– in the House of Commons am ar 3 Mai 1922.
For two days Members in various parts of the Committee have praised the concise and lucid way in which the Chancellor of the Exchequer presented his Budget to us, and I should not like to be behind any of them in" acknowledging that. We were able to follow, by means of the draft papers which were put in our hands, the figures which the right hon. Gentleman gave, and to understand, by the time he finished, the exact position with regard to the figures of the past year and his Estimates for the current one. I suppose there is no man who in private, political, or social circles is more popular with both sexes than the Chancellor of the Exchequer. He has a way of saying kindly things to everyone, and when he cannot say kind things, he does not say anything at all. He is particularly a genius at saying nice things about the present Government. When he was Minister of Labour, when he was President of the Board of Trade, and now that he is Chancellor of the Exchequer he, on all occasions, assures us what a wonderful Government we have, and how perfect are all their achievements. I cannot help feeling that when he was at the Cannes Conference, he used 'to stand by the seashore at about 5 o'clock in the afternoon, gazing at the sun setting behind the Esterel mountains, and saying, "Thank God for a British Government that gives Prance such a sunset!" He is particularly well satisfied with the Government with regard to finance. He says, "Need we be ashamed of achievements like these?" I am afraid there are a good many in this House, and still more outside, who are not at all satisfied with the Government's achievements with regard to finance. We believe that for several years they have spent far more money than they ought to have done, and that the country has suffered heavier taxation than it could possibly bear.
It has been this taxation, and particularly one impost, to which I desire to refer, which has done as much as anything else to bring about the unparalleled industrial depression from which we are suffering to-day, when 2,000,000 are unemployed. The particular impost to which I have referred was that by which, under the Budget of 1920, the Excess Profits Duty was raised from 40 per cent, to 60 per cent. Let mc remind the Committee of a little of the history of the industrial life of this nation. Before the War, our industries were highly organised. Employers had realised that it was necessary for them to introduce every new method, take advantage of all new machinery and keep down their costs to the utmost limit, in order that they might be able to sell their goods in the various markets of the world. During the War all that disappeared. There was a shortage of material; there was a shortage of labour; and any man who could obtain both materials and labour could sell anything that he produced, whatever the cost might be. So almost unconsciously all our business people got into bad habits of not troubling about the cost of production, not looking out for new methods, not trying to run their businesses on economical lines, and that extravagant method was accentuated by the introduction of the tax called the Excess Profits Duty, which took away all incentive to develop business, and all incentive to keep down costs.
For a year, or even 18 months, after the Armistice we had a wonderful boom in trade. It was an entirely artificial boom. It was paid for by foreign nations either out of the surplus of their war loans, or by the creation of paper money. It was bound to come to an end as the purchasing power of the world, no longer bolstered up by borrowings or by paper money, deteriorated. So when that moment arrived, at the beginning of the year 1920, our business men realised that if they were to obtain the advantage of such trade as still existed in the world, they must reduce their costs once more to get them down to a proper basis. The extravagant habits which they had acquired during the War were gradually being eradicated. The reduction of the Excess Profits Duty in 1919 to 40 per cent. gave the hope that in 1920 it would altogether be abolished. There was an entirely different spirit over the whole business world in this country, and in the first few months of 1920 plans were laid on one side for commencing new business, while on the other side plans were being drawn up for an extension of the old ones, particularly for a root and branch revolution in the methods of production so that costs might be at the lowest possible level. All that was being done in order to capture the decreasing volume of trade throughout the world.
While that was already in process the Chancellor of the Exchequer of that year came down and presented his Budget, the Budget of 1920, and he said that instead of the duty of 40 per cent, he was going to put the Excess Profits Duty to 60 per cent. What was the result? Plans were torn up. New businesses were not started. In the old businesses no longer was trouble taken to reduce costs because those concerned said, "What does it matter now whether we trouble any more if there is to be a 60 per cent. Excess Profits Duty taken by the Government; there is no incentive for us to reduce costs." The effect of that was that as the purchasing power of the world became less and less so the sale of our goods or the bulk of them fell off, and the representatives of our manufacturers as they went abroad had more difficulty in finding markets because of the high cost of these goods. If we had put our house in order and reduced our costs we would have got far more, of the world's trade than we got in 1920 and 1921. The effect of the proposal of the Lord Privy Seal, who was then Chancellor of the Exchequer, for increasing the Excess Profits Duty from 40 per cent, to 60 per cent, has been to accentuate the unemployment which we have suffered from in this country over the past year, has caused the businesses to be closed down, and has sent workmen into the streets looking for jobs.
I hope that will interest hon. Friends on my right, because in 1920, on the Report Stage of the Finance Bill, I moved an Amendment that, instead of the Excess Profits Duty being increased to 60 per cent., it should be abolished altogether. On that occasion the Labour party voted with the Government. Their spokesman, who was then the hon. Mem- ber for Govan (Mr. N. Maclean), and one of their Whips, speaking from the Front Bench, said that if the Labour party had their way it would be increased to 100 per cent, instead of 60 per cent. If that had been done in 1920 the Labour party would now have had the sad satisfaction of knowing that still more than 2,000,000 of their fellow-workpeople were out of work. If this was the effect of what I have described on the businesses and industries of this country and the workpeople, what was the effect on the Government of raising the Excess Profits Duty to 60 per cent.? The Government itself were able to collect in the year 1920–21 £200,000,000 of Excess Profits Duty. Why, then, need they save? Where was any incentive to the Government to cut down their expenditure! Here with this easy way of collecting £200,000,000 a year: of getting it in this easy way out of businesses and depriving them of the capital needed to carry on. The Government themselves were able to carry on their Departments, and even to create new Departments, in the summer of 1920, and, in reality, although they possibly may not see it in this light, the picture is this: that no Departments were shut down, no Ministers sacked, no civil servants got rid of, and while they all remained in their establishment, employers, as a result of the action of the Government, were thrown out of their businesses and their workpeople were thrown out of work.
After this long period we are at last having expenditure cut down. Certain recommendations are being carried out in the Estimates that we have before us for the current year. In many of these cases, however, the cutting down could have taken place last year and even the year before. I desire to give to the Committee, if I may, one example. In the summer of 1920 the House aroused itself in the interests of economy and urged upon the Government the necessity of doing something. Before we rose for the Summer Recess in August, 1920, the Government to, as it were, "fob off" public opinion, and the demands of the Press appointed six Government Committees which were to investigate the various Government Departments, each Committee to be presided over by an unofficial Member of the House. I was Chairman of the Committee which investigated the Department of Overseas Trade. In November, 1920, we issued a Report, and that Report made certain recommendations as to the reduction of expenditure. It was possible if the Government had so desired to accept these recommendations for last year's Budget. None of the recommendations were accepted. This year we have had the Geddes Committee. The Geddes Committee's recommendations in regard to the Department of Overseas Trade are almost identical with the recommendations that my Committee made the year before. Some of them have been accepted. Is it not obvious that if the Government had had the will for economy, they could have carried out-economies in that Department last year instead of waiting till now? If we go through the various other Departments which have been dealt with by the Geddes Committee we shall find many economies which they recommend, and which are being accepted by the Government to-day which could have been effected at least a year ago.
We have now got some real reduction in expenditure. We have at last got some reduction in taxation. There are some hon. and right hon. Gentlemen who have spoken who seem to think that the Government have no real surplus, and that they are cutting down taxation by means of borrowing. That is not my view at all. I believe that the Government have under-estimated their revenue and have over-estimated their expenditure for the coming year. I believe, moreover—whether they be right or wrong, that I shall endeavour to show in a moment—that it is our duty at the present time to look upon this Budget and upon the taxation which is imposed upon the nation in the light of the very serious industrial position which exists throughout the land. To my mind, it is only by reducing taxation that we can get the wheels of industry going regularly once more. If I had been Chancellor of the Exchequer, instead of reducing the Income Tax by 1s. I should have reduced it by 2s. in the £. [HON. MEMBERS: "Oh, oh!"] The reason I should do that is this. Perhaps my hon. Friends on the right would say that, "Instead of taking another 1s. off Income Tax we would rather have something taken off sugar."
But I would rather give a man a job, so that by his wages he would be able to pay for the sugar at its present price, than leave him without any wage to pay for the sugar after you have reduced its price.
We also want wages for the working men!
Such a reduction of the Income Tax by 2s. would mean this year an additional £32,500,000, and an additional £52,000,000 in a full year. How is that going to be raised? What would the Chancellor do if he accepted an Amendment to the Budget to that effect? In the first place I think a reduction of 2s. would give an enormous filip to trade and enterprise. The 1s. which has been taken off has almost been discounted. It was, as it were, the dose of medicine to prevent the patient from getting worse. The extra 1s. might be that dose of medicine which would help the patient to get quite well. The effect would be to start industry much more quickly. It would bring to the Chancellor of the Exchequer over a term of years increasing Income Tax, Super-tax and Corporation Profits Tax. The Income Tax he would feel but slightly this year, because only the weekly wage earners and those who receive salaries would be assessed up at the end of this year, and would pay their first instalment in January. On the profits of new businesses those concerned would be assessed on their first year and the right hon. Gentleman would obtain that additional Income Tax in 1923–24. In respect to old established businesses, any increase in their profits for the coming year would only come into assessment when this year came into the three years' average. His additional tax which starts next year will go along year after year. That is not the only thing. It would give an extra filip to trade and get more businesses going, established businesses taking on more and more, as I believe would be done as a result of a 2s. reduction. The country would save something on the other side for we should not have to pay so much unemployment benefit: the Exchequer would be saved that expenditure. Beyond that the purchasing power of the working people is going to be increased. If they have wages instead of the unemployment dole they will spend more on sugar, tea, beer, tobacco, and other excisable commodities and the Chancellor must gain to that extent by the duties which are paid on those commodities.
So a reduction of another 1s. on the Income Tax, although it would mean £32,000,000 this year and £50,000,000 for a full year, is going in part for this year, probably entirely for next year, and for a number of years, to come to have the effect I suggest on Income Tax, Supertax, and Corporation Profits Tax. There would be a reduction of unemployment benefits on the expenditure side, and the spending of extra wages on sugar, tea, and other commodities. I ventured to say two or three, moments ago that the Chancellor of the Exchequer has under-estimated his receipts for the current year and over-estimated his expenditure. My first point is that he has under-estimated his receipts. He told us in his Budget speech that he was £296,000,000 in arrears with the Excess Profits Duty. He has budgeted for obtaining this year Excess Profits Duty to the extent of £27,800,000. I do not know exactly how he arrives at that £27,000,000 odd, but I estimate it will be something like this: He has spread the arrears of Excess Profits Duty to any who apply for the privilege over five years. Here is this £296,000,000 of arrears. Perhaps £46,000,000 has been written off as bad. Of the remaining £250,000,000 he expects to get £50,000,000 this year. Then he has repayments to the extent say of £23,000,000. I do not suppose my figures are exactly right, but possibly the Estimate is something of that nature.
What I want to suggest is this: That people who have found it difficult to pay their arrears of Excess Profits Duty are finding their difficulties becoming less. Businessses during the War period and for a year or two afterwards required far more capital than they had before the War or require to-day. Prices were higher, much higher. A person might have the same volume of business which, let us say, required £50,000 before the War and probably required £130,000 during the War and for a year or two afterwards, because of the price of stock and the amount of book debts which were so much higher. Prices are now falling. A business carrying the same volume does not require so much capital as was required two years ago. It has turned its stock and its book debts to a certain extent into cash, and it is becoming, in- creasingly possible for firms and companies who were rather tied up for money owing to the high prices, to pay their taxes and to pay any arrears. Besides that they had been able to keep back the payment of taxes without any fine. There has been no interest payable on the arrears, but from the 1st January the Chancellor of the Exchequer has put a heavy fine on people who do not pay the duty. It is 5 per cent, free of tax, which is really equal to about 7 per cent.
I know of one large firm which had entered into an agreement with the Chancellor of the Exchequer to pay its arrears of Excess Profits Duty over five years last week decided, owing to the fall of the bank rate, to borrow the money at half per cent, over bank rate and pay the Chancellor of the Exchequer off. There will probably be many others who will pay in this way rather than wait for five years. I think it is almost certain that the Chancellor of the Exchequer receipts from the Excess Profits Duty will be more than £27,000,000 during the current year. The same applies to the Income Tax and to the Super-tax. On the 31st March, 1922, there were arrears of Income Tax and Super-tax amounting to £134,000,000. The year before that, on the 31st March, 1921, the arrears amounted to £102,000,000, an increase of £32,000,000 which have never been taken into account in our national balance sheet.
Everybody is aware that there has been no pressure exercised on the part of the Inland Revenue this year to collect the Income Tax and the Super-tax before the 31st March. There may have been pressure in one or two cases, but generally speaking I think it is recognised throughout the business world that the usual pressure to pay the Income Tax and the Super-tax before the 5th April has not been put on this year. In the same way as it is getting easier for firms to pay the Excess Profits Duty because they get their capital on a lower interest basis, so it is more easy to pay the Income Tax, and the Chancellor of the Exchequer will probably find that he will be able to get in a considerable amount of those arrears of £134,000.000 so that when the 31st March next comes he will have arrears far less than that figure. I think the Chancellor of the Exchequer for these reasons will be able to collect far more of the Excess Profits Duty and far more Income Tax and Super-tax during the current year than lie has estimated for, and he will have no difficulty in taking off the Income Tax the extra shilling.
It may be asked what provision is to be made in future years in regard to the Miscellaneous Receipts of £90,000,000 from the sale of war stores. I have already pointed out that the effect of reducing taxation now will be to increase the yield from the Income Tax, the Super-tax and other tax as a result of increased business. Besides that, there must be reduced expenditure, and the Chancellor of the Exchequer should realise that unless he keeps his hand on the various Departments and presses them day and night to cut down their expenditure, unless he has the incentive himself to do it, he will have a deficiency, and surely the policy I recommend is the best thing the House can do to help the Chancellor of the Exchequer in his task. The right hon. Gentleman the Member for Central Glasgow (Mr. Bonar Law) suggested yesterday that the Navy Estimates might be cut down, and that we were spending more than we need to spend on that Service.
There is another important point, and that is over-estimating the expenditure for the current year. We must remember that the salaries of the Civil Service are based on the increase in the cost of living. I believe I am right in saying that the alteration in these salaries takes place twice yearly at the end of February and the end of August. The Estimates before us are based on the Civil Service salaries remaining at the rates at which they stood in February last. Since then the index number of the cost of living has fallen, and it will fall still more as the result of the 4d. taken off the tea duty, and at the end of August there will be a large reduction in civil servants' salaries. Therefore, for seven months out of the twelve the Chancellor of the Exchequer is going to pay remuneration to the Civil Service in all its branches, including the Post Office, on a lower scale than he has budgeted for, and there will be a saving in expenditure to that extent. For these reasons I venture to express the view that when the 31st March, 1923, arrives, it will be found that the receipts for the year are more than the right hon. Gentleman has budgeted for, and I think the expenditure during the year will be less than he has budgeted for. I almost venture to be a prophet and say that if before this time next year there has been a General Election then the Chancellor of the Exchequer will announce that for 1923–24 he will once more resume paying off debt, but if there has not been an election by this time next year the Chancellor of the Exchequer will announce a reduction in the beer duty.
Although, unlike the right hon. Gentleman the Member for the City of London (Sir F. Banbury), I have not heard 30 Budget statements, the one made by the Chancellor of the Exchequer on Monday last was the fourth to which I have listened and it was the first which I have heard which has been in any way calculated to arrest those feelings of gloom and depression which its predecessors have done so much to create and augment. On this account I should like to offer my humble congratulations to the Chancellor of the Exchequer for having produced a Budget which, while not immune from criticism, for it has been described by the hon. Gentleman the Member for Mossley (Mr. A. Hopkinson) as a piece of humbug, has at any rate done something to cheer us up and to create an atmosphere of confidence in the future, and there is nothing more certain than the fact that an atmosphere of confidence is the thing which this country needs most at the present time.
I am quite sure that the Chancellor of the Exchequer would be the first to admit that nothing but the continuance of progressive reductions in national expenditure would justify the Budget which he has presented to the House. Under these circumstances, that Budget has the merit of being the first since the Armistice to do something to relieve the necessities of all classes, to encourage agriculture and the trading community generally to new efforts, and as I have already said to create a new atmosphere. It may be that I am too optimistic, but I look upon this Budget as marking the turn in the tide of national finance, as we have known it since the Armistice. Much cannot be expected from such small remissions in taxation, for which however we are grateful, but I hope they will do something to enable the workers, who are now idling their time in the market place, and subsisting in enforced idleness—just
as much against their wish as it is against ours—on State doles, to once again earn their livelihood by honest toil, greatly to the advantage of themselves and to the community at large. I think it is as true to-day as when the words were written to say that
Satan finds some mischief still for idle hands to do.
If I may offer a few words of criticism on the Budget, let me say at once that the remissions of taxation offered are, in my opinion, far too small to meet the needs of the situation. While the methods by which these small remissions are obtained are distinctly open to question, and are not those of which any Chancellor of the Exchequer can feel very proud. I think I have seen occasionally, in regard to Central American Government stocks, the announcement: "Sinking Fund payments suspended." Such words ought not to be associated with British Government finance. I agree very much with what the previous speaker has said. I think that the condition of our export trade, and the wave of unemployment from which we are at present suffering, renders desirable a very much bolder reduction of taxation; in fact, I think it is almost a necessity.
5.0 P.M.
Whatever hon. Members on the Labour Benches may say, they know just as well as I do that the workers of this country get their full share of the plunder from what they are pleased to call a rich man's Budget, for even a so-called rich man cannot pay for labour when to the extent of half his income he is merely collecting money for the Government. He cannot do with the remaining half or less than that what he could formerly do with the whole, or a large proportion of the whole, viz., find employment and pay for it. Personally I believe that if a firm stand had been made in the cause of economy it would have rendered possible a greater remission of taxation, and would have avoided the need of any recourse to the dubious methods by which the present reductions have been achieved. I agree that there has been some over-estimating of expenditure and underestimating of receipts. I hope I am right in thinking that if the Chancellor of the Exchequer had, as a business concern would have done, taken into account all his good book debts, better results might have been shown in the Budget. I should like to say a word or two upon the direction in which I think the right hon. Gentleman might look for savings in national expenditure. Since I first entered this House I have eat on the Select Committee on National Expenditure and on the Committee on Estimates which followed it. These Committees have always been checkmated when they came to grips with the activities of Government Departments by reason of the fact that they are not allowed to touch matters of policy. I am quite sure however there has never been a member of those Committees to whom it has not been evident how desirable and how practicable it would be in some cases to apply the axe and in others the pruning knife to many Departmental activities, and especially the activities which have grown up since 1913. On that account I welcome the appeal which the right hon. Gentleman made for "the support of the House, first in resisting new expenditure and secondly in cutting off services which, however useful they may be, are of such a character that at the present time we cannot afford to retain them." That is what we have all been saying, and I hope the House will not refuse the right hon. Gentleman the support for which he appeals. I do not think it will, and I believe the sooner he translates his words into deeds the better it will be for the well-being and prosperity of this country.
The right hon. Gentleman might turn his attention, not only to the numbers of temporary civil servants, but also to the scales of pay of all ranks in Government employment. I am not alluding to the teachers, but I think it will be found that in most branches of the public service, both civil and military, substantial increases have been granted to meet circumstances which, it is to be hoped, are now passing away. I believe that the Committee presided over by the right hon. Gentleman the Member for Paisley (Mr. Asquith) was responsible for fixing the salaries of certain Government officials at the level of £3,000 per annum, a point which had not previously been reached. I do not know whether these salaries were intended to be fixed for all time or whether it was meant that they should apply only to the circumstances of the day when the Committee was sitting, but, at any rate, they represent a consider- able increase in the scale of salaries which existed before the War. Again, there are Ministries to-day which cost considerably more than the Departments which fulfilled the same functions did before the War. There is another question to which attention should be turned, and that is the question of first-class travelling fares for Government officials. No one grudges these officials comforts of that sort, but I believe it will be found that the Treasury rules allow first-class travelling fares in conjunction with salaries which certainly would not be held by the recipients to justify such expenditure if they were travelling on their own account and at their own expense.
As illustrating the great increase in the number of civil servants, I would like to call the attention of the Chancellor of the Exchequer to the increased number of buildings occupied by Government staffs as compared with 1913, and in doing this I would ask him not to forget those ornamental structures which still adorn the roofs of the Admiralty and the War Office. Why a smaller Army and Navy require a larger staff to look after them is one of the things which an ordinary person does not and never will understand. Another thing which it is difficult to understand is why a poor country such as this is requires so much more expensive a Government than it formerly had. These are matters which are exceedingly difficult of comprehension to him who is generally known as the Man in the Street. Some people may be inclined not to attach too much importance to the opinion of the Man in the Street, but Members of Parliament have to take cognisance of such opinions and I think the Chancellor of the Exchequer might do the same. I am aware that the task of the Chancellor is in many ways an unpleasant one and that he deserves all the sympathy that we can give him, but I am sure that the greater the boldness with which he grasps the nettle the greater will be his reward when he meets the House next Budget day. For the present the right hon. Gentleman has given us something to go on with. I agree with the hon. Gentleman for North-East Derbyshire (Mr. Holmes), that it is not so much as we should have liked. The right hon. Gentleman might have been a little bolder and given us a little more, but, at any rate, he has made a beginning in the reduction of the oppressive, I had nearly said overwhelming, taxation with which we are burdened, and I hope it will be continued until we approach those pre-War standards which we remember in the dim distance. Our gratitude is due to the right hon. Gentleman. I, personally, am grateful to him, but I would remind him that like hounds which have tasted blood our appetites are whetted and we ask for more.
In the discussion which has already taken place on the statement made by the Chancellor of the Exchequer last Monday, the Budget proposals have been looked at from nearly every point of view and from almost every angle, but there is one statement which the right hon. Gentleman made which so far has received scarcely any consideration at all at the hands of this Committee. It was a statement elicited by an interrogation, and it was of a very remarkable character. It was to the effect that, in his Estimates for the forthcoming year, he had not included any amount whatever for reparation payments by Germany, and he added that any payments which might be received from Germany would be considered by him as a windfall. A statement like that, coming from the Chancellor of the Exchequer in the present Government, is a very remarkable one, when we consider that it is nearly four years after the War has ended, and when we also consider the statements made by His Majesty's Ministers immediately prior to the last General Election, when we, were told that Germany was to be made to pay for the War to the utmost limits of her capacity. Immediately before the electors were asked to cast their votes the Prime Minister stated that the whole cost of the War would be demanded from Germany, and that he would search her pockets.
The Germans, whatever else they are, are certainly not lacking in shrewdness or craftiness, and when they found that the Prime Minister of England proposed to search their pockets, they took very good care that their pockets should be empty when the searchers arrived. They therefore deliberately and knowingly started the printing press to work at full speed all through Germany, turning out German marks, and those German marks they largely sold abroad, getting very considerable sums of foreign money by that way into Germany. The more marks they sold abroad, the more the printing presses were worked in order to turn out still more marks for home consumption. That had the anticipated effect of providing full employment for the workers in Germany, while our own workers were unemployed. The German working people have, for the most part, had full employment by reason of the fact that they could undersell the goods of nearly every other country in the markets of the world. At the same time, while we were groaning under war taxation, Germany has paid very little war taxation at all.
A few weeks ago, just before the House adjourned for the Easter Recess, I asked the Chancellor of the Exchequer what were the revenue receipts in taxes in this country and in Germany. I agree it is very difficult to adequately compare the value of the mark outside Germany with its value inside Germany. But I have got some figures from which hon. Members can make their own valuation, and they can judge how far the facts approximate to what I am stating. Whatever the valuation of the mark the difference in the burden of taxation as between this country and Germany is colossal. The taxation revenue of Germany for the past year was 62,000,000,000 marks, as compared with £857,000,000 in this country. The value of the mark has varied between 1,250 and 1,400 to the £. It has recently gone up, but in order to arrive at some idea I suggest taking the value of the mark at 1,000 to the £. According to that it will be seen Germany is only being taxed to the extent of £62,000,000 as compared with our £857,000,000. Therefore, whatever value be placed on the mark there is an enormous discrepancy between these two sets of figures. It works out roughly that the burden of taxation in Germany is £1 per head of population, as against £18 per head in this country, and whereas the German national debt approximates 2,500 marks per head (say £3 or £3 10s.) the national debt of this country per head is about £170. Those are startling figures, whatever value one puts on the mark, and I do think there has been great neglect somewhere in not bringing the Germans to task with regard to these matters.
Is the hon. Member calculating the external value of the mark in order to get the ratio of internal taxation?
I am comparing, as well as I can, the taxation obtaining in Germany with that obtaining in this country, and I am endeavouring to point out that we, who won the War, are being taxed out of existence, whereas Germany, who lost the War, is not bearing a tithe of the taxation that we are enduring at the present moment. I have said that by this process of inflation Germany has made her pockets empty to the searcher, but it does not at all follow that Germany is devoid of wealth, or has lost all her wealth. There are two directions in which very great wealth can be discovered in Germany. One is in her factories, which, as I have said before, have been working at full speed. Of course, however, I admit at once that it is impossible for us to accept German manufactured goods in payment of reparations, as it would greatly add to the unemployment from which we are already suffering. But, in addition to her factories, Germany has vast natural resources, which have so far been largely untouched, for, as the Committee will remember as well as I do, the War was fought outside Germany. One of the greatest of Germany's natural resources is her forests. [An HON. MEMBER: "Coal!"] Coal, of course, is an accumulation of forests and sunlight. At the present time one of the greatest of Germany's national assets is her forests. No less than one-fourth of the whole German Empire is under forests, and they are not mere plantations, as they largely are in this country, but carefully cultivated land for mercantile purposes. The trees have been scientifically planted so that they could readily be used, whether for hard wood or soft wood, pit props, or whatever they were required for.
There are some remarkable figures with regard to the timber which this country requires. In 1913 we imported about £33,000,000 worth of timber, in 1919 about £70,000,000, and in 1920 no less than £80,000,000; while last year, in spite of the depression in trade, our imports of timber were no less than £30,000,000. Why have not the Government and the Chancellor of the Exchequer, who is responsible for the national finances, obtained from Germany some share of her vast and untouched forest resources to meet that heavy expenditure which this country has been obliged to incur in respect of timber? As the Committee will know, our timber supply is largely exhausted. It is calculated that it will cost £100,000 a year for planting in order to make this country safe in the event of another war. Owing to the stringency of our finances, we are now spending only £10,000, and not £100,000, in making good the devastation caused to our timber supplies during the War. Therefore, it is inevitable that for years to come we shall have to import for our trade purposes, our pit props, and other things for which timber is required, millions a year from abroad, and I do think that that is one way in which Germany might contribute very substantially towards both the debt and the revenue of this country.
There are other ways in which, without affecting employment in this country, we could obtain considerable wealth from Germany. There are her wood pulp factories, and we import very considerable quantities of wood pulp every year. Then, again, the year before the War, we imported sugar from Germany to the value of something like £10,000,000. We have still to import large quantities of sugar into this country, and, if we got it from Germany, we should, of course, dispose of it here at such a price that it would not interfere with our West Indian colonies or with the small beet sugar industry which we have started here, the sugar derived from which has been exempted from certain taxation in order to foster its cultivation. Millions can be obtained from Germany, and it is the duty of the Chancellor of the Exchequer to get that money for this country, rather than continue the overburdening taxation which is hindering trade and causing unemployment. I will only give a couple more instances. It is well known that during the War Germany, a large agricultural country, was cut off from the supplies of nitrates from Chile, whence she had previously imported large quantities, and she also required them for her explosives. She therefore started large manufactories for manufacturing nitrates from the air. These manufactories are still going full speed ahead, and Germany could supply us from her manufactories with large quantities of these nitrates, which have nothing to do with any manufacture in this country, and which are urgently required by our farmers. I now come to the last matter to which I shall allude as a source of wealth which we could obtain from Germany. The Committee will remember that, owing to Germany having commenced this War, all the business people of this country, very early in the War, were asked to hand over to the Government their American and other foreign securities, to enable the Government to get money from America for the purchase of munitions and war supplies. Germany has very large investments in America, and also in European and other foreign countries, and there is not the least reason why she should not be asked to do to her nationals what the British Government did to its nationals during the War, that is to say, ask them to hand over their American and other securities to the German Government, the German Government compensating them for those securities and paying them the interest in the German currency, which, as my hon. Friend the Member for Eye (Mr. Lyle-Samuel) quite rightly says, has a different value in Germany from what it has outside, so that the loss would be minimised in that way. Those securities could then be handed over to the British Government towards meeting our heavy debt to America.
I claim that I have shown a number of ways in which many millions could be obtained from Germany towards alleviating the terrible burden of debt from which this country is suffering. The getting of those supplies depends on the Chancellor of the Exchequer having a strong heart. It depends far more upon that than upon a nimble mind or nimble fingers. It is all very well to talk of having debtors or murderers or anyone else by the throat, but if they commence to kick your shins and smile, instead of choking, as murderers and debtors ought to do if you take them by the throat, it is no use taking your hand off their throat and saying, "Oh, my dear fellow, I am so sorry! I intended to shake your hand all the time, and by a stupid blunder I caught you by the throat." That is exactly what has happened at the Conference at Genoa. When we said something to the Russians about paying their debts, they at once said, "Oh, but you owe us £5,000,000,000 of debt," and that is the kind of trouble we get into. It is essential for the Government to have a strong heart and to force these things forward. I cannot imagine anything more prejudicial to the interests of this country than that the Chancellor of the Exchequer in his Budget statement, which is looked forward to by every civilised country in the world, should say that anything he might get from Germany would be looked upon as a windfall. I think that is most prejudicial. If you were bringing an action against a man for damages, and your solicitor went about the country saying, "Well, we do not expect to get anything. Anything we get will be considered a windfall," think how prejudicial that would be to your case. That is the point that I specially desire to bring forward. I associate myself with what was said by my hon. and gallant Friend the Member for the Park Division of Sheffield (Lieut.-Colonel Stephenson) and also by the hon. Member who opened the Debate. We have made a beginning in the reduction of taxation, but it is only a beginning, and it is essential that expenditure should continue to be cut down. As I and several others pointed out just before the House adjourned for the Easter Recess, we cannot afford any expenditure which is not absolutely necessary. The presence on the Front Bench of the representative of the Office of Works reminds mc that in the Estimates of that Department, which were then before us, there was case after case of new Post Office buildings, which it was proposed to build during the coming year. It was proposed to build a new post office in Threadneedle Street at a cost of £90,000, one at Brighton at £48,000, one at Luton at £37,000, one at Reading at £86,000, one at Rochdale at £51,000 and one at Dundee at £41,000. We have got on with the old buildings for the last six or seven years. No doubt they are very inconvenient. Lots of people find that it would be cheaper in the long run to buy boots for £3 a pair rather than reach-me-downs at 25s., but many of us have not got the money, and we have to get on with the 25s. boots rather than spend the £3 on the more expensive article. I have no doubt that, as was stated at the time, it would pay the Government in the long run to put up these new buildings and not tinker with the old ones, but we have not got the money to do it at the present moment. I hope that the Chancellor of the Exchequer, when he comes to reply, will deal with these matters specifically.
I have listened with great attention to many of the speeches that have been made on the Budget, and, without any desire to add to the repetition that is now taking place on more than one issue which the consideration of that Budget involves, I do expect a little more elucidation from the Chancellor of the Exchequer, or any other Member of the Committee, to justify the remission of that 1s. on the Income Tax. I can well understand that a good case can be made out for relieving the burden of excessive taxation upon any class in the community. That is an arguable proposition, but that is not the argument which has been prominent in support of the remission of Income Tax. The argument which has been used—I say the argument, but it is hardly deserving the word. It has been no more than a statement that the remission of this 1s. is going to have an effect in the improvement of trade. We ought to have something more than a mere, statement in support of that proposition, and we have not had it up till now. If you can prove to me that by taking off one, two, three or more shillings from the Income Tax you are going to put our people into work, I am prepared to say the proposition ought to be considered. What is the alternative? It has been suggested by Members on both sides of the Committee that the £32,000,000 more that the Chancellor has at his disposal might be better employed in the reduction of the debt, and I am not disposed to quarrel with that view.
Let me try to do what other Members have not attempted up till now, and trace the economic process which will be put into operation when that 1s. is taken off the Income Tax. The argument is that by taking the 1s. off the £32,000,000 will be free to be used in the development of trade and commerce. What would be the effect of reducing I he National Debt to the extent of £32,000,000? That £32,000,000 would be put on to the market as investable capital for the trade and commerce of the country to a far more complete extent than it would be in the form of the remission of Income Tax. The £32,000,000, if it has any effect upon trade and commerce, is there from the first pound to the last. When we buy back the Government stock that is now held to the extent of £32,000,000, and inasmuch as that £32,000,000 is now in the hands of the Government, in the form of an investment that the holders of Government stock are prepared to use, does it not follow that if we buy back that £32,000,000 the persons who own that money will be looking around for means of investment, and thereby improving trade and commerce and employment at the same time? But you do not get that effect. If the £32,000,000 is going to be returned to people of varying interests in different classes of the community, that money is not necessarily going to be free for the purposes of trade and commerce.
It seems to me that the Chancellor of the Exchequer has paid too much attention to the agitation of the City in this matter. I would recall to his mind that when the Income Tax was first introduced into this country there was great opposition in the City, and the financial magnates told Pitt at that time that if the Income Tax was enforced it would have a most deplorable effect upon trade and industry. But events did not justify that prediction. There was also a petition of protest from the City when Peel proposed to reintroduce the Income Tax after a period of abolition, but Peel, although leader of the political party represented by Gentlemen on the other side of the House, was wise in his generation and refused to take off the Income Tax, and Gladstone carried it on afterwards in spite of the protestations of the men in the City. To-day we are asked to remit this tax, with the same reasons behind the proposal as were made in those days of long ago, and with no more justification now than then. But I hope it may not be too late for the Chancellor of the Exchequer to reconsider that part of his proposal. If he is asked by Income Tax payers why he is changing his mind, I can give him an answer out of his own mouth, when he told the Members behind him only a few weeks ago, "You are getting back £700,000,000 or £800,000,000 a year in interest." [HON. MEMBERS: "How much?"] We will say £500,000,000. The Chancellor's point was that those who were complaining were taking it out of the country's funds. Whether it be £1,000,000 or £500,000,000, the principle is the same, and therefore there is no reason why the Chancellor, under a mistaken impression that trade is going to be improved by the remission of the 1s., should give that advantage to one section of the community and disregard the claims of every other section. I submit, on the advice of those better qualified to judge than myself, that it would be sounder finance to maintain the present rate of Income Tax and to apply that £32,000,000 to the reduction of the National Debt, and on those grounds I ask the Committee carefully to consider that question of the Income Tax and the desirability, not of increasing it, as has been suggested, but of giving the benefit of the surplus to other classes of the community who can better do with it than those whom it is proposed to benefit under the proposal now before the Committee.
I am persuaded that most people outside this House will have received the Budget with a certain amount of relief, although I do not expect it has excited very much enthusiasm anywhere. We shall all agree that it is more or less the sort of Budget that everyone expected. I do not mean to imply that it is the Budget the country would have liked to have, but the right hon. Gentleman has introduced a Budget which is tolerably satisfactory to the average man under the present conditions. For myself, I think we could not have expected anything more reasonable, and we can congratulate the Chancellor of the Exchequer on having been able to present in these difficult days so hopeful and so comparatively uncontroversial a statement of the national finances. It has not given rise to any very great outburst of joy anywhere as far I can make out in the City, but I do not think it has called forth any very serious criticism anywhere. Although some people quite legitimately regret the suppression of the Sinking Fund, after all the continual repayment of debt out of revenue is up to a point a process of robbing Peter to pay Paul, and with that one possible exception the Budget will do much to restore confidence and will be a step in the right direction and an earnest of better things to come. But it would clearly be a mistake to imagine that the satisfaction of public opinion goes no further than that or that people will be content to rest for very long with only these reductions. The burden of taxation is still a crushing one, and these measures are valuable as showing some relief and indication that the tide is at last turning towards reduction in expenditure and in taxation. But I do not think it will cause any very considerable uplift either in industry or in trade. It is true that the fact that there will be more money in private hands will to a certain extent stimulate industry and enterprise, but so much of it will have to go to counterbalance past losses or to meeting risks which have been already incurred that I do not think there will be very much money left over for new business in the next 12 months.
But all the information I have received—and I am sure this is the experience of all hon. Members—is that all classes are looking forward for a continuance of relief in taxation with an earnestness and anxiety that no Government can afford to disappoint very long. This year the major part of the reduction has been devoted to Income Tax. Direct taxation has increased much more in proportion during the last few years than indirect taxation, and it has this further disadvantage that although you can evade the incidence of it by extravagance you cannot reduce it by economy, as is possible with many forms of indirect taxation. None the less it is obvious that there are very large sections of the population who do not pay Income Tax and yet consider themselves grievously overtaxed. The accepted definition of an optimist is a man who does not mind what happens so long as it does not happen to him, and there are many optimists, as far as Income Tax payers are concerned, who have become pessimists of the gloomiest type on the question of indirect taxation. The beginning which has been made with tea is a small one, and there are many worthy taxpayers who are not necessarily exclusively tea drinkers. Consumers of spirits and beer and tobacco are also looking for concessions. It is on record that when a referendum was taking place in New Guinea on the subject of prohibition, the question was asked how prohibition would affect the mission, and an Australian digger said it would have a very bad effect because no one would subscribe to a mission unless he was drunk. It is not necessary to adopt the digger's view of that question to realise that were it not for the vast revenue accruing to the State from the consumption of beer, spirits and tobacco we should not be able to reduce Income Tax or any other tax. There- fore it is only fair that the workers of this country, who provide so much towards the State revenue, especially in connection with tobacco and beer, should at an early date, get some consideration. We all realise that there are other claims to be met first, but new reductions on these heads and further reductions on heads that have already come in for consideration on this Budget are looked for eagerly at an early date. The moral of the situation is this, that, however long suffering and patient the people of this country are, the satisfaction which they are evincing over this Budget is based chiefly upon the expectation that the time has come when taxes will be reduced more and more. My own constituency will welcome as much as anything else in the Budget the assurance that there will be further reductions in the course of the next 12 months, and nothing is likely more than that assurance to add to the approval with which the public are receiving this Budget.
The hon. Baronet who has just spoken very truly said that the public expected a reduction in taxation in the present Budget, and that they were looking for further reductions in the immediate future. The Budget of His Majesty's Government-reflects their policy. The Government policy determines the rate of expenditure, which automatically fixes the rate of taxation, and if the rate of taxation in the future is to be reduced it is vital for His Majesty's Government to lower their rate of expenditure. This Debate gives the Committee an opportunity of surveying our national finances. Our financial system has stood five years of War and three years of extreme expenditure. That system, based as it is, broadly speaking, on the ability to pay, and supported by a nation which has shown great self-sacrifices, is to-day the envy and admiration of the world; but any system may be too severely tried. Any nation can have too severe a strain placed upon its resources, and it is quite evident that our financial system is showing signs of breaking under the strain imposed by His Majesty's Government. Not only are there large numbers of people walking our streets to-day, who have been driven there by high taxation, but the very startling figures which the Government have announced, showing that over £100,000,000 of taxation was un- paid at the end of the last financial year, is clear and definite proof that the inhabitants of this country are unable today to pay the taxes levied by His Majesty's Government. That is not only alarming to the Treasury, but creates a keen sense of injustice between the different sections of taxpayers. As every hon. Member well knows, there are taxpayers who have denied themselves severely in order to pay their taxes, and the announcement of the Government that over £100,000,000 of taxation was unpaid on the 31st March last will create a growing sense of injustice in the minds of these individuals. Therefore, I welcome the lower rate of taxation embodied in the present Budget. That reduction is long overdue. It is also inadequate in amount, because, if the Government this year, as they well might, had reduced their national expenditure, it would have been possible for the direct and indirect taxation imposed in this Budget to be reduced.
The main points which have emerged during these three days of Debate is the amount of the National Debt which the Government claimed to have reduced within the last three years. The Chancellor of the Exchequer made great play with that point. The Government claim that the National Debt has been largely reduced. What are the facts? For the past year, according to the Chancellor of the Exchequer, there was a surplus of £88,000,000. For the year 1920–21, according to the statement of the then Chancellor of the Exchequer, there was a surplus of £239,000,000. The Chancellor of the Exchequer, on the 19th April, 1920, stated there was a deficit on the year 1919–20 of £326,000,000. Therefore, taking the three years since the 31st March, 1919, instead of a reduction in the amount of our National Debt as stated in the figures given by the Chancellor of the Exchequer, the reduction only amounts to £21,000,000. That gives a very startling, comparison between the figures enunciated by the right hon. Member for the Central Division of Glasgow (Mr. Bonar Law). The comparison is a true comparison, a comparison from the 31st March, 1919, to the end of the last financial year—three complete financial years. The Chancellor of the Exchequer, in his Budget statement on Monday, took a particular period, the 31st December, 1919, and gave certain figures based on that date.
No, I gave the date at which the National Debt reached its highest point, namely, the 31st December, 1919. The comparison which I made was between the 31st March, 1920, and the 31st March, 1922, and I showed the amount of debt which this country has paid off in those two financial years. I did not compare the present state of the debt with the highest figure.
The Chancellor of the Exchequer admits that a fair comparison is to take a complete financial year. He took two years. I suggest that if we are to-day reviewing the post-War Budget of the present Government we should take three years, and that we should wipe out the four and a half months from the date of the Armistice to the end of March, 1919, as an exceptional period. If the Committee agree that that is a fair method of approaching this subject, the record of His Majesty's Government is that they have reduced the National Debt by £21,000,000. What has happened during those three years? They have collected £500,000,000 of Excess Profits Duty. That has all been spent. They have sold capital assets to the extent of £650,000,000. Therefore, instead of our National Debt being reduced as a result of their three years' policy we have sold national assets to the extent of £650,000,000. True, we have reduced the National Debt by £21,000,000, but the nation to-day is £630,000,000 poorer than it was three years ago. That involves at a rate of 5 per cent, per annum a yearly loss for all time of over £30,000,000. When the public take note, as I hope they will, of this startling and striking statement of fact—which I hope the Chancellor of the Exchequer will correct if I am mistaken—they will be able to judge completely and accurately as to what has really happened during the last three years. The right hon. Member for Central Glasgow supported this Budget on the broad ground that during the period of prosperity this country had reduced her indebtedness. I submit that the contrary is the case, and that duping the last three years, although the National Debt has been reduced by £21,000,000, the nation is poorer to the extent of £630,000,000. That is the record of His Majesty's Government.
Reference has been made to the extreme burden of taxation which is imposed by the Government on the inhabitants of this country. How serious, how deep, and how heavy that burden is is seldom realised. I have been making inquiries as to the rate of taxation imposed in France and in America, and I find, although it is difficult to make an exact comparison, that while making every allowance, and basing the figures on the present rate of exchange, the taxation levied on the inhabitants of America for 1921 was about £13 10s. per head, in France about £8, and in Great Britain about £19. Therefore, if you add together the taxation imposed on the inhabitants of America and France it will be seen that Great Britain is paying to-day nearly as heavy a burden of taxation as the total burden in France and America. That burden is intolerable. It can only be reduced in one way. I will not on this occasion refer in any detail to expenditure, but I am anxious to deal with a point raised by the Chancellor of the Exchequer about the reduction of debt. In his present Budget he frankly admits that he makes no provision for the reduction of debt. To reduce debt can never be very popular at the moment, but any reduction of debt is bound to lead to a lower burden in the future. The rate of interest on the National Debt can only be lowered permanently by a real surplus of revenue over expenditure. The Government point with pride to the sharp rise in gilt-edged securities at the present time. The price of Consols to-day stands at the same figure as at the Armistice. There has been no improvement in our national securities during the last three-and-a-half years in comparison with the date of the Armistice. Here, again, the Chancellor of the Exchequer will correct me if I am mistaken.
Are all the other Government stocks at the same price?
I have not the figures, but I am quite certain that the rate of interest on these things is very much the same to-day as it was at the time of the Armistice. The Prime Minister has often invited the House of Commons to compare the present time with the Napoleonic period. I accept the comparison. Three years after the Napoleonic War, British credit rose by 33 per cent. The Duke of Wellington told the country at that time that there was no need to fear any military trouble on the Continent, with the result that expenditure was very largely reduced, and it is a rather striking commentary on those days that the House of Commons refused to pass the taxation which the Ministry of that date proposed. The House of Commons at that time took the matter into their own hands and refused to accept the heavy taxation which His Majesty's Ministers were anxious to impose, with the inevitable result that the Government was forced to reduce national expenditure. I would like to see this House refuse to grant the necessary Supply to His Majesty's Ministers, and by that means force them to curtail their expenditure, especially on the fighting forces.
Coming to the figures given by the Chancellor of the Exchequer, the total tax revenue for the year 1921 was £856,000,000. The Chancellor of the Exchequer proposes to grant a reduced taxation of £38,000,000, leaving a total of £818,000,000. He informed the Committee on Monday that, through the setting up of a Parliament in Ireland, he would lose £18,000,000 through Customs and Excise I have not been able to find out how much is lost in direct taxation in that country, but if I put it at, say, £12,000,000 I reach a figure of £30,000,000, and deducting that from the £818,000,000 we have £788,000,000 after making these two allowances, but the Chancellor of the Exchequer expects to receive only £729,000,000. If these figures are accurate they lead to the conclusion that he is budgeting this year for a 7½ per cent, decrease in theyield of direct and indirect taxation. Perhaps when the Chancellor comes to reply he may give some information on the point with reference to Ireland, so that the Committee may be in possession of further facts and figures in view of later discussions on this point. Has the Chancellor under-estimated or over-estimated his expenditure? To judge that accurately, we must take note of his past record on this point. Last year the calculations for Excess Profits Duty and Corporation Profits Duty were very wide of the mark. The amount to be received was over-estimated considerably, and if the past be any guide to the present estimate, his estimates of revenue in the coming year are an over-estimate, and there is little doubt that his expenditure is under-estimated. An examination of the figures reveals clearly that the statement made by my right hon. Friend the Member for Paisley (Mr. Asquith), that the Budget is a gamble, is fully justified. The Chancellor of the Exchequer has over-estimated his revenue, and it would seem certain that he has under-estimated his expenditure. The burden must be reduced and can be reduced only by a drastic curtailment of non-productive expenditure. I would invite the Government during the coming month to give attention to that matter, and when the country takes note of their record during the last three years, I think that it will say to itself that during that period His Majesty's Ministers have not exercised that prudence, caution and foresight in the management of national finance which are demanded by the people of this country.
I would like to express to the Committee my gratitude for the consideration which they have shown, both to the Budget which I have presented to them and also to myself personally. I acknowledge with a sincere feeling of thanks the compliments which have been paid to me, and I would like particularly to express my acknowledgment to the right hon. Gentleman the Member for Paisley (Mr. Asquith) for the kindness with which he referred to the speech in which I put forward this Budget. He used only one phrase which could, I think, in any degree be regarded as harsh. He described the Budget as a gamble, and the hon. Member for Greenock (Sir G. Collins) has adopted that particular description of the proposals which I have made. I might have been downhearted as a result of that, but I am comforted by the course of the Debate, even though the right hon. Gentleman seems to hold the view which he has expressed. He is the leader of a party, and one would at least expect, especially when that party does not run to any very large dimensions, that there would be some coherence of opinion among its members. And yet in the course of this Debate the right hon. Gentleman has been thrown over by two very important Members who sit on the benches behind him.
Last evening an illuminating speech was made by one of the Members from Lancashire, a man of great experience, who gave his support to the very Budget which his leader described as a gamble, and, this afternoon, one of the best speeches which have been made upon the subject of the Budget was delivered by the hon. Member for North-east Derbyshire (Mr. Holmes). His opinion is one which all of us must treat with respect in reference to any question which comes before the House, but with special respect in connection with matters which involve business or finance. I suppose that there are few Members of this House of his experience and eminence in either of these matters. He is very well known as a chartered accountant of high standing, with an experience which has given him more information regarding business relations and finance than is possessed by all but a very few Members of the House. Accordingly, I am confident, when I hear such expressions of opinion coming from the benches behind the right hon. Gentleman, from Members whose natural desire would be to support the point of view which he adopts on important questions of this kind, that nothing but a strong and sincere conviction would lead them to take a course directly antagonistic to that which the right hon. Gentleman has taken.
Coming to the main criticisms of the proposals of the Budget—there is first the statement made by the right hon. Gentleman the Member for Peebles (Sir D. Maclean) that we have under-estimated our expenditure and over-estimated our revenue. Both he and the hon. Member for Greenock have been inclined to take the line that the Estimates for last year should give the House less confidence in the Estimates for the current year. Is that a fair comparison to make? I would ask the Committee to recollect what wore the conditions in which last year's Estimates were made. These Estimates necessarily were made up before the presentation of the Budget, and the three months immediately following the Budget were occupied by a stoppage in the coal trade, a stoppage which affected not merely the people immediately engaged in that trade, but brought to a standstill the largest trades of the country and threw an enormous number of people out of employment. I think that the number of people out of employment rose as high as 3,500,000. Could it be expected that those who made the Estimates weeks in advance of a national calamity of that kind could by any chance foretell with accuracy what the national income was likely to be?
I take first the Income Tax in which we have an over-estimate of not much more than £10,000,000. Why in that case were we so near the mark? The reason is that Income Tax is one of the most stable sources of revenue of this country and is based on an average of the previous three years and therefore is not largely affected by the conditions of the immediate present. Accordingly it was more possible in that case to give an estimate which approximated to truth. In the case of Customs and Excise surprise has been expressed at the manner in which the Estimate was exceeded, but we know now what the cause was. The savings of the people of this country amounted in the aggregate to far more than anyone could have supposed, and throughout the whole of last year there was a great deal of expenditure which was justified by the savings of the people but not by their present earnings. Unfortunately these savings, as I fear, are now more or less exhausted, and we have to estimate in the current year a far less yield from these taxes. I think that any body who devotes fair and genuine consideration to the circumstances in which the Budget Estimates were made up last year will come to the conclusion that it was impossible to get anywhere near an exact estimate of what the returns would be.
Let me turn for a moment to the Estimates for the current year. I am told that I have under-estimated the expenditure and over-estimated the revenue. On the contrary, I am inclined to take the view of the hon. Member for North-East Derbyshire more readily that that of the right hon. Member for Paisley or the right hon. Member for Peebles. In point of fact, I have no fear or apprehension with regard to the Estimates which I have made for the current j7ear, always granted that there be no untoward event to upset calculations. You might have conditions arising in different parts of the world and in some not very far away from here which may upset calculations. [HON. MEMBERS: "How about the engineers?"] I am not so much afraid of what the results will be there. I hope to see a comparatively speedy end to that unfortunate struggle. Given normal conditions I think the Committee will find, when we come to the end of the year, that there is a margin in hand for contingencies, even apart from the provision which has already been made for Supplementary Estimates.
Let me remind the Committee of the kind of considerations to which the hon Member for North-East Derbyshire referred. We may hope to have, as a result of this year's working, some revival in trade, and if we get that there will be an increase on our expectations of the yield from Customs and Excise. We may also expect to get rather more than the estimate which the Excess Profits Duty has been credited with in the present account, owing to the fact, already stated, that the cost of money is lessening and that accordingly many people who in other circumstances would not be paying Excess Profits Duty in the present year, will be in a position to pay and will get financial accommodation which will tend to make the return under that head certainly as great as, and probably rather greater than, that which I have estimated. In the same way the Income Tax figure may very well, in the circumstances which we foresee, be exceeded. To put it briefly: the estimate of revenue has been made upon a reasonable and conservative basis rather than upon an exaggerated view. As to the expenditure, I do not think that what we have anticipated will be in any way exceeded.
I am told that I have not placed the figure for Supplementary Estimates, i.e., £25,000,000, high enough. The ground upon which that criticism is made is, in the main, that the Supplementary Estimates of last year turned out to be a figure immensely larger than that anticipated for this year. Again I ask attention to the circumstances of last year. We anticipated Supplementary Estimates last year of something like £97,000,000. Why? The coal strike had already begun. [HON. MEMBER: "Lock-out."] The coal stoppage had already begun, and we had to make some kind of estimate as to what that would cost the National Exchequer. In fact, it cost just over £25,000,000 in direct payments. But there were other payments which had to be made. There were payments to be made under the railway agreements, signed at the beginning of the War, on which a settlement had still to be reached. Last year that cost us just about £44,000,000. Therefore you have in those two items alone, which will not recur this year, a figure of something like £70,000,000. Then there was the settlement under the Corn Production Act. [HON. MEMBERS: "Your own fault."] The question is not whether we were right or wrong, but the necessity of payment. That cost £20,000,000. These are three items which are not recurring this year and which cost £90,000,000 between them. The Supplementary Estimates, apart from those three items, cost last year something like £30,000,000. This year, when we are in a position to make much closer Estimates than last year, I estimate that we shall be able with £25,000,000 completely to cover them. I may prove to be wrong, but at any rate the argument based on the experience of last year cannot be used against me.
They averaged £100,000,000 for three years.
That may be, but the conditions arising out of the War a year ago, and still more two years ago, were very different from the conditions now. You could not then by any chance estimate as closely as you can now, as to what your particular payments were to be in the year to follow. We are gradually escaping, and I hope have almost escaped, from the conditions which followed the War, conditions which necessarily upset all calculations. That being so, surely we are now in a position to make very much closer Estimates than we were at any earlier date. If I am wrong, I should be the first to be blamed, but at present I put that point of view to the Committee with considerable confidence.
There is another criticism. A great deal has been said about expenditure by people who, after all, give us comparatively little help. Particular questions arise affecting, I suppose, the popularity of hon. Members in their constituencies, and their courage fails them. I have had more addresses upon the question of expenditure from the right hon. Member for Peebles than from any other Member of the House. Only the other night there was brought up the question of Old Age Pensions. The proposal would have cost the country another £14,500,000 a year, not a mere charge for one year, but a more or less permanent charge upon the finances of the country. My right hon. Friend was in the House, but we did not get any help from him either in the Debate or in the Lobby.
Perhaps it may interest my right hon. Friend to know that I did a very much more difficult thing with regard to this very question than to make a speech in this House, and that was that last Thursday I faced my own constituents and said in reply to a direct question that, however desirable these reforms might be, this year, at any rate, they could not be granted, owing to the financial position of the country. That was a much more difficult thing to do.
I am very glad that my right hon. Friend's courage increased from the time he was here to the time he met his constituents.
I was not here at all during that Debate.
If my right hon. Friend says so, I accept his statement at once. At any rate the opportunity was afforded to him to help us in the matter. My hon. and gallant Friend the Member for Leith Burghs (Captain W. Benn) was in the House and voted for the expenditure. I am entitled to put it to the Committee that there are very many people, who are anxious to talk about the reduction of expenditure in general, but are very unwilling to give a vote upon any particular question which is at issue. I would like in that connection to refer to some of the other criticisms which we get outside this House, because we do not follow the recommendations of the Geddes Committee in their entirety. I observe that that charge is laid against us repeatedly in the public press, but some of the journals which persistently make that criticism have never given their readers any indication they they would support the Geddes Committee proposals for the cutting down of educational expenditure. They carefully abstain from expressing any point of view on that great topic. I would like the people who make these criticisms to say boldly whether they accept the Geddes Committee proposals with regard to the cutting down of educational expenditure, the cutting down of Naval expenditure—to which I see very little reference in these journals—and the proposals with regard to a reduction in the cost of the Royal Air Force. If we get some indication of opinion in favour of these views we may obtain some practical result, and if public opinion were really to be educated in these directions perhaps it would be more easy to effect the reductions.
I turn to the question which has been raised as to the position of the debt. My right hon. Friend seemed to be in some doubt as to the particular figures which I presented. I have taken the trouble to go into them more particularly since he put his question. The figure I gave as to the amount of cash applied to the reduction of debt in the last two years was accurate. It amounts to £322,000,000. I also gave the figure of the highest point which the debt reached, on 31st December, 1919. It was £7,998,000,000. Of course that was the highest point, I did not compare any figure I gave with that particular figure. I took the figure at the end of the financial year, 1920–21. I gave the figure of £7,574,000,000 as being that to which it had been reduced on the 31st March, 1921. The figure on the 31st March, 1922, was £7,654,000,000, making a difference of £80,000,000. I think my right hon. Friend's question was if we took off £88,000,000 during 1921–22, how was it we had still this addition at 31st March, 1922? That is, as I understand, his question.
My point was I could not follow how it was that if the debt stood on the 31st March, 1919, at £7,484,000,000, and it stood on 31st March, 1922, after deducting that £88,000,000 at £7,574,000,000, how it was that my right hon. Friend claimed so much credit for a reduction of £322,000,000? I now see that what happened was this that after the 31st March, 1919, the National Debt was increased by a sum of between £300,000,000 and £400,000,000, and that increase which was after the Armistice and which really accrued after the 31st March, 1919, was reduced by the sum of £322,000,000.
That is not what I understood my right hon. Friend to ask.
I now understand it.
My right hon. Friend has now been diverted to the point which was being made by my hon. Friend who spoke last. I shall deal with that also, but may I give the answer to what I thought was my right hon. Friend's question? By reason of the 3½ per cent. Conversion Loan there was a nominal addition to the debt of £102,000,000, and by reason of the issue of other loans at a discount, and other circumstances, there was added to that about £18,000,000, making £120,000,000 nominal addition to the debt. That has been decreased by £88,000,000, which was paid off in the course of the year, and there was an overlapping sum into the present year to the extent of about £48,000,000, which came from the £322,000,000 which has been referred to as having been paid off. Accordingly, the figure of £322,000,000, which my friend asked me about, is entirely explained. The question which he has now put is as to the state of the debt at the present time as compared with March, 1919, and I shall deal with that.
It is perfectly true that in the first year after the War the National Debt was increased by about £320,000,000, and it has since then been decreased by £322,000,000. I do not understand the precise point my right hon. Friend seeks to make, but he seems to suggest that the Government is to blame in some extraordinary way for that addition to the National Debt in the year 1919–20. How does he suppose that the enormous army which we then had and which could not have been all demobilised at once, could be kept and paid for except by borrowing. Does he imagine that out of the ordinary revenue which we could have raised in these circumstances, we could have kept up an army and navy at the height at which they then were, paid all the gratuities which we had to pay and given the men the particular allowances to which they were entitled, and all of this without borrowing? Instead of making a point for himself, my hon. Friend only makes my point more clear. The fact is, after we have got over the year immediately succeeding the War, in which we were still saddled with enormous expenditure, we have succeeded by the superhuman efforts of this country in paying off £322,000,000 of our debt during the last two years.
Now I turn to the real issue of the Debate which is as to the form which the proposed reductions of taxation take. I gather that there is not very serious complaint with regard to the particular reductions which we propose to make. My right hon. Friend the Member for Peebles certainly took no exception at all to these reductions except in so far as sugar was not included. One of course would have liked to have given a reduction upon sugar as well as upon tea, but it would be a much more expensive thing to do. If we had given any reduction on sugar which would have reached the consumer, it would have cost £11,000,000 a year.
A halfpenny would not go very far.
A halfpenny would never reach the consumer except in an infinitesimal degree. Accordingly, while one would have liked to give some remission of taxation on sugar it did not prove to be feasible. A question has also been raised as to the Entertainments Tax and one has heard suggestions made from almost every interest in this country, that they deserve some remission of taxation. I think there is scarcely any trade which has not at some time during the last few months, made the suggestion to me that they deserve to have some remission and each of them has given very cogent reasons for what they asked. Had I responded to all these requests, we should have had no revenue at all and I am afraid, so far as the Entertainments Tax is concerned, unless some method can be devised to give me equal revenue to that which I now get from it, it is not possible to remit taxation upon entertainments any more than upon a great many other deserving objects.
Could not you rearrange it?
I cannot go into details now, but I am afraid it is impossible, at least, so far as the suggestions which have so far been made are concerned. Some Members of the Labour party complained that there was no real remission of the taxation which touched the working classes. That certainly is not true, because we included tea, which is largely drunk in working-class homes, among the articles upon which remission is given. I want to carry the matter further. There is also a remission of taxation upon income. I am perfectly certain as the hon. Member for North East Derbyshire has stated, that this provides the working man with the chance of more employment and thus of buying the commodities which he wants. Accordingly we have adopted the method which we believe will be most fruitful in providing a remedy for the greatest evil from which we suffer at the present time.
Then the question is put: Have you any surplus from which to give these reductions at all? Are you not in fact really borrowing in order to reduce taxation, and I understand that is the question which is being put by the right hon. Gentleman the Member for Paisley and the right hon. Gentleman the Member for Peebles. I do not understand that they are entirely supported by those who sit behind them, but I shall deal with the argument as it has been presented. There are, as I explained in the course of my speech in proposing the Budget to the Committee, two forms of debt with which we have to deal. I really divided it on a more close analysis into three, but for this purpose I shall refer to the two forms in which debt may be dealt with. One is by a general sinking fund, and the other is by providing money in order to meet obligations which we have undertaken to the holders of specific securities, and paying off a certain amount of those securities in each year. So far as ordinary sinking fund is concerned, obviously we do not require to borrow at all. All we do is to suspend it. With regard to the other category, I have pointed out that it will be necessary to borrow money in order to meet those obligations, but I have put forward the contention that as we are only proposing to borrow in order to pay off maturing debt we are not increasing our debt. We are reborrowing in order to pay off debt.
That proposition seemed to be disputed by both my right hon. Friends, and I have difficulty in understanding their point of view. Let me put this test. If we are not meeting expenditure, and if we are at the same time borrowing, obviously we must be increasing our debt. If, in point of fact, our debt is not being increased, obviously we are meeting our expenditure. I give the Committee a very simple illustration. Supposing we have three creditors, B, C, and D, and have to provide the money to meet the annual interest on what they have lent us. B and C are quite content to take the annual interest, but D says, "You are under an obligation to me to pay off £100,000," or whatever the sum may be. We admit our obligation, and go to E and say, "Will you lend us £100,000 which D is entitled to get from us?" We borrow the £100,000 from E and pay off D, and then we are indebted to B, C, and E, instead of to B, C, and D, to the same amount. Can it be said that a process of that kind involves an increase in our debt? How can it be urged that by adopting it we are in any way failing to meet our expenditure? Anybody who understands the business which is carried on daily by this country will see that this is the very process by which we deal with our burdens at the present time. What are we doing every day about Treasury bills? What is a Treasury bill? A Treasury bill is a document upon which we have promised to pay the holder, say in three months' time, a certain sum. When that time arrives, what do we do? We sell more Treasury bills in order to pay off the man who demands his money, and we are doing this every day. What have we been doing all these past years with regard to maturing debt? We have paid off £253,000,000 of obligations which fell due last year, but we were not able to do that out of revenue. Who ever supposed that we could? We did it by borrowing from others to pay those whose securities fell due, and as this is the ordinary process upon which business is done, how can it be suggested either that we are not meeting our expenditure or that we are borrowing to reduce taxation?
The real fact is that we can only judge of our position financially at the end of the year. Either we have covered our expenditure or we have not, either we have a surplus or we have not. The principle upon which this present Budget is formed is that at the end of the year we shall have met all our obligations, but should have no surplus for payment of debt. I hope I have made it perfectly clear that it is extravagant and fantastic to say that by the mere fact of not paying off any debt, we are borrowing to meet reductions of taxation. I admit that my right hon. Friend the Member for Paisley knows much more about tinkering with Sinking Funds than I do. I look back upon some of the things which were done during the course of his administration, and I find that not merely in bad times like these, but in prolific times, the right hon. Gentleman was at the head of a Government which was taking money which by statute had been put aside for the payment of debt in order to meet its current obligations for certain social reforms which were wanted in the country at that time. [An HON. MEMBER: "The Chancellor of the Exchequer was the present Prime Minister!"] I quite agree that the then Chancellor of the Exchequer was the present Prime Minister, but the right hon. Member for Paisley was then Prime Minister, and as head of the administration he was perfectly well aware, I hope, of what was going on, and he was certainly responsible for it. I am a purist in finance compared with the right hon. Gentleman the Member for Paisley, and I would never have allowed borrowing under such circumstances, but we are in a very exceptional position to-day. We have, as I have explained, paid off £322,000,000 during the past two years. Is it said that we must go on paying off debt every year?
The Prime Minister said so.
Let me examine that proposition for a moment. Is the proposition that we must go on paying off debt at a fixed amount every year? Let me take an illustration. Supposing two years ago there had been fixed, as seemed possible then, a Sinking Fund of £100,000,000 a year, is it to be said that when we came to a year like this we should have felt ourselves bound, no matter what it cost the country, to find that £100,000,000? Nobody would maintain such a doctrine, I am sure. Probably you would say that you would reduce it, but to what point? To the point at which you could afford to pay it, and if that point is zero the result is that in that particular year you cannot pay oft any debt. I marvel that such a proposition has been advanced by my right hon. Friend the Member for Peebles, and I confess that I agree entirely with the proposition which was put forward by my right hon. Friend the Member for Central Glasgow (Mr. Bonar Law) yesterday, that the only sound maxim to follow is that when trade is good and we can afford to impose high taxation, then we ought to be paying off our debt to the best of our ability, but when trade is bad we must give it a chance, and not impose burdens upon it which it cannot bear.
I turn to another aspect of this question, which was dealt with in a most illuminating fashion by my hon. Friend below the Gangway, the Member for Mossley (Mr. A. Hopkinson). He took the view" yesterday, which was indicated previously by the hon. Member for Twickenham (Sir W. Joynson-Hicks), that to fail to pay off any debt this year would affect the exchange. I entirely differ from that point of view. To begin with, if we were arguing this question as if we were in a world where human feelings and passions have no effect, we might lay down mathematical or economic laws which, if they were operating in vacuo, so to speak, or in a closed space where no currents ever entered, would no doubt be perfectly accurate, but the world docs not work upon that basis. If you look at the condition of Europe to-day you will find numerous illustrations that the proposition advanced by my hon. Friend last night is absolutely inoperative. If we look at this question of exchange, it is notorious that in some countries the exchange value of their currency is much lower than its intrinsic value, and it is equally true of other countries that their currency to-day, because of psychological causes, stands higher than the proposition of my hon. Friend would ever allow it could be. I do not name the countries, because countries are as sensitive about the appearance of their exchanges as women are of their looks, but I could give an illustration which would show my hon. Friend that the theory which he put forward has absolutely no basis whatsoever. France during the last two years has borrowed enormous sums of money. I think in the last year she borrowed something like the equivalent of £326,000,000 sterling. She borrowed it from her own people, but that kind of borrowing does not affect the exchange one iota. The French exchange, which last year went down, I believe, to 58 francs to the pound sterling, stands to day at 48, and is apparently unaffected by all the borrowing she has accomplished. The real fact is that exchange is not affected by the internal borrowing of a country so long as it is not done by creating fictitious credit or inflation. If the borrowing is obtained from the savings of the people, there may be no effect upon the exchange whatsoever. That is true, unless you reach a point at which psychological causes make people so distrustful of your credit that they then will not give you so much for your currency as previously, but so long as those psychological causes are not operative, the other matter, so far as economics are concerned, will not affect the exchange one whit. In France to-day you have conditions under which people still believe, and rightly so, in the credit of France, and in spite of all her borrowing the currency, so far from going down in value, has gone up.
It would have gone higher if they had not borrowed.
If the hon. Member suggests that, he is attributing to France to-day a position of credit which I do not think any country in the world could possibly possess.
What about external debt?
France has a far greater external debt than we have. She owes both to us and America very large sums of money, and she has not paid off any of it, so far as I know. At any rate, she has paid off none to us and very little to America.
The right hon. Gentleman made a great point of the fact that paying off external debt is one of the main causes of the improvement of our exchange.
I did, and the payment off of our external debt to America undoubtedly appreciated the value of our exchange with America. But borrowing from your own people does not affect your exchange at all, if it is not done by creating fictitious credits, except in so far as it raises psychological factors, and only when they are operating will there be any effect on the exchange. My hon. Friend the Member for Mossley went further and advanced another proposition. He said in effect that our failing to pay off any debt this year will affect any funding operation which we desire to make. Again I take a different view, and I do not think it will affect our chances of funding in the very slightest. Let me explain to the Committee why I say so. In the month of August, I think, I stated in this House that I did not expect that in the last year there would be any surplus with which to pay off debt. Did that affect the small funding operations going on in this country? Not in the very slightest. On the contrary, all the funding operations which we carried through were carried out with great success, and the real fact is that what affects the chances and prospects of funding is the condition of the money market. If there is more money in the market than can fee utilised in industrial operations, the chances of funding are enormously greater, because the people with money have to find some investment for it, and that is why in the last year, combined with the fact that the Government credit stands very high, the conversion operations were made comparatively simple. The result to-day is that the British Exchequer stands in a far more favourable position at this moment than at this time last year. Let me put it this way. If you compare the position last year with this, although we then proposed to put through a Budget which would allow us to pay off some £80,000,000 of debt, and I am now budgeting for no payment off of debt at all, we are nevertheless in a far better position now than we were then.
My contention is this, not that raiding the Sinking Fund makes it impossible to produce these conversion operations, but that robbing the Sinking Fund defers for a period the possibility, of carrying out each operation with success—that the right hon. Gentleman would be able to carry out the conversion operations at an earlier date if he was not robbing the Sinking Fund.
I do not at all agree with that proposition. By paying debt you are, of course, left with less debt to pay off, and I agree that if you pay off a very large amount of debt you may find yourself with your credit so greatly increased that your funding operation is made easier. But the whole point is whether, in the minds of those who are going to give you the money for funding, the situation is going to be so influenced by the fact that this year you are not paying off debt to the extent of 30 millions, that you will not be able to carry through the funding operation. I feel perfectly sure that, so far as any funding operations are concerned, what we are proposing to do to-day will not in the slightest way diminish our expectations.
Before I sit down, I wish to deal for one moment with the question of the reduction of expenditure, to which I come back. It is said that the only method by which we ought to achieve the reduction of taxation is by reducing our expenditure. I agree entirely that we ought to reduce expenditure by every means in our power, but I wish to point out again to the Committee, at the risk of repeating myself, that we have exercised the greatest possible care in reducing expenditure already, and that although our efforts are not at an end, nevertheless we ought to get credit for the results we have achieved.
7.0 P.M.
My hon. Friend who has just sat down said, in almost so many words, that the Government had done nothing to reduce expenditure. What is the record of the Government in regard to this matter? It is that we have reduced Supply expenditure since the Armistice from a figure of £2,400,000,000 as it was in 1918–19—I agree that that is not a very comparable figure—clown to the figure to-day of £547,000,000, so that we are to-day spending on Supply Services less than one-quarter of what we spent in 1918–19. I agree that that is not a very fair comparison, so let me take the year 1919–20, which is a fair one. In that year our expenditure on Supply Services was £1,100,000,000, to-day it is less than one-half of that total. In the current year we propose to spend £218,000,000 less than we estimated in the Budget of last year. Is that doing nothing for the reduction of expenditure?
You have changed your policy.
My right hon. and hon. Friends opposite are very fond of saying that the whole error of our position is one of policy. When the policy is changed they say, "You are not entitled to take any credit for the reduction of expenditure on that account."
It is changed so often.
I wish, however, to point out that the reduction which we have achieved is a very great one. Right hon. and hon. Members frequently talk as though we could have reduced our expenditure after the War was over to something like its pre-War figure at one blow. That is the kind of suggestion which is constantly being made, and they appear to think that even to-day we ought to be back at the pre-War figure. How is it possible to achieve such a result? My hon. Friend who spoke last frequently referred to the amount of money which has been realised from war stores. Does anybody suppose that we could have realised those sums from war stores and other sales without the staff to deal with those stores? Is it possible to get a return of £650,000,000, as my hon. Friend said, from the War Disposal Department, without keeping an expert body of people who know how to sell these stores, in order to get returns which are of great benefit to the revenue of the country? This applies not merely to the Disposal Board, but to a great many other Departments. It was suggested that the Shipping Ministry ought to have come to an end at once, yet it was necessary that it should remain in being for the purpose of realising the very large assets which the country owned, and which, if we had not realised them, would have been scrapped and the country would have had no benefit. Even in this last year we realised;£42,000,000 from the War Disposal Board, £29,000,000 from the Ministry of Shipping, £19,000,000 from the Ministry of Food and the Sugar and Wheat Commissions, and a figure of something like £2,000,000 from timber under the Board of Trade. Does anyone suppose that we should not have been losing money if we had suddenly scrapped all the War Departments and left all those assets to become derelict? Accordingly, the Committee must really take the fair view of what is necessary in the way of Government expenditure. As I have said, we have made great efforts to reduce expenditure to its lowest possible limits. Those efforts are not at an end. I quite anticipate that in the course of the present year we shall make still further reductions in the amount of our expenditure, and that in the following year we shall do even better. It is not possible for all this to be done at once; it takes time, necessarily, to achieve the best results.
Just one word about taxation. My hon. Friend complained that the burden of taxation which lay upon the shoulders of British citizens was very much larger than that which has to be borne by the citizens of the United States of America and of France. Everybody will agree that the case of the United States of America is scarcely comparable with ours. After all, we went into the War long before they did, we incurred a far greater burden of expenditure than they did, and their resources are immensely greater than ours. It is ridiculous to suggest that we should be in a position to tax our people at the same ratio as the people are taxed in America. Take the case of France. I have just pointed out one of the reasons why the taxation of France is very small. They are mot meeting their expenditure out of revenue. I do not know whether my hon. Friend suggests that that is a method which we should adopt; that we should reduce our taxation and fail to meet our expenditure. If he does not make that suggestion then I entirely fail to understand the gist of his argument. The reason why our taxation has been higher is that we have all the time been making it our object to pay our way, and I hope that is an aim which we shall always steadily keep in view. I think I have covered all the material points raised in the Debate yesterday and to-day. T venture to submit to the Committee that the Estimates which have been put forward are fully justified, and that the reductions we propose are such as will commend themselves to the Committee.
It is easy, lamentably easy sometimes, for a Chancellor of the Exchequer to be popular. I think on the present occasion that the right hon. Gentleman has aimed, above all, at popularity in the Budget which he has laid before the House. It is desirable, possibly, however, in the interests of the trade of the country, that the Chancellor of the Exchequer should seek not so much popularity as prudence in handling the national finances. Certainly the right hon. Gentleman on this occasion has remitted prudence to Saturn, and has allowed the finances of the country to take care of themselves. In the speech to which we have just listened he has urged that, in making a provision of £25,000,000 for Supplementary Estimates, he was well outside the mark, and that prudent statesmanship was satisfied with that sum for those Supplementary Estimates. I am bound to say, seeing what our expenditure was on Supplementaries last year, that £25,000,000 is a very hopeful Estimate indeed. When you recollect the position in which the country stands to-day, with 2,000,000 people out of work, with the unemployment benefit running out on every hand, so that heavier burdens are thrown week after week on the boards of guardians in this country; when you remember that the boards of guardians are week by week getting larger overdrafts at the bank, so that at any moment the time may come when substantial assistance on a very large scale may have to be made to the guardians in order to keep the unemployed alive; when you remember that during the last year the working classes of this country have had to spend all their savings during the five years of the War and the savings they made during the good year and a half of trade that followed the War, and all that we are faced with to-day—these 2,000,000 unemployed, with the prospect next winter of having far worse times than even those of last winter—then I say that a provision of £25,000,000, £4,000,000 of which has already been pledged since the Budget was prepared, leaving £21,000,000 to meet the financial crises and the economic crises that may well face this country, shows, not prudence, but a gambling spirit which it is undesirable to see in the Chancellor of the Exchequer.
But this Budget was to be, above all, a "Save the Trade Budget." It was boomed in all the papers long before the Budget was introduced as a Budget to save trade. It is the latest panacea of a distracted Government to save the trade of the country. A year ago, every right hon. and hon. Member on the Government Benches was looking pathetically across to the Labour Benches and saying that the only way to save the trade of the country was to cut wages. They said: "If you will only accept lower wages the trade of the country will improve and all will be well with the world." That was a year ago. Wages have come down all right, there is nothing wrong there; but the trade of the country is worse than before and not better. Therefore that fallacy has failed, as everybody saw-it would fail, because as your wages go down so the purchasing power of the working man goes down, he is able to buy fewer things that he wants, and, consequently, more men are thrown out of work.
Then we were told, with a great fanfare of trumpets, that Genoa was to save the trade of the country, and that all that was necessary was that the Prime Minister should go to Genoa, restore Europe, and the exchanges, and save our trade. Well, that is off. He said he was going to save the trade of the country and restore Europe by pegging the exchanges.
Mr. CHAMBERLAIN (Leader of the House):
He never said anything of the kind.
Stabilising them, if you prefer the word. Evidently, Genoa is not going to achieve the restoration of the trade of the country. We are now asked to believe that this Budget is going to do it.
Should we fail, we will count upon you.
That prophecy is admirable and I hope it will come true. I wish to make it quite clear that you cannot save the trade of the country merely by reducing taxation. What improves trade is not reducing taxation but reducing expenditure. If you cut clown your taxation by simply ceasing to repay debt by cancelling your sinking fund trade will not improve by reason of that reduction. If, last year, you paid off debt and this year you cease to pay off debt but instead remit 1s. from the Income Tax, that financial juggle will not help trade. It is infinitely more important to reduce the expenditure of the country than it is to take less in taxes but to pay off less debt. As we on those Benches have said continually, we believe that the only sure foundation for any recovery of trade is to pursue the good, old-fashioned policy of paying off debt. The special argument that we have in favour of repayment of debt at the present time is well known. It has been alluded to by the hon. Member for Mossley (Mr. A. Hopkinson). If you go upon the principle of paying off your debt, you are more able to convert your loans to a lower rate of interest. It is notorious that we have a large amount of Treasury Bills that have to be met every week. I think there are about £1,000,000,000 of Treasury Bills still outstanding.
Between £800,000,000 and £900,000,000.
These bills fall in every week, and have to be renewed. The more Treasury Bills you have to sell, the higher is the price you have to pay in interest on those bills, and when we talk about conversion, it has to be remembered that day by day and week by week this Government is carrying on minor conversions, converting Treasury Bills at a high rate of interest. During the whole of last year they have been converting these Treasury Bills into bills of a lower rate of interest, because the Debt was being paid off, and the finances of the country kept on a sound basis. But now that has come to an end. We are making no provision for paying off Debts. We are to continue day by day this conversion of Treasury Bills, and it may well be, as in 1919, you will have to go on week by week borrowing money, and having to pay more money, instead of less. This system of reducing Income Tax, and at the same time reducing the repayment of Debt may permanently burden the taxpayer with a heavier load. The Labour party, as I have said, base their finance on the good old-fashioned principle of repayment of Debt, and I think that is the soundest attitude for any party in this country to take up. I was amused, and somewhat interested, to see some of the arguments used by the right hon. Gentleman in favour of the non-repayment of Debt. There is a constant interchange between economic arguments and psychological arguments. You cannot appeal to psychology when your economics go wrong, and then appeal to economics when your psychology fails. I recommend sticking to sound economics, and trusting to psychology working out all right afterwards.
The whole point is that if you pay off Debt, you can borrow more cheaply. We on this side propose to pay off Debt, and the only way to do that is by a capital levy on all the wealth of the country. [HON. MEMBERS: "Oh!"] I expected the jeers from the people who do not know how a capital levy is possible, consistent with sanity, but year after year we are having capital levies in this country today. Whenever anybody dies, a capital levy is levied upon his goods, at the most inconvenient time for him and his family [An HON. MEMBER: "Not for him."] Obviously the hon. Member is not one of those who is insured against the Death Duties, but, as a matter of fact, this this capital levy levied at death is inconvenient to the citizen, is capricious and falls at an inconvenient occasion, instead of at a convenient period which can be reckoned against. The proceeds of Death Duties, being a tax upon capital, should be earmarked for the repayment of Debt. They should be used to repay capital, taking capital from private citizens to repay the capital Debt of the country. Unfortunately, it is not used for that, but is there any reason which the House can urge against the capital levy, which should be in its incidence, in its graduation, exactly similar to the Death Duties which we know so well? If that levy were earmarked, and solely reserved for the repayment of Debt, then we should be able to see that the finances of the country were really sound.
It is quite impossible to re-establish the trade of this country so long as we have £8,000,000,000 of National Debt round our necks, and I do submit that the Chancellor of the Exchequer, in making this year a departure from the attitude of his predecessors, has deliberately taken a step backwards. I remember the Leader of the House making his speech two years ago, showing that the enormous deadweight Debt would be gradually eliminated, until, in 30 years, it was going to vanish. That was sound finance, and now in order to be popular, and not in order to save the trade of the country, all those fine financial principles have been thrown to the winds, and we have the Budget we see before us to-day. This Budget is to be a "save-the-trade" Budget, but, if you come to look into it, how far is it likely to help the trade of the country? I was interested to hear the remarks of the hon. Member for North-East Derbyshire (Mr. Holmes). It seems to me the Wee Free party is almost as divided on this as——[An HON. MEMBER: "The Labour party!"] The Labour party are unanimous on this. The hon. Member for North-East Derbyshire and the hon. Member for Eye (Mr. Lyle-Samuel) are both regretting that the cut in the Income Tax was not 2s. instead of 1s., and the money borrowed to make up the difference.
No, no!
This is from the party over which Mr. Gladstone used to preside. Mr. Gladstone would turn in his grave if he could hear the hon. Members. The hon. Member for North-East Derbyshire went further. He said it was to be a "save-the-trade" Budget, that everything should be concentrated on the Income Tax and nothing for sugar and tea. As a matter of fact, any reduction in the sugar duty, any reduction in the tea duty, would be just as good for the whole trade of the country as a reduction in Income Tax. It might Very well be a good deal better. What happens at the present time? If the tea reduction really means something, if it really means a penny off the tea packet, then we shall see the workman's wages going further at the end of the week than they otherwise would do. That penny will be spent on something else. That something else will mean that somebody else will have to be put to work making that thing, and, therefore, the reduction of the tea duty, by reducing the cost of living of the working-classes, will improve the home trade, stimulate manufacture and benefit all the manufacturing industries in the country. It will have just the same effect as a reduction in the Income Tax, and, in some ways, a better effect, because really a reduction in the Income Tax will not help the trade of the country so much as would the reduction of a similar amount in the Corporation Profits Tax. The greater part of the Income Tax comes upon fixed incomes, upon incomes which are based upon preference shares, debenture shares, ground rents and other fixed dividend bearing securities. In so far as the Income Tax reduces the charge upon those incomes, and thereby increases the rate of interest, which everybody who has invested money in those securities gets, it will not benefit the trade of the country in any direct way. It will not reduce the cost of goods; it will not enable prices to come down. Only so far as the Income Tax falls upon ordinary shares or business will it reduce the overhead charges in the cost of production, and bring down the price of goods to the consumer.
After all, I do not think this Budget is going to be so very good for trade. I should very much prefer to see the abolition altogether of the Corporation Profits Tax, which is a tax transferred entirely to the consumer, and I was amused that the Chancellor of the Exchequer again this year should give way completely to the vested interests. Throe years ago, when the Corporation Profits Tax was introduced, the Chancellor of the Exchequer of that day, the present Leader of the House, discovered as the tax was going through this House that certain companies—statutory companies—would not be able to pass the tax on, and that if the Corporation Profits Tax was levied upon those companies the unfortunate shareholders would have to bear it, and not the consuming public. When he discovered that, he said: "I did not mean that the will exempt those companies from this tax, so that the shareholders shall not be penalised, and will levy it only on those businesses which can transfer it to the consumer." In the case of the railway companies it was to be a three years' exemption. The three years are up, and the present Chancellor of the Exchequer makes the same exemption for those vested interests. They are to continue to escape the Corporation Profits Tax, because, in their case, it would be borne by the shareholders. The taxes that are being reduced are obviously selected, not from the point of view of the effect that they will have upon trade, but from the effect that they will have upon the electorate of this country, and it could not be made more clear than in those sections of the Budget which deal with the agricultural interests. The agricultural interests are not content with reduction of the Income Tax from 6s. to 5s., but they are to get half that taken off, and in future to be assessed for Income Tax upon the rental, instead of upon twice the rental. Therefore, their Income Tax will come down from 6s. to 2s. 6d. That, undoubtedly, is a great boon to the agricultural interests, and they will no doubt recognise that boon and understand that a Government which looks out for its friends is worth being cared for by its friends.
Does the Labour party oppose that?
Most certainly. We believe that the people should pay Income Tax upon their incomes fairly, and not upon an artificially low valuation, and we believe that any reduction given to big farmers should be extended also to smallholders. But if that were not sufficiently illustrative of the affection this Government has for its friends, I think the other provision as regards land in the Budget is even more so. Agricultural land is to be assessed for Income Tax at its rental value, but land not used for agriculture, but used for parks and accommodation lands, is no longer to be assessed at its rental value, but at one-third—a positive bonus for all who refuse to allow land to be used for agriculture. Deer parks—they are of benefit to the country! The more deer forests the better for the Chancellor of the Exchequer. He is bribing them to put down sheep and to put up deer. Good! But I said just now that the Labour party believed that the foundation of any restoration of trade was sound finance and repayment of debts. They believe that there is another step that has to be taken if you are going to have a real improvement of trade. Reducing wages has done no good. That, I think, is recognised now generally. Anyway, we no longer hear that reducing wages is going to save the situation.
Reducing taxation is no good if the reduction in taxation simply means increased debt. Reducing debt is all right, and we shall have to go back to that. We might also, if we want improved trade, reduce all the obstacles to trade that the Government has managed to put in the way. Would it not perhaps be as well for the Chancellor to consider whether there are not some obstacles to trade which might be removed even when he is dealing with this Budget? How much longer are we to have on the Statute Book that interesting relic of a by-gone period, the Safeguarding of Industries Act? How much longer are we going to obstruct the general trade of the country by this ridiculous German reparation scheme? The trade of the country is being constantly upset in these ways. It would really be more helpful to the trade of this country than this Budget can possibly be if steps were taken to reduce expenditure rather than reduce taxation, but also to reduce all those obstacles to trade that the Govern- ment has deliberately invented in order to obstruct trade.
Obstacles to production might be removed in other directions as well. In the first place, this scheme in the Budget before us of reducing the taxes upon land which is not used is definitely assisting obstacles to production in the country, thereby reducing opportunities for the recovery of trade. The right hon. Gentleman might consider reversing that process and putting a heavier burden upon land which is not to be used for productive purposes, thereby forcing the man who owns that land to cease to be a dog-in-the-manger and allow additional production. It is in the direction of promoting additional production, and the use of the land of this country to produce the things we want in this country that you will ultimately solve the unemployment problem. At the present moment the process is going on almost automatically, and with no assistance from the Government. Week after week we are seeing the price of land in this country going down, and so getting nearer and nearer the possibility of its use. As the value of land goes down labour is gradually able to get access to that land and begin producing the things that we want.
I suggest that in future instead of remitting the Income Tax on agricultural land to one-half, instead of remitting the Income Tax on land which is not allowed to be used for agriculture to one-sixth, it might be as well to arrange, your taxation so that land which was not used was penalised and land which was used had exemption from taxation. In that direction you might find some improvement in production, some improvement in the opportunities for employment, some improvement in the trade of the country. I am confident this Budget will not make things any better. It will give a few more hundreds of pounds to the people who have already got too many hundreds of pounds. It will not relieve unemployment. It will start our finances on the bad track as the finances of Germany, France, Italy, Austria, Hungary, and Russia have trod before.
I have followed the course of this Debate with very close attention, but there is one point I have failed to hear mentioned, and I would like this opportunity, with the permission of the Committee, to advance it. I do so with some diffidence as I very recently joined this House, and also because of the circumstances under which I speak. Before developing my point, I should like to express the pleasure and admiration which I felt on Monday at the masterly statement made by the right hon. Gentleman the Chancellor of the Exchequer. It was to me a revelation in lucidity and was absolutely convincing. I regret, however, that the right hon. Gentleman did not find it possible to make some reduction in the beer duty. I am glad, however, that he has this afternoon given some hint of the possibility of finding means to do this by a further reduction in expenditure and by an increasing revenue bringing about a more favourable position later, than the Budget Estimate leads us to think at this moment will be the case. I trust, therefore, if that more favourable position should arise he will not fail to make some reduction in the beer duty, perhaps also in the sugar duty, without waiting until the Budget of next year.
In his criticism of the Budget last night one hon. Gentleman said that without saying that the Chancellor of the Exchequer was deliberately deceiving us, he was in fact deceiving us. I cannot associate myself with such a statement, but I do say, and say it with conviction, that I think the Chancellor is deceiving himself. In the course of his statement on Monday he told us that the Income Tax was the heaviest burden that the country had to bear, and that it was the tax which most affected trade. None of ns will quarrel with that statement. I, as a commercial man, certainly can most heartily endorse it. The right hon. Gentleman then went on to say in effect that the main consideration which weighed with him in applying his surplus to a reduction of Income Tax was that it would produce some mitigation in the burden on trade, and he said that he had been assured by commercial men that the best way to stimulate trade was by a reduction in the Income Tax. When I heard his announcement I rejoiced, but when I heard of the method by which he proposed to stimulate and revive trade, I was amazed at his optimism. To my mind so small a reduction as 1s. in the Income Tax is going to have little or no effect upon trade revival.
The industries of this country are depressed for the major part and in not a few cases are in a precarious condition. Those which are depressed, but yet are still profit-earning concerns, will say and feel that, although 1s. reduction is welcome—as any concession of the kind must necessarily be welcome—yet that so small a concession can have no influence upon trading conditions and will produce no revival in their activities. I say that, because revival can only be brought about by new enterprises, the seeking of new fields, or the resuscitation of old fields for the absorption of the products of these industries. With the depleted resources with which all industries now have to struggle the inducement which the 1s. reduction in the Income Tax for developments in trade is such that the risk will not be taken. Further, in the case of industries—and there are many of them, alas!—which are no longer profit-earning or carrying on either without a profit or at a loss, this offer of 1s. is nothing more than a hollow mockery.
I appeal to the Chancellor of the Exchequer to give careful consideration to this point and see if it is not possible to make a more generous reduction. I venture to suggest at least 2s. I am certain of this, that instead of him being doomed to disappointment, as undoubtedly will be the case now, that we shall then see some revival. I make this suggestion with diffidence, as I said, because, according to the statement of the right hon. Gentleman, he has been hard put to to find even the surplus which he has devoted to the 1s. reduction. When, however, I see how much has been done already in the reduction of Civil Service expenditure, I cannot help thinking that that little more which would give us another shilling could be attained. It would only mean a reduction, approximately, of one-tenth under the head of Civil Services. A great deal has been done, as he has told us this afternoon, under that head, and I am convinced that with the remarkable combination of forcefulness and amiability which he possesses, if he set himself to the task, he would secure this extra 1s., and thereby bring about that revival in trade which is so earnestly desired by everyone in the country.
We all welcome the utterance of the hon. Gentleman who has just spoken for the first time, and we all remember ill this connection the poignant circumstances in regard to the Member who was his father, but whose untimely death has led to his being here. I am sure the hon. Gentleman will be a great acquisition to our ranks. If I may venture to make one comment upon what, he has said, I should say this, that business men throughout the country view this concession as it should be viewed, and are thankful for small mercies from the Chancellor of the Exchequer. I did not, however, rise in reference to that particular, but to say a, word upon the subject raised by the hon. and gallant Gentleman the Member for Newcastle-under-Lyme (Colonel Wedgwood) who has just left the Committee. He is now, I suppose, the titular leader of the Labour party. He favoured us with an address on one aspect of the policy of this country which the Labour party hope to control within a short time. He knows that they would favour a sound system of finance.
Let us examine the items of sound finance which they have suggested for our consideration. The policy of the Labour party is by a capital levy to reduce the National Debt. I am not going into the effect of what a capital levy would be further than to say that I imagine it would very largely reduce the value of property of every kind in this country, and that result no doubt commends itself to the Labour party as one of the first items of sound policy. We had suggested yesterday from a Member of the Labour party another method by which the burden of the National Debt might be reduced, and he advocated the compulsory reduction of the Debt. That would mean that the value of the Debt in the market would very largely fall.
Having reduced the Debt by that means and imposed a levy upon the whole of the capital of the country in order to pay off the rest of the National Debt, we should have a party in power which has committed itself to the nationalisation of all means of production, distribution and exchange, so that when they have paid off all the public debt and reduced the capital value of all property, they will then nationalise everything because they believe that there should be no private property at all. Therefore, the sound finance of the Labour party reduces itself to confiscation, bald and undisguised. May I suggest that a little further school- ing and experience would be a good thing before the accession of the Labour party to office. In response to a question by the hon. Member for Watford (Mr. Herbert), hon. Members opposite have committed themselves to an attack upon the agricultural interest by saying that none of these small and just concessions made by the Chancellor of the Exchequer are sound and justifiable. The accession to power of a party which advocates finance of this description would not be very welcome.
I wish to join with the hon. Member for Wolverhampton (Sir R. Bird), to whose interesting speech we have just listened, in expressing the hope that the Chancellor of the Exchequer will find himself in a position to take some of the taxation off beer. Every working man and every member of working men's clubs have been hoping that, there would be some reduction this year in the taxation of beer. The hon. and gallant Member for Burton (Colonel Gretton) told us exactly how the case stood, and informed us that the tax upon a barrel of beer before the War was Ts. 9d., and that it is now 100s., and he further pointed out that a reduction of 30s. would take a penny off a pint of beer. I think the good effects produced by taking 4d. off the tea duty will be more than counterbalanced by the language used by working men when they find that beer remains at the present high price. Why the Chancellor of the Exchequer should have gone back on the teetotallers I really cannot tell. I am sure that none of us, looking at the Chancellor of the Exchequer, would suppose that he was a teetotaller himself.
Comments on the-physiognomy of Ministers, if not out of order, are unusual.
I trust that before long some consideration will be given to a reduction of the tax on beer. The question is, how can equality be effected? I hope that some more measures of economy will shortly be commenced. With regard to Employment Exchanges, can anyone tell us of any employer who ever got the men he wanted at an Employment Exchange or can he tell us of any man who would go to an Employment Exchange in order to get work? No decent working men ever go to an Employment Exchange. [HON. MEMBERS: "Withdraw!"] The Employment Exchanges from that point of view are a waste of money. Not long ago the Minister of Labour said there were 16 counties in the country which had no Employment Exchanges at all. They can get on without them, and why cannot the other counties do the same?
I think the hon. Member's remarks are more appropriate to the vote of the Minister of Labour.
I was only trying to suggest some further economies to the Chancellor of the Exchequer. I do not know whether it is out of order to suggest economies, but we have seen how the Geddes Committee recommended large economies in education which have not been carried out. Look at the great waste which is going on in regard to the administration of education where we find inspectors going about in motor cars. Not long ago a school mistress told me that in one week eight inspectors came to her school. I dare not give the name because I do not know what sort of treatment that unfortunate school mistress would receive. In education we see extravagance going on everywhere. Look at the innumerable forms which have to be printed. There is one form which costs 8d. and this has to be sent out in triplicate which means a cost of 2s. each——
Details of that kind might be appropriate in considering the Estimates of the Education Department, but they are out of order now.
I will conclude by making one final appeal that as soon as possible the right hon. Gentleman will give us a reduction in the taxation on beer.
I do not think there exists in this House in any quarter of it any great enthusiasm for the Budget. What I think is felt is that the Chancellor of the Exchequer has made the best of a very difficult situation. This Government has one peculiarity, namely, the more it falls in public esteem the more it rises in its own, and any Minister on the slightest provocation, and indeed without any provocation, will tell you that this is the finest Government that has been known in modern times, and I believe it is now the custom of Ministers to refer to their colleagues as statesmen. The Government's record in finance is really a bad one. They seem to have suffered from a sort of consumptive optimism which is well known in medicine under the name of spes phthisica, which means that the unhappy phthisic victim at the very moment that he has reached the worst stage has the highest degree of optimism as to the outcome of his complaint. This optimism has resulted in the Government accepting advice as to the industrial and business conditions of this country from various authorities who are not directly responsible to industrial enterprises, but are generally officials holding views directly opposite to those urged by business men.
Let me give an illustration of what I mean by the decision of the Government in the Budget of 1920 to increase the Excess Profits Duty from 40 to 60 per cent. With the exception of the moulders' strike, the decision of the Government to increase the Excess Profits Duty from 40 per cent, to 60 per cent, was the greatest direct attack upon the commercial prosperity of this country that we have yet known. I was then a supporter of the Government, and I appealed to the then Chancellor of the Exchequer, as many others did, not to persist in it, and I asked him to apply one test. On the Third Reading of the Budget I asked him to tell me of a single new business started since that increase was put on, and I asked him also whether he would deny that scores of businesses had limited their activities and plans because that duty had been imposed. I asked him to admit that it was a mistake, and he refused to do so.
8.0 P.M.
But we all know now that it was a ghastly mistake. Certain wise men took advantage of that position to clear out of industry altogether, and if every manufacturer had taken that course, where would business and employment in this country have been to-day? Those who continued in business after the duty was imposed found their difficulties multiplying and their profits absolutely disappearing. I want to say a word rather in sympathy with the hon. Member for Kensington (Sir W. Davison), who referred to the surprise with which he heard the Chancellor of the Exchequer say that anything in the way of reparations he should regard as a windfall. If ever I heard the present Chancellor of the Exchequer, or any future Chancellor, stand at that Box and say that he included on the side of receipts a large sum in cash for German reparations, I should certainly have the surprise of my political life. It is a great disappointment to the country that there are no reparations in this Budget. If the Government had taken the course they could and should have taken in 1919, some of the money which Germany could then have paid, and would have paid, would now be coming in for the benefit of the taxpayers of this country. But the Government played politics in all their business economics. The Prime Minister made promises so fulsome, so imaginative, so capricious, so obviously founded on a desire to secure political support, rather than to inform the people of the world as to the economic position of the world, that the result of those fantastic promises of, and the pressure of certain Members who felt that they had given pledges which they ought to try to redeem—pledges which I am glad to say I did not give, because my constituents are far too intelligent to be told we can make Germany pay the entire cost of the War—is the position with which we are faced to-day. The people had been told by the Prime Minister, "The Germans shall pay, and I will search their pockets," and the effect is that to-day—and the Chancellor of the Exchequer will correct me if I am wrong—far from having received anything from Germany, more than £5,000,000 of further expenditure has been incurred and is included in our debit and credit account with Germany for the cost of the Army of Occupation, so that not merely have we not received a penny, but we are actually poorer in this year's Budget. It is a gross political fraud.
Payments have been made by Germany in respect of the Army of Occupation, and it is not correct to say we have not got a penny from that country.
What I meant to convey was that if one calculates the cost to which we have been put—we, the victorious country—since the Armistice, and what we have received, there is) in fact, no surplus to our advantage, but there is an actual loss.
Except that we should have had to keep the Army somewhere.
I am not so sure that if, after the conclusion of the War, world peace had come, these men could not have been more profitable employed, both for themselves and the nation. This question of the international situation is a serious one. I know the anxiety which must prevail in the Chancellor's mind with regard to it. The real tragedy at Genoa is that America, to which reference has been made in this Debate, did not see her way to accept the invitation to attend. After all, America is the only creditor nation in the world to-day, and as far as she was concerned, Genoa would have been a meeting of her debtors. As far as Europe is concerned, it is a meeting of our debtors. We are the principal creditor, and I quite under stand the pride with which the British Chancellor announces to this House that the £25,000,000 duo this year to America will be met, and that the £50,000,000 due next year to the United States will also be met, and that we are going to pay our way. Every Member of this House is proud of that decision. We are told not merely that the money will be paid, but that plans have already been made so that even with the great burdens pressing on the people of this country that result will be secured. The Chancellor of the Exchequer will agree with me that while it is not a little comforting for the people of this country just now, overburdened as they are with taxation, to find that we are the only country in the world attempting to meet our war debts, it would have been a very comforting thing if the Chancellor, in the course of his speech, had been able to tell us not merely what we are going to do with reference to the sums owed by us to America, but what we are proposing to other nations that they should do with reference to the much larger sums due from them to us. Half of the burdens which we are bearing are entirely due to policy, and while it is a satisfactory statement that we are both determined and able to meet our obligations, it would also be a very satisfactory thing if the Chancellor were able to tell us that the Government have some policy by which this international situation is being dealt with.
I want to make one reference to agriculture. There again there could be nothing more tragic than the decisions taken by the Government at the end of 1920. I was one of the purposeless persons who sat night after night supporting the Government in this House—one Sitting actually extended over 26 hours—in passing an Act relating to agriculture which, within six months, was repealed by the Government. There is no industry in this country which has been so badly dealt with by the Government as agriculture has been. If any Liberal Government had dared to do what this Government has done in regard to finance, and in tinkering with trade and industry, it would have come down at a run. This Government, in 1920, brought in its Agriculture Bill. It set out its agricultural policy. It charged the entire community with the cost of it, and within six months it repealed that policy. We are told that it has roughly cost us £20,000,000, and then, it is added, that is an item which will not recur. The Chancellor of Exchequer will excuse us if we do not thank the Government for the fact that it will not recur. We say it should never have occurred. It is not the right hon. Gentleman's fault. His difficulty is that he has to find the money, but there is nothing in the whole financial policy of this Government that suggests there has been foresight, or the slightest consideration for the pockets of the taxpayers.
Take another little matter to which I wish to specially direct the attention of the Chancellor of the Exchequer. I want to ask him if he will inquire what the introduction of the preference on Imperial tea has cost the Revenue since it was introduced in 1919. There we have a further illustration, and a particularly gross one, of a deliberate sacrifice of revenue and of a vicious attack on the normal process of business in order to secure political and partisan ends. The tea trade of the world was in this country. Every penny of taxation on tea went into our Exchequer. I remember that the Leader of the House, when he was Chancellor of the Exchequer, said, in answer to criticisms on expenditure, "Do not talk about millions; show me how I can save half-a-million." Will the right hon. Gentleman be good enough to find out what was the direct loss to revenue from this fatal and unnecessary interference with Imperial tea? He will find that within the period between the decision being made and now there was a substantial loss of £10,000,000 to the Exchequer. I appeal to the Chancellor of the Exchequer because, after all, he has no more reason to hesitate about sacrificing political views than is to be found in the old saying that a man hesitates to sacrifice his wife's relations. The duty of the Chancellor of the Exchequer is to get money, and to see that no policy of any Department deprives the National Revenue of what should legitimately come to it. It cannot be a pleasure to the right hon. Gentleman to hear, as he must be hearing, tales about industry's representatives going to the, representatives of the Treasury and complaining of their lack of capital and inability to meet the Treasury demands. They are treated indulgently and allowed to carry on because it is known perfectly well that the only alternative is to take possession of their businesses. Surely, it would be a pleasure to the right hon. Gentleman, who has to impose this taxation, if he could say frankly that the preference on Imperial tea was politically unnecessary and economically unsound. It is up to him to collect everything he can for the National Revenue.
Incidentally, I may remark that 92 per cent, of the tea trade in this country comes from the Empire and only 8 per cent. from China. Everyone who drinks China tea does it, not because he cares for it, but because he follows a certain form of religion in the pursuit of which it is a necessary test. I a very glad to see that the right hon. Gentleman who was responsible for this preference has now come into the House. I repeat that the introduction of the preference on Imperial tea was not required to further the interests of the tea trade and that it has cost the revenue substantially £10,000,000. May I ask the Chancellor of the Exchequer if he will make a note of this point. The 4d. reduction, as I understand it, is on foreign tea, and the reduction on Imperial tea grown within the Empire will really be only one of 3d. and one-third of a penny. The Chancellor of the Exchequer rather cheered the hearts of Members the other night by saying there was a flat basis on which they could work in the distribution of the duty by taking 1d. off each quarter of a pound packet. But that will not work in the case of Imperial grown tea. If you take a 1d. off the trade says it represents their whole profit. If only a halfpenny is taken off the quarter pound packet then the trade will be charged by the public gneerally with profiteering. That is a practical point which the right hon. Gentleman should consider.
There is only one other word I would say. I am sure the Chancellor of the Exchequer will agree that what we have to do is to cut down Government activities in all sorts of Departments. Millions have been lost by interference with trade. I sometimes listen with despair to the speeches from the Labour Benches on this subject. I hear them talking about a capital levy which would mean the end of our entire industrial system by which every class in the country is supported. I look forward to the Government responding to the pressure which is being-brought to bear from all parts of the country to secure a return in our political life to wiser methods, to acceptance of responsibility for those things which affect individuals. The Government is interfering in far too many things which involve considerable charges on the Exchequer, and until it limits its functions, until it ceases-to be generous, until it ceases to seek political purposes in order to do various things—until it becomes just to us all, there will be no real reduction in our national expenditure.