It is fifteen years since I first held the office which I occupy to-day. I did not seek it then, and I accepted it on the present occasion with diffidence and with reluctance. It is never an office which, to my mind, is easy. It is always one of considerable difficulty, and the difficulties of to-day are more than ordinary. When I consulted my right hon. Friend and predecessor (Mr. Bonar Law), whose support to-day I am sorry not to have, owing to his engagement elsewhere, he, with his habitual cheery optimism, told me that he thought the position was more difficult at that moment than at any time during the War. I think there is some truth in the statement. We all know what has happened since the signature of the Armistice. There has been a détente in men's minds. In the military sphere armies which would have fought on without a murmur, if that had been necessary, for another year in order to secure victory, began to grumble at being retained with the Colours, and to call for immediate demobilisation, and the same thing has occurred in the civil sphere and in the financial sphere. People who during the War strove their utmost to save and to place their savings at the disposal of the Government are less willing to make those sacrifices now, and less willing, if they do save, to give the State the first call upon their savings. People during the War accepted the immense burdens of war without grumbling, and the House of Commons passed them with the minimum of criticism. But both the House and the people are in a different mood to-day, and I am called upon at one and the same time to remit or to repeal the taxation which was imposed and to remedy all the grievances which have been cheerfully endured in these years of stress and strain, and, not merely to resume the civil expenditure which was interrupted under the stress of war, but to provide the means for creating within a few months or a few years a new heaven and a new earth; and the same people who call upon me for fresh and large expenditure in every special field expect me at the same time to accomplish vast reductions in expenditure. I can work no such marvel, and unless I can have not merely the good will, but the assistance, of Parliament, the task which confronts me is one which no man can complete.

Expenditure 1918–19

With these few preliminary observations on a subject to which I must, I think, return in the course of my speech, I turn at once to the expenditure of last year. By a happy custom now formally adopted, the figures are already in the hands of Members, and I need trouble them with but very few. The expenditure—Exchequer issues—for the year which has just been completed was less than the estimate of £2,972,000,000 by £393,000,000. The estimate of daily average expenditure was £8,143,000, and the actual expenditure was £7,067,000. I think it would be of interest to the Committee to divide the year into the period before the Armistice and the period since the Armistice was signed, and to see what the average expenditure was in each of those two periods. In the earlier period, from the 1st April to the 9th November, it was £7,443,000; in the latter period, from the 10th November to the 31st March, it was £6,476,000—that is, a reduction of £1,667,000 per day on the Budget Estimate, or, in other words, a reduction of 20 per cent. Let me add that that reduction would have been still greater but for special expenditure consequent on and the result of demobilisation. For instance, £52,000,000 was spent on gratuities to members of the forces who were demobilised; and unemployment, a charge arising out of demobilisation, has cost £13,000,000. There has been a saving on the year in the Debt Charge compared with the estimate of £45,000,000.

Revenue 1918–19

If I turn from the expenditure side of the account to the Revenue side, the estimate was for £842,000,000—I give the figures in round numbers. The actual receipts were £889,000,000, in other words, the receipts exceeded the estimate by £47,000,000. There is an increase under Inland Revenue on every important head of duty except three. Income Tax and Super-tax realised just about £750,000 more than the estimate—a very remarkable approximation, I think, on a total of £291,000,000. The Death Duties failed to reach the estimate by £1,200,000, but that was one of those accidents and nothing more than one of those accidents to which we shall always be subject as long as a considerable portion of the Death Duties is derived from very large estates, because those large estates are not sufficient in number to give us a stable annual average. I may add that in this case, had the year closed a week later, the payment of duties on two estates would have brought up the receipts to the amount of the estimate. Excess Profits Duty showed a larger deficiency below the estimate. It was down £15,000,000, but that indicates no loss of Revenue except for the year. What was not paid last year will be paid this year.

I will say a few words about Stamps. My recollection of Stamps is of an uncertain Revenue that was apt to disappoint the Chancellor of the Exchequer. In the year which has closed they have done remarkably well. Even apart from the new Cheque Duty they have beaten all previous records. The total yield was nearly £12,500,000, representing an excess of more than £3,000,000 over the estimate, and of £4,000,000 over the receipts for the preceding year. The produce of the increased Cheque Duty—I wish my right hon. Friend the Leader of the House were here to listen to me—has been more than double the estimate of £750,000, a result which is due, in part, to the bankers having sent in for embossment with the additional stamp larger stocks than were anticipated, and in part to the fact that the imposition of the tax would seem hardly to have restricted the use of cheques at all. The Duties on Conveyances exceeded by nearly £1,000,000 the receipts in the preceding year, due to the large number of sales of property that have taken place. Transfers on stocks and shares account for a further £400,000 of the increase, and the yield of the Companies Capital Duty has risen by over £500,000.

Customs and Excise have also done well. They show a surplus over the estimate of £14,520,000. It may be interesting to the Committee to know some of the articles which contributed to that surplus. Tobacco was up £5,750,000, spirits were up £3,000,000, tea showed an excess over the estimate of over £2,000,000, and the Entertainment Tax contributed £1,500,000. Beer showed a small deficit compared with the estimate.

Of the other items on the Revenue side I need only mention, the Miscellaneous Revenue, which contributes £37,000,000 out of a total excess of £47,000,000. I mention this because the item has given rise, I think, to a good deal of misapprehension. The excess was composed as to £33,000,000 of a contribution from India on account of the £100,000,000 of Five per Cent. War Loan for which she undertook to be responsible. I hope that the fact that I am ex-Secretary of State for India will not be held to debar me from expressing the gratitude of the Committee and the country to the people of India for the contribution which they have made in the financial as well as in the military sphere to the exertions which the Empire has been called upon to make during the last few years, and from expressing the hope that the loyal masses of Indians may soon recover from the sufferings which they are now enduring, whether they arise from the forces of nature or the destructive enterprise of man. A further sum of £2,500,000 represents additional Grants from the Colonies, making £4,500,000 in all. £1,500,000 was due to extra profits of the Mint, chiefly arising from the large demand for silver coinage. I think that is all I need say about the Revenue and Expenditure of the past year.

Balance Sheet 1918–19

If we now compare the two sides of the account, we find that the Exchequer Issues were £2,579,301,000. The Revenue was £880,021,000, leaving a deficiency to be made good by borrowing of £1,690,280,000 cash, or nearly £440,000,000 less than was anticipated a year ago. I think it will interest hon. Members to know the percentage of expenditure which has been derived from borrowing and from taxation. Of the total expenditure in 1918–19, 34.47 per cent. was provided by Revenue, while 65.53 per cent. was provided by borrowing. If we take the figures for the five years from the 1st April, 1914, to 31st March, 1919, the proportions are 28.49 per cent. from Revenue and 71.51 per cent. by borrowing. That is a record which I believe no other belligerent can equal, and the sacrifices which it indicates place us in a good position to face our future difficulties.

The borrowing to meet the deficiency on the year of £1,690,280,000 has been under the following main heads: National War Bonds £986,000,000, War Savings Certificates £89,000,000, Other Debt £400,000,000, of which £325,000,000 were advanced by the American Government and the rest derived from various other loans abroad. The balance has been provided mainly by the Floating Debt. I should add that these figures are given net and represent the face value, excluding premiums, of the securities issued, except in the case of War Savings Certificates, the figure for which is taken at the cash receipt of 15s. 6d. per certificate.

National Debt

This brings me to the amount of the National Debt. The National Debt proper, that is exclusive of what we call Other Capital Liabilities, was at the outbreak of the War approximately £645,000,000. On the 31st March of last year the total was in round figures £5,872,000,000, and on the 31st March this year the total was £7,435,000,000, as against the estimate a year ago of £7,980,000,000. Of the Capital Debt incurred, internal debt accounts for approximately £6,085,000,000 and external debt for approximately £1,350,000,000. A considerable part of the debt is represented by National War Bonds repayable at a premium, and the premiums on those Bonds represent a further liability of £51,716,000. Further, the War Savings Certificates are allowed for at 15s. 6d. each and if they are all held for five years they will be repayable at a £1, which would then involve an additional obligation of £65,000,000. Finally, our Foreign Debt is largely repayable in foreign currency, and the sterling equivalent of the debt must necessarily vary according to the state of the exchanges at the time when repayment becomes due.

National Assets

Against this large total we hold certain assets. First there are the obligations of our Allies and Dominions, amounting on the 31st March of this year to £1,739,000,000. Of that sum £171,000,000 were due by the Dominions and £1,568,000,000 by our Allies. I think the Committee will desire to know how that sum was distributed. There are also assets of a substantial character acquired out of Votes of Credit and now no longer required which will be disposed of as opportunity offers. I shall return to that subject later. Finally, there are the payments that we shall receive in respect of indemnity from our enemies. But when every proper allowance is made for these assets, the amount and value of which, as well as the date at which we may expect to receive payment for them, is necessarily uncertain, the burden of debt left to us is still very formidable.

Before I pass from this subject I should like to remind the House that, in accordance with the proposal outlined by my predecessor in the Budget Speech last year, a set-off has been arranged between the Canadian Government and the British Government in respect of our liability to them and their sterling obligation to this country. The effect of this transaction, as explained in the Treasury Minute of 14th November, 1918, presented to Parliament at the beginning of the Session (Command Paper No. 9234) was, on the one hand, to reduce the debt of Canada to this country, and, on the other, the debt of this country to Canada, by a sum of £80,680,000. I am not without hope that we shall carry through a similar transaction in the course of the current year.

Expenditure, 1919–20

I come now to the current year. I do not propose to enter into any details of the expenditure of the year. The Estimates have been presented and there are more fitting opportunities to discuss the matter, but there are one or two observations I should like to make about them. In the first place, large as the Estimates are, they are less than 50 per cent. of the Estimates of last year, and well under 50 per cent. of what would have had to be provided if the War were still going on, and what, under such circumstances, we should have provided without complaint, and I think with very little difficulty.

Secondly, the Estimates are not Estimates for a normal year. The year is wholly abnormal. The Estimates for the fighting Services are admittedly so. My right hon. Friend the Secretary of State for War could not contemplate normal Army Estimates of £440,000,000 gross and £287,000,000 nett. So, too, with the Civil Service. A great deal of criticism was aroused by the presentation of such large Civil Estimates, but, as my hon. Friend the Secretary to the Treasury has already explained, the comparison which was made with the Estimates of last year was wholly misleading. For in this year we are dispensing with Votes of Credit. The increase therefore as compared with last year is apparent only, and due to the provision in the ordinary Votes for charges which have hitherto been borne in Votes of Credit. Moreover, a very large part of these Estimates, approximately £275,000,000 out of a total sum of £495,000,000, is due to expenditure on temporary charges arising out of the War. I think the Committee was of opinion that it was right that Votes of Credit should be terminated at the earliest possible moment, and responding to that view, freely expressed in the last Parliament, and to the undertaking of my predecessor that it should be done, if it were possible, we have formulated ordinary Estimates instead of Votes of Credit in the current year. But I am sure that the Committee will recognise the extraordinary difficulty of estimating under such circumstances as the present, and will not expect from us, or hold us to, that accuracy which it is the pride both of the spending and other Departments to achieve in normal years. Already I have to make additions to the Estimates which have been presented which will not surprise Members who have followed what has been happening. Since the Estimates were published it has been necessary to assume new obligations for loans to our Allies to the amount of £28,000,000. There are liabilities of £20,000,000, as explained by my hon. Friend the Parliamentary Secretary to the Board of Trade to-day, in respect of coal. Further, unemployment benefit has been extended for a further period, though at reduced rates, and I have to provide £8,000,000 additional for that purpose. Then, I have to provide out of the Consolidated Fund capital for Loan expenditure under the Land Settlement Bill, and I estimate it for the current year at £5,000,000. Finally, there is an additional Civil Service war bonus, under the recent award of the Arbitration Board, which may cost us another £4,000,000 in the course of the year. I must, therefore, allow in my calculation for an excess of at least £65,000,000 on the Estimates as at present presented.

The only other item of expenditure with which I need deal is the Debt Charge. I put this at £360,000,000, of which £29,800,000 will be required for services within the Fixed Debt Charge, and the balance of £330,200,000 for services outside that Charge, including the new borrowing to be effected during the year. Under present circumstances, and so long as borrowing must continue, I cannot make provision for a Sinking Fund. The total expenditure for the current year, after allowing for the additional expenditure which I have just described, will be £1,434,910,000.

Revenue 1919–20

What revenue have we got to set against that? On the existing basis of taxation, we expect to collect during the coming year a revenue of £1,159,650,000, an increase, without any alteration in taxation, of £270,629,000 over the actual receipts of last year. Details will be given in the White Paper, which will be in the hands of Members of the House, I hope, almost immediately after my statement is finished. I need only remark here that it includes a sum of £300,000,000 on account of Excess Profits Duty, and of £210,000,000 for miscellaneous revenue, of which £200,000,000 are receipts from the realisation of Vote of Credit assets. The sum taken on account of Excess Profits Duty may be counted upon whatever be the decision of the House in respect of that Duty. It represents tax due for accounting periods already closed, or already running out, and even if the tax were brought to an end as rapidly as possible, there would remain to be paid £300,000,000 in the current year, and I anticipate £100,000,000 in the year after. As regards the £200,000,000 which I have taken as the probable receipts from Vote of Credit assets this year, this figure, of course, does not represent the total amount of these assets, nor even the total amount expected to be realised in the present year. It is the amount of cash which we hope will be paid into the Exchequer, over and above the very considerable amounts from the same source which are appropriated in aid of Votes. I will give the figures of the Appropriations in Aid: Even that does not exhaust the amount of the credit which we expect to realise. I put the total value of these assets outstanding on March 31st last at approximately £800,000,000. There will, therefore, be a further sum to come in in future years. The £200,000,000 estimated for this year is necessarily a provisional figure. It is extremely difficult to form any good estimate either of the time at which these assets can be realised or the prices which they will fetch. All I need say at the moment is that I am advised that it is a safe estimate.

Balance Sheet 1919–20 on Existing Basis

Resuming what I have said, the position for 1919–20 would thus be as follows:—

Expenditure, £1,434,910,000.

Revenue, £1,159,650,000.

Deficit, £275,260,000.

That is a lesser deficit, I think, than most people have anticipated. We are left, therefore, with a deficit of £275,000,000 for the current year, or, as I would prefer to call it, £300,000,000, in order to allow for contingencies and further demands, some of which I can already see maturing. That, therefore, is, I hope, the maximum figure which, on balance, we shall need to have borrowed at the end of the year. It may be reduced by any sums which we receive, if we receive such in the course of the year, on account of repayment of capital or payment of interest by our Allies on their loans or in the shape of indemnities from the enemy countries, and, of course, it would be reduced to the extent of any increase of new taxation in the current year.

Borrowing 1919–20

That is not an unmanageable figure, but I beg the Committee not to think for a moment that it is any measure of the effort that is required of us. In the first place, the early months of the year are, from the revenue point of view, always lean months, and we have to borrow in anticipation of the revenue coming in. In the second place, a large part of our debt—no less than £957,000,000—is in the form of Treasury Bills, and, for the most part, of three-monthly bills, which therefore fall due for repayment every quarter. In other words, we have to borrow that sum of money four times over in the course of the year. During the War these bills were largely used by the public as a means for the temporary investment of funds intended, on the cessation of the War, to be employed in industry and commerce, and, as they are withdrawn for that purpose, the difficulty of borrowing to replace them will be no less great than the difficulty of new borrowing. It will, in fact, be new borrowing. We have, in addition, maturing in the current year Ways and Means advances of £455,000,000; Exchequer Bonds, £245,000,000 (including in this figure, £66,000,000, of 1922 bonds which have an option of redemption on 1st October), and £96,000,000 of Foreign Debt—together, £796,000,000; making, with the Treasury Bills, a total of £1,753,000,000.

The Floating Debt on the 31st March this year amounted, in round figures, to £1,412,000,000, namely £957,000,000 of Treasury bills, and £455,000,000 for Ways and means advances—an increase in the year 1918–19 of £223,584,000. This sum is less than the amount outstanding at the half-year ending 30th September, 1918, and much less than the maximum of £1,550,000,000 which was reached on the 31st of December, 1918. The drop is, of course, in part due to the collection of revenue but it is mainly owing to the large subscriptions in War Bonds in January last as a result of the special effort and special campaign then taken in hand, which brought the floating debt down to £1,380,000,000. This is not the time, nor am Ito-day in a position, to make proposals to the House for dealing with this large floating debt, but I can assure hon. Members that it is a subject which occupies my grave attention.

The Currency and Inflation

Another question closely connected with the floating debt is the continued expansion of the Currency Note issue. On 1st April, 1918, the amount of notes outstanding was £228,000,000. This figure had increased by the date of the Armistice to £291,000,000. On 31st March of this year it stood at £328,000,000 and on 23rd April it had risen to £349,000,000. The gold reserve remains stationary at £28,500,000, the balance being covered by Government securities. The Bank of England note issue has increased since 1st April, 1918, by £23,000,000. The aggregate amount of legal tender in the country, which is estimated to have amounted at the beginning of the War to about £214,000,000, is now more than £540,000,000. It is obvious that that expansion cannot be allowed to continue indefinitely. But the remedy is not so simple as at first sight it seems. It must be remembered that never at any period during the War, or since, has there been anything in the nature of a forced issue. Currency notes have only been issued in response to the public demand for currency. If there were anything like a forced issue it could be stopped to-day, not only without disadvantage but with positive advantage to all concerned. But what would be the effect of such action under present circumstances? The refusal of the Treasury to issue any more currency notes would not lessen the demand of the manufacturer on his banker for legal tender for payment of wages, and the banker would be forced to meet that demand so long as his customer had a balance to his credit. After exhausting his own stock of notes he would go to the Bank of England. The Bank of England, unable to obtain currency notes, would have to meet the demand by the issue of their own notes or of sovereigns withdrawn from the reserve in the banking department. In order to protect that reserve from immediate exhaustion, a violent rise in money rates and drastic curtailment of credit would have to take place. This would not only have a most serious effect on the prices of securities, on wages, and on the rates charged on Government borrowing, but also on the revival of trade and industry at a critical moment when the revival of trade and industry is the most important object we have in hand. It is to be remembered, further, that the inflation of the currency is not a peculiarity of our system; it is not confined even to the belligerent countries. It is a phenomenon of world-wide extent. A new level of world prices must be established before we can say with anything like exactness what amount of currency is required. To act before that level is established might easily produce evil consequences by restriction beyond what is necessary or justified, without any compensating advantages in any other direction.

Lord Cunliffe's Committee went carefully into this question. The conclusion of that Committee, if it is to be criticised, will, I think, at any rate, not be criticised as erring on the side of heterodoxy. They recognised clearly that the restriction of inflation is impracticable until the conclusion of the period of demobilisation and the cessation of war borrowing. But whilst a direct limitation of further currency issues is not, in my opinion, a step which is at the moment practicable, there is no reason why we should not, and there is every reason why we should, attack the underlying causes as quickly as possible. The first remedial measure is to reduce expenditure. The second is to meet that expenditure as early and as fully as we can out of revenue. The third is, when we are obliged to borrow, to borrow from real investors. The fourth is to repay Ways and Means advances. The fifth, and last, is to fund the immense volume of short-dated Treasury Bills. Measures like this can be rendered practicable only by the strictest national and individual economy.

4.0 P.M.

I should like the Committee to consider for the moment what is the position. The hard, inexorable economic facts are obscured by a fictitious appearance of wealth. There are between two and three times as much legal tender money in circulation as there was before the War. The deposits of the joint stock banks have more than doubled. The position of those banks, judged by every approved criterion of sound banking, is stronger than ever it was before. Almost the whole of their additional deposits are covered by the best of all banking assets—short-dated British Government securities. But these securities, standing behind the deposits and standing behind the legal currency, represent to a large extent not existing wealth, but wealth consumed in the operations of war which it must be our business to replace out of the exertions of the present. Both are drafts on future labour and the future creation of wealth. Pending payment they are an immense reservoir of artificial purchasing power, out of relation to the actual wealth on which it operates, and therefore diminishing in effect with each new step in its increase. Look beyond the accounts for the year and you see a different picture. We have sold £1,000,000,000 of our foreign investments, losing an equivalent power to draw on the wealth created in foreign countries. We have incurred debt to the extent of £1,300,000,000. Against this we have claims on our Allies and on our Dominions, but the position of our foreign debtors forbids us to count on these claims for much large immediate relief. Ultimately and gradually that relief will, we hope, mature, but we cannot count upon it for immediate purposes. For years to come a considerable part of our production must be devoted to paying our foreign creditors; a large part to make good the wastage and arrears of war. Our roads, our railways and, in a lesser degree, but in some degree, our machinery suffered from the absence during these past years of the ordinary upkeep and development. The supply of houses, which was short before the War, is now hopelessly in arrear. A large part of the production of the next few years—I do not know whether I ought to say few years—but a large part of the production of the coming years, both of the produce of labour and of capital, will be needed to make good these losses and to pay the new liabilities we have incurred. I beg the Committee, therefore, to be under no misapprehension as to the magnitude of the task which lies before us. I repeat that there is urgent need for national and individual economy. Nothing but a united effort of all classes, comparable to that which we have seen in the years of war, can enable us to face the years of difficulty which must follow on the conclusion of so great a struggle.

Government economy.

Certainly, Government economy first and foremost. I do not like to leave this subject without expressing, on my own behalf and on behalf of the Government and nation, our grateful thanks to the National War Savings Committee for the immense and successful effort which it made during the War to bring home the need of economy and to secure for the State resources without which it could not have paid its way, and for the time and labour which the members of that body and associated bodies ungrudgingly gave to the public service. May I express the hope that they will lend to me, in the difficulties which still confront us, the same ready and generous assistance which they have offered to all my predecessors?

Future Policy

That review of our position brings me to the consideration of the policy which we ought to follow. The deficit of the current year, on the present basis of taxation, is, as I have said, £275,000,000 or £300,000,000. But the current year is a wholly abnormal year. Expenditure is swollen by the overlapping of war charges. Peace is not yet signed, and even when peace is signed war charges continue. On the other hand, the Revenue receipts are swollen by sums arising out of the conclusion of the War, and the result is that neither side of the balance sheet gives us a true picture of our normal post-war position. But, if this year is abnormal, next year, if not equally abnormal, will, at least, be similarly disturbed alike by the overlap of war charges and the overlap of war receipts. The expenditure side will be swollen by demands arising out of demobilisation, out of the condition of the railways, and of coal production. On the other hand, there will be an overlap of existing Excess Profits Duty, and an overlap of receipts from the sale of Vote of Credit assets. Neither this year nor next year, nor, perhaps, the year after, will, therefore, be entirely normal, and in inviting the Committee to consider what our policy ought to be, I am driven to the hazardous expedient of casting my mind forward into the future to an imaginary normal year.

The Committee will recognise at once what a dangerous and difficult experiment that is to make. I recall but one case in which it was attempted. Mr. Gladstone in 1853 forecasted an expenditure over a period of seven years, and almost before his speech was uttered his calculations were upset by the outbreak of the Crimean War. God forbid that my calculations, after all we have gone through, should be upset by a similar cause! But, apart from that, I cannot conceal from myself that I may be wrong in all the assumptions I make, and that I may be wrong in many. But I must have some basis on which to ask the Committee to proceed, and as far as such a thing is possible, the future should be laid open so that Members may see something of what is in prospect. I will attempt the task. For reasons which I will explain later I shall assume that by that time the Excess Profits Duty as we now know it will have ceased to exist. I shall assume further that the available assets out of votes of credit have all been realised, and that no further funds will be drawn from them. I shall leave out of account for the present the sums we may expect to receive on account of indemnities from the enemy, and in payment of interest and repayment of capital lent to our Allies.

I shall present a picture of our liabilities and our resources standing by themselves alone. I think that will be the best course to take. The necessary reductions can be made later on when our knowledge is more exact. On the basis I estimate the revenue of this future normal year on the existing basis of taxation at £652,000,000, made up of £198,000,000 derived from customs and excise, £400,000,000 from inland revenue, and £54,000,000 from other sources. The calculation of our expenditure in that imaginary year is an even more difficult and hazardous task. I can only tell the Committee the hypothesis which seems to me most nearly to approximate to the probable truth. For the purpose of my balance-sheet I assume that the deficit on the railways and the coal mines is made good, and I know nothing more urgent than that steps should be taken to deal with both of these deficits at once. I assume that all fresh loans to the allies will cease, and that other abnormal expenditure, notably that in connection with the Ministries of Labour, Food and Shipping will also have terminated. Then comes a more uncertain item. What am I to estimate for the Army and Navy; what am I to put down for the new Air Force? I see the First Lord of the Admiralty on one side of me with that Janus-like gentleman the Secretary for War and for Air on my right, and I am not sure that they will assent to these estimates at all. But for the purposes of my balance-sheet I have assumed the figure for the three forces at £110,000,000, being rather more than a 40 per cent. increase on the cost of the Army and Navy before the War. We all hope that as a result of the Peace Conference the demilitarisation of Europe may be effected without fresh naval competition being started in any other quarter. I hope that it may be possible, and I believe it should be possible to reduce the numbers both of the Army and the Navy, but whatever reduction may be possible in that respect the pay will be higher, material will be more expensive, and none of these factors, numbers, pay, or cost of material, are yet capable of exact estimation. I give my figure for what it is worth. You can vary my calculations according to your own estimates of whether I have placed it too high or too low.

The debt charge I place at £400,000,000, including a sinking fund of half per cent. The Civil Services at £190,000,000; Customs, Inland Revenue and Post Office at £53,000,000, and other services at £13,000,000, making a total expenditure of £766,000,000, against which, as I have told the Committee I can count only on a Revenue of £652,000,000, leaving a deficit of £114,000,000. I propose to ask the Committee to raise this amount, approximately, not all in the current year, but by taxes which in the full year would bring in approximately that figure. On the assumption that my calculations are not unduly sanguine, on the further assumption that they are not upset by forces beyond our own control, and on the yet further assumption, about which I feel as much hesitation as about either of the other two, that Parliament will husband our resources and observe economy, the Committee knows the worst that it has to face and any funds received in repayment from our Allies or in indemnities from our enemies will be available in so far as they are capital for the reduction of our National Debt, and in so far as they are interest for the relief of our own interest charges, and either way indirectly for the relief of the burdens which I am now going to ask the Committee to assume.

Land Value Duties

Before I explain the methods by which I propose to raise this large sum there are two subjects on which I must speak, and I think it will be convenient that I should deal with them now. I refer first of all to the Land Values Duties. I do not need to remind the Committee that at the time of their birth these duties were the subject of fierce and prolonged debate, and, as fate would have it, the Prime Minister and I took opposite sides. There is a certain delicacy in a Chancellor of the Exchequer touching the handiwork of his existing chief, and it is not made easier if the Chancellor of the Exchequer, before being a Minister serving under the Prime Minister, was one of his most active opponents. But fortunately on this occasion I have the benefit of the advice of the Prime Minister instead of having to face his opposition. I am glad to be able to say at once that the Prime Minister and myself, no less than the rest of our colleagues in the Government, are entirely agreed as to the course that ought to be pursued. Hon. Members interested in this subject know that from the first the Revenue yield of these duties has been disappointing. But that is not all, and it is not the worst. For one reason and another, in consequence in part perhaps of the original character of the taxes, in part of the inherent difficulties of attempting at one and the same moment to carry out all over the country a new and unparalleled valuation and simultaneously to raise revenue upon it, and in part, and in no small part, owing to decisions of the Courts, the legal propriety of which I must not be thought for a moment to question, the taxes by now have become unworkable. In certain cases duty is declared to be leviable in circumstances in which Parliament never intended to exact it, and in which admittedly it would be unfair and contrary to the public interest to levy it, and legislation to reverse the judgment in question was only held up in consequence of the outbreak of war. In other cases the taxes, owing to other decisions, cannot be levied, nor can even a valuation be made upon which any tax could be levied. The result is, as I say, that the taxes in their present form are unworkable. They must either be amended or repealed; they cannot be left indefinitely as they are. But if I were to attempt the task of amendment or repeal at this moment, in the present divided state of public opinion on the subject, and in the absence of full knowledge as to the facts of the case, I should be inviting, as we hope on the eve of the conclusion of peace, a recrudescence of all the old controversies, which we have forgotten during the War. Under the circumstances, the Prime Minister and I joined in recommending to the Cabinet that before action is taken the present position of the duties should be referred to a Select Committee of this House in order that they may explore it and may recommend a course of action in regard to it. We hope that such a careful inquiry, before which all parties can be heard, may secure something in the nature of common agreement as to the best course to pursue in future. It is fair that I should add that whilst neither the Prime Minister nor I wish to prejudge or to attempt to prejudge the decision which such a Committee may form upon the duties or upon any taxation which may be introduced in their place, we both think it is of importance that there should be a trustworthy valuation of the land of the country available for public purposes whenever it is required.

Motor Spirit Duty

Next I must say something about the Motor Spirit Duty. Since I came into office I have had to give a good deal of attention to matters connected with this duty. It was imposed by the 1909 Budget. The full duty, formerly 3d. per gallon, raised in 1915–16 to 6d., applies only to cars used for private purposes. Cars used for trade or husbandry, hackney cars, cars of doctors or veterinary surgeons when used for professional purposes, are all entitled to a rebate of half the duty. Motor fire engines and certain other cars are entitled to free spirit. Petrol used by stationary engines, motor boats and aeroplanes or for cleaning purposes is also free. In 1913–14, the year before the War, about 47 million gallons paid full duty, over 40 millions paid half duty, and nearly 8 millions were delivered free of duty. I think the Committee will see that a tax of this character is open to serious objection. It is complicated and therefore expensive to administer and collect. In the second place, the test of dutiability is not in the nature of the article but in the use to which it is applied. The same quality of spirit is dutiable if applied to one purpose and not dutiable if applied to another. The machinery for collecting the duty prescribed in the Act is that the duty is to be collected at the full rate and repayment made where the user is entitled to an abatement. In practice the extreme inconvenience of this is overcome in the case of some large users, such as the London Omnibus Company, but the examination of the claims for rebate from small owners gives rise to an immense amount of trouble and an immense consumption of time and irritation, which is correlative not to the value of the tax so much as to the trouble of investigating the claim. Lastly, as the Committee will observe, in a tax of that kind so levied there is a wide opportunity for evasion and for fraud.

I think there is a great deal to be said for levying the charge, whatever it may be, that we wish to levy on the users of motor cars in some other form than in the form of a tax on petrol, but a satisfactory scheme of licensing could only be worked out after conference with the various interests affected, and I desire before making any proposals on the subject to have the advantage of the advice and assistance of the Minister of Ways and Communications as soon as the House has placed him in the saddle. I propose therefore to discuss this question with him in the interval between the present and the next Budget and I hope by next Budget Day that I or my successor may be in a position to make proposals in regard to it.

Excise Duty on Motor Spirit

But there are two points about which I must say something at once. The first relates to the existing Excise Duty on Motor Spirit. That Duty yields only a trifling revenue of some £50,000 a year derived entirely, I think, from Scottish Shale Oil. But a difficult position has recently arisen in regard to benzol manufactured in this country. Before the War benzol was one of those spirits which were occasionally and experimentally used for propelling motor cars but were not taxed when so used. In refraining from taxing it the Board of Customs and Excise acted upon instructions issued by the present Prime Minister and announced in the House of Commons in the early days of the new tax, to the effect that they were to aim at the taxation of spirit which was ordinarily and generally used for driving motor vehicles and not to attempt to levy the tax on the various substances, which though not generally used as motor-car fuel could be or were occasionally used as substitutes for or in association with it.

That was the position up to the War. The War has changed the position completely. During the War the production of benzol for war purposes was stimulated by the Munitions Department with remarkable results. There is now in existence a manufacturing industry with large stocks of spirit which the Munitions Department no longer requires, and a large continuous output amounting now to about 100,000 tons a year, of which 70,000 tons or thereabouts—that is equivalent to 21,000,000 gallons—are available for motor fuel. The Minister of Munitions promised to hand over those stocks to the trade for the use of motor petrol. The Petrol Control Committee undertook to release for motor fuel as much as could be put on the market. Then the Board of Customs and Excise felt it to be their duty to step in and to issue a warning that benzol so applied might be subject to taxation.

I have to consider what is to be done. We have here a case of an industry found vital during the War, created and stimulated for war purposes, practically created at the Government's instigation and under Government guidance. That industry is suddenly confronted with the loss of its market owing to the cessation of the War. That is not all. Benzol is not only important to the nation as an additional indigenous source of the supply of motor fuel, but it is a very important ingredient in the dyeing industry, an industry which, as the Committee knows, has been found so vital to our existence and to our trade that not only this but preceding Governments have done everything in their power to establish it and to promote its growth in this country. Under the circumstances, and acting on the advice of the Board of Trade, I propose to give legal authority to the exemption of benzol from taxation by repealing the Excise Duty, and I am glad to think that the Scottish shale industry, an industry which it is also in the national interest to develop, will, of course, obtain the advantage of the repeal.

Motor Spirit Licence Duty

There is another subject in regard to motor spirit, namely, motor spirit licences. The motor spirit licence duty was imposed as a war measure to restrict the use of private motor cars at the time of shortage. Its revenue effect was purely secondary. The necessity for restriction has now gone. The Licence Duty was collected by the Petrol Control Department of the Board of Trade, a Department which, I think, did its work extremely well but which is now in process of being dissolved. I am told that if we abolish this small Licence Duty, with all its anomalies, we shall at the same time enable the Board of Trade to put an end to the employment of this Department with its 300 officials. In that matter, as I anticipated, the Committee will support me.

Imperial Preference

That brings me to a subject which I, at any rate, regard as the most important feature of the present Budget. I come to the establishment of Imperial preference. Let me say at once at this stage, to prevent any misapprehension and any disappointment, that I am not propounding, and cannot propound to-day a general trade policy for this country. My right hon. Friend the Leader of the House dealt with that question a week or two ago. He explained the steps that would be taken, and, if the steps which are found to be necessary require legislative sanction, that sanction must be given in some other measure than the Finance Bill. For the present my task is only to give effect to the declaration of the Imperial War Cabinet and the Imperial War Conference two years ago, in which the representatives of the British Government concurred, that as soon as possible preference on duties now or hereafter existing should be introduced for goods of Imperial origin.

The range of our present Customs Duties is not wide, though it covers more articles than people are apt to suppose. Only three Colonial or British oversea products fall into the categories subject to duty at the present time in any large quantity—namely, tea, cocoa, and rum; but there are many other dutiable articles which appear in our Customs returns from His Majesty's possessions overseas. I need name only such articles as coffee, sugar, tobacco, and wine. Though the beginnings may be small, the measure of what I am inviting the Committee to do is not the amount of British Imperial trade which secures preference at this moment, but the opportunities for the development of that trade, which I invite the Committee to open out. There is room for vast extension. There never was a time when it was more important to the Empire as a whole, or to us in particular, that development should take place. From the small beginnings of to-day I hope that many Members of this House will live to see a really wide structure of inter-Imperial trade develop

In deciding on the form which preference is to take I have had four main considerations before me. In the first place the preference should be substantial in amount. In the next place the rates should as far as possible be few and simple. Thirdly, where there is an existing Excise Duty corresponding to the Customs Duty which is affected, the Excise Duty must be proportionately altered. We cannot give preference at the expense of the home producer. Lastly, in carrying out this policy I have to remember the interests of our Allies and as far as practicable to avoid increasing duties on their products for the purpose of giving preference.

As I have said, the range of our existing duties is small. It falls mainly into three classes. First there are the new Customs Duties imposed by Section 12 of the Finance (No. 2) Act, 1915, which carry with them no corresponding Excise Duty, on cinematograph films, clocks and watches, motor cars and musical instruments. On these duties I propose to fix the preference at one third, which is what I may call the general Empire rate, in so far as a general Empire rate exists.

The next class comprises taxes on consumable commodities apart from alcohol. These are in essence Revenue duties pure and simple. On these in many cases the duties are themselves very high in relation to the value of the articles, and a preference of one-third would be both more than I could afford and more than I think is necessary or justifiable. Before coming to any definite decision I thought I ought to consult with the interests affected. I accordingly appointed a small Departmental Committee of representatives of the Colonial Office, the India Office, the Board of Trade and the Board of Customs and Excise and asked them to get into touch with representatives in this country of the producers, the importers and the manufacturers of the articles affected, and to ascertain their views as to the probable effect of preference on the trade and industry of the United Kingdom and the British Possessions and on the rate of duty. After considering the views of the interests affected as gathered by that Committee I have come to the conclusion that for preference on this class of article I should be justified in recommending to the Committee a rate of one-sixth of the duty. I do not of course mean to imply that this rate was, in fact, recommended by the trade interests who were consulted. No such absolute uniformity was to be expected. The differences between different trades are considerable. In some cases their recommendations approximated closely to my figures; in some they varied to a smaller or larger degree, but on consideration of the facts I have come to the conclusion that one-sixth would be an effective preference on these articles, and I hope that it will be satisfactory to those concerned. I take the opportunity of thanking the representatives of the trades for the assistance which they have given on this occasion as indeed they so willingly do whenever they are appealed to.

I ought to say at this stage that I propose that in the two classes of goods with which I have already dealt, namely, the duties on manufactured articles and the duties on consumable commodities other than alcohol, the preference should be given by way of reduction of the existing duties on Colonial produce and not by way of surcharge on foreign produce.

My right hon. Friend asked me to give him some further information as to the character of the articles concerned. The most important is tea. The estimated revenue from tea in the coming year is, without the change in duty, £16,000,000. The duty is 1s. preference will therefore be 2d. Even in normal circumstances before the War, when the importation of tea was unrestricted, nearly 90 per cent. of the tea was already Empire grown. The results, therefore, of the Grant by way of preference will be practically equivalent to the reduction of the duty on tea, and I anticipate that that relief, as it always has done, will lead to a largely increased consumption. In the circumstances the loss for a full year involved in that preference may be put at £2,300,000, but probably will not be more in the current year, which is not a complete year, than £1,800,000.

The next article is cocoa. The estimated revenue from cocoa is £2,400,000. About two-thirds of our imports now come from Empire sources. Preference at the rate of one-sixth would be worth 7s. per cwt., meaning a loss of revenue of about £200,000.

The revenue from coffee is small—£650,000—and a small proportion, only about 20 per cent. of our imports normally come from Empire sources. The amount which could be grown in the Empire is capable, I think, of almost limitless expansion. The preference of one sixth of the duty which I am proposing is worth 7s. per cwt., and would mean on the present proportion an immediate loss of about £20,000 in revenue. Chicory will, of course, follow coffee, as it always does, and the Excise Duty will be proportionately reduced. The hon. and learned Member for York, I remember, used to make my life a burden upon the difficulties of the home chicory grower.

Now I come to sugar. The estimated Customs Revenue from sugar is £39,000,000. Only a very small proportion of the imports, 7 per cent., normally comes from Empire sources, and the preference would be worth about 4s. per cwt., which would mean a loss of revenue of about £500,000. The Excise Duty on beet sugar produced in this country will be similarly reduced. It already stands at 2s. 4d. per cwt. less than the Customs Duty.

Dried fruits are only a small matter. I need not trouble the Committee with the figures, but the preference will be given on them also. Coming now to tobacco, the estimated revenue on the present basis is £47,000,000. Only 2 per cent. of the imports came from Empire sources, but a very considerable expansion is possible if tobacco growing were developed and improved. A preference of one-sixth, or about 1s. 4d. per lb. on unmanufactured tobacco, the rate which governs the other duties, is a substantial amount which will, I hope, stimulate increased production in India and the Colonies concerned. The Excise Duty on tobacco grown in the United Kingdom will again be correspondingly reduced. In the case of both tobacco and sugar it is proposed that the preference on the manufactured articles should be based on the amount of the British-grown product in the imports.

Then I come to motor spirit. The estimated Customs revenue is about £2,200,000. Only some 18 per cent. comes from Empire sources. A preference of one sixth, or 1d. per gallon, may mean a loss of revenue of about £60,000. I have decided for other reasons, as I have already explained, to recommend the abolition of the Excise Duty.

What about Colonial wines?

I am coming to that.

That concludes my second class. I come now to the third class of dutiable articles, beer, wine and spirits. There is no importation of Colonial beer. The arrangement of a preference would be complicated and difficult, and at any rate for the time we may safely neglect it. I propose to do the same for the same reason with table waters, matches, and playing cards. Cards are hardly worth mentioning except that I might be attacked afterwards for concealing what I was doing or was not doing. Then I come to wine. The estimated revenue on wine is £1,250,000. Only about 7 per cent. of the imports come from Empire sources at present, but the industry is one which is being developed, and is capable of being further developed both in Australia and South Africa. Both Dominions attach importance to it. At present the wine duty is levied at two rates, 1s. 3d. and 3s. a gallon, according to strength. A preference of one-sixth on those small duties, I am advised, would be quite ineffective. On the other hand, in consideration of the interests of our Allies, notably of France end Portugal, and of some neutrals, we are unwilling at such a moment as the present to raise the duty on a very important article of their export. We propose therefore to give the preference by way of reduction and to allow 6d. on the lower rate of 1s. 3d. and 1s. on the higher rate of 3s. There is an additional tax on wines imported in bottle of 1s. a gallon on still wine and 2s. 6d. on sparkling. I propose to allow 6d. preference on the first and 9d. on the second. Lastly, I come to spirits. These again need special treatment. They constitute my most difficult problem. The State derives a very large revenue from the Excise Duty on spirits manufactured in this country, and it is essential that preference shall not be given in a form which would appreciably reduce the yield. For that reason it is necessary that spirits should be taken in a class apart, as an exception to the general rule which I have followed of giving preference by reducing the duty on imported products. To give a preference by reduction would involve a corresponding reduction in Excise Duty and a loss of revenue which I am unable to face. For the purpose of the duties, spirits are divided into five classes, four subject to Customs Duty, namely, rum, brandy, Geneva and other sorts, and the fifth home-made spirits, including whisky, subject to the Excise Duty. Over 80 per cent. of the rum comes from Empire sources. The imports from the Empire of other spirits are at present small, and I think likely to continue so, at any rate for a long time to come, though they are capable of development. As regards the amount of the preference, I have come to the conclusion that anything like a rate of one-sixth, with such high duties as are charged, would be too high. It would amount to 5s. a gallon on the rate of duty in force in the year which has come to an end, and a larger amount if this duty is increased. I propose, therefore, to fix the rate of preference at 2s. 6d. per gallon, not by a reduction in the duty on Colonial spirits but by an increase in the duty on foreign spirits. That will give me a slight additional yield of revenue. The effect of the preference proposals as a whole on revenue will be a reduction of about £2,500,000 in the current year, and something over £3,000,000 in the full year, without allowing for any increase in the imports of Colonial products. The great bulk will be in respect of the tea.

Date of Preference

Now as to the date on which preference will take effect. The general date which I propose is 1st September, so as to allow time for administative machinery to be set up. But tea requires special treatment as the great bulk of the supply comes from the Empire. To postpone the introduction of the new rate too long might lead to the withholding of stocks, and the consumer going short. After consulting the distributing trade, I propose that the reduced duty should come into force on 2nd June. If these results are small, it must be remembered that the immediate bulk of Colonial products affected is small, but the results, both on the Revenue and, as I hope, on the trade, will proceed increasingly as the years go on.

Now I come to the new taxation which I propose to impose.

Spirits—No Luxury Tax

I am warned by the clock to get on with my task as rapidly as I can. Therefore I confine myself at this moment to saying that I do not propose to proceed with the Luxury Tax. I am quite ready to give my reasons for this, but I think that I should unduly delay the Committee if I did so now. I come first to spirits. I may remind the Committee that it was found necessary to restrict the delivery of spirits from bond, as from the 1st of April, 1917, to a limit not exceeding 50 per cent. of the deliveries in 1916. Owing to a variety of causes, including the restriction just referred to, the increased duty on spirits, the operation of the Immature Spirits Act, and I am afraid I must add some withholding of stock, the supply of spirits fell short of the demand and the prices rose to an extent which led the Food Controller, in consultation with my predecessor, in the spring of last year, to limit them by imposing a maximum scale of prices, which was announced on Budget Day and provided for a substantial increase in the then duty.

Two changes affecting the position have since occurred. In the first place the scale of prices was revised in August so as to afford relief to a section of the trade which had bought their stocks at somewhat inflated prices and had not then had an opportunity of disposing of them. Secondly, the quantities allowed to be delivered from bond were increased as from the 24th February last from 50 to 75 per cent. of the quantities delivered in 1916, bringing the authorised clearance up to 21,400.000 gallons a year. Both of these changes have further increased the profits of the trade, and they are now in the aggregate more than my predecessor estimated, and more than I think is reasonable. And the Committee will not be surprised to learn that I propose to ask that, at any rate, part of these profits should be diverted to the Exchequer by a further increase in spirit duty from 30s. to 50s. per proof gallon. This increase will, involve some readjustment of trade prices to prevent the burden falling unequally on different sections of the trade. The scale consequently is being revised so as to distribute the additional duty as equitably as possible throughout. The alteration will only affect the consumer in a few cases, such as the price of spirits sold to him in bottle, or in jar or cask. Owing to the great rise in the cost of bottling and the prices fixed for the bottle and the glass respectively, the sale of spirits by glass has been much more remunerative than the sale by bottle, and I think that some of the difficulties complained of in the early part of the year during the epidemic of influenza in reference to the obtaining of spirit were due to this cause. The new price for the bottle will be 10s. 6d., and this will remove this cause of complaint. That increase will produce an additional revenue of £21,650,000 in the full year on the present authorised amount of clearance. For the current financial year, a month of which has already passed, it will bring in an increased yield of £19,350,000.

Beer (Larger and Better Supply)

5.0 p.m.

I pass by a not unnatural transition from spirits to beer. Beer is no less favourable to my attentions. A year ago when the authorised annual output of beer was 33⅓ per cent. of the 1916 output, my predecessor found that excessive profits were being made, that the prices charged to the consumer were higher than could be justified by the then existing conditions. He decided in consultation with the Food Controller to increase the duty from 25s. to 50s. a barrel. At the same time the partial control of prices previously instituted was continued in a modified form. The order limiting prices did not touch sales on any portion of licensed premises other than public bars, and it did not refer to all articles sold. It did not touch draught beer above 1034 degrees or any bottled beer. The controlled prices, which were fixed so as to enable the trade to secure sufficient profit without unduly raising the prices of the beers, were not affected by the Order. It was, however, subsequently found that for beers of higher gravity and bottled beers the prices charged were in many cases increased much beyond the limit which would have provided a reasonable profit. Further, after the Armistice, it became possible to some extent to meet the public demand for more and better beer, and as from 1st January an additional quantity has been allowed to be brewed at a higher average gravity. The increase, which was in the proportion of 25 per cent. of the standard barrelage for 1918, had of course the effect of reducing the cost of production, and the trade was thus in a position to make still larger profits than before. In view of that, the Government thought it right to warn the trade that while they might have the run of those profits until Budget day, they must expect an increase of duty at that time. A new scale of prices was issued at the same time that the increased barrelage was allowed. This scale allowed, as I have said, a fair margin for further taxation to be taken in respect of the increased barrelage. The necessity which existed during the War of rigidly restricting the amount of grain to be used in brewing has now passed away, and the Government after full consideration are prepared to take a further step in allowing increased supplies of beer, and of beer of a better quality, and brewers will accordingly be allowed to increase their output by 50 per cent. on their 1918 barrelage. This, added to the 25 per cent. increase sanctioned last January, will mean that the restricted barrelage which was allowed in 1918 will be increased by 75 per cent., bringing the total authorised barrelage for the year up to 20,000,000 barrels, compared with the pre-war barrelage of about 36,000,000.

In order that the consumer may be able to obtain beer of better quality brewers will be at liberty henceforth to brew to an average gravity not exceeding 1040 degrees in Great Britain, as compared with the 1032 degrees which is the existing limit, and with the pre-war gravity of 1050 degrees under unrestricted conditions. The average gravity of beer brewed in Ireland, which has always been higher, will remain at 1047 degrees, as compared with 1065 degrees before the War. [An HON. MEMBER: "Why?"] In consequence of the particular conditions and character of their trade. This increase in the average gravity which the brewers in Great Britain are allowed to brew will, I hope, go far to remove the grievance, of which some of them have complained, that they were unable to maintain their special trade at the low gravity hitherto imposed upon them. The effect of further relaxing the restrictions on output while continuing the present scale of prices to the consumer, which we do not propose to alter, will be to increase the margin of profit for taxation beyond what was contemplated when the prices were fixed in February last and the trade warned to expect it, and I now feel justified in proposing to appropriate to the Exchequer from these profits a total amount of 20s. per standard barrel by raising the duty from 50s. to 70s. In fixing this rate of duty I have had to consider the diversity of conditions existing in the trade and to give fair consideration to those who are least fortunately situated.

Effects of Changes on Revenue

I will indicate very shortly the effect of the proposal on the revenue of the current year. I put my estimate of the revenue from beer on the existing basis of taxation at £37,800,000, and by the existing basis I mean the existing barrelage and the existing rate of duty before any alterations are made. Any increase of output, of course, increases the yield of the tax quite apart from any increase in duty. In estimating the additional revenue I shall secure, I have to take account of both the increased number of barrels on which duty will be paid and of the increased rate of duty on each barrel so charged, and I estimate the combined effect of these two increases at £31,200,000 for a full year and for the current short year £22,200,000.

I should, perhaps, add—in fact, the Government desire that I should add—that, as I think the Committee know, the character of the control to be exercised over the trade in alcoholic drink is now exercising the attention of His Majesty's Government. That is not wholly or mainly a revenue matter; but we think it right to say that, should at some future time a yet further increase of barrelage be allowed, that would be a fair reason for a still further increase in taxation.

In this connection I have one small change to propose, with the object of bringing the charges on beer made in private houses into some kind of correlation with the increased charges now made on beer brewed for sale. The provisions of the existing law are of long standing, and, however appropriate they may have been to a time when the Beer Duty was 6s. 8d. a barrel, they are not suitable when the duty is raised to 70s. a barrel and when brewers for sale are still restricted as regards output and gravity. I thought, first of all, that it might be possible, in view of the new high rates, to prohibit domestic brewing altogether, but, in deference to an old-established custom in certain agricultural districts, I refrained from taking that course, though I could not view with equanimity or patience a large increase of private brewing in consequence of the increased duty imposed upon the brewers for sale. In the case of private brewers who now pay Beer Duty, no change is necessary, and they will remain, as at present, liable to Beer Duty, subject to the nominal Registration Duty of 4s. In the case of persons who do not pay Beer Duty, I do not propose to impose the Beer Duty as such, but to make them pay their contribution to the Exchequer by way of a Licence Duty. The revenue effect of these changes is negligible, except as some measure of protection against loss of revenue from other sources, but I think it is necessary for that purpose and for fairness.

I have finished with Customs and Excise. I turn now to direct taxation, and, first of all, I must say something about the Excess Profits Duty. The tax in its present form is a war tax. It was imposed under the stress of war, and when, in the midst of the enormous burdens we had to bear, it was felt that profits in excess of pre-war profits might justly be called upon to make a special contribution. It is open to many objections, but it was a rough and ready method of justice which Parliament, in its then, happily, not very critical mood, accepted without too much difficulty, and the revenue results of it have been most satisfactory during the War period. It was imposed for the first year at 50 per cent., then for a varying period at 60 per cent., and since the 1st January, 1917, at 80 per cent. It has been, as I have said, a good revenue raiser, but there are great objections to it. In the first place, it operates with unfairness and inequality as between firms with a good pre-war standard of profit and firms with a poor pre-war standard or no pre-war standard at all. In the second place, at the existing high rate nobody can doubt that it has encouraged wasteful expenditure. When £4 out of every £5 would have gone to the State if not spent by the owner, he was inclined to lavish expenditure on his business. But more than that, it cannot be doubted that a flat rate tax of 80 per cent. on all profits over a pre-war standard or, where there was no pre-war standard, over a small margin, acts as a great deterrent to enterprise and industry and a great deterrent to new development. I do not wish under these circumstances to continue the tax a moment beyond what is necessary at so high a figure as at present; it would be contrary to public interest, and I do not propose to do it. On the other hand, I have to remember that, as I said, this is a war tax, that war expenditure is still continuing, that even after peace is signed war expenditure and the burdens of war will still remain, and I am not in a position simply to repeal the duty without finding anything to put in its place.

In these circumstances my first effort was to find some form in which the profits of business might be called upon to make a special contribution to the revenue of the country without the anomalies and the objections to which the present tax is subject. I had before me suggestions made to that effect by my hon. Friend the Member for the Everton Division of Liverpool (Sir J. Harmood-Banner) and by Mr. J. F. Mason, who was then a Member of the House, and who I very much regret is not now a Member, and by Mr. Lionel Hichens, a name well known in industry, and I had also the example of taxation imposed with similar objects both in the United States and in Canada. But my information is imperfect, and the time at the disposal of myself and my colleagues has been short, and we have been subject, as the Committee knows, to other daily grave preoccupations. I need not say that if a new tax is to be imposed, it would in any case be necessary that it should be carefully thought out and its advantages and disadvantages carefully weighed in order that we should not repeat the anomalies or injustices of the existing tax. Therefore the form of the tax would be of great importance, and such an inquiry takes time. I have had other suggestions made to me, but the Government have not been able to give to the subject in the weeks before the Budget the attention which it requires for a satisfactory solution.

Under the circumstances, therefore, I propose to the Committee, as a temporary and only as a temporary measure, to continue the existing tax for another year at the reduced rate of 40 per cent. I anticipate that the yield of the Excess Profits Duty on this basis for a full year will be £50,000,000. The Committee, after listening to the amounts produced last year and anticipated this year from the higher tax may be surprised at the smallness of that figure, but it must not be supposed that the yield of the 80 per cent. rate under war conditions is at all a safe guide as to the yield under post-war conditions. I have to allow for the right of recoupment which is given by statute under certain conditions to those who have paid the tax. I have to allow for the fact that the high yield of the tax, and indeed the initiation of the tax itself, was based upon the fact that certain businesses were making extraordinary and abnormal profits. Under these circumstances, although the Estimate must of course be a very rough and hypothetical one, I am advised that it would not be safe to count upon a revenue of more than £100,000,000 if the tax continued at 80 per cent., and I expect a revenue of £50,000,000 at the lower rate of 40 per cent.

Death Duties

I turn now to Death Duties. The last alteration in the scale of the Estate Duty was made in the first Budget of 1914, and it has not been altered during the War. I think that my predecessors were right in so doing. Death Duties are not a suitable instrument for meeting a temporary emergency. It requires a generation for all the property subject to the tax to pass under it, and accordingly it is only when you are considering a permanent increase of revenue that the Death Duties ought to be raised. We have come to the time when we have to consider permanent increase of revenue, and I propose to ask the Committee to sanction such an alteration in the scale as is estimated to produce, in a full year, a sum of £10,000,000. Hon. Members will find particulars of this scale in the explanatory White Paper which is being circulated today.

I will only say here that no change is made in the case of estates not exceeding £15,000 in value. Estates between £15,000 and £20,000 which now pay at the rate of 5 per cent. will in future pay at the rate of 6 per cent. The present rates rise from 6 per cent. to 9 per cent. in respect of estates of between £20,000 and £100,000. A corresponding rise in the new scale would be from 7 per cent. to 14 per cent. At present an estate of £250,000 pays 12 per cent. I propose in the future that it shall pay 20 per cent. The rate is now 16 per cent. on estates of £500,000, and the proposed new rate is 25 per cent. The maximum rate on the existing scale is 20 per cent., applicable to estates of over £1,000,000. I propose that estates between £1,000,000 and £1,250,000 should in the future pay 30 per cent., estates between £1,250,000 and £1,500,000 32 per cent., and between £1,500,000 and £2,000,000 35 per cent., and that estates of over £2,000,000 should pay 40 per cent., or double the existing maximum rate.

I do not conceal from myself or attempt to hide from the Committee the fact that these are very onerous rates of duty. They constitute, taken in conjunction with the Income Tax, a further differentiation between wealth derived from continuing personal exertion and wealth derived from accumulated capital. But they are more than that. They are an insurance for the safety of capital. Montesquieu said that taxation was that part of his wealth which each citizen gave to obtain the secure possession of the remainder.

A Levy on Capital

There has been a good deal of discussion of late about a levy or tax on capital. If by a tax on capital is meant a small annual charge, then I think that that charge is as widely distributed and more fairly and conveniently raised in the shape of our Income Tax. If, on the other hand, there is meant a large levy on capital, a large slice to be taken out of accumulated capital, then I beg the Committee to consider what the result might be. It is a bad time to propose such a tax when, for the past five years, you have been begging people to save, and when you are still obliged to ask them to save and to give you their savings. It is a bad time to tax those who have responded to your appeal by reducing their expenditure and making economies and to let those go free who disregarded your instructions and who spent their money when it was not in the interest of the State or in ways which were not in the interest of the State.

But consider a levy on capital apart from the circumstances of the moment. The Death Duties make such a levy once in a lifetime, and at a time when the taxpayer receives an accession of income, and since they are levied only at death, and we do not all die at the same time, the process of making the valuation and of levying the tax is a task of manage- able proportions. It can be done justly and fairly as between man and man, and it can be done with a minimum of evasion or of fraud. And since only a portion of the capital of the country is dealt with in any one year the tax is paid without any disturbance of credit and without any depreciation of securities to the detriment either of the State itself or of the individual. If a levy was to be made on all the capital of the country at one and the same time by the tax collector all these advantages would be lost. To make an efficient valuation fair as between man and man and fair as between the revenue and the State would exceed the power of any revenue administration in the world, and I make bold to say that our administration is the best. It would exceed their power at any time, and still more now when the staff is still depleted owing to the War, and when they are charged with the overwhelming new responsibilities which the War has brought. It would be open to all the objections and all the difficulties to which the simultaneous valuation and taxation of the whole land of the country gave rise under the Land Values Duties, and it would be open to that objection on a vaster scale, because you would have to value not only real but personal property. Since very few people would have money lying idle sufficient to pay their obligations under the tax, it would mean an immense disturbance of credit. Everyone would be seeking to sell securities of one sort or another, and, where all are sellers, who would be buyers, and who shall measure the loss to the country by the depreciation of all securities? Who shall measure the loss to the individual through the same cause?

If, to avoid these difficulties, the State takes payment in kind, then all the difficulties of valuation still remain. The State cannot refuse to accept property of any kind at a valuation which the State itself has put upon it, and we should be left the owners of odd parcels of land and odd parcels of shares in every conceivable part of the country and in every conceivable undertaking, many of them of very doubtful value and very difficult to realise. I will only add that if it were thought that this expedient, once resorted to, would, as might well be the case, and as some desire should be the case, be resorted to again, at every moment of difficulty or of extravagance, it would then be the greatest possible discouragement to industry and enterprise that the mind of man or Parliament could devise. It would be the strongest deterrent to saving and the creation of new capital, and it would be the strongest incentive to wasteful expenditure and to the dissipation or withdrawal of existing capital. I say boldly that, whatever be our views on the distribution of wealth or on the respective shares of the fruits of industry to which capital and management and labour are entitled, our great need now and for years to come is that we should have not less capital but more capital, and I hope the Committee will lend no countenance to so hazardous, and, in my opinion, so disastrous an experiment.

I estimate, as I have said, that this new scale of Death Duties will add £10,000,000 in a full year and £2,500,000 in the current year, taking effect from the date of Royal Assent to this year's Finance Bill. There is one small matter in this connection with which I must deal. The existing rate of interest charged in respect of outstanding duty is 3 per cent. That no longer corresponds at all to the value of money. It acts as an encouragement to postpone the payment of the duties, and, without wishing to suggest for a moment anything in the nature of a vindictive or punitive rate, I think it would be proper now to raise the rate to 5 per cent.

Before we leave the subject of the Death Duties, let me say that the Committee is aware that certain relief was granted from the Death Duties as regards the estates of members of H.M. Forces, Mercantile Marine, and fishermen. I now propose to extend those provisions in two respects. At present the death must have occurred within twelve months of the wound, accident, or disease to which it was attributable. Experience has shown that that period is not long enough to cover a considerable number of cases which fall within the spirit, if not the letter, of the law. I propose to extend the period to three years, and to give that extension retrospective effect. Further, I hope the Committee will agree that there should be power to grant relief to persons belonging to the categories that I have named dying within the same period of three years as the result of wounds, accidents, or diseases occurring after the War, but, in effect, as a direct consequence of the War. I have in mind such cases as military operations if they continue anywhere after peace is signed, and cases where death or accident may be due to mine-sweeping or removal of dangers which the War has left behind. Provisions to that effect will be inserted in the Finance Bill.

Income Tax

I come now to Income Tax, the last subject with which I have to deal. I have already mentioned the satisfactory yield of the Income Tax last year. In the current year we expect to do even better. Last year's Income Tax and Super-tax together produced £291,000,000. This year we expect them to produce £354,000,000, an increase of £63,000,000 without any further change in the rates. Apart from normal growth, the increase is due to two causes: First, owing to the imposition of the tax at higher rates last year, the arrears carried forward from last year to this year are at a higher figure, and, secondly, this year will see a full collection under Schedule A, whereas, owing to the introduction of the instalment system, only one-half was collected last year.

Now what am I to do about Income Tax? The Committee knows that a Royal Commission has been appointed to investigate Income Tax and Super-tax and all the problems to which they give rise. It was recognised before the War that the time had come for such an inquiry. The higher rates—we thought the rate of Income Tax high then—had increased the anomalies of the tax and rendered greater any hardships which were endured. But, of course, the pre-war rates were nothing compared with the post-war rates. Accordingly, all the old anomalies and grievances pressed more urgently for consideration and new ones were created by the circumstances of the War. I therefore appointed a Royal Commission as soon as I could after entering upon office. I do not know what the Report of that Commission may have in store for the taxpayer or the Chancellor of the Exchequer. The taxpayer, I imagine, views it with hope; the Chancellor of the Exchequer looks forward to it with foreboding. Whatever may happen, they are likely—I think they are certain—to propose great changes and great changes are seldom made in a tax without decreasing its yield at the then existing rate. Under the circumstances, I have thought that the wisest course for me to pursue was to make no change in the Income Tax pending the Report of that Commission.

Double Income Tax?

No change pendding the Report of the Commission, except so far as may be necessary to carry out special undertakings already given, such, for example, as the exemption from Income Tax of wound and disability pensions and of gratuities payable on demobilisation. On the other hand, in pursuance of the same principle—for what is sauce for the goose is sauce for the gander—I do not propose to ask the Committee to modify this year any of the temporary reliefs from Income Tax or Super-tax, which have been granted from time to time as the result of the War. Whether right or wrong the proposals which I make with regard to the Income Tax are consistent proposals, to be treated as a whole, and I hope that the Committee will accept them as such. I think they may be encouraged by the thought that Lord Colwyn, the Chairman of the Royal Commission, hopes that the Commission will be able to report in time to enable effect to be given, if the House so wills, to their recommendations by the Budget of next year.

Final Balance Sheet

I am now able to summarise the result. In a full year I should obtain, by the changes in taxation, £103,950,000, derived, as to £60,000,000, from Inland Revenue, and as to £48,950,000 from customs and Excise, thus almost exactly meeting the deficit of £114,000,000, which I calculated we shall have to face in the future normal year. In this calculation I took no credit for the normal growth of the yield in revenue. On the other hand, I allowed very little for the normal growth of taxation. I set the one against the other. But it must be remembered that social and industrial changes now in progress, if by lessening the return on capital they restrict the accumulation of wealth, may eat into the yield of the direct taxes, and especially of the Super-tax and the Death Duties. Again, the £50,000,000 of the £114,000,000, which are attributable to the continuation of the Excess Profits Duty, are avowedly intended only to be temporary and must be replaced from some other source, unless in the meantime we find relief from our burden in other ways.

In the current year I estimate an additional revenue of £41,450,000 net. The final balance-sheet for 1919–20 will thus be:

Expenditure, £1,434,910,000;

Revenue, £1,201,100,000;

Deficit to be borrowed, £233,810,000.

On this basis the gross debt on 31st March, 1920, will be increased from £7,435,000,000 to £7,669,000,000, or, if we take the round figure of £250,000,000 as the new borrowing, to allow for a margin of error, £7,685,000,000—still substantially less than the figure of £7,980,000,000 which we thought last year might be the total on the 31st March now passed. Against these future liabilities we shall hold special assets in the shape of loans to our Allies (£1,668,450,000), loans to our Dominions (£196,890,000), and a further contribution from India of £30,500,000, making together a total of £1,895,840,000. Or, if I follow the calculation of my right hon. Friend of last year, who reckoned the Allied debt to us at half of its amount: Loans to Allies, £834,225,000; loans to Dominions, £196,890,000; and Indian contribution £30,500,000, giving a total of £1,061,615,000. There will be, in addition—I do not forget them—the German indemnities, and so much of the remaining assets acquired out of Vote of Credit and of the arrears of existing Excess Profits Duties still outstanding on 1st April next as is not required to meet the abnormal expenditure of that year caused by the overlapping of war conditions. The estimated balance of the Vote of Credit assets, as I have already stated, is £350,000,000, and the arrears of the existing Excess Profits Duty £100,000,000.

I thank the House for the patience with which they have heard me. I have now completed my immediate tasks. I have endeavoured to give the House as clear a picture as is yet possible, both of our present position and of our future prospects. I have had to urge upon the House, as I may have to urge again and again, the necessity for severe economy in national and individual expenditure. I have no hope of any reduction in expenditure unless we in this House show an example. I have had at the same time to impose further large burdens upon the community. I cannot hope that in the discharge of either part of my task I shall earn popularity. But in one point I find satisfaction. I am grateful that it has fallen to my lot to make the first proposal in this House for the statutory embodiment in our financial system of that policy of Imperial Preference with which my father's name and fame will be for ever linked.

Motion made, and Question proposed,

Tea (Customs)

1. That on and after the second day of June, nineteen hundred and nineteen, in lieu of the existing duty of Customs the following duties of Customs shall until the first day of August, nineteen hundred and twenty, be charged upon all tea imported into Great Britain or Ireland (that is to say):

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

We have had a very full and a very interesting statement from the Chancellor of the Exchequer in introducing his Budget this afternoon. At the same time, I am bound to confess that, from the point of view of labour, in certain respects the Budget statement is of a very disappointing character, and will leave the right hon. Gentleman and the Government open to a considerable amount of criticism both in this House and in the country. I desire, however, to temper my criticisms with a sincere expression of commiseration for the Chancellor whose unhappy fate it has been to provide the first instalment of the terrific obligations imposed upon us by the extravagance, and in certain respects the incredible folly of our spending departments during the War period. But something more is necessary than a mere expression of sympathy. We require both by criticism and helpful suggestion to assist him in finding a considerable portion of the money that will be needed to meet our obligations by a method more just and more productive than that which he has outlined to the Committee this afternoon. The first point of criticism which I desire to make is with reference to the fact that, notwithstanding that the War is over, the right hon. Gentleman has still found it necessary to budget for, roughly, £1,500,000,000. I am not unmindful of the fact, as he himself stated, that this is an abnormal Budget. It is in certain respects a War Budget. But at the same time I think that, with care, and with the application of business ability by our various Government Departments, the right hon. Gentleman would not require to budget for roundly £1,500,000,000 this year, and the fact that he is budgeting for this large sum creates a very serious position for the industry of the country. Taxation can only come out of the wealth produced by hand and brain, and the whole future of the country depends permanently on the development, to the fullest extent, of our industry, our agriculture, and our trading. The Government should be making extreme efforts to get rid of at the earliest possible moment all sources of excessive expenditure, thereby removing the burden of taxation to a certain extent from the industries of the country.

There are three items, as the Chancellor specially mentioned himself in the course of his statement, namely, the Civil Service and the Army and Navy Estimates, where the total amount required for the ensuing year is, roughly, £1,000,000,000. Surely, if the Chancellor is to keep a watchful eye, there should be substantial opportunities for reduction in these three particular Departments. Many of the offices that have been created were purely for war-time purposes, but evidently there is a tendency, notwithstanding that the War has been finished, and mainly because temporary Government servants may be reluctant to give up lucrative positions, to keep these offices in operation. That is a condition of affairs which neither this House nor the country can tolerate, and the utmost pressure must be exercised both on the Chancellor and on the Government to take immediate and drastic action with a view to reducing expenditure in these directions to a more reasonable figure. The next point of criticism I have to make is to be found in the fact that the Chancellor proposes to meet his excess of expenditure over income by contracting fresh loans and thereby adding still further to our national indebtedness. There may have been reasons for meeting the excessive expenditure during the War by loans, but surely, now that we have reached peace-time, there is no excuse for thus continuing it. The Committee knows that the money is in the country, and there are many of us who believe that the Chancellor would have been well advised to have taken his courage in both hands and to have found the money without the necessity for further additions to the National War Debt. As a matter of fact, there are some of us who believe that the Government ought to have to a much larger extent found the expenditure as they went along during the war-period, and unless the Chancellor is courageous enough to take this line, I fear that it will lead to a considerable amount of dissatisfaction and criticism. There is another point to which I want to draw the right hon. Gentleman's attention. It is the one in which he informed the Committee that there is to be a very substantial reduction in the Excess Profits Tax. If I understood him aright, I think he led the Committee to believe practically that at the end of the present financial year there is a likelihood of this tax being abolished altogether. So far as Labour is concerned, they protest strongly against any alteration of this kind being made, particularly at a time when the Chancellor is unable to meet his obligations without adding to the national indebtedness.

A further point with which I wish to deal is one in which the right hon. Gentleman himself evidently takes a considerable amount of pride, namely, the question, of Colonial Preference. It is perfectly true that to a considerable extent he is giving effect to it in a negative way, rather by reducing the existing import duties than by creating new tariffs or adding to the existing tariffs. But, in our opinion, whether it be in the way he has suggested or whether it be accomplished in the positive sense, it is a proposition we look upon with grave concern, for we are strongly of opinion that this is the thin end of the wedge, and that it is the beginning of the setting up of tariff walls in this country. We have been led to believe that the establishment of the League of Nations, which includes a Labour charter, would to a considerable extent break down the tariff walls that have existed between the one country and the other in the past. We have been encouraged to hope, by statements even by members of the Government, that this idea of ours would be realised, but evidently the Chancellor of the Exchequer—and I take it he speaks for the Government in putting forward this new change in the method of dealing with the duties—is not convinced of the efficacy of the idea that what the League of Nations is bringing about will result in the way we have anticipated. My next point is that the Chancellor still seeks to continue the excessive burden of indirect taxation which boars so heavily on the working-class population of this country. As a matter of fact, he makes provision in this Budget for increasing the indirect taxation instead of reducing it.

I am not increasing the charge except in the case of the consumer by bottle or cask.

6.0 P.M.

I am rather looking at what is likely to be the effect of the Chancellor of the Exchequer's proposal and to what his intentions are. As I view his proposition, he is rather increasing the indirect taxation than lowering it. [HON. MEMBERS: "How?"] He himself has stated that on a certain article so much increase will be put. I believe the effect will be the same on other articles. If those hon. Members who are putting questions to me across the floor will restrain themselves, they will have an opportunity of replying to any statement I am making regarding the speech of the Chancellor of the Exchequer. Economists tell us that there is no calamity to a nation so great and of such lasting injury to the well-being of a people as a general lowering of the standard of life of the large majority of the folks who live on weekly wages. We of the Labour party strongly maintain that indirect taxation should be levied on persons whose incomes fall below a reasonable Income Tax standard, say, of £250 per year, only on such articles as may be described as luxuries, with some of which the Chancellor has been dealing in the elaborate statement he has given to the Committee this afternoon. Those are the points of criticism I desire to make regarding the Chancellor of the Exchequer's statement.

I desire now to pass on to him what I think will be a few helpful suggestions with a view to raising the money necessary to meet the obligations of the country under the present conditions by a more just and productive method than he himself has suggested. May I preface my remarks on this head by warning the Chancellor of the Exchequer and the Government that Labour will not continue to carry the present excessive burdens, both of direct and indirect taxation on a small income, that will be necessary to enable us to meet our obligations along the lines suggested by the Chancellor of the Exchequer when those who have so flagrantly exploited the national credit and resources by their profiteering activities during the War remain in comparatively undisturbed possession of their unpatriotic gains? Just before the Easter Recess my hon. Friend the Member for North Aberdeen (Mr. Rose) pursued some inquiries by means of questions in the House. He was concerned with the difficult problem of trying to trace some of the vanished millions for which the Chancellor of the Exchequer is now called upon to find security. Questions of this character are not very fruitful of satisfactory results, but my hon. Friend elicited at least valuable information regarding certain items, one of which I now invite the Chancellor of the Exchequer to study. My hon. Friend was able to demonstrate that one great firm of munition contractors, made passing rich by fat contracts, watered its capital to the extent of three times the original value, namely, £1,000,000 to £3,000,000, and in a very short time thereafter the concern changed hands and came into the possession of a second firm at no less a sum than £15,000,000. Our belief is that all these sums in excess of the original £1,000,000 represented excess profits upon which the duty was not levied, and that these manipulations were designed for the purpose of evading the Excess Profits Duty. We claim that this is not an exceptional instance. It is rather typical and illustrates the shameful way in which the necessities of the country were exploited, during the War time. We are strongly of the opinion that by the method I have already nentioned, and by other dark and devious ways, the War munitions contractors have appropriated something amounting to a very large sum of money in excess of the very liberal statutory profits laid down by the War Munitions Act, 1915, and that they have in this way been allowed to tax the nation. In demanding in the name of Labour that the profiteer shall now be called upon to disgorge most, if not all, of these excess profits, we urge the Chancellor of the Exchequer to go closely and keenly into this matter, being convinced that if he does so he will get a considerable sum of money that will enable him to meet some of the obligations of which he has been telling us this afternoon and restore the balance of justice as between one section of the citizens of this country and the other, and, at the same time, will strengthen the confidence of his fellow-countrymen both in himself and in the Government he represents.

The next suggestion I would pass on to the Chancellor of the Exchequer for his consideration is that we want the Government to develop the productiveness and serviceableness of every part of the public domain. We want a rich and prosperous Exchequer, not a starved and bankrupt one. Let me take one illustration from many. We want the Post Office to develop its profitable business in all directions, and not to stop short in its activities where it enters into competition with bankers, railway companies, carriers, or remittance houses. We want the Government rapidly to develop the super-power stations that are to give electric heat, light and power, and we want them to own and develop the transport services of the country, to own and develop the mining industry. Such essential national services as these should be exploited for the whole of the people, even if this means that there are fewer opportunities for piling up private fortunes. Even if these two sources of Revenue which I have briefly discussed with the Committee and the Chancellor of the Exchequer were exploited to the fullest extent, I do not suggest that they would provide money sufficient to enable the right hon. Gentlemen to meet his obligations. The next suggestion I make to him is that, instead of following the policy he has outlined to-day, he should endeavour to raise part of the necessary money which he requires by a system of graduated Income Tax, beginning after an Income Tax standard of £250 has been exceeded with a small payment of one penny in the £, and going on by well-balanced stages until we reach a very substantial Income Tax in the cases of those whose incomes range from £50,000 to £100,000 and over per year. There is another suggestion which I have had passed on to me by a correspondent, for which I take no personal credit, but which I now give to the Chancellor of the Exchequer, as I think it is worth his consideration. My correspondent makes the following suggestion: the very emphatic statement he has already made on the question of a levy on capital, he would be well-advised to explore thoroughly the possibilities of this suggestion. I need hardly say that it is not specially an invention of the Labour party. It is an expedient to which those who are facing squarely the alarming financial situation ahead of us—bankers, economists, and serious politicians of all kinds—have for some time been considering. It has even had some consideration by the British Exchequer. The Leader of the House, when he was Chancellor of the Exchequer, gave some consideration to this matter, and, while he objected to imposing a levy on capital during the progress of the War, at the same time said that it was a matter that might have to be seriously considered when the War was over. If the question of a levy on capital is to be considered, I would suggest that it should be done on the same principle as I have Already suggested should be given effect to in regard to Income Tax, namely, that it should begin from a figure that would leave to the possessors of the wealth an income of £250 on their capital, and from that point it could begin at 1 per cent. and, by well-defined stages, go up to a substantial proportion in the cases of the possessors of millions of pounds. If that were done, I very humbly suggest to the Chancellor, it would yield to him a very much larger amount of money than the increase that he has suggested should take place in the course of his speech this afternoon. I know that there are serious objections taken to a suggestion of this kind. The Chancellor has given expression to them. For instance, he discussed the possibility of the putting into operation of a tax of this character and the effect on the selling value of our national securities. He even pointed out that there would be so many securities on the market that there would be no buyers. I think that objection arises from a misunderstanding of the proposal. If this suggestion were given effect to, the tax would be paid in stocks and shares and securities of other kinds, as well as in money. In the second place, it has been said that a levy of this kind would cut down the capital of the country when it is most needed. There, again, I think, there is a misunderstanding. The levy would not cut down the capital; it would merely transfer the title-deeds, or the ownership of it, from the individual to the Government. Again, it is suggested that a levy of this kind is in the nature of a repudiation of our debt. That is not true. The citizens of the country are in any case jointly liable for the State debt. There is no essential difference in asking them to pay off the debt with a portion of the capital, than there is in asking them to pay off the interest of that debt out of their income. The financial situation that faces the people of this country at the present time is a very serious one. So far as the Labour party are concerned they are under no illusion as to the position. They do not believe that our obligations can be met by any fanciful methods, such as the printing of more paper money or the magical provision of universal bank credits or Labour notes, or any other fanciful ideas that we hear given expression to from time to time. Neither do any of the responsible men in the party believe in the repudiation of the National Debt. We believe that our obligations will have to be met by one form or another of taxation on the individual. That taxation we suggest ought to be levied in such a way as to enable it to fall justly and equitably on all sections of our people in accordance with their capacity to bear it. We do not think that the manner outlined by the Chancellor this afternoon fulfils those conditions, and consequently we hope that we will be able before the Finance Bill passes through all its stages to make substantial alterations which will enable us to give fuller expression to the principals of equity and justice than the policy outlined by the Chancellor of the Exchequer.

I do not wish to pursue the subject which has been referred to by the right hon. Gentleman, and which the Chancellor of the Exchequer, I think, dealt with very fully in his speech. The Chancellor commenced his speech by asking the sympathy of the House in his difficult position, and the cheers which he received when he sat down will satisfy him, I think, that he had the sympathy of the House. The right hon. Gentleman in his very lucid address instituted a comparison as to the amount of revenue and our contribution towards the expenditure. We are practically the only people who have to a substantial extent been taxing ourselves during the War. I think the people of the country sometimes do not realise the amount which has been raised by taxation. The amount of tax revenue has increased since 1915 by four times, and last year represented 34·4 per cent., or for the four years 1914 to 1918 the percentage was 26·9. The Chancellor for last year estimated it would be 28.3 per cent. Excluding the Excess Profits Duties, direct taxation contributed 67·5 per cent. against 54 per cent. in the year 1913–14. The Customs and Excise revenue has about doubled since the first year of the War, and now amounts to £161,000,000. The Income Tax and Super-tax now total £291,000,000 as against £69,000,000 in 1915. The Leader of the House, when he was making his Budget statement last year said—and perhaps the Financial Secretary will draw the attention of the present Chancellor to the words—

I want to make only two remarks on the present taxes. When the Super Tax was first put on, the point was raised in this House, but it was not so important then when the amount of Income Tax was so small. Now, however, it is an important anomaly. Take an income of £5,000 a year. The Income Tax at 6s. is £1,500, which reduces the individual's income to £3,500, but, instead of charging Super Tax on £3,500, it is charged on the full £5,000, making the Super Tax £287 10s., or £125 more than it ought to be. It is felt to be an injustice, and I hope my hon. Friend (Mr. Baldwin) will make a note of it and see that it is brought before the Income Tax Commission. With regard to the extra penny duty on cheques, the right hon. Gentleman congratulated himself and the Committee that that tax had brought in double—£1,500,000. According to the Report of the London clearings, this extra penny has made little or no reduction in the number of cheques passing. My experience in the country has been the reverse. I happen to be chairman of one of our country banks, and we had an examination of the number of cheques of £5 and under paid during the month of December, 1917, and then we took the same month in 1918, and we found that there was a decrease in the latter year of 12 per cent. at the head office, 13 per cent at one of our large country offices, and over 20 per cent. at an important local branch. My suggestion is that, although the revenue from this tax is satisfactory, it is not satisfactory from the point of view of inflating the currency.

The Chancellor of the Exchequer told us that there has been a very large increase in currency notes from March last year to March this year. They have gone up by no less than £100,000,000, and I see, according to the last record on 23rd April, they were no less than £349,000,000. I do not myself regard these Treasury currency notes with the alarm that some people do. I do not think they are responsible for what is called inflation of prices. I think that the currency notes have been issued to meet the demand. In my view the increases in prices and wages have arisen simply through the operation of the natural law of supply and demand. The War caused a shortage of men for labour, and commodities were also scarce. At the same time the Government commenced to borrow money. What was the natural result? There was more money to pay in wages and less labour to receive the money, and there were less commodities. The law of supply and demand must, of course, operate in conditions like those. We must not blame the Government for the issue of currency notes. These notes are only issued by the Bank of England on demand from the banks, which have to pay value for them.

There is only one more point I want to mention, and that is with regard to borrowing. During the War, fortunately, it has been a habit for all classes of our people to save and invest in Government Loans. It is a very wholesome doctrine, and a great security to the State to have a great majority of its citizens, estimated at 17 millions, holding Government securities. I think it is a safety valve. I know my right hon. Friend is not of the opinion that investment in these securities is not now necessary. We want money largely, not only for winding up the War, but for all the developments, such as housing, transport, pensions, and many other things. My advice to the Chancellor is that he should do all he can to continue this short borrowing, say, for periods of five or ten years. I think he would be well advised to alter the term "War Bonds" to "National Bonds," because we all hope that the War is over, or will be over when peace is signed. These bonds are a security which yield over 5¼ per cent., including premium on redemption. That is a much better thing to invest in than speculative concerns which promise 7 per cent., 8 per cent., or 10 per cent. which have not security of capital. People of smaller means who are able to save money ought to invest in an absolutely first-rate security, and this is one of them, because the individual is perfectly certain of getting his capital back with some premium in addition. As the sale of these War Bonds seems to be falling off, the Chancellor of the Exchequer should make it his business to see if he cannot make them even more attractive, because this borrowing, which has been so very successful, should be continued. The right hon. Gentleman, in his instructive speech, said that, after all, the prosperity and success of this country must depend upon two things—and I am absolutely with him—namely, economy both in Government Departments and in the individual. If these two things are carried out, and if the right hon. Gentleman will put up a stiff back to the Government Departments, and say "No, I will not allow you to spend this money. I will not allow an office to have more officials in it with high salaries than it ought to have"—if he will strengthen himself in that way, I am perfectly certain this Committee will back him up and thank him for his services.

I desire to offer my warmest congratulations to my right hon. Friend the Member for West Birmingham on having assumed the most important position of Chancellor of the Exchequer. I do this because twice over, in the House, in the last eighteen months, I have urged the Leader of the House that no super-man could properly discharge the duties of the Chancellor of the Exchequer, a member of the War Cabinet, and Leader of the House of Commons, and I have urged that he should call to his assistance, if possible, my right hon. Friend to resume the duties of Chancellor of the Exchequer. Therefore I take special interest in his first deliverance to-day, and I only regret that he is not in the same happy position that he was in 1905, when he delivered his previous Budget speech. In that year the income and expenditure were just about £150,000,000, and he was able to remit taxation. To-day he has to provide for an expenditure multiplied tenfold—£1,500,000,000. The occasion of the first introduction of the Budget is not one for going into details about the various changes of taxation imposed. In my opinion, that will be better done tomorrow, after those proposals have had more consideration. But to-night we may deal suitably with some of the main questions in the position, financially, that is confronting us. We know that the expenditure for the current year is estimated to be £1,435,000,000, and it was amazing to find that the Chancellor of the Exchequer is going to provide a revenue of £1,201,000,000 this year against that expenditure of £1,435,000,000 and only have a deficit of £233,000,000. That is highly satisfactory.

But I do not consider that the £200,000,000 he put into this £1,201,000,000,to come from the sale of war material, ought to be considered as revenue of the year. I think it rather stands in a different category. However, it does reduce our national indebtedness by £200,000,000, and with £233,000,000 to borrow from this year's expenditure, we come to the next question of the short-dated obligations that are confronting us. These include the £986,000,000 of Treasury Bills—all to be paid in the course of the current year—the provision of £455,000,000, Ways and Means balances, and the payment of Exchequer Bonds to the extent of £247,000,000 which come due very soon. In another place the figures were given about a month ago, and it was there stated that before the end of the current financial year we have short-dated obligations to be met amounting to £1,758,000,000. Since that statement was made, £86,000,000 of Treasury Bills have been taken and £28,000,000 more added to Ways and Means balances. That makes a total of £1,872,000,000 of short-dated balances that are to be met within the current financial year. Add to that the £233,000,000 deficit on the current year that must be raised by borrowing, and what do we find? We find, to me, a very alarming result, namely, that in order to square the accounts up to 31st March next we require to borrow on War Loans, or to find in other ways, £2,100,000,000. That comes upon all our previous borrowings. Fault was found with the Chancellor of the Exchequer for issuing a new series of War Bonds at 5 per cent. That was an absolutely wise proceeding on his part, and for this reason: Now that the War is over and great industrial developments are taking place, industrial firms are offering 6 and 7 per cent. for extra money to undertake those developments. The fact that the Chancellor of the Exchequer did not offer too good terms is shown by the fact that in the twelve weeks in which those new 5 per cent. War Loan Bonds have been on sale only £49,000,000 have been taken up—a little over £4,000,000 a week. That shows that, at any rate, the public does not consider for one moment that the Chancellor of the Exchequer is offering too much. On the face of it it looks an uncommonly good investment. It is a Government security of 5 per cent! But the lender does not get 5 per cent. The Government gives 5 per cent. on the one hand, and, on the other hand, large lenders have compulsorily taken from them 6s. in the form of Income Tax and 4s. in the form of Super-tax, or 10s. in the pound. That, taken in the form of war taxation by the Government, means that they lend money—that the man who has enough money to sport with—lends to the Government and gets 2½ per cent., and no more. I think the sooner the whole nation realises facts of this sort the better, otherwise it may come to be said that the lending of money the Government is turning men into 5 per cent. profiteers. It is doing nothing of the sort.

We have heard a great oration to-night from my hon. Friend the chairman of the Labour party (Mr. Adamson). I do not know whether or not we shall see him in the position of Chancellor of the Exchequer in a Labour Government standing at this Table and working out some of the problems with which he dealt to-night. I was interested in his speech, but, at any rate, in his attack on the Excess Profits Duty he could not be attacking the coal-owners. He knows perfectly well that they have not only paid 80 per cent. in Excess Profits Duty into the Treasury during the last two years, but they have also paid a levy of 15 per cent. more into the Coal Controller's Financial Department. Therefore, anything they have got is a mere 5 per cent. I do not think the colliers ought to grumble, for if the coal-owner gets 5 per cent. extra there is the very substantial increase in wages over pre-war wages that they themselves have got. The miners really have got more in proportion than have the coal-owners. No charge of that sort can be made in regard to Excess Profits Duty, at any rate, against the coal-owners whose interests I am supposed sometimes to advocate in this House. The question to my mind—and I should like the Chancellor of the Exchequer to have dealt with it—is: How are we, between now and March next, going to raise £2,100,000,000 by some longer dated loans? That is a problem of a very serious character. I am sorry my hon. Friend below (Mr. Baldwin) was not here a few moments ago. He is such a keen economist. I will refer to one or two other matters for his especial benefit. I should like information on several points. We have a National Debt now amounting to £7,686,000,000. We owe outside the United Kingdom £1,300,000,000. In round figures £1,000,000,000 are due to the United States of America. I am very anxious about that. What arrangements are the Government making for the discharge of that liability? We have to pay interest on that £1,000,000,000.

What are the arrangements to pay principal as well as interest—because it is a huge amount that we must find to discharge that liability to America? We have also £1,700,000,000 in loans to our Allies and the Dominions. When is any payment coming to our Exchequer either for interest or principal in regard to the £1,700,000,000? We have, therefore, for the time being—I think my hon. Friend may well agree with me in this—to finance not only the £1,300,000,000 we owe outside these Islands, but also the £1,700,000,000 we have lent to our Allies and the Dominions. I assume these amounts are all included in the total, £7,685,000,000, which was stated to-day to be the gross amount of our National Debt. That is so far satisfactory, but I should like to have heard something more on some of these points. Like, however, his predecessor, the Chancellor of the Exchequer to-day made no reference to the necessity of full Treasury control being exercised over national expenditure. We know perfectly well that Treasury control lapsed almost altogether during the War. It was admitted that the great spending Departments spent pretty well as they pleased—whether it was the Ministry of Munitions, the War Office, the Admiralty, or the Air Board.

Our financial system in this country rests upon the doctrine that the interests of the taxpayer in limiting expenditure should not be left to the Minister at the head of a spending Department, but should be in the special charge of another independent Minister, namely, the Chancellor of the Exchequer, working through his own Department, the Treasury. I ask my hon. Friend (Mr. Baldwin), When does the Treasury propose to resume full and proper control of the expenditure of this country? There was a statement in the "Times" newspaper of yesterday in regard to Air Board contracts. I should like to have my hon. Friend's attention to this point. We are told in this statement there were certain contracts made by the War Office in connection with the construction of aerodromes. The Air Board took them over. Those contracts were on a percentage of profit on the cost to the contractor. The Air Board took them over and immediately procéeded to give the contractors a higher price. The increase amounted to £66,000, because, they say, the contractors were not taking a proper interest in the work they were carrying out. The Treasury very properly made very strong comments upon this waste of public money. But this waste was only brought under their notice by the Comptroller and Auditor-General, and applied to the year 1917–18. It was, therefore, too late to retrieve the loss. The Committee on National Expenditure very strongly recommended that not only should we have the benefit of the supervision of all expenditure by the Public Accounts Committee which, after all, only deals with irretrievable waste—because it is always a year or two after the waste has taken place that it is brought to the notice of the House, but that Estimates Committees should be appointed to go through the Estimates before they are laid before the House in order, if possible, to effect economies in the Estimates. I should like to know from my hon. Friend why the Estimates Committees recommended by the Committee on National Expenditure have not been appointed. My right hon. Friend the Member for the City of London (Sir F. Banbury) has undertaken the Chairmanship of the National Expenditure Committee, and I presume that that will to some extent take the place of the Estimates Committees that have not been appointed. But we want every possible assistance if we are to get economy exercised in the expenditure of the country.

In this statement in the "Times"—I dare say hon. Members have seen it—I find that the Treasury write a strong remonstrance, and it is stated that both the Admiralty and the Air Board on their own initiative, without any sanction from the Treasury, had extended an award of a 12½ per cent. bonus to work done in Ireland which it was not intended to apply.

Why?

I knew I should have that query, but I am not criticising the 12½ per cent. being extended to Ireland; I am merely stating what the communication says. I think it should be given to Ireland quite as well as to any other part of the country.

Not at all—Ireland should not be treated the same as other parts of the Kingdom!

The hon. Baronet is diverging on to the expenditure of the year. We are in Committee of Ways and Means, to consider the raising of taxes. The discussion of expenditure is not in order now.

Am I not in order, Mr. Whitley, in urging Treasury supervision and control over expenditure?

Yes, but not in going into specific cases.

7.0 p.m.

I am sorry, but this case happened to be in the paper yesterday. It was such a very cogent one that I had forgotten that I must not refer to specific instances. I may, perhaps, however, be allowed to urge that greater measures should be taken to restore Treasury control over national expenditure, and to save the enormous waste which is taking place.

There is another question I should like to ask the Chancellor of the Exchequer. We have had no definite information as to whether any payment whatsoever has been received from the German Government, either as payment for food supplies or towards the expenses of the Army of Occupation. The taxpayers of this country are being subjected to an enormous burden of taxation through the wicked and unprovoked aggression of Germany on the rest of Europe. I hold a very strong view that the British Government should use every possible effort to extract, as early as possible, large payments from Germany for the relief of the British taxpayer, and towards this huge debt of £7,685,000,000. The Germans, when they thought the tide of victory was with them, openly declared that they would make England pay £10,000,000,000, and lay her under tribute for a generation. I think it would be a very good thing to know from the Chancellor of the Exchequer what prospect there is of early payments from Germany. Perhaps it is premature to ask him to tell us the amounts of those payments, but so far as we know no money, either for reparation or any other purpose, has yet been received from that country. The question of the increase of taxation is certainly a serious one. In 1914, the pre-war taxation of this country was £3 10s. per head of the population; now it is nearly £17 per head. That certainly shows the necessity for very great vigilance and for a making vastly greater efforts to prevent the waste of public money. I wish to put a question with regard to what I think I am almost right in regarding as unconstitutional taxation which has been given effect to recently.

We passed a Coal Control Bill through this House, and when it was being passed it was agreed that no money should be taken from the taxpayers in connection with that measure without a Financial Resolution first being introduced into the House and a Bill being passed to sanction it. But how was this evaded? The Coal Controller instructed the collieries to charge the consumers throughout the country half-a-crown more per ton for coal. This realised £25,000,000, about £20,000,000 of which went to the Treasury and about £4,000,000 into the coffers of the Coal Controller. That was outside the Budget and the purview of Parliament, and was done without the sanction of Parliament. I should like to know from the Chancellor of the Exchequer whether he is not inclined with me to regard that as unconstitutional taxation. There was a distinct understanding, and an agreement, embodied in the Coal Control Bill, that this should not be done in connection with that Bill. I bring this forward because I think the Chancellor should consider it and should protect the taxpayers of this country from similar evasive methods of increasing the demands upon them, for, seeing that the Treasury got nearly £20,000,000 of this money, this was only another method of taxation. Lastly, I would refer to the estimate of the Chancellor of the Exchequer as to what the expenditure will be in a normal year after all war expenditure has ceased. He estimated it at £766,000,000. He admitted that it was very difficult to make an estimate, for instance, of what we should spend on the Army and the Navy and the Air Service, which he put down at £110,000,000. I am afraid that our Army, Navy, and Air Service, after the War is completely over, will cost us a good deal more than £110,000,000, and I shall be thankful if, in my lifetime, we see a Budget under a total of £900,000,000 or £1,000,000,000. What about the £100,000,000 lost in working the railways under Government control? I do not see that provided for in the Budget. This loss has to be paid by the taxpayers of the country, and the same thing will apply in other directions, unless Government interference and control are put an end to pretty speedily. If, as a nation, we are to have economic recovery and industrial prosperity, they will only be obtained by the earliest cessation of all Government interference and control. This is doing great harm and is hindering our economic recovery at a time when the financial position is such that it is only to be met by increased production and trade. I am perfectly certain, however, that the Chancellor realises, quite as strongly as I do, the necessity for this, and that we may count on his assistance, and the assistance of the Financial Secretary, in reducing national expenditure and in saving waste—for instance, in the great public Departments, where the staffs could probably be reduced by one-half to-morrow with advantage, and in several other directions.

I confess I was deeply interested in the speech of the Chancellor of the Exchequer this afternoon. I also confess that I was very much bewildered by the enormous figures which he dealt with. Like a good many others, during the War I was deeply interested and concerned by the steady piling up of the load of debt on to the back of the nation, and I wondered, not so much about the load of debt itself, as about the way in which it was going to be repaid, together with the obligations which we were incurring during the War. I realised that unless we could find some other method of repaying this gigantic sum of money than by the pre-war methods of taxation it would mean that those boys who had done all the fighting in winning the War, and had made all the sacrifices, would be heavily taxed when they came home again on purpose to pay for the War. That, to my mind, is an almost impossible position, and, like others, I have tried to think out whether it would not be possible to find some other means of meeting this gigantic load of debt and at the same time of relieving taxation very considerably. With all humility, I desire to make certain suggestions to the Chancellor of the Exchequer on these lines. In doing so, I do not propose to deal with any chimerical or Utopian scheme. My proposal is to call attention to certain facts already in existence, and to draw certain deductions from those facts. We are all agreed that the only way in which we can pay this load of debt and meet our obligations honourably is by increasing our annual production of wealth.

What do we mean by an increase in the annual production of wealth? I am gong to deal with this, not as a financier or as a business expert, but as I conceive the man in the street would deal with it. What the average man in the street, when you speak to him about an increase in the production of wealth, means is this: "We require more food, more clothes, more houses; we require insurance against sickness and unemployment; we require a pension of 20s. a week at 60 years of age." In addition to all that, what the man in the street also requires is more holidays, and a reduction in the hours of labour, so as to enjoy some of the good things of life, and also means of recreation, education, and leisure, and travel, and all that kind of thing. I think that would be considered a fair charter for the average man in the street. It is obvious that we cannot enjoy food that has not been produced, neither can we wear clothes that have not been made, nor live in houses that have not been built. Above all that, it is impossible to enjoy all those things in greater abundance and at the same time to reduce the hours of labour and to make provision for old age unless we get an absolute free use of all kinds of labour-saving machinery. I think that is a fair statement of the position. It also means that before we can get an increase in production we have to have a better understanding between capital and labour, and a more friendly point of view. In pre-war days, and I speak as a trade union official, the position between employers and employés was something like this. The employing class tried to get as much labour out of the workers as they possibly could, and to give in return as little wage as possible. To my mind that was a fallacy, for the reason that the wages that the working classes received in pre-war days, and which only averaged about 25s. a week, were not sufficient to enable them to buy back the produce of their own labour. The result was that we had disorganisation and unemployment. That has got to be got rid of. There are even employers to-day who have not realised that their employés are not only workers but potential customers to the tradesmen they supply and to themselves, and that customers who have little or no money to spend are not much good as customers. Therefore we must have an alteration in that. On the other hand, the working classes were compelled to combine because employers in competition with each other were struggling to produce for the cheapest market, and the workers had to combine in their trade unions, not only to protect their own interests, but also to improve their conditions of life. They had no interest in producing anything more than they could possibly help. In other words, they restricted output because there was no inducement to make extra profit for the employers. That was bad also for production. In addition to that the working classes generally had a great antipathy to the introduction of too much labour-saving machinery, and for the very good reason that under the old conditions of pre-war days the introduction of labour-saving machinery generally ended in the discharge of a good many of the employés, and therefore they feared that too much labour-saving machinery would bring about unemployment, either for themselves or their fellow workers. Therefore, there was great antipathy to that. That, again, was bad for increased production. That, I hope, has been got rid of for all time.

I am very pleased to know from the statement that you, Sir, made the other night, that there are no fewer than fifty Whitley Councils now established, covering as many industries, and I also understand from you, Sir, that there were twenty-five others in course of formation. That was very great news to me and to my colleagues who were with me on that particular occasion. We thought that was one of the most hopeful signs of the times. What do these Whitley Councils consist of, and what is their object? They consist of an equal number of employers and employés and the object is to try to bring about a better understanding between the workers and the employers. Further than that, they are to agree upon what the rates of wages and the conditions of employment are to be in these various industries. From that point of view they are very useful institutions. When they have arrived at what the rates of wages and the conditions of employment are to be in a given industry it is suggested that they shall be imposed upon the whole of the industry. Further than that, one of the objects of the Whitley industrial council, in which I am interested, is to try to get the various industries properly organised, and to this end all the workers are advised to join their trade unions and all the employers their associations. That is going on at present, and remarkable progress is being made in that direction.

This brings us to a very important point, because when you get the employers all organised we get this position. Almost every day we see the employing classes closing up their ranks on purpose to eliminate the more wasteful forms of competition amongst themselves. Scarcely a day passes but we hear or read of huge amalgamations in different industries taking place, running into millions of money. They are evidently learning the lesson that competition is one of the most wasteful forms of production, and therefore they are closing up their ranks. What we are leading up to is this. We are going to have each industry thoroughly organised, with the workers on one side and the employers on the other. In other words, we are going to have in each industry under the Whitley industrial councils so organised that it is going to be in a position to exploit the consumer. I do not think there can be any doubt about that. The question arises would they exploit the consumer if they were in that position? Obviously they would. We are told, on no less an authority than the late Sir W. S. Gilbert, that this is a very wicked world and that virtue is triumphant only in theatrical performances. There is a good deal in that. The opportunity for exploiting the public will be greater than these huge combines could resist, and that would mean that the Government would have to step in on purpose to protect the consumer. I think there is nothing far fetched in a deduction of that kind.

I come now to the speculative part of my proposal, as to how the Government could be assisted in raising the money to pay for this debt that the War has left upon our shoulders. If the Government stepped in to protect the consumer my suggestion is that it should pull its full strength; in other words, that it should assist those industries that it steps in to protect the consumer from. That is a very easy and a very natural thing for the Government to do. There are such things as research, foreign markets, raw material, and many other things of that kind which the Government could do to assist production which those trades could not possibly do for themselves. I understand that before the War Germany had a system of trading which is practically unique from the organisation point of view. I am told that the manufacturers of Germany who imported raw material and made it up into finished commodities were not allowed to import their raw material individually. That all had to import it through a Government Department which sent one buyer out into the markets of the world to purchase these raw materials instead of a thousand different competing travellers, distributing them amongst the manufacturers and charging a percentage upon the amount imported. That is a very useful suggestion which would be well applied to the industries of this country when they have been organised under the Whitley industrial councils. If the Government thought it necessary to step in to assist industries in this way they should take a share of the increase in production. In doing that we could well define the line of demarcation between what the Government should do to assist industry, just as we define now in the Whitley councils the line of demarcation between the employers and the employés. I think that is quite feasible and there is nothing Utopian in such a proposal. If the Government accepted it, I think we should be well out of our difficulty with regard to finding the ways and means of paying our way for the future.

When you have your Whitley councils established you have still to deal with the question of making it worth the workers while to increase production from his point of view. Obviously, it would be foolish to expect that the worker is going to become enthusiastic at the idea of producing so as to make more profit for the employing classes. It will not come off. What I suggest is that the worker should be guaranteed a share of the extra produce accruing, and that could be done in this way. The first charge upon the cost of production should be a proper rate of pay for the workers, from the managing director downwards. The second charge should be the ordinary establishment charges which every industry has to bear and which need no explanation from me. The third would be a fair rate of interest for those who have put up the money which has made the business possible, and after that I would suggest that all extra produce should be divided between the State, to assist the finances of the country, the worker, who should have an extra bonus for extra production, and also the shareholder as an inducement to enterprise. That I do not think is an unreasonable proposal. If we get that position it will solve our financial problem altogether, because it will enable us at least to treble production.

I want to quote figures showing the possibility of trebling production from the point of view of getting the State, the employing classes and the workers to co-operate and to work together instead of pulling against each other as they did in pre-war days. These figures are taken from a book called "Eclipse or Empire." I regard it as one of the most remarkable books published during the War. It gives a list of figures showing the average production in America and in this country in a selected number of industries I only want to deal with one industry. I take the boot and shoe industry of America and this country and compare them. In this country the machinery used per 1,000 persons employed was only 172 horse-power as against 487 horse-power in America. One of the results of that is this: The average production per head of the people employed in the industry in this country was only £171, as against £516 in America. That is more than three to one, and that practically applies on an average to nearly all the industries in America and this country. I suggest that we could at least equal that. If we did, it would mean this: Our annual production of wealth in pre-war days, according to different estimates that I have read, worked out at something like £2,300,000,000 per annum. I have a leaflet which the London Municipal Society has sent me—I do not know why. They state that the average production of wealth before the War was £2,500,000,000 per annum. Therefore, my estimate is not an exaggeration. If we can treble that, it means £6,900,000,000. In other words, it is an increase of £4,600,000,000 per annum. If the Government only took as its share one-third of that sum they would have no less than £1,500,000,000. These are figures that I am not responsible for. I am simply trying to draw a deduction from these figures. First of all, we want an increase in the production of wealth in order to pay our way, and I have shown how that can be done. I submit that if we have increased production to the same level as in America we can increase our production by no less that £4,600,000,000. If the Government only take one-third of that for their assistance to industry, they will be out of their financial difficulty, altogether irrespective of what money can be raised by other forms of taxation.

I agree that our present form of taxation hampers and paralyses trade. The Excess Profits Duty is a case in point. That does discourage production. Our present form of taxation has a tendency to depress industry and cause unemployment. Take the question of housing. We tax houses on 50 per cent. of their rentable value, and the result is that people live in two or three rooms instead of four, five, or six rooms. That is not only bad for the health of the people, but it is also bad for the builders. You come to the same thing in nearly every industry which is taxed in this particular way. My suggestion is that whatever we tax we depress. I admit that it is one thing to increase production and another thing to find a market for the increased production. That brings me to the question as to what we are going to do with regard to our foreign markets. Here, again, we are up against a problem in which new conditions have been brought in as a result of the War. We have, as the result of the War and the setting up of Whitley Councils, practically wiped out the old form of competition so far as the wages of the working class are concerned. That is a revolution in itself. But I submit that we have to go a step further, having regard to the fact that we are not a self-supporting nation. We have to try to achieve that object, and, so far as that is concerned, I think it is necessary to extend still further the policy that has been initiated this afternoon by the Chancellor of the Exchequer in regard to Imperial Preference. I am a very keen believer in that, because I do not think there is anything that we require that cannot be found within the four corners of the British Empire. I believe that if we can create trading within the Empire and extend it afterwards to our Allies as laid down in the peace proposals, we are going to get well out of our financial difficulties and to solve the unemployment problem as well. I apologise to the Committee for dealing with these matters at length, and I only want to say further, that the Chancellor of the Exchequer has it in his own hands now to assist the nation to get rid of its financial difficulties by aiding the trade and commerce of this country on the lines I have suggested.

I listened with very great interest to the speech of the Chancellor of the Exchequer, but I was rather surprised at the way in which he avoided treading on the thin ice of the question of a sinking fund. I was much more surprised that when he came to the question of the increased Death Duties he did not then attach to this large contribution which is to be laid upon the capital fund of the country, by means of increased Estate Duties, some small form of sinking fund. I reinforce my view that such a small sinking fund should be attached to what is undoubtedly a depletion of the capital fund, capital money, which will be spent as revenue, not only on moral grounds, as an example to the country that it should be economical, as the Chancellor of the Exchequer expressed the wish that it should be, but also on the grounds that it would, by its percussions and repercussions, certainly have advantageous effects otherwise. There were many discussions in this House in the time of Pitt as to whether it was wise to borrow money for the purpose of using it for sinking fund, but in those days capital money was not being used for revenue, as the Chancellor of the Exchequer now proposes to use it. He proposes to take money for current expenditure from a capital fund in the form of Death Duty upon the capital fund of this country. I pass away from the details of the discussions about sinking funds which took place in the period of the Napoleonic Wars or after the wars of the French Revolution and suggest to this Committee the beneficial effect that a small sinking fund would have on War Loan values.

If there is one thing we require to do in this country, and for two reasons, it is to get down the price of money. In the first place, so that the War Loans or floating debt may be refunded or continued at a less rate of interest and that the taxpayer may be called upon to pay less money for interest from taxation for that purpose, and secondly, that if you can by borrowing money in Treasury Bills, say at 3½ per cent., re-invest that to yield 5 per cent or 5¼ per cent. in War Loan, you are not putting the country to any expense in by so doing, introducing a sinking fund for moral reasons, while at the same time elevating the market price of War Loan, thereby cheapening the value of money in this country by raising the capital value of the bell-wether among investments. I cannot impress too much on this Committee my view, that the need of this country is cheap money, not only for the purpose of manufacturers, with whom I identify myself, to assist them to extend trade and employment, but for the purpose of converting the great 5 per cent. War Loan, when it comes due in 1929, to a lower rate of interest. There is another reason why we need cheap money in this country, towards which, I think, we might be helped by operation of a sinking fund, which would by its repercussion increase the market value of War Loans and thereby reduce the loan able value or interest on money in this country, it is that the cheaper money is here, the better we shall be able to lend money abroad, and I do not think that America will be able to lend money to her own investors as cheaply as we shall be able to do. The cheaper we are able to lend money or finance foreign bills the better we shall be able to stimulate our export trade. By lending money cheaply, as we have done in the past, we have built up our great export position. For that purpose I do suggest, with great humility to the Chancellor of the Exchequer, that now that he is taking a large slice of revenue from a capital fund by means of Estate Duty the time has come to ignore what was called heresy in the time of Pitt by borrowing money to repay capital debt, and that now the War is over, a sinking fund proposition should be again considered. There are many disadvantages and advantages in such a policy, too numerous to discuss now, but on balance the policy will prove beneficial to our nett financial position.

In accordance with the usual practice that we should make progress with the Resolutions, I think we might get the necessary Resolutions now so that we might have a discussion at 8.15 on another subject. I have already undertaken to keep over until to-morrow the Resolutions dealing with the general amendment of the law which will enable a general discussion to be resumed to-morrow. I know my hon. Friend the Member for Wood Green (Mr. G. Locker-Lampson) desires to move an Amendment with respect to the Income Tax, and I will agree to keep over the Income Tax Resolution. I hope we may bring the discussion on the other Resolution to an early end this evening, and take up the subject afresh to-morrow.

I am sure that those who act with me are very desirous to do everything they can to facilitate business, and also so far as we can lighten the labours of the Chancellor of the Exchequer, who certainly has gone through a very arduous experience to-day. But one of the real difficulties facing us at the moment is the question of Preference which is involved in Resolutions Numbers 1, 2 and 9. There is the 3rd Resolution, or at any rate one of them, which on the face of it carries nothing to which one could object. It carries on existing duties, but it is an integral part of the system of Preference which it is proposed to set up. We have had no opportunity, except by the courtesy of the Chair for one moment, to put the House to a Division, but at the same time we must save our position, and I say at once that so far as we are concerned we are root and branch opposed to this proposal, and I hope to say so to-morrow. We are really most anxious not to inconvenience the Chancellor of the Exchequer or to put the House to an unnecessary Division, but if we allow these Resolutions to go by with the ordinary challenge without forcing a Division, I want to make it perfectly clear that our position is in no way prejudiced, and I hope if we are fortunate enough to catch the eye of the Chairman to-morrow to give one or two reasons for our position. If that is clearly understood so far as we are concerned, we shall let the Resolutions go with the usual challenge.

Of course, I do not want to commit my right hon. Friend and those associated with him to any proposition to which they do not agree. I think it would be very unusual on the first night to challenge on the Resolutions, the propositions which have been sketched in the Budget Statement. The right hon. Gentleman will have his opportunity, and more than one, of challenging the principle of Preference, in principle or any of its forms, and when that time comes I shall be very happy to meet him on that ground.

I should like to know when the Chancellor of the Exchequer proposes to bring on the Resolution regarding the Petrol Duty. I suggest that instead of merely consulting the Minister of Transport, seeing that he is proposing a new form of taxation on motor cars instead of by Petrol Duty, he should consider the desirability of appointing a small Committee, as he has done on one or two other questions of taxation. I do suggest that the trade interests know far more about the question of motor traffic than the Minister of Transport, who is a railway man pure and simple—I say that without any disrespect—and they would be able to help the Chancellor of the Exchequer to evolve a system of taxation which would raise the same amount of money on a fair basis.

I do not want to commit myself to the appointment of a Committee at the moment, but I have said that before I make any proposition there must be an opportunity of consulting all the interests concerned, and I am anxious to have that consultation and co-operation.

When does my right hon. Friend propose to get rid of the Petrol Control Department?

I hope that the duty will go on 17th May and the Department very soon afterwards.

Those who are interested, I presume, will have an opportunity of discussing the Beer and Spirit Duties during the Debate to-morrow. No one in the Committee except the Government and the Chairman has seen these Resolutions, unless by courtesy of the officials at the Table a copy has been shown. I would suggest that a copy of these Resolutions should be placed in the Vote Office on these occasions after the Chancellor has made his statement, so that Members should not be asked to vote blindly on a number of complicated Resolutions, full of technical phraseology which it is impossible to understand when read out at the Table, and there is no further opportunity of studying them.

One point in the discussion which has taken place concerns the Chair, and I had better make myself quite clear about it. According to our custom, whatever Resolution or Resolutions are carried over to to-morrow's discussion, the one that comes first will be the one that will form the peg on which the whole of the Resolutions, the whole Budget Statement, can be discussed. Suppose Income Tax is the Resolution which is left over until to-morrow, on that hon. Members will not be confined to Income Tax, but can go over the whole field The result will be that, as the other Resolutions will be printed in the Votes to-morrow, their actual form will be in hon. Members' hands.

On a point of Order. If an Amendment is moved to the Income Tax Resolution, that Amendment, I suppose, would have to be moved at the end of the general discussion?

That is the exact reason why I thought it only right to intervene. If I allowed an Amendment to a Resolution to come at the beginning I should be defeating the usual desire of the House to take a general discussion, but, of course, the Resolutions are open to relevant Amendments when, the general discussion has had a reasonable course.

It would be open to my hon. Friend later in the evening to move an Amendment. It is quite clear, I think, that we must have the Income Tax Resolution to-morrow. We cannot carry the discussion over to-morrow.

That is understood.

I must press the point, which I ventured to raise, that we should be furnished with copies of these Resolutions before the House is asked to pass them. It is quite impossible to understand long technical phraseology when read out from the Chair.

It has never been the custom to treat the first night of the Budget as a suitable occasion for discussing the proposals in detail. On the first night the discussion has always been of a most general character. If my hon. Friend's idea is that the first night of the Budget should be converted from a general discussion into a discussion of the detailed proposals of the different Resolutions, then I think, as at present advised, that it would not be for the general convenience or an improvement on our present practice; but I do not want to prejudge the suggestion of my hon. Friend.

Question put, and agreed to.

Continuation of Duties (Customs)

Resolved,

2. That the following duties of Customs imposed by Part I. of the Finance (No. 2) Act, 1915, and continued by Section 1 of the Finance Act, 1918, until the first day of August, nineteen hundred and nineteen, shall continue to be charged as from that date until the first day of August, nineteen hundred and twenty (that is to say):

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

Continuation of Duties (Excise)

Resolved,

3. That the additional duties of Excise upon medicine imposed by Section eleven of the Finance (No. 2) Act, 1915, and continued by Section two of the Finance Act, 1918, until the first day of August nineteen hundred and nineteen, shall continue to be charged until the first day of August, nineteen hundred and twenty.

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

Spirits (Customs)

Resolved,

4. That, in addition to the duties of Customs now payable on spirits imported into Great Britain or Ireland, there shall on and after the first day of May, nineteen hundred and nineteen, be charged the following duties (that is to say):

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

Spirits (Excise)

Resolved,

5. That in addition to the duty of Excise now payable for every gallon computed at proof of spirits distilled in the United Kingdom there shall, on and after the first day of May, nineteen hundred and nineteen, be charged the following duty (that is to say):—

and so on in proportion for any less quantity.

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

Beer (Customs)

Resolved,

6. That in addition to the duties of Customs now payable on beer imported into Great Britain or Ireland there shall, on and after the first day of May, nineteen hundred and nineteen, be charged the following duties (that is to say):

and so in proportion for any difference in gravity.

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

Beer (Excise)

Resolved,

7. That in addition to the duty of Excise now payable in respect of beer brewed in the United Kingdom there shall, on and after the first day of May, nineteen hundred and nineteen be charged the following duty (that is to say):—

and so on in proportion for any difference in quantity or gravity.

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

Private Brewers' Licences

Resolved,

8. That in lieu of the existing duties charged upon licences to be taken out annually by brewers of beer (other than brewers for sale) occupying houses of an annual value not exceeding fifteen pounds there shall, on and after the first day of October, nineteen hundred and nineteen, be charged the following duties (that is to say):—

And such licences shall be taken out by all such brewers, including those who brew solely for their own domestic use.

I beg to move, "That the Bill be now read a second time."

Amendment of Law

Resolved,

14. That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue (including Excise), and to make further provision in connection with Finance.

I understand the general discussion will be resumed on the Income Tax.

Resolutions to be reported To-morrow (Thursday); Committee to sit again To-morrow.

It is a Bill to confirm a scheme certified by the Board of Education under the Charitable Trusts Act, 1853. The scheme forms the subject of a Report which has been on the Table of the House for some weeks. It has been published as required by law, and every opportunity has been offered to lodge objections to the scheme. There has been only one suggestion for its alteration, and that on a point of detail, and that suggestion has been withdrawn. The Bill therefore comes before the House as an unopposed measure with the agreement of ail concerned. It is a charity that was founded by the Crossley family in 1868, and it is administered by governors who have been incorporated by Royal Charter. Owing to the increased cost of education, and to the rise in the cost of living, it has been found impossible to make the school pay its way, and the object of this Bill is to put the school in a position that will enable it to earn the Board of Education Grants and to become a thoroughly first rate secondary school. I have heard of no opposition from any quarter whatever, and I trust the House will give the Bill a Second Reading.

Question put, and agreed to.

Bill accordingly read a second time.

Resolved, "That this House will immediately resolve itself into the Committee on the Bill."—[ Mr. Lewis. ]

Bill accordingly considered in Committee, and reported, without Amendment; read the third time, and passed.

The remaining Government Orders were read, and postponed.

There being no other Government business on the Paper, I will leave the Chair until 8.15.

Sitting suspended until a Quarter-past Eight o'clock.

I beg to move, any agricultural policy. I remember quite well on the second day that this House assembled putting a question on this very subject to the Prime Minister. The Leader of the House replied to my inquiry and said that it was premature and apparently it is premature now, because ever since that date, in spite of repeated attempts, we have made no headway at all in finding a solution to this all-important problem.

Since that date a large number of hon. Members have asked similar questions. Various agricultural debates have taken place but all to no purpose, and the utmost that we have accomplished is to get from the Government a promise that they will overhaul the Department of the Board of Agriculture and Fisheries. They have promised to thoroughly overhaul the machinery of that Department and bring it up to date, and put it on a sound business footing. I assume that that is being done, but I should like to hear from the hon. and gallant Member for Dudley (Sir A. Boscawen) exactly what progress is being made in that direction. I cannot forget a very important resolution on this very question which was sent to me a few weeks ago from the Berks and Oxford shire Chamber of Commerce, and I will read it to the House: to say, "Thank you for nothing." If I may use an expression of popular language to-day, the agriculturists of this country are "fed up," fed to the teeth, with the constant appeals to their patriotism, with the daily appeals to their intelligence, and appeals to their energy and industry. All this put together will not help to make the farms pay. Pious exhortations of this kind are no use to the farmers to-day, and what he really wants is a policy. These sort of appeals will not help to meet falling prices which are brought about by the wholesale importation of foreign cereals, nor will they place the farmers in a good enough position to enable them to pay the wages which are rising with such striking rapidity.

Before passing from this, I would like to say that the demands of the agricultural labourers have my entire sympathy, but how can this industry be called upon to pay those extra charges unless it is first of all in a flourishing condition. Any hon. Member of this house knows full well that you cannot run any business without a policy. It does not matter whether it is a great engineering or shipbuilding business, or a departmental stores, or even a one-man business. The first thing, if you want success is to formulate a policy, and unless that is done for this great industry of agriculture, which gives employment in this country to more people than any other industry, I really cannot see how the farmers can pay these big wages which they are asked to pay to-day. Let me turn to the last important speech made by the President of the Board of Agriculture and Fisheries. Some two or three weeks ago he addressed a large meeting of farmers at Taunton. His speech was full of warm and generous exhortations. It abounded with appeals. It was stuffed full and chock-block with sound advice, just as you would expect from a man of his ability and great experience; but the farmers were there hoping to hear a statement in regard to the Government's intentions, and they went away somewhat disappointed. I would like to read a short paragraph from his speech—

I do not pretend to be an export in agricultural matters as a large number of hon. Members in this House. I am only a plain business man, but I maintain that it would be folly for me, or for that matter for any other hon. Member, to come to this House and denounce a state of affairs in any Department unless he is able to suggest a remedy. I have only waited for this opportunity, because I have not been quite as fortunate as I should have liked in catching either Mr. Speaker's eye or that of his Deputy. I have, I believe I am quite right in saying, got up from twenty to twenty-five times, and I have given quite a lot of time to preparing what I thought to be very striking speeches. I therefore welcome this opportunity of being able at last to give the House my view how a policy should be found for this industry. It will be seen from my resolution that I recommend that a Royal Commission be set up forthwith to thoroughly investigate the whole of this industry. I do not mean a Royal Commission of the old type. I do not want your pre-war Royal Commission at all. I want a Royal Commission set up on business lines. We all know about the old Royal Commissions which used to take some three years to hear the evidence. I believe they took three years to write their reports and eventually their findings were pigeon-holed for the benefit of posterity. That is not what we want at all. This Commission must be set up at once. It must be presided over by a judge of the High Court. I lay great stress on that point. You must have a judge who is used to sifting evidence and who can expedite the proceedings of a commission of this nature. All parties interested must be represented. You must, I suppose, have the Government officials, you must have the landlords, you must have the tenant farmers, you must have the agricultural labourers, and the consumers also must be represented on that Royal Commission. It must have a definite order to report by a given date, just the same as the Royal Commission on the Coal Mines was instructed to report by a certain date. If that course were adopted—and personally I see no objection to it—the Royal Commission could report within two or three months' time, and then the farmers would be in a position in the autumn to know what to do in regard to their crops for the following year. As it is, the Government seems, perhaps quite rightly, to be labouring under the difficulty of not being able to adjust the various points of view, and, in order to bear out this statement, the House will, I hope, forgive me if I quote another short paragraph from the Noble Peer's speech. He said: Does not a confession of that kind, does not so candid an admission, point to the necessity of something being done to put the Noble Lord in a position to find out what the farmers are thinking about, and what their views are, before we enter on any new legislation? Does it not suggest that a great deal of the unrest in the country, which unfortunately is growing rather than diminishing, is called for? Do not hon. Members think it is about time that we tried to find a middle course—a course which would satisfy the natural aspirations of the masses in industrial centres for cheap food, which would also satisfy all the people employed on the land, and which would make certain that the people on the land had a chance of earning a decent livelihood It is high time we made a very strong effort to find such a course. It may be said that the agricultural interests do not want a Royal Commission. I do not expect they all do, but the minority which does not want a Commission is one composed of those who have the least need to be afraid of the future outlook. They are the larger and the wealthier farmers.

In the last two or three weeks meetings have been held in almost every county in this country, from one end of the land to the other, and all have voted in favour of the course which I now suggest. I am certain that the agricultural labourers in this country would welcome a Commission of this kind. They are keenly anxious for an opportunity of putting their side of the case before a responsible body. The agricultural interests of this country deserve consideration. They are often the victims of cheap sneers, but they played a very great part for the nation during the War. Their efforts, and when I say their efforts I mean the efforts of farmers and all the people employed on the land, played a great part in saving the people of this land from starvation, and I am sure that the work they did also played a very important part in bringing about ultimate victory. Are we going to revert to the position before the War? What did we find after the War had been on for some twelve or eighteen months? We found, much to our surprise, that we were almost wholly dependent on foreigners for bur food supplies. Are we going to revert to that position? I sincerely hope not. We should aim to place this country in such a position as regards its food supplies that if at any future date we should find ourselves in a similar position, at least we should have enough food in the country for our people. What we ought to aim at is British food for the British people. I therefore move my Resolution. It is always open to the Government at the last moment, as a sort of death-bed repentance, to come forward and say, "There is no need for a Royal Commission, as we have a policy." While I would welcome such an announcement, I must say I would sooner see the whole question threshed out by all parties interested, because I feel that if the course which I have suggested is adopted the Government will get very valuable information indeed. I hope therefore they will be able to satisfy my demand, which points to the only course left open, and I venture to say that if this all-important problem is not tackled at once and in a masterly manner, it may turn out to be one of the gravest problems of our time.

In seconding the Resolution which has been so eloquently proposed by my hon. and gallant Friend I am going to assume from answers I have received in this House, and also from inspired reports that have appeared in the Press in the last two or three days, that the Government propose to accede to the demand contained in the Motion. Therefore I will not detain the House by adducing any arguments beyond saying that no one who has followed the course of agricultural events during the last year or two can fail to realise that it would be absolutely impossible for any Government at the moment to adumbrate any policy which could satisfy the nation as a whole or the agricultural community in particular without a thorough investigation. It is difficult enough, as we heard this afternoon, in the financial field to devise any standard, but with the agricultural industry it is wholly impossible, from the point of view of labour and from the whole economic point of view, to either stabilise or standardise it at the moment. Therefore, I cannot join with my hon. and gallant Friend in holding up to scorn the Noble Lord who presides over the Board for not being able at this moment to produce a cut-and-dried policy. At the same time, the appointment of a Royal Commission is the only course that is now left open to the Government, and I believe, from my knowledge of the agricultural industry, that that would give nothing but satisfaction. During the last few days there has arisen an agitation in two or three counties in England owing to the decision of the Government to differentiate in the price allowed for milk in those counties from the price allowed in other counties. I do not know whether the field covered by the Commission is going to more than cover stock production and corn production. If it is also going to include milk production, I would ask my hon. Friend to defer examination of the whole question of milk production until such time as the Report of the Government Committee, over which it is my privilege to be deputy-chairman, is issued. I think I can promise my hon. Friend that our Report will be in the hands of the House within the next two or three weeks. It covers the whole field of milk production and distribution. The case is being examined, not only in this country, but with the Dominions. It might result in some overlapping if the Royal Commission started over the same field as that covered by the body whose conclusions will be in the hands of the House at an early date.

In regard to this Commission everything will depend on the constitution of the personnel. I hope that the Government is going to profit by the experience of the Coal Commission and that this Commission, when set up, will be so composed that it will make a really earnest effort to arrive, both from the national point of view and from the agricultural point of view, at the true economic conditions now prevailing in the industry, and that it is not going to be made a playground for every peculiar person to air his fads and fancies in a wholly unpractical way. The nation is now at the cross roads so far as agriculture is concerned. The real advantage of this Commission will be as an educational effort, because what we really suffer from is the absolute ignorance of the average man in the industrial area as to the very elements of the agricultural problem. If it can clearly show, in perfectly simple language, to the ordinary man in the street and in the industrial area, who merely looks upon it through the eyeglass of the consumer all the difficulties and intricacies of the most complicated and complex industry in this country, it will have more than justified its existence. It can only do that if it is composed of men of sufficiently open mind and, from the point of view of eliciting information, possessed of sufficient knowledge of the industry to examine and cross-examine witnesses in the sort of way that will contribute something to the information of the nation as a whole. It is for the nation now to make up its mind whether it is or is not worth while carrying on this industry on an economic basis. It can only arrive at that decision if it has the case presented in such a way that the average man of ordinary intelligence who knows nothing about agriculture can say, "Yea" or "Nay," and can say, "On this evidence I am perfectly prepared to take the risk. We have had a great War, and so far as I am concerned I am prepared to take the risk that during my lifetime at any rate I shall not run the danger I have incurred during the last five years." If he takes that risk, all I would remark on that attitude is that any man who takes it is incurring a responsibility that I, for one, would certainly refuse to share—namely, the responsibility to his children and his children's children. He is also incurring a very grave responsibility in sharing in the benefits which during his lifetime have been won for him during the War, which he could not possibly have enjoyed had it not been for the efforts of the agricultural industry in this country. I would conclude by quoting some words which were used eighty-two years ago. They are so wholly true of the agricultural position to-day that, with the leave of the House, I will repeat them:

9.0 P.M.

In rising to address the House, for the first time, I hope I may have its indulgence, though I cannot promise anything in return very much except that I shall be as brief as is possible for a very nervous Member. I wish to join in the appeal which has been made for the setting up of a Royal Commission to inquire into this very important question. I am afraid in the old days an appeal of this nature would be construed to mean indifference, or it might be hostility. A Royal Commission in the past has more or less a stock Government sedative and a very convenient form of stifling all agitation by excess of official attention. I am not at all sure that many subjects have not been relegated to a Royal Commission for the same reason that an inconvenient Member has sometimes been elevated to another place, because both places have a reputation for comparative repose, where the wicked are supposed to cease from troubling, and where to a certain extent the weary are at rest. I think Royal Commissions are by way of embarking on very much more useful careers, and in this respect the recent and indeed present Royal Commission on coal has set a very important and I think very beneficial precedent. It has shown that it could sweep away all the dilatory traditions that attached to Royal Commissions in the past and that it could work very expeditiously, and that it could deal very exhaustively with a vast subject and could present a Report very quickly. That means in these days, too, that so much publicity is given to the proceedings that the public feel that they are more or less partners in the inquiry; while the fact that the Government has shown itself ready to put the recommendations into immediate operation quickens public interest and gives a deeper sense of responsibility to the Commissioners who are conducting the inquiry. It has been said that government by public meeting is a highly precarious form of government by Commission, but I think that we have arrived at a time when it is very desirable that we should have government partly by Royal Commissions. They are the only, or at least they are the best, methods by which we can gather together information which is absolutely essential. There are the munitions by which the Government is able to formulate its policy. In the old days I am afraid those munitions were turned out almost exclusively from party factories. I would particularly point out that it is a misfortune that the great question of agriculture has for so long been a subject of acute controversy, and I do think that a comprehensive inquiry, and an unbiassed inquiry, and an expert inquiry, would help to lift this great question from the arena of factious disputation and immensely strengthen the hands of the Government when they came to deal with it in a legislative manner. There are plenty of people outside this House, and very largely because they are outside this House, who would like to take advantage of every opportunity of weaking the authority and impairing the competence of this House in the eyes of the country. I cannot imagine anything which would contribute more powerfully to the maintenance and enhancement of the authority of this House than the conviction growing outside that the Government of the day and Parliament itself does not proceed to legislate on great questions until it has exhausted all the means at its disposal for gathering the facts and figures in connection with the subject. There are in this House, I believe, more parties than there have ever been before. They vary in size, and also, perhaps, in quality, and certainly in numbers, and I do not think it would be extravagant to say that they are not all equally important. But I think I may say there has never been a Parliament where there has been such a general amount of agreement on the main immediate legislative objectives, and I think it is in the best interests of the country and Parliament that we should do all that we possibly can to maintain and develop this unity of purpose and turn out useful legislation for the benefit of the nation. I come from an industrial district which is also concerned with agriculture, and there is this atmosphere of unrest surrounding us wherever we go. There are thousands of explanations of it, almost as many as there, are grievances, and that means a great many. But I think you can reduce the large majority of them to a feeling of distrust which is growing and spreading and hardening into bitter conviction that the working men and the workers generally of this country are being exploited in their lives and labour, in other words, that the share which falls to them of the fruits of their toil is a disproportionate one. That is the cause, I think, of this miasma of mistrust which is spreading everywhere, and I am absolutely convinced that nothing will dispel it permanently except the letting in upon it of the strong sunlight of the full knowledge of the facts which appertain to the situation. I would like to mention in this connection the recent coal crisis. I come from the heart of one of the largest mining areas of South Wales. What happened there? Before the Commission was set up, the men made a demand, and by an overwhelming majority they said they were prepared to go on strike to enforce that demand. The Coal Commission inquiry was held, and by an even more overwhelming majority they decided to accept the recommendations of the Royal Commission. What did that prove? It proved that what the men, the workmen of this country, wanted was not so much that their terms in their entirety should be granted, but to have the feeling, amounting, if possible, to a certainty, that they were getting what was just to them. That, I think, is the great lesson which the recent mining crisis and the Coal Commission brought.

I would appeal to the Government to set up a series of these Commissions. Let the searchlight of Royal Commissions play upon every nook and corner of our industrial system. Let everything be brought to light, and then, in the work of reconstruction, we shall not have any hidden places in our structure. I would point out that I am not making a new appeal. During the last four or five years Members appealed very frequently, and the appeal was made from the country generally, to the Government and to all those in authority, to tell them all the facts. In the darkest days of the War, and some of them were very dark, the spirit of the nation seemed to rise as its fortunes fell, and in the very darkest hours, when the gloomiest forebodings darkened the whole horizon, all they asked was, "Tell us the facts, tell us where we are, because we are afraid of nothing, provided we are facing realities and we know." I think that a country which came through that time of trial is prepared to face the problems of reconstruction with the same character and high spirit. That, I am convinced, is the path of wisdom. It is the way of safety, and it is the only road that leads to permanent peace in all our industrial conditions in town and country. In particular, I would appeal for greater consideration to this great industry of agriculture. We say in our reminiscent moments that it is our greatest and oldest industry, but its greatness has not saved it from frequent adversity, and its ancient days has not saved it from very grevious neglect in the past. There were signs of a revived interest in the industry before the War, and the present Prime Minister, if I remember rightly, started a campaign and inaugurated a programme to deal with the whole industry, when the War intervened. But everything that has happened since has strengthened the case for a reconsideration of the whole question. The hon. Member who moved this Motion spoke truly when he said that a large share in the defeat of the German submarine belongs to the agricultural community of these islands, from the landowner down to the farm labourers, men, women and children. No industry played its part with greater elasticity, with greater industry and with greater sacrifice. We have all in this House pledged our word and adjured our consciences that none of the men who risked all, and nearly lost everything, in the great adventure, shall for the rest of their days feel the pang of penury or distress.

I do not think it is more than common prudence to say that we ought to see to it that those industries which stood us in such good stead in the dark days when the nation was in great extremity should not be allowed to fall into decay. It appears to me that the legislative instalments of the reconstruction programme of the Government already passed through this House assume that we ought to have a progressive agricultural policy. There is, for instance, the Ways and Communications Bill. That is to set up a system of railways, motor service, and other means of getting about the country in order to link up the inaccessible places with the hives of industry. That more or less assumes that we are to have a revival of prosperity in agriculture. Then, again, the very best Health Bill in the world will be of little avail to ourselves unless we can be quite sure that the dwellers in cities and large towns shall be every now and again recruited from the ranks of the countryside. Take, further, the Land Settlement Bill and its complement, the Land Acquisition Bill. These are designed to provide opportunities for men to settle on the land in increased numbers. I think it would be the most heartless mockery to ask these men to go and settle on the land, to work hard and train themselves for the work, to sink their little capital in it, and then to turn round and say, "We do not believe the agricultural conditions of the future are such as to be able to afford you a comfortable livelihood:" I hope very much, therefore, that the terms of reference, if the Government have decided to set up a Royal Commission, will be as broad and as wide as possible. Let us include everything. I would go so far as to ask them particularly to put in the very vexed and difficult question of nationalisation. After all, nationalisation is in the air in these days, and one of these next years it may very well come down to the land. When that time comes, it will prevent a great deal of aimless talk and unsubstantial thinking, if we have to guide us expert advice on these lines. Therefore, I would ask the Government if they decide to do this, to let the terms of reference be very wide indeed. In any case, there is no harm done, if they are not able to accept the recommendations made. The country will have gained a good deal. It will prove to the country, particularly to the agricultural community, that the Government are prepared, so far as in them lies, to deal justly with this great industry. It will also prove that they are prepared to continue the war-time practice, which is a very valuable one, of marshalling and organising all the resources of knowledge and the accumulated fruits of research, and harnessing them to the immediate needs of the community at large.

I represent a large division, which is equal to about one-half the county of Gloucester, and the former representatives of which bore a very honoured name in this House, namely, Hicks-Beach, both father and son. That division, as I have said, is equal to about half the county of Gloucester, and we have in that division almost every system of farming. In the hills there are the sheep and the barley farmers and in the valleys the milk producers. There is also the market gardening industry, and a good deal of mixed farming in various places as well. From all you have the one same complaint, that at the present moment there is a kind of paralysis for every one of these classes because they say they do not know whether it will be worth their while going on with the industry or not until the Government have formulated their policy. I want to point out, too, that the very question of housing in the country districts depends very largely indeed upon the line you take over agriculture, because, unless you are going to make agriculture prosper, there are enough houses in the country already, but if you are going to have a prosperous industry we shall want at once a good many houses, and we shall want them of a far better type, and even to-day, with the wages that are being paid, it is almost impossible for the agricultural labourer to make two ends meet.

I would like to point out a case which came before me the year before war broke out, to show the position in which the agricultural labourer then was, and I think you will see he is very little better off now. I happen to be the secretary, at Cirencester, in the middle of the Cotswold Hills, of a very large benefit society with some 15,000 members. A woman came to me about a little matter of a club account in October, 1913. She wanted a little help from the society, and this is the position in which she placed her financial budget. She said, "My husband is a good, steady man." I said, "I know he is. I have known him for a quarter of a century, and he has worked for the same farmer all that time." "Yes," she said, "and in the winter time he gets 1s. a week more than the ordinary labourer because he is a good man." His wages then were 14s. a week; that is,. 1s. a week above the standard rate of wages in that part of the country in the winter season. I said, "How do you manage to get a living out of that?" She replied, "My husband gets his 14s. a week. He is a very steady, careful, sober man, and he only keeps back 2s. a week for beer and tobacco." One-seventh of one's income for beer and tobacco is rather large, but 3½d. a day is not very much for tobacco and beer for a working man. I said, "That brings it back to 12s." She said, "We have a very good cottage indeed. I do not grumble a bit. It has three decent bedrooms, and the water laid on, and we only pay 1s. 6d. a week for it." I said, "That brings it back to 10s. 6d." Then she said, "There is 9d. to you and 3d. for the national insurance." "That," I said, "brings it back to 9s. 6d." She stated that there was 1s. for coal, which brought it back to 8s. 6d. She said, "There is my husband, myself, my eldest girl aged twelve, my youngest boy aged ten, and we have to live on 8s. 6d." I say that you can Hardly credit that people can live on that. But that man has actually saved £58 in the society of which I am secretary, showing that he must have scraped and almost starved himself rather than be a burden on the parish in time of need. We want to encourage that feeling from top to bottom, that the man shall be independent and not look to the parish, but look to his own exertions, and to-day, although that man is getting more than double what he got in 1913, yet, in consequence of the high price of commodities—of his coal, his clothes, his boots, his bread and meat—he actually is slightly worse off to-day, as we think, than he was at that time. That being so, can you wonder when the sons of these men are grown up—this man, by the way, has only one son—that very few ever go upon the land? They go upon the railway, into the shops in the towns, into the Post Office, into almost anything, and for two reasons: In the first place, they get wages which are much more commensurate to their ability, and the second point with many is this: If they go on the railway, or in the police force, or into the Post Office they get a good pension when they are incapacitated from work—and that counts for a lot—whereas if they stay upon the land no farmer is going to give them a pension, and they simply have to take the old age pension. From the labour point of view, therefore, to keep these men on the land, to keep them from crowding into the towns is to the advantage of labour. It is, I suggest, for the Labour party to see that they have proper housing accommodation and good wages; but these can only be obtained if the industry itself is prosperous and can afford to give good wages.

That being so, I wish with all the power and energy that I possess to support the Resolution to have a Commission appointed that shall report within two or three months, because I assure hon. Members that at the present moment the number of farmers that have given notice to leave their farms, or are seriously considering it, for next Michael as is very large. I have lived on the Cotswold Hills for thirty-three years, and I have never known so many farms taken in hand in the way of sales, and so many estates being broken up into small quantities. Certainly I never knew so many farmers give notice as happened last Lady Day and is in contemplation for next Michael as. This must be stopped if the country is to prosper. But so long as the present state of uncertainly exists, first, as to prices and second, as to whether they are going on in their farms or not, just so long you will not have increased employment in the country districts. We want increased employment on the land. That will mean better cottages, and it will give a great deal of employment to those people who are now drawing unemployment pay. By so doing I think the Government will do a good thing not only for agriculture, but for the country at large.

If this Debate has done nothing else, or if it were going to do nothing else, it has at all events produced three very excellent maiden speeches. I desire to congratulate the makers of those speeches upon their efforts this evening. I am very glad that the fortune of the ballot enabled my hon. and gallant Friend the Member for Henley (Captain R. Terrell) to get round the difficulty he had experienced of catching your eye, Mr. Deputy-Speaker. As regards my hon. Friend the Member for Pontypridd, it almost made my mouth water when he talked of the place where the weary are at rest. I was for over two years Parliamentary Secretary to the Pensions Ministry—that was not a place for the weary to rest. When I was transferred to my present position a friend of mine said: "You will have an easy time now." I cannot say that I have found, up to date, that the Board of Agriculture, interesting as it is to the last degree, is precisely the place where, under present conditions, the weary are at rest. Well, my hon. Friend behind me who spoke last did, I think, put his finger on what is the crux of the situation. We all want to see a decent living wage—and, indeed, better than what is ordinarily called a living wage—paid to the agricultural labourer. But we want to be assured that the industry can pay such a wage. What my hon. Friend said touches really the important matter in the question. I have risen at this early stage in the Debate, not that I want in any way to stop the Debate—it may, perhaps, produce other maiden speeches as good as those we have already heard; and I hope it will, because the more the Members who interest themselves in this agricultural problem and who realise the immense importance of agriculture to the country at the present moment, the better—I have risen simply because I think it may be for the convenience of the House if I make a perfectly plain statement as to what are the intentions of the Government, so that the House may know precisely how it may view the present Resolution.

On behalf of the Government I am not going to oppose this Motion. On the contrary, before it was put on the Paper we at the Board of Agriculture had been considering the necessity of appointing just such a Commission as my hon. Friend suggests. The Government now have decided to appoint such a Commission forthwith. I am not in a position to-night either to mention the names of the Commissioners nor to give the precise terms of reference, but I may say as regards the names that the point which occurs in my hon. and gallant Friend's Motion will be taken into account and carried out—namely, that all classes interested will be represented. There will be representatives of such bodies as the Farmers' Union, the Agricultural Labourers' Union, the Workers' Union, and others. These will represent the farmers and the Labour aspect of the case; and then, perhaps, the Government will be represented. I must not be understood to give any exhaustive account of the interests to be represented. All material interests will be represented. Not only so, but it is our intention not to have a lengthy body which shall shelve the question for months or years. On the contrary, we want to get a quick Report on the main question so that we can base our policy on it in the next few months.

When I say a quick Report on the main question I mean as regards the economic position of the more important branches of the agricultural industry, such as the production of corn, meat, and milk. We shall desire to get a Report in the next month or two in order to base our policy. It is quite true that the Commission may have referred to it other matters—bigger and wider questions—but if that is done we shall ask for an interim Report very much as has been done in the case of the Coal Commission. We shall ask in respect to the major aspects of the economic position of the industry a Report as early as possible, because we are apprised, quite as fully as the House, of the necessity of stating our policy at the earliest possible moment. With regard to this policy, I fully admit the necessity of it. During the War, conditions were altogether abnormal and exceptional, and the policy that was laid down two years ago is not applicable at the present moment in its entirety. What do I mean? We had the Corn Production Act. That Act guaranteed certain prices for cereals; it also set up an Agricultural Wages Board. Between the minimum wage proposed in the Corn Production Act and the guaranteed price, which also occurred in that Act, there was a certain relation. The minimum wage mentioned in that Act was 25s. a week. The guaranteed price for wheat will come down, so far as the Act goes, to 45s. next year. It must be clear that if there was any definite relation, as I believe there was, between that minimum wage of 25s. and the guaranteed price for wheat of 45s., that relation is entirely upset when the minimum wage is raised far beyond the 25s. That is precisely what has happened. The minimum wage, on the average, at the present moment is not 25s., but the average throughout the country is 33s. An addition of 6s. 6d. is now to be made by the Wages Board, I think, almost within the next few days, and that brings up your average minimum wage to 39s. 6d. It is quite clear that if 45s. is regarded as a reasonable guaranteed price for next year and the years following when the minimum wage is 25s., it cannot be so regarded when the average minimum wage is 39s. 6d. Therefore, it is quite clear to us that there must be a modification of the policy.

I do not wish the House to think that I am in any way condemning the Wages Board for having put up the wages in the way they have, nor that I am in any way lacking in sympathy with the agricultural labourer in this increase in wages. The Agricultural Wages Board has been performing an exceedingly difficult task. I know the majority of its members have worked very hard and have performed their duty to the best of their ability, and I think the thanks of the community are due to them. Again, I am sure none of us were contented with the wages paid to the agricultural labourer before the War, and when you realise the great increase in prices that has occurred during the War it is literally and absolutely true that the increased wage paid now, though it may seem a great increase in money wages, is not any increase in real wages at all. I am sure there is not one of us, and I do not believe there is anybody interested in land, either as a landowner, or a tenant farmer or anything else, who does not desire to see the agricultural labourer well paid. In fact, one of the ideals on which I was brought up, and which occurs, I think, in one of Disraeli's books, was the great necessity for what he called a contented peasantry in this country. Therefore, I say that I am not in any way blaming the Agricultural Wages Board, nor am I finding any fault with the increase of wages, but we come back to the point made by the hon. Member for Cirencester (Mr. Davies), that you must be sure that the industry can pay these wages. Because, if the industry cannot pay the wages, what is going to happen? Not merely will a great part, in fact probably all, of that land which has lately been ploughed up for food production purposes during the War—a fact which contributed, as I entirely agree, so much to our winning the War—go back to grass, and in many cases tumble back to grass, but a great deal of what was arable before will go out of cultivation. If you are going to have wages, and I think you ought to have good wages, over and beyond what the industry can afford, the only result will be that the industry will diminish and you will get a vast amount of unemployment in the country districts. Feeling that as we do, we see the necessity of having a careful inquiry into the whole economic situation, in order that we may be able to arrive at a decision as to where we are, and to take care that right and sufficient wages are paid and that the industry is in a position to pay them. The view I take is that the country is not going to let the agricultural industry down. It wants to know precisely where it stands with regard to the agricultural industry, and therefore this inquiry is made.

We have been criticised, sometimes very adversely criticised, by hon. Members in this House, and outside, because we have not produced a policy up to the present moment. With some of the attacks that have been made on the Board, and with all the attacks that have been made on the President, I am sure the House has no sympathy whatsoever. There have been statements made that I think are absolutely unjustifiable, because I am perfectly certain there never was a man who, under most difficult circumstances, has done more for the industry than the present President of the Board of Agriculture. He has had to guide the industry in a period of unparalleled difficulty, when calls were made upon it such as have never been made before. After all, is it fair to say there has been no policy? How do we stand as regards this present year? Cereal prices have been guaranteed, and guaranteed at a figure which is equal to the maximum price which ruled last year. I do not know that the House or the country realises that that may cost the taxpayer a very large sum of money.

How much?

That is a question that I cannot possibly answer, because it depends upon two considerations, as to neither of which have I any data to draw upon. One is, what are prices likely to fall to during the year? The other is, what is the acreage likely to be grown during the year? Until I know that—and nobody can possibly tell what those two figures are likely to be—it is impossible to say.

Can the hon. Gentleman give any approximate estimate at all?

It might be nothing, if prices do not fall. On the other hand, if prices fall considerably, it might be a great deal. Then, again, we do not at the present moment know what the acreage may be. All I am saying is that so far from there being no policy with regard to this year, prices have been guaranteed, and they may involve—I do not go higher than that—a very considerable charge on the taxpayer.

Will the hon. Gentleman tell us how much these guaranteed prices are below the prices of foreign wheat?

I was coming to that in a moment. Therefore, as regards this year, if I may resume my argument, we have a policy. Where do we stand? As regards this year there is a policy, but I agree that a policy for one year is no use in the long run, and that we must have a policy for a term of years. In order that we may get a policy for a term of years we ask that this Commission may be appointed which will really give us the economic position, not having regard to profits which have been made under totally abnormal conditions during the War, but having regard to what is likely to happen in the near future. That is the point. It may be quite possible to prove that certain farmers during the last few years, with War prices, have made large profits, but those conditions are quite abnormal. What we want to know is what is likely to happen in the next few years, and what is necessary in the way of guaranteed prices to enable the industry to succeed and to pay the wages we wish to see paid to the labourers. After all, the country owes a great deal to the farming industry. At great risk, in a great emergency, at the call of the Government, old pastures were broken up and risks were taken by farmers which had never been taken before. Having regard to that, it is right and proper that the country should see the agricultural interest through the difficult transition period between war conditions and peace conditions.

I have been saying a word in defence of the Board as against criticisms which have been made largely by members of the farming interest in the last few months. There were also attacks made upon the agricultural interest. I have read in various papers this sort of attack: "The farmer wants big guaranteed prices. He has had the guaranteed prices for the last few years, and he wishes to screw the last possible shilling out of the guarantee." The farmer has had no effective guaranteed prices. There have been the guaranteed prices of the Corn Production Act, but the prices have never come anywhere near them, and all the farmer has had has been maximum prices, which are not in any sense a guarantee to him, which are no help to the producer, but which, on the other hand, limit his profits. It is only right that the House and the country should know that the Wheat Commission has been buying abroad during the last few years sometimes at no less than 30s. a quarter more than the price allowed to the producer here. That is a very material consideration. All this points to the fact that we have not got the data at present on which to base an agricultural policy for the next few years. If we are to have a policy, and I agree entirely that we must have a policy, we have to get those data and to get them quickly. We have got to appoint some body of people who understand their job to get those data. We have to ask them to report at the earliest possible moment. When we have got that Report we shall know where we stand, and we do not know where we stand at present.

When will the Committee be appointed?

I hope in the next, few days.

Who will preside over it?

I stated earlier that I was not in a position to give any names.

Will it be a judge of the High Court?

It may be. I cannot say more than that. My point is that the case for an inquiry, and a quick inquiry, is an overwhelming one, and for that reason the Government accepts the Motion and proposes to appoint a Commission with the least possible delay.