Mr. Speaker, Members of the Private Bill Committee over whom I have the honour to preside have been frequently receiving letters, anonymous and otherwise, attempting to influence us in the discharge of our judicial functions. We very strongly resent such action and desire to bring these facts to your notice.

I am glad the hon. Member has brought this to my notice and to the notice of the House. The public outside appear sometimes to forget that Members serve on Private Bill Committees in a judicial capacity, quite different from their service upon Standing Committees of the House, and for anyone by letters, anonymous or other, to attempt to influence Members of Private Bill Committees is a very reprehensible practice. If the hon. Member or any other hon. Member will be good enough to send me any such letters they may receive during their service on Private Bill Committees, I will take all steps in my power to stop the practice.

COUNTY OF LONDON ELECTRIC SUPPLY COMPANY BILL [Lords]

Reported, with Amendments; Report to lie upon the Table, and to be printed.

I beg to move to leave out from the word "That" to the end of the Question, and to add instead thereof the words surpluses under the two headings amounted to over £176,000,000, and after allowing for the charges which were likely to mature in the course of the twelve months the right hon. Gentleman came to the conclusion that a surplus of £80,000,000 would still remain.

That was the position when the Budget was introduced. Now we find that Supplementary Estimates to the amount of £72,000,000 have already been introduced in the first quarter of the financial year, and I am not including the Supplementary Estimate for Mesopotamia, which was purely a book-keeping arrangement and was allowed for in the original Supplementary Estimate. Apart from Mesopotamia, Supplementary Estimates, to the amount of £72,000,000, have now been introduced. I am quite prepared to admit that a considerable proportion of the £72,000,000 was probably allowed for by the Leader of the House, when Chancellor of the Exchequer, and foreshadowed in his Budget speech. The obligations which we were to incur in the future were not very closely defined in that speech, and it is very difficult indeed to understand exactly what proportion of these Supplementary Estimates to the amount of £72,000,000 was already foreshadowed in the Budget speech of the right hon. Gentleman and allowed for against the surpluses which he hoped to realise, but it is evident, from an examination of these Supplementary Estimates, that a very considerable proportion of the new expenditure on which we are now asked to embark was not foreshadowed or foreseen in any way when the Chancellor of the Exchequer introduced his Budget, and we are, in fact, confronted with an expenditure this year very greatly in excess of that foreseen at the time of the introduction of the Budget Estimates. It is quite clear that the £80,000.000 surplus anticipated by the Chancellor on the full year has already vanished into thin air during the first quarter of the financial year. Already such encroachments have been made upon that £80,000,000 surplus that the surplus necessary for Debt redemption at the end of the year cannot possibly be realised, and I would remind the House at this stage that in December last the present Leader of the House said:

We find that the revenue for the first quarter of 1921 amounts to £204,168,385. The first quarter of 1920 we realised in revenue, ordinary and extraordinary, no less than £314,986,452. In other words, in the first quarter of this year, as compared with the first quarter of last year, we find the enormous decrease of £110,818,067—over £110,000,000 decrease on the first quarter of this year in revenue, compared with the first quarter of last year. Those in themselves are very ominous figures, but when taken in conjunction with a brief consideration of the saving in expenditure, they become even more ominous, because during that period, as compared with last year, we find that in expenditure, after a close survey of Government returns, we have only saved £13,307,948. Our decrease in revenue is over £110,000,000; our saving in expenditure is only, approximately, £13,000,000. Those are figures which, I venture to say, alone and unsubstantiated would prove some justification for this Motion.

In the course of a Debate such as this, one is naturally desirous of making one's case entirely fair, and I propose to give the right hon. Gentleman the benefit of every argument that I possibly can, for a discussion such as this is far too serious for any partisan outlook. It is quite true that during this period we find a very great difference in the amount realised from the sale of War stores. That is quite correct. There is a very great difference indeed, but then, to a large extent, that is only one aspect of the conditions with which we are confronted. We are living in a time of trade depression, in a universal slump of prices, and it is only natural and normal that, under such conditions, we should realise less for our War stores than we did last year in comparatively good times, and by the little amount we have already realised in the sale of War stores, there is grave reason to fear that anything like the £155,000,000 — speaking from memory—foreshadowed on this account by the right hon. Gentleman in his Budget statement, is very unlikely to be realised. Having given the Chancellor of the Exchequer the full benefit of the argument that there has been a depreciation in the prices realised by War stores, even then, if we make a comparison with last year purely on ordinary revenue we find that, on the first quarter, there is a depreciation of £26,479,117—a depreciation of over £26,000,000 on ordinary revenue alone as compared with last year. I venture to submit that those figures alone lend some weight to this Motion.

It is incumbent upon us, in a Debate such as this, not only to consider the immediate circumstances, but to look to the remainder of the year, and, in taking that, we can only base our calculation upon the trade returns and the trade prospects of the country. The Chancellor of the Exchequer will probably argue—I think he has already argued—that the next quarter will demonstrate a substantial improvement upon the first quarter. That can only be so if the trade conditions of the country improve, and I submit that the trade slump, the depression of prices, under which we are labouring to-day, has scarcely made itself felt in the revenue returns of the country, and that this trade depression is only just beginning to reflect itself in national finance. I will take for the purpose of my argument the volume of trade of this country in the first five months of this year as compared with the first five months of last year, and it must be remembered that the depression in trade in the first five months of this year has as yet scarcely had time to reflect itself in the national finances, or in any substantial fall in the revenue. These figures I have taken were given by Mr. Crammond in his recent address to the Institute of Bankers, and they can be substantiated. I have taken the trouble to get them from the Government return. In the first five months of this year, as compared with the corresponding period last year, our imports show a depreciation of no less than 43 per cent. Our exports are 36 per cent, less than last year, and our re-exports—the most remarkable figures of all—in 1920 were £115,700,000, and in 1921 £42,600,000; in other words, in less than a year the great re-export trade of our country, on which, in pre-War days, our prosperity largely rested, on which our industrial well-being in the past has been founded in so large a degree, showed a depreciation of over 63 per cent, in less than one year. It is, no doubt, anticipated that the beneficent influence of the anti-Dumping Bill will remedy that. On the two combined, exports and re-exports, we find a depreciation of some 41 per cent.

What is the lesson of all this? We find a diminution in our total volume of trade of nearly 50 per cent. Taking that in conjunction with the decline in the revenue, and an increase in the expenditure, the consideration of a Budget whose bottom has already fallen out in the first three months, surely justifies a Motion which calls attention to the financial position of the country, and asks the Chancellor of the Exchequer at this stage of affairs to come down to this House to make a fresh statement of our financial position, and to give this country some new idea of the position with which it is to-day confronted. On every hand to-day, throughout the Press, and even hinted at, I am sorry to say, in the speeches of Ministers, we find a return to the old sloppy optimism which was responsible for so many of our troubles in the past. Confronted with such conditions as those which face us to-day, surrounded on every side by impossible economic conditions, we are told to expect some great trade revival, some boom in the industries of this country, which will carry us through this difficult period, and leave us once again in a position of financial supremacy. Surely a brief survey of the conditions which, it is submitted, will engender this great revival, surely the very briefest survey of world conditions will vitiate that theory in a very few moments. It is trite to say that revenue depends upon the trade of country, and that trade depends upon the foreign markets of the country. What now is the position of those great world markets, upon which the trade of this country was built up in the past, from which the revenue of this country was in its turn derived? If we divide those markets into two classes, those that still possess purchasing power, and those without purchasing power, and consider the markets under both those categories, I think it can be clearly shown that no great trade revival such as is foreshadowed can soon be realised under present conditions.

Take the markets with purchasing power; what are our prospects in those markets? Our traders at home, and those who are familiar with these things, tell me that they are constantly informed that our old markets in South America and other places are still available if we can produce goods at a price. That is the crux of the whole thing—if we can increase our efficiency and our production; and it is said in some quarters—though I deplore that doctrine—lower our standard of life. If we can effect these changes those markets are still available. That is, if we can bring about a great industrial upheaval of this country involving many conflicts, we shall be restored to our pristine prosperity in those markets which still possess purchasing power. Even if we can effect all these beneficent changes, what is the position?

If the hypothesis of the Government's legislation be correct, if the theory of the Anti-Dumping Bill be true, we are faced with a situation which baffles and defeats all competition, however efficient and however well organised. If the hypothesis of the Anti-Dumping Bill be correct, then Germany, and other countries, with depreciated exchanges, can flood our foreign markets with an enormous quantity of cheap exports which will completely undermine and ruin any hope of successful English competition. If the hypothesis of the Government legislation be in any way correct, we have no prospect of regaining our old grip upon these markets, however efficient English industry may be. Again, in these markets we are subjected to competition which was practically unknown before the War. The great Oriental populations, armed with modern European machinery, are now competing actively in those markets with the start afforded to them by the War, and the only steps the Government are taking to counteract that competition is to repudiate the Washington Convention with its limitature of the hours of labour, so removing any shackles upon that unfair competition which is to-day driving us out of those markets, thus we are leaving those Oriental countries free to repudiate the obligations they accepted, and flooding those markets with cheap imports based upon the cheap slave labour to the ruin of English competition. Surely the Government should know as much as any man that our prospects, even of recovering our old position in the markets that do possess purchasing power, and the prospects of a great trade revival are very remote!

What of the other markets, those markets without purchasing power, Germany say, our second best customer before the War? In the present condition of her exchange she is not going to buy much from this country. She cannot until she has appreciated her exchange and until she has restored her financial position in all those foreign markets into which we are driving her, in discharge of the great pressure of, reparations. When by a flood of cheap exports to the countries of the world, she has appreciated her position—at the expense of our industries—then she will be able to buy from us, and not before. What about Austria, or those indepen- dent States which formerly constituted the great Austro-Hungarian Empire, and former customers of ours in Central Europe? They are still as prostrate as they were at the time of the Armistice, and they will remain so until we have picked them up and put them on their legs again, set them working and restored their industries—a burden we ought to have undertaken three years ago, as the Noble Lord below me (Lord R. Cecil) so constantly urged in this House on the Government of that time. We should have undertaken it then instead of waiting until we were in the very trough of the wave and until the industries of this country were found in a condition of complete dislocation with serious and unparalleled unemployment spread throughout the country. In these Austro Hungarian great market for this country until we have to set them working and get them again on their legs.

What about Russia, the great market, if not of this country before the War, of our great Dependencies? Russia is not likely for some time to be restored to the European economy, in view of the genial influence of the Secretary of State for the Colonies that our Russian market shall be out of the way for some time to come. Surely just a brief examination of the world conditions to-day, and a survey of the old markets avilable, those that can buy things and those that cannot buy, surely any such examination blows sky high the ridiculous and absurd theory that we can expect any immense trade revival in this country? We are in the trough of the wave of the greatest depression that our country has probably ever faced. We are now in the very trough and burdened with our own past mistakes. At the time of the boom instead of carefully conserving our energies, we launched out into every sort of commitment that we should not dream of before the War, like some convalescent recovering from a long illness who, instead of conserving his energies, launches out into activities he would not have undertaken in a period of full health. In the same manner we struck out into every conceivable adventure so burdening ourselves with a weight we should not have thought of carrying in the days of our prosperity.

The consequence is that to-day the industries of this country are suffering from a very severe relapse. It is lunatics who prefer Imperial expansion to the fundamental doctrine of statesmanship —Imperial stability—who are as much responsible as the trade depression for the position in which we find ourselves. What is elementary wisdom in such a situation as that in which we now find ourselves? Surely it is well to consider what we can afford and to limit our expenditure to the burden which the country in its present state of output can stand; then to preserve and conserve our energies till at some future day our industries are once again restored, and once again we take our place in the world's economic system, restored, I hope, to sound prosperity. I know the Government believe that it is impossible to arrive at any accurate idea of the burden that this country can uphold. It has, however, been laid down as the doctrine of many experts that we should ascertain exactly what burden this country could undertake in its present condition. But when great financiers came forward and advanced their ideas to the Government, the Government tendered no reply at all, or they laughed these men to scorn. I remember over a year ago Mr. McKenna put forward an estimate of £1,000,000,000 as the maximum sum available, not only for the taxation of this country, but also for that annual replenishment of capital which is vital to our industrial recovery at a time when all over the world our markets are demanding increased efficiency. That capital is vital to our industrial recovery. We have a new Chancellor of the Exchequer who has not been called upon to listen to these considerations before, and in view of that, I will venture very briefly to recapitulate the line of argument upon which the estimate of a year ago was arrived at, and which should reflect a proportionate reduction to-day. The basis of that theory rests upon the admitted fact that the taxable capacity of the country is represented by the surplus national production over the aggregate individual consumption, a fact which I think will be admitted by all. We had a £200,000,000 Budget before the war, and to that should be added the £400,000,000 which was estimated before the war to represent the annual savings of the community which flowed back into industry. That made up a pre-War surplus of some £600,000,000. If we now translate that £600,000,000 to the present monetary value we arrive at a sum of £1,400,000,000, and having arrived at that sum whirh is available for the taxation of the community and the vital replenishment of capital, we have to consider all those factors which are likely to make an increase or a decrease in our surplus of production over consumption. There are many factors which tend towards a substantial decrease. Production as compared with pre-War days is estimated at 80 per cent, of the pre-War standard. With higher wages and a higher standard of life our consumption has increased. Our great foreign investments, the interest on which provided a substantial proportion of the annual national income have largely vanished and in their place we are confronted with foreign indebtedness. The rates of the country have more than doubled and they amount to £150,000,000 a year, a sum not far short of our total pre-war Budget.

Finally, we have to consider the dislocation of industry and the disruption of the world's markets. Taking into consideration all these factors, allowing the Chancellor of the Exchequer the benefit of the full argument, and admitting that the money raised in taxation and devoted to debt redemption flows back again; admitting that the interest on the National Debt is itself subject to taxation, and taking all those things into consideration, I venture to state that a year ago the estimate of Mr. McKenna, that the taxable capacity of this country did not exceed £1,000,000,000 was not an over-estimate. Mr. McKenna stated that he was assured that a great proportion of the taxes of the country were actually being paid out of capital. The nation was then living on its capital resources and no money was available for the launching of fresh enterprises and the restoration of machinery just at the moment when above all others it was most needed.

The nation for years past has been living on its capital resources. To-day, because of the financial pressure of our time, we are flinging over vital schemes of social reform, but still like the prodigal we remain true to our traditions that even when we have to surrender the bread of life we shall maintain our precarious tenure in the desert of Mesopotamia. That is the policy, but it is useless to dwell upon this, which is as much responsible for the present position as the trade depression which our mistakes have largely engendered. I think the figures that have been advanced—I hope the Chancellor of the Exchequer can refute them—demonstrate anyhow that there is a case for a further revision of the financial situation, that we are placed in the very direst straits, and that the Government at least is up against its financial Nemesis. This Motion sets forth that the Government shall state what action they propose to take save the country from the retribution which to-day is overwhelming and ruining their own policy.

Although I agree with certain points that have been raised by the last speaker, I do not think the position is so grave as he assumes it to be. Where the hon. Member was possibly wrong in his lucid explanation of the financial position was that he did not realise how wrapped up we are as a country with international finance, and although we may be better off than some other countries, I cannot help thinking that where the weakness of the hon. Member's financial statement comes in is that he did not realise the necessity for co-operation in international finance at the present time. Our debts amount to about £8,000,000,000, and our pre-War debt was £700,000,000. Roughly, our expenditure on war finance was £11,000,000,000. Of that amount we tax ourselves to the extent of £4,000,000,000, and we run up a debt of £7,000,000,000.

I well remember when I met His Excellency Herr Bethmann Hollweg, his words to me were "Will you please congratulate your Chancellor of the Exchequer on the way he has taxed his people during the War." That is what makes our financial position better than any country in the world. Supposing we compare our position in this respect with France, In 1922 the Budget in France, which, I believe, has just recently been introduced, shows that their War expenditure was £9,600,000,000, but the total indebtedness was £10,573,000,000. Taking again the franc at the par of exchange, they are endeavouring to get financial control again as they had in pre-War days. They are also taking a large amount of the bonus from their civil servants in order to try and make their Budget meet. The actual amount is 394,000,000 francs, but even then if the French estimates come out as suggested, you have only got a surplus of £1,740,000. What is that in a gigantic debt of £10,000,000,000?

Take the United States of America. In pre-War days they had a debt of £266,000,000, taking the dollar at par of exchange. Does that not compare satisfactorily with ourselves? Our debts are divided into two parts. You have your external debt and you have your internal debt. I contend that your external debt is the most dangerous of all debts, because you have not got control of it. Our external debt is £1,200,000,000. It decreased in 1920–21 by £130,000,000. I believe that this is the only country in the world which paid off and decreased its external debt in 1920–21. We can only pay off this external debt in three ways: either by gold, or securities, or exports. Our foreign investments in pre-War days were about £4,000,000,000. We are supposed to have sold £1,000,000,000 worth during the War. The hon. Member for Harrow stated that we had no more foreign investments left. Recently, I put a question down asking how many dollar securities we had returned to the owners and how many we had left. The total amount of dollar securities left was £438,000,000. Those are first-class securities. What is the amount of second and third-class securities? I contend that if we wanted we could pay off the external debt with the greatest ease by the foreign investments still left in this country. What is the position of France or Austria or Germany or other countries which have external debts? We have owing to us by other countries nearly £2,000,000,000. It is a large sum. Whether we shall ever get any of it or not it is impossible to say, and whether it would be better to scrap it or not, again, is a matter for argument, but we have that money owing to us, and it can only be paid by exports or by us purchasing goods.

Let me deal with the other side of the question. The floating debt is indeed most difficult. It is possibly more difficult than the external debt. The Treasury Bills at the moment run into £1,400,000,000. Let me congratulate the Chancellor of the Exchequer on going back to the old system of placing Treasury Bills. I think the country by going back to that system of tender will save £30,000,000 a year and possibly more. You have to deal with the Treasury Bills as well as with the short term debt. It is a vast amount. The total may possibly run into £1,700,000,000, excluding Treasury bills. That will have to be most carefully handled in a broad way. I do not think that anyone can say that the 3½ per cent. Conversion Loan was a success. It did not bring in the amount that was anticipated. It was attractive, but one has to remember that it increased the nominal amount of our debt by over £100,000,000. Although it is only redeemable in 1961 at the option of the Government, there is a very heavy sinking fund attached to it. At the present time there is an offer of 5½ per cent. Treasury Bonds. The amount that has been subscribed in the first week is not very large. We hope it will be a success, but may I impress upon the Chancellor of the Exchequer the necessity of dealing with this matter in a broad way? Many people who have money to invest do not like to go into a new loan. They say that they have three or four British loans already, and they do not want a fifth. May I suggest that the Chancellor of the Exchequer should consider the possibility of opening the 5 per cent. War Loan again and endeavouring to get more money put into that at, say, 3 or 4 points below the market quotation, provided that it was not sold for a certain period? It might be attractive. It might be worth considering. It is only a suggestion of mine, but I think certain investors would be more attracted by it than by a new security. Let me come to the paper currency. It is possibly more difficult than any of our financial problems or the problems of Europe or America or any other country. Few people seem to understand it, and Mr. G. J. Goschen, in his standard work on Foreign Exchanges, says: currency of foreign countries has increased since the Armistice. Our paper currency is more or less the same. Practically it has not increased since the Armistice. This is one of the few countries of Europe that has not increased its paper currency. On 30th May, 1914, France had 5,800,000,000 francs in paper currency. To-day she has 38,000,000,000 francs. On the same date, in 1914, Germany had 2,000,000,000 marks. To-day she has 80,000,000,000 marks, and nothing against it. Take a little country like Poland. She has more paper currency to-day than even Germany. She has 86,000,000,000 Polish marks in paper currency. Never before was this subject of more importance than it is at the present time. Yesterday, in one of the Committee Rooms, the two currencies of Germany were brought forward. I contend that we want two currencies. We want our domestic currency, and we want our international currency. It might interest the hon. Member for Harrow to read the history of the middle centuries. He would find that the situation then was even more chaotic than it is to-day. They got over it by starting Exchange Banks. In Europe Exchange Banks were started, and they acted as a clearing-house. We have to-day five great banks acting as a clearing-house. We have also dealers in futures acting as a clearinghouse for Contangoes. Why should not something be decided with a view to the bartering being settled through an exchange bank, the difference being paid by some new basic unit? The Amsterdam Exchange Bank was the principal bank about a hundred years ago for dealing with this exchange. There was also the Hamburg Bank of Exchange. That bank was only taken over in 1875 by the Reichsbank. I cannot help thinking if something of that sort were looked into, although the details may be different it might lead to an endeavour to get rid of the paper currency of the world. Adam Smith, in his "Wealth of Nations," gives some illuminating adversions on the institution of the Amsterdam Exchange Bank and after alluding to the uncertain currencies of many minor states, he relates the following:

12 N.

I wish to move the Adjournment of the Debate, on this ground. Yesterday I asked the Leader of the House whether the Chancellor of the Exchequer might be expected to-day to make his statement founded on the very unfortu- nate position of the country's finances as reflected in the revenue returns, which quite obviously have created a most serious position with regard to the Budget estimate. The reply of the Leader of the House was that he was not quite certain whether he would be able to do so, but that I should be informed later on. I was told last night, and it has since appeared in the public Press, that the Chancellor of the Exchequer would make a statement. The ground on which I would ask you to accept my Motion is that it is not possible for the House to debate the present position with any real adequacy unless they get from the only person who can tell it, and who can tell the country, what is the new situation as created by the disastrous position of the country's finances.

I do not think the right hon. Gentleman has a case. I observe on the Order Paper an Amendment in his name which is, in effect, a Vote of Censure on the Government, and it would be hardly reasonable for any statement to be made on behalf of the Government until they have heard the case of the right hon. Gentleman. I never remember a Vote of Censure being put down, and not moved before to-day. The Chancellor of the Exchequer undoubtedly will lay before the House his views, but he is entitled to know the grounds of the right hon. Gentleman's challenge before he answers it.

But an Amendment has been moved by my hon. Friend behind me, and has been put by you from the Chair. I cannot therefore move my Amendment.

I expressly called upon the right hon. Gentleman.

I think the right hon. Gentleman opposite has taken a most extraordinary course, and one utterly unprecedented, as far as my experience goes, for the leader of a party in a matter of this kind. He professes himself unable to take part in the discussion, because he has not sufficient information, but that lack of information did not prevent him putting down a reasoned Motion condemning the whole finance of the Government. What he now asks is that the Chancellor of the Exchequer should forfeit his right of reply, and that he himself should be allowed to develop his attack after the Chancellor of the Exchequer has spoken. The right hon. Gentleman has run away from his own Motion.

No, no!

My right hon. Friend is entitled, if an attack is to be made, to have an opportunity of replying, and not to have the attack opened only after he has spoken.

Since it is perfectly clear that we shall get no statement from the Chancellor of the Exchequer until someone has spoken from these Benches, I at once exercise the right of rising to catch your eye to continue the Debate on the Amendment which is now before the House. The Leader of the House has thrown out a challenge, and, as this is the only way of getting a statement from the Chancellor of the Exchequer in reasonably early time, I shall take the opportunity. The financial position of the country, as at present revealed by the statistics before us, and as shown in the Press and in official documents, indicates, as far as I am able to grasp it, that the Budget of the Chancellor of the Exchequer lies in ruins at his feet. Therefore, the Amendment which has been moved, and that which stands in my name and that of my hon. and gallant Friend the Member for East Newcastle (Major Barnes) are not unjustified, because those Estimates were made on grounds which the Government were warned, when they laid them before the House, were untenable on the facts as they were then presented to the nation. My right hon. Friend and Leader (Mr. Asquith), in the course of his speech, pointed out over and over again how rickety in his judgement were the foundations upon which the Chancellor of the Exchequer based the statement which he laid before the House.

My hon. Friend who opened this Debate, in a speech which was wholly admirable not only in the lucidity of its presentment of the case, but in the force with which it was argued, pointed out what the position is as developed up to date. I would put the same position in a slightly different way, and would point out to the Chancellor of the Exchequer that, while the revenue in the first 16 weeks of 1920–21 was £394,988,720, this year, unfortunately, it has dropped, for the same period, to £282,631,350—a lamentable decrease of £112,357,370. That is the position with regard to the revenue. Now what about the expenditure? Taking the same periods for both years, the expenditure last year was £331,896,725. This year, with all the warnings which the House and the country have addressed to Ministers, and which, indeed, Ministers have addressed to themselves, the expenditure has reached the colossal and staggering figure of £324,781,081—a decrease of only £7,115,644. The deduction which the House and country will make is that, reckless of the financial position, of the falling trade, of the sagging of credit, of the whole finance of the nation, expenditure has been kept up to this enormous figure. Of course, Ways and Means are not Supply, and, therefore, I will enter into no detail except by way of an occasional illustration. The illustration to which I desire to draw the attention of the House is an answer which was given yesterday to the hon. and gallant Member for Penrith and Cocker-mouth (Sir Cecil Lowther). He asked the Prime Minister what was the total estimated annual cost of the salaries paid to persons employed in Government Departments on the 30th June, 1921, and this was the answer: such a direction as this, at any rate. With regard to the revival of trade, what is the position in which we find ourselves? There are 2,000,000 people unemployed, and those 2,000,000 live upon the industry of others who are fortunate enough to be employed. They are in a very difficult and trying situation in order to get the bare necessities of life.

That is the position, stated quite simply and baldly, and it calls, not for what my hon. Friend (Mr. Mosley) described as sloppy optimism in the hope that trade may revive, but for drastic action on the part of the Government, at any rate, in regard to every possible Department which they can cut down. It is no new thing—and this is the point that I want to bring to the attention of my right hon. Friend. Some of us who were taking an active part in this matter of financial economy long before there was any idea of the Anti-Wasters, started this campaign in this House on the very first day of the first Session of this Parliament. In response to that campaign, conducted in those seemingly far-off days, the Prime Minister finally produced in the autumn the famous circular to the various Departments. At last something was being attempted, but apparently little or nothing done. We cannot even get from the Chancellor of the Exchequer now what the result up to date of this famous circular is. I make this prediction, that no information will be given to the House at all before it rises. They are still walking round the various Departments seeing what the Departments think of the 20 per cent, reduction. Nothing will be done. This House may never meet again. In my opinion, that is a very likely contingency. If it meets again in the autumn we shall be presented with some estimate, I suppose, but the Government will take every step they can to keep from the House of Commons the results of this attempt to cut down the Departments, and for a very good reason. They can show nothing at all commensurate with the demands made upon them by the House, and certainly by the country as a whole, for drastic action in the Government Departments.

The Chancellor of the Exchequer made a speech in the City. He admitted the case in general terms and looked for something to be done, and asked for mercy from the bankers and merchants of the City of London. What did Le plume himself upon? That they had scrapped their own policy. What a reply to the cry for economy! He truly said "if you want to win the War you must spend money." Agreed. But they started post-War and brought out a policy which was costing hundreds of millions of pounds and his way of meeting the challenge of the City of London was to say: "Well, at any rate, we have scrapped the agricultural policy and we have scrapped the housing policy," and they have scrapped the education policy. What a reply! It showed that they admitted the whole case. Instead of making drastic sweeping economies in Government Departments, as has been insisted on from this side of the House time and time again, they reversed their policy. I make no comment on the merits or demerits of these policies. I cannot do it here, I have done it on many other occasions from my place in the House and outside. Possibly if this Government meets again six months hence they will claim further credit for further reversals of their policy. I can scarcely imagine a single direction in which the country would not be benefitted by further reversals of policy, or even by the complete demission of office.

In whose favour?

If the Government gave us the chance, we would form in this House an alternative Administration which would, at any rate, do far better than the present one in the matter of public economy. They are not at all likely to give us the opportunity. The over-taxation which the country is suffering from at the moment is obstruction of trade to the point almost of the destruction of it. Over and over again at this Box I have brought to the attention of the House, as have other hon. Members, various appeals which have been made to the Chancellor of the Exchequer with regard to the conduct of the nation's finances, first to the Leader of the House, and then to the present holder of that high and distinguished office. This morning hon. Members will find another reminder of what the financial authorities of the country think of it. Here is an appeal signed by the merchants, manufacturers and shipowners of the United Kingdom, praying the attention of this House, in accordance with the precedent created by the merchants of London as far back as 1820. The bankers have been scoffed at in this House. The Minister of Health the other day, in reply to a comment of mine, denied the authority of the bankers to give anything approaching a conclusive opinion on the Bill then before the House —the Safeguarding of Industries Bill. I wonder what he and Members of the Government, if they do not pay much attention to the bankers, think of this further appeal. The whole country is against them on this point. Take any class in society, from the financier on the highest plane, down to the humblest cottager in the country. They are all, rightly, denouncing the wicked folly of the Government in the handling of the public finances. The whole position is one that calls for such Amendments as are on the Paper to-day. The Leader of the House talks about the unprecedented notices on the Paper. Unless I am very much mistaken, he himself, more than once, went into the Lobby against a Finance Bill.

The right hon. Gentleman misunderstands what I said. It is not unprecedented that a Motion against the Third Reading of the Finance Bill should appear, with the support or in the names of prominent Members of the Opposition. What is absolutely unprecedented in the history of Parliament is that, having put such a Motion down, the right hon. Gentleman should run away from it.

All I asked was that, in the unprecedented position of the country's finances we were entitled, and I still say so with much respect to the Speaker and everyone else, that the country was entitled to hear, before we started this Debate, what the Chancellor of the Exchequer had to say with regard to the ruin of his Budget and the parlous state of the general finance which has developed quite recently. The House is not competent, until the Chancellor of the Exchequer lays the facts before it, to discuss in a really adequate way the issue now before us. If you get an unprecedented position you must take unusual courses. That is the reason for the course we have taken to-day. That is the answer to that. The Leader of the House is no new convert to the idea of unprecedented courses, as we know too well in his conduct of the business of the House—time-tables and all the rest of it. He takes unprecedented courses. I follow his example with the greatest confidence, in these matters at any rate, and I shall continue to take unprecedented courses wherever I think the interests of the House demand it. The position is, that the country is living on its capital. It is dissipating its capital, and no one knows it better than the two right hon. Gentlemen sitting there. Instead of seizing the position with both hands and dealing with it as they would if they were handling their own businesses and were face to face with such a position as that, they still allow this reckless prodigal expenditure to go on. They make speeches inside and outside this House, and everyone who has grasped the situation clearly and who takes an independent responsibility knows that their predictions must be falsified in the course of the next year or two. We cannot go through what we have gone through, strikes and stoppages of work, the devastating effects of war, from which we suffer as well as other countries, without the situation being totally changed. It calls for a totally different attitude towards our expenditure than the Government has hitherto shown. They have no real grip or realisation of the actual facts of the situation. Whether we realise them or not, the facts are there, and they are making their impression felt in every household in the land. I only wish that the same deep impression which the average citizen has got in connection with the financial situation had been made on the Government. If so, they would appreciate the national position and would deal with it as they would with their own private affairs. There is no real difference between the administration of national finances and the administration of private business. The same simple, homely, common principles which make a man or a woman successful in their private undertakings are those which dominate national finance, if you want success. There must be a straightforward cutting down of expenditure where you know you cannot meet it with any adequate realisation of your responsibilities. It is because of that situation that my right hon. Friend and the Government find, wherever they go throughout the country, a national condemnation of reckless extravagance, and of this hoping for better days and that some day or other something will turn up to help them out of the difficulty. That is not statesmanship, and that is not finance. That is the charge against His Majesty's Government.

I think the House will agree after the vehemence of the attack to which we have just listened, that I was entitled to hear my right hon. Friend before I made my speech. I judge from what the right hon. Gentleman has said that he was not in any way hampered in his eloquence by the fact that I did not address the House prior to him. I have been long enough in the House to know that the right hon. Gentleman is most vehement when the ground upon which he stands is most shaky. He generally advances his cogent arguments in a quiet and persuasive fashion, but he has treated us to-day to a series of phrases and rather vague accusations which do not carry us very far when we come to discuss the realities of the position. His attack upon the finance of the British Government during the last three years is one which would not be made against us in any other country in the world. We are always inclined amongst ourselves to cry "stinking fish," but let my right hon. Friend read the journals of other countries, harrassed and embarrassed by the aftermath of war as we are, and he will find nothing but glowing tributes to the capacity of the British people in dealing with the situation which confronts all alike.

I quite understand the anxiety of the House to become as closely acquainted as possible with the financial situation, and I promised the House that before the end of the Session I would tell them as nearly as I could how it semed to me to stand. I intended to make that speech upon the Consolidated Fund Bill, for the reason that that would leave time for the situation to be more clearly disclosed than it is at the present time, but I do not at all demur from doing my best to-day to put before the House the position as I see it. I would ask the House, however, to understand that I do not profess to see it very clearly. Any man who would dogmatise upon the present position would, in my opinion, be very rash. Therefore, if I do not adventure into the regions of dogmatic statements, I hope the House will forgive me, because it arises not from any desire to conceal anything but only from a desire not to misinform the House. Nothing could be worse than to put forward a statement which would lead to misapprehension and create uncertainty in people's minds. There is nothing so bad for the business of the country as that, and one has to be very careful, when one comes to deal with large financial matters, not to create an impression in people's minds which in the end might prove to be injurious because of the fact that it was entirely inaccurate.

I have previously said in the House that the condition of things as we have experienced them has undoubtedly altered one's attitude towards the figures which were presented in the Budget statement, but I am not sure, looking back upon the matter now, that there is so very much to withdraw or to correct. Let me ask the House to remember what the position was which was put before the House in the Budget statement made by the Lord Privy Seal. In the region of ordinary expenditure we estimated a surplus of £84,000,000, but there was a note appended to that figure in the following terms: expenditure which we have to meet something like £98,000,000 in all. Of that sum £41,000,000 is represented by ordinary expenditure, and £56,000,000 by extraordinary expenditure, particularly the railway claims which had to be met and the corn production guarantee If you take the surplus which we estimate upon ordinary expenditure as £84,000,000, and deduct from it the ordinary expenditure which is represented by the Supplementary Estimates, you will have a surplus of £43,000,000 over the ordinary expenditure. That is on the assumption that your revenue is maintained at the figure you estimate. Similarly in connection with the extraordinary expenditure, if you deduct the £56,000,000 from the assumed surplus of £92,000,000 you are left still with a surplus of £36,000,000, again on the assumption that your revenue is realised.

These two surpluses from ordinary and extraordinary receipts and expenditure amount roughly to £80,000,000, which my right hon. Friend put before the House as a figure which was likely to be attributed to the redemption of debt, so if the figures, which we could not calculate at the time, turn out to be as I have described, and again on the assumption that revenue is maintained, you will have something like the surplus which the Lord Privy Seal put before the House as that which would be used for redemption of debt at the end of the year. But I agree that this is all upon the assumption that you will have the revenue which was estimated, and I assent at once to the view that we are unlikely to realise all that we estimated for. We have been going through a period of very great depression, and we have had the coal strike, and accordingly I think it likely that we shall have less revenue at the end of the year than we expected. It is impossible at present to estimate to what extent our revenue will be reduced. No man would be audacious enough to attempt to form an estimate.

It is said that you should have regard to what has happened in the June quarter. It is true, as my hon. Friend in his able speech at the beginning of the Debate pointed out, the June quarter is always one of the lean quarters of the year. You cannot take the figures for that quarter, multiply them by four and arrive at the result for the year. It is only necessary to look at the figures of former years to see how fallacious that would be. For instance, if you take the normal years before the War, you will find that in the financial year 1912–13, there was a deficit of over £2,250,000 on a Budget which was not quite £200,000,000. In 1913–14 there was a deficit on the working of the June quarter of nearly £5,000,000, that is to say, the expenditure exceeded the revenue by that amount. In 1914–15 the expenditure in the June quarter exceeded the revenue by £6,250,000, and accordingly it would create misapprehension if you took the figures for the June quarter as a guide and said that your year is going to be a complete failure.

The right hon. Gentleman (Sir D. Maclean) said, "The Budget of the Chancellor of the Exchequer has fallen about him in ruins. Look at the June quarter." Once it is looked at with knowledge and apprehension the difficulties do not present themselves at all. I have here the figures for the June quarter 1920–21 and 1921–22. You could not expect to get as much revenue in the June quarter this year as last year. We estimated, as the House will remember, to get £209,000,000 less in the year 1921–22 than we got in the year 1920–21. Accordingly, since your revenue for the whole year is going to be less, you would naturally expect to have less in the June quarter, especially as it is the leanest quarter of the year. But there are many other considerations to look at. My right hon. Friend says that you had less in the June quarter of this year by £105,000,000 than you had last year. The figure is almost entirely explained by the income from miscellaneous revenue. Miscellaneous revenue comes in in a most irregular fashion, varying according to the proceeds which you get from the sales by the Disposal Board. It comes in in great lumps at some times, and then there are bad periods, and it is obvious that this makes a great difference when you are dealing with a particular period. For instance, supposing that you were to sell half of all that remains—and propositions of that kind have been made— of our War material, that would all go into one quarter. Last year was quite an abnormal one for miscellaneous revenue in the June quarter. The receipts were £103,000,000 for that quarter, out of a total of £300,000,000 receipts for the year. This year we have only got a figure of £20,000,000. We anticipated a considerable reduction in the amount to be obtained from miscellaneous receipts this Year. The estimate for the year is £180,000,000.

:What will they be?

I cannot tell. There have come before me, from time to time, propositions for sales for a very large amount. If these go through on the terms which are being negotiated, then you will realise a very large figure. I would not for a moment say that we shall not fully realise the sum for which we estimated in respect of miscellaneous receipts. No person can dogmatise upon it. I certainly am hopeful that we shall realise the full amount which we put in the Estimates. But that depends on many factors which I should not like to be very confident about now. Although it is asumed that there is very little money about, it is perfectly amazing to me to see the propositions which are put forward for the purchase of material of this kind. There are evidently in some hands very large accumulations of money. I do not at all feel that despair to which many people give expression with regard to the state of the country's business.

Let me turn to some of the other items of the June quarter. We find that in Excise we have realised practically £6,000,000 more in the June quarter of this year than we realised in the same quarter last year. We realised less on Customs. These figures are rather startling. I think that most people who went about the country during the coal stoppage were impressed by the fact that there was not anything like the amount of distress in the country during that period which it was assumed that there would be. There has been a much greater expenditure upon liquid refreshments than one assumed to be possible in a country depleted of money amongst the working classes. The figures of Excise and Customs are certainly very remarkable. They lead one to think that there are more assets in this country, spread about through the whole community, than one might have expected. Take the figures of Income Tax. They are up by £10,000,000 during that period. The place where there is a falling off is in connection with the Excess Profits Duty. With regard to the June quarter, that is the only item which shows a decrease which you would say was startling or surprising compared with the Estimates. Taking all the facts together, no one could draw from the June quarter of this year, compared with last year, the inference that we were going to have a very bad time. That leads me to say at least this: I am not going to express any sentiment of what has been called sloppy optimism, but I am not going to give way to despair.

Give way to economy.

Economy is all that is asked. I have expressed, not once but many times since I have had the honour of holding my present office, my views with regard to the question of economy. We are all for limiting expenditure, but I notice that when right hon. and hon. Members opposite claim that staffs should be reduced to their pre-War level they never condescend to mention the Departments in which the economy is to take place.

The War Office.

"The Admiralty," "the Air Force," "the new Ministries."

Let us all agree that we should get down expenditure to the lowest possible limit. I do not know whether it is necessary to assure the House again that we are doing our utmost to put that principle into practice. My right hon. Friend (Sir D. Maclean) seems to think that we are going slow about it. It is a slow process, as he very well knows. You cannot do it simply with an axe. You have to see what your commitments really are and what the purposes which you still have to serve require in the way of staff.

It started two years ago.

Of course it started two years ago. My right hon. Friend always talks as if nothing had been done since the Armistice. He is generally a very fair-minded controversialist, but on this matter he never fairly states the position to the House. The last time I replied to a speech made by him I had the same complaint to make of his lumping a lot of figures together and contriving to give to the House a completely unfair presentation of the position. If you take year by year since the Armistice you will find a steady decline in the staffs in all the offices and a steady reduction in the expenditure. There are not now more Government employ és than there were at the time of the Armistice. To say otherwise is to make a totally inaccurate statement.

There was an in crease, comparing October, 1920, with 1st April, 1921, amounting to 700 persons.

That might very well be. But look at the situation. I am comparing the time of the Armistice with the present time. That is the challenge. The hon. and gallant Gentleman's reply is quite irrelevant. I am not talking about the period from the end of 1920, but about the period since the Armistice, and I say this. Unless you are going to say that the Insurance Act, which extended insurance to five times as many workpeople as were previously under it, must involve no addition to expenditure, you can make no complaint. Instead of 2,500,000 people being insured, the Act brought 11,000,000 people under insurance. Does that require no extra staff? Look at the conditions through which we have been going. We have, had an unexampled period of depression and of unemployment. How were you to distribute unemployment benefit to 3,000,000 people who were out of work with a staff which was accustomed only to dealing with something like 500,000 people? Does my right hon. Friend really say that that process was possible? Does he say, "Scrap the Insurance Act"? Is that his position? Would he desire to see the country go through such a period of depression and unemployment as we have had with absolutely nothing for the workmen to live on except what they got from their trade unions? Is that his position? If it is not his position, he must agree with the expenditure.

It is just that class of criticism which is so unhelpful in regard to these matters. There is another matter about which the right hon. Gentleman talked—the War Office. As I have said, we are eager to get the staff of the War Office as low as possible. But the man who tells me that the staff can be got down to pre-War level at the present time is not helping the argument. He is only hindering. We have undertaken to look after the graves of our men in France, and that means the placing in position of hundreds of thousands of inscribed headstones. That must necessarily mean an increase of staff. Take another matter. We have to distribute 12,000,000 medals and clasps to the men who fought in the War. Are we to have no staff to do that? I wonder whether the right hon. Gentleman appreciates what it means to distribute 12,000,000 medals and clasps. Each has to bear the name of the man who receives the medal. [HON. MEMBERS: "Correctly!"] Necessarily, mistakes have been made, because, after all, the people who fought are a shifting population. You have to get the medal first and thereafter you have to look up the record of the man, and then you have to see that the medal is sent to the proper place. No doubt you will have a medal sent back repeatedly until it reaches the right, address. That work requires 3,000 people at the present time. [HON. MEMBERS: "It is cheap at the price!"] I agree that it is cheap at the price. What does the right hon. Gentleman think about this? Does he say that we should not distribute these medals, but cut the staff off entirely? Is that his point? Or would he suggest that we should abandon our uniform practice of putting a man's name on a medal, a practice which enhances its value, but gives a great deal more trouble and requires a much larger staff? All this discussion becomes futile unless you come down to the hard facts. Vague phrases do not meet the case. My right hon. Friend (Sir D. Maclean) himself, if he had the matter to deal with, would find difficulties which he, with all his abilities, would fail to overcome. The House, I am sure, will take these two simple illustrations alone, but I could multiply them a hundredfold.

Take he Admiralty.

I will take the Admiralty if my hon. and gallant Friend wishes. The Admiralty has a staff considerably larger than before the War.

Seven thousand more.

I think my hon. and gallant Friend is wrong about that.

I have got the figures here.

I have not got all the figures at the moment, but I do not suggest you cannot make any cut or reduction in staff. If I were to say that, I should be destroying my own position to begin with. Having begun by undertaking to make every reduction I can, I cannot continue by saying that it is impossible to make any reduction. I do want the House, however, to understand the difficulties of the position. Take the case of the Accounting Department of the Admiralty. There are something like 1,000 more people employed in that Department of the Admiralty than there was before the War. There is a case which I myself queried. I asked "What is the meaning of all this?" The reply was complete. They are dealing with Admiralty accounts connected with the War, and the rules which the Public Accounts Committee impose upon Departments in dealing with these accounts require the most meticulous inquiry into each of them. Is it to be said that War accounts are to be dealt with, under the Admiralty, with the same staff as was required for the ordinary peace-time accounts? You must do one of two things. You must either say you are going to risk the loss you might incur by passing the accounts unchecked, or else you must employ people to check them. I do not know which course the hon. and gallant Gentleman opposite would take, but he must take one or other of those courses, and he must be bold enough to declare which.

Did the right hon. Gentleman say there were 1,000 more people employed in the Admiralty?

One thousand more in the Accounting Department of the Admiralty. I am not under-stating the figures. They are dealing with the Admiralty accounts arising out of the "War, and any person who goes to see them will find that these people are all busily employed in the task which they have been set to fulfil.

Will the right hon. Gentleman say what about the other 6,000?

I have not got all the details of all the Ministries here. What I am trying to do is to bring before the House—

Medals!

My hon. and gallant Friend says, rather derisively, "medals." I have already stated that there are 3,000 people engaged in connection with that.

In the Admiralty?

No, 3,000 over all. It is no good simply derisively saying "medals" and then saying you must cut down your staff. You really cannot maintain both positions. I have given these illustrations of the difficulties. Do not let us lose ourselves in rabbit burrows, but let us deal with the situation. Those who are anxious for economy will be much more helpful in this matter if they address themselves to the practical point. I have gone on the assumption that the House had not read the speech which I made last night, and I think it was a fairly well-founded assumption.

I read it.

1.0 P.M.

My right hon. Friend read it for the purposes of controversy, and not because he wanted to get any light from it nor because he was willing to accept instruction. As to that, his mind was closed—absolutely closed—and he read it for the purpose of getting points of attack. As I have said, we are rather apt to appreciate what other countries are doing, compared with ourselves, in whatever sphere of activity the comparison may arise. Let us remember that if you compare this country with the other belligerent countries, we have done very well indeed. Take, for instance, the expenditure in the United States, who were a very much shorter time engaged in the War than we were, who never incurred anything like our obligations, never had anything like the same number of people killed or wounded, who have not to pay anything like the sum in pensions that we have, and have not all the huge burdens which we have. Yet to-day the expenditure of the United States is more than five times as much as before the War.

That includes present expenditure on the Navy.

Probably, but there is not so very much of that, as yet, in the expenditure to which I refer. They incurred a certain amount of debt and have to pay interest just as we have. France to-day is spending nine times as much as before the War.

What currency are these comparisons in?

I am taking it in francs, in the case of France, and in dollars in the case of the United States. In the case of Italy their expenditure is nine and a half times what it was before the War.

And Poland?

Does anybody know their expenditure before the War, and can anybody estimate in the currency of Poland to-day? Our expenditure is only six times as much as before the War. I venture to state to the House that here, as in most of the countries which have been engaged in the War, conditions have arisen which require more expenditure than we have ever had to meet. The fact that we have a debt demanding every year £345,000,000 in interest is surely a considerable factor. That is very nearly twice as much as our whole revenue before the War. You have to add to that over £100,000,000 for pensions. I suggest that some discrimination is required in the kind of arguments presented upon this topic. The hon. Gentleman who spoke first talked of "sloppy optimism." I must confess I thought, in his case, a very able speech was rather marred by a dreary pessimism. He wrapped himself in melancholy. He pointed out what a miserable people we were. He used every adjective and adverb of wretchedness in the English language. In fact he reminded me of the pessimist who was described as the type of man who, of two evils, would always choose both.

Is the right hon. Gentleman aware of the percentage of our people who are unemployed?

I do not think that the country can get any advantage from the exaggeration of its difficulties. My belief is that if you care to, you can, by that kind of exaggeration and that type of depression, increase the difficulties with which the country is faced to-day. There is nothing that creates success as much as confidence. If you once produce the feeling that we can never get out of this situation, then you are not going to help our people. I agree with the hon. Member that we have got to pay attention to work and to thrift. One of the misfortunes of this country since the War is that people have not worked as hard as they might, or as they should. If we compare the extent of our activity with that of Germany and Belgium, we come out very badly by contrast. We had all hoped when the War ended that we were going to enter upon a period in which all the asperities would have disappeared through the co-operation that we had seen in the course of the fighting, but instead of having a period of greater peace and calm in industry, we have had constant dislocation and confusion, which have upset all our calculations. I do not suppose anybody in this House really anticipated, when the Amistice occurred, that we were going to have a period such as we have gone through since then.

If we individually believed that we were going to enter upon better times, is it marvellous that the Government should have imagined it was possible to do more than actually has proved to be the case? Take the business man. You had only to go about the country to see the confidence with which the business man faced the situation after the Armistice. He proceeded to increase his works and he made an enormously greater establishment charge, in the belief that he was going to do business which would cover it. You find that all over the country, but he has found in the course of experience that all this is a dead weight to-day on his shoulders, and he is not doing business comparable with what he expected. What I venture to say is, that this feeling was not confined to the Government; it was broadcast throughout the country, widespread amongst our people. It has happened that as much has not been done as we expected. Peace has not been preserved in industry, the material has not been produced, our production has gone down, our exports have gone down, and the money has not been available for the great objects which we sought to achieve. Would my right hon. Friend, supposing that he had been in our place, have refused to have taken up any housing project at all under the circumstances in which we were? Would he have said, "Although everybody is confident that we are going to have a booming trade, although everybody believes the country is going to do better than it ever did before, nevertheless I am so prescient that I see a terrible time coming, and therefore, although the country is crying aloud for houses, I shall do nothing at all to help it"?

That is exactly what I did do from the first day when this Parliament met. I started with that prescience, almost alone.

Then I take it my right hon. Friend would have been against doing anything for housing?

My right hon. Friend accused me a little earlier of not being quite fair, but I do not think he is fair in the statement he has now made that, simply because I did not answer a rhetorical question, I was against housing reform.

I fail to understand my right hon. Friend's attitude. Either he is prepared to do something, or he is prepared to do nothing. If he is prepared to do something, obviously it will cost money; but I shall accept my right hon. Friend's statement. I shall take it from him that he alone, as he says, took up the attitude of prescience.

Almost alone.

If there was only one great man who foresaw the situation, I do not think we can be unutterably condemned, and I venture to think that, in view of reviving signs of trade and commerce, we will better serve our country by inculcating the duty of work, and thrift, not only on the part of the Government, but on the part of individuals, which is generally forgotten, than by pronouncing diatribes upon the unfortunate conditions of depression through which we have been passing.

Will the right hon. Gentleman now tell me whether he has the information for which I asked, namely, whether the estimate of monthly expenditure on salaries and wages to persons employed in Government Departments, including temporary staffs, but excluding industrial employés, was £8,360,000, making an average total of over £100,000,000 a year?

:I have the information. When it is said that it excludes industrial workers, that means the people in the dockyards and in industrial establishments. It does not exclude the Post Office, and £50,000,000 a year is represented by the remuneration of Post Office employ és.

I would like to congratulate the right hon. Gentleman the Chancellor of the Exchequer on attempting, under difficult circumstances, to give to the country a picture of the financial situation at the present moment. He very rightly said that confidence is the the thing which is most important at the present moment, and the commercial community as a whole are now looking for some assurance and encouragement from the Government and from the Chancellor of the Exchequer. If one may speak as one who worked for a long time in a Government office, and is familiar with the whole routine and procedure of a Government office, one is not disinclined to remember that the criticism which is continually levelled at the Government of extravagant expenditure in Government Departments, overlooks the fact that a very large part of that expenditure, as a result of the enormous staff of officials, arises from the meticulous exactitude which must be observed in all Government records for this purpose, namely, the preparation of replies to perfectly irrelevant questions levelled at the Government by Members of the Opposition. I venture to say, for instance, from a considerable experience of a Government Department, that the expenditure imposed in answering questions raised by the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) would be something very substantial indeed. I know that intimately. In regard to the criticism on the subject of accounts, I remember when I was working in the War Office coming into touch with one very prominent financial representative, and I asked him why it was necessary to keep such accurate records of so much perfectly irrelevant matter, and he replied, as one of the civil servants employed in this connection, that he had just completed the accounts for the Crimean War, and was going to start now on the South African War. It is along those lines that we are getting a little tired of the criticism which is levelled by the Opposition generally at the Government. Coming to the able speech delivered by the hon. Member for Ilford (Mr. Wise), he raised a point in regard to the Cunlifie Committee's Report.

If I may interrupt my hon. and gallant Friend, I would like to say that I forgot to deal with that, but I intended to deal with it.

Without anticipating anything that my right hon. Friend intended to say, I would like to emphasise, as a director of a large joint stock bank, that we are not a little exercised at the present moment with regard to the currency question. The Cunlifie Committee based its Report on a return to the gold basis. I think it is not unreasonable to say that, since that Committee made its Report, circumstances have very much changed, and there is in the mind of the commercial community as a whole the belief which has been expressed by the Federation of British Industries, that another Committee should be appointed to review this. Broadly, the Cunlifie Committee recommended that we should return to a gold basis. There are many of us who feel that, if the country is to return to a gold basis, it means a liquidation on such a vast scale as will bring a very large part of the commercial community to grief, and will reduce the revenue to an alarming extent. There are those of us who think that, if the values of commodities as a whole should be reduced in this country to a point below, let us say, 50 per cent, higher than the pre-War average, it is inconceivable that trade in this country could be done which would justify the imposition of taxation necessary to raise revenue to meet the fixed charges on the existing Debt, apart from the Civil Service requirements. If so, it seems advisable that we should have an authoritative statement that the aim, which was the foundation of the Cunliffe Report, should be abandoned, and some other less ambitious goal established to which the country's financiers should direct their attention. I emphasise that, because it is without question that, if we are to revert to a gold basis, we are going to have such an alarming further deflation in values, that the business which the country can do, instead of falling somewhat short of the expectations which the Chancellor of the Exchequer said many firms in the country had formed in the establishment of their staff, would not reach anywhere near the pre-War extent, and there would be an alarming decrease in revenue.

There is at the present moment a feeling that the Government might give an additional lead to this appeal for greater thrift and harder work. In that matter, one was not able again to escape the reflection of the class of criticism levelled at the Government by the Leader of the Opposition. He insinuated that they would not have incurred such expenditure. Housing was given as one instance. I venture to think that a very large part of the expenditure, of which we are complaining at the present moment, is the result of the demands made from the Opposition side of the House, not excluding the relative countenance on their part to the principle of reduced effort in output, and it is a fact that so much less return is given for money actually paid, not only by the workmen, but also by the Civil Service in its subordinate capacities. I refer to the vast staffs of the Ministry of Pensions and the Unemployment Exchanges. It is that factor which contributes very largely to the increased cost of carrying on the Government. It is in these costly schemes of social development, on which the country has its eyes fixed, that we feel economy can be effected, and that economy necessarily must be effected. Those of us who are directors of large banks see the weekly picture of the accounts of firms employing their many thousands of workers, with increasing unemployment in many cases, and, what is more serious, decreasing prospects of expanding employment. If we are to remove that, there is an absolute need for a realisation that we must be less ambitious in our schemes of social improvement, which are proper under certain circumstances of affluency, but only under those circumstance. It is undeniable that the country at the present moment, while wishing to enter into the spirit of optimism—I am glad the right hon. Gentleman used the expression "cautious optimism" as against the "sloppy optimism" which has been mentioned—must realise that our foreign trade alone will bring employment, that there are innumerable industries in the country at the present moment, ably directed and ably supported by efficient workmen, but unable to produce what they need in order to give employment which will produce revenue to the Exchequer. While the cost of raw material may have been lowered, conversion costs are still too high.

It is in that way that better support can be given by those who, from the Opposition Benches, level continual criticism, instead of using their influence to impress in the right quarters that prosperity and employment are the means through which these schemes of social advancement, as we hope in the not distant future, may come. Greater thrift on the part of the Government has been urged in this House. There is no necessity, I know, to urge it on the present Chancellor of the Exchequer. Those who know him know that not only is that his own inclination, but it is his determination in this matter. In his hands I feel that we are safe. His efforts will be to urge upon every Government Department to put a curb upon unnecessary expenditure. But an appeal should be made to those who sit on the Opposition Benches to remember that with that determination to get a better return for what wages are distributed, it is not the rates of pay, but it is the wages taken home at the end of the week which will indicate the amount of work that is done, and if that increases then the revenue will increase, and unemployment will decrease, and there is some hope of our getting back that large volume of foreign trade, which alone will restore our financial position, and will remove the need for speeches of unutterable despondency such as we have heard this afternoon.

It has been with a good deal of pleasure that I listened to the speech of the Chancellor of the Exchequer; the Speeches of the right hon. Gentleman and others last night I read in the newspaper report. I am not a pessimist, because I believe in the invincible spring that there is in the British people. But it is rather unfortunate that they always need to be pretty hard-driven before they waken up to the necessity of things. I find it a little difficult to see any prospect of an early trade revival, and I will tell hon. Members why. How does anyone expect people who have got some money left—and there are a few in this country—to venture on speculation at the present scale of taxation! I noticed the other day amongst a return of estates that of one belonging to the Duke of Buccleugh. It yielded £20,000 a year in 1912. It now yields about £400 or 5d. in the £ after all taxation has been paid. That is not a property, it is a liability!

What is the money being spent on? Much that does not return an equivalent. In industries, if you drop across any man fortunate enough not to have been permeated by that spirit of optimism which led men to erect large works and expect great trade, but who is managed on the principle of " ca' canny"— and I say that without any offence to hon. Gentlemen on the other side — to conduct a small business, and has got some money beside, and you ask him whether he is going into any speculation or investment, or any development of business, and what is his answer? "What is the good of doing it? If the thing turns out a loss, I bear the whole loss of 20s. in the pound on my capital; if it turns out a success the Government will take in taxation 15s. in the pound"—for that is what it amounts to after rates, and taxes, and Super-tax have been paid. Such a man—and there are many such—is not going to venture into any new business. The dice are too heavily loaded against him. The effect is precisely the same as it has been in a country which is not so popular with hon. Members opposite as it used to be. I refer to Russia. Lenin went to the peasants of Russia, and he said to them: "We are going to take your grain, the fruits of your labour, without compensation, because we believe in communism and brotherhood; we will leave you just enough to live upon and you will be unable to sell grain at a profit; we are going to take your surplus." What has been the result of this kind of legislation? That the peasants have not now even got enough for themselves. Is there any difference between those peasants and the lot of the taxpayer under His Majesty's Government when they take 15s. in the pound from him?

We are committed to considerable expenditure as it is. There is our National Debt. There is our debt to those who saved the country. There are the soldiers and sailors' pensions, far, far too meagre, and there are the official war bonuses for Government officials. It makes one's blood run cold when you consider these war bonuses. My classical education leads me to know that bonus is Latin for good; but the war bonus is not a good thing, for it means that somebody is getting some good out of the War which they have no right to expect. There is only one thing worse than losing a war, and that is winning a war. You have now the expenditure on the War debt, money borrowed, and there is the expenditure, too, on what is termed social reform. The Chancellor of the Exchequer asked the hon. and gallant Gentleman the Member for Leith (Captain W. Benn) whether he would repeal the National Health Insurance Act, and he had not the courage to say that he would. I certainly think it ought to be repealed, and repealed forthwith, though that may be a very unpopular argument. I have never seen any good result that accrued from it. We all remember how it was passed amid the clamour of the medical men and after conjunction and negotiation with the British Medical Association. The only result that I have ever been able to see accrue from it is to enable the sixpenny doctor to run an American motor-car with very perfunctory medical attendance.

I was talking to a leading West-end doctor the other day, one who has a fashionable practice, and he was considering whether he should not resign his panel practice. He said the thing was a crying shame. He went an hour or two every evening, and a few working men came in to see him with very little the matter with them. He said: "I am only allowed to give them the less expensive medicines; if there is anything serious and I give them medicines to match, I get into trouble. This panel practice brings me in a considerable income and enables me to keep a motor-car, yet I am ashamed every quarter comes in to take my cheque. But why should I give it up? If I do somebody else will take it." Then, again, he went on to explain that if a workman's wife declares a dividend, a lady who is described as a health visitor goes into the house and proceeds to repeat a number of shibboleths about the care and upbringing of children, for which she receives a very handsome salary. All this has destroyed the moral of the medical profession, and destroyed that friendly feeling between doctor and patient that once existed.

Again, you have the education legislation of the last Parliament. That sort of legislation has ruined the rural districts. But the education neither teaches morality or virtue nor industry. It is doing nothing to improve those concerned. What has it achieved, and what is happening? We have large sections of our poulation who carry out the principle of "ca' canny," a totally irrational principle. No wonder that the Minister of Health cannot build houses. Consider the immense disparity betwen the cost of laying bricks before the War and now. It is now 12½ times greater than then. It is perfectly simple to reckon the whole cost up. You find that what then cost 6s. costs now 74s. No wonder there are no houses. Similarly, material went up in cost, because labour enters into all. But how can you argue with people who illogically believe that the less you do the richer the country will become? The whole education of the people has been turned upside down. It is demoralising, and the hard thing is this, that it seems to be necessary that we should go through a period of want to bring us back to more, common-sense views of life. Many people, who might be expected to know better, take the wrong view, but there it is; and you, therefore, get the man whose money and energies would fructify, not going forward, because he is afraid of risking his capital; if he does make money, it is only taken from him.

Again, take the Employment Exchanges. Here is a chance for economy. They are staffed by loafers to register tramps. [ Laughter. ] Yes, that is practically what they are. No good workman or good employer ever goes there. You never get an employée there. You ring up an exchange perhaps and say you want an employé, and you hear nothing about it. You seldom get an answer. Three months later, long after you have got a man, you are rung up and asked if you have been suited, and when you say "Yes," the Employment Exchange credit themselves with the result of that operation. The only thing done at these is paying out unemployment benefit. Those in charge like this, for it gives them employment paying out to the unemployed. These exchanges are no use, and they are costing thousands of pounds. It is extraordinary that once a Government Department is established each one seems to become like the Ark of the Covenant, and no Member of the Government lays a hand upon them. We had a remarkable case in reference to the Liquor Control Board. Once officials are employed you can never get rid of them. I believe they are now being kept on as an experiment in the hope that some day a temperance Government may come along and nationalise the drink traffic, and then they will say, "Here we have the foundation of a department to manage this business." The ordinary working man cannot understand why an official at £600 a year should be sent round to see whether a public-house is crowded or not.

I have received an intimation this morning that a large number of those officials will receive a month's notice if the Licensing Bill pass.

What has Carlisle done that it should be victimised in this way? The whole Government Bench seems to think that it is impossible to deal with that Department, and keep saying that these officials cannot be got rid of. In my opinion, the National Health Insurance Act ought to be scrapped, because nobody likes it.

I permitted the hon. Member to refer to the National Health Insurance Act, although I doubted whether it was in order. I allowed it as an illustration, but I cannot allow him to pursue that subject.

Taxation being so high, the real trouble is how to get capital to carry on industry. An hon. Member opposite went fully into the question of the gold standard. Do not let us haste to get back to that at all at once, otherwise you will produce a terrific crash in this country. That is the last thing we should seek to do, and you cannot get back to a gold standard with advantage except by very slow degrees. With regard to what has been said about large incomes, there is no harm in a man having a large income as long as he does not waste it, but if it is extravagantly expended, then that man is the enemy of the community. The man who makes a large income, and reinvests it, is simply lending his money to his fellows to enable them to be employed, and the man who builds up a great industry in any district is a benefactor to the people of that district.

I was in a place yesterday where a large works had been established through the energies of one man. If that man makes a profit, what happens? I think it is very hard, when a business requires so constantly to be refreshed with new capital, that this grotesque system of taxation should come in and take it away. It is only starving industry and bringing unemployment. The Dutch system of taxation is much better, because in Holland you are only taxed on the money you spend, and not on the money you save to develop your business. The Income Tax there is paid on the dividends. That is an ideal to which we should strive to get near. I think that all money which is reinvested in industry should get some advantage over money spent.

I would like to point out to the Chancellor of the Exchequer that the collapse which has been referred to curiously synchronises with one deadly act of his predecessor which took place when the country was just getting into its stride—I allude to the increase from 40 per cent, to 60 per cent, in the Excess Profits Duty, which itself was the most extravagant and futile tax that was ever imposed upon an industrial community. The former Chancellor of the Exchequer increased instead of decreasing that duty, and that led to a tremendous falling off in our trade, because it discouraged everybody, and it had more to do with the collapse of our trade than anything else. Our trade would have gone on well, but the men in the City thought a breach of faith had been committed. This did an immense amount of damage. I never could understand why it was done. Why do the Members of the Cabinet pay so much attention to their officials instead of taking their own view of things? I am sure the present Chancellor of the Exchequer is a man of sturdy independence, and I do not think he will be so much liable to be guided by the permanent officials. I wonder why the Government trust them in commercial matters at all. I know the Treasury officials are a most able body of men at their own job. I have had the whole body of them before me at an inquiry, and although they know how to collect taxes and money, on commercial matters they are a very ignorant body of men. The best of these officials at that inquiry on one occasion described the taxpayer as the donkey before whom the Government must hold the carrot, and on my objecting he substituted the unproductive mule, which showed how officials regard taxpayers. I remember the way the then Chancellor of the Exchequer always alluded to "my advisers." It reminded me of the Scottish laird who alluded to his lawyer as though he were a deuced clever fellow before whom everybody must bow down. I wish the Government would pay less attention to their advisers, like Sir Michael Hicks-Beach when he was Chancellor of the Exchequer, and Mr. Gladstone, who both cut down expenditure and performed miracles in economy, simply because they thought for themselves. It is the same with regard to the Post Office, that used to be one of the most profitable sources of revenue. Tremendous expenditure is being there incurred. The Post Office has now become a liability, and the right hon. Gentleman who defends it is as big a bureaucrat as any of his officials. He seems to regard his officials and staff as though they must be defended at all costs and hazards.

The gift of making money is a real one. The man who can amass means probably is not very lovable, but he is necessary, and, if you are going to have such taxation as there is at the present time, I do not see how you are going to get him to revive industry. It does not lie in the mouths of hon. Members opposite to demand economy, because they are responsible for much of the policy that has led to this great expenditure. Unless there is a change of policy our revenue is going to dwindle. I know one wealthy man who lives in South America for the simple reason that he is not going to pay the State 10s. 6d. in the £ of his income. He does not approve of the way that the Government is spending his money, and he stays there and comes home to this country for a week or a fortnight once a year to see his friends and then goes back to South America. You cannot catch capital. It melts away in your hand like quicksilver. It takes wings unto itself in the morning and flies away to the uttermost ends of the earth.

You must recollect that this country is impoverished and unless you change your policy in less than three years' time all your schemes will go to the wall. Your Education Acts must go. The country, and especially the rural districts, cannot stand them. The Teachers' Union stole a march on you. The cost of the teachers is ruinous, and you are not getting value out of them for your money. All that and all your other schemes will have to go or we shall become a very poor people. It will only be thanks to the resilience of the nature and temper of our people if we are not reduced to absolute want. There are our foreign adventures too. We do not want to spend money on the Jews in Palestine or on any of these foreign commitments. I wish we could cut down our Army and Navy. I do not see what we want them so large for. We have had a big war, and we shall probably not have another for another hundred years. I would like to see these commitments cut down and several hundred millions saved. I want to see the people restored to productive industry, so that we can produce at such a price as to be able to compete with foreigners. We cannot do that at the present time. We cannot even produce coal at less than 30s. per ton, and you can get it in the States at £l a ton. We want to get to understand that we were not born into this world to have an easy time. The unhappy man is he who thinks that he is going to have an easy time or who tries to have an easy time. Nothing but thrift, industry, and hard work can save this country. Every man must provide for his own family and not rely on the State.

All this policy of general State assistance all round—unemployment doles may be necessary at an extreme time—is bad. You have to look to the character of your people, and we must get the nation to see that if we are going to have real education, it should teach that whatsoever your hands find to do, do with all your might. That is the end of all education. Think of the demoralisation of the policy of ca' canny in any sphere of life. How bad it is for a man not to be doing his best. You are poisoning that man's sold when you encourage him not to do his best. We must try and get this country back to sound views, and the Government should set the example by thoroughly chasing out of its Departments everybody who is unnecessary and surplus, instead of continuing to award war bonus and having surplus and useless Departments with officials getting 1½ years' pay when they chuck up their jobs, even in the best of health, and pensions, not only on salaries, but also on war bonus. You have the same system with the teachers, who are all non-contributors. Can you, in face of these facts, expect miners and ordinary men, who have to struggle day in and day out for a living, and who never know when they are going to be unemployed, to do their best? No, you cannot. Why should you not start by putting an end to all that system of pensions in Government Departments and the teaching profession? Why should they have pensions? Why should they not take their old age pensions like you and I when we get on in years? Then you could go to the mass of the people and say, "We have no favoured class. Government servants have to work hard and save and provide for their own future, and we ask you to do the same." Then you would raise the moral tone of the people, and in a few years the country would rise again and there would be a revival of industrial prosperity.

There was one part of the hon. Member's speech which I think will strike a responsive echo in the hearts of everybody. When you get a thoroughly indefensible Department of State it becomes the business of all parties to combine to defend that Department. Any expenditure on lavish education or Employment Exchanges or anything of that sort is always certain to find advocates on every bench. On the same principle when you have what is called an "agreed Measure," a Measure said to be non-partisan and non-controversial, it is sure to be a very bad one, as was the Agriculture Act which was one of the worst enactments ever passed through this House, although it was cheered through the Lobbies by the combined forces of all parties. The present Debate has brought us a lucid, clear, and instructive statement from the Chancellor of the Exchequer, for which I think the House and the country will be very grateful indeed. No more could be expected of the Chancellor of the Exchequer, and I am glad he was not persuaded by the voice of the syren to make an entirely new Budget speech. In these days when everything is in a state of flux and of indetermination, when we have industrial war, national war, and every kind of war on all sides, when we have trade slumps, and so on, I think the most a Chancellor of the Exchequer should be expected to do is to make one full-dress Budget speech in the course of a year, and to call on him, as this Amendment does, to make one every two or three months in order that it may be knocked down and trampled upon in the next two or three months, possibly by a vigilant Opposition, is more than any Chancellor of the Exchequer ought to be asked to do. On the other hand, although we have had some very instructive speeches, such as that of the hon. Member for Ilford (Mr. Wise) on currency, it will be generally admitted by the House that the attack on the Chancellor of the Exchequer today has called forth no new suggestion, no helpful criticism, and nothing really of any importance whatever.

2.0 P.M.

Take the speech of the right hon. Member for Peebles (Sir D. Maclean). One sympathised with the right hon. Gentleman a good deal, because obviously he was waiting for the Chancellor of the Exchequer to put up what he anticipated would be a kind of Aunt Sally for him to knock down, but when he did make his speech, struggling with this difficulty, it proved to be one which did not contain any concrete suggestion. On the contrary, the speech consisted of what might be a long series of cuttings from the leading articles of the "Daily Mail," and one almost expected that the right hon. Gentleman would wind up with the words, "That is why your Income Tax is 6s. in the pound," or, "Demand net sales," or any of those obscure incantations with which the pride of London journalism decorates its pages. The first part of the speech was directed towards attacking the Government, because when it found that the income of the country was not great and the expenditure was very large, it realised there was an absolute necessity for the Chancellor of the Exchequer to drastically cut down everything, to see that the country did not outrun the constable, that the taxation was kept within the smallest limits, and that both ends were made to meet by the Treasury of this country. Then the right hon. Gentleman went on, after that, to deride the Government for reversing its policy about labour, about housing, about corn production, and about agriculture generally, reversals of policy which had been decided upon by the Government simply because it found it could not pay for all these things. What are hon. Members to make of criticism of that sort—criticism which begins by assaulting the Government for not adapting themselves to circumstances and then going on to deride them for adapting themselves to circumstances? It is evident that such criticism is not meant to be helpful and it is not honest criticism. It is merely using any stick they can find with which to beat a poor old dog. At the beginning of this Debate we had a very eloquent speech from the hon. Member for Harrow (Mr. Mosley). What was his indictment against the Government? It was, first, that it had run into extravagant expenditure, then it seemed to suggest that they had made a mistake in not setting Austria and Germany and Central Europe generally on their feet by immense financial commitments on the part of this country—in not putting them on their legs at the expense of the British taxpayer, an expense of which we could not expect ever to have recovered one halfpenny. When one gets these contradictions hurled at the Government it is perfectly obvious that the intention is not to help the Government in its very difficult task, the most difficult task any Government has had to tackle, but to make party capital of the anti-squander maniac stunt.

It is certainly the case that supporters of the Government—loyal supporters of the Government—can claim that the Government did begin after the Armistice with a great lot of schemes which were extremely expensive to this country—all sorts of schemes, Education, Housing, and so on. Then we had Railway Control and Coal Control, we undertook vast commitments in the way of Corn Production, and in fact the Government went away into the far country of Socialism, and wasted its money in riotous living; but it did that with the combined cheers of all parties in this House, and especially of men on the Labour Benches and of the Opposition generally. Consequently neither the Labour Members nor the Opposition generally are the proper people to throw stones at the Government because it has come back from this far country, because it has come to itself and awakened to the real state of affairs. It is quite true, as the Chancellor of the Exchequer said, that the Government erred not alone in this matter of vast expenditure, for those were the days when everyone thought they were going to be much better off than they were prior to 1914—everyone, every private individual and every business man. And not only that, but the Governments all over the world, and institutions of all kinds, thought themselves justified in launching out in most extravagant expenditure and paying anything for anything as long as it was an exorbitant price.

Everyone is coming back from that state of affairs, and no one is coming back better than this Government is. So far from deriding the Government for coming out of Socialism, reversing its policy, and cutting down expenditure in all these directions, I think that the Government is entitled to the greatest credit for its courage and patriotism in reversing the policy which it started, when it finds that it has not the money to meet that policy. That is a matter in which it will have the applause of every honest and proper-thinking man in this country—except, of course, the Socialist party, who, naturally, want more expenditure and more Government interference, who want the Government to go on acting as universal provider for everyone and assisting everyone, who want more Government expense and more Socialism. Apart from them, everyone who is honest in the country will applaud the Government for coming back to a proper realisation of the state of our finances, and cutting the coat of this country to suit its cloth. The Chancellor of the Exchequer has taken a proper standard of comparison, namely, the comparison with other Governments and other countries in the world, and he has shown what I think ought to satisfy the country and the House, namely, that our financial policy has been better than that of any other country, and that our Government has shown itself to be more capable and more courageous in tackling our financial problem, and has actually been more successful than has been the case in any other country. Those points which the Chancellor of the Exchequer made are perfectly justifiable points.

The War bonus, which has been touched upon in recent speeches, is another of those things which were scattered over a smiling land by all Governments, ours among them, after the War, because then it seemed to be a fact which might be taken as an axiom upon all sides, that everyone was not only not going to be worse off than in 1914, but a lot better. Accordingly it became the accepted policy, as the right thing to do, to bestow war bonuses on everyone, from the highest official to the lowest. We have seen in the last two or three days the beginning of a reversal of that policy, and that reversal, no doubt, will have to go on. The whole country financially, every individual, every business, and also the Government, has had to pull in its horns— I am not trying to make a pun—and has had to adopt more stringent measures. It has had to realise that there is such a thing as res angusta domi, and that we are now in for a pretty lean time. I am bound to say that I do not think any Government that one could imagine would have tackled the business more courageously and drastically than this Government. I am not a great optimist. I am a constitutional pessimist, I am sorry to say, and would, therefore, fall under the ban of the Chancellor of the Exchequer; but there is one thing that does give me hope for the country, and that is that the Government is in capable, courageous, and public-spirited hands. I do not like to appear in the unpopular rôle , in what will, be called the servile rôle, of an apologist of the Government, but one must confess that the Government of this country does possess the confidence of the country in a way in which no other Government that one could figure would.

In all this anti-squandermania "stunt" there is a certain amount that is valuable and a certain amount that is justified, but I should say that about nine-tenths of it is totally dishonest, and is either personal or partisan. For the comfort of the Government I may say this: I am not very well acquainted with inner political circles, but in my own part of the country I know very well what the ordinary working man is thinking, and I am in continual touch with him. I may tell the Government that, whatever may be the case in London and about here, where people read the "Daily Mail," and believe in it very likely, the people of Scotland are not in the least excited about this agitation. I never get a question upon it at the continual open-air meetings which I hold, at the rate of about two a month, through the summer. I am, as everyone is who is talking to a Scottish audience, heckled thoroughly about everything they are thinking about, but I am never asked questions upon that. I think that every fair-minded person recognises that the Government, on this serious question, is tackling the business with great courage, and that it has to face the strongest opposition, not only in the Departments, but everywhere. To-day we have had a lucid statement from the Chancellor of the Exchequer. His expressions of resolution to see that everything is done that can be done in that way are honest, and, I think, have given great satisfaction and hope to this House, and will to the country at large. In the meantime, this Debate has been extremely fruitful in drawing from him that lucid and clear statement.

The doctrine which has just been laid down by my hon. Friend the Member for West Edinburgh is, I am afraid, substantially different from the doctrine which for a very brief time must now be laid down by another representative of the same city. It is wrong to say, in discussing the financial position of the country, that the Labour movement in its more recent researches suggests for a moment that the State should be a universal provider. It is also wrong to suggest that Labour has been either indifferent or hostile to any effort in Great Britain to put our finances on a proper footing. Within recent times we have been very much impressed, as a movement, by the great weight of taxation in this country, and we know that it is practically impossible to restart industry and commerce, and to provide remunerative and regular employment, until that great burden of taxation is substantially reduced. It is our object to try to face, no doubt with many limitations and numerous inaccuracies, the whole position, and I am going to pick out one or two difficulties which specially appeal to us on this side of the House, and to try, if I can, to draw a reply from the Government on those points. I think hon. Members in practically all parts of the House would agree that for a certain period after the conclusion of the War, with all its artificial industry and commerce and with all its admittedly artificial financial conditions, we continued that state of affairs in this country and it was continued also in other lands.

In a recent review which was made of the conditions of Great Britain, of Germany, and of other Continental countries in the two years after the Armistice, attention is directed to the fact that during that time these countries were in the process of liquidation of War debts, that very large sums were being paid, to the various industrial enterprises in the different States, and that that activity, which, of course, was necessary in discharging the duties and the obligations of war, actually tended in some ways to perpetuate the boom of those artificial conditions which led us to believe that the world was going to recover with very little difficulty indeed. Now, of course, we have passed from that state of affairs. The slump, which may or may not have been inevitable, has come. The various countries are in financial difficulties, and the leading consideration which we have to keep in mind is whether we can so adjust our finances and our taxation as to give us, compared with those countries, a maximum opportunity of recovery. I entirely agree with the Chancellor of the Exchequer that we have nothing to gain from undue pessimism. I do not think it is wise to make speeches which are going to lower the credit or the prestige of the country. It is wrong to do that on the one side, but I believe it to be equally wrong to pass to an unfounded or exaggerated optimism on the other. What we require rather is what I may call a discreet confidence, and I think that discreet confidence is forthcoming when we review the position in this country and compare it with other countries which the Chancellor of the Exchequer himself cited, and which, of course, must occur to every Member of the House in his study of world financial affairs.

Comparisons were drawn with Germany, with Belgium, with France, with Italy, and with other countries, but it is perhaps dangerous on our part to attach too much importance to the apparent advantage which we possess compared with these other lands. Take the position of Germany. I do not suppose anyone for a moment would regard that as other than extraordinary, exceptional, and utterly incapable of lasting for any length of time. German financiers have been compelled to resort to a very large number of devices in taxation which probably would never be adopted in this country. They have a very complicated range of taxes, and what is more important from many points of view is that some of these taxes have ceased to be productive and they are now working their way back to a more sober and a far sounder system. It is probably unwise also to devote too much attention to the apparent prosperity of the German banking institutions, on which some thinkers in this country have recently fastened for the purpose of indicating that, after all, conditions in Germany cannot be so bad as they are sometimes painted. We must keep clearly in mind that they are dealing in terms of an almost terrible depreciation and that seems to me to vitiate the comparison between Germany and this country. Then, again, if we go to other lands—this is only for the purpose of trying to offer some reply to the case the Chancellor of Exchequer put forward— we find that everything that underlies finance, so to speak, is again substantially different. Take the case of Italy. How could any hon. Member make an effective comparison between the conditions in Italy at present and those in Great Britain? There has been from many points of view a practical revolution in the Italian industrial structure and they have adopted far-reaching Syndicalist and other devices which will probably never be adopted in Great Britain. They propose to hand over the control of considerable blocks of industry to the workers in a way that even our most advanced thinkers would not recommend. That vitiates a comparison because it is really on that that the financial structure of the country is reared.

Then, again, a fair part of the territory of France was devastated. The recovery has been remarkable from many points of view, but still the underlying conditions are again different, and I want to use these illustrations to press home the fact that there is a real danger in understanding our financial position in founding upon them the argument that, bad as we are in Great Britain, we are infinitely better than other people. We must be perfectly sure that there is a fair basis of comparison, and my submission is that a fair basis of comparison probably does not exist and we must be very cautious indeed in using arguments of that kind. But having made all allowance for those considerations, we are still entitled to a certain measure of confidence, and the confidence is found in this, that if anyone interested in the financial structure of Great Britain had said in 1914, before the War broke out, that in 1921 we should be able to carry six times the pre-War Budget and we should have been able to build up a debt of very nearly £8,000,000,000 and still preserve, the structure of our industry and our commerce, and on the whole come through it with perhaps no very deep or widespread suffering of the kind that we have known in other industrial crises, that man would have been described probably as a fool. Hardly anyone would have suggested that it was possible, while actually, of course, it has taken place, and it proves the remarkable elasticity of the economic and financial system or effort of Great Britain. I think our safety lies in that elasticity, in the power we have of recovery and of meeting great emergencies, with always this reservation and condition, that we must not test it or press it too far.

The next point to which I wish to draw attention is one which was mentioned in passing by the hon. Member (Mr. Wise). Reference was made to the terms of the Cunliffe Report and the importance in national finance of a sound system of currency, and a reply was offered from this side of the House to the effect that the Cunliffe Report was out of date. With that criticism I find myself quite unable to agree. The final Report which was issued by the Cunliffe Committee was dated 3rd December, 1919, and excluding a considerable part of the Cunliffe Report which referred to the recovery of the foreign exchanges, that Report dealt in reality with high and permanent principles in finance, and above all, in a very early paragraph, it referred to the importance of the restoration of a sound system of currency in each country if a proper world recovery was to be brought about. The difficulty which I have in mind is the difficulty of this dilu- tion or depreciation of the currency in Great Britain. I know, of course, that it is a highly technical and a very difficult subject, and it is sometimes suggested that it should be left severely to financiers and bankers or the high authorities in the State, but it has a practical application for every member of the community, because there can be no doubt whatever that if we are increasing the quantity of currency unduly, that will be reflected in the upward tendency of prices. There can be very little doubt that it will have powerful effects upon various forms of industrial and commercial enterprise. The hon. Member referred to the fact that that currency was practically stationary in quantity.

Paper currency.

Paper currency. I ask my hon. Friend the Financial Secretary, who is a recognised authority on these matters, whether we are quite safeguarding the position in that respect in Great Britain? We must remember that there has been a great trade slump, and the presumption is that in a great trade slump of that kind there will be, generally speaking, a reduced call upon the currency of the country, or, to put it in another way, there will be less for the currency to do. Against that you have to set the payments which the State must make by way of unemployment donation, etc., just like the payments which we had to make to the sailors and soldiers and their dependants during the War itself. These payments, in the main, will be less than what the men and women would have earned in industry. That strengthens the argument that the call upon the currency has diminished. If that is true, are we quite satisfied that the machinery which exists in the banking world at the present time is sufficient to make certain that the currency is reduced in quantity as that reduction is permissible and safe in the country's general effort and activity at large? On that point, and on the general conclusion of the Cunliffe Report, the Financial Secretary may be able to give us some information. I do not for a single moment associate myself with the theory, which is sometimes put forward, that inflated currency is the sole cause or even a main cause of the great rise in prices. On the other hand, I cannot agree that it is altogether negligible. The con- clusion which I reach is that it is a contributing factor of importance, and if that is true, and if we are taking every step in this country which we must take to bring down prices in a healthy way, then that factor must be noticed by the Government, by the Treasury, and by the great financiers and others on whose advice from time to time they work.

The only other point is one to which an increasing number of hon. Members are devoting attention. The reduction of expenditure and the re-establishment of sound finance in Great Britain will be governed not by the selection of individual Departments, here and there, for improvement, important as that may be, but by a better, healthier, and sounder policy in foreign and home affairs. I do not desire to traverse the ground that has already been covered in regard to Mesopotamia and Russia, and the heavy commitments of this country in different parts of the world. I do know that we taxpayers in Great Britain, with 44 millions of people and a comparatively small island, cannot afford very much longer to carry these great burdens with safety to ourselves. Accordingly, I support most strongly every world or other movement which we can find in the direction of disarmament, in what the predecessor of the Chancellor of the Exchequer has described as the demilitarisation of Europe, and, I would add, of every country in the world. It is necessary to support these movements at the present time not merely on financial grounds or on broad economic grounds, but in the interests of civilisation itself. There is a world tendency and a world policy which has received new messages of hope within very recent weeks, which must go far towards counteracting any discouraging factor, and in that sphere we have a real safeguard for our finance in Great Britain.

In addition to that very important movement in world policy, I ask the Government if it is not worth while at this stage to find a better domestic policy, more particularly in industrial affairs. One of the most remarkable and hopeful features of recent times has been the weakening of faith in the strike or in industrial stoppage or any effort of that kind with a view to the permanent improvement of industrial conditions. On the other hand, there are many employers who are quite satisfied as to the waste and the danger of the lock-out. Industrial strife since the Armistice has cost this country many millions of money, directly in the taxation which we can study for ourselves in the returns, and indirectly in the impaired efficiency and in the decline of power which, of course, any interruption of that kind brings about. There are at the moment in Great Britain powerful forces, both in capital and labour, which are willing to sit down and try to work out an industrial policy, the primary aim of which is to be the preservation of peace and, above all, the earliest possible recovery, which is simply another way of stating that we are going to lay the foundations on which we can best reduce our taxation and get back again to health and strength in financial affairs. My fear as a Labour Member is that that opportunity may be lost. I think the time has come when the Government must have regard not merely to foreign and colonial policy and these huge commitments—they must let these countries get on a proper footing as soon as they can— but they must associate with our policy abroad a sound economic policy at home. If we can combine on some effort of that kind we shall have laid the foundation of better finance, and of great reduction in taxation, and with that a real improvement of our industry and commerce and the safeguarding of remunerative and regular employment in Great Britan.

It is always with great pleasure that we on this side of the House listen to the hon. Member who has just spoken, whether we agree with him or not. Such speeches have far greater effect upon my mind than carefully-prepared panegyrics of the Government such as that to which we listened from the hon. Member for West Edinburgh (Major Jameson), bearing the evidence of having been carefully prepared with the midnight oil, and the equally carefully prepared attack on the Government delivered by my hon. Friend the Member for Harrow (Mr. Mosley). The hon. Gentleman who has just spoken has put the situation very fairly from the Labour point of view, and I think I may go further and say from the national point of view. Neither of the opponents of the Government—I do not include the hon. Member for Central Edinburgh (Mr. W. Graham) entirely among the opponents of the Government, but I refer rather to the hon. Member for Harrow and the right hon. Member who spoke from the Front Bench opposite—nor the Chancellor of the Exchequer have put the case entirely fairly. It is rather absurd to adopt the attitude of certain portions of the Press and to use phrases about impending bankruptcy and the collapse of the Budget and things of that kind. I do not think we have reached that position yet. But I think it equally absurd for the Chancellor of the Exchequer to complain that while his opponents were ready to make general accusations of waste against the Government they were unwilling to come down to concrete facts. He was brought down to concrete facts by an interruption made by the hon. and gallant Gentleman opposite (Captain W. Benn) who asked him to explain the figures in reference to the Admiralty. I accept the accuracy of these figures—

They were quoted from a Government statement.

The hon. and gallant Member mentioned an increase of 7,000 in the personnel of the Admiralty. That may be a small matter compared with the gigantic sum which we owe as war debt, but it is important, not only in itself, but also as being one of those things which influence the minds of so many of us. Why should there, two and a half years after the Armistice, be this great increase in staff? My hon. Friend the Member for West Edinburgh insists that this is the best possible Government. It may be, perhaps, there is no alternative Government which would not be worse in the circumstances at the moment. But even the best possible Government, if asked to explain such an enormous increase in the personnel of one of the Departments, should be able to do so. The Chancellor of the Exchequer used an argument which did much less justice to his honesty than most of the arguments which he uses. He referred to audit work which had to be done, and said that we have got 1,000 extra to do that. Then where did the other 6,000 come in? The Chancellor of the Exchequer says that he is not sufficiently familiar with the facts to explain that. Then he has no right to say, "Why do you not attack the Government on con- crete grounds?" and then when concrete examples are given, to say that he does not know.

He used another argument which did equal injustice to his honesty. My hon. and gallant Friend (Sir J. H. Davidson) made some inquiries—and no one knows more about the War Office than he—in reference to the War Office. There is not a department which has not doubled or trebled since the War. A great number of the heads of departments are paid far more, even allowing for war bonus, than they were paid before the War. The question is asked, "You speak about such things as the Ministry of Health. Why do you not refer to the War Office and the Admiralty?" I do refer to them. I say that it is intolerable that we should have these additional officers and these assistants doing the work which was done by one man before the War. Now I come to another argument which seems to do injustice to the usual sense of honesty of my right hon. Friend. He used an argument which was intended to appeal to the sympathies of the House. "Is it suggested," he said, "that the graves of our soldiers in France should not be looked after and that medals should not be distributed?" Nobody suggests anything of the sort. The right hon. Gentleman knows that the increase of personnel of the War Office is not composed solely of those who look after graves in France and the giving out of medals. He knows that the increase is because of the commitments which have been entered into owing to the folly, as I think, of our foreign policy during the last two and a half years and the secrecy of the whole thing. Persia is an example of what I mean. You have to drag out by means of wire ropes any information from the Government as to how our foreign policy is conducted. That is one reason for the increase in the personnel of the War Office.

My hon. and gallant Friend the Member for Leith (Captain W. Benn) who has a way which is most inconvenient for the Government of bringing up awkward facts—and I hope that he will not give up this useful habit—brought up the figures for Government Departments and showed that there has been an increase in the personnel of 730 since last October. The Chancellor of the Exchequer says there has been a tremendous decrease in personnel since the Armistice. I should hope so. I cannot conceive why two and a half years after the Armistice there should be employed the same great staff that we had at the time of the Armistice. I could not help thinking that if we had a really effective Opposition in this House, and a really first-class figure on the Front Bench opposite, what mincemeat he would have made of the Chancellor of the Exchequer.

May I invite the Noble Lord to join us.

My hon. and gallant Friend has thrown a Very fair piece of chaff at me, but I suggest that neither he nor myself would be able to make mincemeat of the right hon. Gentleman as effectively as would a figure of more importance, one who had filled high office in the State. I regret that the right hon. Gentleman the Member for Paisley is not present. The right hon. Gentleman said that there had been a reduction since the Armistice, but when my hon. and gallant Friend put the point that there had been an increase of 730 since last year, "Oh," said the Chancellor, "is the House not aware that the Unemployment Insurance Act was passed since last year? Are hon. Gentlemen opposite prepared to abandon that? It is all very well for the House to object to expenditure, but they are responsible for this Act." But, on the other side, may I say that it is all very well for the Government to talk about cutting down Government Departments when they proceed to increase their number of Government servants. If the Government are really desirous of cutting down Government expenditure and reducing the number of direct employ és of the Government, which is perhaps the most important thing we could do in administration at the present moment, they should not bring in any Bills, however desirable, such as the Unemployment Insurance Act, which increases the number of persons employed by the Government.

I think we are rapidly approaching a parting of the ways in this matter. There are many in this House, particularly in the Labour party, who are genuine believers in State socialism. There is an equally large number of people in the House, and an enormously increasing number of people in the country, who believe that the salvation of this country will be attained only through the industry, hard work and goodwill of all classes. Where the Government are in a very unfortunate position is, that on the one hand they can never satisfy the demand made by hon. Members opposite for the increase of Government Departments and Government control—it is well known that there are many Members opposite who would like to see the railways and the land nationalised, and those the Government cannot satisfy—and on the other hand, the Government will find more and more, as time goes on, that their own supporters are beginning to object to the way in which the Government has failed to carry out its promises in retaining these enormous Government Departments. The Chancellor of the Exchequer made much of one point. He said, in effect, "Take the Press of any foreign country; take the opinion felt about us in the United States or in any country in Europe on the subject of our financial position, and you will find no agreement with the lamentations expressed in this House. On the contrary you will find the greatest tribute paid to the way in which we have dealt with our financial obligations after the War and the way in which we have paid off our debt."

Up to a point that is true. I think the Government is entitled to credit, and should receive it in quarters where it does not receive it now, for what it has done in regard to the payment of debt. But surely there is a great distinction between the policy of a Government in paying off debt and the policy of a Government in its current expenditure at home and abroad. We give the Government credit for paying off debt. We agree that, so far as it is caused by the repayment of debt, the enormous and overwhelming effect of the Income Tax is less undesirable than it would otherwise be; but while we say that we are equally entitled to say that the Government have neglected to realise the persistent and insistent demand of the people of the country for a reduction of foreign expenditure, a reduction of the number of people directly employed by the Government, and a reduction of the amount of Government assistance given to all classes in industry, employers and employed alike. By that the Government will be judged, and on it will depend whether they succeed, or do not succeed, in maintaining the present form of Coalition.

Let not the Government suppose that they are in such a strong position that their idea of a Coalition is to be maintained, even up to the next General Election, let alone what happens after. I believe the historian of the future, in writing of the present time, will say that .the Government had in 1921 an opportunity, such as could not occur again, of restoring the Government Departments to something like their position before the War. If the Government fail to take that action, I am convinced that the whole system of Coalition Government will fall to the ground. What will take its place I do not know. It may be another form of Coalition, or it may be a system of different groups in this House, but the Government will come crashing to the ground, I am certain, unless they take the action I have indicated. I am convinced, after going up and down the country making political speeches, that there is tremendous alarm in the minds, not of the extreme politicians, but of the ordinary elector, the people who hitherto have always given overwhelming support to the Unionist party and to the old Liberal party. To some extent their alarm has been caused unnecessarily by what they have read in the Press, but a lot of it is based on the real facts of the case. I believe I shall have the assent of all hon. Members who are interested in business when I say that it is impossible for this country to maintain for many years the Income Tax at the present level. So far from talking of an increase of 700 in one Department, and making excuses for it, I think the Chancellor of the Exchequer would be far better engaged in considering how he can reduce taxation. I earnestly appeal to the hon. and gallant Gentleman (Mr. Hilton Young), who, I understand, is to reply on behalf of the Government, to give us an assurance that in the case of the Departments to which reference has been made, cuts are to be made, and that the economy axe is to be applied.

In the speech to which we have just listened the party which is led by the right hon. Member for Paisley (Mr. Asquith) has received castigation. The Noble Lord was very mild with regard to the Labour party, and he left the new Anti-Waste party severely alone. On the balance, I think the Government are to be commiserated with on the value of the support they get from the Noble Lord. At all events, I agree that it is wasting the time of this House, and that it is not the way to treat this subject merely to ride off on comparisons with other countries. If other countries are going to disaster, it is no reason why we should follow suit. There is hardly any analogy —no one knows it better than Ministers— between the economic position of this country and that of other countries. It will serve no useful purpose merely to say that we had a Debate on finance, that we took stock of the whole resources of the country, that we examined all our possibilities, and that we came to the conclusion, on balance, that we were much better off than other countries of which we know nothing. Viewing the position from the standpoint of the people of the country, we ought to clear away what is the most dangerous of all doctrines, namely, that the financial stability of the country is a matter only for a section or a class of the people.

I am not unmindful of the grave danger created by people in our own ranks saying, "What does it matter to you, the workers, if the country goes to pot? "That doctrine is frequently preached, and it is not only a dangerous doctrine for the country, but it is the most fatal of all doctrines, for the very people to whom it is addressed. It cannot be too strongly emphasised that there is no nation in the world so dependent on its foreign trade as ours. It is equally true that there is nothing so calculated to injure the country as an absence of confidence in the country, and the first people to find the effects of that, will be the workers. We ought to approach the question, not as it affects any section or any part, but as it affects the whole country and examine it from that point of view. I think we are justified in taking stock of our financial position in connection with what has happened since the War. All the optimistic speeches about better world, and the land fit for heroes to live in, and all those other things, when boiled down, will be found to ignore what all history proves and what we should have recognised, namely, that you cannot live on capital for four years and then assume that nothing has happened. You cannot do so in your individual households, and the nation is not different in that respect. Take the case of America. By all theories America should be the happiest place in the world. It is the one credit country in the world. The dollar stands higher in all parts of the world than it ever did before, and 42 per cent, of the gold of the world is in America at this moment. We owe America money and other of our Allies owe America money, and for all these reasons we should assume America to be the most prosperous country of all.

3.0 P.M.

What are the facts? In America today there are 4,000,000 unemployed. The business men of America are in a worse position than the business men of this country. There are more bankers' overdrafts in America than there ever were before. They are nearing financial disaster, and everyone who has been to America and discussed the question with responsible people, knows that to be the fact. Curiously enough, there is this other fact in connection with America. Outside of tea and coffee, America is a self-supporting nation. America holds or can raise everything she wants except tea and coffee. [An HON. MEMBER: "And a little rubber!"]—and a little rubber. That is a generally accepted fact. People say that America is suffering from over-production. Some of our people in this country said, "Oh, you advised us to produce more, and now Northampton is full of boots, and Lancashire is full of cotton, all because we have worked too hard." Nothing of the kind. The theory that the world, or this country, is suffering from over-production is absolutely fallacious. We are suffering, not from over-production, but from under-consumption, and the real secret of the business is that America, as well as ourselves, has got goods to supply, but no customers ready to take them. That is something that we have to face, and there is another fact to be considered in this connection. Our pre-War investments abroad brought in roughly £400,000,000 in 1914. From that sum coming in from abroad this nation reaped extensive benefit. Not only did the people at home benefit, because of the money coming in, but it came in to people who invested it, and it developed in other ways. I understand the figures to-day are roughly somewhere about £180,000,000 to £200,000,000, or in other words, there is a reduction of nearly 50 per cent. If we face the real facts, we must see that in order to get ourselves out of this difficulty, we must in some way or other get more trade. That is the basis of the whole question. There are two things that can stimulate trade. Over-taxation will cripple trade. I agree entirely as to the effect of the 6s. in the £ Income Tax. It is no good for the worker to say that the 6s. in the £ Income Tax does not matter to him. It does matter to him, because people cannot spend the money which is paid in that way in the development of trade and industry. I have said that outside the House as well as inside, and I have said it to the workers themselves. The Government however have got to accept responsibility for that, and that brings us right up against the question of where we can look for fresh revenue, or whether the only means of dealing with the situation is not rather in the reduction of taxation instead of looking for increased revenue. I believe you cannot get more in revenue, and that we must look for reduction in taxation. When we look for that reduction, I do not think we are wise in looking alone at the dustman's wages or at what the scavenger costs.

The real items of expenditure, the millions that go to make up this huge Budget, are to be found in our foreign policy, in armaments, in the Army and Navy, and do not let us ignore that. I would be the last to suggest that we should not curtail surplus staffs. Someone earlier in this Debate pointed scornfully to these Benches and said, "What do these people care about increases in Government offices?" We do care. When we advocate State control, it may be wrong or it may be right from your point of view, but do not make the mistake of assuming that we advocate it, merely to find useless jobs for any number of people. If there are redundant staffs in Government Departments to-day, someone has to pay for them. We neither excuse nor defend them. I ask our anti-waste friends, however, who are running such a campaign in the country, to point out to the people that you cannot get very far unless you tackle these big questions of foreign policy. I mean foreign policy in its broadest sense. I do not only mean Mesopotamia. I do not only mean armaments in Ireland, and the Army and Navy. I mean that this country, like America, is never going to be restored to a position which we can justify until the rest of the world is in a position to trade and to do business with it. Take the position of the exchanges; take the German mark at 240, or the franc, or any of the foreign money, and what do you find? You find that we are suffering to-day, not from the rate of exchange; that is not nearly so difficult as the fluctuation of the exchange. It is the fluctuation of the exchange that is ruining the whole position. I have talked to Ministers in different parts of the world, and every one of them has said, "We do not care whether the German mark is at 240, or the Austrian crown at 320, or the franc at 60; we do not care a bit if we can only get a stabilised exchange." Until you get a stabilised exchange, you cannot get trade and commerce put on a right basis. All these things cannot be dissociated from the functions and responsibilities of the Government. In other words, you have got to have, in order to get stable trade, a stable policy, and you cannot have a fluctuating policy without all these difficulties.

That is my first point on taxation, and I now come to another point, in regard to which I frankly say there may be differences of opinion. I agree that since the War we have had an abundance of industrial disputes, and I cannot dissociate the state of finance, the state of trade, the general economic position of the country from the industries; and I believe there is nothing that would tend to stability, there is nothing that would cause such a revival in trade, and there is nothing that would be so beneficial to the workers themselves as what I would call a settling down in these industrial matters. Let me first say, without going into the merits of the miners' dispute, that one lesson at least that I have drawn, and that I want the country to draw, is that we have been attaching too much importance to the fear of Bolshevism and revolution in this country. Without going into the merits of the dispute, is there any hon. or right hon. Gentleman in any part of the House who would dispute the statement that, if there was a great revolutionary movement in this country, a movement that was likely to be feared, the opportunity and chance came in the mining dispute? I would ask the House to observe that it proved something else; it proved that the great mass of our people are anxious to do the right thing, and it proved that the great mass of our people do love their country. It is equally true that the real facts have not always been put clearly before the people of the country; in other words, mistakes have often been made through them being unable to understand the position, and here the Government must accept some responsibility, because people cannot understand a policy when the policy is reversed from day to day. You cannot have the workers understanding that we have been living on borrowed capital and manufactured paper money when they can see millions spent abroad. They say, "It must come from somewhere, and there is some unlimited source from which it comes." All that is bad, because it does not bring home to the minds of the people the real seriousness of the situation.

At this point—

entered the House .

Hear, hear!

I hope my right hon. Friend will understand that that applause is a compliment to me because he has missed hearing my remarks.

I hope the House will forgive me for not having been here, but I was obliged to attend an important conference.

Is the Leader of the House also engaged?

I conclude by saying that I think a great mistake is made by taking a too pessimistic view of the situation. I do not mean by that, that there is not serious ground for reflection, but I do mean that our attitude on this matter may be misunderstood abroad if we take too pessimistic a view. On the other hand, I do think that the finances and economic state of the country are sufficient to warrant serious consideration, and I have only to say that, so far as the party I represent are concerned, we are against unnecessary ex- penditure. We are against redundant offices being maintained; but, above all, we want to distinguish between real and artificial expenditure. We believe that the Government's foreign policy is responsible for most of this waste, and if this Debate brings home to the people of all sections the seriousness of the situation, and, above all, brings home to the Government their responsibility, it certainly will not have been in vain.

I should not have intervened in this Debate but for a speech delivered by my hon. Friend the Member for West Edinburgh (Mr. Jameson). He thought it right to tell the Government that they have done. everything they ought to have done in regard to expenditure, and, indeed, administered to my right hon. Friend a dose of soothing syrup, which may be very gratifying to the recipient, but which, in my judgment, is altogether the wrong medicine. My hon. Friend opposite, speaking of his own division in Edinburgh, said he had never had a question put to him on the subject of Government expenditure. I accept his statement on that particular point, but I can only say that, speaking for other parts of Scotland, I know there is no subject which excites more comment and anxiety than Government expenditure at the present time. I think it only right that that statement having been made from one part of Scotland, another representative from Scotland should give the other point of view. I do not say the average taxpayer in this country grudges paying his taxes, provided he is satisfied they are well spent; but what the average taxpayer wants to know to-day is, why is it that, out of every £l he pays in taxation, 4s. goes towards the upkeep of armaments? You may tell the taxpayer that the taxes he is paying to-day are the price of his freedom by winning the War, and he will accept that, provided the expenditure which is going on is reasonable and in the interest of the country; but I cannot give any answer to the man who asks me why to-day we are spending so much on the Army and Navy, and why the number of the Admiralty staff, to which reference has already been made, is so far in excess of what it was in 1914.

It has been said that we want to stabilise exchange. We also want to stabilise industry in this country, and the present taxation makes it almost impossible. Businesses cannot go on developing in this country if they are to be starved of capital, as they are under the present expenditure, and, not only in business life, but in ordinary domestic life, the taxes are getting almost beyond the limit which the country can bear. I have no wish to criticise the Government unduly, but I do feel that extravagance, up till now, has not been tackled in a worthy manner. There are two points of view which the right hon. Gentleman ought to bear in mind. All expenditure should be undertaken, first of all, from the point of view of the housewife, who to-day is paying high prices for all the commodities required in the household. The second point of view is that of the taxpayer, who on 1st July received his demand note for the second half of his Income Tax which, in many cases, he is quite unable to pay. I believe the people of this country would support any Government which took as its motto the reduction of expenditure. My right hon. Friend does not attach much importance to criticism in general terms. I agree; but certain specific cases have been given which, in my judgment, have not been properly answered. I ask my right hon. Friend to believe that in his own country the business men to-day are getting beyond the bounds of patience. They feel they cannot possibly develop their businesses, and they cannot understand why it is that after we have won the War and achieved our freedom we are spending such enormous sums on the Army and the Navy. I do hope that with all the ability my right hon. Friend has, and the determination that we know he possesses, he will apply his mind to this tremendous problem with all the power he has, and lay the axe with a will to the root of the tree of Government extravagance.

I had a strong hope that we should have heard a further reply from the Government on this Motion. I cannot congratulate them on the way they have treated the House of Commons this afternoon. We have not had very much consideration from them, nor have we had the presence of any Cabinet Ministers during the latter part of the discussion. I think any other House of Commons would have bitterly resented that treatment. I rise for a very few minutes to draw the attention of the House to the actual Motion before it. It reads as follows:

I listened, and I believe all hon. Members who were fortunate enough to be present listened, with great interest to the excellent speech—if I may be allowed to say so—of the hon. Member for Harrow (Mr. Mosley). The hon. Gentleman produced figures which show that we are undoubtedly suffering from too high taxation. I remember that I ventured last year on the Third Reading of the Finance Bill to make a speech, not so well conceived, but in the same sense as my hon. Friend has to-day. I put forward grounds which then existed for thinking the taxation of the country was too high, and that it was becoming so high that it would defeat its own object, and cut off at the sources very much of the taxation that could be levied. I remember the Chancellor of the Exchequer, now the Leader of the House, in reply to me, used these remarkable words: Bench and said that in his judgment we had reached the limit of our taxable capacity. That is a very serious statement. It means that every shilling beyond that is taken primarily from the prosperity of the industries of the country. We have repeatedly heard of the celebrated Circular issued by the Secretary to the Treasury in which it is stated that:

The statement issued by the Treasury shows that in order to keep that level you have to cut down expenditure by 20 per cent., and in addition to that we have a statement now that even that reduction will not do, because the revenue on which it was based can no longer be relied upon. It is a very serious situation, and I do not think anybody will doubt, in face of that situation, that the House of Commons is entitled to a carefully thought out statement from the Chancellor of the Exchequer. The answer given us is a very familiar one, and it is—What is the use of attacking expenditure unless you give us instances? My right hon. Friend knows that nothing is more difficult than for those outside a Department to select a particular case and say that that is over expenditure, and nothing is easier than for any Department to construct an admirable defence for any expenditure, and then it is difficult for anyone to destroy that defence. As a matter of fact, serious criticisms have been made which have not been answered. It shows how very bad the present finance of the Government is when even outsiders can point out grave extravagances, and no adequate answer is given to requests, for example, for information as to why you should have 7,000 more employés in the Admiralty and 4,000 more in the War Office. No answer has been given, except that the right hon. Gentleman really thinks it is a sufficient answer to say to the House of Commons that it is all caused by the difficulty of distributing medals to the Army and taking care of the graves of our soldiers in France.

My right hon. Friend is really not fair.

There was no other explanation. My right hon. Friend may have had other explanations, but he did not give them.

I said quite distinctly, as my right hon. Friend knows, that I was giving those simply as illustrations, and that I could go through a whole category of things of the same kind. The right hon. Gentleman seeks to represent them as the explanation of the whole thing.

I wish to be quite fair.

You are not fair.

I think I am. They were put forward, if not as the sole explanation, at any rate as typical illustrations of the difficulties of the Government.

No, they were not.

They were given as typical illustrations of the difficulties with which the Government are faced, and nothing else was given.

Would my right hon. Friend like me to go through the whole-category—the number of people required? to distribute pensions, and to train ex-service men according to the promises of all parties in this country when they were-asked to serve? I should still be detaining the House, and my right hon. Friend1 knows it perfectly well.

I can only take the defence which the right hon. Gentleman chooses to make. He tells me now that that was not the best defence that he could have made. Let me take the other defence: This was really the literal argument which my right hon. Friend put forward. "Do you mean to say that you would not do anything for the housing of the people? Is that your case?"

My right hon. Friend has not been listening to my speech. I said: "What would any other party have done two years ago looking forward to the necessity for houses?" I did not say anything about the people required to-day to conduct housing operations. What would my right hon. Friend have done if he had been in our place two years ago?

I certainly should not have done what the Government did. I certainly understood my right hon. Friend to suggest that anyone who objected to the housing policy of the Government was against housing reform, and, if that was not the suggestion, I am sorry; but I do not know what it was.

You should have listened.

If my right hon. Friend did not mean that, I am very glad to hear it. He says, "What would you have done?" What is the real substance of the defence? There is only one of the two alternatives—either to deal with housing, or to deal with it in the way the Government did. What I say, and have always said, is that the whole housing policy of the Government was recklessly extravagant and thoroughly ill-conceived, and what is more, 'has failed to produce the houses that were wanted. I have dealt with the first point that the-Government made. Their second point was, "We may be bad, but other countries are worse." That is a most unfortunate line of defence to take. I do not know the right hon. Gentleman did take it, but other apologists for the Government did. I do not know, too, that it is in keeping with facts. One would have to examine carefully the financial system of each of the other countries. The real point is this: if other countries are bad, and even worse off than we are, that is no comfort to us. It makes our position still worse. The great vice of the contention is that if other countries are badly off, we are so much the better in consequence.

No one argued that.

My argument is, the more you prove that other countries are badly off, the more essential it is for this country to pursue a strict policy of economy.

There I am entirely with you.

And, therefore, to say that other countries are badly off has no bearing whatever on this controversy. The question is, are we really carrying out a policy of economy. That is the only question before the House. My right hon. Friend concluded by making a reference to the Member for Harrow and to his pessimism. What we want is the real truth. We want absolutely the truth. It is a great mistake to suppose it is better to exaggerate on one side than on the other. All exaggeration is bad, and 1 say that with the more confidence because I am one of those who have constantly warned the Government ever since I came back from Paris—and I came over from Paris to warn them—of the dangerous financial situation into which we were drifting. I was accused of being a wild pessimist at the time, although everything I said then has come true. I never suggested we were on the verge of ruin. What I did suggest was that the position was exceedingly serious—so serious that even the policy of the Government in demanding a 20 per cent, reduction was, on their own showing, grossly insufficient. That is the case I make. It is one that cannot be answered. It is absolutely dependent on their own statements. My right hon. Friend says you must avoid pessimism for fear of interfering with confidence, but I hold it is much better to tell the people of the country the absolute truth, even if it is disagreeable. That is a lesson which the Government have never yet learned. The Chancellor of the Exchequer made a great sneer at the right hon. Gentleman the Member for Peebles, on the ground that he was the only wise man who had foreseen the difficulties of the situation. [HON. MEMBERS: "He said so himself!"] However that may be, it is inaccurate. Almost every financial authority, and my right hon. Friend knows it perfectly well, warned the Government. They went into this reckless policy of extravagance, not only not in ignorance, but with their eyes wide open. They knew perfectly well, or had the means of knowing, what was going to happen, but they chose, for the purpose of temporary popularity, to adopt a policy of reckless public expenditure, and the country is now paying for it.

The Noble Lord is wont to surround facts and figures with an atmosphere of so much emotion—I might almost say, I hope without offence, of heat—that I really hesitate to plunge into our deliberations immediately afterwards for the sole purpose of giving the House a little information of, I am afraid, a cold sort about various matters dealing with facts and figures that have been raised in the course of the Debate. One method of dealing with figures is to form your own conclusions in the first place, then to look to the figures which most clearly coincide with your conclusions, and, if they do not perfectly coincide, to distort them until they do. That is a method which I shall always seek to avoid. The other method which I want, if I can, to pursue is to find out what the actual figures are, and then to invite the House to draw its own conclusions from them.

There is one matter dealing almost wholly with figures which has been referred to frequently in the course of the Debate, and that is, the comparative staff of the Admiralty as it stands at present. I do not think that our understanding of this question was really very much assisted by the comparison thrown out, I think, by the hon. and gallant Member for Leith (Captain W. Benn), giving the gross increase, as shown in the Pilditch return, of 7,000. This figure of 7,000 for the increase, as shown in the Pilditch return, is entirely misleading to the House unless it is examined in a very simple manner. In the first place, the increase of 7,000 is not for the Admiralty office only, but for the whole of the establishments of the dockyards, out-stations, and all other civilian employés in connection with the Navy. Of the 7,000, 4,000 excess at the present time, in comparison with pre-War, is due to the dockyard employés. The House is aware that, owing to the conditions of industrial employment, that staff is very much more difficult to reduce rapidly, or, on the other hand, to increase rapidly. Further, owing to the enormous establishments that were taken in hand during the War at the dockyards and so on, there is still a large amount of non-recurrent work in progress, which accounts for this excess of 4,000 at the dockyards. The attention of the House has not been called to it for that reason, but for the purpose of invidious comparison in connection with the civilian staff of the Admiralty office. The total increase at the Admiralty now, in comparison with pre-War, is the balance of 7,000 after deducting the 4,000, namely, only 3,000 —a very much smaller number. Of that 3,000 excess at the Admiralty at present, in comparison with before the War, beside the matters already referred to by my right hon. Friend, the principal in-

crease in the staff is due to the Accountants Department and it is caused by the great work of liquidation which still survives and has to be done in order to wind up the enormous .undertakings of the War, a matter which I think requires no further explanation to any hon. Member of business experience. In the second place, and far less contributory to the increase of arrears, but still important, this difference is due to a circumstance which I think will explain itself to the House. It is due to the fact that there was an enormous increase during the War of every form of technical work in connection with the Navy and this very much bigger technical staff had to be employed. Here, as in other regions, the work of winding up the reduction of staff is in progress and will be carried out. To-day the staff is 5,200, a reduction of 50 per cent, as compared with the time of the Armistice. Steps have already been taken which will, it is anticipated, further reduce the staff by at least 20 per cent, of its present strength by December next, and a further 15 per cent, of the residue in the course of the next Financial Year.

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

The House divided: Ayes, 194; Noes, 43.

Bill read the Third time, and passed.

I beg to move, "That this House do now adjourn."

I would like to make a brief statement. Statements have appeared in certain organs of the Irish and the English Press attributing words of grave consequence, to His Majesty the King relating to Irish policy. They appear in the form of an interview which Lord Northcliffe seems to have given in the United States of America, and to have forwarded to his newspapers here for publication.

It is quite impossible always to follow these calumnious statements, but here they are of a very categorical character, and attribute very serious statements to the Sovereign. Moreover, they are calculated at the present moment, if believed, to prejudice seriously the chance of an Irish settlement, and they have been circulated very freely, more specially in Ireland.

His Majesty has therefore authorised me to read to the House of Commons on his behalf the following statement which I have just received:

His Majesty the King has had his attention directed to certain statements, reporting an interview with Lord Northcliffe, appearing in the "Daily Mail" and reproduced in the "Daily Express" and some of the Irish newspapers. The statements contained in the report are a complete fabrication. No such conversations as those which are alleged took place, nor were any such remarks as those which are alleged made by His Majesty.

His Majesty also desires it to be made quite clear, as the contrary is suggested in the interview, that, in his speech to the Parliament of Northern Ireland, he followed the invariable constitutional practice relating to Speeches from the Throne in Parliament.

I hope that this announcement may do something to sterilise the effects of the criminal malignity which, for personal ends, is endeavouring to stir up mischief between the Allies, and misunderstanding between the British Empire and the United States, and to frustrate the hopes of peace in Ireland.

The House generally will appreciate the action of the Prime Minister in dealing with this matter in the only place in which it ought to be dealt with. Any public man must, of necessity, be subject to criticism and difference of opinion. The Government to-day can be no exception. But this House need not on any occasion be called upon to take sides on criticisms of public men or even representatives of newspapers. After all, there is an issue raised in this matter that is of more importance than either the House, politicians, or newspaper proprietors. The position that His Majesty occupies in this country to - day is a position second to none occupied by any king in any part of the world. I believe that is due to one good and sound practice. It is, first, that His Majesty recognises no distinction between classes or creeds, and he realises that the interests of the whole people are his first and paramount consideration. The second reason is that His Majesty acts as a constitutional monarch. If the party to which I belong came into power to-morrow, we all believe that His Majesty would accept our advice as he now readily accepts the advice of his present Ministers. That is not only the duty of His Majesty, but it is the practice that he is always anxious and willing to follow. That makes His Majesty the strong Monarch that he is to-day.

Therefore I believe that it is the duty of all of us in this House to associate ourselves with the dignified protest that His Majesty makes—a protest that His Majesty is entitled to make, not only in his own interest, but in the interest of constitutional government in this country.

I take this opportunity of saying that more than once in grave industrial disputes efforts from different quarters were made to involve His Majesty. I always took the view that no greater disservice could be rendered to the Throne, for many and obvious reasons. In the same way, and following the same rule, I believe it is wise that it should be made clear to all parties. Therefore I am glad that this opportunity has been given, not merely in the interests of the Government, but in the interests of the House of Commons, which represents the country, to place on record our feeling that His Majesty the King has not taken what otherwise would have been an unconstitutional action, and that nothing that has been said by anybody for interested or Press purposes will prevent that peace in Ireland which we desire, and for which the whole country looks at this moment.

In one sentence, may I say that His Majesty has been one of the truest exponents of the real constitutional doctrine that the British Throne has ever known. In his repudiation of the words which have been attributed to him, His Majesty has acted in accord with what the whole of the people of this country and his faithful Commons expected of him.

Question put, and agreed to.

Adjourned accordingly at Four o'clock till Monday next (1st August).