HC Deb 16 March 1926 vol 193 cc273-395

Order for Second Reading read.

The CHANCELLOR of the EXCHEQUER (Mr. Winston Churchill)

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

I had occasion a fortnight ago when was speaking at Belfast to make it clear that this Economy Bill was not a revolutionary Measure, because I did not wish to encourage extravagant expectations which would only be attended by a reaction of disappointment. At any rate there is one Member of the party opposite who cannot complain that he has been. disappointed. It was only last week that the right hon. Member for Colne Valley (Mr. Snowden) blandly informed the House that he was sure that the savings resulting from this Bill would not in their aggregate exceed the £4,000,000 or the £5,000,000 which he estimated and over-estimated would be the cost to this country of the Northern. Ireland Unemployment Insurance Bill. At any rate, it is a matter of great pleasure to me that the right hon. Gentleman is not included among those who will be disappointed on this occasion, because the savings which will result from this Bill, if it is accepted by the House, will, over the same period of four or five years, amount to at least ten times the total which the right hon. Gentleman scornfully assigned to it only a week ago.

There are two main questions before us this afternoon. The first is: Are the proposals of the Bill right?[HON. MEMBERS: "No!"] I said it was a question. The second is: Why are there no more proposals for economy? I should find it quite impossible to do justice to the issue before the House unless I surveyed the whole field of national expenditure, and I gather that it is your ruling, Mr. Speaker, that it will be open to the House on the Second Reading of this Economy Bill to consider each question and issue in the Bill in relation to other suggestions which may have been made for economy and in relation to the general problem of public expenditure. I propose, therefore, first to deal briefly with the main proposals of the Bill and, next, I propose, if the House will bear with me—and this, after all, is a most important subject with which we have to deal—to survey the whole field of State expenditure.

The proposals of the Bill are, naturally in a Measure of this kind, disconnected. They deal with different topics which have been assembled within the scope of one Measure, but with one object. Each of these topics will be dealt with by the Minister whose Department is concerned, and, of course, they will be dealt with in the Committee stage, where each particular subject can be treated exhaustively by itself. The Navy and Army and Air Force Insurance Fund proposal will be dealt with by my right hon. Friend the Secretary of State for War. The Home Secretary will deal with the electoral register proposal, calling to his aid, no doubt, the Secretary of State for Scotland when the important issue relating to the Orkney and Shetland Islands—or, as I believe it is correct to say, the Orkney and Zetland Islands—is discussed. Then the President of the Board of Trade, the President of the. Board of Education, and the Postmaster General will deal with their respective Clauses.

Mr. W. THORNE

Where do you come in?

Mr. CHURCHILL

I come in at this moment, and, as the hon. Gentleman may anticipate, I will deal specially with the Health Insurance proposals and the Unemployment Insurance proposals, which will, of course, also be defended at the proper time by the Minister of Health and the Minister of Labour. Take the first proposal to reduce the State contribution to Health Insurance from two-ninths to one-seventh for men, and one-fifth for women. This effects a saving of £2,750,000 a year. What are the facts which justify this change? The most recent and powerful fact is the passage of the Act of last year conferring pensions on widows and old age pensions at 65. This scheme, to which the State contributes about £5,750,000, substantially reduces the liabilities for which the Health Insurance system is responsible, by taking off, as from the beginning of 1928, the responsibility for sickness and disablement benefits to every contributor between 65 and 70, that is the very contributors for whom the liability to sickness is at a maximum. This relieves the funds of a responsibility which is actuarially computed at upwards of £37,000,000. That is the first main fact which justifies the change.

The second main fact is the rise in the rate of interest which has attended and followed the convulsions of the Great War. The Cabinet originally responsible for the Health Insurance scheme which will for ever be associated with the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George)—that Cabinet of which I was a Member, contemplated that the interest on the investments under the Health Insurance system would be received at 3 per cent., whereas the rate which is now being received is between 4½ per cent. and 5 per cent. This increases the regular income from the invested funds by nearly £2,000,000 a year, and this £2,000,000 a year is free of tax. This very factor which has so greatly benefited the Health Insurance system has, as everyone knows, operated enormously to the detriment of the State, which used to pay 3½ per cent. on the National Debt, or rather borrow 3½ per cent., but now has to pay 4½ per cent, or more on a National Debt multiplied ten-fold. Moreover, this contrast in fortunes between the State and the Insurance Fund is emphasised by the fact that the additional income of the Health Insurance Fund arising from the depreciated credit of the State is itself a cause of attracting still larger grants from the depleted Exchequer which are applied to the payment of increases in benefit. That is the second fact which justifies the change.

The third fact on which we rely is this. Ever since the beginning of Health Insurance the State has followed the practice of meeting every liability which arose, in excess of the original actuarial calculation, out of public funds, but, at the same time, we have followed the practice of leaving every unforeseen advantage which occurred on the figures, to enure to the benefit of the insured community. In the 14 years during which Health Insurance has been in operation the sums thus added by the State have aggregated upwards of £24,000,000. Surveying these three substantial and important causes, there is no ground for suggesting that the contributors to the fund will be unfairly treated by the proposals of the Bill, or that there is any breach of faith in the new relation which is being established between the individual contributor and the national Exchequer. The contributor will receive, not only all he was led to expect, but far greater advantages than the authors of the scheme ever contemplated, and he will receive these from causes which, in their general operation, have proved in a great measure extremely detrimental to the State.

4.0 P.M.

In consequence of the advantages which the Health Insurance Fund has reaped from these causes and from other minor causes with which I do not now trouble the House, the scheme is now in an exceedingly prosperous condition. The surpluses to-day are estimated at no less than £65,000,000. £30,000,000 of this is due to be spent over the next five years in additional benefits; that is to say, benefits beyond the contractual provisions. The Royal Commission which has just completed its examination of the whole system has shown that, after providing these large additional benefits, and after meeting the cost of medical benefit, for, which this Bill now before the House also makes provision, there will be a surplus of over £2,000,000 per annum. Of course, it would be very agreeable to apply this surplus in still further extending the benefits, and it would be easy to unfold many very desirable plans for spending the money. Such plans, however, in their operation would automatically attract additional State grants of over £500,000, and therefore the increasing prosperity of the Insurance Fund would from that very fact throw an ever-increasing burden upon the over-strained Exchequer.

The Government have therefore decided, on a general review of the financial situation, that the time has come when the State contribution to National Health Insurance can, both in justice and in prudence, be reduced as provided in the Bill. That part of the Bill which deals with Health Insurance contains a number of Clauses expressed in language only intelligible to those who are masters of this intricate and highly specialised subject, but their main purpose is to make sure beyond doubt or question that the reduction in the State contribution will be effected in such a way as not to prejudice in the slightest degree the solvency of any part of the system or of any individual society. On that point, the Report of the Government Actuary must be studied by all who desire to take an effective part in the discussion of the Clauses.

I would say this generally on this question of Health Insurance. We have to think for the duration of this Parliament. We are, as I shall presently show, confronted every year with steady cumulative, increases in expenditure and, in particular, in social expenditure. At the same time, there will certainly arise in this Parliament new needs and new services, and, unless we gather up where it is possible and proper the resources at the disposal of the central Government, the closing years of this Parliament will see us utterly unable to meet any new needs without re-imposing harsh and harmful taxation. The only levers which the State possesses to set in motion great national schemes are financial levers. They are not so numerous, and they are not so strong as they were. When, therefore, some great work or organisation has been successfully set on foot and is rolling forward prosperously and is in an expanding condition, common foresight demands that some of the levers which have played their part successfully in initiating the movement should be withdrawn and kept available for further enterprises.

I now turn to Unemployment Insurance. There is an apparent inconsistency in legislating to reduce the State grant to the Unemployment Insurance Fund only nine months after we have legislated to increase it; but in the interval the circumstances have changed They have changed partly no doubt through a stricter administration of the Unemployment Insurance Acts. They have changed mainly through the improvement in trade conditions. [Interruption.]. I am trying to state the facts fairly, and I stated the first fact although I knew it would excite the derisive applause of hon. Gentlemen opposite. They must also apply their brains to facts which are not entirely congenial to them, such as the improved conditions in the trade of this country being one of the causes which have led to a decline in the total number of the unemployed. [Interruption.] I have a long way to go, I am afraid, and I hope hon. Gentlemen will not draw me from my beaten track.

In July last, when we passed our Bill, we contemplated an average live register for the 12 months from June, 1925, of 1,300,000, and on that basis the. State contribution was raised at the same time that the employers' and workpeople's contributions were reduced by 2d. In fact, however, and as it has turned out, the live register at the period in which the peak of the year is usually reached was only 1,150,000. The fund is therefore in a much better position than we expected in July last. In spite of all the unemployment of last year, it has practically balanced. It has been necessary only to draw upon the statutory borrowing powers, which amount to £30,000,000, to the extent of £2,000,000 in the whole of last. year, and the debt of the fund is now only about £7,500,000, having fallen to that figure from the highest point which it reached of over £17,000,000. For a fund whose statutory borrowing powers are £30,000,000 and whose annual income exceeds £50,000,000, such a deficiency is certainly not a serious burden and is indeed absolutely in keeping with the intentions of Parliament in giving this margin of borrowing powers to the fund.

What then are the prospects of the year 1920? I exclude altogether the possibility of a vast collapse in industry due to a great cessation of work on the coalfields. Such an event would rupture all calculations. It might throw in a few weeks 2,500,000 workers on to the fund; it would absorb the whole of the borrowing powers of the fund; it would derange the whole structure of the national finances. Therefore, I exclude altogether from these calculations that possibility, not because it is not a possibility, but because it is relevant to an entirely different set of calculations. On the assumption, then, that there is no industrial catastrophe, we estimate for an average live register for the financial year 1926 which will not exceed £1,030,000. That is our estimate, and I could give the House at length the very elaborate mathematical calculations which were made in relation to the course of unemployment in different years to show how that figure was arrived at. I will only say that no question of a surprise improvement in trade was taken into consideration in arriving at the figure. It is not based on a speculative assumption. But, since the calculation was made, there has been a fall of 80,000 in unemployment, and this fall has manifested itself over the whole of the general trade of the country. In consequence, our confidence in our estimate is confirmed.

Mr. WALLHEAD

Is that a genuine fall in unemployment?

Mr. CHURCHILL

I do not suppose that anything would convince the hon. Gentleman that a fall in unemployment could be genuine. One of the principal planks in his platform is that unemployment is getting continually worse, and I suppose no tide of facts would ever induce him to abandon so valuable a foothold for levelling his onslaughts on the existing structure of cur economic civilisation. I only endeavour to show the basis on which we considered that the reduction of the State contribution as proposed in the Bill can prudently and properly be made. Here let me say that, just as in the case of Health Insurance, the solvency of the Fund should be in no way affected, the benefits will be in no way reduced, and the administration will not be altered from what it was under the Act passed last year by the House. The only people who may have a ground of complaint are the employers who were hoping, and who were led to expect as I must frankly admit, that they would receive a reduction of ld.—the next reduction of ld. that was possible—to bring their contribution down to 8d., level with the 8d. contribution of the workpeople. There is no doubt whatever—I do not disguise the fact—that the proposal which we make in this Bill will contribute somewhat to postpone this relief unless there is some unexpected forward move in the general trade of the country.

I cannot leave these two reductions of expenditure on Health and Unemployment Insurance without one reference to the general contribution which His Majesty's Government is making to the maintenance of the insurance and old age pensions services in 1926. In spite of these reductions, which between them may amount to nearly £8,000,000, that contribution will be greater in 1926 than it was in 1925, and greater than it was in 1924 when a Labour Government was in office. In 1924, under the Administration of the right hon. Gentleman opposite, there w as provided from the Exchequer for Old Age Pensions, for Health Insurance, and for Unemployment Insurance a total of £46,500,000. In 1926, for the same services and for the new widows' and improved old age pensions schemes, £52,000,000 will be required, even after this reduction of possibly £8,000,000 has been assented to by the House.

Moreover, is this not the year of all others when we are entitled to ask for help and assistance generally from all parties in the House? This year and next year we are providing over £2,23,000,000 for the coal industry in the hopes of averting—hopes which certainly have not diminished in the nine months that the subsidy has lasted—a stoppage which, if it occurred, would throw a crushing burden on the Insurance Fund and sweep away at a stroke all these calculations of reduction of contribution and so forth to which we have been looking forward. Fair-minded men will bear that in mind, and will bear in mind the problem which the Government have to face in their earnest effort to promote the general well-being of the country as a whole. I have mentioned these figures of what we are proposing to spend next year compared with what was spent in the days of the Labour administration, not at all for the purpose of bandying recriminations. I have only mentioned them because I think it is desirable that the facts should be before the House, and I do hope that the right hon. Gentleman who is going to reply, and to whose speech we are all so looking forward, will not allow these facts to cramp his style in any way, especially when he comes to that moving passage, with which we are getting rather familiar, but which is always put by him with such happy force, about the wicked, dastardly, mean inroads of a reactionary Government upon the vital social services of the poorest of the poor.

Now I come to the second part of my remarks—to a far larger question than those with which I have been dealing: Why is this all we are able to do this year? I have studied, as is my duty, many public criticisms which are made upon the expenditure of the day, and particularly those which are made by the Press, which, with praiseworthy perseverance, continues to ingeminate economy. I hope it will continue. It is an assistance to me and an assistance to the Government in our task, arid, for the sake of the advantages which these criticisms and this agitation bring to the public interest, we are certainly quite prepared to put up with a very respectable flow of vituperation and disparagement. It. has, however, become necessary—and this is, I think, the best occasion—to place this controversy on a sensible and accurate basis, so that it may continue with unabated vigour, but so that those win, take part in it may be free, if they wish to be free, from ignorant misapprehensions and vulgar errors. Therefore, I will proceed, if the House will bear with me, to survey the whole field of expenditure, and to say how the proposals of this Bill fit in with the general policy of the Government, with our economies in other directions, and with the general needs of national finance at the present time.

For this purpose, I have ventured to classify the total expenditure of the country in a somewhat different and simpler form from that in which the Estimates have for a long time been franked. The figures which I shall, give are necessarily round figures, and the classifications which I make are intentionally broad classifications, but, in order to facilitate the study of the argument, I have arranged that a White Paper, in which the exact figures that I use this afternoon will be set forth in a series of tables, shall be available, at about six o'clock, in the Vote Office, The expenditure in 1923 and in 1924 and the original Estimates for 1925 were almost exactly £800,000,000—within a very little of £800,000,000. It is riot usual to disclose, until the Budget is opened, the exact total of the Estimates for the forthcoming year, but I shall depart so far from the usual custom as to state, what everybody by this time is probably aware of, namely, that the estimated total expenditure of 1926–27, comparing like with like, will probably be in the neighbourhood of that figure. All this controversy turns around the figure of £800,000,000. That is the figure which the public have in their minds; that is the figure, as I say, of the last three-years of expenditure or Estimates; that is the figure which, formidable and tremendous as it is, I take as the starting point of my examination.

I take this figure of £800,000,000, or, to be accurate, £799,400,000, as set forth in the Estimates for the year 1925–26, the present year, as the basis of my examination, and I classify expenditure in the following four broad categories and in the following sequence: First, Obligatory Services, in which I include debt and pensions of all kind, taken from every branch of the Estimates. The second category consists of Grant Services, by which I mean grants of all kinds, almost entirely to local authorities, in regard to which the money is found, in whole or in part, by the Exchequer on the basis of a, given percentage, and the spending of the money is entrusted to other authorities than the national Departments concerned. The third category consists of what I call, for want of a Letter name, Self-supporting Services, such as the Road Fund and the Post. Office, both of which have a larger revenue attached to them than their growing expenditure. Lastly, in the, fourth category, I include what may be called National Administration Services, that is to say, all that has hitherto been regarded as the field for controversy between the economists and the expenditure, advocates—the whole area of Defence, the Insurance Funds, the foreign and Empire Departments, trade expenditure, agricultural expenditure, all the cost of tax collection, all the cost of the central administration of all the Grant Services and all the other Civil Services. All that is comprised in the fourth category. Here, then, are four perfectly clear divisions of expenditure, which are governed by quite different conditions, and are capable of being dealt with in different ways.

I take, first of all, the Obligatory category, debt and pensions. The debt charge is approximately £355,000,000 in the present year. The pensions services of all kinds, including old age pensions, war pensions, the ordinary pensions charge of the Fighting Departments, teachers' pensions, the State share of police pensions, Civil Service pensions, entail an expense to the State of over £121,000,000 a year, so that the obligatory charge for debt and pensions, put together, amounts to £476,000,000, of which £433,000,000 is a net increase since pre-War times. I think the House will be astonished at this pensions figure of £121,000,000; I do not think it has ever been stated in that complete form before. Now, I ask, does any serious or responsible person deny that these charges are obligatory, deny that they are beyond the control of any Government which refuses to repudiate contractual or statutory obligations to its creditors, to its pensioners, or to its servants? Of course, if we embark on the policy of repudiation, immense reductions are possible in this field, although it might mean that, along with the immense reductions in the burden, would come a still greater reduction in the strength to bear the remaining burden.

It has been suggested—I have seen it suggested, not in one quarter only, but not, I think, by any responsible politician—that we ought to repudiate a portion of the interest on our War debt. [HON. MEMBERS: "Hear, hear!"] I said so. I said I had heard it suggested, though not in any responsible quarter, that we should repudiate a portion of the interest on our national War debt, and that, instead of paying the interest at the rate contracted, we should pay 1 per cent. or 2 per cent. less Such a proposal is not only dishonourable, but needlessly, stupidly unfair. Why should those who lent money to the State be the only class of capitalists, part of whose property is to be confiscated? Why should a man who has invested in War Loan, or in Consols, or in any of the other national securities fare worse and have a large proportion of his property confiscated, while all the other subjects of the Crown, who have invested their money in banks, railways, industrial shares, gold mines, oilfields, rubber plantations, real estate, or any one of the thousand other forms of capital, get off scot free? We have repeatedly stated that we are opposed to a Capital Levy, but a Capital Levy, at any rate, is even-handed and falls upon the nation as a whole. However injurious to credit and disastrous to the creative processes by which new wealth is produced, it is to be preferred to such a disastrous, unjust, and indeed fraudulent expedient as arbitrarily reducing the interest on national securities while leaving all other forms untouched. Therefore, I say that the debt services are obligatory, and that they cannot be diminished except by regular processes of conversion through improving credit, or, of course, by largely increased taxation for the more rapid extinction of the liability. I do not gather that anybody seriously disputes that assertion.

As to pensions, the War pensions are declining with the deaths of the pensioners—[HON. MEMBERS: "And reductions"]—but all other pensions are increasing, and will continue to increase year after year for the best part of a generation. One great increase is due to the original Old Age Pensions which Lord Oxford inaugurated in 1908. It was not then foreseen how enormous the charge would he that would ultimately come from this cause upon the Exchequer. It is only in the last two years that the steady onward march of the non-contributory old age pension figure has been brought home to the House, first rather tentatively by the right hon. Gentleman, and last year fully by me in bringing forward the Budget. It is due, of course, to the fact that we are now entering upon the period 70 years away from the great expansion of the population in mid-Victorian times. The teachers' pensions and the State share of the police pensions are already £4,500,000 and £2,250,000 respectively. They are advancing each year cumulatively by over £500,000. Unless faith is broken, and public servants are deprived of what they have contracted for, looked forward to and earned, these pensions will continue to advance at this rate for the next 10 or 15 years though at a less rate thereafter. Lastly, there are the ordinary miltary and Civil Service pensions, amounting to £21,250,000 a year, all fixed by Statute, or guaranteed by Royal Warrant, or protected by covenant, and all steadily growing. It is open to Parliament at any time to name new conditions for new entrants, but no relief will come to the Exchequer from such a decision during the lifetime of anyone who is here this afternoon. It is open to Parliament, if it chooses, to reduce the rates of non-contributory old age pensions: every shilling a week reduction would save about £2,500,000 a year. I hope, for my part, and I am sure I express the views of the Prime Minister also—we hope that we shall be in Opposition when such a suggestion is made. It was open to the Government, in consequence of the fall in the cost of living, to reduce on 1st April next the pensions to the wounded soldiers of the Great War, and in this case there could have been no charge of breach of faith, because power was explicitly reserved to make such a reduction should the cost of living fall. We decided, however, that our financial situation, however difficult, in no way justified such a harsh step, and the Minister of Pensions was accordingly authorised by the Cabinet to make the announcement for which he had so earnestly pressed, and which he so ardently desired. That is all I have to say about this first category of debt and pensions. It is obligatory, and beyond the control of any constitutional, law-respecting Government, but remember that together debt and pension aggregate £476,000,000 per annum, and constitute an increase of £433,000,000 upon the pre-War figure.

I come to the second category—the grant services. They are not all obligatory in the same sense as the pensions or debt are obligatory. They are not all obligatory in the sense that it would be dishonourable to abandon or reduce them, but they are nearly all fixed by law, nearly all concern the local authorities, and they nearly all affect the rates. This group, as I say, affects the local authorities and the rates. They are in nearly all cases fixed by Statute, and comprise grants for education, grants for health services, the housing annuities—the Addison annuities alone cost over £8,000,000 a year and are virtually a debt charge—and grants in aid of local taxation. I have included in this group Irish services, grants to special industries on the faith of which capital has been invested, such as the beet-sugar industry—all these grants which we pay and others spend, are on a percentage basis or related to the scale which certain services attain. All of these grants are under the effective control of the House of Commons. The House can, by legislation, reduce most of these grants, but, of course, at every stage they will encounter the opposition of the local authorities and the powerful interests— perfectly honourable interests, but marshalled and organised interests, which are accustomed to benefit by these grants, which would rally to their defence. At every stage too we are confronted by the argument that a reduction in the Exchequer grant means a transference from taxes to rates, and the laudable desire of Members of Parliament to effect economy crimes very often and very early into collision with that scarcely less respectable resolve to keep their seats.

The grant services under all headings amount to over £90,000,000. This is a very unsatisfactory field for the Exchequer. The grants are, as I say, mostly based upon the percentage system. More than half the money is supplied by the Treasury in accordance with Acts of Parliament. Nearly the whole administration is in the hands of the local authorities, subject to Government regulation, inspection, audit, etc. In consequence, the expenditure, apart from legislation to alter the scale of grants, is largely uncontrollable. The local authorities call the tune, and it only remains to calculate the percentage upon which the Exchequer pays the piper. I think I am justified in saying it is a very unsatisfactory field. It is the considered policy of His Majesty's Government to convert the system of percentage grants into a system or block grants, that is to say, to pay definite sums instead of percentages to the local authorities, to give those authorities increased discretionary powers, to make them responsible for any extravagance or any unduly bold enterprise to which they may commit themselves, and to give them 100 per cent. of any economies they may themselves be able to effect. That is our policy. But this policy can only be carried out gradually, and through complicated and, no doubt, controversial legislation. I see very little prospect, I may at once say and I wish the House to face the facts—we all have to face them, and nowhere do we have to face them more clearly than in the region of finance—I see very little prospect of any relief to the Treasury through a reduction of the present scale of Exchequer grants. But I am sure of this, that unless we move from the percentage system to a block grant system—I do not say a fixed grant system —based on other considerations than mere expenditure flowing out through the hands of other people, charges which are ever growing, and are of an indefinite amount, will automatically and irresistibly impose themselves on the national finances. Moreover, when one authority is spending money and another has to supply it, there is no adequate cheek—I will not say on waste or extravagance; that is the easier evil to grapple with—but on well-intentioned, inordinate expansion.

In present circumstances, this expenditure is quite uncontrollable. Look at what happened even in this year. when our finances have been examined and. combed with exceptional stringency —with a stringency I only once remember to have seen in all the 20 years I have served in the 'Government, in the period of the Geddes Committee—even in this year, when we have gone over the field and gleaned and scraped in every way we could possibly find open to us, we have found ourselves unable to refuse to assent to increases compared with last year of over £1,000,000 in education— — [HON MEMBERS: "Hear, hear!"] and over £200,000 in health grants— [HON MEMBERS: "Hear, hear!"]—including inter aliatuberculosis and venereal disease. I gather the House feels we have done right. I hope it will remember this when I come to add up the total figures. We have also had to give certain additional grants to agriculture, drainage for instance, which, incidentally, is one of those aids to employment which in other connections invariably attracts the enthusiastic applause of the party opposite.

To sum up. In this second category. where over £90,000,000 of expenditure is involved, there is no practical expectation of substantial reduction, and, upon the whole, I would say, nor ought there to be. If the mental, moral and physical welfare of the population is to progress, there is no effectual reduction to be made in this field whatever may be said by uninstructed critics or whatever abuse may be hurled at our heads afterwards by those who have already assented to this expenditure, and who would be the first to cry out were it diminished. No. Sir, the only aim which the Government have is to protect the Exchequer from an indefinite and an uncontrolled increase in the future in this sphere, and also to secure value for money in the spending of the immense sums involved.

I come to the third category, which I call the Self-Supporting services. There are two important State services which deal with internal communications by locomotion and by correspondence—the Road 'Fund and the Post Office. These two, excluding their pension charges. which I have already lumped in the pensions category, together cost £67,500,000 this year. But they differ from all other classes of expenditure in that they produce an immediate and large revenue to the Exchequer. The taxes on motor cars are at present assigned to the Road Fund, and they will this year produce over £18,000,000, or nearly £2,000,000 more than the estimate. Next year on the present basis the figure may well rise to over £20,000,000. The earnings of the Post Office, on a cash basis, exceed the expenditure by over £4,000,000. It is at present the duty of the road authorities, and of my right hon. Friend the Minister of Transport to spend the motor taxes on the roads as fast as they possibly can. The more they get the more they spend. But in spite of their very best efforts to get through the money they have had to accumulate a large surplus for which they are unable to find any practical use. That is the present system—which has so many supporters. As for our postal, telegraph, and telephone services they increase in scale and efficiency because they are more resorted to by the public, because the public are able to make greater use of their facilities, and because, therefore, they have to develop their plants and organisations.

On the present basis, the expenditure on these two services will probably grow by nearly £4,000,000 next year, and the revenue to a still greater extent. Is that a good thing or a bad thing? Is it a good thing that the large and increasing wealth of the country—for such is the undoubted fact—should permit of an increasing activity in locomotion and correspondence? Can anyone doubt that these increases are a proof of healthy progress? Why, then, should I be blamed because the total figure of national expenditure is swollen by £4,000,000 or, £5,000,000 through the natural and normal extension of healthy public activity? I may be blamed for other faults, but why should I be blamed for that? We must have some rational processes in these controversies. You may blame me, or the Government, of which I am a member, because of increases in the expenditure which is controllable, or which is unproductive, but increases of expenditure which come from the normal, healthy growth of services that pay their way, which produce corresponding revenue or a greater revenue—to blame a Minister or a Government for that is really an economy in mental effort which is hardly commendable.

I may have some proposals to make about the Road Fund when the Budget is opened, so I shall say no more about that now. But take the Post Office. Is it not really absurd to lump the revenue-earning expenditure of the Post Office in one general account with that of the ordinary spending Departments? Is there any business in the world in which it would not be a cause for rejoicing when the scale of operations and the balance of profits had increased simultaneously? To mix up the expenditure of a Department like the Post Office with the general national expenditure; to inflate the expenditure by a sum of £53,000,000, and the revenue by the sum of £57,000,000, is only to confuse the ignorant and darken the counsels of the wise. Internal efficiency and economy in the Post Office is a different matter, but it is not relevant to the argument with which I am now dealing It is general economy I am dealing with; and a rational method of presenting the Post Office Estimates to Parliament in relation to the general accounts would be, I think, only to show the profit or loss arising from these separate services. But it must be apparent that any such alteration would he a break in the continuity of oar statistics, and would make comparisons with past years difficult to follow. As these two Departments, communication and correspondence together, show an expenditure of £67,500,000, I have already accounted for the whole £800,000,000, except £165,000,000. That is what is left, and I await suggestions of reductions and economies over the whole of the vast area of expenditure which I have already covered.

I have now reached the field on which the usual battles about expenditure and economy have been fought. It is out of this remaining £165,000,000 that we have to provide the whole of the services of the Crown, the Army, Navy, and the Air Services, the so-called Civil Service, the tax-gathering departments, the National Insurance contributions, prisons, Judges, Civil List; everything has to be provided in this last category, which I call the national administrative services. Let me sum up this part of the argument. In categories one, two and three, there are the obligatory services, the grant services, the self-supporting services, to which are allocated £634,000,000. To the fourth category of ordinary national expenditure of defence and administration there is allocated £165,000,000. Let us compare those figures with those that existed in 1914–15. In those days categories one, two and three aggregated, not £634,000,000, but £108,500,000, while the expenditure on national administration—category four—aggregated £96,500,000 as compared with £165,000,000 at the present time. Therefore, since the War the expenditure over which the Executive Government has no effective control, and which to a very large extent no honest Parliament can reduce without repudiation—or which is revenue-producing expenditure—that class has as a whole increased by nearly 500 per cent., and, on the other hand the national administrative services have increased from £96,500,000 to £165,000,000, about 70 per cent. I ask the House to look at that-figure of 70 per cent., because it is almost exactly in the same ratio as the purchasing power of the pound sterling in those two periods. This has occurred in spite of the fact that the population has increased appreciably, that the number of functions discharged by the Central Government has been continually added to, that they have become more complex.

5.0 P.M.

Here is a factor—let me deal with it for one moment—I am afraid it is my duty to make a full statement on this subject, and I should very much regret if I were not able to make it in its entirety; therefore, I earnestly trust that the House will concentrate their attention upon this aspect of its public duties with zeal and assiduity. I want to say a word' about this factor of the decline in the purchasing power of money, as far as it may he of use in dealing with the estimates of the year for comparative purposes. It is not, as is sometimes suggested, a mere juggle of figures. It is the actual economic truth, because, after all, behind the money values which are only nominal, stand the basic facts—whatever they are—how many men are you withdrawing from productive industry; how much of the material accumulated by units of labour are you devoting to defence or official purposes? What proportions are these of national resources? These are the underlying realities of the case. The exchanges, which are the nominal expression in money terms of these realities, are not the truth, but only a varying factor. It is upon the limited field of this £165,000,000 of national administrative expenditure, already cleared four years ago by the energetic operations of the Geddes Axe, fortified by the will-power of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George)—it is upon this limited field, and only upon this field, that the executive Government can, in practice, effect proper economy. And very much further economies now are indispensable. For observe what is coming upon me. Before we reach the figure of £800,000,000 for 1926–27 I have to face very large increases of expenditure. These increases of expenditure are due to three causes. First of all, they are due to decisions for which the present Parliament and the present Government are responsible. Let us just see what they are. There is the new Widows' and Old Age Pension scheme, £5,700,000. There are increased State contributions to Unemployment Insurance which, if they are not altered by the present Bill may mean £3,800,000. There is the beet-sugar subsidy, an additional expenditure of £1,750,000. The right hon. Gentleman the Member for Colne Valley was the first to bring this child into the world. It is growing extremely well. He left it on our doorstep, and we have nourished it. It is growing in weight and in cost almost every hour. It is, in fact, a model of what a healthy and growing child should he. I hope the right hon. Gentleman, not content with saddling us with his burden, is not going to abuse me, and to abuse the Government for the care they have taken of his offspring. Now I come to an item which will a little excite his wrath. The new cruiser and construction programme added to our Naval Estimates, £3,724,000. The coal mining industry subvention will be £4,100,000 next year—that is the subvention we agreed to in August last. The Unemployment Insurance (Northern Ireland) Bill, which the House discussed last week, which was much criticised, although no party voted against it, will cost £875,000. There is the marketing of Empire produce, £500,000. Provision for increases in the pay and the strength of the police forces, £400,000. I am told there is in effect a city as large as Birmingham being built in Great Britain every year now; hundreds of miles of new streets are created; and it is almost inevitable that there should be an increase in the forces of the police to preserve order over these immense new areas which our housing programme is creating. Now here is something for right hon. Gentlemen and hon. Gentlemen opposite—provision of steel houses for Scotland, £368,000. There is the new drainage scheme for agriculture, £200,000. The Tithes Act of 1925, £150,000. The training of unemployed men—the younger men, £150,000; I am sure no one will object to that, no one will say that is not a thrifty form of expenditure.

Miss WILKINSON

What about the women? [Interruption.]

Mr. CHURCHILL

I have not followed that point, but obviously the argument covering men would apply, with whatever modifications were appropriate, to women also.

Viscountess ASTOR

It does not.

Mr. CHURCHILL

I am putting forward an Economy Bill. I am defending the Government, of which I am a Member, from reproaches which are hurled at us because we do not reduce expenditure enough. Has anyone heard anything during this Debate—there has not been much interruption I admit, I have nothing to complain of—but has anyone heard anything during this Debate except suggestions for additions to the expenditure? Then there is an increase of £2,730,000 in the Education Estimates, which is purely book-keeping, which involves no additional burden. It is due to the fact that the teachers' pensions contributions have been diverted to the Exchequer under the Teachers' Superannuation Act, 1925, instead of being treated as an Appropriation-in-Aid; that means to say, they go into our accounts and swell the nominal total by £2,730,000, without in the slightest degree affecting the realities of the case.

In the second place, these increases are due to decisions for which previous Parliaments have been responsible, and in this matter the party opposite have a full right to share in some of the credit. There is the Air Force scheme of expansion of four years ago, which was continued by all Governments until the present time, and would have entailed an additional expenditure of £2,500,000; the increase in old age pensions under Lord Oxford's scheme, £1,250,000; the increase in health insurance grants, apart from anything we are doing under this Bill, £1,925,000; housing subsidies increase, £570,000; land settlement revaluation, £560,000; teachers' pensions, £500,000; overseas settlement, £500:000—there is a move forward here; for a very long time we spent less than was taken in the Estimates, but developments have now really begun to bear fruit—Imperial War Graves Commission, £300,000; police pensions, £145,000. I made a mistake in saying that the increase of teachers' pensions and police pensions amounted together to £500,000. It is the teachers' pensions alone which amount to £500,000; the police pensions are £145,000 additional. These increases, for which previous Parliaments were responsible, total £8,250,000, and have to be added to the increases for which the present Parliament is responsible, amounting to £24,447,000.

The third class of increase is the normal growth of Post Office and Road Fund expenditure and the working of the incremental scales, which operate in the public service, and under which salaries increase at definite intervals, and there is also the normal growth of pensions of Government servants. These headings I estimate at £6,000,000.

If we add these three classes of increases together they will aggregate £38,750,000 of increase upon the £800,000,000 figure. That is not all a genuine addition to the national burden, for, as I have explained, the teachers' pensions are a book-keeping entry of about £2,750,000; of the beet-sugar subsidy nearly £1,000,000 is recovered in Excise; there is the growth of the Road Fund, £2,000,000, and the growth of the Post Office expenditure of about £1,750,000. These make a total of £7,250,000, which is either book-keeping or a non-burdensome addition. But even after excluding these, I am left with an increase of £31,000,000 to face. To achieve a figure of £800,000,000, £31,000,000 must be saved, not out of, as some people suppose, the £800,000,000, for £634,000,000 of this is, as I have shown, beyond control, but out of the £165,000,000 from which the whole of the national administration has to be maintained. A saving of £31,000,000 out of £165,000,000 is a reduction of just under one-fifth, and has to he effected in order that we may simply maintain our existing position; and its reduction has to be secured on the one branch of our expenditure which has shown the slightest percentage of advance since 1914–15. As I have shown, it has only advanced pari passuwith the devaluation of the pound sterling. To effect that reduction is a very difficult task. How will it be accomplished? I will show the House before I sit down how it will be accomplished—very nearly accomplished.

I will take first the Defence Services. This year they cost £120,500,000, and the Estimates for next year are £116,500,000, a reduction of £4,000,000. But that is the net reduction on last year. That takes no account of the increases due to the cruisers, or to the expansion of the Air programme with which we were confronted, and which we have had to absorb before any reduction can be effected which would show itself in our figures.

Let us first take the expenditure on the Army, because there is not much controversy about the Army. The right hon. Gentleman the Secretary of State for War made a small reduction in his Estimates last year, and a considerable further reduction this year, and has done so without substantially affecting the strength of the fighting forces. I have had experience as Ministerial head of all three combatant forces, and I know as well as anyone what a solid achievement this represents. I am far from thinking, however, that we have completed the task of economy in Army administration. It is imperative that measures should be taken, and if adequate time is allowed I am sure they can be taken. By making modern weapons and modern organisations substitutes for old weapons and old organisations, and not mere additions, as they too often are, it should he possible without reducing the national security in the future to make substantial diminutions in military expenditure. But, after all, we must not expect an impossibility. The British Army was not appreciably increased on account of the Continental menace before the War. It was never measured against that menace; it was measured against the needs of the British Empire as a whole. The Continental menace has disappeared, but the British Empire remains, it remains larger than before, and in some respects no more contented, no more free from dangers of a minor character, and, therefore, reductions in our military strength will necessarily be of a limited character. £42,500,000 is the sum for which my right hon. Friend is asking this year, and that compares with a pre-War sum of £29,000,000; that is an increase of £13,500,000. One cannot compare these or any other increases without making allowance for the inflation of money values since the War, in other words, the diminished amount of service and material purchasable by the pound sterling. Making allowance for that difference, the pre-War Army Estimates of £29,000,000 would be to-day over £50,000,000, yet the Estimates of my right hon. Friend are under £43,000,000.

The Estimates of £16,000,000 for the Air Force were passed without a Division. There would have been an increase of £2,500,000 in those Estimates if we had pursued the programme which the last four Governments have acquiesced in or approved. The scheme of air increases inaugurated in 1923 had been carried forward without a break until now. It has been left for the Government of to-day to impose upon that scheme a drastic retardation, in view of the improved international situation, and for the Secretary of State for Air to effect economies which have reduced Estimates definitely forecasted at £18,000,000 for next year to £16,000,000.

Lastly, I come to the Navy. Everyone is down on the Navy. [HON MEMBERS: "No!"] Every one of the economy critics is down on the Navy. Since the German submarine menace was overcome, and the German fleet destroyed, it has found no friends. After all, there is a, policy in regard to the Navy, and I should like to know whether that policy is challenged or not? There is a standard, which I am not aware has been seriously aspersed in any responsible quarter, and that is the one-Power standard. On the morrow of our greatest victory, and at the moment of our greatest power, this country consented to abandon the standard of naval supremacy which for centuries had been our lifeguard, and which we had, at any rate in the last 100 years, never used except to the benefit. of the whole world. We deliberately and voluntarily resigned it. If I had been told that I should have been, as I have been, and am, a consenting party to this great departure from our historic policy I would not have believed it, but I am convinced that we were wise and right in agreeing to adopt the one-Power standard—a standard not of supremacy to, but of equality with, any other Navy in the world. But there, Sir, we stop. The The one-Power standard must be maintained.. The people of these islands, who depend for four-fifths of their food on ocean trade, cannot accept a position of being definitely inferior in naval strength to any other people. The one-Power standard does not mean that we should be in a position to wage naval war in any part of the world at any moment, nor does it mean that in each class of vessel in our Fleet we should be at least equal to the Power with the largest number of vessels of that class, but it does mean that our naval strength as a whole should not be inferior to that of any other nation, however distant or however friendly.

We have been greatly hampered, and was greatly hampered, in pressing the necessary curtailment of the increase of naval expenditure by the attitude towards that increasing expenditure which was prevalent under the Administration of the right. hon. Gentleman opposite (Mr. MacDonald). He was confronted, as I was confronted, by a new naval construction programme set out year by year over a long period which proposed increases in every branch, and which went far beyond the reasonable interpretation of a one-Power standard. As far as; can make out, the late Chancellor of the Exchequer and the late Prime Minister did absolutely nothing during their tenure of office to analyse, canvass or modify by reasonable arguments this enormous programme of expansion. No doubt they were a minority Government and found the Estimates made out when they came into office. No doubt they protested.

Mr. SNOWDEN

We reduced them by £5,000,000.

Mr. CHURCHILL

That was a paper reduction which in no way reduced the services. The fact remains that the policy of the late Chancellor of the Exchequer, with his, no doubt, superior virtues of economy, did not react in any effective or appreciable manner against this immense programme. They accepted the first cruiser programme which was the first step on a rising scale planned for many years ahead and which, if consistently followed, would have placed the Navy Estimates, not at £58,000,000 this year, but at nearly £70,000,000. I do not wish to criticise the right hon. Gentleman, and I only mention this fact to show how little right he has in this matter to criticise us. The First Lord of the Admiralty and his naval adviser have succeeded in doing what in my recollection has never been done before, that is, to make a substantial increase in new construction, which is the vital element in Fleet administration, while at the same time producing a substantial diminution in the demand upon the taxpayers. No one who understands the scientific application of naval warfare will under-value the effort involved in this or the result which has been attained. For my part, I hope the First Lord of the Admiralty will not weary of well doing, and when he is considering his Estimates in future I hope he will accompany successive programmes of new construction with successive abatements of the public charge.

Now, Sir, to present the accounts. There are, first of all, certain administrative decreases which must be taken into consideration. I have spoken of automatic increases, but there are automatic decreases. The total automatic decreases amount to over £4,000,000 which represent the decline in War pensions and the completion of the training scheme for ex-service men, etc. That leaves a total of £27,000,000 to be found if I am to reach the £800,000,000 figure, and it is not possible to do this without reconsidering the decisions which have given rise to the increase. We are reviewing these decisions and making reductions where possible. The Defence Services I have just dealt with. But let us see what we are saving on them in regard to the expense which otherwise would have been incurred in consequence of the public decisions taken not- only by this Government, but by previous Governments. The Air Estimates reduction amount to £2,000,000. There is a reduction of £2,000,000 on the Army Estimates, and there is a reduction when you take into consideration the increase of the cruiser programme of over £6,000,000 on the Navy. Thus on the fighting services the reductions which we have effected by altering decisions, or making economies to pay for them, amounts to over £10,000,000. These savings on the Defence Services leave us with 217,000,000 still to find.

Next there are the reductions effected on Palestine and Iraq which amount to one-third of a million, and a reduction of nearly £750,000 on the Colonial Office services effected by the Colonial Secretary out of a comparatively small section of the Estimates and these together amount to over £1,000,000. The sum of £500,000 has been saved on the Estimates of the Office of Works, and £750,000 is accounted for by reductions in the Ministry of Agriculture. There has been over £2,000,000 saved by reductions over a. variety of departments, and so we get to over £4,000,000 altogether, leaving the balance I have still to find of £13,000,000, and that is where this Bill comes in.

From this figure we must take the economies of this Bill which effects a saving of expenditure of £8,000,000, and in addition provides certain additional revenues amounting to over £1,500,000, but even when all the proposed economies have been carried out, and after making all the allowances which I have explained, there still remains a net increase on the figure of £800,000,000 of £3,500,000, which is almost equal to the amount provided in the Estimates for next year for the coal subsidy. This is an expense which is entirely novel and, I trust, a completely temporary intrusion upon our expenditure. I have still to state what the expenses of other Consolidated Fund Services, such as the Debt Services, for 1926–27 will be, but that I am not in a position to do at the present moment with accuracy, and, therefore, I reserve my final figures for the Budget statement.

I thank the House for its indulgence in listening to me so long, but I desired to place the case before them for their consideration in order that it may be carried forward with the utmost advantage. I have tried to answer the questions, "Why do you do what you are now proposing, and how is it you are not able to do more?" I conclude by saying that the opportunities for economy are limited to the restricted field of £105,000,000. We have been confronted with increases of expenditure which were necessary, and have been approved, of £38,750,000. If the proposals we now make and our Estimates are adopted in their entirety, they will not involve any undue diminution of national defence nor any retrogression in the social services. They will enable new and important services like the widows' pensions to be initiated without appreciably increasing the total expenditure of the country, and together with the proposals which will be made in the Budget they will carry us through this difficult financial year without either the reimposition of burdensome taxation or any resort to unsound financial expedients.

Mr. SNOWDEN

I beg to move, to leave out the word "now," and, at the end of the Question, to add the words "upon this day six months."

The Chancellor of the Exchequer has many qualities which are admired alike by friend and foe. He has a remarkable facility for adapting his position and opinions to changes in political circumstances, but I doubt if his most intimate friends ever suspected that he possessed a gift for ironic humour. The Bill we are discussing this afternoon has been described by himself as making dastardly, mean and contemptible proposals. Therefore, the right hon. Gentleman has anticipated my description of this Measure, and he has done so with an eloquence and a vituperation which I could never hope to emulate. I have not the right hon. Gentleman's knowledge of the English dictionary, but I would remind him that such knowledge is no compensation or excuse for ignorance of the most elementary principles of national finance. If it were not that the right hon. Gentleman, apparently, regards this Bill as a serious proposal, I should think that it was the greatest joke that had ever been perpetrated upon the House of Commons. If this is the best the right hon. Gentleman can do, then I would respectfully suggest that he can best serve his own interests, arid certainly the interests of the country, by realising and admitting that he has not the competence to discharge his job. The right hon. Gentleman, in the greater freedom of political platforms, expresses his views quite freely about the intelligence and capacity of myself and my hon. Friends He describes us as softies and fatheads, and repeatedly states that we are not fit to govern. Well, if the right hon. Gentleman's proposal is the evidence of his capacity to govern then I am glad that we have not the capacity to govern.

I want to bring down this question to the facts of the case. The right hon. Gentleman spent three-quarters of an hour in making a most intricate and elaborate statement, intended, I assume, to prove and to justify the fact that there is to be no reduction of expenditure this year. What did the right hon. Gentleman tell the House 12 months ago? He promised the House at that time that we were to have a progressive reduction of £10,000,000 a year, and, in the hope of realising that, some of us hoped that the right hon. Gentleman might be permitted to hold his office for the next 80 years, when he would have succeeded in abolishing taxation altogether. That was not £10,000,000 for next year, but £10,000,000 every year. Where has that gone? The right hon. Gentleman has not only had his own ingenuity at work, and the assistance of the ablest staff in the Civil Service, but he told us in his Budget speech that a Cabinet Committee was going into this question of the reduction of expenditure. Not content with himself, not content with the assistance of his Cabinet, he appointed a third Committee or agency, the Colwyn Committee, which was to go over the whole of the national expenditure. The right hon. Gentleman tells us this afternoon that that Committee has gone over every item of national expenditure, has pruned if rigorously and examined it thoroughly; and what is the result of it all? Not a reduction, but an increase in national expenditure.

There is not a newspaper which generally supports this Government which has not expressed its keen disappointment at the result of the efforts of the right hon. Gentleman. Some time later in the year, when, apparently, it became evident to him that there was no possibility of redeeming the pledge he gave to the country 12 months ago, he put forward other ideas, and made certain excuses. The right hon. Gentleman made a great speech at Leeds a few months ago; what a contrast there is between that speech and the miserable exhibition the Tight hon. Gentleman has made today! Really I can hardly find it in my heart to be caustically critical of the right hon. Gentleman—I feel much more inclined to pity him. He told his audience at Leeds that the whole programme of Government economies, both legislative and administrative, would be seen. when he presented his economy proposals to the House of Commons. We have seen them this afternoon. Where is the economy? Furthermore, these economies, said the right hon. Gentleman at Leeds, would cover the whole field; no Department would escape from them. This afternoon the right hon. Gentleman has read out to the House a long list of Departments where, in the Estimates for the coming year, an increase in expenditure is recorded.

The Prime Minister repeated a state-meat that the Chancellor of the Exchequer has often made during the past 12 months—and this is important, in view of the selection the right hon. Gentleman has made for the reduction 'of Government grants—that everyone of every class will be called upon to make sacrifices. But three-fourths of the national expenditure, the right hon. Gentleman tells us this afternoon is obligatory, sacred, sacrosanct. Everybody, however, was to be called upon to make sacrifices. It is so much easier, said the Chancellor of the Exchequer, when everybody is making sacrifices. What is the standard that the right hon. Gentleman set himself 12 months ago? Let us see how far he has attained that standard in the proposals he has submitted to the House this afternoon. There was to be a progressive reduction of £10,000,000 a year, and it was to be an all-round reduction. Everybody was to make sacrifices and the purpose of this reduction—and this is interesting in view of the very last sentence the right hon. Gentleman uttered — the only thing he hopes from this dastardly, mean and contemptible proposal is to avoid re-imposing the taxes that he so wantonly squandered.[Interruption.]

The right hon. Gentleman has now abandoned all hope of a net reduction of expenditure. Taxpayers in the country, and particularly his own friends who are groaning under the burden of heavy taxation which the right hon. Gentleman promised to mitigate 12 months ago, will not read with much satisfaction the Chancellor of the Exchequer's speech in the papers to-morrow morning. All that he is trying to do now, he admits, is not to reduce expenditure, but to prevent the automatic increase of expenditure. It has only dawned upon the right hon. Gentleman in the last few months that there is such a thing as an automatic increase of expenditure. Up to that time he appeared to think that we could go on improving social services, meeting the need for a higher social condition of the people, without any expenditure being involved; but all that the right hon. Gentleman now hopes to do is to stop what he calls this automatic increase of expenditure. On every one of the grounds which the right hon. Gentleman himself laid down 12 months ago he has failed miserably. He has failed to reduce expenditure; he has failed to make equal sacrifice from all; he has failed to mitigate the hardship of taxation.

I never like to give the House of Commons figures, but figures are the crux of this case, and I hope, therefore, that hon. Members will forgive me if for a moment I give them a few figures, which I will try to make as simple and as clear as I possibly can. I will take first the Civil Service Estimates—that part of the national expenditure in which, according to what the Chancellor of the Exchequer tells us this aftrenoon, economy is alone possible. May I say that I quite agree with him in what he said as to the undesirability of including the revenue and expenditure of the Post Office in the aggregate of national income and expenditure? I think that hon. Members may perhaps recollect that on many occasions in days gone by, when dealing with national income and expenditure I always excluded these items, and I shall exclude them now, dealing only with the Estimates of expenditure on the Civil Services.

We were to have a reduction of £10,000,000 in expenditure. Excluding coal, the new total Estimates come to £ 296,500,000, while the revised Estimates for last year were£294,000,000. Therefore, on these Services, where, says the right hon. Gentleman, economy is alone possible, there is an increase, excluding coal of£2,500,000. The Fighting Services show a reduction of just under£4,000,000 —not over£4,000,000, as I think the right hon. Gentleman said—and, therefore, we get upon the Fighting Services and the Civil Services, a net decrease of£1,413,000. But the so-called economies proposed in this Bill are included in the Estimates for next year, and, therefore, in effect, we get an increase of just under£10,000,000 a year. Let not the right hon. Gentleman misunderstand my position; I am dealing with his figures, not with mine, in regard to economy and expenditure. Of the separate heads of the Civil Service Vote— there are 13 of them— seven show an increase and six a reduction. The seven show an aggregate increase of£14,600,000. Everyone must make sacrifices, said the right hon. Gentleman. That apparently has not been applied to seven of the 13 heads of the Civil Service Vote.

Mr. CHURCHILL

What are they? Head them out. Education.

Mr. SNOWDEN

The right hon. Gentleman has already forgotten what I said a moment ago. I am dealing with his position and not with mine. If I were in his place I should be prepared to justify many of these increases under the seven heads of the Civil Service Vote, but he told us a year ago he was going to make a reduction and everyone was to make sacrifices. But where reductions have taken place they are not, on the admission of the right hon. Gentleman himself, permanent reductions. He has been striving might and main in order to make a temporary reduction of expenditure in certain Departments this year. The Navy and the Air Force tell us that we must look forward to an increase of expenditure in these Departments in the years to come. The First Lord of the Admiralty said that in the Estimates for the past two years a special overhead reduction is being made in the provision for contract work in Votes 8 to 10 to discount in advance possible delays in the progress of such work. If the delays do not in fact occur, the deficiency will have to be made good. The Air Minister says in this statement that he is looking forward to increased expenditure in the future.

What has the right hon. Gentleman done? Instead of equal sacrifices, out of hundreds of items of expenditure in the various Departments he selects national health, unemployment and education. I remember the right hon. Gentleman saying it was the definite policy of the Government to stop the increase of Exchequer grants for these services. The percentage grant is to be abolished and a block grant to be instituted of an arbitrary amount. The Bill gives power to the Board of Education to fix practically what grants it likes to the local authorities. These are the three services the right hon. Gentleman has selected for what the "Times" calls "so-called economy." There is no economy in them, as I shall show in a moment, but at any rate the right hon. Gentleman's intention is undoubtedly to rob the sick, the disabled, the unemployed and the children. That action well deserves his own description of his Bill as dastardly, mean and contemptible. The Chancellor of the Exchequer would not give the slightest countenance to any suggestion that there should be any reduction in regard to the interest upon the War Debt. That was a sacred obligation. But health insurance is a contract into which the State entered with the millions of people who were compelled to go into insurance. Is that contract any less sacred? These societies were given a solemn undertaking that if they managed their affairs diligently, carefully and efficiently all the advantage of their diligence and efficiency should accrue to themselves and that the members should reap the advantage of it. Ah, says the right hon. Gentleman, there is no reduction of benefits. Here we have an illustration of the right hon. Gentleman's financial capacity. He is going to reduce the income of these health societies by£3,000,000 a year and now he tells us because they have£3,000,000 a year less income they will be able to give greater benefits.

The consequences of a policy of this sort are very far reaching and disastrous. The effect of this robbery of insurance will be that the approved societies will lose confidence in the good faith of the Government. They will naturally say to themselves, "What is the good of efficiency? What is the good of saving? What is the good of being economical, because if we pile up reserves the Government will come along and rob us of the results." The Minister of Health practically admitted the same thing yesterday in a speech he appears to have delivered to the Association of Approved Societies. The right hon. Gentleman was right. Perhaps it was an oversight on the part of the Chancellor of the Exchequer that he did not include the right hon. Gentleman in those Ministers who were going to defend the Bill. This is what the right hon. Gentleman is reported to have said yesterday: He appealed to the societies not to refuse to do their bit, but, with such resignation as they could command, to accept sacrifices which did not impose any deprivation at present, but would contribute materially to the relief of national expenditure. Do not those words justify everything I have said to-day? The Chancellor of the Exchequer said a moment ago there are going to be increased benefits. The Minister of Health, who certainly knows a great deal more about this than the Chancellor of the Exchequer does, told them that there would be no deprivation at present, but he said the societies must make sacrifices with as much resignation as they could command. They, he said, must do their bit. But they cannot be making sacrifices. They cannot be doing their bit unless they were called upon either to make an additional financial contribution or to suffer the loss of some contribution which they have hitherto received from the State.

The Chancellor of the Exchequer said it certainly appeared to be somewhat illogical that last year the Government proposed to increase the contributions to the Unemployment Fund, and now he comes forward proposing a reduction. What is his justification? He is gambling on an improvement of trade. He got no justification for that hope, at any rate, from the deputation he met last week from the Federation of British Industries, who gave him a most dismal story, not only of the present condition of trade but of the immediate prospect of an improvement. With the figure of unemployment at what it stands to-day there will be an increasing deficiency upon this fund. If I understood the right hon. Gentleman aright, he said the fund has been drawn upon to the extent of£2,000,000 during the last 12 months. According to the actuaries' calculation, when the figure drops below, or to, 1,030,000, the contributions will just pay for the outgo, and therefore, under this proposal, unless unemployment falls to a figure which I think no one expects, there must be an augmentation of the deficiency upon the fund. But there are ways and means available to the Government, and they certainly have utilised them during the last few months. There has been a reduction, we are told, in the number of unemployed. If the Government impose a few more restrictions of the character of those they have applied during the last few months they might bring down the number of unemployed to 800,000. Then the fund will become solvent. I do not think for a moment the Government will hesitate to do something of that kind. At any rate, whether they do or not, their proposal means that there is no likelihood of the present unfair and unjust restrictions being removed. Persons who are entitled to standard benefit will continue to be denied benefit, and extended benefit will continue to be refused in deserving cases.

6.0 P.M.

May I refer to a sinister paragraph in this Bill dealing with education. The interpretation I was prepared to place upon it has been confirmed by the statement of the Chancellor of the Exchequer. It is in Clause 14 and it gives the Board of Education arbitrary power to refuse to sanction certain expenditure of local authorities. Circular 1371 and Memorandum 44, we are told, have been withdrawn. Clause 14 of this Bill has been introduced to take their places, penalising the sick and disabled, penalising the unemployed, and robbing the little children. These savings are not savings at all. There is no economy in this Bill. There is no reduction in expenditure. What the right hon. Gentleman is doing in effect is this, he is simply manipulating figures in order to create the impression of having made a reduction, and when he is doing this he says it is the policy of the Government. He is transferring the cost of certain social services from the Exchequer to the local authorities. That has been done already in regard to unem- ployment. The cost of Poor Law relief is increasing week by week. Now, the right hon. Gentleman has foreshadowed a raid upon the Road Fund in the approaching Budget. He is relieving the national Exchequer and adding to the burdens of the local authorities.

This, says the right hon. Gentleman, is the policy of the Government. I do not agree with the right hon. Gentleman that if economy is to be effected, if reduction in national expenditure is to be made, that it either can be made or that it ought to be made in the categories which the right hon. Gentleman has selected for that purpose. There are two others. There is the National Debt. The right hon. Gentleman referred to the Capital Levy. If our proposals for the Capital Levy had been adopted in 1919, when there was a large volume of public opinion in favour of such a levy—the late Mr. Bonar Law, without perhaps definitely expressing any enthusiasm for it, certainly did not disapprove of it—we could have reduced the National Debt by a very considerable sum, by paying it off at the devaluation at which the currency stood at that time. Any reduction of the National Debt to-day would cost us about 8s. in the pound more than it would have cost us seven or eight years ago. If the Chancellor of the Exchequer cannot do that, there is one thing that he can do.

Mr. CHURCHILL

Does the right hon. Gentleman agree that I cannot?

Mr. SNOWDEN

The right hon. Gentleman has no right to put that question to me. I am not in the dock. It is the right hon. Gentleman who is in the dock. Will he take a suggestion from me? If he cannot adopt that proposal, at any rate he can make the recipients of interest upon the War Loan contribute by Income Tax much more generously and much more justly than they are doing at the present time. The right hon. Gentleman and his Tory predecessors in the last few years have reduced the Income Tax by £120,000,000 a year. Tens of millions of that are received by the recipients of War Loan interest. Everybody is to make sacrifices, says the right hon. Gentleman. Everybody! But it is really only the working people who have to make sacrifices, and they have to do it for the benefit of the Super-tax payer. The right hon. Gentleman is robbing the Unemployment Fund and the National Health Insurance Fund by a sum the mean of which is just about equal to the sum that he handed over to the Super-Tax payers last year.

There is no economy in this Bill. I hope that hon. Members opposite will enjoy their dinners this evening, contemplating the relief, the mitigation of taxation, which has been offered to them in the speech of the Chancellor of the Exchequer to-day. On his own admission, there is no reduction of expenditure, but a transference of existing burdens to the local authorities, an increase of local rates, and no, mitigation of the burden of taxation borne by his friends. We ask the House to reject the Bill. In the whole history of Parliament, there has never been put before the House of Commons a more grotesque proposal.

Mr. CHURCHILL

"Dastardly."

Mr. SNOWDEN

The right hon. Gentleman has been in labour for 12 months, and he has brought forth this abortion. It is not even worthy of the maternity benefit.

Mr. ERSKINErose—

Mr. SNOWDEN

If the Chancellor of the Exchequer had taken the advice and sought the help of the hon. Member for St. George's, Westminster (Mr. Erskine), who, I believe, is a great authority on such matters as birth control and on the determination of sex, he might have produced a more creditable offspring. I ask the House to reject the Bill, and I do so because no more dastardly, contemptible, and, at the same time, ridiculous proposal has ever been submitted to this House.

Sir JOHN SIMON

We have listened to two very elaborate, eloquent, and, in parts, amusing speeches. I propose for a few minutes to take one or two points, not in any language of rhetoric, but in an endeavour to bring the House back to one or two practical questions which I am sure are pressing upon some of the interests touched by this Bill, as to which I think they will hardly receive much comfort from reading in the papers tomorrow either that the Chancellor of the Exchequer has been very amusing, or that a great deal of eloquence has been displayed. The first Clause of the Bill appears to me to be a perfectly deliberate attempt to go back on a Parliamentary pledge. There may conceivably be some circumstances when that might be justified, but it needs very plain and convincing argument to show that it is justified. It cannot be a justification for going back on a Parliamentary pledge, that the performances of the Chancellor of the Exchequer are so ludicrously different from his confident anticipations. There was a Parliamentary pledge to which the Chancellor of the Exchequer was a party, to which my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George) was a party and with which in a minor capacity, I had something to do, when the National Health Insurance Act of 1911 was passed. When I heard the Chancellor of the Exchequer introduce this Bill in a few carefully chosen emphatic phrases about Clauses 1, 2, 3, and 4, and then treat us to a general disquisition on the difficulties of national economy, I know him well enough, and I know enough about advocacy to know that the reason he says so little about the Bill and so much about other things is because the actual proposals of the Bill will not really bear reasonable justification.

Let me put the position as it seems to me. When one reads the first Clause of the Bill, and takes the trouble to look at the different Sections to which it refers, and then one turns to the Report of the Government Actuary, it is clear that this is a proposal to change the law of National Health Insurance, with the result, as it is anticipated, that the State in the year coming will be required to find less by£2,800,000 than in the present year it would have to find. One, therefore, needs, and I think every hon. Member needs, to say this, "Can you justify that reduction in the State contribution?" Before one can answer that question, one has to ask oneself how came it that there was a State contribution, and was the arrangement that there should be a State contribution the result of a bargain? There was a State contribution because when National Health Insurance was started and a certain scale of benefit was enacted—sick benefit, maternity benefit, disablement benefit, and so forth—the whole scheme depended on this: that as to the money needed for benefits and administration, seven-ninths would be provided by the con- tributors, whether employers or employed, and two-ninths would be provided by the State.

Here is a Bill which, to try to meet the Chancellor of the Exchequer's extremity, proposes to strike out two-ninths, and to substitute for it a smaller fraction. However eloquent and interesting the Chancellor of the Exchequer may be, has he really offered to the House any justification for that action? He began by saying that in 1911, when the approved societies were counting on the British taxpayer finding two-ninths of the sum that would be, needed in order to pay benefits, the rate of interest that could be earned on money was less than it is to-day, and, therefore we are given to understand by the Chancellor of the Exchequer that gives him reason for cutting down the contributions. Let us examine that position. In the first place, as everybody knows, and as the Chancellor of the Exchequer knows, this two-ninths is not a sum of money which is handed over in advance by the State to the societies, in order that the societies in their turn may do this and that with it years afterwards. It was one of the essential principles of national health insurance that it would he absurd for the State to hand money over in order that it might come back again. The truth is the State does not actually provide its contribution until the expenditure comes to be met. If in any given year, in reference to any given case,£9 is needed,£7 of the£9 will be provided from the contributions of employers and employed and the other£2 is not something which the State provided long ago; it is something which the State provides now, and it is not true, therefore, that changes in the rate of interest have anything whatever to do with the subject of this Parliamentary bargain.

In the second place, the Chancellor of the Exchequer suggested that one of the Sections of the Widows' and Orphans' Pension Act of 1925 afforded him an excuse. What a curious time to have found that out. If it was the case, when the Minister of Health was carrying this Act through the House, that one of its results was to relieve the State from a liability to the approved societies under the National Health Insurance scheme which would justify the cutting down of the State contribution, what a pity it is that someone did not say so then. It is curious it should be found out not in connection with an examination of the finances of old age pensions, but long afterwards when the Chancellor of the Exchequer has utterly failed to fulfil his confident predictions and when, as he says, he is scraping in any corner he can find for something in order to make his Budget balance. The argument is without any foundation. If I follow it rightly, it seems to stand like this. When national health insurance was established it was contemplated it would bring in people between the ages of 16 and 70.

It is quite true that the Widows' and Orphans' Pensions Act and the reduction of the age in the future for old age pensions has made it probable, nay has made it certain, that a great many people will not be required to get their health insurance benefits after the age of 65, although formerly they may have had them until the age of 70. That is true, but inasmuch as the State does not actually hand over money for benefits in advance, but only provides the money for benefit as and when it is needed, the only result is that the State will not have to provide money for people when they reach the age of 65, and to a certain extent will be saved in the amount it might otherwise have to find. This advantage is the automatic consequence of carrying the Widows' and Orphans' Pensions Act, but it is not a justification for cutting down the statutory contribution as and when it is required. The result of carrying the Widows' and Orphans' Pensions Act, I agree, will be that a number of old people in the community will not be calling upon their Approved Societies in old age for benefits which they might otherwise get, andpro tantoit means that the contributories will not have to find so much, and the State will not have to find so much; but, as it appears to me, that is no justification whatever for saying in this Bill that you are going to cut down the fraction of two-ninths to something smaller and something different. Whether I am right or wrong, it is a matter about which we are entitled to have information from the Chancellor of the Exchequer, and it is no sort of consolation to those who are interested in national health insurance to be favoured with a disquisition, however forcible and wide-reaching, as a kind of preliminary edition of the Budget statement.

There is another aspect of the matter. Everybody who has paid any attention to this subject—I was one of the Ministry who helped to carry it through—knows that when we started National Health insurance in 1911 or 1912 the scheme was one which was to give benefits, in response for a fiat contribution, to people who were, of course, of a very wide range of ages. There were some people who were to contribute at the age of 17, and would go on paying contributions during the whole of their working life. Therefore, such a person as that was an entrant at the age of 16, and was a person who would have made an immense number of contributions, his employer would also have made an immense number of contributions, and in his case, therefore, the scheme would be at once and completely actuarily sound. On the other hand, there were a great many people who were new entrants at the beginning of the scheme who had lived 30 and 40 years of their life, and, therefore, unless special provisions were made in the form of reserve values, you would have to get these people to pay bigger contributions or give them smaller benefits—neither of which arrangements would have been satisfactory—or else, as the only other possible way of doing it, you would have to begin by contenting yourself with benefits which really did not represent the whole 9d. but represented in the case of the younger people not more than 7d. or less than that.

That was always understood in the scheme, and what was said— I remember the Debates perfectly well—was this: It is quite true that the contribution which you are calling for to begin with seems a large contribution: it is quite true that for the younger members of the Fund you will he able to do more for them with this contribution than you are doing; you will be able to give the benefits under the scheme with a smaller contribution, but if you want to start this scheme with a flat benefit and a flat contribution for old and young alike, you must, for a period of years, calculated at one time at 15 years and at another time at 18 years, be content with benefits which are not really as a matter of fact absorbing the whole Fund; you must keep a certain portion of the Fund in order to provide a reserve value for the older entrants. That will work out in the course of a generation or less, after which the societies will have this advantage: it will be possible for them to give bigger benefits, or additional benefits, or reduce the contributions of their members, or otherwise adjust the scheme.

But see what has happened. The scheme was set on foot in 1912, and these reserve values in respect of the older entrants were distributed to this society and that. They would not have taken these older people if they had not had these reserves values with them. All this time the benefits for the younger people have been less than their contributions would justify, but all that was none the less to be defended if you had a national scheme on a flat benefit with a fiat contribution for all ages. Now this first generation has exhausted itself. The Approved Societies were told that if they accepted, these older members as original entrants with their reserve values a time would come in the course of 15, 16 or 17 years when it would be possible for them out of the accumulated reserves, once the first strain on the Fund had been exhausted, to increase the benefits and pay additional benefits to their members if they administered their society well. That was part of the original scheme. I have looked up the Debate, and I have here one quotation which shows this clearly. The then Attorney-General, my colleague, the present Lord Reading, on the Second Reading of the Bill said: Those who are managing the society, as well as the members of the society, have every interest in administering well, because to those members the society will give the additional benefits which may be payable out of the surplus attributable to mat particular society."—[OFFICIAL REPORT, 25th May, 1911; col. 452, Vol. 26.] The whole scheme has gone on that basis ever since, and if we put it in plain English you are not here interfering with the original statutory benefits—I do not suggest that—but the real effect of Clause 1 of this Bill is to postpone the day when the Fund will be in a condition to contribute these additional benefits. That is the plain English of the position; and what is the good of coming to the House of Commons and giving a lecture, fascinating as it was, on the difficulties of economy and the general position of British finance if, in truth, what you are doing is to break a perfectly plain Parliamentary pledge to which the Chancellor of the Exchequer himself as a Member of the Government at that time was a party. One must not speak on these matters with complete confidence, because they are so complicated, but, subject to correction, as I understand it, that is the effect of what is here proposed, and I say that the first Clause is one which is contrary to the whole basis on which national health insurance was founded, as it deprives the scheme of the contribution which the State as a partner in the enterprise promised to make. The result of that is that you are postponing the day when the reserve values originally provided will be no longer needed, because the Whole population will have passed its life under the head of national insurance as far as the workers are concerned. You are doing that and putting forward reasons to defend it which have no logical foundation whatever. I have not the faintest idea why it should be supposed that because the State is relieved from having to meet claims when certain numbers of persons reach the age of 65 under the head of national health insurance it is any justification for cutting out the fraction of two-ninths and substituting a smaller figure.

As for the argument that the funds of the societies were invested at a time when investments may have brought in three per cent. whereas now they may earn four per cent. and five per cent., the Chancellor of the Exchequer has been lecturing us this afternoon about the folly and iniquity of repudiating the National Debt. He has been pointing out that it would be most inequitable as well as a most foolish thing to say to people who hold a particular form of investment that although they might be entitled to such and such a rate of interest, you propose to reduce it by Statute. What on earth is he doing here except exactly the same thing, with this difference, that he is not doing it to persons who are holding blocks of Governmental securities but to a class of people who are, speaking generally, of a much humbler order. I am quite unable to see how the arguments of the Chancellor of the Exchequer have anything to do with the point. Until some explanation is offered which shows why these considerations are wrong, I shall continue to think that this really is a proposal to break a Parliamentary pledge, to go back on a bargain which was struck at the time on the faith of which National Insurance was carried through and established in the country, and that, not in the least because these things are justified in the realm of good sense or fair play, but simply because the Chancellor of the Exchequer is at his wit's end to find another million or two.

Take Unemployment Insurance, a subject about which I am willing to admit that I am better informed than about Health Insurance, because I did have, in the old days, a direct responsibility for carrying the Bill and dealing with its details. I always understood that the basis of the scheme of Unemployment Insurance really was that the employer and the employed should make equal contributions. It was so in the original Bill and it has been so in mast a the Bills since. Quite recently, in view of a temporary emergency, there was an increase in the employer's contribution of a penny compared with that of the man. At present, the employers pay a penny a week more than the men. When that was done it was done on the most distinct assurance and assertion that it would be the first object of Parliament to get the two halves of the contribution equal again as soon as possible. That was the thing which was aimed at as the principal object of the Bill. You can see it quite well in the actual language of the Act which was passed only last year. The Act of 1925 continued this inequality, but it contained, as far as any Act of Parliament can, a formal Statutory statement that this was intended to be quite temporary. Section 4, Sub-section (1, d), provides (d) If at any time during the extended period the amount of the outstanding advances, together with interest accrued thereon, does not exceed the amount of the 1925 debt, and the Minister is of opinion, and the Treasury concur therein, that, having regard to all the circumstances of the case, the amount of the advances which will at any time during the next succeeding insurance year be outstanding, together with interest accrued thereon, is not likely to exceed the amount of the 1925 debt "— Then what?— the Minister may in respect of contributions payable for that next succeeding insurance year by Regulations reduce the rate of the contribution payable by the employer by one penny in the case of the contribution payable in respect of a man or a woman and by one halfpenny in the case of the contribution payable in respect of any other person. Indeed, when that was carried, the colleague of the Chancellor of the Exchequer, the present Minister of Labour, in explaining the object of the whole thing, said in July of last year: The principle of equality" (between employer and employed) "has been accepted" (by someone opposite). "It is in harmony with the principle of the Bill, and really in harmony with the principles laid down by the hon. and gallant Member, that both sides should be treated on a parity, and that they should be equal. For that reason I hope the arrangement of the Bill will he allowed to stand. I am not in the least accustomed in this House, or out of it, to suggest that people in one part of the House are solely interested in the employer and that there are others who are solely interested in the employed. I do not believe it is true. But this is only in the first instance an employer's grievance, because it ultimately reacts on the community as a whole. If it is true, as the Chancellor of the Exchequer led us to suppose, that the fortunes of this Unemployment Insurance Fund are going to improve, it is perfectly certain that the first object which ought to be carried out as a consequence of that improvement is to reduce the employer's contribution by that penny. Instead of that, the Chancellor of the Exchequer says, "Oh, let the employer go on paying his penny, and then in the sacred name of economy I will raid the Fund and balance my Budget." It is the Chancellor of the Exchequer who says that we must always try to regard these financial questions from the broad national point of view, and must not put either special burdens or special favours in the way of some particular class. How much economy is there in telling the employers of the country that they must continue to pay and stamp cards for a larger weekly sum than they ought to pay, and which they are quite certain to see is a sacrifice shared between them and the trade, and then at the same time say that you are relieving the burdens on industry because, forsooth, of a Bill in favour of economy? It is a perfectly grotesque position. Again, I am not in the least surprised that the Chancellor of the Exchequer spent the minimum time in referring to it to-day, and talked for an hour about the principles of national finance.

When one comes to the third member of this trinity, the difficulty of avoiding using the sort of language which the Chancellor of the Exchequer suggested in advance, becomes almost overwhelming. The Minister of Education, I say boldly, at the bidding of the Chancellor of the Exchequer and because the Chancellor of the Exchequer was telling the Cabinet that otherwise he could not see how to introduce his Budget as he wished this year— the Minister of Education produced his Circular 1371. It raised a storm, not only on one side of the House, but in all quarters of the country where the interests of education are regarded as a thing that cannot be jeopardised because of the embarrassment of a Chancellor of the Exchequer. It raised a storm. The Noble Lord (Lord E. Percy) for some time attempted to defend this instrument. There was not a single syllable in Circular 1371 about efficiency in education. It was not an education circular; it was an attempt to cut down the amount which the State might have to provide for education, not in the interests of education but in the interests of economy. If it could have been said that it was going to secure that we spend less by getting better service, by getting more efficient results, there would have been a great deal to be said for it. But there was not one syllable in the Circular which suggested anything of the kind.

There was a second Debate about the Circular, in which I happened to take some part. The Noble Lord, I will not say defended it, because it was not quite clear to me how much of the Circular he regarded as remaining and how much had already begun to evaporate and disappear, but at any rate within the last few days it has been quite evident that the Noble Lord abandons and cancels his Circular in terms, and he says so. The reason why he says so is that in one of the Clauses of this Bill is to be found a proposal which in principle is exactly the same. I congratulate the Noble Lord on one thing. This time, at any rate, he has made apparent what was not clear at all, that this is not education, but that it is the Chancellor of the Exchequer who is doing this. At any rate, the Noble Lord has succeeded in throwing on someone else the burden of justifying it. What is the proposal? It is a proposal to give the Board of Education, and the Minister as the head of the Board, a much larger discretion in refusing or vetoing expenditure even under approved heads than he ever had before. The Noble Lord has a history and a past about this. He made a speech on the Economy Bill in this House in 1922, and I rather think that on that occasion he had something to say on this exact subject. Let me read his words in the Debate on 10th July, 1922. He said The gravamen of the charge against the Government is that under this Bill the Home Secretary, the Minister of Health, and the Minister of