Considered in Committee.

[Mr. JAMES HOPE in the Chair.]

It is usual, in opening the Budget, to compare the current year with the last, but on this occasion, in presenting a fifth Budget, at the close of a Parliament, I feel entitled to look back over the whole period for which we have been responsible. It has been a chequered story. The difficulties have been more prominent than the good fortune. The immense industrial disaster of 1926 has cut a deep gash across the statistical record of our national life. I thought at one time, and I so informed the House of Commons three years ago, that the finances of the Parliament would have been completely ruined by a loss to the Exchequer, which, including the coal subsidy of 1926, was certainly not less than £80,000,000. However, on a review of the past five years, I must admit that matters have worked out a good deal better than I hoped or expected. [An HON. MEMBER: "Or deserved."] No one has more interest in things going well than the Government of the day and the Minister responsible for the finances of the country. In spite of the injury to every form of national life by the follies of 1926 we have realised a respectable and, as I shall show, a solid surplus in the year that has closed. The material prosperity of this country, whether judged by the condition of its finances, by the volume of its trade or by the saving and consuming power of its people, has maintained a steady advance. For more than two years now we have enjoyed a lucid interval without a general strike or a period of general elections, or a general war. That is the longest lucid interval that I can remember since 1914. Two years' recuperation is quite a long time for this country to allow itself between its ordeals, and, naturally, after two years of peace and quiet there must be a sensible improvement in the general situation.

I will give the Committee a few facts and figures. During the present Parliament the savings of the smallest class of investors, measured by the Post Office Savings Bank, the National Savings Certificates, Building and Provident Societies, and other thrift agencies, have increased by £170,000,000. New purchases of Savings Certificates, which were £31,650,000 in 1926 and £36,000,000 in 1927, have risen under the chairmanship of my right hon. Friend Major-General Seely to £40,850,000 in 1928. The number of persons employed in the insured trades has gone up by 591,000. The cost of living, according to the latest figures, which I only received at the end of last week, has declined by 18 points at least, while money wages over the whole country are almost exactly at the level of 1924. There has been a notable decline in the consumption of alcoholic liquor, accompanied by a progressive diminution in drunkenness. The consumption of working-class indulgences has shown an increase generally, though it is naturally much more marked in the southern parts of the island. Motor bicycles, silk garments, popular amusements, excursions by train and char-a-banc, have all shown a moderate, steady increase, and this in spite of the shocking injuries we have inflicted upon ourselves in the course of the period I am reviewing. But the symptom upon which I dwell with more confidence than any other as indicating the general position of the masses of the people is the increased consumption of tea and sugar. In the palmy days before the great War, the British people consumed each year per head 6.55 lbs. of tea and 81 lbs. of sugar. Last year, after all that had happened at home and abroad, they consumed per head 9.15 lbs. of tea and 90 lbs. of sugar. That is the record consumption of these commodities. The breakfast table duties are the traditional Gladstonian indices of the condition of the wage-earning masses, particularly of the unorganised masses, and especially of the poor. Under all the froth of our turbulent party fights and in spite of all our common faults and shortcomings, it is at any rate satisfactory to note this steady and marked improvement in such an important feature.

Coming now to the commercial sphere. The balance of trade has sensibly improved, and the power of this community to invest capital abroad, thus fostering our export trade, has risen from £86,000,000 in 1924 to £149,000,000 in 1928. New capital issues for home investment in 1928 show a growth of about £100,000,000 over those of 1924. Municipal and industrial issues in the United Kingdom have risen from £70,000,000 in 1924 to £180,000,000 in 1928. Bankers' deposits have risen by £140,000,000, or about 8 per cent. Five hundred million more letters were written and 700,000 more motor vehicles used last year than in 1924. To sum up, whatever may be the fortune of particular industries or particular localities, there is no doubt that we all dwell to-day in a more powerful, more wealthy, more securely founded, and more numerous community than five years ago. There is no doubt that we are steadily improving our own conditions, and that compared with most European countries we are maintaining our old pre-War level. Of course, our progress during these years has been relatively far outstripped by the United States of America, which gained great advantages in the War and has displayed a far higher stability of purpose ever since.

I almost hesitate to mention to the Committee the subject of public economy. We are assured on all sides that the only way to gain the approval of the modern electorate is to spend money as fast as possible and on an enormous scale. The two Opposition parties vie with one another in promises of vast expenditure; the only difference between them is that the Labour party would get the money by taxation and the Liberal party would get it by borrowing. A Surtax of 2s. in the £ levied on investment incomes in excess of £500 a year would, if nothing disappointing happened in the collection, produce £65,000,000 a year provided it was levied on the reserves and investment incomes of companies as well as on the investment incomes of individuals. Such a sum would only be obtained at the cost of a very sharp setback to every index of national prosperity. But the right hon. Gentleman the Leader of the Opposition has already distributed the £65,000,000 at least four times over. The Surtax, originally proposed for the reduction of the National Debt, is now to pay for the free breakfast table, for the replacement of all the McKenna, silk, luxury, safeguarding and key industry duties, as well as for the £200,000,000 or £300,000,000 of the Socialist social programme. I must observe that in this field, at any rate, there will be disillusionment—and disillusionment in our own time.

The Liberal opposition would proceed to capture the great heart of the people by borrowing. The right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) proposes to borrow £200,000,000, and to spend it on roads and telephones in order to cure unemployment. Borrowing, if your credit has been carefully looked after, is often feasible, and it is always an easy way of avoiding disagreeable) things like work and and self-denial. It saves a lot of trouble. Instead of having to earn the money and save the money, you just go and borrow. What a lucky thing that in this crisis of our fortunes such a brilliant idea should have struck the right hon. Gentleman! Spending money, borrowed or otherwise, while it lasts is always good fun. There must be many hon. Members who from their personal observation or even experience can confirm that view.

Accordingly, the right hon. Member for Carnarvon Boroughs is going to borrow £200,000,000 and to spend it upon paying the unemployed to make racing tracks for well-to-do motorists to make the ordinary pedestrian skip; and we are assured that the mere prospect of this has entirely revivified the Liberal party. At any rate, it has brought one notable recruit. Lord Rothermere, chief author of the anti-waste campaign, has enlisted under the Happy Warrior of Squandermania. The detailed methods of spending the money have not yet been fully thought out, but we are assured on the highest authority that; if only enough resource and energy are used there will be no difficulty in getting rid of the stuff. This is the policy which used to be stigmatised by the late Mr. Thomas Gibson Bowles as the policy of buying a biscuit early in the morning and walking about all day looking for a dog to give it to. At any rate, after this, no one will ever accuse the right hon. Gentleman of cheap electioneering.

I am afraid that after these spacious figures, running into hundreds of millions, the Committee will be ill-inclined to follow with much interest the modest savings we have been able to effect in the course of last year and in the lifetime of this Parliament. Nevertheless, in presenting the public balance-sheet it is my duty to draw attention to them. Our greatest economy in this Parliament has been upon armaments. The Navy, the Army, the Air Force, including the Middle East, which was not included in the military Estimates for 1924, have yielded savings of over £7,500,000 compared with the year of the Labour Government. The Navy had a specially difficult task because the Labour Government, quite rightly in my opinion, laid down five cruisers, which cost Lord Chelmsford's Estimates only £1,500,000, but cost the Estimates of my right hon. Friend the present First Lord nearly £10,000,000. I certainly expected, and I stated so four years ago, a figure for Navy Estimates substantially larger than we have now, and I think that great credit is due to the First Lord of the Admiralty and to the Board of Admiralty for the way in which they have managed to provide for the heavy cost of an increase in the new construction vote, not only without appreciable addition to the Socialist Estimates, but, if you take the increase of the non-effective charges and the transference of the Fleet air arm from Air to Navy Votes into consideration, with an actual diminution of £1,750,000 a year. This represents five years of careful and resolute work which is naturally much against the grain to naval men. But I admire them for the persistency with which they have carried it out.

The Army has been administered by the Secretary of State for War with progressive and increasing frugality. Every single year he has effected further reductions. When he first went to the War Office, in 1921, the Estimates, in the dying momentum of the War, were £80,000,000. When, at the beginning of this Parliament, he went there they were £45,000,000. They are now £40,500,000, and the later diminution has been achieved, not only without loss of efficiency, but in spite of the serious necessary new expenditure on what is called mechanisation.

It was, and I believe it still is, common ground that the Air Force should be expanded into some reasonable defensive relation with those of our Continental neighbours, and programmes were approved six years ago which would have carried the expense of the Air Force in the ordinary course to £21,000,000 this year. The actual expenditure is £16,000,000. It is mainly through the agency of the Air Force and the thrifty genius of Sir Hugh Trenchard that my right hon. Friend the Secretary of State for Air has been able to bring the cost of the Middle East, which before the Cairo Conference of 1921 was £44,500,000 a year, down to just over £500,000 a year at the present time, and to effect a reduction, within the lifetime of the present Parliament, of £4,250,000 a year. In all, the reductions made by the present Government under these four heads—that is, the three fighting services and the Middle East—aggregate over £7,500,000 a year. I hope the Committee will excuse me for mentioning such a trifle, in view of the megalomaniac projects of expenditure which we are told are now so popular.

I turn to the Civil Supply Services. The steady growth of expenditure on the Civil Supply Services existing in 1924, notably housing, health and education, has added £11,500,000 to the public burdens. Old Age Pensions, partly as a result of our legislation and partly by the automatic growth occurring as the result of previous legislation, have increased by £10,500,000. In addition, we are providing in the present year for several services which were not ill existence in 1924—Widows' Pensions, beet sugar, schemes for the training of transference of unemployed, additional expenditure on agriculture—amounting in all to £8,500,000, or a total increase of Civil Supply Expenditure from all these causes of £30,500,000. This increase has been partly offset by automatic reductions, chiefly in War pensions through the dying-off of War pensioners and the re-

marriage of War widows. This offset amounts to £18,500,000, leaving a net increase of £12,000,000. But I ask the Committee to note—and I ask them to give due credit to this achievement—that by savings elsewhere, year by year and month by month, effected in small sums over wide areas and prolonged periods, His Majesty's Government have been able to show, instead of an increase of £12,000,000 as compared with 1924, an actual decrease on Civil Supply of £5,500,000. It has been able to show that decrease for services which are appreciably larger, more comprehensive, more varied and rendered to a population which is greater by nearly 1,000,000 souls.

In the year just closed I have been able to repeat the salutary process which I started three years ago of a second scrutiny of the spending Departments after the Estimates have been approved by the Cabinet and by Parliament. I took no money in the last Budget for the extra troops in China. I have had to face £3,500,000 worth of Supplementary Estimates—acceleration of the freight relief, £1,000,000; extra Old Age Pensions, £559,000; transference and training of unemployed, £460,000; contribution to the Lord Mayor's Fund, £857,000, and that act of generosity towards the sufferers from Irish injuries on which the House resolved, £385,000, or a total of £3,600,000 odd. But, notwithstanding all this, the actual expenditure on Supply Services is less than the original Budget provision by £2,600,000, entirely through economies of over £6,000,000 effected during the year, by day by day administration, after the Estimates had been passed.

Before leaving this question of economy, may I say that, in my judgment, there is no room for large cuts in the social services. Large cuts in armaments are dependent upon international agreements which, I fear, will not be as easy to reach as we would all hope, and, even so, we are limited by the absolute requirements of the safety of this island and of the community of the British Empire. A process of continued refinement and reduction can and should and must go on, but we cannot break up our social services around which the life of the people has so largely been built. We cannot make any large reductions in the Navy without falling below the one-Power standard, which, in my opinion, would be a fatal decision, or without jeopardising our food and trade routes. We cannot further reduce the police force which we call our Army without failing to retain the Cardwell system of linked battalions upon which depends the whole economy of the garrisons which we have to keep in India and elsewhere overseas. We cannot arrest the development of the Air Force without placing ourselves largely at the mercy of that very neighbour, for subservience towards whom we are repeatedly reproached, and whom the right hon. Gentleman the Member for Carnarvon Boroughs is never too busy to offend.

I will now, if the Committee will allow me, come to the question of the gold standard and the cost of living. Everyone knows, or pretends to know, the arguments for and against the gold standard. No one has ever denied that it carried with it privations as well as rewards. My hope and faith is that the privations are minor and temporary and that the rewards will be major and permanent. Everyone knows, for instance, that the gold standard renders inflation impossible and that its introduction deprives the exporting power of a country of the hectic stimulus of a collapsed exchange. Everyone knows that a fall in prices, although it may bring you into truer relation with the outside world and although it is in the long run an advantage of the highest kind, is, while it is taking place, disheartening to the producer at home. Everyone knows that our present policy of paying our debts and maintaining a sound currency implies inevitably high taxation, national sacrifices, and some suffering.

I now come, having dealt with economy and the cost of living, to the Debt operations of the present Parliament. [An HON. MEMBER: "What about wages?"] Money wages are equal to those of 1924, taken over the country as a whole. The nominal dead weight Debt has fallen from £7,598,000,000 to £7,501,000,000, or by a total of £97,000,000. But such nominal figures, as I have several times explained, are misleading as a test of the progress made. They fail, for instance, to discriminate between such totally different liabilities as a £100 bond payable next week and a nominal £100 of the old Consols, which need never be repaid, except at the option of the Government, and will in fact never be repaid until some remote date when the interest rates are in the neighbourhood of 2½ per cent. But on a direct actuarial valuation, on the basis of the 4¾ per cent. tables—that is to say, taking every separate stock we have issued and calculating its own actuarial value—on this basis, which is the nearest basis we can get to a true scientific valuation, the obligations imposed on the State by the existing debt contracts have fallen in the last four years by £175,000,000. But this figure of £175,000,000 takes full account of all unpaid Savings Certificates interest. If it were open to me to follow the example of every previous Administration in ignoring that unpaid interest, the reduction in the four years would not be £175,000,000, but over £200,000,000. That is not as much as we had hoped, and it is not as much as eminent Liberal economists, or ex-economists, as I am afraid I must say, like the right hon. Member for West Swansea (Mr. Runciman), have often told us it ought to be, but it represents an immense exertion and sacrifice by the taxpayer and the Exchequer. At any rate, the right hon. Member for Carnarvon Boroughs ought not to cavil at it, because it is almost exactly the sum of £200,000,000 which, in trying to win the General Election, he now proposes to borrow and spend in a couple of years. At least we may console ourselves by feeling that the thrift of a Parliament has provided the raw material for another Yellow Book. We have painfully and toilsomely gathered together our meagre savings, and they are now to be butchered to make a showman's holiday.

4.0 p.m.

During this Parliament we have been passing through a period of enormous maturities in respect of the medium term debt consisting principally of National War Bonds, and no less than £1,105,000,000 of debt has fallen due for payment, over and above the ordinary very large transactions upon the Floating Debt. These maturities have come upon us at obligatory moments even in the worst period of 1926, as I said at the time, like Atlantic waves sweeping the deck of a labouring ship, and I have been forced to repay or convert over £1,160,000,000 in four years, that is to

say, at an average of £23,000,000 a month during the whole lifetime of the Government, an experience unprecedented. But the greater part of the task is now over. These comparatively short-term bonds have now, been largely replaced by longterm debts, and their volume has shrunk from 17 per cent. to 9 per cent. of our total liabilities. An easier period lies ahead. The total Debt falling due in the next four years, which the Government is under compulsion to redeem, amounts to no more than £321,000,000, or much less than one-third of that we have had to deal with in an equal period, and the removal of this recurrent preoccupation and disturbance undoubtedly simplifies the prospects of dealing with the conversion of the 5 per cent. War Loan, which still remains the greatest and most fruitful financial operation likely to be open to the British people, With one single exception every conversion for which I have been fully responsible has effected a saving to the taxpayer, and the total saving from Conversions has been £1,500,000 a year. The one exception was the £62,000,000 of the 3½ per cent. War Loan. This was issued at the beginning of the War at the low rates of interest then prevailing. It was issued under conditions which made it redeemable at par at a fixed date, which fell in my tenure of office, and, of course, the money had to be reborrowed at the post-War rates. That involved us in an annual addition of £700,000 to the charge for the Debt. But for that, the reduction by conversions in the annual public burdens would not have been £1,500,000, but £2,250,000. In the meanwhile—[ Interruption]—in spite of all the help which we were given in 1926—in the meantime, by the constant operation of the Sinking Fund, the interest upon the Debt has been reduced by £9,500,000 a year, and with the saving by conversion, the total reduction in the annual cost of our permanent borrowing is £11,000,000 a year.

Why then, it will be asked, has the total snnual charge for the service of the Debt increased? There are two reasons. First of all, the accumulated interest on the Savings Certificates encashed, which, in 1924, was only £7,000,000, was in 1923 nearly £18,000,000. If, throughout, the British Government had faced their obligations on these Certificates as we are now doing, there would be no such difference in the two periods. The increase in the charge on account of Savings Certificates has accounted for £11,000,000, and thus the real reduction effected on the other permanent parts of the Debt Charge has been veiled. The second cause is the Treasury Bill rate. In 1928 that rate, contrary to expectations at the beginning of the year, proved high, and the cost of the floating Debt was £5,000,000 higher than in 1924, although the Debt itself was somewhat smaller. The Treasury Bill rates in the last seven or eight years have fluctuated to such an extent as might easily make a difference of £20,000,000 to the Budget. The Treasury Bill variations are in their nature temporary, and neither the Treasury Bill rate nor the fact that we have faced our obligations on the Savings Certificates should be allowed to obscure the solid and irrefutable fact that the actuarial value of the Debt has been reduced by £175,000,000, and the permanent annual cost by £11,000,000. There is, therefore, no ground for supposing that the exertions of the taxpayer in maintaining the Sinking Fund have not yielded a full proportionate diminution both in lower interest charges and in regard to the aggregate Debt liability.

I come to the surplus of 1928. It would seem almost that I ought to apologise to both the Oppositions for the size of that realised surplus. They seem to show almost as little enthusiasm—it is only human nature—when the surplus goes up as they do when the unemployment figures go down. The right hon. Member for Colne Valley (Mr. Snowden) has rebuked me, in his excursions in the Press, for having raided the Sinking Fund. I have not raided the Sinking Fund. I have only carried out the law which Parliament enacted last year. People cannot pretend that they do not understand legislation. If they do not, they ought at this moment to conceal the fact. I have only carried out the law which Parliament passed last year. I have simply fulfilled the statutory requirements of a fixed annual Debt charge of £355,000,000. This was specially augmented last year by £14,000,000 in consequence of the windfall from the currency note account and the total immense sum of £369,000,000 was, as prescribed by Parliament, devoted to the service and extinction of debt. At any rate, the right hon. Member opposite, my predecessor, is in no position to criticise me. I provided last year £57,500,000 for the Sinking Fund out of the fixed Debt charge as against £45,000,000 which he thought necessary when he framed his Budget, and I provided £18,000,000 for the Savings Certificates, as against £7,000,000 which was all he provided—and he had not had a General Strike. The fact is that on these two heads—the extinction of Debt and the prevention of future Debt—I have provided £75,500,000 as against the £52,000,000 which he thought, and which, at the time, I thought proper, or £23,500,000 more money was found last year than he provided. To be quite fair, I ought to make allowance for the concealed Sinking Funds which I mentioned to the House last year, and take off £5,500,000—I am glad the hon. Member for West Leicester (Mr. Pethick-Lawrence) is approving of this—and making allowance for this £5,500,000, I have in fact provided for the extinction of Debt and non-incurring of Debt, £18,000,000 more than the right hon. Gentleman.

I am not using that argument in order to plume or preen myself over the right hon. Gentleman. I am only doing it to protect myself against his future unkind-ness. I am very glad I persuaded Parliament to assent to this arrangement, and I expect anybody who occupies the position I now hold—[An HON. MEMBER: "Not for very long "]—we are to have further information about that—will be very glad that the fixed Debt charge has been established. What could be more absurd than to mix up Supply expenditure, which depends upon the decision of the Government of the day and the House of Commons, with the fluctuations in the world money market? We were all agreed last year that our accounts ought to be simplified so as to-separate the healthy growth of revenue on the Post Office and Road Fund from the ordinary Supply expenditure, and to isolate the expenditure which represents the cost of national administration, and the accounts are now presented in that form. But how much more absurd would it be that any Chancellor of the Exchequer should labour for the best part of the year to claw back £5,000,000 or £6,000,000 from the spending departments, and that the Treasury should fight week after week over £100,000, £50,000 or £10,000 of expenditure, and then when this £5,000,000 or £6,000,000 has been saved, as the result of this harassing and unpopular process, the whole fruits of this conflict should be whisked away because the Bank Rate has had to be put up or because more Savings Certificates have been encashed than was foreseen? I do not hesitate to say that if the House of Commons wishes to keep strict control over expenditure and be continually in a position to curb and check the tendencies to profusion of Governments and bureaucracies, the vital step to take is to isolate controllable expenditure from other elements in the Budget, to set it, as it were, on a pedestal or, if you like, in a pillory, where it is nakedly exposed to the public gaze.

That is what we have tried to do, and that is what we have done in fact. On the one hand, the new system of accounting thrusts away from the ordinary expenses of Government the healthy normal growth of reproductive departments, and, on the other hand, we wall off into a separate water-tight compartment all the fluctuations of finance to which we are subjected by the fact that we remain the central money market of the world, and we think it well worth our while to exert ourselves so to remain. Thus there is left for the criticism, censure or approval of the House of Commons, the direct cost of managing and guarding the State. Instead of all these quite different things being jumbled together and a muddled total presented, I have stripped onerous and controllable expenditure of every cover, so that henceforward it can be accurately and stringently examined and measured by the House of Commons. I do not think that this system will be altered in the future. It may be too much to hope that the £355,000,000 fixed charge will be maintained in force for the next 50 years, in which case the Debt would be extinguished, but it certainly ought to be maintained for longer than anyone in this present Assembly lives-upon the surface of the globe. But, however that may be, I claim to have placed future Chancellors of the Exchequer in a position where the extravagance or economy of the Governments they represent can be clearly and justly judged.

I come now to the expenditure for 1929. I estimate the Consolidated Fund Services as follow:

I will now forecast, in the light of 1928, the revenue of 1929. Last year Customs and Excise showed a deficit of £8,400,000. That is almost entirely accounted for by beer alone, which showed a shortfall from the estimate of £7,350,000. That is an Exchequer embarrassment, but it is not a national misfortune. The depression of the basic industries and the impoverishment of a large part of the wage-earning classes through the troubles of 1926 are a partial explanation, but in the main there has been a steady decline in the consumption of alcoholic liquor throughout the island. That is due to a change in national habits and to the growth of alternative attractions. After making full allowance for all the improvements in trade conditions which may be expected, I cannot estimate for more than £79,000,000 of beer revenue in 1929. The move- ment towards greater temperance appears general among all classes, for the wine revenue fell short by £650,000; and, if spirits showed a quite unexpected increase of £300,000 upon the Estimate, that is entirely due to the exceptionally cold weather through which we have passed. In the whole field of this revenue, even prosperity will bring no marked expansion. I think we may all dwell with some complacency upon the results which regulated freedom, corrected by high taxation, have shown compared with those which have followed—or perhaps I ought to say which have flowed—elsewhere from prohibition, tempered by bootlegging.

The sugar remission of last year cost £1,000,000 more than I had expected. That is due to the very rapid shrinkage in imports of foreign refined sugar. Whereas in the three years ending in 1927 the British refining industry had fallen to a 50 per cent. share of the home market, it had already risen to 70 per cent. in 1928 and is still expanding. Contrary to the predictions of the right hon. Gentleman the Member for Colne Valley, who was very lavish in his predictions and assertions last year, the farthing remission reached the consumer, and so far from being withdrawn after a few months, it was reinforced by another farthing, which was due to the abundance of sugar supplies throughout the world, and to-day the consumer is paying a halfpenny less on an average for granulated sugar than a year ago. There is very little to complain of in that. The Betting Duty yielded £2,250,000 in 1928 owing to the higher rates being in force during the flat racing season. The full yield of this Duty at the new rates established on 1st October, 1928, would be £1,400,000. The new Oil Duty yielded £800,000 above the £12,200,000 which was my final estimate after the exclusion of kerosene. This duty has proved extremely easy to collect, and it has not checked the rapidly increasing use of petrol as much as we thought it prudent to allow for. After considering all that has taken place, I put the Customs for 1929 at £126,000,000, and Excise at £131,950,000, a total of £257,950,000. I have put the Exchequer share of the Motor Vehicle Duties at £4,700,000.

I turn to Inland Revenue. If the Committee will consult the Blue Paper, they will find, in Table 2, details of the Inland Revenue in the year now closed. Income Tax exceeded the Estimate by as much as £4,700,000. This year, we have to face the increased cost of the children's allowances, but even taking that into consideration, I look forward to a receipt, in 1929, of £239,500,000 from Income Tax. The Death Duties yielded the record figure of £80,500,000, showing £8,500,000 above the Estimate, and £3,000,000 above the high yield of 1927. This duty has been substantially underestimated for the last two years, and I feel justified in taking a definitely more favourable view of its prospects than before. Therefore, I put the Death Duties for 1929 at £81,000,000, an increase of £500,000 above the record figure of the present year. Stamps, through the continuing activity of the Stock Exchange and the flotation of new companies, yielded in 1928 £2,000,000 more than the Estimate, and £3,000,000 above 1927.

At this point, I shall indulge myself once more in brief retrospect. Let the Committee remember the formidable subtractions from the revenue I have had to face. The remissions of revenue made by the light hon. Gentleman the Member for Colne Valley cost £13,500,000 more in a full year than in the year in which they were made. The special receipts from war stores have dropped by £11,500,000 since his day. The revenue from beer and spirits has fallen during my tenure by £10,500,000 a year. I have remitted £41,000,000 of Income Tax, and £4,000,000 upon sugar. Thus the total adverse tide which I had to face has been over £80,000,000 a year; and beyond this the coal stoppage cost the Exchequer, £80,000,000, spread over four years. In order to avoid the reimposition of severe taxation, I have brought into the revenue of these difficult years £19,000,000 from the Road Fund, £10,000,000 from the brewers' credit, £17,000,000 from the earlier collection of Schedule A, £14,000,000 from the Currency Note Account and unclaimed dividends, £60,000,000 in all. But these non-recurrent receipts are substantially less than the losses of the coal stoppage. [ Interruption.] I do not want to use a controversial term. We have always agreed to call it the coal stoppage.

There still remained a permanent gap in revenue of over £80,000,000. All this had to be filled. On the other hand, we had the debt settlements and we have the working of the Dawes plan, for which matter the right hon. Gentleman the Leader of the Opposition deserves all due and lasting credit. These have together secured to us increased receipts of over £23,000,000 a year, that is actual receipts of £32,000,000 or £33,000,000. There has been an increase in the Post Office surplus of £4,500,000. The General Exchequer share of the Motor Vehicle Duties is £4,500,000. The general growth of the yield of taxation has been £38,000,000. Lastly, in the place of the £45,000,000 of remitted taxation, we have increased the old taxes upon wines, tobacco and matches by some £6,000,000; and have devised new taxes upon luxuries like silk and artificial silk, the McKenna duties, duties on tyres, and in addition there are various safeguarding duties. Together these yield over £13,000,000 a year. Thus the new receipts of the Parliament aggregate £89,000,000, and more than fill the formidable gap I have described. I thought it would interest the House to realise, what changes, in fact, had actually taken place in the character of our taxation.

Of the group of new import duties, which together yield a revenue of £13,000,000, it is certainly true to say that they are far less burdensome to industry and to trade than the income tax which would be required to replace them. To pretend that they are a burden on the wage-earning classes is pure nonsense. To treat them as if they were on the same footing as sugar, or even on the same footing as beer, tobacco and popular entertainments, is also absurd. Foreign motor cars or motor tyres, foreign pianos, silk garments, or even betting, are not forms of expenditure which compare, at any rate, with tea and sugar as essentials in the cottage budget.

No doubt we shall very soon be arguing on public platforms about the effects of the McKenna, Key Industries and Safeguarding Duties, and certainly that is a contest about which we feel no anxiety. But there are some duties which are not the result of any Committee or any general statutory enactment, but for which I personally am responsible as Chancellor of the Exchequer, and about which I should like to say a word. I take first silk. We have had four years of the Silk Duties. Everyone can remember—if people nowadays remember anything—the long Parliamentary controversy which marked the passage of those duties. According to the right hon. Gentleman the Member for Carnarvon Boroughs I was to be hanged in a silken halter. [An HON MEMBER: "Wait and see!"] I am quite ready to wait and see. At any rate, it will be a cheaper halter. Let us see what has happened. The import of foreign artificial silk yarn has shrunk to a quarter; the British export has increased by 50 per cent.; home production has risen from 26,000,000 pounds to 51,000,000 pounds; 21 new factories have been erected in this country, some of them by foreign firms.' The insured persons employed in the silk and artificial silk industry have risen from 46,500 when the duties were passed to over 70,000 in 1928. The home price of artificial silk yarn has fallen by 25 per cent., and the quantity available for home consumption has increased by 50 per cent. And as a final result we have an assured revenue of over £6,000,000 a year. It requires a very pedantic purist to frame an indictment against such a duty. When the right hon. Gentleman the Member for Colne Valley has a little leisure, perhaps he will re-read the speeches he delivered against the Silk Duties during their passage, and will compare the assertions and the prophecies of which he is always so free with the facts and results as we know them today.

Very much the same story has revealed itself in respect of the protective or quasi-protective and revenue duty imposed upon foreign motor tyres. Six foreign factories have been established in this country, and increased employment has resulted, the export of British tyres has been fully maintained, the import has been diminished by more than a half, and the price of tyres has fallen 15 per cent. since April, 1927.

However, there is one of the new taxes for which I am responsible which has been a failure, which, indeed, has been a fiasco, and which obviously has caused more trouble than it is worth. I mean, of course, the duty on betting. Here was a project which had behind it a greater backing of public opinion, so far as the newspaper press expresses public opinion, than any other project of taxation of which I have ever heard. Newspapers as widely separated in view as the "Morning Post," the "Star," the "Spectator" and the "Church Times" ardently advocated the duty on betting, and many of those who had studied the subject with great attention thought a revenue of £6,000,000 or £7,000,000 a year, or even more, could be obtained from the taxation of this highly-luxurious dissipation. In practice, however, the duty has failed. The volatile and elusive character of the betting population, the precarious conditions in which they disport themselves, have proved incapable of bearing the weight even of the repeatedly reduced burdens we have tried to place upon them. It has become plain that the collection of this duty in this shape has been vitiated because it has not worked fairly. It is being paid exclusively by the honest bookmaker—who has been unable to avoid it. The very fact that he has paid the tax has placed him at an invidious disadvantage compared with more slippery and unsubstantial rivals. I shall say with the great Burke,

"If I cannot have reform without injustice, I will not have reform."

I must admit that in considering this question I have also been influenced by a sense of obligation towards the Labour party, particularly towards the Leader of the Opposition. It is scarcely a year ago since the right hon. Gentleman told the country that His Majesty's Government, in deriving advantage from the duty upon betting, had become a parasite upon damnation. Scarcely a month ago the right hon. Gentleman, seduced by the spectacle of 100 bookmakers' motor cars at the Battersea election, showed himself only too ready to become a parasite upon damnation. [An HON. MEMBER: "It damned your candidate!"] It is in the common interest that we cannot afford to have the ideals of great parties debased in this manner. We must not lead the weaker brethren into temptation. We must not expose a young, new, callow, half-fledged organisation to the seductions to which, in their immature state, they will infallibly succumb, and it is out of consideration largely for them, and for their reputation, that I have decided that the turnover duty upon betting should be immediately repealed. [An HON. MEMBER: "How about the motor cars now?"] I shall, however, continue to levy the personal licence duty of £10 upon all bookmakers, and, in addition, a licence duty of £40 a year upon every telephone installed in a bookmaker's office. The yield of these licence duties is estimated at £500,000 a year. We have as a monument of the betting tax, thanks to the zeal of the hon. and gallant Member for Abingdon (Major Glyn), the healthy machinery of the Totalisator, and upon this will be imposed a tax of one-half per cent. of the takings, which I have been led to believe is a fair equivalent to the licence duties upon bookmakers. The cost of these changes will be £850,000 in the current year and £900,000 in a full year.

It will be convenient for me at this point to deal with several minor but not necessarily uncontroversial topics. I have only one new tax to impose this year, and it is a very small one. I have been told that the fact that the rating relief, as given to brewers, distillers and tobacco manufacturers, is capable of being used by people of unscrupulous character and low mentality—such as are certainly not present in this House—as a means of prejudicing the scheme for giving rating relief to productive industry. Here, again, it is our duty to help our weaker brethren, and not to place a stumbling block in their path. Luckily, there is a convenient method which does not mar in any way the general symmetry of our rating reform scheme or the principle on which it is based. Manufacturers' licence duties have now long been levied, though at very low rates, upon brewers, distillers and tobacco manufacturers. I propose to raise those duties so as to take away from these industries the equivalent of the relief they will obtain under the de-rating scheme. There is not the slightest reflection or stigma upon those industries; on the contrary, some of their leading representatives have publicly stated that they do not wish to benefit by the de-rating proposals, and it is very much to their credit that they have made that statement. The date of the imposition of these increased duties will be arranged, as the Scotch would say, "timeously" with the currency of the relief, and therefore these three industries will neither gain nor lose by our proceedings. The relief they would obtain in the normal working of the de-rating scheme is now estimated at £480,000; and the manufacturers' licence duties will be raised as described in detail in the White Paper, so as to produce a new revenue of like amount.

I now pass to a more amiable concession. For many years it has been contended that the Liquor Licence Duties which were imposed in 1910 stand at too high a level in view of the curtailment of the hours of sale. I stated in last year's Finance Bill Debates that this contention was justified so far as on-licences are concerned. I had not then the means at my disposal to remedy the grievance, but I now propose to reduce the licence duties payable by on-retailers by 25 per cent. This concession will take effect on the 1st October next, and will cost £950,000 in 1929–30 and £970,000 in a full year. At the same time, I propose to meet a demand, which has been frequently urged in Parliament for the convenience of the public in general, and to allow such off licence holders in England and Wales as hold a Justices' Licence and only if they hold a Justices' Licence, to sell single half bottles, but not quarter bottles, of spirits.

Perhaps I had better dispose at this point of some other modest matters. I have made a provision of about £30,000 a year for reducing Harbour dues in certain cases where they press unduly upon fishermen, especially upon those engaged in the herring fisheries in Scotland and for assisting in the discovery of deep sea fishing grounds or in other ways. In addition certain debts to the Exchequer which weigh upon these fishing harbours and prevent them making full use of the rating relief will be eased either by remission or suspension. Fuller statements on this subject will be made if de- sired by the Secretary of State for Scotland and the Minister of Agriculture.

There are one or two minor alterations affecting the Stamp Duties on amalgamations and in connection with the motor vehicle duties which will have a small effect on the finances of the year. These will be found set out in the White Paper.

Last, but not least, it is proposed to afford to the public, especially in rural districts, certain improved telephone facilities. At present there is an extra charge of £1 a year for each furlong for telephone lines laid more than one-and-a-half miles from the terminal. By increasing the radius to two miles there will be comparatively few points in the more populous regions of this island which will be beyond the reach of the telephone service at ordinary rates. The immediate cost of this concession is £90,000 a year.

Secondly, and in addition, there are about 6,000 post offices—by far the greater part of them in villages—and 1,600 rural railway stations which have at the present time neither telegraph nor telephone facilities. It seems to the Government most desirable that this closer and wider linking up of our country districts with the centres from which they purchase and with one another should be fostered even though in many cases it cannot be justified on a strictly profit-making basis. Accordingly it has been arranged that at least five-sixths of these 6,000 post offices and 1,600 railway stations shall be equipped, for the most part during the next six months, with call boxes at ordinary rates. The remaining one-sixth which constitutes the most unprofitable investment must be left over for the present time. The cost of this will amount to £1,750,000 in the shape of capital expenditure under the borrowing powers of the Post Office. These concessions are no doubt small items—I almost blush to name them—but they fit harmoniously into the general scheme of the Government for fostering basic production.

Precise details of all these matters will be found in the White Paper. The various adjustments which I have mentioned make their inroad upon the surplus. The Betting Duty relief costs £850,000, the Publicans' Licence Duty relief costs £950,000 and the various minor concessions cost the revenue £110,000. On the other hand the increase in the manufacturers licence duties on beer, spirits, and tobacco will be £480,000, leaving a net diminution of the prospective surplus of £1,430,000. Subtracting this from £11,976,000 leaves us still in possession of a surplus of £10,546,000.

What shall we do with it? Let us, first of all, by way of preliminary digression, address ourselves to the burning question of whether national prosperity can be restored or enhanced by the Government borrowing money and spending it on making more work. The orthodox Treasury view, and after all British finance has long been regarded as a model to many countries, is that when the Government borrow in the money market it becomes a new competitor with industry and engrosses to itself resources which would otherwise have been employed by private enterprise, and in the process it raises the rent of money to all who have need of it. This orthodox view holds, therefore, that a special, even perhaps a double, responsibility rests upon the State when it decides to enter the money market as a rival to the ordinary life and trade of the country. The onus is laid upon the Government to prove either that the need is paramount as in the case of national safety being in danger; or that the work is necessary, and would not be otherwise undertaken; or that the spending of the money by the Government would produce more beneficial results than if it had been left available for trade and industry. No absolute rule can be laid down, but each case must be judged upon its merits and in the prevailing circumstances. We ourselves have certainly not followed any absolute rule. On the contrary, in our desire to induce a speedier return to prosperity and to diminish unemployment we have, during the last five years, ventured upon very heavy capital outlay. We have set on foot and carried into effect of far-reaching and carefully considered programmes of housing, roads, telephones and agricultural development. The expenditure provided for these purposes, either from revenue or from loans raised on Government credit during the past four years, amounts in round figures to £260,000,000. In addition, we have implemented guarantees under the Trade Facilities Act and provided new guarantees for colonial development schemes for a further £40,000,000. We have already carried through a scheme for the re-organisation of electricity supplies at an estimated cost of £40,000,000 or £50,000,000.

5.0 p.m.

The total development expenditure of the present Government during their period of office already exceeds £300,000,000, and there is a further £50,000,000 of commitments in sight. These figures do not include the expenditure, principally on housing and roads, undertaken by the local authorities on the basis of Government grants, which probably fall little short of another £100,000,000. It seems only a very little while ago that we were actually being scolded and criticised from both sides of the House for an extravagant use of cash and credit upon schemes like beet sugar, trade facilities and subsidies in any form. Nevertheless we have pursued the even tenor of our way, and during the course of the present Parliament we have spent, or caused to be spent, or undertaken to spend in cash or credit, over £400,000,000. I believe this great sum has on the whole not been unwisely invested and that much of it will return to us after many days and that we have a better island to live in than we had before. The point I am coming to is that for the purpose of curing unemployment the results have certainly been disappointing. They are, in fact, so meagre as to lend considerable colour to the orthodox Treasury doctrine which has steadfastly held that, whatever might be the political or social advantages, very little additional employment and no permanent additional employment can in fact and as a general rule be created by State borrowing and State expenditure. I am not trying to draw too rigid a line and our own practice does not entitle me to do so, for we have drawn very largely on capital account. I can express my own personal view best of all by a simple illustration which is familiar to all our minds, that of the Boat Race, where the full life-energy and power of the crews must be exerted. There is always an opportunity to the one side or the other to make a spurt, and, if the spurt is judiciously timed and wisely used, it may bring a definite advantage. It may gain a favourable position upon the river, it may possibly even secure a victory. But a spurt is only a draft in an intense form upon the total life-energy of the crew; it exhausts them to a formidable degree; and, if it fails, they are worse off than if they had simply rowed steadily on. Moreover, the race in which we are rowing is not one which has any definite ending. It goes on and on, for reach after reach, and no one can tell at what point any definite advantage can be registered. Certainly, in these conditions, the greatest possible care and deliberation should be used before ordering a spurt from a crew so hard pressed, and nothing would be more foolish, more wrong, more wanton, than for a stroke to make an exhausting spurt, not on any sound calculation of winning the race, but just for the purpose of giving the crowd on Barnes Bridge, under which he was about to pass, something to shout at. I think that all of us will be agreed upon that, or very nearly all of us.

That brings me back, oddly enough, to the proposal of the right hon. Gentleman the Member for Carnarvon Boroughs to spend £200,000,000 mainly on road construction, in addition to the already heavy programme of road and other developments which, of course, is going forward and increasing year by year. The plan of forcing road construction to such an extravagant pitch in a country which already has the best roads in the world, and which is already spending more on its roads than any country in Europe, would, I am sure, not only be of no real or lasting advantage as a remedy for unemployment, but would be positively and gravely injurious to the national welfare. This opinion does not rest only on argument or on belief. Curiously enough, as has lately been pointed out, an almost similar mistake was made 80 or 90 years ago in the frenzied enthusiasm with which the railways were promoted. In the railway construction boom round about 1845, great loans were raised for the rapid building of railways, and armies of men were employed in their construction. The demand for steel rails and rolling stock promised a most vigorous stimulus to other trades; hope and courage were high. But what happened? According to Cunningham's

"Growth of English Industry and Commerce," a standard authority, speedy trade depression and financial crisis ensued, from which it took the country several years to recover. Cunningham says, in Volume II, page 828:

"The period of commercial depression was chiefly due to the vigour with which railway enterprise was taken up, and the fact that the ordinary course of commercial transactions was dislocated. In the autumn of 1845, 2,069 miles of railway were opened, with a capital of £64,000,000 odd, while 3,543 miles of railway were in progress, involving capital amounting to £74,500,000. Of course, there was no immediate return on this large amount of capital; it was for the time absolutely sunk; the investment of so much money in forms not immediately productive had the result of injuring many branches of industries and depressing commerce. In so far as the wealth devoted to railway enterprise was withdrawn from circulation in the form of wares, the effects were for the time being disastrous. The proprietors had less means available to purchase goods. Capitalists found their sales diminished; they were unable to replace their stock of materials or to continue to pay wages, until their stores of finished goods were realised; and a general stagnation resulted."

Of course, in the long run, the new railways were the foundation of a new era of prosperity, but that prosperity would have come just as surely, and probably more quickly, if we had maintained a steady methodical progress, and if, let me observe—and this is a point to be noted—the vast canal system, embodying the labours of half a century, had not been incontinently scrapped and sacrificed and ruined for the sake of overdoing a new idea. We ought, I think, to try to learn from the teachings of experience; we ought not, for the sake of a frantic development of roads, to disturb and dislocate the normal productive life of the nation, or strike a precipitate State-subsidised blow at our superb system of railways, in which more than £1,200,000,000 of capital has been sunk, and by which more than 600,000 men get their daily bread.

I have another announcement to make about the expenditure in connection with roads. During the Debates on the Local Government Bill, I declared a further increase in the percentage grants for the maintenance of classified roads and bridges—an increase from 50 per cent. to 60 per cent. in the case of Class I, and from 334 per cent. to 50 per cent. in the case of Class II roads. That was at a cost of £2,600,000 a year, with consequent relief to rates, and especially to county rates. I am glad to say that the balance of the Fund at the end of the year has turned out to be larger than was expected; it amounts to about £4,500,000. We propose, therefore, now to make a corresponding increase in the percentage grants for road improvements and new construction. For the year 1929, the normal road grants for these purposes will be 60 per cent. of the approved cost in the case of Class I roads, and 50 per cent. in the case of approved schemes for all roads and bridges other than Class I; and, as an inducement to local authorities to assist in the transference of labour from depressed areas, we have decided to give an additional grant of 15 per cent. in respect of all schemes on which not less than 50 per cent. of men drawn from such areas are employed, provided that they are engaged through the Employment Exchanges. The additional allocation in the Road Fund Budget for these purposes, as well as for those of accelerating the reconstruction of weak bridges in private ownership on important roads—

I am glad to be in a position to make one modest, but immediate, contribution to a policy of the modernisation of our industries. There is no doubt that the railways have much more to give to the revival of industry, and especially of basic industries, than the roads. Heavy traffics, bulky agricultural traffics, and, above all, mineral traffics, have no other transport comparable for economy or efficiency with railway transport. Last year we inaugurated a reduction of railway freights upon selected heavy traffics. This is the first instalment of the policy of rate relief to come into force, and it has already amply justified itself. Now we have another contribution to propose, which should make for the greater efficiency of railway transport. For nearly a hundred years there has been a Railway Passenger Duty levied upon the railway companies, yielding to the Exchequer nearly £400,000 a year. The railway companies have repeatedly sought relief from this tax, which they regard as an invidious survival. Subject to the approval of Parliament, I have offered to meet their wishes, but only on one condition, namely, that the capital equivalent of the whole of this relief from taxation, amounting to £6,500,000, should be used as an additional stimulus for the development and modernisation of railway transport. The works contemplated will include such items as port equipment, terminal facilities, marshalling yards, and the adaptation of the railway system for dealing with heavier rolling stock. If Parliament approves of these proposals, the principal railway companies have undertaken to submit a list of schemes which will be put in hand forthwith, and upon which work will be effectively begun within the present financial year. That is all that I have to say at the moment on the problem of railways, but it is by no means all that can be done in that field. The repeal of this Duty will cost £300,000 in the present year.

After all, however, the best and surest help we can carry to productive industry, and, through productive industry, to employment, is by a reduction of the burdens which enter directly into the cost of production, or which deplete the capital accumulations upon which, in modern times, industry can alone develop. We have in the Suspensory Fund a realised surplus of £22,500,000. I propose to use this for the purpose of making a very important remission of taxation, a remission of a most onerous and invidious form of taxation, namely, the local rates upon productive industry. After the current payments, three-fourths of the rates upon productive industry, and the whole of the rates upon agriculture, will be abolished. I think I mentioned this last year in my Budget speech, and my right hon. Friend the Minister of Health has had to refer to the subject several times in the interval. This is because it was necessary to obtain Parliamentary authority for the accumulation in the Exchequer of the necessary funds and also to pass legislation to enable them to be applied in the most useful manner.

Of course, it would have been much nicer if we could have kept this quiet all this time and if I could have announced it for the first time now, but unhappily in a world of reality—and Governments and Chancellors of the Exchequer are painfully anchored to reality—it is often necessary to make long preparations in order to secure any large or permanent advantage. However, the period of preparation is over. The necessary laws have been passed by Parliament, the necessary funds have been gathered, and we are in a position to abolish this year three-quarters of the rates upon productive industry of all kinds and the whole of the rates upon agriculture. That is the best, and by far the greatest, gift which it is in our power to bestow. We have saved up for it, we have toiled for it, and we can now bestow it. The £22,500,000 is not needed for the rating scheme in the year 1929. During this year the yield of the Petrol Duty, £15,700,000, will be sufficient to meet the half-year's relief to industry and agriculture, but in 1930 the full scheme of rating relief comes into operation and the Exchequer will provide in relief of local rates nearly £36,000,000 of new money. In that year the Petrol Duty should yield £17,000,000 and £3,000,000 will be provided from the Road Fund, leaving less than £16,000,000 to be taken from the Suspensory Fund, which we hope by that time will be increased by any surplus resulting from 1929. Thus the finance of this vast scheme of tax remission is fully provided for till the year 1931. Thereafter we must look to the normal increase of revenue which, even in these bleak years, has shown a steady annual rise and which during the last year has definitely exceeded expectations.

But, apart from the normal growth of the revenue, there is one special additional factor on which I think I am entitled to dwell. Before the great disaster to the coal industry occurred—[ Interruption.] I must describe what happened. Something happened in 1926. To put it in the least controversial way, before what happened in 1926 happened, the principal basic trades of the country yielded profits assessable to Income Tax of £150,000,000 a year. In the present Budget I am counting upon less than £100,000,000 of profits from this same group of trades. It seems probable that a definite and solid revival of prosperity in the basic trades has now begun, but even if these trades do no more than regain in 1932 the levels at which they stood in 1923 and 1924 an addition of at least £10,000,000 would be made to Income and Super-tax on that account alone. Indeed the improved prospects of the revenue and the increase in the Suspensory Fund encourage and justify a further step forward at present in the relief of productive industry.

We have been repeatedly pressed to bring the reliefs into operation at the earliest possible date. We have already hastened the freight relief upon selected traffics. Instead of the £18,000,000 in the suspensory fund which I originally budgeted for, or the £14,000,000 which was all I had a right to expect at the end of the Summer Session, we have now £22,500,000. We propose, therefore, to bring the relief of rates upon agricultural producers into immediate operation. The farming community will not have to wait until October. They will be freed from the burden of rates as from the beginning of this month. This earlier relief costs £2,500,000, a sum which in its happily reinforced condition the suspensory fund can properly bear. A short Bill will be necessary before the Dissolution, non-controversial I have no doubt, to allow this further relief and to enable the Exchequer to make good to the local authorities the £2,500,000 which they would otherwise be collecting from the agricultural producers. The Bill will be introduced immediately after the Budget Resolutions.

I have anxiously considered whether it would be practicable to ante-date in a similar way the relief to manufacturing production. The rates upon agriculture have already for many years been divided under the workings of the Agricultural Rates Acts. They have been divided between productive and residential properties and, therefore, it is a simple matter to remit the rates upon land and buildings used for agricultural production. In the case of industry the frontier line is now only for the first time being drawn between those hereditaments which fall within the scope of our legislation and those which fall outside it. There is no assured basis, therefore, upon which the relief on productive industry can be ante-dated. Industry must still wait until October, but agriculture can receive its relief at once.

After allowing for all the minor concessions or remissions, we are still left with a prospective surplus of £10,246,000, out of which I think the taxpayer is entitled to some further relief. The Super-tax payer, with an in- vestment income has received, of course, nothing in the present Parliament, because the relief of £10,000,000 which he gained in 1925 was at the same time, as is so often forgotten, exactly cancelled out by the increase of Death Duties on the same class of fortunes.

I have never had much fiscal sympathy with the consumer, of luxuries, and particularly of foreign luxuries. It is to the primary comforts and to some extent virtual necessities of the mass of the population that we should now turn our attention. I have already spoken of the immense boon of at least £160,000,000 a year conferred upon the wage-earners by the reduction in the cost of living. Compared with that universal easement, anything the present surplus can bestow must necessarily be small. We reduced last year the tax on sugar at a cost of £3,000,000 of revenue, and it is to tea that I now turn with feelings of good will. The Committee know, from the annual Debates in this House, that I have long desired to effect some reduction in the Tea Duty. There is no other comfort which enters so largely into the budget of the cottage home, or the still humbler budgets of the old, the weak, and the poor. The reduction or the removal of the tax on tea has been asked for in a

long succession of Parliaments. Its mitigation would always have been regarded by social reformers of every party as an auspicious milestone in the history of the Custom House. There has been a tax on tea ever since the reign of Queen Elizabeth, and I am glad to think that the reign of His Majesty King George the Fifth will witness the total, immediate, and, I believe, final abolition:

"And while the bubbling and loud-hissing urn

Throws up a steamy column, and the cups That cheer but not inebriate wait on each, So let us welcome peaceful evening in."

I said that the remission would be total and I have said so advisedly, and, although over three-quarters of the tea drunk in these islands is produced within the British Empire, Javanese tea enters to a great extent into the cheapest blends used by the poorest people. To maintain for preferential reasons a tax on this foreign tea would therefore exclude from the benefits of remission the very class for whose sake, most of all, this serious sacrifice of revenue is being made.

I am not dealing in the present Budget with the duties on coffee, cocoa and chicory, and although the cocoa group has usually moved up and down with the Tea Duty, there is no essential reason why they should be inseparably connected, and there are Gladstonian precedents for the independent treatment of tea. The cost of the abolition of the tax on tea is £6,150,000 in the present year. The repeal will date from the 22nd April next. I have every reason to believe that an effectual reduction of 4d. in the lb. in the price of tea will reach the consumer immediately. With the abolition of the Tea Duty, the proportion of our revenue raised from comforts, that is to say the remaining breakfast table duties, coffee, cocoa, chicory, sugar and also from matches, falls from 4.43 per cent. under the Labour administration to 2.91; by far the lowest percentage ever known.

I can now balance the Budget of 1929 with an expenditure under all heads, including the rating relief, the Sinking Fund, and the self-balancing accounts, of £822,584,000 and with a revenue of £826,680,000, leaving a final prospective surplus of £4,096,000. I hope that this surplus may be increased, as the last two surpluses have been, by further savings by the departments during the year, and that in any case this will be sufficient to pay the usual inevitable expenditure on Supplementary Estimates for minor contingencies. My intention is, if I should remain responsible, that whatever surplus is realised at the end of the year, should go, like its predecessors, to strengthen the Suspensory Fund and still further lengthen the period before the full weight of the new rating reliefs measures itself against the expanding revenues of the Exchequer.

I will now explain an important departure in procedure upon which we have resolved. It arises naturally and inevitably from the circumstances in which we stand. Everyone wishes to proceed as soon as possible to the General Election, and all parties are making arrangements on that basis. The limits of Parliamentary time are therefore fixed with much rigidity. We have only a very few days. On the other hand, I must present the Budget scheme for the finances of the year in its integrity. That cannot be done in any Finance Bill which can receive the Royal Assent before the General Election. We therefore propose this year to have two Finance Bills. The first will contain only the necessary provisions to express the Government policy and carry on the public services. All the complicated consequential Clauses will be left to the new Parliament. The Opposition, if successful in the battle, will have the pleasure of passing or repudiating all the machinery Clauses, and will have plenty of time to do so. The first Finance Bill will therefore contain only those—

In this very lengthy statement, during which the House has shown me such exceptional consideration and indulgence, I have thought it right to lay forth fully the financial situation, but I have not attempted to deal with the wider issue of Imperial and social development which will naturally constitute the main portion of the programme upon which His Majesty's Government intend to submit themselves to the country. I have confined myself to that considerable range of business which directly affects the finance of the present year. The main policy which we should pursue in the new Parliament will be set forth by my right hon. Friend the Prime Minister, at what may be called an early and a suitable occasion. I should like, therefore, in presenting my fifth Budget to add a very few words of general summary. Anyone can see that the coal disasters of 1925 and 1926 created a situation very different from that with which I hoped to deal. If I could have foreseen the lamentable course of events, I should certainly not have remitted 6d. from the Income Tax in 1925, but once the standard rate had been reduced to a clear cut figure like 4s. in the £, it would have been very injurious and very vexatious to raise it again. Neither did I wish in any way to detract from the great remissions of in- direct taxation which had made the Budget of my predecessor in 1924 memorable. The last three years have been a struggle on my part to avoid reimposing either oppressive direct taxation or trenching upon the relief of the taxation of the comforts of the people which he had given. In this, I claim to have been successful. I have maintained, upon the average of the five Budgets, payments to the Sinking Fund and upon the accumulated interest of Savings Certificates substantially greater than those which were made in former days.

The successful re-establishment of the Gold Standard will still be regarded as a memorable event long after the exertions and sacrifices it has entailed have been forgotten. The preferences upon Empire products, notably upon wine, sugar and tobacco, have been carried to the furthest point that they have yet attained with a remarkable accompanying growth of inter-Imperial trade. I have spoken already of the remissions of taxation which it has been possible to effect. As far as expenditure is concerned, the upward trend has been stopped. It has proved beyond my power to reduce it as much as I had hoped. At any rate, it has been controlled, and it is £6,000,000 less, on a strictly comparable basis, than it was five years ago. Notwithstanding all this, the means have been found to inaugurate and to finance for periods extending far beyond the lifetime of the present Parliament the two most considerable Measures of domestic reform with which I am acquainted, namely, the immense extension of the Pensions and Insurance scheme in 1925, and the relief of productive industry and the rating reform scheme of my right hon. Friend the Minister of Health, in 1928.

I feel that the corner in our economic fortunes may well now have been turned. There are no causes, apart from fresh causes of our own making, which should prevent the next four or five years being easier and more fruitful than those through which we have made our way. The future lies freely in our hands. Reviving trade, lower unemployment, expanding revenues, cheaper money, more favourable conditions for debt conversion, lie before us at this moment as reasonable and tangible probabilities. We can by wisdom and public spirit bring them nearer and realise these long sought for advantages. We can by faction, violence, and folly drive them far away again. The future is inscrutable, and it is equally vain to prophesy or boast, but for my part I have faith in the fair play and august common sense of the British nation, and to their judgment now, and in later years, I submit with confidence the financial record of a Conservative Administration.

Motion made, and Question proposed,

"That—

Provided that the foregoing provision relating to annual value shall not apply to lands, tenements and hereditaments in the administrative county of London with respect to which the valuation list under the Valuation (Metropolis) Act, 1869, is by that Act made conclusive for the purposes of income tax.

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

Question put, and agreed to.

Resolved,

"That the Excise Duty payable on bets made with a bookmaker shall cease to be chargeable as from the sixteenth day of April, nineteen hundred and twentynine."—[Mr. Churchill.]

Resolved,

"That the Railway Passenger Duty shall cease to be chargeable as from the first day of April, nineteen hundred and twentynine."—[Mr. Chwchill.]

Motion made, and Question proposed,

"That—

(a) The duties of Customs charged by Section seven of the Finance Act, 192S, for a period of four years beginning on the sixteenth day of August, nineteen hundred and twenty-five, on hops and extracts, essences or other similar preparations made from hops and the additional duty of Customs charged by the said Section for the said period on beer, shall continue to be charged for a further period of four years from the date on which the aforesaid period expires, except that hop oil shall, as from the said date, cease to be chargeable with duty as a preparation made from hops and in lieu thereof a duty of Customs at the rate of twenty shillings the ounce shall be payable on hop oil during the said further period; and

(b) The additional Excise drawback payable under the said Section for a period of four years beginning on the sixteenth day of November, nineteen hundred and twenty-five, in respect of beer shall continue to be allowed for a further period of four years from the date on which the aforesaid period expires; and

(c) Section ninety-eight of the Customs Consolidation Act, 1876 (which relates to the charging of duty on the quantity of goods ascertained by weight, measure or strength at the time of the actual delivery thereof) shall apply to hops when cleared from a warehouse for home use."—[Mr. Churchill.]

Question put, and agreed to.

Motion made, and Question proposed,

"That the Customs Duty chargeable on tea until the first day of August, nineteen hundred and twenty-nine, shall cease to be chargeable as from the twenty-second day of April, nineteen hundred and twenty-nine."—[Mr. Churchill.]

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

Resolutions to be reported To-morrow.

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

The remaining Government Orders were read, and postponed.

Motion made, and Question proposed, "That this House do now adjourn."—[ Commander Eyres Monsell.]

Question put, and agreed to.

Adjourned accordingly at Twenty-eight Minutes after Six o'clock.