§ Order of the Day for the Second Reading read.
§ LORD TEMPLEMORE
My Lords, the traditional supremacy of the House of Commons in finance ought not to preclude, and does not preclude, the undoubted right of this House to survey and criticise the financial arrangements for the year on the occasion of the Finance Bill which I now ask your Lordships to give a Second Reading. Following the example of my predecessors who have been in charge of this Bill in your Lordships' House, I do not propose to trouble your Lordships at any great length. I think a long speech on the Finance Bill, while suitable in another place, is unnecessary in your Lordships' House. I shall therefore venture to make only a short speech. Then noble Lords will no doubt continue the debate, and I will endeavour to answer any questions which may be put to me.
Your Lordships will remember the position when my right honourable friend the Chancellor of the Exchequer introduced his Budget of April 22 last. There was a final surplus from last year of 696 £2,941,000. This surplus was nearly £2,500,000 more than had been anticipated. It was obtained indeed after Supplementary Estimates for £22,000,000 had been presented to Parliament and, allowing for savings, my right honourable friend had had to find an extra £14,000,000. I think your Lordships will agree that that was a remarkable example of the buoyancy of our Revenue and of the returning prosperity of the country. I cannot resist giving your Lordships a few figures, but I will not trouble you with many. Last year, in introducing the Finance Bill, my noble friend Earl Stanhope gave an example of the purchasing power of all classes. He told your Lordships that in 1934 there had been some 80,000 tons more sugar, 6,500,000 lbs. more tobacco, 270,000,000 pints more beer and 700,000,000 more cups of tea consumed. I can give your Lordships still better figures for 1935, except for sugar, the consumption of which remain stationary. As regards the other articles, 9,750,000 lbs. more tobacco was consumed and 230,000,000 more pints of beer. That I am sure will not please my noble friend Lord Arnold, whom I see in his place, but he will be consoled when I tell him that the people drank 2,400,000,000 more cups of tea.
When my right honourable friend came to the Estimates for the current year, as your Lordships will recall, he estimated the Expenditure for the year at £797,897,000 and the Revenue at £776,606,000, which left a deficit of £21,291,000. This deficit was more than accounted for by an extra £54,000,000 having been allotted to the Defence Services. Indeed my right honourable friend said that this was a Defence Budget and your Lordships will realise that the whole of the financial provisions for the year are affected and dominated by the necessity of repairing the gaps in our Navy, Army and Air Force. As regards the method of meeting the deficit your Lordships will remember what was done. There was, first of all, an increase of threepence in the standard rate of Income Tax, which is calculated to produce £12,000,000. As against this my right honourable friend, in Clauses 16 and 17 of the Finance Bill, has made certain concessions. He has increased the personal allowance for married persons from £170 to £180 and the child allowances from £50 to £60. 697 The result is to offset the increase in the standard rate to married taxpayers in the lower ranges of income and they will be actually paying less than last year. The increase in the child allowances makes those allowances higher than they have ever stood before, but that is offset by clauses affecting educational trusts to which I will refer a little later. My right honourable friend added twopence a pound to the tax on tea, which is calculated to produce £3,500,000. He appropriated the balance in the Road Fund—to which I shall also refer a little Later—amounting to £5,250,000 and made various minor changes, for example, an additional £1 a barrel on beer imported from non-Empire countries, which with a, few other minor changes is estimated to produce £1,025,000. The total new taxation amounts to a net figure of £21,775,000, which is calculated to give a surplus of £484,000.
Your Lordships will also remember that the Chancellor of the Exchequer introduced one or two new matters into the Finance Bill. Those are the clauses which are designed to prevent the avoidance of tax which is at present done to a certain extent in a perfectly legal manner. Your Lordships will see that Clause 18 prevents the avoidance of tax by people living in this country who transfer their property to persons abroad. They do it in such a way that while they retain control of the property they do not appear to be in receipt of income and therefore are not liable to tax. Clauses 19 and 20 prevent the avoidance of tax by what are known as one-man companies. Then Clause 21, on which there was a good deal of discussion in another place, deals with educational trusts. I am not going into detail on any of these clauses, but I will do my best to answer any questions about them. I may say, however, that my right honourable friend thought that the avoidance of tax had in some cases got to a very high pitch, and he saw no other way in fairness to taxpayers in general than the introduction of these clauses into the Finance Bill. He reckons that in a, full year the result of Clauses 18 to 21, when they are in full operation, will be a netting of £6,000,000 to the Exchequer.
My right honourable friend also introduced a new item into his Finance Bill in connection with the Road Fund. Your 698 Lordships will find it in Clause 33 of the Bill. You will be aware that up to now all money from motor taxation has gone direct into the Road Fund, and they have paid money as it seemed good to them. In future the money from motor taxes, as from everything else, is going to be paid direct into the Exchequer, and the Exchequer are going to pay it out in their turn to the Road Fund by means of Votes in the usual way in the House of Commons. That does not mean in any way—my right honourable friend was emphatic in his declaration—that His Majesty's Government and the Treasury are going to curtail the road programme which has been laid down for the next few years.
Those are the main items of the Finance Bill, which, as I have said, is dominated by the vital necessity of repairing our defences in as short a time as possible. That the charge is going to be a large one there is unfortunately no doubt, and your Lordships will have to bear in mind that even after the heavy capital expenditure of the next few years has been done with, the charges for the maintenance of these forces will not sink again to the level at which they stood up to a year ago. That is obvious, and I think my right honourable friend made that very clear in the debate in another place. It would not be proper for me now to give any opinion or enter into any prophecy as to how this expenditure is going to be met in the next Budget or the one after that, but my right honourable friend, after full and very anxious consideration of this question, decided that, at all events for this year, the deficits on the Budget should be met out of current taxation, and in making his increases of tax he made them with the purpose that every class in the country should bear its share of the cost of rearmament.
I need not say that it has been a bitter disappointment to His Majesty's Government, and especially to my right honourable friend the Chancellor of the Exchequer, that in a time of returning prosperity, when employment is increasing and when signs of better times are really in the air, at a time when there might have been really substantial reductions of taxation, the movement should in fact go the other way and fresh burdens should have to be put on, even 699 though at present they are fortunately not very heavy. But I think your Lordships will agree, and the country will agree, that no country situated as we are can afford any longer to neglect its defences. His Majesty's Government were returned last November on this policy of rearmament, returned with a great majority. The country approved the end, and I think they will also approve the means to the end. I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Templemore.)
THE EARL OF ONSLOW
My Lords, may I say one word? As, I understand, this Bill is not going to be committed, this is the only opportunity your Lordships will have of discussing it. It is of course impossible for your Lordships to amend the Bill, but there is no reason why it should not be discussed, and I think that principle has on several occasions been maintained in your Lordships' House. I should like therefore to ask my noble friend a question. If, as he said, he will answer any questions which your Lordships may wish to put to him in regard to the Bill, I would venture to ask him if he could give us a little enlightenment, when he replies to the debate, concerning the proviso to Clause 18 (1):Provided that this subsection shall not apply if the individual shows in writing or otherwise to the satisfaction of the Special Commissioners that the transfer and any associated operations were effected mainly for some purpose other than the purpose of avoiding liability to taxation.Does that mean to say that if the transfer is made for some purpose not entirely that of avoiding tax, no tax will be charged, or does it mean to say that some other arrangement will be made whereby the tax shall be paid? I do not think it is quite clear, and perhaps when the noble Lord replies he will be able to give a few words of explanation on that point.
§ LORD ARNOLD
My Lords, the noble Lord, Lord Ternplemore, in moving the Second Beading of the Finance Bill, did so, if he will allow me to say so, in a speech of commendable brevity and clarity. I can always understand what the noble Lord means when he speaks in your Lordships' House, although I do not always by any means agree with what he says, and I shall have certain criticisms to make this afternoon. It is quite true that he had not a very difficult task in 700 explaining the main provisions of the Finance Bill this year, because there is not a great deal to explain. Whatever virtues the Chancellor of the Exchequer may possess, he is not usually regarded as being conspicuous for financial imagination, and his Budgets are usually described by the Press as "humdrum," "unsensational" and "non-spectacular"; and then the papers go on to say that the Budget is "orthodox," "sound," "safe," and so forth. I do not agree with the last commendatory adjective, but I think the others undoubtedly apply. Whenever the Chancellor of the Exchequer has anything to do, whenever there is a change to be made in the financial arrangements for the year, we can always rely upon him taking the obvious Tory line. We can almost predict in each case what he is going to do.
Although there is not a great deal to explain in the Bill this year, that is not to say that it is not open to criticism. The first observation which I have to make is one which I have made before, and one which I shall go on making as long as the position remains the same: that is, to call attention to the fact that this Budget is not balanced at all, because it has no Sinking Fund. It is really not right for the Government to go on year by year presenting themselves with a piece of silver plate because of their balanced Budget, because the Budget is not balanced. I am not now discussing the question of whether there ought or ought not to be a Sinking Fund, and I am not going into it. No doubt there is a great deal to be said under present conditions for there not being a Sinking Fund, though the Chancellor of the Exchequer did, it seems to me, indicate that before long something would have to be done about the Sinking Fund. I would venture to remind him that to ignore the problem of a Sinking Fund is not to solve it. The Chancellor of the Exchequer does not now apologise for there not being a Sinking Fund, but simply says nothing about it at all. If I may say so, I think that is hardly respectful to the Sinking Fund. I think it is worthy of more than a passing phrase and should receive some apology; the fact is that for the time being it is left entirely out in the cold.
I put this point to your Lordships' House. We have a National Debt which now amounts to £7,796,000,000 without a 701 Sinking Fund, and what on earth we are going to do if unhappily, which God forbid, there should come another war, with further gigantic borrowing and with this Debt of already nearly £8,000,000,000, is one of the terrifying problems from which the mind revolts. No doubt if those very much deprecated circumstances came about, there would have to be conscription of wealth. Nothing else would really be possible, so far as I can see, with the national finances as they are at present. But after all, if the Prime Minister is right in saying that the next war will put an end to civilisation as we know it, it will not very much matter whether there is conscription of wealth or not.
The main criticisms of the Finance Bill this year have naturally centred round the increase of the Income Tax and of the Tea Duty. So far as the Labour Party are concerned, if taxation has to be increased we do not object to an increase of the Income Tax. We think that if there has to be an increase of taxation it is one of the most appropriate sources, but it is a little bit strange to me, having heard many financial debates in this House during the last ten or twelve years, to witness a member of the Government standing up at that Box and without any apology proposing a higher Income Tax. I remember debate after debate in which there have been great fulminations from noble Lords opposite, in which they have almost exhausted their adjectival resources in inveighing against a higher Income Tax. They have always protested that it was the one thing to be avoided, because under it trade could not possibly prosper. Mr. Churchill reduced it one year by 1s. and the next year by 6d., with a view to helping trade. The fact is that this argument about the evils of a high Income Tax has very-little in it. It is not supported by any economist of note, and when challenged on the point noble Lords opposite have never brought forward any arguments in reply to those challenges. We do not of course like a high Income Tax, but I would remind your Lordships' House that the Income Tax is not a charge against profits but an appropriation of profits after the profits have been made. I am not going into the psychological effect of a high Income Tax. I think there is a certain deterrent there, but 702 I am not going into that matter further now.
I should like before I pass on to say-something about the increase in the Tea Duty. I know it is thought that nothing new can be said about it, but I think the argument against the increase is one which merits attention and requires further analysis. All taxation should be equitable, economically sound, and productive. The Tea Duty conforms to the last principle, but not to the first two. It is not equitable and it is not economically sound. The argument is one with which your Lordships are very familiar. It is not equitable because it is not levied in proportion to ability to pay. The larger a man's family the more he has got to pay, although his ability may even be less than that of a man in an equal position whose wages are about the same. The Tea Duty is not economically sound because it is levying a tax upon what must be regarded as a necessity, considering the place which tea drinking has in the national life. I would like very respectfully to put that argument to the Chancellor of the Exchequer, because I do not think he has quite appreciated the position in regard to the difference between the taxation of luxuries and the taxation of necessities.
When the tax on tea was being discussed he said that everyone must pay something towards the cost of armaments, otherwise some would be getting the advantage and not contributing anything. The position we take up is that a tax on necessities should not be imposed below a certain level of income. There ought to be a minimum, a proper subsistence level, below which there should be no taxation of necessities. We know that there is a percentage of cases in which working men's incomes are so low that there is not enough to support existence properly, and a Tea Duty is therefore taking away money which is needed for health and efficiency. Therefore the duty is economically unsound, because it is not good in the interests of industry and production that such men should pay money which ought to be used in building up health and working efficiency. That, very briefly, is our argument, and I do not know what reply there is to it. No reply has been given, probably because there is no reply, but I leave it there.
703 I will turn next to a matter which I have raised in this House many times before, and that is the question of the yield of the Death Duties. Over a long course of years the Death Duties have been greatly under-estimated by the Chancellor of the Exchequer and his officials. Even last year I again gave them a warning, but they underestimated to the extent of £7,920,000, and in every year, except two, since the War the yield of the Death Duties has been under-estimated, and sometimes greatly under-estimated. One of the years in which that was not the case was the worst year of the economic crisis. I explained as well as I could some of the reasons why the yield of the Death Duties was going to be higher than was estimated. I cannot say that the Chancellor of the Exchequer and his officials have been very apt pupils, but they at last seem to appreciate the force of certain arguments which have been put and the general position, but like other converted sinners I am not sure that they are not suffering from an excess of zeal. They have estimated the yield of the Death Duties at no less than £89,000,000—£9,000,000 more than last year. It may be that this time the mark has been overshot. The yield for the first three months of the year has not been up to the proportion which it should be if that total is to be achieved. What will really happen with regard to the yield this year I do not know. I do not say that £89,000,000 is not enough, but I am inclined to think it may be a little hit too much. Time, however, will show.
The noble Lord was kind enough to say that he would answer any questions. The noble Earl on the Woolsack (the Earl of Onslow) asked him one question, and I want to ask him another. He has referred to Clause 21, and this clause, or a subsection of this clause, is without doubt the worst drafted section or subsection of an Act of Parliament which I have ever seen. Let me read it to your Lordships, because it really demands your attention as a question of the drafting of a Bill which comes before your Lordships. This is subsection (5) of Clause 21:Subsections (2) and (3) of Section twenty of the Finance Act, 1922, shall have effect as if references to paragraph (c) of subsection (1) of that section included references to the foregoing provisions of this 704 section, as if references to a disposition included references to a settlement, and as if the reference to the making of a disposition included a reference to the making of or entering into a settlement, and subsection (4) of that section shall have effect as if the reference to that section included a reference to the said provisions of this section.To an ordinary person that is absolutely unintelligible, and indeed it is unintelligible even to Government draftsmen except after prolonged research into the wording of an Act fourteen years old.
This method of legislation by reference should be resorted to as sparingly as possible and this is an instance to the contrary. It is the duty of Parliament to make its enactments as clear as words can do. It is particularly the duty of a Second Chamber, which is supposed to be a revising Chamber. This subsection might have been devised to achieve a maximum of confusion and obscurity. I cannot conceive anything being more complicated and less obvious in meaning than that subsection (5). Let me make it quite clear that I am not criticising the Government draftsman. It is the Chancellor of the Exchequer who is responsible for this Bill, and it is his duty to see that the Bill is presented to Parliament in the best form that can be devised. I think there is really a good deal to be said for demanding that the wording of this subsection should be changed and made clear. Some years ago we had this matter up in your Lordships' House in regard to the wording of one or two Unemployment Insurance Bills and the late Lord Carson, by his eloquence and persistence, forced a change. He held Bills up, he would not let them pass, and he forced Amendments. He compelled the Government to make the meaning clearer before the Bill was allowed to pass your Lordships' House. The noble Earl who now sits on the Woolsack said that your Lordships of course cannot amend a Finance Bill. I am not anxious that your Lordships should amend a Finance Bill in anything that has any financial effect, but it is not the case that you cannot amend a Finance Bill. I do not say the Amendment will be accepted in another place.
§ LORD ARNOLD
I am not going to have a long constitutional argument, but it is quite possible to put an Amendment 705 in and send it down to another place. I am not urging that that should be done, but I make a present of the idea to any noble Lord opposite, just to make constitutional history—they have much more influence with the Government than we have. I do not say he would achieve success. But it certainly would, I think, be a very happy state of things if this subsection were revised and the wording were made such as, I will not say persons of average intelligence, but such as a Member of Parliament can, at any rate with difficulty, understand. Before I pass on to the other side of the national accounts, I want to say one or two things which I am tempted to say because of the observations of the noble Lord, Lord Templemore. He was good enough to imply that I should not be pleased with the increased consumption of beer, and that is quite true. He says that the consumption of beer and the yield of the Beer Duties have gone up. Yes, and drunkenness has gone up. He did not tell your Lordships that. From 1932 to 1935 the prosecutions for drunkenness have increased by about 40 per cent. That is a very serious matter.
I should also like to say one or two words about tariffs. Lord Templemore spoke about the increasing prosperity of the country, and the Chancellor of the Exchequer has dwelt upon this matter and has ascribed most, if not all, of the credit to our system of tariffs. Such prosperity as has come to this country, as compared with the low point of the depression of 1932, has been surpassed by many other countries proportionately. When noble Lords speaking for the Government stand up at that box and talk about our prosperity, you would think this was the only country which had made any progress at all since the depression. As a matter of fact the figures of the Financial and Economic Section of the League of Nations show that in the recovery which has taken place Great Britain is tenth on the list. There are nine other countries that have done better. It is quite true that we have made certain progress, but particularly have those countries made recovery which went off the gold standard. We are not told that from the Box opposite, or by the Chancellor of the Exchequer. My own opinion is that if we had not had any tariffs at all our recovery would have been considerably greater than it 706 has been, and we should have been among the first five instead of being tenth.
Now I come to the other side of the accounts, the Expenditure side. The chief controversy in another place in regard to this Budget centred round the vastly increased expenditure on armaments. I am not going to discuss that matter in any detail, not because I do not think it is a very grave matter, but because I do not think that this is quite the appropriate occasion. We have other occasions. All I would say is first this, that for the expenditure on armaments to be reaching this year, as it already is with the Supplementary Estimates of last week, nearly £200,000,000 is such an appalling state of things that it almost makes one physically sick to contemplate what it may mean. And we are told that this in all probability is not the end of it. The Government take upon themselves an enormous responsibility in giving the people of the country to understand that this increased expenditure on armaments will give them security. That is the word which they used in their White Paper of last March, and that is the word which the Chancellor of the Exchequer used only a few days ago in another place. He spoke of spending large sums of money to make the country safe.
Well, unfortunately there is no effective defence against air warfare, and the next war, if another war should come, will be largely one fought from the air. It is wrong, it is deceiving the people, to give them to understand that something is being provided for them which, as a matter of fact, is not being provided and cannot be provided. It would be much better, much more honest, to tell the people what the Prime Minister himself in effect once said, and that is that there really is no effective defence against air warfare, because if the peoples in all the countries of Europe could really understand the fiendish dangers which surround them it is possible they would insist upon measures being taken—if it rested with them they certainly would—to avert the greatest destruction which, if it should come, the human race has ever known.
The noble Lord opposite talked about "rearmament." As a matter of fact, this country has never been disarmed. The total expenditure on armaments in this country has never been below the 707 proportionate figure of what we were spending in 1914. The term "rearmament" is a complete misnomer; it should always be "increased armaments." As the noble Lord indicated, and as the Chancellor of the Exchequer has indicated in another place, this greatly increased expenditure on armaments—and we are told with practical certainty there is more to come—opens up a bleak financial prospect. Bearing in mind what happened when the National Government was formed in 1031 and what was done then under alleged financial stress—grossly exaggerated and misrepresented—I want to say as strongly as I can on behalf of the Labour Party that whatever is done or not done in the future in regard to financing armaments, there must be no tampering with the Social Services. In point of fact, there is a great deal of misunderstanding about the cost of the Social Services. I think I can prove to your Lordships that the real charge on the national accounts in respect of the Social Services is much less than is commonly supposed. I have sometimes heard speeches from the opposite side of the House, particularly from the noble Marquess, Lord Salisbury, who is not present to-day, suggesting that the Social Services impose an almost insupportable burden upon the country, although there is never a syllable of similar concern on the part of noble Lords opposite about expenditure on armaments, however heavy that may be.
Before I conclude, let me analyse the National Expenditure and let us see what are the real facts about it and what is the true cost of the Social Services when comparing our National Expenditure of to-day with pre-War figures. It is often said that the post-War Expenditure is about four times the pre-War Expenditure, that we are now spending about £800,000,000 a year where we only used to spend about £200,000,000 a year. That, broadly, is how the argument is frequently put. Let me examine this statement. The estimated Expenditure for the current year is £798,000,000. That is apart from the Post Office and the Road Fund which are, as your Lordships know, what I shall call self-balancing items. This figure of £798,000,000 includes about £224,000,000 for interest on the National Debt, practically all of it paid to people in this country. That is not expenditure in the ordinary sense of the word. It is 708 money taken from some taxpayers and paid to other taxpayers for them to spend as they desire. It is not money spent by the Government, not money thrown into the sea. Therefore I say that the figure of £798,000,000 should be reduced by £224,000,000, bringing it down to £575,000,000. The corresponding pre-War figure in 1914, taking out again the Post Office and the charge for interest on the National Debt, was about £160,000,000. But the total national Income and wealth are very much greater to-day than they were in 1914. That is partly owing to the increased productivity of the country, partly owing to higher prices, and also to other circumstances.
Summing it all up, the fact is that the total National Income to-day is about 75 per cent. higher than it was in 1914, although the population is about the same, because the increase in population which would have taken place in the normal way since the War has been about balanced by the loss owing to the creation of the Irish Free State. What does all this mean? It means that the total National Income having increased by 75 per cent. since 1914, the figure of Expenditure of £160,000,000 which I gave for 1914 can be increased by 75 per cent. without proportionately adding to the burden that the country is bearing. Therefore, the £160,000,000 becomes £280,000,000. That is the true figure which should be set against the corresponding figure I have already given of £574,000,000. Looking at matters in that way, the increase is one of £294,000,000. That is a very different state of things to the £600,000,000 which we are often told is the figure. It is not true to say that the cost is about four times what it was in 1914. Moreover, this figure of £294,000,000 of increase should be carefully analysed to see what is the additional burden of Expenditure upon the total resources of the country.
This figure of £294,000,000 includes £42,000,000, the cost of War pensions. I need scarcely say that nobody objects to that. That is an item that is steadily declining and that will in course of time practically disappear. Another item in this £294,000,000 is the cost of derating. I do not think noble Lords will object to that. That was really a transfer from local authority expenditure to National Expenditure, and the charge for this item 709 in the current year is £22,000,000. That, added to the £42,000,000, makes £64,000,000, bringing the £294,000,000 down for purposes of further comparison to £230,000,000. A large proportion of this £230,000,000 is for unemployment benefit and for new and increased Social Services. For instance, old age pensions have been doubled since before the War, and apart from that there has been a great increase in the number of persons receiving old age pensions, because there was a very large increase in the population in the decade of about seventy years ago. What I wish to impress upon your Lordships with regard to that is that it is a cost which, as I shall endeavour to show, would in one way or another have to be met out of the total national resources. Apart from unemployment benefit and old age pensions, there are now insured persons and their wives receiving pensions at sixty-five. Towards that benefit they contribute through insurance, and there is also the cost of widows' pensions, a new item compared with pre-War.
This kind of expenditure is really in the nature of a redistribution of the National Income. It is not expenditure in the old sense of the word. A great deal of it was incurred in pre-War days although it did not go through the national accounts. I have said that old age pensions have increased both in number and amount. They ought to be higher because the cost of living is higher and the aged poor have got to be kept somehow. If they were not kept by the old age pensions, they would have to be kept, as they were kept before old age pensions were introduced, by the local authorities, by relatives who could ill afford the money, by charity, by various institutions and so on. Therefore, whether this expenditure, or a good deal of it, goes through the national accounts or not, it would have to be met, and it is very much fairer and better that it should go through the national accounts in order that those persons who can afford it—the wealthier section of the community—should bear a considerable proportion of the expenditure than that it should fall upon the local authorities or upon the relatives or friends many of whom really could not afford to find the money to keep the aged poor. The point, I repeat, is that the total burden on the total 710 national resources has not been greatly increased, and, in so far as it has increased, it is good expenditure called for on humanitarian grounds.
To a large extent the same argument applies to unemployment benefit. You would imagine from the way some people talk that in pre-War days there were no unemployed. The average number of unemployed before the War was somewhere about half a million, and they had to be kept somehow. They were kept a good deal more than they are to-day by payment out of the rates, or, again, by relatives and friends who contributed but who really could ill afford to find the money. It is very much better that the matter should be arranged as it is now. True, it is on a more generous scale, but the country can afford it, and it is only right that it should be so met. The present plan is one which conforms to a more enlightened social conscience. Moreover, I would remind your Lordships that this social expenditure is a great support for the home trade. It has undoubtedly been an important factor in helping our country to surmount as well as it has done the economic crisis. I could quote in that connection even from such an august source as a Bank Review. I could quote words from a Bank Review commending, in effect, this form of expenditure, and pointing to the beneficial character of at any rate a good deal of the expenditure I am discussing so far as the prosperity of the country is concerned. Another factor is this. We all know it is true that this expenditure, which is social expenditure, has been a supremely important factor in allaying social unrest. There can be no question about that. Considering the very difficult years through which we have had to pass it has been a matter of supreme satisfaction that there has been very little social unrest. Quite obviously, but for these social arrangements which I am discussing, there would have been a great deal more unrest.
Before I finish what I have to say I wish to touch briefly upon one more item which may be rather more controversial, though we in the Labour Party most strongly support it, and that is the increased expenditure on education. Out of this total expenditure of £294,000,000 which I am discussing, £60,000,000, as compared with pre-War, is for the increased cost of education. A certain 711 amount of that goes for increased salaries to teachers. Teachers are better paid and they ought to be better paid. We say that this expenditure on education is a good investment. It brings a return in the increased skill and efficiency of the workers, and it is partly due to it that the National Income has increased to the extent it has done. It is partly due to our better system of education that we have the increased productivity of the country about which I have been speaking. Summing up the whole matter, I affirm with confidence that the increase in National Expenditure is one which, when carefully analysed, can be demonstrated to be to a large extent beneficial expenditure, which is proving and will prove to be an excellent investment for the country. I shall not detain your Lordships any longer. I have put my main arguments before you, and I thank your Lordships for having listened to them with the attention that you have done. I conclude by repeating this warning. Whatever else is done or is not done in the future in regard to financing armaments expenditure, we of the Labour Party urge that the Chancellor of the Exchequer should pay attention to our warning, which I will sum up as: "Hands off the Social Services."
My Lords, I do not intend to follow the admirable speech of my noble friend Lord Arnold, except to congratulate him on the very clear case he has presented to your Lordships. I wish only to raise one special matter, and that is on Clause 6 of this Bill. I believe in doing so I am breaking a gap through which the noble Earl opposite, Lord Midleton, might manage also to scamper. The noble Lord, Lord Templemore, referred to one or two novelties, as he called them, in the Budget, but he did not refer to the greatest novelty of all, one that is new in the whole fiscal history of this country, and that is the double-deck tariff as exposed in Clause 6. I believe, and I say this with great respect to the noble Earl, Lord Onslow, that this clause should not be in the Finance Bill at all. I believe I have the support there of my noble friend Lord Arnold. It has nothing to do with the Finance Bill at all. It has been smuggled through, shepherded as it were into the Bill to 712 avoid a separate Act. Here I am speaking for myself personally, not having had an opportunity of consulting my noble Leader behind me (Lord Snell), but I would much have liked to see it left out, and I believe we should be constitutional in moving that it be left out.
This clause introduces what is known as the double-deck tariff, and is entirely novel in our fiscal system. It allows a semi-public body to decide how much iron and steel is to come into the country at a certain level of taxation—namely, 20 per cent.—and it allows the same body to decide that all other imports of iron and steel shall pay the higher duty of 33⅓ per cent. From the White Paper it is obvious that this matter has been arranged by the Iron and Steel Federation in conjunction with the International Cartel of Steelmakers—bound together in their Entente Internationale as they call it—of France, Belgium, Germany, and Luxemburg. Therefore the taxation level is decided not by the House of Commons, not by the elected representative of the people, but by the Iron and Steel Federation of Great Britain in confederation with the Iron and Steel Cartel of these foreign countries. I submit that this is a most extraordinary state of affairs. And the matter goes a good deal further. If your Lordships would look at the White Paper issued as a result of astonishment in the other place at this clause—Command Paper No. 5201—you will see that we have the following sentence right at the beginning. I would ask your Lordships to pay particular attention to these words because I submit that they are extraordinary. The purpose of this clause, which your Lordships are not supposed to be able to touch as it is finance—
Whether it is certified or not it is a Finance Bill. I bow at once to the noble Earl, Lord Peel. If we can touch it I hope he will help me to touch it very soon.
In any case it is a Finance Bill. This is the first sentence of paragraph 1 of the White Paper: 713The purpose of this clause is to enable effect to be given to an agreement, made on the 31st July, 1935, between the British Iron and Steel Federation and the Entente Internationale de L'Acier (otherwise known as the Continental Steel Cartel).Are we to implement an agreement made between these people sitting at Strasbourg, or wherever they went? I do not know but, if I may use an Americanism, "that is a new one on me." I see that this agreement was signed on behalf of the British Iron and Steel Federation by three personal friends of mine, all of them gentlemen for whom I have the very greatest respect. One of them is the noble Earl opposite, Lord Dudley, who, if he will allow me to say so, sets a great example to his and my order by his enterprise and industry in the great family concern which is so admirably managed in the iron and steel trade. The second name is that of Sir Andrew Duncan, who is recognised as a man of great eminence and of great efficiency, who does public service in many ways. Another friend, the third signatory, is Sir William Larke, who is most energetic in helping the iron and steel industry.
Therefore there is nothing personal in the strictures which I have just ventured to make, but I say it is really asking too much of Parliament to implement this private arrangement between the Continental Steel Cartel and the British Iron and Steel Federation. Not only does this agreement decide how much iron and steel should come into this country, but who is to have it. It is all brought under the umbrella, if I may use the expression, of this clause. Any one using iron and steel has to get it through the Federation or at a higher price through a higher rate of tax. I hope the noble Earl will enlighten your Lordships on this matter. I understand that they are going to ration our foreign markets as well. How much iron and steel is exported from this country will depend on the arrangements made with the Cartel. I think it is all most extraordinary. There may be a case for this state of affairs—I do not know—but I would like to remind your Lordships of what has happened in the important test case of Jarrow. In another place there were accusations and counter-accusations and a rather indefinite statement by the Government, but I hope that here the noble Lord, 714 Lord Templemore, with his usual frankness will give us the facts, and I am sure the noble Earl, Lord Dudley, will be only too pleased that the facts should come out. I am certain that he, personally, has had no part in anything improper and perhaps he can give us a little light on this important question.
We ought to know the truth. Parliament rules in this country and not the leaders of the iron and steel industry or any other industry. We have not got syndicalism here yet, and in any case this would be a sort of inverted syndicalism because in the real syndicalism the workers concerned have a say in the matter. The Federation undertook when they were given the protection of this tariff in the first place that they would not exploit the consumers and that they would admit independent firms who agreed to abide by the rules, which were mainly rules, I understand, as to price. But I submit that it is dangerous to put powers of this kind in the hands of an irresponsible body—I use the word "irresponsible" in its technical and constitutional sense—a body not responsible except on this one occasion in the year to your Lordships' House, an irresponsible body whose motive is private profit. They have to think of their shareholders. They are mostly representatives of great public companies—that is not so of course in the case of the noble Earl—and they have in the first place to think of their shareholders. It is dangerous to put in the hands of such a body these immense powers.
Let us see how those powers have been used. There is a great shortage of steel in the country, partly owing to the continuance of the house-building and road-making programmes and partly due to the armaments programme. Under this lower duty under Clause 6, we are importing this year 525,000 tons, whereas last year the figure was 670,000 tons. I understand that a great deal more will have to come into the country. According to an estimate I have seen stated in another place and which has not been denied, there will have to be imported by the end of the year iron-ore, or iron itself, or steel to the total of about 1,500,000 tons—something of that order. Therefore we are not producing anything like our own needs in steel in this country. There is something to be said for a complete system of Protection and there 715 is something to be said for a complete system of Free Trade. But I think there is very little to be said for an international trust deciding who shall work and who shall erect factories in this country. That is, in effect, what happens.
The Government say now that they are not concerned with whether steel works are put up at Jarrow or not. That is their latest pronouncement. Earlier in the year, in the winter, the Prime Minister and leading members of the Cabinet were going about saying that they must do something for the Special Areas and that they must find work; by all and any means. Their latest pronouncement is that it is not their concern. The Iron and Steel Federation in a statement published in the newspapers—I have The Times report in front of me—say that they are not preventing anyone from erecting iron and steel works at Jarrow. What is happening, however, is this. To erect modern basic Bessemer steel works, which I understand are contemplated, would cost between £3,000,000 and £4,000,000. That capital cannot be raised without being underwritten, and it cannot be underwritten in the City except with the good will of the Iron and Steel Federation because the Federation are now so firmly entrenched that they can control supplies of raw material and control the markets. If they oppose a project the finance houses dare not look at it.
In this case it is a section of the Federation which is hostile, because at the beginning Sir Andrew Duncan was favourable to the scheme I gather, and a well known firm of specialists in the steel industry who act both for the Federation and for the promoters of the scheme were in favour. What it comes to is that the section of the Federation representing steel interests on the Tees objects to the erection of new works on the Tyne in spite of the fact that we are importing immense quantities of iron and steel from abroad. I do not want to overstate the case, but I want to get the opinion of the Government and I hope that the noble Earl will give his side of the question as well. There is a case to be answered here. There is in this country, I understand, my Lords, only one basic Bessemer steel works, at Corby in Northamptonshire, and we are importing great quantities of foreign ore for our open hearth works.
716 I understand that, if we had more basic Bessemer works, we could use more of our own ore. That is a technical question which I do not pretend to understand, but that is the information I have. If you erect at Jarrow or elsewhere another basic Bessemer steel works you must also produce other products to make a commercial success of it, and my information is—I do not know whether it is true or not—that it is in the disposal of the other products that there is difficulty from the Federation, and that the rival concerns feel that there may be some competition with them and have in effect stopped the scheme. Now this is not a wild Socialist attack on private enterprise, although such of the criticisms as I venture to make come from one who belongs to the Labour Party.
§ THE EARL OF DUDLEY
I think the noble Lord should develop that statement, if he could explain to the House how they have stopped the scheme. That is a very strong statement.
I will certainly say how they have stopped it. They have stopped it because, if the Federation are hostile to it, the money cannot be raised in the City of London. We are not children in this House. We know perfectly well that the great steel industries in this country are very powerful and that they are in alliance with the money market in London, and the money market in London will not find the money, however excellent the scheme is, if they have the opposition of the Iron and Steel Federation. That is how they have stopped it. Now I cannot do better in this matter—and this is my last word, and in a way this answers the noble Earl, and I repeat that I am not making any sort of reflection on him at all—by quoting the leading article in The Times of July 8 last. I repeat that this is not a wild Socialist attack on private enterprise, though it is an attack, I admit, of the individualist against this danger of international monopolies, which I think is a very serious danger to-day.
I will read only one or two sentences from what The Times leader writer says. First of all, he has some reflections to make on the Board of Trade, which is so ably represented in your Lordships' House by the noble Lord opposite, who will in due course reply: 717What has been surprising is that the Board of Trade, knowing the facts, should have been so unsuccessful in directing events.The second sentence which I wish to read refers to the Federation:A statement purporting to be a defence of the Federation was printed in these columns yesterday. From that statement it appears that the Jarrow scheme was not rejected because of inherent defects, but that it was wrecked by the jealousies and rivalries of the members of the Federation in the North-Eastern area. Unless a much better defence is forthcoming, the conclusion is not easily avoided that the public interest has suffered severely.Your Lordships will note that the language of The Times is much stronger than I have ventured to use in your Lordships' House.
The last sentence which I wish to quote from this very interesting leading article in The Times is this:The justification of the scheme was in the expert's opinion that there was room for such works, and that they would complete, and not disarrange, the iron and steel production of the North-Eastern area.My only information, I assure your Lordships, is what has appeared in the newspapers and what has been said in another place. I do beg the noble Lord to give us some comfort on this question. I understand that the Board of Trade has the matter in hand. That really is not quite a sufficient answer, though I know that the noble Lord would not attempt to ride off by saying that the President of the Board of Trade has it in hand. I appeal to your Lordships. This is our one opportunity to-day of probing this matter firmly, and that it certainly needs probing I think the published facts go to show.
§ THE EARL OF MIDLETON
My Lords, I need venture to trouble your Lordships, on this particular Bill, only on this subject. I understood that the noble Lord opposite, who I think has made out an ample case for investigation, would take under the Bill the opportunity of discussing the matter, because the terms of the Finance Bill are undoubtedly most unusual and invite criticism. I do not desire to call anybody in question in this matter, but I wish to call your Lordships' earnest attention to the most deplorable results which have followed the course which the Government have taken.
718 In the County with which I am connected, as the noble Earl on the Woolsack knows, we happen to have taken an interest, as a County, in one of the distressed districts—namely, Jarrow. Three years ago a pilgrimage was made to all cathedrals by countless individuals who were invited to subscribe some nominal sum—half-a-crown, I think it was—towards the help of the distressed districts, and it was felt in the County with which I am connected that we should not stop there but see whether we could not do something for one particular district, the County of Surrey being in comparatively easy circumstances compared with these down-and-out districts in the North, in South Wales and in some parts of the Midlands. The High Sheriff of the County moved in the matter with regard to Jarrow, and I will only say this: that I believe he could not have selected a better or a more needy district. As a matter of fact, no man with greater knowledge or greater power of initiative could have been selected to take that question in hand.
I would only point out to your Lordships as briefly as I can what my complaint is. Nobody denies the difficulties of that great place, Jarrow. The large works of Palmers, on which it depended for any number of years and on which the houses have all been built up, have been closed. The question was, could you reopen them in such a way as to give employment, not casual employment but employment which in itself would justify the action which was taken? It is not merely a question of the steel works; you have at Jarrow unequalled opportunities. You have the breaking-up of ships which are actually there on the Tyne and can be there broken up more cheaply, perhaps, than in any other place. You have also other industries: the scrap which comes from breaking up ships is needed in the steel works; and further on it was proposed to put other industries which would use the steel which had been produced there. The scheme as dealt with and proposed by the then High Sheriff of Surrey, Sir John Jarvis, would have relieved the whole district.
What has occurred? Without going into detail, I will just mention three or four dates which I can substantiate from my own experience. In January, 1934, the option to purchase these steel works was taken. It was November, 1934, 719 before the plan which was drawn up by the promoters of these new steel works was reported upon by Mr. Brassert. What happened during that time? Mr. Brassert, I believe, is a most admirable man; Sir Andrew Duncan, who had dealt with him, has been forwarding all these schemes; but somehow, between one and the other of the critics, we reached November without any decision, while the wage-earners for 24,000 people were waiting for employment. During that period I myself was in touch with three members of the Government, and two others who have been named to-night. There is one thing I venture to say, that neither I nor the public have any right, or pretend to the knowledge which would enable us, to decide whether these new steelworks could operate without disadvantage to the country. One thing for which I impeach the Government to-night is that there was no one to cut the Gordian knot of delay. It was stated in The Times, and by those responsible that the report by Mr. Brassert was ready months before it was published. It was sent back time after time for alteration, and it is stated—I do not confirm it—by interested parties, that well known steel makers on the Tees objected to the establishment of fresh works on the Tyne. I ask that we should be told why these delays took place, and that the door will be opened to further investigation by the Government of the full conditions.
By the end of 1935, when the whole question had been going on for nineteen months, a meeting was held at Harrogate at which it was decided to proceed, with or without the North-East coast members of the Steel Federation. By that time the Prime Minister had taken a hand. Let me say that I agree in every respect with what has been said in the papers by Sir John Jarvis with regard to the Prime Minister. He says:Restive of these delays and realising their inevitable consequences, I was able to get in touch with the Prime Minister of the day, who gave ungrudging and sympathetic help, but the General Election came and it was not until December, when I made my maiden speech in the House of Commons, that I had the opportunity of bringing Jarrow's claims into prominence.The present Prime Minister made this pronouncement—the only other quotation which I propose to read:A great many people and a great many industries have benefited by the protection 720 given to them by this Government, and there are many industries to-day—I instance the steel industry particularly—which, had the conditions of 1931 been allowed to go on, would have been bankrupt at this moment and are now enjoying great prosperity. No one grudges them that prosperity…There can be no better work for the men who have received well at the hands of the State than to pay back their debt to the State, to those who are most in need.I honestly think that the action of the Steel Federation is one which ought to be taken into account by the Government, and that the matter should be taken by them into their own hands, to decide whether persons interested should be allowed to prevent the Jarrow industry from being set on foot. If it is not settled now this question will come up again and again. The whole of the Tyne has been kept in restraint with the greatest difficulty, because of the injustice which they feel has been done to them.
There is another public point of view from which I feel it is really necessary this question should be specially dealt with. People of this country are very little aware of the difficulties and dangers with which this country has been surrounded during the last few months, and very few of them give due credit to the Government for all that they have achieved. Again, the people of this country fail, I think, to realise the great advance which, despite the speech of Lord Arnold, has I believe taken place in our financial position, and also in our position relative to the rest of the world, but there is one thing by which the Government will be judged in this country, and that is whether they have or have not used their immense powers to enable people to be set to work who at the present have no outlet of any description for their energy.
I went to Jarrow merely to see what had already been done by the fund which Sir John Jarvis administered. I found vegetables being grown where they had never before been grown, and parks open for recreation, and the fishing industry pushed on by the provision of ships. I found that the Town Council had done everything they could in the provision of houses. I also went into some of the houses which did not belong to the Town Council. In one I found a man who had served in the War, a young man who was nursing a child, his wife with two other 721 children, and two relatives—seven people in two rooms, and not one farthing coming in except the "dole," I do not say that the Government have not done all they can do to assist, but that man said to me: "What do you think of my position, sir, after three years, with not one day's work procurable in any direction?" And he had been a daily worker at Palmer's since leaving the Army.
I assure your Lordships that these things must not be allowed to continue. When it comes to a really distressed district you must not be influenced solely by the consideration of whether 5s. should be put on steel produced in a place which is new compared with a place that is old. The clauses in this Bill have given immense power, and they have been taken in order to promote further employment throughout the worst districts. We have been told that ungrudging sympathy has been shown in the manner in which these cases have been brought before the Minister, but they have been dealt with not by the Ministry but by, I should not like to say a prejudiced, but somewhat powerful body of men. I will ask the Government this. It is more than a year since I took a hand in this matter. It is more than a year since I saw the last official on the subject, and he assured me that by the end of June of last year this matter would be settled, and the men at work. It is now thirteen months since June of last year, and we are still wallowing in the trough of the sea. What I ask His Majesty's Government—for the Prime Minister is far too busy a man—is that they should appoint three members of the Cabinet to consider all the circumstances of this particular case and to give a decision before Parliament rises, so that at all events the people of the North-East coast and on the Tyne should feel that their case has met with all reasonable and proper Ministerial consideration.
§ THE EARL OF DUDLEY
My Lords, before the noble Lord replies I should like to be permitted to make one or two observations, speaking as a past President of the British Iron and Steel Federation, in connection with what has been said by the last two speakers. I can assure your Lordships that there is really a good deal of misconception on 722 this subject. I am not going to be led astray by the noble Lord opposite, Lord Strabolgi, in regard to the preliminary remarks that he made in his speech, or to argue with him the merits of Free Trade and Protection. Neither am I going to argue whether this Bill is or is not the right place to introduce the necessary legislation to control the arrangements which we made with the Cartel last summer. I am sure the noble Lord in charge of the Bill is perfectly competent to do that. I feel that there is a general agreement throughout the country in regard to the excellence of the arrangements which we then made, and which have since proved to have brought an immense measure of prosperity and employment to an industry which such a short time ago, to use a colloquial expression, was on its beam ends. It has, in fact, been rehabilitated by that arrangement.
The noble Lord referred to the prices of monopolies, but the matter is really perfectly simple. The price of steel is now virtually regulated by the Government. We are bound, as I think the noble Lord knows, under a "gentlemen's agreement" with the Imports Advisory Committee that we will not raise the price of steel without subletting to them good reasons for wishing to do so and receiving their assent. Therefore, that controls the price of steel made under British manufacture. By our arrangement with the Cartel made last year we undertake to give the members of the European Cartel a higher price for their commodity sold in this country, that is to say, a price which is on a level with British prices, in exchange for what they give up in quantity. That quantity has been limited to round about half a million tons. Therefore it will be the British Government, through the Imports Advisory Committee, who, by controlling British prices, will also control foreign prices. And the distribution of that material is really perfectly simple, because, apart from certain technical plants which have been provided for, it will not make any difference whatsoever to British consumers whether they get British steel or the amount of Continental steel which is imported under this arrangement.
The noble Lord talked about a fearful famine in steel, but I should like him to quote any instance which he knows of where consumers have actually been 723 denied steel up to now. But still I do not want to quarrel with that argument of his. What I want chiefly to do is to make one or two observations, speaking for the Federation, in regard to this Jarrow controversy, and I would like to assure your Lordships at the very outset that the Federation, as a body of affiliated firms, has at all times used every endeavour to secure the necessary assent to a fully co-operative plant at Jarrow, and has never at any time attempted to prevent the syndicate from proceeding independently with their scheme. I say that without any hesitation at the very outset.
§ THE EARL OF DUDLEY
Consent from its members. It has used every endeavour to obtain the consent of its members. But of course it is obvious to the noble Lord that the Federation has no power whatsoever, even if it should desire to do so, to prevent any syndicate proceeding with the erection of any steel works in any part of the country. And it equally has no power to force upon any of its members a decision which their experience and judgment might tell them is wrong, or which demands a greater sacrifice from their employees, their shareholders, or indeed their townspeople, than they consider is justified. I yield to no one—and I know I can speak for my fellow-members of the British Iron & Steel Federation—in my sympathy for and my desire to help the townspeople of Jarrow, but I would like to remind your Lordships that the unemployment in Middlesbrough was greater at the time these discussions took place than the unemployment at Jarrow, and indeed I believe that is still the case. Therefore what has been Jarrow's loss has been Middlesbrough's gain.
The demands made by the syndicate in regard to their output at Jarrow, where they wished to place these works, was a good deal larger than the original output of the old Palmer Shipbuilding Company. It was in fact over three times as large. The output at Jarrow in the days of the old Palmer Shipbuilding Company, which went out of operation in 1920, was 2,000 tons a week, and the proposition of the new syndicate which proposed to erect this new plant, was for 7,000 tons a week. So that it was a great deal 724 more than what the people of Jarrow had a right to expect. I think I might say that if the demand had been smaller—though I understand a smaller demand would not have been economic—the proposition might have been easier to push through. There was no question of anybody preventing the syndicate from putting their works at Jarrow, none whatever. They were perfectly free, as they are now, to go and put their works at Jarrow.
§ THE EARL OF MIDLETON
Is it not the case that the Federation were able to lay down the terms on which Jarrow might produce, and that those terms, which have been quoted, made the whole thing impossible?
§ THE EARL OF DUDLEY
I do not think the noble Earl has seen an official statement made by the Federation, but they completely deny all those allegations made by Sir John Jarvis in another place. Those are quite untrue. I think the noble Earl will accept my statement for that. There is no foundation in it whatever. But, to resume, there was no question of any sort that they were prevented from putting their steel works at Jarrow or anywhere else. The steel producers at Middlesbrough were reluctant to give up their interests and the employment of their own townspeople in favour of a steel works at Jarrow. I think that is natural enough. Of the two alternatives that were put before them by the Brassert Report—namely, a steel works at Jarrow or a steel works at Middlesbrough—they were naturally willing to co-operate with the Middlesbrough scheme but not with the Jarrow scheme. The syndicate on the other hand had an option on their plan: at Jarrow, and therefore could not possibly proceed with the Middlesbrough scheme. I am not here to defend the action of the Middlesbrough steel producers, but why should they sacrifice the employment of their own townspeople, who have a greater amount of unemployment than existed at Jarrow, in order to support a scheme which will enable a strange syndicate to raise their money in the City of London and indemnify 725 them against the reasonable risks of putting clown their plant at Jarrow? That is the point.
They wanted the steelmakers on the North-East coast to indemnify them against the risk of putting down their plant at Jarrow. I submit to your Lordships that that is really asking too much. But that was not the only consideration. There were other very considerable considerations which the North-East coast steelmakers had to take into account, and throughout these negotiations they have only claimed for themselves the same freedom of judgment as they were willing to accord to others. I would ask your Lordships to remember that, although there is a considerable demand for steel at the present moment, nobody can possibly say how long this demand is going to last; nobody can possibly say with what justification a four million pounds steel plant can bo put down at the present time in any location. Any location where you propose to put down a new steel plant has to be chosen with the utmost care, caution, and deliberation. It is that which was mainly in the minds of the Middlesbrough steelmakers, I understand. They only favoured a steel plant at Middlesbrough because, in the event of a further recession of trade it would be much easier for them so to organise matters that they could shut down any section of their plant which loss of trade made it necessary for them to do. They could not have the same interchange of commodities, of materials, if the plant was situated at Jarrow. That is quite easy, I think, for your Lordships to understand.
Apart from that, we always have to consider very carefully whether plant extension is justified at all. May I remind your Lordships of the state in which the industry found itself from 1921 to 1931, due entirely to over-production to meet national needs during the War? All this redundant plant had to be gradually sifted and weeded out before the industry could be rehabilitated. Your Lordship will remember that we were brought literally to the verge of bankruptcy duo to the collapse of prices after the War and to the cut-throat competition which went on by virtue of everybody trying to keep redundant plant going, and also on account of free imports. That was averted, firstly, by tremendous sacrifices 726 on the part of the industry in which they sacrificed £50,000,000 of their capital, or 25 per cent. of their total capital holdings: by the reorganisation of the industry which has taken place since then; by Government aid and Government encouragement, and naturally also by the protective measures which the Government introduced at the same time as they told us we were to put our house in order.
I do hope your Lordships will understand that it is imperative we should carefully bear in mind the dangers of redundancy in plant by increasing our output to such an extent that we should be once again caught by a slump in trade and have to face up to all the financial difficulties of the ten years after the War. It is obvious that we have got to expand our plant to meet present demands, and that we are doing. I think it shows how efficient the industry is that we have been able to do that. As I have said, I challenge the noble Lord to find one single instance of any firm that has tendered for steel and has been denied supplies. It is necessary to meet that expansion with great rapidity, with far greater rapidity than can be done by putting down any new steel plant. Any new steel plant would take at least two years to put down, but you can expand existing plant in a matter of weeks, and that is what has had to be done to meet existing demands. I myself approach any question of plant expansion with the utmost caution. I would not put down plant at this time that I could not write off in two or three years. Surely that is a much better policy from the national point of view because, if a slump comes, that plant will have paid for itself. A new plant is a different thing altogether. A new plant, with £4,000,000 of capita], is something you have to cater for, something you cannot justify at the present time.
I hope that in the few remarks I have made I have shown that in all these matters caution is imperative. There was no question of delay. There was no question of ill will or of dog-in-the-manger. It is perfectly obvious that the syndicate, if they had wished to go ahead with their scheme, could have taken the risks we all of us have to take; but it was asking too much of the North-East 727 coast manufacturers to ask them to cooperate to make tremendous sacrifices in order to indemnify the syndicate against the ordinary risks of business. I hope your Lordships will understand the misconceptions that have been made on this subject, and I hope the Government will support the Federation in this matter.
§ LORD TEMPLEMORE
My Lords, first of all I have a question to answer. My noble friend the Lord Chairman, who was occupying the Woolsack but who is not in his place at the moment, asked the meaning of part of Clause 18. In detail subsection (3) prescribes criteria to be applied in determining whether an individual has power to enjoy the income of the non-resident. I understand the noble Earl is coming back, so I shall defer my remarks on that point. As regards the noble Lord, Lord Arnold, he criticised the Bill in his usual able way, but I do not think there is very much for me to answer in his speech except that he said he hoped the Government were not going to cut down Social Services. If the noble Lord refers to the remarks of my right honourable friend the Chancellor of the Exchequer, in his speeches both in the House of Commons and in the country, he will find there is no intention on the part of the Government to do that. He also said that noble Lords on this side of the House did not object to expenditure on armaments. I do not think that is quite the way to put it. Although we are fully alive to the necessity for expenditure on armaments at the present time, he must not imagine we like being taxed any more than he does. I hope the noble Lord will put that idea right out of his head.
As regards the very important point which was raised by the noble Lord opposite, and by my noble friend the noble Earl, Lord Midleton, as regards Jarrow, I think that has been almost entirely answered by my noble friend Lord Dudley in the most able speech to which your Lordships have just listened. As regards the position of His Majesty's Government, I would only say that naturally the Government wish to see industries established in the depressed areas. They have said so and they do wish it, but, with the best will in the world, neither the Government, nor the Federation, nor any member of the Federation, has any power to order an 728 industry to start in a particular area, or to prohibit it from starting in a particular area. Whether or not an industry can, under economic conditions, be started in any given area is not a matter which normally comes under the Government's knowledge or control. The only thing we could do would be to say: "Unless you start a particular works in a particular area we will remove the tariff," but I think your Lordships will agree that that would not do very much good.
I should like to say in this connection that the matter is still engaging the consideration of the Government. In fact there is a deputation to the President of the Board of Trade from Jarrow tomorrow, when no doubt the question will be fully gone into again. As regards the suggestion of my noble friend Lord Midleton, that the Prime Minister should set up a Committee of Ministers to go into the whole question of Jarrow and its condition, on this particular point I cannot, of course, give any undertaking, but I do give my noble friend a definite promise that his suggestion shall bo brought to the notice of my right honourable friend the Prime Minister and the Cabinet.
§ THE EARL OF MIDLETON
May I interrupt my noble friend for a moment? I should be satisfied if he will undertake that the Government, having reviewed the whole circumstances, will come to a decision. I think my noble friend has gone a little beyond the fact in saying that the Government have no power one way or the other.
§ LORD TEMPLEMORE
I have given one undertaking, and I would rather not give too many undertakings in this House, because one sometimes goes a little too far. Therefore I would rather not give any further undertaking on the matter if my noble friend will excuse me. In reply to the question of my noble friend who has returned to the Woolsack, the noble Earl, Lord Onslow, I would say in regard to subsection (3) of Clause 18 that subsection (3) prescribes certain criteria which are laid down to be applied in determining whether the individual has power to enjoy income of the non-resident. Thus paragraph (a) covers cases where income is accumulated by the person abroad and the rights of the individual in the United Kingdom are such that he is the future beneficiary of the accumulation. Paragraph (b) 729 covers such a case as that in which an individual here covenants to pay an annuity to a company abroad in return for, say, redeemable debentures; the receipt of the annuity by the foreign company would operate to increase the value to the individual of his debentures. Paragraph (c) covers the case of an individual who is entitled to capital payments from a foreign company in so far as the payments may be satisfied out of the income or out of assets representing the income of the foreign company. Paragraph (d) covers cases where assets have been transferred to a foreign trust under which income is accumulated but with a power of revocation under which the individual transferring the assets can obtain for himself the accumulated income. Paragraph (e) is a general test. Where an individual can control the applications of the income he has prima facie the power to enjoy it. I hope that I have answered my noble friend's question on that clause. I have answered to the best of my ability all the questions that were raised on this Bill during the debate.
§ On Question, Bill read 2a.
My Lords, may I ask, before that Question is put, whether it means that this is the last stage of the Bill and that no Amendments can be put?
§ LORD TEMPLEMORE
My Lords, I am glad the noble Lord has raised that point. Perhaps I had put the Motion the wrong way. I wish to take the sense of the House, and I see the sense of the House is against negativing Committee. Therefore we should propose to put the Committee stage down for Wednesday.
§ Bill committed to a Committee of the Whole House.