Sir HILTON YOUNG
I beg to move to leave out the Clause.
It will be within the memory of the House that this is a Clause which provides for the making good, of a deficit of £14,500,000 in last year's accounts by 2056 additional Sinking Fund payments of £5,000,000 this year, £5,000,000 next year and £4,500,000 in the year to follow. I move formally to omit this Clause in order to give Pharaoh one last chance to soften his heart on this matter, which is if so much vital interest to the trade and industry of the country in its present condition. I think the Chancellor of the Exchequer will agree that the matter was not fully discussed in Committee owing to the lateness of the hour, and that it is one of the biggest issues, on the merits, which has to be decided in the Finance Bill. It will, therefore, not be thought inappropriate to devote a few minutes to the subject on Report. It is a momentous issue. Let me make it quite clear that, speaking from these benches, we are not in any way attacking the strength of the arrangements made to maintain the Sinking Fund, or the sanctity of those arrangements. On the contrary, we are ardent champions of the maintenance of a regular scheme of Sinking Fund payments.
What we are attacking upon this occasion is not the maintenance of the regular scheme of the Sinking Fund, but its exceptional increase. In this issue there is involved no less than the big general question of policy as between the paying off of debt and the reduction of taxation. The first proposition which I would like to assert, on behalf of those who sit on these benches, is this: In the current year the financial requirement of the country is not an exceptional effort to reduce debt, but it is an exceptional effort to reduce taxation. It is our contention that what the nation has done in the way of reduction of debt, under the programme laid down by my right hon. Friend the Member for Bewdley (Mr. S. Baldwin), is adequate, and mere than adequate. It is enough to maintain the credit of this country in the highest degree: but in the circumstances in which we find ourselves this year, caught in the vortex of a storm of world depression, with every source of revenue affected and with all the trade and industry and commerce of the country crying out for relief in order to enable them to meet their foreign competitors, it is little short of irresponsibility 2057 to make an exceptional provision for increasing the reduction of debt.
But I must remind myself that the Chancellor of the Exchequer has supported this particular action by a remarkable argument. On the occasion on which this Clause came up for consideration in Committee he explained the reason why he had made the proposals. They were on the following ground:When you borrow to make up a deficit you are drawing money out of the market and away from industrial purposes. When you pay off debt you pay back money into the industrial market. In the application of this particular proposal the £5,000,000 which will be appropriated for the reduction of the £14,500,000 deficit will go back into the industrial market, and will therefore be available for the extension of induetry."—[OFFICIAL REPORT, 25th June, 1930; col. 1286, Vol. 240.]A remarkable passage, deserving almost to become a classic in the text book of fallacies. I do not think that either branch of the proposition could be repeated otherwise than more truly in the opposite sense, and particularly the latter one—the astonishing proposition that you are benefiting industry by taxing it in order to pay off debt. If you are doing so, why stop this refreshing process at £5,000,000? Why not carry it further and increase your provision to £50,000,000? But, indeed, the Chancellor of the Exchequer is not always the victim of this particular form of fallacy. When he was meeting our argument against increasing the Sinking Fund he told us that it must be done in order to put more resources at the disposal of industry but the other day when we were meeting him on another issue—the issue of leaving more resources at the disposal of industry by reducing taxation on the reserves of companies—he told us that ours was a nugatory and a futile proposal because the resources at the disposal of industry were ample in any event.
Which way is the right hon. Gentleman going to have it? Is he going to maintain the argument which he used on the occasion of the Sinking Fund debate, or is he going to maintain the argument which he used in connection with the taxation of reserves? I am sure that the right hon. Gentleman's passionate attachment to dogma is too great to induce him to try to maintain both. But the issue is wider than that. The issue can be extended to cover another and a most im- 2058 portent question of policy in connection with the Sinking Fund. What is the good of continuing to pay off debt when, at the same time, you are compelled to borrow? If there is one policy of wisdom, which has been retained in the traditions of public finance, it is that it is wasteful and deceptive to embark upon an illusory sinking fund policy and to pretend to be paying off debt when, at the same time, you are borrowing against the amount which you are paying off. We had the Government of the day coming down to the House last week with a proposal to increase the demands which will have to be made in future in the way of borrowing capital in respect of the provision for the Unemployment Insurance Fund. Next week we shall be considering the Public Works Loans Bill, the provisions of which will increase future borrowing, I imagine, by £30,000,000 for housing and purposes of the sort. All the time, owing to a misconception which one does not readily detect or drag into the light of day, in connection with the Sinking Fund policy of the country, debt is being increased and then, in his illogical devotion to a Sinking Fund policy, out of which the bottom has been knocked by the facts, the Chancellor of the Exchequer gratuitously insists on imposing this additional burden of £5,000,000 of taxation on the country. That is only possible to an academic financier. It would be impossible or it should be impossible to anyone responsible for the public finances who has his eyes fixed on the realities of the situation.
To do the Chancellor of the Exchequer justice, I do not think he was giving us the true account of his own activities in the debate to which I have referred. I think he gave then a wholly fallacious explanation of the reasons for his policy of taxation to pay off Sinking Fund. I believe the true reason to be the right hon. Gentleman's devotion to the formal logic of public finance without attention to its realities. There was a technical deficit last year but let us remember that it was not an actual deficit. It was not that we actually overspent on the recurring expenditure and revenue of the year. The deficit was only an unexpected reduction in the settled provision for the redemption of debt. But the right hon. Gentleman 2059 becomes hypnotised by the fact that we did not redeem as much debt as we expected and, out of that formalism to which I think he is unduly devoted, he insists on accumulating this unnecessary burden on the shoulders of trade and industry in the following years.
As regards general policy I believe that it is a gross error to make an exceptional increase of Sinking Fund provision in this year. I wish to make it perfectly clear that we maintain to the utmost the actual programme laid down by my right hon. Friend the Member for Bewdley. What we object to is an exceptional increase of that programme. Apart from that objection we say that the form in which this increase is proposed is mischievous. It tends to keep the debt finances of one year accumulating as a burden upon the following year—a sort of hanging weight. That is one of the greatest errors which you can make in public finance. Sufficient unto the year is the good or the evil thereof. It tends to confusion and mistaken policy to keep the obligations of one year hanging over the next year. They can be dealt with as they come. Write them off and start fresh. Reconsider every year what your situation is, and make your provision in that year to meet the necessities of the year, but do not allow yourself to be confused by the ghosts of the past. There is but one permanent provision that should be observed and that is the maintenance of the Sinking Fund programme. That we support, but this proposal is not the maintenance of that programme. This is a departure from it. This is an actual increase of that programme and out contention is that it may be just as weakening to the literal and accurate maintenance of the original programme, to go in for unnecessary increases of the amount, as to go in for unnecessary diminution. On the widest ground that this is not a year in which to make an increase of the Sinking Fund and on the ground of sound administration of the public finances, that you ought not to allow legal obligations and legal burdens to go on confusing you and accumulating from year to year, this Clause ought to be rejected.
§ Mr. STRACHEY
I think that this Clause ought not to go through the 2060 Report stage without someone on this side of the House expressing the doubts and the troubles which we feel about it, though we regard it from a point of view which is rather different from that just stated by the right hon. Gentleman the Member for Sevenoaks (Sir H. Young). We are not in accord with his argument about the very narrow limits of taxation or the extremely deleterious effects on industry of raising this £5,000,000 for the purposes of the Sinking Fund. We believe that those arguments are always extremely exaggerated by hon. Members opposite. Still, of course, there are limits to the taxation which can be imposed in any one year, as the Chancellor of the Exchequer himself has so often told us. It is simply a question of what you can afford and what you cannot afford. We feel that this year at any rate events have shown us that we cannot afford to make an extra £5,000,000 provision for the redemption of debt. Events have shown this very strikingly during the actual passage of this Bill through Parliament, because while it is still before us the Government have had to come down to borrow £10,000,000 and, if events compel the borrowing of £10,000,000, surely it would be wiser to recognise the fact that in those circumstances it becomes merely an empty gesture to pay back or attempt to pay back £5,000,000 at the same time.
It does not, naturally, very much matter. I suppose it is a little more expensive to do the thing by borrowing £10,000,000 in one way and paying back £5,000,000 in another. No doubt, as I say, it does not very much matter, but still it ought to be an object lessen to us that we have bitten off more than we can chew this year in this matter of debt redemption. However unyielding and unflinching the Chancellor of the Exchequer is, the logic of facts is irresistible. Though he may put his Sinking Fund provision at whatever figure he likes—£10,000,000 or £20,000,000 higher than it is to-day—yet, as a matter of fact, as has been shown quite clearly in the economic situation, difficult as it is, the only result is that he has to borrow in some other place. It has been brought home to us very clearly during this part of the Session that the hard facts of the situation are that this is the last year in which 2061 we ought to attempt an exceptional increase in our efforts to pay back debt. I suggest that it is regrettable that we have attempted this exceptional increase, because this £5,000,000 could have been used in other directions. I am not asking, as hon. Members opposite have, that it should have been used for tax reduction. There are many other uses which we on this side feel would have been infinitely preferable to that.
There are a great many things which we know we have had to forgo and postpone in the programme of our party because the Chancellor has told us again and again that we could not afford them and that we had not the necessary financial resources. Many of these things should have come before this attempt to increase, over the statutory limit, the very heroic provision for Debt redemption that has become part of the law of the land. There are many other things which, in circumstances of such financial stringency, should have come before that, and, above all, we think a thing which should have come before it is expenditure which would itself have reduced the volume of unemployment, because had such expenditure been undertaken in time, and a year ago, it might have made it unnecessary to make the other borrowing for the Unemployment Insurance Fund which has made entirely nugatory this redemption of Debt. We should have escaped altogether—because we should have employed this money in providing useful work—the necessity and the dilemma which we find ourselves in now of repaying with one hand and borrowing with the other. We do feel that events themselves have been very stern logicians, and they show that with this great volume of unemployed labour, which has somehow or other to be provided for and which is after all the root factor of the situation, it is not true economy, but false economy which attempts not simply, as may be necessary, to keep up the statutory Sinking Fund provided for Debt redemption, but arbitrarily to increase it by £5,000,000.
§ Sir BASIL PETO
I should not have ventured to intervene in this debate after the extremely able exposition of the fallacies underlying this Clause in present conditions, made by the right hon. Member for Sevenoaks (Sir H. 2062 Young), if it were not that I feel in one or two directions I can add something to strengthen the appeal. The right hon. Gentleman suggested to the Chancellor that he should throw off the cloak of Pharoah in present circumstances. I suggest that national affairs demand that he should now play the part of Joseph, and that being placed in charge of the finances of the nation, he should husband our resources in view of the approaching famine. I would point out that a great many weeks have elapsed since the Chancellor framed his Budget, and therefore we should attach no blame to him if, in the march of events which has been so extremely rapid, he came to the conclusion that what was after all an heroic policy, namely, adding an extra £5,000,000 to the Sinking Fund, is now, under the altered conditions of employment and of the industries and finance of the country, not justified. The policy embodied in the Clause could hardly have been more ably or more directly condemned and exposed than by the speech to which we have just listened from the hon. Member for Aston (Mr. Strachey). In only one thing do I disagree with him, and that is when he suggests that we on this side are asking for the omission or the Clause because we look to get this £5,000,000 in tax reduction. I do not think that is so.
I suggest that events have happened so rapidly since the Chancellor framed his Budget that it is quite clear that the basis on which he framed it, and on which he thought he had arrived at an equilibrium by the taxes proposed which would give him £5,000,000 in hand to provide for additional Debt redemption this year, has entirely changed. When he made his speech introducing the Budget, it was a gloomy speech and was received as such not only in this House but throughout the country. There was one ray of hope which he gave us at the end of that speech when he said that he believed next year, if he was still in the position of the Chancellor of the Exchequer, he would not have to introduce any fresh taxes. He then saved himself by certain phrases indicating that that was only a promise or forecast if nothing happened to upset the forecast, but events have happened already that have upset the forecast. We know that revenue cannot be coming in, and certainly during 2063 the latter months of the year will not be coming in, either from Income Tax or any of the other great sources of revenue, at anything like the rate which the Chancellor must have estimated for three or four months ago. Therefore, if it was the case three or four months ago that on that basis he attempted to make this exceptional provision of an additional £5,000,000 for the Sinking Fund, it seems to me that it is the height of folly in present circumstances to attempt it simply because it has been put into the Bill, and not to recognise the fact that the whole situation of the country has altered since the Budget was introduced.
It is on that ground, and that ground only, that I venture to add to the plea made by the right hon. Gentleman the Member for Sevenoaks. I would beg the Chancellor not to regard it as any reflection upon his Budget if he were now to agree to the Amendment before the House. On the other hand, he would show the wisdom of the wisest if he were to say, in the completely altered circumstances, that that which was attempted as an heroic policy is now recognised as one which is placing an additional burden upon industry and the employing classes of the country to which they should not be subjected if we are to hope to weather the storm in which we find ourselves.
§ Mr. P. SNOWDEN
The right hon. Gentleman the Member for Sevenoaks (Sir H. Young), who moved the deletion of this Clause, has appeared to-night in a very different character from that by which he has been known to those of us who have been students of his economic writings for a good many years. He spoke of reviving the ghosts of the past. I will spare the right hon. Gentleman the visitation of a number of ghosts which he has created in the past. Nobody has written more strongly than he has about the importance to our national credit of maintaining the Sinking Fund, and nobody has written more strongly also in deprecation of the policy of raiding the Sinking Fund. The right hon. Gentleman repeatedly said that his party were ardent advocates of the maintenance of a reasonable Sinking Fund, and he spoke of the statutory amount of the Sinking Fund as being fixed by what is known as the Baldwin Fund. The right hon. Gentleman has forgotten that 2064 the Baldwin Sinking Fund policy is no longer our policy. That was abandoned or superseded by a new policy that was adopted by my predecessor a few years ago under the plan of a fixed debt charge.
It is quite true that there are certain statutory obligations which require that we should provide something over £50,000,000 a year. One of the justifications for the proposal that I am making in this Clause is that in recent years we have not paid those statutory obligations. We have not even met the Baldwin Sinking Fund requirements. During three of the last five years there have been heavy deficits, and, far from meeting our statutory obligation of £50,000,000 which was set down in the Baldwin Sinking Fund, in 1925 there was £14,000,000 deficit; there was nearly £37,000,000 deficit in the following year—
§ Mr. SNOWDEN
I am not dealing with causes; I am merely stating the fact. It is true that there was a surplus in two years, but that was not applied to the reduction of debt, but to the Rating Relief Suspense Account. Then there was, of course, the deficit last year of £14,500,000. May I add that this Clause also suggests that there should be a similar allocation next year of £5,000,000 and one of £4,500,000 in the following year. It would be perfectly open to Parliament to alter that provision next year, and it would be perfectly open to me, should I occupy this position, to come to the House of Commons and to suggest that we should abandon for any year that special provision for making up the deficit. Both the right hon. Gentleman the Member for Sevenoaks and the hon. Baronet the Member for Barnstaple (Sir B. Peto), who supported his proposal, or, shall I say, improved upon the speech of the right hon. Gentleman, because I suppose, the right hon. Gentleman had not presented his points with sufficient force, raised the question of the taxation which would be imposed this year. We have already fixed the amount of taxation for this year, and, therefore, if this Clause were deleted, it could not affect the taxation for this year.
The right hon. Gentleman who raised this proposal said that the defence I had made was full of fallacies. It may 2065 be true, as I remember the right hon. Gentleman opposite said in replying to what I said, that I had taken money by taxation and thereby limited the amount of money available in the industrial market, but it is beyond a doubt that money used to pay off debts goes straight back into the market. The hon. Gentleman behind, who spoke last but one, is a comparatively new recruit to the Labour party, and he probably is not aware of the paramount importance that the Labour party attached in its propaganda for a good many years to this important question of the reduction of Debt.
I hope the House will not think that I am saying this in any boastful way, as that is far from my thoughts, but I claim that the policy which we have followed has had perhaps the greatest beneficial effect upon trade of anything that has been done in recent years. I am not responsible for the statement, but it is a fact or a statement which is accepted, I find, by practically all the financial newspapers, that a reduction of one per cent. in the Bank Rate is a relief to industry of £10,000,000 a year. I do not say for a moment that the policy of Floating Debt reduction that has been effected by us is wholly responsible for the reduction of the Bank Rate, but I do say—and, if it were necessary, I could produce abundant financial authority from supporters of the party opposite to the effect I have stated—that the reduction of the Bank Rate, if that be so, during the last five months from 6½ per cent. to 3 per cent. has been a benefit to industry to the extent of £35,000,000 a year. [Interruption.] The basis of credit is higher to-day than it was 12 months ago. That may be due to a number of causes, but things would certainly have been worse than they are if it had not been for the fact that we have pursued this policy of debt reduction.
The other point that has been raised by all the speakers who have taken part in this debate is that I am paying off debt with one hand and borrowing with another. If I was not paying off this debt, the result would be that there would be £5,000,000 more debt. [Interruption.] As a matter of fact, it might be put like this, that there would be a debt of £15,000,000 in place of £10,000,000 if I had not been in office. When the money is paid off and the debt 2066 is reduced, the money is available for other purposes; I do not say that it will go to industry, but it will be available for some other purpose to help the extension of credit.
§ Sir B. PETO
I quite agree with the Chancellor's sum in arithmetic that if he did not pay off £5,000,000 Debt, there would be £5,000,000 more Debt. What I wished to put to him was that it might save him from having to impose fresh taxation to the amount of £5,000,000 next year if he did not insist on repaying this £5,000,000 this year.
§ Mr. SNOWDEN
It is too late to reduce taxation this year. I said just now that it would be perfectly open for Parliament next year to repeal that part of this Clause which would allocate next year £5,000,000 for the reduction of the Debt. It is true that circumstances have altered for the worst since I made my Budget statement. I do not know what they will be next April, but I will say this. I am not going to alter this provision this year, but when I have to consider the financial position of the country in relation to trade and unemployment and the like next year—if I am here, of course—I shall take these relevant facts into consideration. I have often said that it is in times of prosperity that we should make the greatest efforts at Debt reduction, but at other times it must give way to matters of urgency or even of expediency. I do not think that present circumstances justify me in making any change in the proposal as it is embodied in this Bill. I must ask the House to let this Clause pass, with the reservation that, if I am here next year, in considering the financial position, and if I think then that the circumstances are such that we cannot afford to make more than the statutory provision for Debt reduction, I will not hesitate to come to the House and tell them that.
§ Sir L. WORTHINGTON-EVANS
I would ask the Chancellor of the Exchequer to let orthodoxy give way to expediency and to do it now, and not postpone it until next year. I am not saying he is not orthodox in trying to maintain the Sinking Fund. I agree with the importance of maintaining the Sinking Fund, but when he claims that in the present circumstances his mainten- 2067 ance of the Sinking Fund has been the main cause in the reduction of the Bank Rate, he is stretching the point to absurdity.
§ Mr. SNOWDEN
The right hon. Gentleman has misunderstood me. I said it was the reduction of the Floating Debt.
§ Sir L. WORTHINGTON-EVANS
The reduction of the Floating Debt by the Sinking Fund. When he sees his words, he will find that he never used the words "Floating Debt." He was pointing to the beneficial results that his maintenance of the Sinking Fund had, and he said that it was an important cause in the reduction of the Bank Rate, and that by the reduction of the Bank Rate he had given £10,000,000 back to industry. That was his argument, but the reduction was unrelated to his action in the maintenance of the Sinking Fund. He complained that I challenged his statement that when he paid off this £5,000,000 he gave it back to the market. He would have left in the market the sum of £5,000,000 if he had not raised it by taxation; it would have been in exactly the same place. What he has done now is to take it from the market by taxation, and has put it back again into the market by the payment off of the Sinking Fund. Our complaint is that while he is pretending to maintain the Sinking Fund, he is in fact borrowing. Every week now he is borrowing £500,000 for the Unemployment Fund. There is £30,000,000 for local loans, and a large amount, £10,000,000 or £20,000,000, for the Unemployment Fund. He is borrowing at the same time as he is pretending to increase the Sinking Fund, and that we say is wasteful.
His argument just now was most amusing. He said that if he had not repaid this £5,000,000 to the Sinking Fund, and if he had borrowed £10,000,000, he would have £15,000,000. To put it the other way, if he does not pay off this £5,000,000 to the Sinking Fund, he need borrow only £5,000,000 instead of £10,000,000. He does not understand it evidently, and he does not realise that it is wasteful to borrow and at the same time to pay money off the Sinking Fund. He has to pay all the costs of raising this £10,000,000, out of which he is going to repay £5,000,000 to the Sinking Fund. He admits that since he made his 2068 original Budget statement, things have altered and got worse, the revenue is not coming in to the same extent, expenditure is increasing and, instead of having, as he thought he would have after paying off this extra sum on the Sinking Fund, a credit of something like £2,000,000, he is facing the prospect of a deficit and a loss of revenue and an increase of expenditure. Surely expediency, if not orthodoxy, ought to warn him to keep this Fund in hand until at least the end of the year, and until he can see that he has a surplus out of which he can increase the Sinking Fund. This is the year when he is not only maintaining the Debt charge but increasing the Sinking Fund by this £5,000,000 and by another £8,750,000 or thereabouts which he has got as a windfall from reparations. Is that orthodoxy? Surely that is something which ought to give way to expediency. Face to face with a deficit, he is still pretending that he is increasing the Sinking Fund.
§ Sir OSWALD MOSLEY
The Chancellor of the Exchequer rebuked my hon. Friend the Member for Aston (Mr. Strachey) for his contribution to this debate, and in so doing appeared to indicate that an abnormally large Sinking Fund was a part of the policy of the Labour party. As one who took some part in the controversy within our party upon that question I very much doubt whether the right hon. Gentleman's claim about party policy can be substantiated. What he had in mind was the fact that under totally different conditions from those which now prevail the Capital Levy for the redemption of Debt was a part of the policy of this party. It was a factor in the party's policy at a time when the £, in 1913 values, was worth about half what it is to-day. At that time it was a policy which commanded support not only on these benches but also, to a large extent, in business circles. That was the moment to make a drastic attempt to deal with the Debt, but that our party some years ago desired, by the instrument of the Capital Levy, rapidly to redeem our Debt is no reason for arguing that a very large Sinking Fund in present conditions would obtain the same result.
What is the difference in our National Debt position since that day? Since that day, with the acquiesence of the present Chancellor as well as of the right 2069 hon. Member for Epping (Mr. Churchill), we have pursued a policy of drastic monetary deflation. That policy was pursued as a result of the recommendations of the Cunliffe Committee, by which the present Chancellor said that he was generally guided in the year 1924. As a result of that deflationary policy the real burden of our National Debt has been more than doubled, and these paltry attempts by a Sinking Fund to meet that enormous increase are neither here nor there. There was something to be said for repaying bondholders in £'s worth half what the £ is to-day, but what is there to be said, from a Labour standpoint, for repaying bondholders in £'s which are worth something like double the £'s which the bondholder lent us?
Is this moment, when the £ has so vastly increased in value, when industry is so severely strained, when money is so urgently required for other purposes, the moment of all moments to devote such large sums to the Sinking Fund? Even in the course of the right hon. Gentleman's present administration it appears, on good authority, that the policy of deflation, which continually increases the burden of our National Debt, has been very strenuously pursued. The right hon. Gentleman has preened himself upon the reduction of our Floating Debt by Funding operations. There was a series of very powerful articles in the "Midland Review," the organ of that great bank, which strove to show that the most potent deflationary instrument at present being used in this country was that very process of reducing our Floating Debt for which the right hon. Gentleman has taken such credit to himself this evening, and it has even been suggested that one of the biggest factors of our present abnormal unemployment is the pursuit of that deflationary policy. That is not the only organ of orthodox opinion which takes that view. The "Financial Times," as recently as May last, I think, said the policy of deflation was proceeding apace, the burden of the Debt, by these means, by continually depreciating price levels, being constantly increased.
What purpose does a slight increase of £5,000,000 in the Sinking Fund serve in conditions like that? It only serves one purpose—yet further to appreciate the gilt-edged securities of those people who have already so great benefited, while 2070 industrial securities go down. That is the result of this policy. The whole concentration of Treasury policy for years past, under successive Governments, has been the pursuit of this policy, which benefits the rentier class in this country at the expense of industry in the illusory hope of some great conversion operation. I would suggest that that operation, which lies behind all these Sinking Fund payments, can be achieved in one of two ways. You can get conversion through the general prosperity of your country, through your inherent financial strength, which rests upon industrial prosperity, or you can get it by means of the Treasury policy, by making industrial investment so unprofitable that investors, having no outlet in industry, seek an outlet in gilt-edged securities. That is the policy of conversion through depreciation. But there may be another result of that policy, not perhaps foreseen, that instead of money being lent to the British Government it will be lent abroad, so that the President of the Board of Trade can rise in his place and talk of our financial prosperity by reference to the large foreign loans we float. That may be the effect of this seeking after conversion by a policy of credit restriction and deflation.
I suggest to the right hon. Gentleman that he might at any rate consider whether by any of these abnormal means it is possible to force down the rate of interest which the present Government has to pay very far below the world level, whether it is not really a world problem which has to be solved through an international medium rather than by any artificial means such as a Sinking Fund in one country or the other? If the right hon. Gentleman tried through international settlements to pursue some solution of what is called the distressed debtor problem, under which people are crowding on the money market from Central Europe and other countries offering, on good security, very high rates of interest, which tend to keep the whole rate of interest throughout the world up, he would better serve the prospects of this country than by a policy which hits industry in order to benefit the rentier class.
Surely the real way out of our present financial tangle is to pursue on every possible occasion a policy of industrial prosperity, to use every resource we have 2071 with which to meet the unemployed problem, and not to repay the £s we borrowed with £s worth at least twice what they were when they were lent to us. All this money could usefully be employed to create live assets for the country, and, after all, a live asset to set on your balance sheet is very nearly as good, and in many ways better than, the repayment of debt. A business faced with a similar problem of either repaying debt or using its finances for the creation of live assets would know which course to pursue, and that seems to me the choice in our national finance. We can either pursue this curious course or repaying debt, with consequences which are very different to-day from those which prevailed when these rules were drawn up in the last century, or we can pursue an expansionist policy of using our resources for improving the industrial stuation. We can achieve by industrial prosperity the financial basis which we are now seeking by other means.
§ Mr. ERNEST BROWN
I am reluctant to differ from the hon. Member about the policy of his party, but I think he is wrong in his facts. I remember the discussions in 1919 and 1920 over the Capital Levy. The idea was propagated by a Member of this House who is now a Member of another place, but when he first brought forward the idea of a war debt redemption levy we were in the War period and the suggestion was made from the Liberal benches. It was not until 2½ years later, after he had gone over to the Labour party, that he succeeded in getting the Labour party to adopt that policy. The hon. Member's recollection of his own party policy is therefore inaccurate. I have listened many times to the eloquent speeches delivered by the hon. Member, once or twice from these benches, when there was only a handful of Members to listen to him pleading for the policy of non-deflation, but he seems to me to raise too many false hopes in the minds of those who listen to him. He argues always as though the money owing to those who hold bonds was borrowed at a time when its value was half what it is now. That is not so.
It would be interesting to have a return of the amount of the War debt which is now held by people who borrowed the money before 1918–1919, 1920 and 1921. A 2072 great deal of the argument of the hon. Member for Smethwick (Sir O. Mosley) falls to the ground, because he fails to understand that money is constantly changing hands. [Interruption.] At any rate, I am entitled to my own view on that point, and, whether I am right, or whether the hon. Baronet is right, in the end the facts will find us out. It is useless pretending that the party opposite has some infallible method of dealing with unemployment. I will only say that if the hon. Member for Smethwick will have an inquiry made by the Treasury as to where this money is now held, in what hands, and what proportion is held by people who hold double what they really borrowed, we should be in a stronger position. With regard to deflation, I remember that I and other members of this party in 1919 and 1920 expressed the opinion that we were much too early in adopting the gold standard, and I have never changed my view on that subject.
§ Mr. OLIVER STANLEY
I will not join in the controversies as to whether a drastic policy of debt redemption is the policy of the Labour party. I can only say that I have not heard from Labour platforms that fervent appeal for a large Sinking Fund or the policy of a large redemption of debt put forward. The Clause we are discussing deals with the actual provisions for debt redemption made this year and the constitutional point as to whether it is right to tie the hands of succeeding Parliaments. This Clause makes a provision of £5,000,000 a year for the Sinking Fund. I agree with what the hon. Member for Smethwick (Sir O. Mosley) has said with regard to the importance of the Sinking Fund and its effect on the money market. The Chancellor of the Exchequer must be a little disappointed with the result of his operations of the Floating Debt and the Sinking Fund and its result on the price of gilt-edged securities. An important factor is the difference between the rate at which it is possible to borrow short-dated loans and the rate which has to be paid for long-dated securities. The effect of contributing £5,000,000 to the Sinking Fund on the one hand and the fact that we have such a huge total of unemployed is bound to weight the scales heavily against the possibility of this country borrowing money at a cheap rate.
2073 The Chancellor of the Exchequer said quite truly that the situation has changed very much for the worse since he introduced this Clause and fixed the Sinking Fund at £5,000,000 for this year. I think most people in the early months of last year would have anticipated some such provision as that with which we are now dealing. Let us now consider for a moment what justification the Chancellor of the Exchequer has for trying to tie the hands of succeeding Chancellors of the Exchequer, or himself, in future years. What has the right hon. Gentleman laid down as his own policy which differs very much from the policy which he put forward when he introduced the Budget. When he introduced a Budget he was like the gamekeeper watching the poachers on this side. The right hon. Gentleman told us of the atrocities which the right hon. Gentleman the Member for Epping (Mr. Churchill) had committed upon the Sinking Fund, and he said that he was not only going to put that matter right, but that he would see that future Chancellors of the Exchequer would not be able to do what the right hon. Gentleman the Member for Epping had done. Of course he was dubbed as honest by those stern sticklers for political honesty. What is the right hon Gentleman going to do? Instead of doing what he told us he intended to do, he now states that
§ when next year comes he will consider how the state of industry affects the case and then he will judge as to whether it is expedient to maintain the proposal which he now puts forward.
§ The right hon. Gentleman is laying down an obnoxious and innocuous instruction to succeeding Chancellors of the Exchequer and he is treating the Sinking Fund as a kind of fetish. It is entirely a matter of indifference to the right hon. Gentleman that the prosperity of our trade stands for far more than the mere provision of £5,000,000 or £4,500,000 for the Sinking Fund. We say, therefore, that no Chancellor of the Exchequer should lay it down as a principle that so much has to be provided this year or next, irrespective of the conditions of the time, but that every Chancellor of the Exchequer should do what the Chancellor of the Exchequer of to-day has said he will do, that is to say, consider the facts of the moment; and that, on those facts, on the advantages and disadvantages for him, and on those alone, he should form his conclusions for that year, and that year only.
§ Question put, "That the words proposed to be left out stand part of the Bill."
§ The House divided: Ayes, 258; Noes, 137.2077
|Division No. 452.]||AYES.||[10.15 p.m.|
|Adamson, Rt. Hon. W. (Fife, West)||Buchanan, G.||Gibson, H. M. (Lancs, Mossley)|
|Adamson, W. M. (Staff., Cannock)||Burgess, F. G.||Gill, T. H.|
|Addison, Rt. Hon. Dr. Christopher||Buxton, C. R. (Yorks, W. R. Elland)||Gillett, George M.|
|Aitchison, Rt. Hon. Craigie M.||Calne, Derwent Hall-||Glassey, A. E.|
|Alexander, Rt. Hon. A. V. (Hillsbro')||Cameron, A. G.||Gossling, A. G.|
|Ammon, Charles George||Carter, W. (St. Pancras, S. W.)||Gould, F.|
|Arnott, John||Charleton, H. C.||Graham, D. M. (Lanark, Hamilton)|
|Aske, Sir Robert||Clarke, J. S.||Graham, Rt. Hon. Wm. (Edin., Cent.)|
|Attlee, clement Richard||Cluse, W. S.||Gray, Milner|
|Ayles, Walter||Clynes, Rt. Hon. John R.||Greenwood, Rt. Hon. A. (Colne)|
|Baker, John (Wolverhampton, Bilston)||Cocks, Frederick Seymour||Grenfell, D. R. (Glamorgan)|
|Barnes, Alfred John||Compton, Joseph||Griffith, F. Kingsley (Middlesbro' W.)|
|Barr, James||Cove, William G.||Griffiths, T. (Monmouth, Pontypool)|
|Batey, Joseph||Cowan, D. M.||Groves, Thomas E.|
|Benn, Rt. Hon. Wedgwood||Daggar, George||Grundy, Thomas W.|
|Bennett, Capt. Sir E. N. (Cardiff C.)||Dallas, George||Hall, F. (York, W. R., Normanton)|
|Benson, G.||Dalton, Hugh||Hall, G. H. (Merthyr Tydvil)|
|Bentham, Dr. Ethel||Davies, E. C. (Montgomery)||Hall, Capt. W. G. (Portsmouth, C.)|
|Bevan, Aneurin (Ebbw Vale)||Davies, Rhys John (Westhoughton)||Hamilton, Mary Agnes (Blackburn)|
|Birkett, W. Norman||Day, Harry||Harris, Percy A.|
|Blindell, James||Denman, Hon. R. D.||Hartshorn, Rt. Hon. Vernon|
|Bondfield, Rt. Hon. Margaret||Dukes, C.||Hastings, Dr. Somerville|
|Bowen, J. W.||Duncan, Charles||Haycock, A. W.|
|Bowerman, Rt. Hon. Charles W.||Ede, James Chuter||Hayday, Arthur|
|Broad, Francis Alfred||Edge, Sir William||Hayes, John Henry|
|Bromley, J.||Edmunds, J. E.||Henderson, Arthur, Junr. (Cardiff, S.)|
|Brooke, W.||Edwards, C. (Monmouth, Bedwellty)||Henderson, Thomas (Glasgow)|
|Brothers, M.||Edwards, E. (Morpeth)||Henderson, W. W. (Middx., Enfield)|
|Brown, C. W. E. (Notts, Mansfield)||Egan, W. H.||Herriotts, J.|
|Brown, Ernest (Leith)||Elmley, Viscount||Hirst, G. H. (York W. R. Wentworth)|
|Brown, Rt. Hon. J. (South Ayrshire)||Forgan, Dr. Robert||Hirst, W. (Bradford, South)|
|Brown, W. J. (Wolverhampton, West)||Gardner, B. W. (West Ham, Upton)||Hoffman, P. C.|
|Hollins, A.||Marshall, Fred||Simmons, C. J.|
|Hopkin, Daniel||Mathers, George||Sinclair, Sir A. (Caithness)|
|Horrabin, J. F.||Matters, L. W.||Sinkinson, George|
|Hudson, James H. (Huddersfield)||Melville, Sir James||Sitch, Charles H.|
|Hunter, Dr. Joseph||Messer, Fred||Smith, Ben (Bermondsey, Rotherhithe)|
|Isaacs, George||Middleton, G.||Smith, Frank (Nuneaton)|
|Jenkins, W. (Glamorgan, Neath)||Montague, Frederick||Smith, H. B. Lees (Keighley)|
|John, William (Rhondda, West)||Morgan, Dr. H. B.||Smith, Tom (Pontefract)|
|Johnston, Thomas||Morley, Ralph||Smith, W. R. (Norwich)|
|Jones, F. Llewellyn- (Flint)||Morris, Rhys Hopkins||Snowden, Rt. Hon. Philip|
|Jones, Rt. Hon. Leif (Camborne)||Morrison, Herbert (Hackney, South)||Snowden, Thomas (Accrington)|
|Jones, Morgan (Caerphilly)||Morrison, Robert C. (Tottenham, N.)||Sorensen, R.|
|Jones, T. I. Mardy (Pontypridd)||Mort, D. L.||Stamford, Thomas W.|
|Jowett, Rt. Hon. F. W.||Moses, J. J. H.||Stephen, Campbell|
|Jowitt, Sir W. A. (Preston)||Mosley, Sir Oswald (Smethwick)||Stewart, J. (St. Rollox)|
|Kedward, R. M. (Kent, Ashford)||Muff, G.||Strachey, E. J. St. Loe|
|Kelly, W. T.||Muggeridge, H. T.||Strauss, G. R.|
|Kennedy, Thomas||Murnin, Hugh||Sullivan, J.|
|Kinley, J.||Naylor, T. E.||Sutton, J. E.|
|Kirkwood, D.||Newman, Sir R. H. S. D. L. (Exeter)||Taylor, R. A. (Lincoln)|
|Lang, Gordon||Noel Baker, P. J.||Taylor, W. B. (Norfolk, S. W.)|
|Lansbury, Rt. Hon. George||Noel-Buxton, Baroness (Norfolk, N.)||Thomas, Rt. Hon. J. H. (Derby)|
|Lathan, G.||Oldfield, J. R.||Thurtle, Ernest|
|Law, Albert (Bolton)||Oliver, George Harold (Ilkeston)||Tinker, John Joseph|
|Law, A. (Rosendale)||Oliver, P. M. (Man., Blackley)||Tout, W. J.|
|Lawrence, Susan||Palin, John Henry||Townend, A. E.|
|Lawrie, Hugh Hartley (Stalybridge)||Perry, S. F.||Trevelyan, Rt. Hon. Sir Charles|
|Lawson, John James||Pethick-Lawrence, F. W.||Vaughan, D. J.|
|Lawther, W. (Barnard Castle)||Phillips, Dr. Marion||Viant, S. P.|
|Leach, W.||Potts, John S.||Walkden, A. G.|
|Lee, Frank (Derby, N. E.)||Price, M. P.||Walker, J.|
|Lee, Jennie (Lanark, Northern)||Quibell, D. F. K.||Wallace, H. W.|
|Lees, J.||Ramsay, T. B. Wilson||Wallhead, Richard C.|
|Lewis, T. (Southampton)||Raynes, W. R.||Watkins, F. C.|
|Lloyd, C. Ellis||Richards, R.||Watson, W. M. (Dunfermline)|
|Logan, David Gilbert||Richardson, R. (Houghton-le-Spring)||Wellock, Wilfred|
|Longbottom, A. W.||Riley, F. F. (Stockton-on-Tees)||Welsh, James (Paisley)|
|Longden, F.||Ritson, J.||Welsh, James C. (Coatbridge)|
|Lovat-Fraser, J. A.||Roberts, Rt. Hon. F. O. (W. Bromwich)||West, F. R.|
|Lowth, Thomas||Romeril, H. G.||Westwood, Joseph|
|Lunn, William||Rosbotham, D. S. T.||White, H. G.|
|Macdonald, Gordon (Ince)||Rowson, Guy||Whiteley, Wilfrid (Birm., Ladywood)|
|MacDonald, Rt. Hon. J. R. (Seaham)||Salter, Dr. Alfred||Whiteley, William (Blaydon)|
|MacDonald, Malcolm (Bassetlaw)||Sanders, W. S.||Wilkinson, Ellen C.|
|McElwee, A.||Sawyer, G. F.||Williams, David (Swansea, East)|
|McEntee, V. L.||Scrymgeour, E.||Williams, Dr. J. H. (Llanelly)|
|McGovern, J. (Glasgow, Shettleston)||Scurr, John||Williams, T. (York, Don Valley)|
|McKinlay, A.||Sexton, James||Wilson, C. H. (Sheffield, Attercliffe)|
|Maclean, Neil (Glasgow, Govan)||Shaw, Rt. Hon. Thomas (Preston)||Wilson, J. (Oldham)|
|McShane, John James||Shepherd, Arthur Lewis||Wilson, R. J. (Jarrow)|
|Mansfield, W.||Sherwood, G. H.||Winterton, G. E. (Leicester, Loughb'gh)|
|March, S.||Shield, George William||Young, R. S. (Islington, North)|
|Marcus, M.||Shillaker, J. F.|
|Markham, S. F.||Shinwell, E.||TELLERS FOR THE AYES.—|
|Marley, J.||Short, Alfred (Wednesbury)||Mr. Allen Parkinson and Mr. Paling.|
|Acland-Troyte, Lieut.-Colonel||Cayzer, Maj. Sir Herbt, R. (Prtsmth, S.)||Forestier-Walker, Sir L.|
|Albery, Irving James||Chadwick, Capt. Sir Robert Burton||Galbraith, J. F. W.|
|Allen, Sir J. Sandeman (Liverp'l., W.)||Chapman, Sir S.||Ganzoni, Sir John|
|Allen, Lt.-Col. Sir William (Armagh)||Christie, J. A.||Gibson, C. G. (Pudsey & Otley)|
|Amery, Rt. Hon. Leopold C. M. S.||Crichton-Stuart, Lord C.||Glyn, Major R. G. C.|
|Ashley, Lt.-Col. Rt. Hon. Wilfrid W.||Croft, Brigadier-General Sir H.||Gower, Sir Robert|
|Atholl, Duchess of||Crookshank, Capt. H. C.||Greene, W. P. Crawford|
|Atkinson, C.||Croom-Johnson, R. P.||Grenfell, Edward C. (City of London)|
|Baldwin, Rt. Hon. Stanley (Bewdley)||Culverwell, C. T. (Bristol, West)||Gunston, Captain D. W.|
|Balfour, Captain H. H. (I. of Thanet)||Dalrymple-White, Lt.-Col. Sir Godfrey||Hacking, Rt. Hon. Douglas H.|
|Balniel, Lord||Davidson, Rt. Hon. J. (Hertford)||Hamilton, Sir George (Ilford)|
|Beaumont, M. W.||Davies, Dr. Vernon||Hammersley, S. S.|
|Betterton, Sir Henry B.||Davies, Maj. Geo. F. (Somerset, Yeovil)||Haslam, Henry C.|
|Bevan, S. J. (Holborn)||Dixey, A. C.||Henderson, Capt. R. R. (Oxf'd, Henley)|
|Birchall, Major Sir John Dearman||Duckworth, G. A. V.||Herbert, Sir Dennis (Hertford)|
|Bird, Ernest Roy||Dugdale, Capt. T. L.||Howard-Bury, Colonel C. K.|
|Bourne, Captain Robert Croft||Eden, Captain Anthony||Hunter-Weston, Lt.-Gen. Sir Aylmer|
|Bowyer, Captain Sir George E. W.||Edmondson, Major A. J.||Hurd, Percy A.|
|Bracken, B.||Elliot, Major Walter E.||Iveagh, Countess of|
|Braithwaite, Major A. N.||Erskine, Lord (Somerset, Weston-s.-M.)||Jones, Sir G. W. H. (Stoke New'gton)|
|Brown, Col. D. C. (N'th'l'd., Hexham)||Everard, W. Lindsay||King, Commodore Rt. Hon. Henry D.|
|Brown, Brig.-Gen. H. C. (Berks, Newb'y)||Falle, Sir Bertram G.||Lamb, Sir J. Q.|
|Buckingham, Sir H.||Ferguson, Sir John||Leighton, Major B. E. P.|
|Butler, R. A.||Fermoy, Lord||Lewis, Oswald (Colchester)|
|Carver, Major W. H.||Fielden, E. B.||Llewellin, Major J. J.|
|Cautley, Sir Henry S.||Ford, Sir P. J.||Locker-Lampson, Rt. Hon. Godfrey|
|Lymington, Viscount||Rawson, Sir Cooper||Thomas, Major L. B. (King's Norton)|
|Macdonald, Sir M. (Inverness)||Reid, David D. (County Down)||Thomson, Sir F.|
|Macdonald, Capt. P. D. (I. of W.)||Rentoul, Sir Gervais S.||Tinne, J. A.|
|Maitland, A. (Kent, Faversham)||Richardson, Sir P. W. (Sur'y, Ch'ts'y)||Titchfield, Major the Marquess of|
|Makins, Brigadier-General E.||Roberts, Sir Samuel (Ecclesall)||Todd, Capt. A. J.|
|Merriman, Sir F. Boyd||Ross, Major Ronald D.||Tryon, Rt. Hon. George Clement.|
|Monsell, Eyres, Com. Rt. Hon. Sir B.||Ruggles-Brise, Lieut.-Colonel E. A.||Turton, Robert Hugh|
|Moore, Sir Newton J. (Richmond)||Samuel, A. M. (Surrey, Farnham)||Ward, Lieut.-Col. Sir A. Lambert|
|Morden, Col. W. Grant||Sandeman, Sir N. Stewart||Waterhouse, Captain Charles|
|Morrison, W. S. (Glos., Cirencester)||Savery, S. S.||Wayland, Sir William A.|
|Morrison-Bell, Sir Arthur Clive||Shepperson, Sir Ernest Whittome||Wells, Sydney R.|
|Muirhead, A. J.||Sinclair, Col. T. (Queen's U., Belfst)||Wilson, G. H. A. (Cambridge U.)|
|Newton, Sir D. G. C. (Cambridge)||Smith, Louis W. (Sheffield, Hallam)||Windsor-Clive, Lieut.-Colonel George|
|O'Connor, T. J.||Smith, R. W. (Aberd'n & Kinc'dine, C.)||Winterton, Rt. Hon. Earl|
|Oman, Sir Charles William C.||Smith-Carington, Neville W.||Womersley, W. J.|
|O'Neill, Sir H.||Smithers, Waldron||Worthington-Evans, Rt. Hon. Sir L.|
|Penny, Sir George||Somerset, Thomas||Young, Rt. Hon. Sir Hilton|
|Peto, Sir Basil E. (Devon, Barnstaple)||Somerville, A. A. (Windsor)|
|Pownall, Sir Assheton||Southby, Commander A. R. J.||TELLERS FOR THE NOES.—|
|Ramsbotham, H.||Stanley, Maj. Hon. O. (W'morland)||Captain Wallace and Sir Victor|
|Rathbone, Eleanor||Sueter, Rear-Admiral M. F.||Warrender.|
§ Bill to be read the Third time upon Friday.