £500. I am satisfied that, if that were done, the Chancellor would be able to get the additional money that he expects to get from the Tea Duty.

I wish he would get away from the argument that everybody has to contribute a little for national Defence. People believe in national Defence, but they do not see that it ought to come out of a commodity like tea, where the poorest of the poor have to bear an unfair burden.

The question of the old age pensioner ought to have been attended to a long time ago. Year after year we haw advocated the need for something more being done. I admit that things have improved as the years have gone on and the pension has been raised to 10s., but would any one say that that is enough on which to exist? I may be old that the 10s was never meant as a subsistence level. It was meant in addition to something else that is in reserve. With the increased mechanisation that there is, people are put out of work at an earlier age than they ever were before. We have public authorities telling us the feelings of men of 45 who are out of work. imagine the expectation of their having some reserve to fall pack upon when they reach the age of 65. All the reserves that a working man likes to build up are dissipated and, when he reaches 65, there is no reserve to fall back upon at all. I have given notice of a Motion on the subject but we have never had an opportunity of discussing it. My hon. Friend the Member for Rochdale (Mr. Kelly) was informed on the day before the Adjournment that the number of old age pensioners was 2,589,984. To give them 5s. a week extra, which is little enough in present circumstances, would call for £35,669,000 from the Treasury. It might involve 6d. or 9d. on the Income Tax but it would not be altogether lost. The money would be spent week by week, and that would create employment. I am satisfied that it would be for the benefit of trade, and it would provide a better standard of life for these aged people. I have a letter from Kent which says that half a crown a week would go a long way. The writer, one of two sisters living together, aged 65 and 70, gives their budget. They spend on rent 8s. 6d., coal 2s. 7d., gas 2s., life insurance 4d.—total, 13s 5d. There is 6s. 7d. left for these two people to live on.

That is typical of a large number of letters that we receive. When we know that the resources of these people, who have proved themselvs decent citizens, are exhausted, the country ought to recognise that something more should be given. We are told that it cannot be done because of the enormous expenditure on armaments, but the Chancellor is defending people who have much more to lose than these aged people, the very rich and the moderately rich. It is unfair to keep these people in poverty when we have vast sums of wealth at our disposal. I have another letter from a colleague with whom I worked in the mines He is turned 65 and he has spent 53 years in the mine and has no resources at all behind him. These are the men who have built up the country. We have never had any help from the other side in this direction. They will have to face the country well before five years are up. At the time of the Fulham by-election I heard a Member opposite say it was won not on foreign affairs but on what he called the administration of the country. We won the election on social reform. I believe there is a lot in it. When the next election comes round the payment of old age pensioners will play a very prominent part. The feeling is growing throughout the country that these aged people are not getting fair treatment. I do not know whether the Chancellor can do anything before this Budget is completed but, if the Government cannot do it this time, I appeal to them to do something in the next Budget for this deserving class of people. We have a scheme in our programme which is better than what I am advocating now, but at the moment I am only making the reasonable demand that the Government should advance the pension by 5s. a week.

7.10 p.m.

Photo of Mr Robert Tasker Mr Robert Tasker , Holborn

I agree with a good deal of what the hon. Member has said, but I rather regret the tone of his speech, implying that sympathy with the old age pensioner is confined to the benches opposite. That is quite wrong. I was chairman of the London Old Age Pension Committee from 1922 to 1937 and I know something about the conditions. I do not dispute his figure that 5s. a week is equivalent to a charge of £33,000,000 a year, but when he drew a picture of what 15s. would do, he might have said that £1 would be better than 15s., 25s. better than a £1, 30s. better than 25s. and so on. We have to consider the finances of the country and there is a limit to the amount of taxation that can be extracted from the people. I feel sorry that the Tea Duty is to be increased. I suppose it would cause a good deal of confusion if the Chancellor were to reconsider that and see whether, instead, he could not commence the Surtax at £1,500. I wonder whether, in connection with the storage of food, the Chancellor, instead of encouraging the collection of food in large quantities, would encourage people to store food which will keep in their homes. If that were done in a million homes it would save distribution in time of peril and it would not be so liable to damage as a large collection of produce in one given place. I wonder whether some encouragement could be given by making an allowance on an undertaking being given that the food will not be used except in case of emergency.

I should like to call attention to the method adopted by the Treasury in the control of the finances of municipal and other authorities and private individuals. The methods adopted by the Treasury resemble those which must have existed at the time of Palmerston. If a municipal authority or a Government Department wishes to spend even a very small sum of money, it has to obtain authority, and that authority is the Treasury. The matter passes from one Department to another, and if it is decided to permit the expenditure, the auditor has to be satisfied that the money has been satisfactorily expended. This entails an enormous amount of labour. On one occasion I asked the Controller of the Board of Trade to be good enough to find out how many times a ball of string had to be entered in the books of the Board of Trade. It took many months to find out, and he was as astonished as I was myself, for it was reported to him that that ball of string was entered in no fewer than 20 different books. What that cost goodness knows. Government Departments and municipal authorities are at the mercy of the Treasury. If we were to be given a reduction in taxation, it would encourage those who produce wealth rather than those who indulge in administration, where you may find one man doing a job and three or four other men engaged in seeing that he does not make a mistake.

I will not take advantage of the opportunity of addressing the House to range over many of the subjects which other hon. Members have mentioned, but there is one thing I should like to mention in connection with road transport. The extraction of the enormous sum of money from the motor industry is a gross betrayal of that industry and of those who use motor cars, though the present Chancellor of the Exchequer is free from blame, as he is only following precedent. I believe that the right hon. Gentleman the Member for Epping (Mr. Churchill) was the first to take action in this direction. It was originally intended that the money collected from the motor industry should be devoted to the formation of roads and the like, and now we find that it is all being absorbed in other directions and nothing is being done, except a bit of widening and straightening out here and there. I suggest that the Minister of Transport should make representations to the Chancellor of the Exchequer as to what a proper system of road construction would mean in this country. It would do much towards the development of industries which at the present time are almost dormant.

The right hon. Gentleman the Leader of the Liberal party seemed to derive great satisfaction from the fact that he had predicted a slump. I hope that for the sake of our country we shall encourage commerce and industry, upon which we live, rather than that we should be pessimistic and talk like a lot of old women and Jeremiahs.

7.20 p.m.

Photo of Mr Valentine McEntee Mr Valentine McEntee , Walthamstow West

I should like to add a word or two to what has already been said by my hon. Friend the Member for Leigh (Mr. Tinker) and to extend his remarks a little. All of us on this side, and, I think, many hon. Members opposite, will regret that the Chancellor of the Exchequer has thought it necessary to put any additional tax on tea. I can remember the time when the Chancellor of the Exchequer himself was one of those people who were very much opposed to any tax on what used to be called by the Liberals of that time the breakfast table. I have heard him make many speeches in which he has said that any form of taxation on the breakfast table, including a tax on tea, was to be regretted and deplored. The Chancellor of the Exchequer, like many other Members who sit on the Government Front Bench, has changed his mind.

The point to which I would like the Chancellor of the Exchequer and the Government to give some attention is the fact that the increased production of armaments is causing a rise in prices and that the prices of food generally are going up. People with fixed incomes particularly are suffering in consequence of the rise in the price of food. Many hundreds of thousands of the working class have their wages fixed on a cost-of-living basis, but people who draw the old age or widow's pension or Civil Service, police or military pension, and many others with small incomes, are feeling very seriously the increased cost of the commodities that they have to purchase. I suppose that there is no Member in this House who has not received letters similar to the letter read to-day by my hon. Friend the Member for Leigh. I have received many, including one within the last few days in which the writer abuses me for not doing more than I have been doing to obtain an increase in his pension. The effect of the increases in prices means that people with fixed incomes, particularly old age pensioners, cannot buy the amount of commodities that they were able to purchase a year or two ago. I had a list of figures a few months ago referring to 1934, which showed an increase in the cost of living of 17½ per cent. An old age pensioner who could purchase 10s. worth of goods at that time would now be reduced to purchasing 8s. 3d. worth of goods. That is very serious to old age pensioners or those who are living on small fixed incomes.

There is another serious aspect of this matter. These people have to purchase fewer goods and therefore fewer men and women are employed in the production of goods. That is a sort of vicious circle which ought to be seriously considered by the Government. There have been a great many discussions as to what the Government propose to do. All that we seem to be able to ascertain is, that they are trying to increase overseas trade, which nobody disputes, though they are not meeting with any marked success in that direction. It appears that we have settled down to the belief that it is the normal thing and the thing to be expected, that there shall be roughly 1,500,000 men and women permanently unemployed. That is a very serious state of affairs, and I hope that it is one that the electors of this country will not allow to continue under this or any other Government. I do not know that it is even necessary that this matter should be considered in the Budget at all. My impression is that it is not necessary, and that if the Chancellor of the Exchequer and the Government were in earnest and desired to increase the old age pension, it could be done very easily. The Chancellor of the Exchequer could easily find a way. Old age pensioners are feeling the pinch of poverty at the present time, and I do not think that we are asking anything that is unreasonable when we ask the Government to consider the effect of their own policy. It increases prices and reduces the purchasing power of the people, and we have a right to ask and to expect the Government to give serious consideration to the position of old age and other pensioners, and to do something to enable them to get back to something like the standard which existed three or four years ago.

Question put, and agreed to

EXCISE DUTY ON SPIRITS USED FOR MAKING POWER METHYLATED SPIRITS.

Resolved, That—

  1. (1) on and after the second day of May, nineteen hundred and thirty-eight, there shall be charged on all spirits used for making power methylated spirits a duty of Excise of ninepence for every gallon of the spirits so used;
  2. (2) in this Resolution the expression ' power methylated spirits ' means spirits methylated in the manner prescribed for making power methylated spirits by regulations for the time being in force under Section thirteen of the Finance Act, 1924."

INCREASE OF CUSTOMS DUTY ON TEA.

Resolved, That as from the twenty-seventh day of April, nineteen hundred and thirty-eight, the Customs Duty on tea not being an Empire product shall be at the rate per pound of eightpence instead of sixpence, and the Customs Duty on tea being an Empire product shall be at the rate per pound of sixpence instead of fourpence: And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

CUSTOMS DUTY ON REIMPORTED FILMS.

Resolved, That—

  1. (1) no film printed, or produced by any other process, in the United Kingdom and exported therefrom shall be exempt from Customs Duty by virtue of any enactment relating to the exemption of reimported goods, unless the Commissioners of Customs and Excise are satisfied either that no imported film was used in the printing or production of the film as aforesaid, or that the duty chargeable on all imported films so used has been duly paid;
  2. (2) in this Resolution the expression ' film ' means a positive or negative cinematograph film within the meaning of Section three of the Finance Act, 1925, or a positive or negative sound track, whether developed or not."

INCOME TAX

CHARGE OF TAX.

Resolved," That—

  1. (1) Income Tax for the year 1938–39 shall be charged at the standard rate of five shillings and sixpence in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine;
  2. (2) all such enactments as had effect with respect to the Income Tax charged for the year 1937–38 shall have effect with respect to the Income Tax charged for the year 1938–39:
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

HIGHER RATES OF INCOME TAX FOR 1937–38

Resolved, That Income Tax for the year 1937–38 in respect of the excess of the total income of an individual over two thousand pounds shall be charged at rates in the pound which respectively exceed the standard rate by amounts equal to the amounts by which the rates at which Income Tax was charged in respect of the said excess for the year 1936–37 respectively exceeded the standard rate for that year: And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

AMENDMENT AS TO RELIEF IN RESPECT OF LIFE INSURANCE PREMIUMS.

Resolved, That, in cases where the allowance to be given in respect of life insurance premiums and other payments under section thirty-two of the Income Tax Act, 1918, is restricted by paragraph (f) of sub-section (3) of that section as amended by section twenty-three of the Finance Act, 5935, the rate of tax by reference to which the allowance is so restricted shall be ten thirty-thirds of the standard rate instead of one-third of the standard rate: And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

AMENDMENTS OF SCHEDULE C AND CONSEQUENTIAL AMENDMENTS OF SCHEDULE D.

Resolved, That—

(1) for all the purposes of Income Tax under Schedule C and Rule r of the rules applicable to Case III of Schedule D, the expression ' public revenue ' shall, except where the context otherwise requires, include the public revenue of any Government whatsoever and the revenue of any public authority or institution in any country outside the United Kingdom;

(2) where a banker or any other person in the United Kingdom, by means of coupons received from any other person or otherwise on his behalf, obtains payment of any foreign dividends elsewhere than in the United Kingdom, the tax under Schedule C shall extend to the dividends and the person obtaining payment shall be treated for the purpose of the paying agents rules as if he were intrusted with the payment thereof;

(3) where a banker in the United Kingdom sells or otherwise realises coupons for any dividends, being foreign dividends, and pays over the proceeds to any person or carries them to his account, or where a dealer in coupons in the United Kingdom purchases any such coupons as aforesaid otherwise than from a banker or another dealer in coupons, the tax under Schedule C shall extend to the proceeds of the sale or other realisation, and the paying agents rules shall apply to those proceeds as if they were dividends, and shall apply to the banker or dealer as if he had been intrusted with the payment thereof;

(4) the provisions of the last two foregoing paragraphs shall apply for the purpose of Rule 7 of the miscellaneous rules applicable to Schedule D (which relates to interest, etc., from colonial and foreign companies) subject to any necessary modifications;

(5) for the purpose of this Resolution—

  1. (a) the expression ' banker ' includes a person acting as a banker and, notwithstanding anything in the paying agents rules, includes the Bank of England and the Bank of Ireland;
  2. (b) the expressions ' dividends,' coupons ' and ' coupons for any dividends ' have the same meanings as in the paying agents rules and the expression ' foreign dividends ' means dividends payable elsewhere than in the United Kingdom, whether they are also payable in the United Kingdom or not;
  3. (c) the expression ' paying agents rules ' means the rules applicable to Schedule C as to interest, etc., with the payment of which persons other than the Bank of England, the Bank of Ireland and the National Debt Commissioners are intrusted;

(6) the provisions of Schedule C and Schedule D shall be deemed always to have had effect subject to the foregoing provisions of this Resolution:

Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven and before the twenty-seventh day of April, nineteen hundred and thirty-eight, tax could have been charged on or deducted from any profits under Schedule C or the said Rule 7 if the provisions of this Resolution had been enacted at that time, but has not been so charged or deducted, those profits shall be chargeable under Case VI of Schedule D for the year of assessment in which the profits arose:

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

TRANSFERS OF INCOME ARISING FROM SECURITIES.

Resolved, That—

  1. (1) where, in any year of assessment, the owner of any securities (in this Resolution referred to as ' the owner ') has sold or transferred or hereafter sells or transfers the right to receive any interest payable, whether before or after the sale or transfer, in respect of the securities without selling or transferring the securities, the following provisions shall have effect and shall be deemed always to have had effect:—
    1. (a) that interest, whether it would or would not be chargeable to tax apart from the provisions of this Resolution, shall, for all the purposes of the Income Tax Acts, be deemed to be the income of the owner or, where a beneficiary is entitled to the income arising from the securities, the income of the beneficiary, and not the income of any other person, and be deemed to be income for that year;
    2. (b) in the case of a sale or other realisation the proceeds whereof are chargeable to tax under Schedule C or Rule 7 of the miscellaneous rules applicable to Schedule D. the amount of the interest deemed to be the income of the owner or beneficiary shall be an amount equal to those proceeds;
    3. (c) in any other case, tax at the standard rate in respect of the interest shall be chargeable on the owner or beneficiary under Schedule D;
  2. (2) nothing in the foregoing provisions shall affect any provision of the Income Tax Acts authorising or requiring the deduction of tax from the interest, or from the proceeds of any subsequent sale or realisation of the right to receive the interest;
  3. (3) for the purpose of this Resolution, the expression ' interest ' includes dividends, annuities and shares of annuities, and the expression securities ' includes stocks and shares."

FUNDING BONDS ISSUED IN RESPECT OF INTEREST ON CERTAIN DEBTS.

Resolved, That—

  1. (1) where any funding bonds are issued to a creditor in respect of any liability to pay interest on any debt to which this Resolution applies, the issue of the bonds shall be treated for all the purposes of the Income Tax Acts as if it were the payment of an amount of that interest equal to the value of the bonds at the time of the issue thereof;
  2. (2) where any person by or through whom any such bonds are issued in any year of assessment would be required under the said Acts to deduct tax from the said amount of interest if it had been actually paid by or through him, he shall retain bonds the value whereof at the time of issue is equal to tax at the standard rate for that year on the said amount of interest, and shall be acquitted in respect of the retention in like manner as if he had deducted such tax from the interest, and shall be chargeable with such tax accordingly: Provided that the Commissioners of Inland Revenue, if satisfied that it is impracticable to retain bonds as aforesaid, may relieve any such person from the foregoing provisions of this paragraph on such conditions as they think fit, and thereupon tax in respect of the amount of interest treated as having been paid by the issue of the bonds shall be chargeable for that year under Case VI of Schedule D on the persons receiving or entitled to the bonds;
  3. (3) the debts to which this Resolution applies are any debts incurred, whether in respect of moneys borrowed or otherwise, by any Government, public authority or public institution whatsoever, or by any body corporate whatsoever, and for the purpose of this Resolution the expression ' funding bonds ' includes any bonds, stocks, shares, securities or certificates of indebtedness;
  4. (4) the foregoing provisions of this Resolution shall be deemed always to have had effect:
Provided that, where at any time after the twenty-ninth day of July, nineteen hundred and thirty-seven, and before the twenty-seventh day of April, nineteen hundred and thirty-eight, any bonds could have been retained under this Resolution if its provisions had been enacted at that time but have not been so retained, an amount equal to the value of the bonds at the time of the issue thereof shall be chargeable under Case VI of Schedule D for the year of assessment in which the bonds were issued: And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1953.

PROVISIONS AS RESPECTS SETTLEMENTS.

Resolved, That—

  1. (1) there may he included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to—
    1. (a) settlements which are wholly or partly revocable or otherwise determinable in any circumstances whatsoever (including settlements whereunder the settlor's liability might cease on payment of a penalty);
    2. (b) settlements whereunder any income or property of any description is, or will or may become, payable to or applicable for the benefit of the settlor in any circumstances whatsoever;
    3. (c) the disallowance, in computing total income for purposes of Surtax, of the deduction of sums paid by a settlor to the trustees of the settlement or persons connected with the settlement:
    4. (d) sums paid directly or indirectly, whether by way of loan or repayment of loan or otherwise, by the trustees of a settlement or persons connected with a settlement to the settlor;
  2. (2) subject to such qualifications and exceptions as Parliament may determine, the said provisions shall apply to any settlement wherever or whenever made or entered into, and shall apply for the purposes of assessment to Income Tax for the year 5937-38 and subsequent years;
  3. (3) for the purpose of this Resolution the expression ' settlement ' includes any disposition, trust, covenant, agreement or arrangement, and the expression ' settlor' includes any person by whom a settlement was made or entered into directly or indirectly and, in particular, includes any person who has provided or undertaken to provide funds directly or indirectly for the purpose of a settlement, or has made with any other person a reciprocal arrangement for that other person to make or enter into a settlement and references to a settlor include references to the wife or husband of a settlor."

AMENDMENTS AS TO AVOIDANCE OF INCOME TAX BY TRANSFER OF INCOME ABROAD.

Resolved, That there may be included in any Act of the present Session relating to finance such amendments of Section eighteen of the Finance Act, 1936 (which contains provisions for preventing avoidance of Income Tax by transactions resulting in the transfer of income to persons abroad) as Parliament may determine, and any such Act may provide that the said amendments shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years, and shall apply in relation to transfers of assets and associated operations whether carried out befor or after the date of this Resolution

ADMINISTRATION OF ESTATES.

Resolved, That—

  1. (1) there may be included in any Act of the present Session relating to finance such provisions as to Income Tax as Parliament may determine in relation to the estate of a deceased person and the income arising therefrom before the completion of the administration of the estate, in relation to persons having an interest in the residue of an estate before, on and after the ascertainment thereof and persons to whom legacies are bequeathed by a will, and otherwise in relation to the administration of estates;
  2. (2) any such Act may provide that the said provisions shall have effect for the purpose of assessment to Income Tax for the year 1937–38 and subsequent years and shall apply in relation to the estate of a deceased person whether he died before or after the commencement of that year."

VALUATION OF TRADING STOCK ON DISCONTINUANCE OF TRADES.

Resolved, That—

(1) when any trade is discontinued or treated for the purposes of Income Tax as if it had been discontinued, any trading stock then belonging to the trade shall be valued, in computing for the purposes of Income Tax the profits or gains of the trade, as follows:—

  1. (a) in the case of any such trading stock which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade in the United Kingdom and may deduct the cost of the trading stock as an expense in computing the profits or gains of that trade, the value thereof shall be taken to be the amount realised on the sale or the value of the consideration given for the transfer;
  2. (b) in the case of any other such trading stock, the value thereof shall be taken to be the price which it would have realised if sold in the open market at the discontinuance;

(2) provision shall be made for determining any questions arising under sub-paragraph (a) of the last foregoing paragraph for the purpose of computing the profits or gains of both the trades concerned;

(3) for the purpose of this Resolution, the expression "trading stock" includes property of any description, whether real or personal."

LOSSES OF CAPITAL REDEMPTION BUSINESS.

Resolved, That—

(1) where any person carries on capital redemption business—

  1. (a) the capital redemption business, if carried on in conjunction with business of any other class, shall be treated for the purposes of Income Tax as a separate business; and
  2. (b) in ascertaining whether and to what extent he has sustained a loss in the carrying on of the capital redemption business for the purpose of setting off or giving relief in respect of the loss, any of his income derived from investments held in connection with the capital redemption business shall be treated as part of the profits arising from that business;

(2) in this Resolution the expression ' capital redemption business ' means the business (not being life assurance business or industrial assurance business) of effecting and carrying out contracts of insurance, whether effected by the issue of policies, bonds or endowment certificates or otherwise, whereby in return for one or more premiums paid to the insurer a sum or series of sums will become payable to the insured in the future."

ESTATE DUTY.

ESTATE DUTY IN RESPECT OF RESIDUARY ESTATES.

Resolved, That—

  1. (1) there may be included in any Act of the present Session relating to finance such pro- visions as to Estate Duty as Parliament may determine in relation to the residue of the estate of a deceased person and to the inclusion of property representing such residue in the property that passes or is deemed to pass on the death of a person dying before the completion of the administration of the estate;
  2. (2) any such Act may provide that the said provisions shall have effect and be deemed always to have had effect in relation to a person so dying whether before or after the commencement of the said Act."

ESTATE DUTY IN RESPECT OF PROPERTY TRANSFERRED TO, AND SHARES IN, CERTAIN COMPANIES.

Resolved, That—

  1. (1) for the purpose of determining the rate of Estate Duty, property which is deemed to pass on the death of any person by virtue of Section thirty-four or Section thirty-five of the Finance Act, 1930, shall not be an estate by itself but shall be aggregated with other property passing on the death;
  2. (2) for the purpose of the definition of ' the value of the total assets of the company ' contained in Section thirty-eight of the said Act, the deduction to be made under paragraph (i) in respect of any debentures, debenture stock or preference shares of the company shall, instead of being the par or redemption value thereof whichever is the greater, be the principal value thereof."

ESTATE DUTY IN RESPECT OF SETTLED PROPERTY.

Resolved, That the exemption conferred by Subsection (3) of Section five of the Finance Act, 1894, in the case of settled property where the interest of any person under the settlement fails or determines by reason of his death before it becomes an interest in possession and subsequent limitations under the settlement continue to subsist, shall cease in cases where the property would, if that Sub-section had not been enacted, have been deemed to pass on the death otherwise than by reason of the failure or determination of the interest.

MISCELLANEOUS.

NATIONAL DEFENCE CONTRIBUTION.

Resolved, That Part III of the Finance Act, 1937 (which relates to the National Defence Contribution) shall be amended—

  1. (a) so as to re-define the circumstances in which a body corporate is to be deemed to be a subsidiary of another body corporate for the purpose of Section twenty-two of the said Act (which provides for the amalgamation of the profits and losses of subsidiary and principal companies) and of any provision made in pursuance of this Resolution;
  2. (b) so as to alter the provisions of the said Section twenty-two relating to the giving of a notice thereunder by a principal company as respects a subsidiary;
  3. (c) so as to disallow, in computing profits, any deduction in respect of any interest, annuity or other annual payment, or any royalty or rent, paid by one body corporate to another, where one of them is a subsidiary of the other or both are subsidiaries of a third;
  4. (d) so as to disallow the carrying forward of any loss under sub-paragraph (2) of paragraph 2 of the Fourth Schedule to the said Act, if and to the extent that the loss has been deducted from or set off against the profits arising from a trade or business, whether under the said Section twenty-two or otherwise;
and that the said amendments shall be deemed to have had effect as from the date on which the said Part III came into operation.

RESTRICTION OF RELIEF FROM TRANSFER STAMP DUTY ON CERTAIN INSTRUMENTS.

Resolved, That any Act of the present Session relating to finance may restrict, in such manner as Parliament may determine, the relief from Stamp Duty given by Section forty-two of the Finance Act, 1930 (which relates to instruments the effect whereof is to convey or transfer a beneficial interest in property from one associated company to another).

AMENDMENT OF LAW.

Motion made, and Question proposed, That it is expedient to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise) and to make further provision in connection with finance.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[Captain Dugdale.]

Resolutions to be reported To-morrow.

Committee also report Progress; to sit again To-morrow.

The remaining Orders were read, and postponed.