HC Deb 11 July 1932 vol 268 cc923-1047
Sir STAFFORD CRIPPS

Before coming to deal with the domestic situation in this country since the National Government took office, I want, if I may, to refer for a moment to the international situation, especially in view of the recent agreements at Lausanne. I am sure that everyone in this country who cares for the future of civilisation will congratulate the French and German statesmen on their wisdom in arriving at a final compromise upon the reparations question, and I am sure, too, that all parties in this country will be grateful that our representatives at the Conference were able to give real assistance in arriving at that settlement. We have always said that, if the National Government were prepared to take enlightened and progressive views of any matter, whether national or international, we would support their views, and certainly, so far as the Lausanne agreements are concerned, we give those steps that have been taken our whole-hearted support. We look upon them as the first steps towards clearing away the tangle of financial and political injustices which had their origin in the spirit of hatred and revenge that arose out of the War.

Since the Treaty of Versailles, and even before, the Labour party have always urged that the policy of reparations was madness and was suicidal to the whole future of Europe, and, at long last, after some 13 years of gradually increasing hardship and misery to the peoples of Europe, the half-strangled victims of that mad policy have seen reason and have come to some form of agreement. We believe that the results, though important, will not, of course, settle the financial or industrial difficulties of the world, and we hope that the peoples of Germany and France will ratify these proposals and will give their direct sanction to the initiation of a policy of friendship and mutual help between those two great nations, whose mutual misunderstandings have led to so many difficulties in the past. Those who are engaged in clearing away this wreckage, which has been created by the system that has pervaded Europe in the past, will realise that it is useless to clear away the wreckage unless some better system is put in its place, a system which is going to bring justice, happiness and employment to the peoples of Europe.

I want for a few moments to examine the domestic situation of this country, and to point out that in our view we are convinced that the whole policy of the Government as it has been followed through during the last nine months has completely failed to take any constructive step to initiate any ideas or plans which will solve the difficulties in which this country finds itself. We seem to have been engaged in a futile attempt to get back to that very system, the system of private enterprise, which, even though it may be temporarily revived, will, we believe, bring again difficulties, sufferings and injustices to the people of this country if it is allowed to be perpetuated.

The Government came into power some nine months ago, in the middle of what was undoubtedly the most serious industrial crisis in the history of the world. For some years prior to last autumn, there had been a steady volume of unemployment throughout the world. That volume had been imperceptibly increasing, until, in 1930, there was a sudden reversal of the previous tendency of world trade. That sudden reversal led to an acceleration of the difficulties in industry in all countries of the world. Between the years 1927 and 1929, there had been a small annual increase in the volume of world trade, which, although accompanied by a gradual fall in prices, had yet resulted in an increase, though a diminishing increase, in the total values of world trade. But in 1930, not only did prices fall catastrophically, but the quantum of world trade fell as well. The fall in that volume was a fall of from 7 to 8 per cent., while the fall in prices was over 12 per cent., resulting in that year in a total fall in values of just over 20 per cent. As the House knows, in 1931 that tendency increased, and has continued increasing up to the present day.

The effect of that increase has been shown, not only in the figures of unemployment in this country, but in the figures of unemployment throughout the world, and one will realise the gravity of the situation if one examines the percentage increases of unemployment during 1931 in some of the chief countries of the world. For instance, in Germany and Belgium there was a 42 per cent. increase of unemployment; in the United States and Canada, a 21 per cent. increase; and in this country an increase of 18 per cent. Accompanying that fall in the value of world trade and in its volume, there went along side by side with it the normal increase of productive power in the world. Apart altogether from the great strides made in production by Russia, which one can regard as a special circumstance, the normal tendency towards an annual increase in productive power was gradually accentuated by the struggle of competitive interests to survive on a profit-earning basis. As prices fell, more and more pressure was put upon the producer to bring forward measures of rationalisation, which not only maintained, but even increased, productive capacity, but with a rapidly diminishing consumption of man-power; and it is that feature, the rapidly diminishing consumption of man-power, which has been to a great extent responsible for the present position as regards unemployment.

In the world, therefore, there was this rapid contraction of markets in the Autumn of last year, there was an expanding production, and there was an enormously increased competition among the industrial countries for the neutral markets of the world. The most signal feature of that increase in competition was the intense economic nationalism, restricting international exchange of every kind of commodity, creating new industries in all sorts of countries—industries which were to produce commodities of which the world already had an over-supply—and increasing the struggle of every country to become self-contained and to obtain as great a share as possible of the diminishing markets of the world. This led to the high tariffs, quotas, licences and exchange restrictions which everyone admits have done more than anything else, perhaps, to hamper international trade. In fact, one might say that by this progressive decline, which brought about such restrictions and rationalisation, the industry of the world had got into a spinning nose-dive. It was in that state of affairs that the National Government drove this country into a policy of economic nationalism from which, to its great advantage, it had hitherto been free.

The Government's programme when they came into power was designed to accomplish three things—first of all, to maintain sterling on a gold basis; secondly, to balance the Budget by economies; and, thirdly, to balance payments to and from this country by a restriction of imports. Fortunately, as everyone now thinks, they completely failed in their first object, and going off the Gold Standard brought an immediate, though temporary, advantage to the industrialists of this country. But that advantage was very soon nullified to a considerable extent by the imposition of import duties, and also by the artificial maintenance of money at a high price, which made it almost impossible for industries, even if they would, to get access to credit facilities. The import duties and the budgetary economies further acted as a restriction upon the available market, which was already so heavily restricted in other directions.

The economies, which largely consisted in the breaking of contracts by the Government out of hand and without notice, immediately reduced the consuming power of this country by over £1,000,000 sterling a week, and thereby had a serious effect upon the industrial situation. The effect of sterling going off the Gold Standard was to accelerate the fall in gold prices, and gold prices, from January to August, 1931, in eight months, fell 8.9 points, while from August, 1931, to April, 1932 they fell by 17 points, or twice as fast as the previous fall. As seems to be admitted by the economists, the greater part of that fall was caused by the competition of sterling prices in neutral markets, causing gold prices to be brought down rapidly, while commodity prices in sterling, during the same period, only rose by four points to meet the fall in gold prices. All these steps which were taken by the National Government led, not to an alleviation, but to an intensification of the difficulties. When the fall of sterling might have reacted favourably—it being the only feature which could have done so—upon the industries of this country, the Bank of England—on its own account, of course, uncontrolled by the Government as it is—saw to it that no credit should be available for industry. That was a policy which was carried through until late in the spring. The Government, further, themselves, through the Export Credits scheme, severely restricted the export credits which were available, and further diminished the opportunities which this country had for doing export trade with those countries, such as Russia, which desired as a condition of that export trade to have facilities for placing orders and for long-term credits. When, later on, the Bank of England decided, presumably with a view to the conversion scheme which followed, to cheapen money, industry was then unable to absorb the cheap credit which was provided, and for two main reasons—firstly, because the joint-stock banks, acting independently and not in the least in the national interest, took steps to maintain an exorbitant charge for credit, even though the Bank of England had cheapened money; and, secondly, industry could then see no outlet for its goods in a market which the Government had taken every possible step to contract domestically, and which, in its external trade, was being contracted by world conditions and the fall in gold prices.

It was not only the Government's direct economies that led to contraction of consuming power, but also their admonitions to the local authorities—that reiterated demand for economy which has been made so often by the Government. Tens of millions of pounds of useful expenditure were entirely stopped and those who would have benefited by doing the work necessary to meet that expenditure were relegated to unemployment insurance benefit and had, naturally, a greatly reduced power of consuming commodities. Then we have the iniquitous policy of the means test. It not only impoverished the families and the relations of the unemployed by compelling them, out of their meagre earnings or savings or pensions, to support the unemployed, who should have been a charge upon the State, but they made the position such that the local authorities, in the distressed areas in par- ticular, had greatly reduced power of expenditure and it is hardly to be wondered at that one gets resolutions passed and forwarded to the Government such as I have had sent me from the Bristol Public Assistance Committee the day before yesterday. Let me read it to the House: The Bristol Public Assistance Committee, being concerned at the heavy increase in the numbers receiving Poor Relief and the consequent increased cost to ratepayers of that city, urge the Government immediately to deal with the case of unemployment and to make every effort to find remedies. That is a thought that is probably behind every local authority in England which finds itself saddled, through the policy of the Government, with a vastly increased expenditure upon the maintenance of the unemployed. Then, too, we have the feature which has been emphasised in the unemployment figures which have been read out to-day of the terrible effect upon the great export trades, and particularly coal, that the tariff policy has had. I should myself have condemned the tariff policy as a failure, but it is unnecessary for me to do so when one who is a member of the Cabinet, and has inside information to which I could never get access, on the consideration of that confidential inside information makes the statement to the whole country that the tariff policy has been a failure. Let me remind the House what Lord Snowden said the other day: He did not like to rub it in when a person was conscious of the mistakes that he had made and the failure of his expectations, but he thought that for the moment they might leave the Protectionists to contemplate the failure of their own policy, because the failure of that policy was unmistakably clear everywhere. I do not think anyone could more admirably express the result of the tariff policy. I have no doubt Lord Snowden has earned the gratitude of his Cabinet colleagues for placing so clearly before the country what must be the result of his own personal investigation into the confidential documents available to the Cabinet.

Lord Snowden's statement seems to us to be about as strong an indictment as one could have of the one single point of major policy that the Government have brought forward in practically the year of Parliamentary time which they have had at their disposal. There are only two other steps that they have taken at all that could be called constructive. Firstly, there is the setting up of the Foreign Exchange Fund. We supported the setting up of that fund because we thought it was a valuable acknowledgment by the Government of their responsibility for controlling the vital financial operations of the country and, secondly, because we were convinced that it was bound to lead in the not very far distant future to the nationalisation of the Bank of England, which we look upon as a vitally important matter of policy, especially in view of the experience that the public have had of the operations of that body in the last decade. But, till that control has been made complete over the whole of the functions of the Central Bank, I quite agree with some critics that there is a serious risk of the Government losing their £150,000,000 in the gamble on the Exchange. Secondly, there is the War Loan conversion. That is a measure for which we have pressed continuously. [Interruption.] The right hon. Gentleman laughs. He need not lie ashamed of having done something which we consider right. I hope he will not be discouraged by our commendation from going forward to more conversion, compulsory if necessary, in order to bring about a reduction of national expenditure. But we look upon this conversion as just another attempt to clear away some of this jungle growth of capitalism. We shall be interested to know from what point of view the other party look upon it because, if they are logically capitalist, there can be no reason for starting to get rid of either international or national indebtedness. We believe that the piling up of debt burdens upon producers for the purpose of providing an income for people who are not producers is one of the factors which have led to the present unemployment throughout the world and, had the policy of the Labour party to bring about a Capital Levy immediately after the War been followed, every single Member of the House would look back upon it with gratitude.

4.0 p.m.

The Government's action and their failure to act in the past nine months show, as far as we can see, a complete lack of appreciation of the fundamental difficulties that are besetting the country. It reminds me a little of the old test for lunacy. When a subject who was suspected was shown a. bath in which a tap was running and was given a spoon and was instructed to stop it overflowing, if he tried to bale it out with a spoon he was adjudged a lunatic. If he turned the tap off, he was passed as being sensible. The Government seem to us to be trying to bale it out with a spoon. They have not got the conception of turning off the tap. The Government are unwilling to face the necessity for immediate and urgent action which will lead to the over-riding of private interests in the interests of the community. With this ever-growing capacity for production, and with the ever-diminishing man-power which is demanded to produce the commodities that are required, the problem, as we see it, is to devise some method of matching this country's and the world's consuming power to its producing power. Not only is the productive power increasing, but many people seem to fail to observe that it has very largely changed its character in this century. Since the beginning of this century mass production 4.0 p.m. has been introduced in more and more industries, and mass production calls essentially for mass consumption. The period during which a comparatively few wealthy persons could absorb a large part of the manufactured products of this or any other country has gone. In the 19th century the profit-earners were able, either by the investment of their profits in capital goods, or by the consumption of comparatively expensive articles, to provide a very large market for the industries of the world; but, owing to the increased industrialisation throughout Europe, and, indeed, in other parts of the world, and through the development of world resources by others from capital assets which were created in the 19th century, one finds now that the whole tendency of trade has gone from producing articles for which the profit-earner was the market, and, in the attempt to cheapen goods, has been driven to producing masses of commodities for which the markets are far wider but for which individually less wealth is required. If we give in, we shall see a vista of unending mass unemployment, unless we are prepared to agree to a reduction of population as being the one solution for the unemployment problem. We believe that, it is necessary, although the Government have taken no steps in that direction, to increase mass consumption, not by economies, which is the very reverse of the right policy, nor by any system which depends for its motive power upon the inducement of high profit offered to private enterprise. Those two factors, we believe, are essentially fatal to producing circumstances in which one can get employment again.

If one looks at the figures of national income for the year 1931, one sees that the receivers of rents, debenture interest and profits absorb almost exactly the same amount as the receivers of wages—both of them about £1,400,000,000—the rest going to the salaried classes, whose income was about £750,000,000. From that joint fund the State has drawn in the past, and does now draw, the whole of its budgetary income, and it has attempted to redistribute that fund among wage-earners and salary-earners by expenditure upon social services, and other State expenditures. But as long as the community has to rely for the development of industry and fresh capital upon the surplus of the profit-owners, that is, those who receive £1,400,000,000, a surplus which the profit-owner can use as he wishes, not necessarily in British industry, but invested abroad or in any other way, so long will it be said—and truly said—that that profit fund cannot, in practice, be reduced below a certain limit, because there must be available the money for reinvestment in industry. Because of that, we hear so often the statement that direct taxation has reached the limit; but, somehow or other, the national income must be divided in some new way so as to provide the necessary consuming market for mass-produced articles, and also so as to provide, when required by the State, and not at the will of the individual, the necessary fresh capital for British enterprise and British industry.

One day, when that idea sinks in, and when such a re-arrangement can be brought about, it will, we hope, be possible for everyone to obtain at least some hours work every day, and a decent standard of living, because it is ridiculous in this period, when there are over 25,000,000 unemployed in the world, that we should insist upon long hours of labour, and even insist, from the point of view of economy, upon child labour. Nothing seems to us to be more symptomatic of the complete failure of the existing system to cope with the existing circumstances. The idea of re-distribution by taxation of this fund of the national income has been tried by successive Governments in varying degrees. It was started long ago by Liberal and Conservative Governments, and the late Labour Government tried to accelerate it. It was Lord Snowden's theory, which he may, or may not, still hold—I do not know—but whoever has attempted it has always failed, and as long as the system of private enterprise and capitalism continues, it seems to us that it is necessarily a failure to try to bring about by taxation a re-distribution of the national income.

From a purely economic point of view, apart altogether from the inherent injustice of the present situation, we shall certainly continue to urge that this situation should be treated as an emergency by the Government, that they should be prepared to do everything they were prepared to do in 1914, taking complete control, if necessary, of everything that is useful as a resource for national prosperity. If, for the purpose of meeting a great war, it was necessary to do that, surely for the purpose of meeting a great industrial crisis like the present it is just as necessary, and just as wise? As long as the community of this country is dependent upon the whim of the profit-owner for its industrial existence, so long, we believe, unemployment will continue.

I cannot, on this occasion, discuss measures or methods, but I do desire to emphasise the fact that we believe that War Loan conversion, or Conferences at Lausanne, Ottawa or elsewhere, will never even begin to solve the difficulties constructively. There is a great deal of wreckage which has to be wiped away first, but, while that wreckage is being wiped away, it is, in our view, essential to start upon a constructive system for curing the actual ills which exist, and, during the term which the present Government have been in power, they have so far done nothing in that direction. Indeed, their whole psychology, the psychology of the profit-owner clinging to his profit, is one which never will, and never can, lead to a solution. Some of the papers nowadays speak of the boom of the Stock Exchange following the conversion of the War Loan as if it were a solution of the unemployment problem. That will never give employment to any- one except, possibly, a few stockbrokers; nor, indeed, if we could now return to the conditions of 1929 or 1930 could we solve the problem of unemployment.

Few people, perhaps, realise fully the results of rationalisation which has taken place under the extreme pressure of competition in private enterprise. To take one figure alone, in a single year in the motor industry in this country unemployment doubled while the output remained the same. That will give some idea of the amount of labour which is disposed of by rationalisation, and even if we were to get back to what is regarded now as the comparative prosperity of 1929, we should still have vast hordes of unemployed in this country, and throughout the world. It is that aspect of the matter, more particularly, which, we believe, demands some fundamental change, because we believe that neither the people of this country nor the people of any other country in the world will continue to tolerate a system which necessitates millions of people living on the verge of starvation in a world where productive power vastly exceeds consuming power, and where there is no valid reason that we can see why everybody should not have an opportunity of work, accompanied by a decent standard of life. We believe that the only solution lies along the road of social planning and social control, a scheme which we have put forward in the past, and we shall await with confidence the coming of that solution, in the hope that neither this country nor Europe will be thrown into the chaos of revolution before the solution materialises.

Mr. CHURCHILL

The sermon to which we have just listened showed that the hon. and learned Member has all the capacity, which one would expect from his profession, of getting up, at comparatively short notice, a complicated brief, and of presenting it in solemn, impressive tones and lucid phrases. I trust that his performance to-day will give the fullest satisfaction to his teachers—for we understand that his first political speech was made only a year ago—and that it will be beneficial to that career to which his talents, no doubt, entitle him, and which his ambitions have probably long selected. I understood that the hon. and learned Gentleman was to speak upon the record of the Government, and, of course, I expected that some formidable indictment would be presented; but, apart from his Fabian essay, with all the old, cheap, threadbare, discredited rigmarole of bankrupt and democratically censured Socialism, there has been no sort of constructive suggestion or solution, and only appeals to prejudice against all who work for profit, and contempt of the profit-maker, which comes so glibly from the lips of a late Law Officer of the Crown who, in a few undistinguished months of office, gobbled up the salaries of four or five Cabinet Ministers, and probably the livelihood of 20 or 30 working-class homes. [An HON. MEMBER: "What are you gobbling up?"] Well, I am not gobbling up any public money, except my salary as Member of Parliament, which, I believe, is the rate of wages current in the district, and subject to the regular cuts.

The hon. and learned Member's indictment was tempered, modest as it was, by praise of the Government's principal and most recent actions—the Conversion Loan and the treaty at Lausanne. It was not very generous praise, it is true. It was more on the lines of "We did it. We, the Socialist party, did it. You have only done what we told you to do, but what we did not do ourselves. In fact, we did the opposite." They did the opposite. [Interruption.] Certainly, they left the whole process of conversion utterly untouched, and, as far as the Lausanne Convention is concerned, I shall have a word to say before I sit down about Lord Snowden's conduct at The Hague and the tribute paid to him on that occasion.

I should like to congratulate my right hon. Friend the Chancellor of the Exchequer—I was not in the House the other day when he made his statement—upon the success of his Conversion scheme. The timing, the secrecy, the scale, the boldness of this plan will, I venture to think, constitute a model for such operations. Of course, for years the Treasury have always looked longingly at the 5 per cent. War Loan and eagerly sought all chances of converting. The chance has come. The decay of world trade, the paralysis of enterprise through the fall in prices and through high taxation, the flight of capital, seeking safety in the gilt-edged stocks of solid and stable Britain—these are the evils out of which opportunity has been born, and the right hon. Gentleman has seized that opportunity—and we are grateful to him for it—to carry through an immense and salutary financial operation which has not only yielded an immediate important saving to the expenditure of the country, but, from the skilful way in which it has been handled amid these many mysteries of finance, seems to have stimulated temporarily at any rate, almost the whole of the British market.

I have only one general comment to make upon the Conversion Loan on this occasion. In all our discussions at the Treasury in my time—and we had, of course, discussions every year and examined any number of schemes, but unhappily the high price of money was such as to render action inopportune and unacceptable—it was always considered that conversion should be accompanied by a proportionate reduction of the Income Tax. I ask the House to remember that when, in the Parliament before the last, I established the fixed Debt charge of £355,000,000 I expressly reserved any economy arising from conversion to a lower rate of interest for the purpose, not of accumulating the fixed Debt charge, but of reducing its extent, and I made it clear that the sinking fund should be reduced accordingly. So there is no doubt whatever that my right hon. Friend has greater freedom now in dealing with the various sinking funds, such as the earmarked statutory sinking funds, than any Chancellor of the Exchequer has had for many years, and in my opinion the relief should be given to the taxpayer.

The saving which has been achieved through the reduction of interest should be returned to the taxpayer in the form of reduction of direct taxation. Without that, I must point out that this great operation is essentially and definitely deflationary in character unless it is unsuccessful, and, of course, it must not and will not be unsuccessful. If it is successful, it is definitely deflationary in character, apart, that is to say, from the £20,000,000 bonus. The national spending power is reduced by the £23,000,000 per annum, and it can only be restored to its old level by a corresponding reduction in the weight of taxation. There is another deflationary aspect which I will just mention, because it should attract the attention—and I have no doubt that it has—of the right hon. Gentleman and the Treasury. With the fixed charge of 5 per cent. interest upon loans of all kinds, there must be a widespread tendency for debtors to the banks who own either assented or non-assented stock to sell out their 3½ per cent. holdings and pay off their 5 per cent. loans with the proceeds. This seems to be a point which ought certainly to engage increasingly the attention of my right hon. Friend.

I return to the general argument employed by the hon. and learned Member on what he called the record of the Government, or what we may say may be called the state of the nation, which is especially suitable and relevant to these general Debates upon the Appropriation Bill. Last autumn we were confronted by a financial panic which was stemmed, stopped, and even reversed by the displacement of a Socialist Government and by the establishment in their stead of a National Government, and, above all, by the mighty vote of the nation against those very doctrines which we have heard so thinly paraded here this afternoon. The mere arrival of this new Parliament—and I always thought that Parliament had a lot to do with what happened since the election—was decisive in ending the financial panic. We may say, "We came, we were looked at, and we conquered." The mere presence of a new Parliament produced a remarkable psychological result. Fear, unjustifiable fear in many cases, was harrying the mind of the nation. The fear was removed, and once the fear was removed the inherent wealth and strength of Britain and of the Empire asserted itself in the minds of all nations. But the other underlying causes of difficulty and danger which were operative last autumn have not been removed. Let me mention the four grim evils by which we are now harried—over-taxation, unemployment, the fall in prices through gold cornering, and the obstruction of the channels of world trade.

Mr. MAXTON

And poverty.

Mr. CHURCHILL

I am talking of the evils which are causing all the trouble. [Interruption.] My hon. Friend will do well to let me deploy my argument, and he will see how his ingenious and picturesque though somewhat disorderly mind can best address itself to its task. I have said that there are these four evils, and I venture to think—and I am afraid it is painfully true—that every single one of them is definitely worse now than at this time last year. We had the harsh October Budget introduced through no fault of the right hon. Gentleman the present Chancellor of the Exchequer under which we languish at the present time, with an enormous increase of taxation and with taxation reaching levels where it is now known and proved that it is destructive of trades and of the sources of revenue.

With regard to unemployment, I was rather relieved at the figure read out at Question Time. I understood that the rate was going to be somewhat worse. But unemployment has increased since last year and is increasing, and everyone knows that in the forthcoming winter it must stand at probably record levels for this country, except in a period of general strike. The price of gold is higher than it was a year ago and is still rising steadily. As for the obstructions to international trade, they have greatly increased. They have increased through tariffs, quotas and licences, as has been mentioned. They have increased to an unprecedented condition. They are injurious to all countries, but they are specially injurious to this crowded island which was so largely the world's carrier and commission agent. I am a supporter of the British tariff for various reasons, but among those reasons there is none which weighs with me more than the reason which may force a situation upon the world which will eventually lead to a universal lowering of tariffs and to a greater measure of exchange of commodities throughout the world, to a greater measure of true Free Trade in which we shall share, and to a greater measure of the exchange of commodities throughout the British Empire and to what is called Empire Free Trade, in which we shall not only share but have a central position.

For those reasons, I consider that in the circumstances in which we stand we must he armed and defended by this tariff. But, of course, the actual adoption of the tariff is an addition to the tariffs of the world, whatever its advantages and however great its needs, and behind it at the moment, in foreign countries, in the principal countries with which we deal, there has sprung up a whole new network of quotas and licences which, in a manner much more irritating even than the tariffs of foreign countries, have hampered the flow of our goods, Therefore, taking these four evils which I have mentioned to the House, these four dark horsemen of the economic Apocalypse have become more formidable—no one can deny it, for we have to look at the facts—and more appressive than they were at this time last year.

4.30 p.m.

I make no apology to the House for referring to the topic which my right hon. Friend the Member for Hillhead (Sir R. Horne) and I have on various occasions brought into the Debates of this House this year. I believe that there is one process, and only one process, which will dissolve this frightful fourfold confederacy of evils, and which will give to the world and to mankind a speedy chance of sharing joys instead of miseries. That process is the restoration by the united action of the leading nations of the world of a fair measure of value and exchange. I do not see any other way. There are many contributory ways, but I do not see any other direct ways, practical, positive, which could he taken by which we could escape from this vicious circle in which we are gripped and which month after month is strangling the expanding energies of mankind. So far the high price of gold—I think that that is a much better expression to use than the low price of commodities—the lengthening of the measure from 12 to 20 inches, has only reached the working people of this island, at any rate, in the shape of unemployment. The material evil of unemployment has been largely mitigated in this country by the enormous expenditure upon relief which is provided from that very high, over-taxation which is in turn working its evil upon our affairs. There is, I must admit, healing balm in low prices to the general consumer. Even if the low prices are produced, as these are, unhealthily and unnaturally, nevertheless for what it is worth there is a certain relief and balm to the general consumer. Therefore, this crisis in its material aspect has not yet reached the masses of the people. In the moral aspect I agree that unemployment is a terrible evil, and I cannot challenge the observation of my hon. Friend opposite that there are 25,000,000 or 30,000,000 of people in this world to-day, many of them skilled, most of them willing to work, for whom there is no employment of any kind. I cannot help feeling that that is a terrible challenge to our system of society. It is terrible to say to millions of men, the heads of families, many of them: "It were better had you never been born." It is an awful blow to a man who is capable of and willing to work, an honest man, to feel that in the society in which he lives his services are not required.

Therefore, I am by no means treating that matter as if it was something that can be taken as a matter of course, one of those necessary evils to which we have to submit, on the contrary; but I say that the crisis through which we are passing, in which we are, and into which I am afraid we are still moving, is in the main in this country, at any rate, with its incomparable social services, with its vast compassionate machinery, less acute upon the working people than it is upon the financial institutions of the country. It is the crisis of the financial institutions. No one knows better than the Chancellor of the Exchequer how grevious that crisis is. Even the first pristine stimulus of the tariff has not been able to make headway against the increasing distortion of our weights and measures which has so prodigiously increased the difficulties of creating new wealth wherewith to pay off old debts and charges. Enterprise and industry are prostrate beneath the burden of taxes, overhead and fixed charges, and the financial institutions themselves, far from profiting by this state of affairs—they certainly have not brought it about by their own conscious will or action—are every month exposed to greater tension and strain from the collapse of their indispensable industrial partners.

It seems to me that the leaders of the financial institutions had better, before it is too late, address themselves with mental vigour, for this is no time for mental sloth, to these questions, and not fob us off with airy statements about currency cranks and so forth, and endeavour to restore a fair standard measure. During the last two years, and before that, I have listened to everything I could hear upon this subject and, if I select one point, it is not because I have not considered an enormous number of others. It is the measure that dominates everything. Unless the measure is restored, unless the increasing distortion of the measure is arrested, all the sacrifices, however painful, however enormous, however well meant, will be in vain. Interest may be reduced, rents may be re- duced, workmen may be persuaded to reduce their wages, taxes may increase, budgets may be balanced by heroic efforts, debts may be forgiven at terrible cost for those who counted on them, yet in a few months a further rise in the price of gold, due to circumstances which are unconnected with the economic conditions of the world, due to national ambitions of hoarding and to artificial circumstances, will make it necessary for the whole bitter tribulation to be gone through all over again.

Even now I expect my right hon. Friend the Chancellor of the Exchequer to say, in reply to my suggestion that he should reduce the Income Tax by the proportion of the savings made from the Conversion Loan: "How can I reduce taxes through the saving on conversion? You will be lucky if you do not find that I have to augment them." There you are. These conditions reproduce themselves, it must be remembered, in many of the most civilised countries of the globe, and yet never was the desire of mankind to consume greater, and never was the capacity to produce greater. Grave is the responsibility of those who are at the head of affairs. The responsibility is grave not only on the politicians but also on the leaders of our financial institutions. They cannot leave these great. questions unanswered, they cannot leave these great problems unsolved, and imagine that merely the process of tightening the belt and the practising of high moral and political wisdom is going to enable the world to get out of the quagmire into which it is sinking. Therefore, however successful the record of the National Government has been—and if you wish to measure its virtues you will read them in foreign eyes almost as readily as you read them in the eyes of our own fellow countrymen—successful as its efforts have been in many ways, as we all agree, there is plenty more work for them to do.

I come to the other topic which was mentioned by the hon. and learned Member, the Treaty which was concluded two days ago at Lausanne. There is to be a Debate to-morrow on that subject, and I would not touch upon it to-day at any length were it not for the fact that there are some aspects of this Treaty which require immediate clarification. The public, as far as I can see, is completely bewildered as to what has taken place. There can he no good reason why a full statement should not be made to the House and to outdoors. I am afraid that I cannot associate myself with the spokesman of the Socialist Opposition in applauding the settlement of Lausanne or in joining in the apparent jubilation which that event has caused. Of course, anything which removes friction between Germany and France is all to the good, and I congratulate the Prime Minister on that. I am sorry that he is not here, but I quite understand the cause. He must have rest and prepare himself for tomorrow. After all, when one has saved Europe a day's rest is not an extravagant demand. I congratulate him upon this feature of the settlement, and I also congratulate him upon the personal address which he has shown and the influence which he evidently commands in the councils of Europe.

But it seems to me that it is Germany which is most to be felicitated upon what has taken place. Within less than 15 years of the Great War Germany has been virtually freed from all burden of repairing the awful injuries which she wrought upon her neighbours. True, there are 3,000,000,000 marks which are to be payable by Germany, but I notice that Herr Hitler, who is the moving impulse behind the German Government and may be more than that very soon, took occasion to state yesterday that within a few months that amount would not be worth three marks. That is a very appalling statement to be made while the ink is yet damp upon the parchment of the Treaty. Therefore, I say that apart from that Germany has been virtually freed from all reparations. What has become of the Carthaginian peace of which we used to hear so much? That has gone. Some of it may have been written down in the Versailles Treaty, but its clauses have never been put into operation. There has been no Carthaginian peace. Neither is there to be any bleeding of Germany white or any bleeding of her to death by the conquerors. The exact opposite has taken place. The loans which Britain and the United States particularly, and also other countries have poured into the lap of Germany since the firing stopped far exceed the sum of reparations which she has paid; nearly double.

It is a fact that if the plight of Germany is hard—and the plight of every country is hard at the present time—it is not because there has been any drain of her life's blood or of valuable commodities from Germany to the victors. On the contrary, the tide has flown the other way. It is Germany that has received an infusion of blood from the nations with whom she went to war and by whom she was decisively defeated. Even these loans, which almost double the payments Germany has made in reparations, are now in jeopardy. They are subject to a moratorium. Let me give one striking instance which came to my notice when I was crossing the Atlantic Ocean. We and America took under the Peace Treaty three great liners from Germany. The Germans surrendered them at a valuation and then borrowed money to build three very much better ones. They captured immediately the Blue Riband of the Atlantic, and they have it still. Now, the loans with which the Germans built these ships are subject to a moratorium, while we are unable to go on with our new Cunarder because of our financial crisis. That is typical of what I mean when I say that Germany has not nearly so much reason to complain as some people suppose.

Absolved from all the burden of reparations, with a moratorium upon all commercial debts, with her factories equipped to the very latest point of science with British and American money, freed from internal debt, mortgages, fixed charges, debentures and so forth, by the original flight from the mark, in these conditions her measureless efficiency and competitive power only await trade revival to gain an immense mercantile ascendancy throughout the world. I think that we are entitled to felicitate Germany on what has taken place, and I am sorry to see, as far as any information has reached us, that the only reaction is that, like Oliver Twist, she asks for more. England—I may mention England—or, if you like, the Government of the United Kingdom of Great Britain and Northern Ireland, has not done quite so well out of the whole business. As usual, it has been our part to make the sacrifices; and we seem to have done it most thoroughly and most cheerfully.

May I remind the House that not only did we pay for every farthing of our war expenditure, but that we lent £2,000,000,000 to various Allies. We reduced this immense sum by a settlement, at which I was much concerned, until we received £19,000,000 on reparations from Germany and £19,000,000 of war debts from our Allies. The principle of this settlement was the well-known principle of the Balfour Note; that we would take no more from Europe than was asked from us by those on the other side of the Atlantic. We nearly succeeded in achieving that balance of payments as between our debtors and creditors. There is £134,000,000 of arrears; that is, we have paid more by this amount in the payment of our debts to our creditors than we have received under this agreement; and it has always been considered a matter of immense importance by the people of this country. I hope the House will give me a little time to develop this most important case, because it is to be debated to-morrow, and I am most anxious to put the main issues before the House.

My settlement with France and Italy was made on the sole credit of those two countries, irrespective of whether they obtained any benefit from German Reparations or not. The Cabinet were invited to take a higher figure contingent on the payment of Reparations or a much lower figure on the sole credit of France and Italy, and they decided that it should be the lower figure. That was an honourable and expressed undertaking made with the representatives of these countries, and the express stipulation we put forward—

Mr. THORNE

May I ask the right hon. Gentleman whether it was he who gave £1,000,000,000 to France and Italy?

Mr. CHURCHILL

I am coming to that; but I must tell the hon. Member that he is terribly behind the thought of the times. He has reproached me with not exacting more from the Continent, while at the same time he is applauding a settlement which abandons all claims. I am afraid that I cannot have a great regard for him; I am anxious that he should keep up with the march of political things. It is terrible if he is to be left two or three years behind. These are very important rights and assets for this country. What is the feature of last year's finance? It is the enormous financial strength of France, the gigantic hoards of gold which they have gathered at great detriment to the trade of the world; the large balances in London which have excited grave anxiety because of the probability that they might be withdrawn. It is no use pretending that there is any difficulty in making payments as between France and Great Britain at the present time. There is no difficulty whatever. It would be a mere adjusting of accounts, writing off certain balances here as against, balances on the other side, or the shipment of bullion, which would be liberated and come once more into circulation as the foundation for world credit. An adjustment between two partners thus situated raises none of the difficulties which are present when there are no other means of paying War Debts and Reparations except by exporting goods across tariff frontiers which do not desire to receive them. How does all this stand now? I think we should have from the Government a clear and full account how the Churchill-Caillaux settlement stands under the new arrangement.

I must pause to reflect on the extreme changeableness of public opinion. Where are all those who used to demand that we should extract the last penny of war debts and reparations from Germany. There still rings in my ears the abuse and criticism to which I was subjected, an echo of which came from the benches opposite just now, because I did not get more out of France and Italy, when the policy of His Majesty's Government was to limit our pressure upon Europe, under the principle of the Balfour Note, to the minimum claimed from us by the United States of America. I was not in the country at the time, but I read in the newspapers of the spectacle, which rises in my imagination, of the scene at Liverpool Street Station, less than three years ago, when the late Chancellor of the Exchequer, who was supposed to be stark and stiff in comparison with his predecessor in reclaiming war debts and reparations, was received by rapturous crowds, who saluted him with tremendous cheers as the Iron Chancellor, and how he was conducted with the Prime Minister, the same Prime Minister, to the Guildhall to receive the freedom of the City. All this was because he was supposed to have secured half-a-million pounds more. The late Sir Laming Worthington-Evans, who was good at details and figures, used to dispute vigorously whether or not that half-million pounds had been claimed, but, at any rate, the mere assertion that it had been claimed was sufficient to bring crowds to Liverpool Street Station, as fast as they came last night to Victoria.

I well remember the calculations which the late Chancellor of the Exchequer used to make about the burden I had placed on British shoulders by my misjudged leniency to France and Italy. I have always held the view that these war debts and reparations have been a great curse. I was with the Balfour Note from its inception, a cordial supporter of it, and I have always held the view that the sooner we could free ourselves from them and the less we exacted the better for the whole world, always provided that we were not left in the position of shouldering the whole burden. I have not changed my view. Now we have the act of Lausanne. No longer returning from the Hague but from Lausanne we have the same Prime Minister, the same crowd, or similar crowds, the same cheers, a different railway station it is true, with a policy, so far as they can tell us, which is the exact opposite of the policy of the Hague.

I am forced to ask, in honest doubt and some degree of bewilderment, what is our policy to-day? Until this morning's newspapers we were led to believe that we had forgiven Europe all debts and reparations irrespective of our obligations to the United States. From a study of the newspapers that was the impression on my mind; and very shocked I was at it. It was the opinion of others with whom I consulted—that we had forgiven all our debts and reparations irrespective of anything which may happen to us; that we had opened a new book; begun a new era; Europe had been saved once again at British expense. That was the impression of all the reports given from all Government sources and by all newspapers yesterday. Now I have been reading the "Times" this morning, and tucked away in a rather insignificant column there is some information which completely and fundamentally alters that impression; revolutionises it. We are told that after the Act was signed a general agreement was arrived at that it was not to come into operation until it was ratified by all the nations, and that it was not to be ratified until the signatory Powers had arranged with their own creditors. Is that true, or is it not? I think we must assume that it is true. It is inconceivable that such a statement would have been left uncontradicted; and I have no doubt that it is true. A very amusing phrase is used. It speaks of a "semi-secret" arrangement. I do not like the phrase "semi-secret." We have heard of secret diplomacy and how wicked it is, but this semi-secret diplomacy is a new term of art. It says: If it should, however, become clear that the Lausanne Agreement is not going to be ratified, it is understood that, strictly speaking, there will be a return to the previous legal basis—namely, the Young Plan. I am reading from the paragraph in the "Times." Really, if anyone in his senses supposes that we are going to get back to the Young Plan in Germany, they really deserve special medical attention. If the settlement at Lausanne is contingent upon a settlement of our debts to the United States, and, if ratification is to be delayed until then, then the whole of this Lausanne Act drops to a vastly lower plane and shrinks greatly in scale and importance. You may say that Europe is saved, but you can only say that Europe is saved subject to ratification. Indeed, I do not see, quite frankly, how in fact or in principle the policy affirmed at Lausanne differs from the Balfour Note. We have always said that we would like to see the end of debts and reparations, and take no more from our debtors than is demanded of us by our creditors. I shall be glad to hear from the Prime Minister to-morrow how there has been a sensible and material advance on that position. I want to know what was the purpose of this fanfaronade, this trumpeting and proclaiming round the world that a new era has begun, that a new book has been opened. I cannot see that it has been attended by any solid benefits if, after an agreement is made, another agreement is made which renders everything contingent on negotiations with the United States of which the outcome is unknown at present.

5.0 p.m.

I think that this agreement must greatly prejudice our lawful claims upon our debtors. I am glad to know that the Young payments are in suspense. I feared that we had been left utterly defenceless. If the Chancellor of the Exchequer had anything to do with that our gratitude goes to him on that account, but we have undoubtedly prejudiced those claims. The Young Plan never can be revived and, therefore, it may be that the debts which depend on German payments under the Young Plan will be held to have fallen in consequence of its non-revival. I do not think it has benefited us at all in our position with our debtors. But how will it help us with our creditors? I have some knowledge, I think, of the realities of opinion in the United States on this question at the present time. I say deliberately that I believe no more unfortunate approach towards debt cancellation could have been made than the procedure adopted at Lausanne. First of all, there is the time. When I spoke six weeks ago on this subject in the House I begged the Government not to bring this debt question to an issue, to a head, until after the Presidential election campaign had ended in the United States. [Laughter.] I said "bring it to a head." Do not laugh until I have finished my point, because I think you will be in agreement. I thought that to bring this question out now in the frenzied advent of the election would be disastrous to the ever-growing number of friends of debt revision in America, and still more difficult for that very large body of the people who are in favour of special debt revision for the British on account of the unfair manner in which they have hitherto been treated. I think that the waiving of our claim against Germany—that, I take it, is the one operative part of the arrangement made—can only mean that the German voters in the States will not be concerned any more with helping their old race in their Fatherland, because they are out of it anyhow, and will be free to vote against the cancellation of the debts which are owed to the land of their adoption by the enemies of the land of their origin, a very serious factor and one which should not be ignored.

If it be true that we have entered into a special contract with France, or with France and Italy, to present a joint attitude to the United States, all I can say is that that will make it far more difficult to obtain a British revision. The growth of good will between England and the United States has been tremendous in late years, and everywhere there is admiration and affection for us. At the same time a very bitter quarrel has been in progress in these years on financial matters between France and the United States, about the withdrawal of gold credits and so on. I cannot see that we have gained the slightest advantage in any respect by this decision, and I think we may very conceivably have inflicted upon ourselves an injury which will cost us dear. Why could not our representatives and the Prime Minister rest upon the wise and prudent resolution of a moratorium, which opened the Conference, and allow the latest stages of the settlement of debts and reparations to follow the development of the World Conference which is expected to be held in London, and which for the first time will bring all the nations together? If we have hampered that development for the sake of this one day's wonder, all I can say is that we have purchased that advantage far too dearly.

I would ask one question of the Chancellor of the Exchequer. What is the position of the War Debts, nearly £114,000,000, owed to us by the Dominions? Surely you are not going to wipe the slate of friends and allies and foes alike completely, and at the same time exact the payment from your valient and beloved children? It is impossible, absolutely impossible. I had always contemplated that some day that would be dealt with. I should have thought that it would have been well to have withheld this announcement and to have proceeded on the basis of the moratorium, which is after all the only practical step you have taken and the basis on which you are actually proceeding—it would have been well worth while to have withhold the announcement and to have brought the whole of this question into the great effort to make an Empire pact in the near future at Ottawa. Then it would have been done with grace instead of being a mere consequential result of a foreign bargain. I need hardly add that the addition of £114,000,000 to the British dead-weight Debt more than wipes out all the sinking funds of the last two years. I am bound to say that I hope we shall hear how all this matter is to be treated.

For good or for ill Lausanne is over. Something, we trust, may emerge from the grimacings and counter-grimacings which are taking place at Geneva, which have now become very complicated in character. But Lausanne and Geneva recede, and all our hopes just now are centred on Ottawa. I will only say how ardently we all wish the utmost good fortune and success to the distinguished delegation of representatives of the British Government who are setting sail in two days for Ottawa. I am only sorry that the economic state of the world is not more propitious, and that there is so much distress and stringency in the Dominions themselves. Still, I have no doubt that the Government have thoroughly explored the scene and know exactly the limits within which practical action can be taken, and that they have taken pains beforehand to make sure that there will be a satisfactory result. But there is one aspect of the discussions—here I end where I began—which might conceivably be more fruitful and more potent than any other business likely to be transacted there. I understand that the Government have decided that the money problem and the position of sterling are to be resolutely explored by the representatives of the British Government. Certainly some of the financial experts they have chosen are men who would command the greatest confidence and even excite the enthusiasm of some of those who consider that the alteration in the price of gold is the main cause of our troubles. It may well be that the exploration of the money question at Ottawa will lead to definite conclusions, and that these conclusions in their turn will serve as an invaluable basis for the further World Conference in London, which still remains the most practical step open to us to take.

Since last I spoke on this subject the invitation of His Majesty's Government has been accepted by the United States. The policy of attending such a conference in Europe has actually been adopted as a plank in the platforms of both political parties in America, and I believe that even funds have been voted by the Legislature for that purpose. Do not let the Government cavil at the agenda. Do not let us be told that War Debts and reparations are excluded from the agenda. They cannot be excluded from the minds of those who meet around the table. Neither can the clearance of the seas from the obstruction to international trade, from which we have suffered, be absent from their minds. Here for the first time the greatest financial authorities, the representatives of the nations of the world, will meet together and consider something which involves no sacrifice from any, which offers benefits to all, which for the first time gives them a common interest. They can all rise from that table, if there has been a revaluation of commodities, with the sense that prosperity will return to every country. If an agreement were to be reached on such a basis is it not conceivable that the return to prosperity will draw out an impulse towards the clearing away of many of the other difficulties and evils which now beset us and under whose grip we writhe so powerlessly? If it were not for this World Conference, following as it does upon Ottawa, upon the money problem, upon the attempt to restore a fair measure of value of exchange to all the nations of the world, the outlook for us all would be bleak and drear indeed.

Sir GODFREY COLLINS

The House has listened to a masterly survey of the present position of the world. The right hon. Gentleman, in picturesque language and in a perfect House of Commons manner, has directed the minds of Members of this House not only to the internal problems at home but to the international situation abroad. If I understood him correctly the right hon. Gentleman takes exception to the settlement at Lausanne because the question of War debts has been brought to a head. But Europe, it appears to me, cannot wait; it cannot wait until a settlement which may be arrived at later in the year with other nations. Surely the spectacle of France and Germany coming together round the table at Lausanne will point the way to the final settlement of this problem when other nations meet the Chancellor of the Exchequer in London in the autumn. I for one rejoice that the Government have succeeded in bringing this problem nearer to a finish by their negotiations at Lausanne. The right hon. Gentleman at the beginning of his speech dealt with the internal problems at home, and advocated that steps should be taken to secure a rise in the price of commodities. Surely our statesmen at home would be well advised, rather than take steps to increase the price of commodities, to take steps to reverse what has brought about a rise in prices during the last 10 years. By that I mean War debts, reparations, and excessive taxation. I hope that the Government will continue to pursue the policy which they have pursued since they took office last October.

I wish to direct the attention of the House to a much more prosaic problem than that mentioned by the right hon. Gentleman. I have risen to draw the attention of the Chancellor of the Exchequer to a Resolution on the Order Paper in the names of several hon. Members and myself, inviting the Government to submit estimates in the coming autumn showing a reduction of £40,000,000 in comparison with the Estimates of this year. The Chancellor of the Exchequer has a unique opportunity to-day. Consider for one moment the composition of the present House of Commons. The majority of hon. Members were elected, not to increase our national expenditure, but were elected by vast majorities to reduce expenditure, and by that means to lighten the burden on trade and increase employment at home. It is true to say that no House of Commons during the last generation has had a more direct mandate to reduce national expenditure than the present House of Commons. How can this problem be tackled? It is not an easy one. The Chancellor of the Exchequer on the Third Reading of the Finance Bill told us that much hard thinking was necessary, and I am sure that I shall express what was in the right hon. Gentleman's mind at that time if I say that what is required is hard thinking with sympathy and understanding. I hope that that will be his attitude to this problem in the coming months.

Since the War there have been two big movements to reduce national expenditure. They were the Geddes Committee and the May Committee. Both were helpful. The May report lifted the curtain and revealed the facts to the people and enabled the nation to save itself. But neither of those movements was completely successful and it seems that the problem must be attacked from another quarter. The suggestion which I am about to make was made by my late chief, Lord Oxford, many years ago, when he urged that the Chancellor of the Exchequer should first fix the rate of taxation which the nation could afford, and, having fixed it, and having secured a certain revenue, should then ration every State Department according to the in- comings of the Exchequer. The late Lord Oxford developed that argument at some length seven years ago in another place, and I submit that the policy which he then advocated indicates the only way in which this question can be strictly tackled.

It may be argued that such a practice would be in too sharp conflict with the past practice of this House, which is, first, to settle the Estimates of the year, and then to determine the level of taxation which is necessary to meet the expenditure of the year. But we need new methods. We live to-day in a time when old ideas are being discarded, and my plea to the Chancellor of the Exchequer is that he should act boldly as he did a few days ago with his Conversion Loan. He should settle first what the nation can afford, in view of the state of trade and employment, and then proceed to ration the Departments of State.

Let me submit several broad considerations which I hope will influence the Government to reduce expenditure in the coming year. During the last 10 years every business man, every trader, every manufacturer has been working day and night to reduce his costs so as to cater successfully for the reduced purchasing power of the public. But while that has been going on in every business in Great Britain, business men noticed that Government expenditure until September, 1931, was steadily mounting. There was a different policy in the minds of the Government, during that 10 years, from the policy which every business man had to pursue in his own business. The policy which the nation has had to follow in its own private life might be developed further by the Government in the coming autumn. We have witnessed in the last few days a cut in the rate of interest on the War Loan made by the Chancellor of the Exchequer. We witnessed last autumn cuts in several of the social services. Is it not now even more incumbent of the Government, in view of those facts, to lighten the burden of the cuts by reducing expenditure and so reducing taxation?

The National Government consisting as it does of all parties in the State, can afford to fight sectional interests in this matter. I think it is true to say that no party Government to-day can ruthlessly and fairly cut down the rate of ex- penditure, but a National Government interpreting correctly the national mind, can ignore sectional interests while thinking of the interests of the whole. This Parliament is still young and, four years hence, this Parliament will be judged by one standard only. The test will be, "Has it succeeded by its policy in reducing the rate of unemployment?" What more fruitful way can a Chancellor of the Exchequer adopt to increase employment than by reducing the taxation which presses so heavily upon all? The maintenance of our social services and of unemployment relief depends upon the productivity of the Income Tax. If the yield declines it may not be possible to maintain those services at their present level. The State to-day is the largest shareholder in industry, taking some. 25 per cent. of industry's profits, and, if the State cannot get out of industry what it needs for its Estimates, that may be because the State has been laying an excessive burden upon industry and drying up the sources of revenue. In no country in the world has direct taxation been so high as it has been in Great Britain during the last 10 years. Let me add what I think even hon. Members opposite will agree with, that in no country in the world has wealth paid so readily and cheerfully as the wealthy classes in Great Britain have done during the same period. This heavy direct taxation has brought as its natural corollary acute unemployment. The increase of unemployment in our country has been largely attributable to the heavy direct taxation imposed by various Governments during the last 10 years.

Before I come to definite suggestions as to the economy of £40,000,000 which I have already mentioned there is one other general consideration which I should like to mention. Much has been written about the House of Commons control of expenditure. How illusory is that phrase I According to an article in "The Nineteenth Century" only 17 per cent. of our Supply Services are reviewed yearly by the House of Commons. In 1914 the percentage was not 17 but 50. I mention that fact for this reason. In order to secure a saving of £40,000,000, departmental economies will be quite insufficient. A new policy will be required to secure that economy. The Chancellor of the Exchequer is aware of the intense interest taken by the House of Commons in this matter and of the fact that a large number of Members are themselves investigating the question. May I ask the right hon. Gentleman in order that those Members may be enabled to study the problem more effectively, to issue before the Recess a statement showing the recommendations of the May Report which were adopted, those which were refused and those which were left over for further consideration. Hon. Members would thus have better opportunities of grasping the whole problem.

I come now to the means by which, it is suggested, this £40,000,000 might be saved. I do not wish to shirk facing ugly and awkward facts but I can do no more than indicate where cuts may be made and naturally, in speaking of those cuts I speak only for myself. I realise that departmental chiefs speaking from the Treasury Bench can make an arguable case for every item in their Estimates, but necessity demands a big cut in the coming year. Pressure for reform always comes from without, but reform to be effective must come from within, and the Government alone are capable of deciding how these cuts should be made. I turn to the yearly statement for 1932 in order to analyse briefly the position in regard to the Supply Services for the year. First, I take the Road Fund. The average expenditure in the years from 1921 to 1924 was £12,500,000 per year. During the War and since the War a sum of £500,000,000 has been spent on the roads. The May Committee recommended that the amount should not exceed £20,000,000 a year. The actual figure this year is £23,000,000. Since the years 1921–1924, during which the Road Fund cost an average of £12,500,000 a year, wages and the cost of materials have fallen but the amount of traffic on the roads has increased. Would it be unreasonable to suggest that, in the coming year, we should allot to the Road Fund a sum 20 per cent. above the average for the years 1921–1924? Does that proposal not seem reasonable in view of the fall in wages and in the price of materials? If that proposal were carried out, it would represent a saving of £8,000,000.

The Education Estimates this year represent a total of about £52,000,000. The average in the years 1922–1924 was £43,000,000 and for the years 1928–1929 £45,000,000. The average cost per child has risen from £12 4s. to £15. Would it be unreasonable for the Government to fix the cost of education for the coming year at 5 per cent. above the average cost for the years 1922–1924, and not exceeding the figures of 1928–1929? There is a growing feeling that certain items of expenditure are unnecessary and that some are actually wasted. The figure which I suggest seems not unreasonable in view of the average cost during the years 1922–1924. This economy would represent £6,000,000 a year.

5.30 p.m.

I turn now to the defence forces. I observe in the "Times" of 1st July that the French Government propose to reduce their expenditure on their defence forces in the coming year by 1,500,000,000 francs or about £15,000,000. Our Navy Estimates this year are only about £500,000 less than last year's. The size of the Navy Estimates is determined by two broad considerations—one, the number of personnel and, the other, the amount of Votes 8, 9 and 10, which are the shipbuilding Votes. As a layman, it is impossible to me to make any comments as to the number of men required by the Navy but I turn to the report of the Geddes Committee which was presided over by an ex-First Lord of the Admiralty and included the late Lord Inchape and Lord Maclay who was Minister of Shipping during the War. I think it would be accurate to say that each of these individuals supported the idea of a big Navy, but what did they say 10 years ago? They recommended that the personnel should be 83,000. Yet 10 years later although the navies of the world have not increased the Admiralty to-day are asking for 91,000. I submit in view of that report that there could be large reductions in personnel. As to Votes 8, 9 and 10, in 1930 these Votes have absorbed £21,700,000 and this year 21,300,000, or a small reduction, but, in view of the falling cost of materials and wages, surely, big reductions could be made without in any sense jeopardising the strength of the Navy for its Imperial responsibilities. An analysis of the Army and Air Votes 5.30 p.m. reveals similar figures, with which I do not wish to weary the House, but in view of these facts it seems to me that the Defence Forces might be reduced by £13,500,000 in the coming year.

I turn to works and subsidies, and here I ask any hon. Member, Has the policy of subsidies since the War been successful? Has the outpouring of public money been justifiable in view of the results? I venture to think that, subsidies having been tried and their results having been shown as uneconomic, the Government might well decide in the coming year to abolish subsidies altogether.

Lord EUSTACE PERCY

Does the hon. Gentleman mean that he would abolish subsidies on past houses, houses already built?

Sir G. COLLINS

Naturally I do not suggest abolishing all subsidies or rather that the money borrowed for the erection of subsidised houses should be revoked by His Majesty's Government, but works and subsidies, I think, might be reduced by £3,000,000. That is how I get my total figure of £30,500,000, made up of Road Fund £8,000,000, education £6,000,000, defence £13,500,000, works and subsidies £3,000,000, a total of £30,500,000 out of a possible £40,000,000. I will not weary the House with further figures, otherwise I could show how the other £9,500,000 could be secured, but the Estimates of Departments to which I have not referred absorb £270,000,000, and a small reduction on those, of less than 4 per cent., is all that is necessary to make up the total of £40,000,000. I am fully conscious of the acute difficulties and the political difficulties which would face the Government in any such effort, but is it not true to say that taxation must be reduced to enable employment to be created? I appeal 10 the Government correctly to interpret the mind of the British public, their political sense. There is a feeling abroad that not only national but local expenditure should be reduced. Let the Government in the coming months give a lead in this matter, and so give hope to industry and increased employment to our people in Great Britain.

Lord E. PERCY

The hon. Member for Greenock (Sir G. Collins), who has just sat down, is to be congratulated by the House on having ventured on the most difficult and dangerous task of suggesting actual detailed economies. He will expect, and so will we all, that against his actual suggestions in detail it might be possible to advance arguments, but it is that effort to suggest economies in the lump which alone can produce a real policy of economy. I feel, however, that there is some danger of the Debate today being split into two halves, the first two speeches, and especially the first speech, concerning themselves especially with wide questions as to the state of the nation—rather, as regards the first speech, a chaotic view of the state of the nation, but still an effort to summarise the state of the nation—and then the latter half of the Debate jumping on to the subject of economy, as if there was no particular connection between the state of the nation and the policy of economy.

I should like to bring these two ends of the Debate together, but I confess that when I listened to the first two speeches I wondered whether I ought to intervene in this Debate, for I wondered whether I could include my own murky past in company so immaculate as that of the hon. and learned Member for East Bristol (Sir S. Cripps), who spoke for the Opposition, or even that of my right hon. Friend the Member for Epping (Mr. Churchill). We understood at any rate that the Labour party had nothing to regret, that they had suggested all the good things that have never been done since the War, that they had resisted all the evil things, and that they were, in short, like that animal known to the poet: A milk-white hind, immortal and unchanged, Fed on the lawns, and in the forest ranged, Without unspotted, innocent within, She feared no danger, for she knew no sin. But, may one ask, is that really the case? Is it not rather true that every party and every Government since the end of the War has fundamentally misjudged the situation? The hon. and learned Gentleman himself admitted that the policy of redistributing wealth by taxation, which has been the cause of nine-tenths of our high. expenditure, has failed. Do hon. Members opposite bear no responsibility for that failure? Is it not the fact that, in spite of these rather chaotic attempts to review the state of the nation, all parties in this House ever since the War, and even before, have had a policy of expenditure or a policy of economy quite independent of any considered estimate as to what was the economic trend of the nation for whom they were legislating? After all, just as a business man has to manufacture for a market which will demand his goods, so, in much the same way, a Government's social policy must depend upon its judgment of the trend of economic conditions, of economic conditions not of to-day or yesterday, but of 20 years hence.

Now mark why the policy of redistributing wealth by taxation has failed. In 1919 we assumed—I think every section of opinion in this country assumed—that the increased standard of living, the increase in real wages due to the war, which was an increase in real wages rather than an increased standard of living, must be maintained, could be maintained, and that we must base our social policy on the maintenance of that standard of living. Consequently, we built houses for people who were going to earn real wages at those rates, with the result to-day that we have built houses for the wrong people, we have built houses for the better-to-do working man, aye, for the stockbroker, the professor, and the teacher, who were perfectly able to provide their houses for themselves, and we have not provided houses for the very men for whom we desired to provide houses, but whose need we have fundamentally misjudged.

Again, in education, we assumed that the result of the War would be to maintain, to raise, the level of professional earnings in a comparable degree with the rise in the earnings of the wage-earner. We increased teachers' salaries to a level which to-day is seen to be, broadly speaking, out of relation to the earnings of comparable professions. It is one thing to create a standard of living like that; it is a very different thing to have to break into that standard of living. You have a profession which, having got that increased standard of living, has committed itself, by insurances, by investments in building societies, and so on, up to the hilt, and it is extremely difficult to reduce, to go back on your mistake, without creating the gravest hardships.

But what has been the effect on education? I would ask hon. Members opposite.to consider this question. It has been that while our education is not more expensive than in other countries—not, at any rate, more expensive than in a good many other countries—yet, in spite of that fact, we are doing less education than other countries, not less in quality—I do not agree with all the wild criticisms made of the quality of our education—but less in amount. We have not got the technical education system, or the day continuation school system, or the extended secondary school system that other nations have, and the development of our education is stifled in every direction by the effort to maintain running costs which are out of relation to the general standard of living in the country.

The same thing applies throughout almost the whole range of our municipal services. It applies, I think, to the salaries of our doctors in public service. It certainly applies, without any doubt, to the scale of wages in municipal businesses, in those sheltered businesses run by municipalities. In short, we have fundamentally misjudged the whole trend of economic conditions. We have misjudged our market. Of course, that does not matter if you take the comfortable view of the hon. and learned Member for East Bristol, that, contrary to what Mr. Gladstone used to say, that wealth would always fructify best in the pockets of the people, wealth will always fructify best in the pockets of Government contractors and Government servants and that, therefore, any economy reduces the consuming power of the population. But that view is not seriously put forward, though it was stated in passing by the hon. and learned Member.

Well then, if this be so, what is the market for which we have to plan our social policy? There is one piece of legislation, and one alone, during the last 10 years which has been directly related to the future economic trend of Western civilisation, and that was the old age pensions provision of the Act of 1925. Some argue that we cannot afford these heavy insurance premiums to insure ourselves against old age, 20, 30, 40 or 50 years hence, but we have in that Act of Parliament a statement in cold figures of the risk which we, in common with the whole of Western Europe and America, with the exception of Italy, are running—the risk of a violent shifting of the weights in the balance of life and an. enormous increase, steady and continuous, of idle mouths which have to be fed by the work of fewer active hands. These are the vital statistics of the future, and it seems to me madness for us to base an estimate of future economic conditions on the assumption that a. population with a falling birth rate, a population which has to meet intense competition to-day from the very markets in Asia which used to consume its goods, that a civilisation of that kind, can expect to continue the same rapid accumulation of wealth as the earlier civilisation of the 19th century with a rapidly expanding population, a rapidly rising birth rate, and a continuous opening up of new markets.

Really, the hon. and learned Gentleman's explanation of the prosperity of the 19th century, based on the theory that the demand for goods came from the profit-earner, is the most extraordinary excursion into economic history that I have ever heard from a politician. Does the hon. and learned Member think that Mr. Stiggins used to sell his moral pocket handkerchiefs for little niggers to the profit-earners of the West Indies? It was the constant opening up of new markets and the constant rise in the birthrate that produced the rapid accumulation of wealth of the 19th century; and the calm, happy assumption that that will go on in the future as in the past is surely the most unjustifiable assumption that has ever been made by a politician. But if that accumulation of wealth, that continual rise in the standard of living, is not going to continue in future, what becomes of the whole finance of the social services? The increase of the social services was based on the assumption that we would always be able to tap tomorrow as we could tap in the 19th century those great accumulations of wealth, that we would always have a large fund from which the central Government could give grants in aid of local rates; but if the whole conditions which made those great capitalist accumulations have fundamentally changed we are tending in the direction of a civilisation where we shall have a far greater equality of wealth, a far more stationary condition of wealth, and where we shall have to finance our social services, if we finance them at all, not by taxing the vast accumulations of wealth but by the co-operative effort of hundreds of thousands of people with small incomes.

The future finance of the social services is a finance based upon local contributions, upon local rating. That, whether in the form of the present rating system or in an analogous form, is the main source from which we shall have to draw the finance of our social services in future. To go on, even while you are clamouring for a redistribution of wealth and an equalisation of income, building up the social services on a scale which can only be supported if we are still able to draw on these great accumulations with which ex hypothesi you want to deal—that attitude of mind can only be likened to the Gadarene swine. The really desperate danger as I see it at the present day is that the whole structure of our social services, the efficient working of which has already been arrested by the failure to provide a sufficient amount of money, will collapse unless we can re-erect it on a very different basis from that to which we have been accustomed. That is the real significance of the conference of local authorities which the Chancellor of the Exchequer has summoned.

I should like, if I may, to welcome that action of the Chancellor of the Exchequer. Such a conference of local authorities was desperately required. It is a more effective way—in the first instance, at any rate—of reviewing the statutory duties of local authorities than a Select Committee such as I originally proposed, but if there is any truth in the view that I hold, clearly the work of that conference is far more difficult and far more fundamental than any mere review of the onerous duties of local authorities or the petty restrictions on the actions of local authorities. It is neither more nor less than a preparation for a Parliamentary review of the whole structure of the social services, and an attempt to relate them directly to future conditions and not to base them on the economic conditions of an era which is already passing. I am a little afraid that the Government Departments concerned—for there are many—will leave the initiative too much to that conference and will fail to put before it the proposals for the change which it alone can draw up, but I am sure that the conference like every other committee, will never have a real power of initiative unless it is actively used as an instrument by the Government and not merely treated as a sort of panel of outside advisers who can make representations to the Government if they feel so inclined. We should all welcome an assurance, which I am sure that the Chancellor of the Exchequer will be prepared to give us, that the conference will be used actively by the Government as an instrument for this review of the present statutory duties of local authorities.

Perhaps I may make a few suggestions as to the work of the conference, dealing first with a number of purely administrative questions, and later saying a few words about the actual social services which I believe have to be reconstructed. In the first place, do let us consider getting rid once and for all of the purely nonsensical, obsolescent provisions of the Statutes which have now no basis in common sense at all. I do not know whether the House knows that one of the bulwarks which protect the liberty of conscience of the elementary scholars of this nation is that the Church in a church school should pay for the heating apparatus, but that the local authority should pay for the fuel. Let us get rid of idiocies of that kind, which can have no basis in any sensible or reasonable policy. I apologise to the House for talking platitudes, but it seems necessary to reiterate platitudes at the present moment. Secondly, we must adapt our machinery of administration to the thing we are trying to administer. I believe that one of the greatest roots of expenditure at the present time is the fact that we treat a particular type of local authority as a maid-of-all-work for all possible subjects, and the tendency in recent years has been to concentrate more and more work in the hands of a particular type of local authority, namely, the county and county borough council. That body is an extremely efficient unit for certain purposes, but I think that I am right in saying that it is much too small for a proper system of road administration and much too large for a proper system of administration of elementary schools. The elementary school is an intimately local thing, and yet we expect the county council to run these schools as mere regimental units in an enormous system of education spreading over the country.

That leads me to the third point. Where you have an administrative body of any kind, give it responsibility. That is surely a platitude, but look at the elementary school managers who cannot even close a school in cases of infectious disease for three days without writing to the county council, and having a doctor down from the county council, and setting in motion the whole cumbrous paraphernalia of Government officials in order to do something which we might surely leave to the school managers and the local panel doctor. The same consideration applies to the control by Government Departments of the local authorities themselves. There is a great deal to be said for close control of local authorities by Government Departments if that control represents a continuous policy, but what has been the history of the control of local authorities by the Board of Education and by the Ministry of Health during the last few years? It has been a history of chops and changes of the most absurd description. Even within the last 12 months local authorities have been urged to spend more on public hospitals and so on, and, a few months afterwards, urged to spend less.

Where there is no continuity of policy Government control is pure extravagance. Here I agree with my hon. Friend the Member for Greenock that what we want to do in the way of controlling local authorities is to control their programmes of capital and revenue expenditure over a period of years. Let these authorities commit themselves to a limited programme, and that is all the control there need really be over borrowing or over local expenditure out of revenue. This enormous machinery of control which has been built up in Whitehall is, I believe, wholly ineffective, and I can speak of this one point from some personal experience, because a system which I tried to introduce of programmes of education was followed by a reduction of something like 30 per cent. in the staff of the Board of Education over a period of six or seven years. The staff of the Board of Education is to-day actually smaller than it was before the War. The attempt to duplicate control all the way down the ladder of administration is the cause of much petty extravagance which, in its accumulation, adds a large sum to the rates and taxes.

6.0 p.m.

May I add another administrative point—the old principle that the expert should be on tap and not on top? There is no doubt that the system in our local government of having every department run by an expert—the education department by an ex-teacher and the health department by a doctor, leads to the most and the worst kind of bureaucracy. There is no bureacrat like an expert bureaucrat. I have another suggestion which is more fundamental. The whole of our system of Government at the centre in this country has been based upon the principle that elected persons should have no patronage, and Members of this House have been rigidly excluded from any responsibility for the detailed work of executive administration, in order that we might get rid of the scandal which always results when elected persons are able to fix salaries and rates of wages and determine the terms and conditions of employment. But ever since the great growth of local government in this country, ever since the Act setting up the county councils, we have accepted without question the dangerous fact that we have set up in local government a body which is both an elected legislature and an administrative department, or a series of administrative departments.

I have no doubt that the greatest reform necessary in the direction of a properly planned national economy in this country is that all municipal trading services, and housing, should be taken out of the hands of elected bodies and put into the hands of appointed bodies of the public utility type. The present organisation of municipal trading services has done more than anything else to dislocate the wage scales in this country by giving, for example, the tramwaymen a wage altogether out of relation with that of the skilled artisans of the country. It is that same influence which is at the present moment preventing the restoration of any sort of coherence in the wage scales of this country.

May I conclude the administrative section of my remarks by making two suggestions, one about local government and one about central government? They are suggestions which have been urged upon me from outside this House by persons of some experience. The first is that the Minister of Health should maintain—at this moment, certainly—a panel of advisers, persons experienced in local administration, who could be called in by local authorities to advise them on the organisation of our whole administration. We should probably need for each local authority a man experienced in inside administration and a man experienced in outside work—street cleaning, transport and so on. There are many local authorities who urgently want advice, who believe that a better organisation of the services is possible, but find it very difficult to get the responsible administrative advice which they require. My second point is an analogous one about central government. Some Departments can deal with their internal economic reorganisation for themselves, it has been done; but as a general rule we want a joint committee of civil servants, only one of whom is drawn from the Department concerned, to review the administrative arrangements of that Department. A series of committees of that kind would, I believe, do a great deal of good.

May I add this before leaving the administrative side? In any policy of economy proper structure and administration at the centre is of great importance. Outside critics seize upon the Ministry of Transport and the Ministry of Mines as Departments to be abolished. I do not wholly agree with that, and for this reason. I am quite sure that the correct organisation of government needs a few very large Departments, each with a Cabinet Minister at its head; and as Cabinet Ministers have very little time to devote to the detailed administration of their Departments, they should have under them Parliamentary Secretaries definitely responsible for certain sections of the work of the Department, though not as a kind of fifth wheel to the coach, as a Parliamentary Secretary too often is under the present organisation. The organisation at the Board of Trade, with the Ministry of Mines and the Ministry of Transport, is, broadly speaking, the right organisation; but the trouble there has been that instead of keeping the statutory powers and duties in the hands of the President of the Board of Trade as the supreme head of the Department, responsible for policy, we have divided his statutory powers with the Minister of Transport and the Minister of Mines, with the result that they are no longer Under-Secretaries under the authority of a Cabinet Minister but have become semi-independent Ministers of their own. However, I feel convinced that that is the proper organisation.

As has been frequently urged, and as I have pointed out, no administrative economies, far reaching as they may be, of that kind can possibly produce economies of the order mentioned by my hon. Friend the Member for Greenock, let alone greater economies such as are of ten demanded. I would advise the House not to concentrate too much on an economy of £40,000,000 in next year's Budget. Quick economies are generally temporary economies, and temporary economies are all we have made up to now. All the May Committee economies of last year were temporary economies, which cannot be held for any length of time. If we are to economise permanently in the way I have suggested, in the direction of a new set of economic conditions in the future, we must be content to plan economies progressively, for what is wanted is not so much immediate savings in any particular year as a permanent saving by the end of this Parliament, a permanent saving related to the economic conditions of the future.

All I would say on the particular question of the social services is this: If I am right that the services cannot in the future be financed out of large accumulations of capital, out of large incomes, they must increasingly be financed, as Canada has to finance her social services, on the basis almost exclusively of local rates, or at any rate of taxes levied on people of small incomes. If that is so, the whole complexion of our social services is changed. Take the question of housing subsidies. The fact that housing subsidies to-day come largely from the pockets of the working class themselves is obscured by these big grants from the central Government, but when once it is realised that a housing subsidy is merely a tax levied on one working man to provide a house for another working man, when that is on the face of our system, then, of course, we shall come to the conclusion that subsidised rents can only be justified as a form of public assistance; and that is a principle that we have got to recognise. Further, if we are going to have either an active policy of slum clearance or a proper administration of our existing housing estates, we need to put the work in the hands of appointed commissioners and not in the hands of elected members of local authorities. I do not believe that housing, and still less town planning, is a function which can be properly discharged by most elected local authorities.

As to education, if the organisation of education in the future is going to be local in the sense that I have suggested, if the money for education has to come mainly out of the pockets of the people whose children are being educated in the schools, as it does to a, large extent today, a very different complexion will be put upon the elementary school in the local area. Moreover, we must get rid of this absurdity in education, that a local authority may, indeed must, maintain an elementary school, but must not make any contribution towards any school not maintained by it if it is an elementary school. That system, by which we give a certain sacrosanctity to the fact of a school being supported out of the rates instead of out of the voluntary contributions of the parents—that distinction will disappear in the future.

I have said enough to indicate at any rate the line upon which I think this country has to go. We have got to plan our social services on the assumption of a far simpler if not a lower standard of living than the past, a far more stationary civilisation. We have got to forget those ambitious, money-grubbing assumptions on which too much of our present system of social services is based. It is only in that way that we can bring, as we must bring, the policy of economy in Government expenditure into direct relation with the whole economic policy and economic conditions of the nation. It is in that way alone that we shall get not merely temporary economies in the way of wage cuts and the postponement of developments that we have to restore in three years' time, but a permanent economy and a permanent reconstruction of our social services.

Mr. DAGGAR

I shall not be expected to follow the speech of the Noble Lord. I am not for the moment interested in Church schools and the question of economy and I want, if I may, to narrow the discussion. My justification for that is that in a very short time this House will be adjourning, and our people who live in areas where there are as many as 95 per cent. of the men unemployed will be interested to know what the Government propose to do. I want to make reference to the condition of things in those areas where there is such a large percentage of unemployed. When this question was raised last the Board of Trade promised that the condition of the depressed areas should have consideration immediately upon the publication of two reports that were then being considered by the Board of Trade. Those two industrial surveys have been issued. One covers the whole of South Wales and shows that, including my own area, South Wales has permitted the transference and migration of 242,000 men between the years 1921 and 1931. The report also points out that at the present moment there is a visible surplus of over 70,000 men in South Wales. We are anxious to know what the Government propose to do with reference to those individuals. Have they got to exist or vegetate in those areas upon the receipt of Poor Law relief? The other survey to which I have referred deals with the South of Scotland. We find that it is anticipated that in two years time there will be a surplus of 117,000 workers, a total for both areas of 187,000. We are anxious to ascertain from the Government whether it is their intention to permit the transference of those men from those areas, in view of the fact that the Government boast of having a free hand, and that the report to which I have referred makes no recommendation.

We were told last week by the Secretary for Mines that since 1st October last, 68 pits in South Wales and Monmouthshire, employing over 13,000 wage earners, had been closed and not reopened. As I. said on a previous occasion, my district is typical of the whole of South Wales. I have since been forwarded a copy of the report of the medical officer of health for my division. It covers the area known as the Abertillery Urban District. This statement by the medical officer of health is of considerable importance, and is more valuable than a discussion upon the question of economy in public finance. He says: Sixteen boys and 13 girls were found at school whose footgear was in a very bad state of repair. In most of these eases the little children had practically no boots at all, so bad was the condition of their footgear. The large number of children attending school in canvas shoes was specially noted. This is to be accounted for by the very trying economic conditions existing in your area. There was a considerable falling off in the condition of the boots and clothing, especially underclothing, of girls and boys as compared with previous years. On inquiring into the absences of children from school, one finds the reason given us that the children had not got boots in such a state of repair as to enable them to attend school, especially in inclement weather. The school attendance officers' monthly reports also bring out the fact very vividly. It is a most unfortunate position, as the Education Authority lose considerably in grants from those absences, and the health of the little children suffers considerably from lack of suitable footgear and clothing. I often think it would be greatly to the advantage of Education Authorities if the Board of Education would allow them to supply hoots after due inquiry, and with considerable discretion, to those deserving cases who are the victims of economic circumstances. This would be to the advantage of the children, also the authority. Boots and clothing were supplied to children of the unemployed through a local distress fund. I submit that these questions are of more interest than those that have been previously discussed. In these areas we are pleased to note an effort which has been made by the Government to assist these people. The Prime Minister, as I have said, continues to take a special interest in the depressed industrial areas. Evidence of that fact, is to be found in a letter which he recently wrote to Lady Londonderry, the chairman of the Personal Service League. In a portion of that letter he says: In places where unemployment has been long and severe there are families who are in need of boots and clothing. Recognising this need, men and women in various parts of the country have formed local organisations for collecting and supplying garments, and for raising money to buy boots to distribute in the depressed industrial areas. I think that this movement deserves every encouragement; it may be very helpful next winter, if by then it can be organised and coordinated on a systematic basis. That is an entirely new role for the Prime Minister of this country. When we are disposed to criticise him, it is assumed that we have more regard for his political activities than for his versatility, which is entirely incorrect. It is an entirely new role for a Prime Minister to act as an agent in advance for the collection of old boots and clothes for the people in industrial areas.

We have been informed by the President of the Board of Trade and by his Secretary that since the imposition of tariffs there have been established in this country 144 new undertakings that have given employment to 5,000 of our people. At the same time, many of our industries and their workers are idle. The complaint is that the Government are doing nothing to attract those industries, if they are of any value, to the depressed areas. I want to point out the difference that exists between the information supplied to us by the Parliamentary Secretary to