I beg to give notice that on Tuesday, 28th April, I will move—

May I ask my hon. friend whether he does not consider it possible to give notice so as to include both Thursday and Friday. There are a number of functions going on here in connection with the visit of the Prince of Wales. I think we all appreciate very much the action of the Government in adjourning over Thursday, but there are these functions going on Friday which would interfere very much with our work here, and I would make the suggestion to the Prime Minister that the notice should cover both Thursday and Friday.

I may just say that I would be only too glad to meet the wishes of the House, and I will consider the matter between now and Tuesday in consultation with my colleagues.

I move, as an unopposed motion—

seconded.

Agreed to.

As Chairman, I bring up the Report of the Select Committee on Old Age and Invalidity Pensions. The report is a very short one, and was unanimously adopted by the Committee, and I would suggest that it be read and considered now.

No objection being raised,

Mr. SPEAKER read the report as follows—

When I moved the adjournment of the debate on this matter some days ago, I stated that the country would be deeply disappointed that there had been no reduction of taxation in the Budget. I think the position is even worse now, still more disappointing, especially when the country has found, as doubtless it has by this time, that so far from there being any reduction of taxation, there is actually proposed to be an increase of taxation. The Minister of Finance showed us in his Budget speech that there was a surplus of £800,000 on last year’s revenue over expenditure. He has also discovered in the Treasury a nest egg amounting to £3,400,000, which is accumulated surplus of the Custodian of Enemy Property on his transactions during war time. He proposes with these two sums, amounting to something over £4,000,000 altogether, to pay off the deficit which has been accumulating in recent bad years amounting to close on £2,000,000. He is also to make certain other special grants in the shape of paying for roads or contributing towards the cost of any new roads £500,000, also for land settlements and other matters £200,000, a total of £700,000 for special grants. Then with the balance he proposes to pay off public debt with which all must cordially agree. But the Minister of Finance also looks forward to the growing prosperity of the country in the coming year, and consequently to increased receipts from the existing sources of taxation. In any case the net increase of receipts from existing sources of revenue for 1925-’26 will be, he estimates, at £482,000 over the actual receipts for 1924-’25. And notwithstanding these facts, notwithstanding this very satisfactory position, so far from reducing taxation, as the people expected, and as I think everyone outside Government circles expected, he actually proposes to put on increased taxation for the year 1925-’26 amounting to £400,000 net. He proposes to take off the tax on leaf tobacco amounting to £200,000. He proposes to take off the preference on the customs from which he expects to get £600,000, and also income tax adjustments £200,000. Then there are certain alterations in the tariff which bring the total he expects to get in the shape of extra taxation through the customs to £400,000. It is true that he also proposed to reduce the postage from 2d. to 1d., on which he expects to lose £130,000 in the current year. I would like to point out, however, that even this reduction is a post-dated cheque which does not come into operation for nine months. It really amounts to pledging the revenue of next year. Then during the current financial year, notwithstanding the extra receipts and the extra taxation the Minister expects to get, notwithstanding the extra taxation, he expects to leave off with a total deficit of £187,000. This notwithstanding the growth of revenue from the prosperity in trade and so forth amounting to £482,000. The Government are not satisfied with the growth of the prosperity of the country, but they propose to increase taxation to the extent of £400,000 net through the Customs and Income Tax. This will bring up taxation this year to £19,110,000. If hon. members will just refer to the estimates of revenue which have been laid on the Table they will see that from taxation the Minister expects to get from existing sources £18,710,000. If you add to that the £400,000 which he intends to lay on as the increase in the customs tariffs you will see that the total taxation payable by the people of this country will be brought up to £19,110,000. As far as I can see this will make it more than £500,000 above the taxation we paid this year. This is exclusive of the taxation paid through provincial councils amounting to over £3,000,000. It has always been a favourite charge by hon. members on the other side of the House that the South African party Government when they were in office always favoured the Chamber of Mines and the gold mining interests. It is an old standing charge with the Minister of Labour, and we have heard it also from the Minister of Interior. When they get into office they were going to put these things right, to make the gold mining interests pay their share of taxation. To show I am not exaggerating let me quote from my hon. friend the Prime Minister in the speech to the electors at Smithfield on May 5, 1924. This is what he said—

Just allow me to quote the Budget speech of the Minister of Finance on this identical subject. Under the heading of “Gold mining revenue” he said that, coming to gold mining revenue it would be wrong, of course, to ignore the probability that while the production of the gold mines will probably be as much in 1925 as in 1924, the profits would be sensibly lower owing to the disappearance of the gold premium, which, in 1924 contributed no less than £3,828,000 to the profits of the industry. The estimate for the yield of normal and dividend tax (including tax equivalent included in the lease consideration of the leased areas) had been put at £1,570,000 against receipts of £1,842,000 in 1924-’25, or a reduction of £272,000. He was not justified in putting the figure at the same as last year. That was what the Minister of Finance said. Well, I am not advocating any increase. We take up the position that we made the mining industry pay their fair share. The charge made by the other side, even by the Prime Minister, has proved to be absolutely groundless. The industry is paying less this year owing to perfectly justifiable circumstances. This charge is like many others made by the other side against the late Government, which they have found out are absolutely incorrect. I could mention one or two others of a somewhat similar nature by which the other side misled the people. Coming back to the matter of taxation, we are the only Government in the British Commonwealth of Nations today who have not made reductions in taxation since the war. As hon. members know big reductions were made in Great Britain. Australia made reductions, and according to the latest news she proposes to make a further reduction of £5,000,000 during the current year. New Zealand has reduced taxation, and Canada, I see, proposes to take off 24,000,000 dollars during the current year. But the South African taxpayers have had absolutely no reduction. It is true there has been a reduction in the patent medicine tax of £100,000, and on tobacco of £200,000, but these amounts are more than made up by taxation now being levied, which is estimated by the minister himself at £400,000. So the net result is that the poor taxpayer of this country has had absolutely no relief from the heavy taxation laid upon him during the war. I wish to say quite deliberately that so long as the present alliance continues between the Nationalist Party and those people in the corner, there never will be any reduction. Let me explain that. I never knew the Labour Party to agree to lessen the expenditure of Government money in the whole history of the Union. They are always out for spending public money, and so long as the alliance is kept up I do not expect any reduction in taxation. I say also that the taxation of this country is heavy and excessive. It has grown enormously in recent years and not only so, but it has grown far more than the population and the development of the resources of South Africa. Let me give you a few figures: the total taxation paid in the Union in 1913-’14 (before the war) was £8,846,000, and the Provinces paid £1,187,000, making a total of £10,033,000. In the current year, as hon. members will see, it is proposed to spend out of taxation £18,710,000. That is before you add on the £400,000 levied this year, and the taxation by the Provinces will amount to something like £3,310,000. Even allowing for the reductions which my hon. friend the Minister of Finance announced that the Provinces are going to take off, it will still mean that the Provinces will tax at the rate of £3,310,000, which brings the total to £22,020,000, as against £10,033,000—an increase of just on £12,000,000, or 120 per cent. since before the war.

In what years?

In the year ending 31st March, 1924, as compared with the current year, but I have not brought into account the £400,000 of extra taxation. Let us compare this with the increase in the population. The European population, which, after all, bears the greater part of the taxation, increased in the ten years’ census period between 1911-’21 by 19 per cent. The increase in the coloured and native population was only 16 per cent. Then I take it the exports should give some indication at any rate of the increase in wealth, and these increased by £11,373,000, as compared with 1913, which amounts to 17 per cent. Just let hon. members keep these figures in their minds. Taxation since 1913-’14 has increased by 120 per cent., the population by 19 per cent., and the exports by 17 per cent.

We have been pointing that out for the last ten years.

And has the position improved? It cannot be stated that this increase is due to war debt or interest on war debt. I estimate the war debt at £35,000,000, which I think is a fairly liberal estimate, as it is usually reckoned at £30,000,000. The interest, at 4½ per cent., would bring the annual interest charge to £1,575,000. If you add to that war allowances, war pensions, artificial limbs and other help to ex-soldiers, the amount comes to £873,000, it brings the total extra amount on account of the war to £2,448,000. Consider that with the extra £12,000,000 in taxation. We cannot say as in Great Britain, Canada, Australia, and New Zealand that the heavy taxation which we pay to-day is due to heavy war debt. To show, further, the folly of this heavy taxation: After all, this is a new country, which, to a very large extent, is undeveloped, and if you are going to develop any country I do not know of any other way to do it than by getting capital, together with work, and yet we take £22,000,000 out of the pockets of the people of this country. Naturally, of course, you cannot have it both ways. You should leave the money with the people themselves to use it to fructify, and for development purposes; otherwise the result will undoubtedly be to hamper the development and progress of the country. In my opinion the best remedy for unemployment, which has not yet disappeared, would be a big reduction in taxation, and leaving the money with the people. They will not allow it to lie waste, but will make use of it in new enterprises and new industries, or at least a very large proportion of it. If I may give an example from action of the late Government: they made a big reduction in railway rates, amounting, according to the present Minister, to £4,000,000. He has made a further reduction of £500,000, making £4,500,000. Will anybody deny that these reductions have stimulated production? This is testified to by the record traffic which is being carried at the present moment, and which would never have been carried at the old rates. And I believe that if we could get material reduction in taxation, it would give a stimulus to employment. Now I come to one of the sources of our financial troubles in recent years, and one of the reasons why we have to bear the increased taxation that the hon. Minister of Finance has proposed—and that is the growth of provincial expenditure and the want of power on the part of the Union Government to control it. I should like to quote a memorandum which gives the expenditure on European education, not the total expenditure of the provinces. From the year 1913-’14 to 1921-’22 this expenditure increased from £2,341,000 to £6,657,000.

Are you opposed to it?

I say there is a good bit of extravagance in that expenditure, and the committee of very capable men which made a very careful examination into the matter expressed the opinion that there could be a saving of £1,000,000. The expenditure per head of emolument of scholars in the Cape increased from £10.39 to £17.04; in Natal from £8.83 to £21.53; in the Transvaal from £11.23 to £21.53; in the Free State from £10.37 to £19.93; and, taking the average for the Union, from £10.51 to £19.46 between 1913-҆14 and 1921-’22. The late Government, let me say, were alarmed by the growth of provincial expenditure, and appointed a commission to investigate that expenditure and to ascertain whether it was proportionate to the resources of the country, and whether in any direction economies might be effected. That commission, known as the Baxter Commission, reported to the late Government and made several recommendations with a view to effecting economies. After that report had been received by the late Government, and while they were still in office, the then Minister of Finance (Mr. Burton), the hon. member for Yeoville (Mr. Duncan) and myself, had a meeting with the various administrators and their executives with a view to inducing them to adopt some of these recommendations, and thus to bringing about economy. We could not get them to agree; the position was perfectly hopeless; they would not meet the position in any way. In fact, as stated by the Minister, practically nothing was done. Since then I noticed that the present Minister had a meeting at Durban with the administrators and their executives, and it was reported that they had come to an agreement. I must confess that I was perfectly surprised and was full of admiration of the tact, firmness and ability with which he handled these administrators.

Were you disappointed?

No; I think I have the interests of the country at heart as much as hon. members on the other side. I think I can say that all of us on this side had this admiration for the Minister until the Bill was published, and then it was very easy to see how the Minister had come to an agreement—the administrators had simply made rings round him. I am not surprised that he has been no match for them, he has given way in every instance, and pretty well given them all they asked. It is easy to come to an agreement with your opponents when you do that. They have adopted the Baxter report where it gives them more money, but where it puts checks upon their spending and imposes some safeguards, its recommendations are not enforced at all; they have not been accepted. For instance, the hon. Minister of Finance under this agreement proposes to give the provinces £823,000 in grant more than he would have done if the old state of affairs had existed under the £ for £ principle. Under the new agreement this grant is made according to the attendance of pupils, and the Minister now proposes, in the Cape and Natal, to pay £14 per head of average attendance and in the Transvaal something like £16 17s. 6d.

What about the deficits?

The deficits have been allowed to be capitalized. Is that first-class finance? But the hon. Minister has, gone further. He proposes, I believe, with the concurrence with the hon. Minister of Education, to take over the trade schools, which are the most expensive schools we have—far more expensive to run than the ordinary schools. They alone, according to a very careful estimate I have made, will cost at least £150,000, and of this amount the provinces will be relieved. I have ascertained from the report that in estimating the grant per head of school attendance, all these schools, which are most expensive, were taken into consideration, and although the provinces are relieved of these schools in which the cost per head is probably between £30 and £40, they have been included for the purposes of the grant. Now that is not a recommendation of the Baxter Commission. The same commission proposed that all trade and occupational licences should be transferred to the Union, and that the proceeds should go into the Union Treasury, in order to get some money to pay the increased grants. Nevertheless, though some of them are being transferred, most of them are being collected by the Union and the proceeds go back to the provinces. That was not the recommendation of the Baxter report.

I never said I was going to carry out the Baxter report.

I was pointing out how my hon. friend gave everything away at the Durban meeting—he is no match for these gentlemen, although it was not my business to tell him so. The same commission recommended that these special grants of £100,000 each to Natal and the Free State should be done away with. My hon. friend has been able to do that to some degree by reducing the amounts to £75,000 each. One of the great features of the Baxter report was the limitation of the taxing powers of the provinces in order that the central Government might maintain a better control over their finances. Let me show what the position is. The Baxter report suggested that the taxing powers of the provinces should be confined to dog, fish and game licences, motor and wheel taxes, entertainment taxes and immovable property tax. As a matter of fact they have kept all their taxation powers with the exception of the turnover, crayfish export, and company taxes. All the taxes which exist in the Transvaal remain there; they continue the poll and income tax and the auction and employers and insurance premium taxes, while the importers tax is also left to the provincial administrations. Not only that, but duplicate taxation, which is strongly condemned by the commission—that is to say that if the Union Government put on an income tax the provinces should not also have the power to impose an income tax.

Why not?

I have not the slightest doubt that remark was perfectly sincere. The report recommended a uniform scale of teachers’ salaries with a view to preventing the competition for teachers between the provinces, which has led to extravagant salaries being paid. That was accepted by the late Government, and a Bill was passed to that effect, but the present Government proposes to repeal this, so that we shall have the same old competition and extravagances in force.

What was taken away?

The salaries of teachers had to be uniform.

The general power of direct taxation was taken away.

Good lord! I appeal to hon. members to tell me in what way have the taxing powers and the consequent expenditure of the provinces been limited in any shape or form. They can just go on—as I believe they will—in the same extravagant fashions of the past. Every inducement to economy in the shape of restricting the taxing powers of the provinces has been done away with. Let me say in reply to the hon. member for Graaff-Reinet (Mr. I. P. van Heerden) that in this report the commissioners point out that on carefully going into the matter they arrived at the opinion that it was quite possible to economize in provincial expenditure to the tune of a million. There is going to be no economy to the tune of a million now. We are just going to continue what is actually the most expensive system of education in the world. I do not know of any other country which spends as much per head on education as South Africa does. Our education costs us on the average £19 10s. per head, the next highest being Canada which spends £11 per head.

But we are bilingual.

Canada is also a bilingual country.

Only sectionally.

I have not the remotest doubt but that the taxpayers will have to pay increased taxation. I come to another point. If I may venture to say so with great respect to the Minister, the taxpayers seem to be about the last people thought of in this budget. He has taken off the tobacco tax, which is a political move, and does not affect the great body of taxpayers. But he has increased the duties of the necessaries of life, like cheese, bacon and ham and blankets; the duty on the latter is little short of a scandal. The duty on these cheap blankets, which are used by the natives and poorest people in the land, has been increased by over 100 per cent. But that is not all. He has taken off the 3 per cent. rebate on most of the articles in the tariff, which the Minister himself admits will mean an increased customs receipt of £600,000. This sum is not picked up in the streets, but has to be paid by the consumers.

Why the consumers?

Who else is going to pay it? The merchants and the storekeepers will not pay it, but will pass it on. Let me say a few words about the rebate to the British manufacturers for, much to my astonishment, some hon. members were not quite clear the other day what this really meant. The question arises, who gets the benefit of the rebate of 3 per cent., which, so far as Great Britain is concerned, amounts to £860,000? Does the consumer or the British manufacturer get the benefit? Under the existing tariff the customs give a rebate of 3 per cent. on a large number of articles, most of which come from Great Britain. The general rate being 20 per cent., with 3 per cent. off, leaves a rate of 17 per cent. The first thing the importer, who brings this stuff to South Africa, must do is to work out his landed costs, and on that basis the selling price is fixed. Supposing he lands £100 worth of stuff from Great Britain, with the duty at present 17 per cent., then leaving out freights and landing charges it would cost him, duty paid, £117. We propose abolishing the 3 per cent. and restoring the full 20 per cent. The same man, therefore, with £100 worth of goods would have to pay £120 and, of course, it is on the £120 he would base the selling price. In the former case the consumer gets the benefit, but now the extra 3 per cent. will be passed on to the consumer, and he will have to pay more for his stuff. It is said the British manufacturer gets a bigger price for his articles, as he gets this duty from South Africa, but on the vast majority of articles there is absolutely nothing in it.

Then why is he concerned about it?

Why does the Minister himself admit in his Budget speech that it will have to be paid by the consumer? There may be a few foreign things a shade cheaper than the British, but if that difference were covered by the 3 per cent., the British manufacturer would get the order. I think I have shown that the consumer gets the benefit of the 3 per cent, rebate given on goods coming from the United Kingdom. Further, my hon. friend the Minister of Finance claims to have reduced the tariff by £200,000. He has, I don’t deny that, by various adjustments he has made. If hon. members will examine the case they will see the adjustments and reductions have been made on raw materials as set forth under chapter 15 of the schedule of customs duties. They are made for the benefit of local industries, and they are going to get the benefit, and not the outside consumers. This concession is a bonus for the manufacturers. If he look at chapter 15 of the customs tariff, he will find that materials for industrial purposes, cotton piece goods, for instance, which have hitherto paid 15 per cent. with a 3 per cent. rebate, leaving 12 per cent., are made free. It is only the manufacturer who imports these things who will get the benefit. Take fibre and grass for broom-making and brush-making, they pay 20 per cent., less 3 per cent., but now they are on the free list, and so it goes on. The greater part of these reductions and adjustments are going, not to the ordinary consumer, but to the local manufacturer, and therefore they are nothing more nor less than a bonus to the local manufacturer. My hon. friend estimates the total increase, by taking away the rebate, at £600,000. With these reductions and adjustments at £200,000, it brings the net increase of taxation in the receipts at customs to £400,000. There can only be one result in my opinion, and that is it is going to send up the cost of living in South Africa. You cannot expect the people of this country to pay at least £400,000 extra duty. That amount will be passed on, and will undoubtedly put up the cost of living, and at the same time put up the cost of production. I would like to say one thing about the increased cost of living. To increase the cost of living in South Africa is about the most unsound policy we could pursue, for this reason, it handicaps the white man when he competes with the native for work in this country. The white man has a higher standard of living than the coloured man in this country, and consequently he must earn more and get higher wages. Not only that, but he consumes more imported goods and a better class of goods than the native or the coloured man, and, therefore, any increase of customs, and in the cost of living affects the white man more than the coloured man. It handicaps him if he goes to seek for work, because he must keep up a certain standard and have a higher wage than the coloured man. It is an extremely important point that any increase in the cost of living is a grave handicap on the European where there is such competition in the unskilled labour market. There is a tendency to-day in industrial establishments for the non-European to increase and for the European to decrease. Take the figures of the census. In 1915-҆16 the total percentage of Europeans in all industries was 39 per cent In 1921-’22 it dropped to 35 per cent., and I must say this, that undoubtedly this tariff and the increased cost of living is going to increase that percentage of non-Europeans as against the percentage of Europeans employed in various industries in the country. Eventually it will increase the expenditure on the railways and make higher the working costs in industries in the country. This shows the folly of increasing the tariff in a country like this. When we have this increased working expenses and increased cost of living plus the Wages Bill which the hon. Minister has got on the stocks, many industries will find it impossible to live. It is not going to lead to the employment of more Europeans in South Africa. That is my firm conviction. Another point I would like to mention, as exemplifying the foolishness of raising the cost of living. Those of us who have been in a responsible position know the process we had to go through in reducing the expenditure of the country and reducing working costs. These involved largely reducing allowances, salaries and wages, and I can assure you it was a painful process. It was a process that we could only justify by the fact that the cost of living was coming down. Now when you raise the cost of living artificially in this country I can only see one thing in front of us, and that is that you are very likely to have, when these things come into full effect, an agitation in the country, and undoubtedly they will give rise to unrest throughout the whole country. I would like to ask my hon. friends of the Labour party, who claim to take care of the ordinary people in this land and to be the poor man’s friends, were they looking after the interests of the working man when they agreed, we will say, to put up the duty on bacon, as they have done? Bacon and hams, which before were l½d. with a rebate of one farthing, have now been put up to 3d. Take cheese; the duty on this was l¼d. with a rebate of one farthing. It has now been increased to 25 to 30 per cent., or 3½d. to 4d., whichever is the higher.

That will relieve the cattle farmers.

How about the poor workers who have got to buy cheese in the towns? The local price will be put up, as has already been announced in the press in the case of bacon. Then there is the matter of blankets. You have cotton blankets which are worn by the poorest of the poor; not only natives, but whites of the poorest class also wear them. Unfortunately, they have got to do that because they cannot afford better. Take the blankets from Manchester, which cost 1s. 5d., the old duty works out at 3¾d., and the new duty is 1s. Then take the Belgian blanket, 2 lbs. 4 ozs. It costs 2s.; the duty on that was 6d., while the new duty is 2s. 3d. Where are the principles of my hon. friends in the corner now? The Minister of Posts and Telegraphs the other day stated that righteousness and justice were the underlying principles of the Labour party. Is there righteousness and justice in putting duties on things like these? The kaffir is like every other human being, if he could afford to pay a bigger price for a better blanket he would buy it. He buys these articles because he is compelled to. I am afraid he won’t be able to buy even these now, and that he will have to be content with sacking and things of that kind.

What about fixing the price?

You cannot fix the price. I would like to ask also, why does not my hon. friend insist on the dumping duty being taken off flour, a necessary of life, as called for in Durban? That is recommended by the same Board of Trade. How is my hon. friend looking after the interests of the poorer people? Bread, of all things, presses most heavily on the poorer people.

What about the items where the duty has been reduced?

On balance, there is an increase of £400,000. The reductions will mostly inure to the benefit of the local manufacturer, and are intended for the local manufacturer. There has not been any consideration for the consumer in this tariff. I come next to the matter of preference which is also dealt with in the tariff arrangements. On the bulk of our importations from Great Britain, subject to duty, we give 3 per cent. preference, so far as goods produced in Great Britain are concerned. We are also giving preference in customs duties on certain articles which come from Australia, New Zealand and Canada, because those countries give us a preference on certain things which we send them. So far as Great Britain is concerned, let me say that this preference was given in the first place without asking anything in return, no quid pro quo in any shape or form. It was simply done in recognition of the fact that Great Britain is the best and largest market in the world for the products of this country. All our products going to that country, with the exception of light wines, spirits, tobacco and dried fruit, go in absolutely free. Even those which are subject to a duty get a preference. Wines, spirits, tobacco and dried fruits get a preference in Great Britain. We also get the benefit and the use—it may not be very great—of the British consuls abroad. But, above all, we get the benefit here in South Africa of the protection of the British fleet. I know that is not of very much account on the other side of this House, but there it is. You get the benefit of that without any contribution.

There is the League of Nations.

That is not going to give you much protection. I would rather have a good British warship. We are supplied with capital and loan monies and the like on better terms and at lower rates of interest in Great Britain than we can get in any country in the world. Let me mention the example of Queensland. They went to New York to raise money, but they have come back to London.

London went back to them.

Not at all. Let my hon. friend just look at some of the foreign loans raised in New York and see the onerous terms on which those loans were raised. These are items which I, myself, consider and no doubt many members of this House will consider of great benefit to this country, and of great value to this country, but as far as I can judge they are looked upon by the present Government as purely sentimental, and of no value when it comes down to business, no practical value. I would like to know if my hon. friends, the Minister of Labour and the Minister of Posts and Telegraphs, are of the same opinion, if they look upon the benefits I have mentioned as purely sentimental.

Are you suggesting that London bankers would lend us money at cheaper rates purely for sentiment?

You could get better terms from London than you could get from the other big lending market, that is New York. Let him try New York and see for himself. Acting on this view that all these benefits are purely sentimental, they propose to do away with the preference, or rather to enforce it in the future on strict business lines, to give preference where preference is given in return. The preference given to England amounted to £860,000; on the existing tariff, that is to be reduced to £300,000. The sum of £800,000 is not for the benefit of the English manufacturers. It comes to the benefit of the consumers of this country. There is less duty and consequently the consumers pay less. What is the position now? The extra £560,000 has to be paid by the consumers, the taxpayers. This rebate of £300,000 is going to be given on certain articles on which he states they wish to give a benefit to Great Britain, and on which competition with Great Britain is very keen. I have looked through the list, which comprises something like twenty articles. I see one here motor-cycles and side-cars. Motor-cycles are a monopoly of Great Britain; she has a monopoly of the trade. Take another article which has been left out, motorcars, where competition is keen from the United States, Italy and Germany. Cheap cars costing less than £400, mostly from the United States, are actually charged a lower duty than the higher priced cars which come mostly from Great Britain.

Is that a benefit to Great Britain?

It is against Great Britain; it is of benefit to the United States, naturally. Then, furthermore, they propose a two line tariff, that is to say, they propose to establish a tariff with minimum duties and maximum duties, and those nations which give preference to South Africa are going to get the benefit of the minimum tariff. That is the position. I want to ask the Prime Minister, this time, a question. Suppose we enter into an agreement with Germany? There is a proposed preference on varnish of 6d. a gallon. Suppose that is given to Germany, and they bring in varnish at 6d. less than the ordinary tariff, is Great Britain going to get the benefit of that as well?

She may get it if she gives anything for it.

Varnish is not on the British list at all.

She can bargain as well as anyone else

She has no tariff to bargain with.

If that is going to be the case it is a shame, and to go further, it is base ingratitude to give a foreign nation in certain articles the preference over Great Britain, the country which gives us the largest market in the world, and a free market as well. There is no question that is what it comes to. She gives us preference on wines, spirits, dried fruits and tobacco.

And money as well?

Exactly. On cheaper terms than anywhere else. At this very time the British Government is contemplating extending its preferences. It proposes spending a million of money to promote trade in various parts of the British Empire, and no doubt South Africa would benefit under that scheme; whereas our policy seems to be to seek to diminish the trade between Great Britain and South Africa. That is the only result there can be. Just contrast our policy in regard to preference with that of Canada. She has a three line tariff, maximum, intermediate, and British preference tariff. The intermediate tariff is about 3 per cent. below the maximum. British preference is about 35 per cent. less than the maximum. Let me just quote for the benefit of members. On grey cotton fabrics, the British tariff is 12½ per cent., the intermediate tariff 22½ per cent., and the general tariff 25 per cent. Then take laces. On white and cream coloured laces, etc., the British tariff is 12½ per cent., the inter-mediate tariff is 17½ per cent., and the general tariff 20 per cent., and so it goes on. There is not a single thing on which the British tariff is not considerably less than the intermediate tariff. The other day, Canada made an arrangement with Spain, and she has also arrangements with France, Belgium and Holland, but all they get is the benefit of the intermediate tariff. None of them give anything near the British tariff. I must say that I consider the policy embodied in the proposals has not been properly thought out and it is contrary to the policy of the Union representatives at the London conference in 1923. I do not know whether my hon. friend respects that.

Does not your policy in many ways differ from the present policy?

Surely when my hon. friend makes an agreement he should carry out the agreements of his predecessors.

Did they carry-out the agreement?

So far as they have gone they have done so. In the recommendation of the conference the word “treaty” was used in the sense of an agreement, and the conference recommended that it was desirable that no treaty should be negotiated by any Government of the Empire without due consideration of its possible effects on other parts of the Empire or the Empire as a whole.

Hear, hear.

The recommendation goes on to say that before negotiations are opened steps should be taken to insure that any of the other Governments of the Empire concerned are informed, so that if such Government considers its interests would be affected, it may have an opportunity of expressing its views or, if considered necessary, of participating in the negotiations.

Hear, hear.

I take it my hon. friend is going to follow the practice recommended. At the meeting at which this was drawn up, the then Prime Minister of the Union, Gen. Smuts, was present. Is my hon. friend, if he negotiates treaties of this kind, going in the first place to consult the Imperial Government? Because he will admit that the interests of the Imperial Government are intimately concerned. I do hope my hon. friend will give us some information on that particular point. There is another point which I think has not been properly thought out. From the report of the Board of Trade and Industries, which was issued this morning, it is pretty evident that the board anticipates the conclusion of an agreement between this country and the United States. If my hon. friend will look at page 13 of this report he will find there are certain articles left for negotiation, such as patent medicines. There are also cash registers and calculating machines. If my hon. friend will ask the Commissioner of Customs he will find that these come from the United States. There are also weighing machines and crude and mineral oil, etc. Of course the commissioners are green to this business; so I will not be too severe upon them, but they evidently have the idea of concluding an agreement with the United States. I do not know if the hon. member is aware, but my information is that there is not the ghost of a chance of concluding an agreement with America, as the constitution of that country is against it. They have only one tariff, and so far as I am aware, they do not give any preferences.

I do not know that we have made any attempt to negotiate.

We can only judge by what we read and see, and when we see articles mentioned which can only come from one country, we naturally assume that an endeavour will be made to conclude an agreement with that country. But the United States goes in for retaliation when they consider they have a cause. When a preference is given by one member of the British Empire to another, then the United States looks upon that as being an agreement between members of one family, just in the same way as when they give a preference to Cuba and the Phillipine Islands, which they regard as connected with them. But when a nation gives a preference to a foreign nation—say we gave a preference to Germany, for instance—then the United States would have something to say. The Act adopted by their congress on the 21st of October, 1922, gives power to the President to retaliate against any duties which discriminate against the United States. They may even go as far as to prohibit the importation into the United States, in cases where a discriminating tariff is continued, or to put on counterfoiling duties up to 50 per cent. If you give reductions, therefore, you must give them all round. If we gave a preference to Germany, the United States would, without doubt, make representations to us and say that the preference must be extended to them. If you do not, then you might find they would place a stiff duty on South African skins, wools, etc., for instance. Exactly the same position is taken up by Switzerland, where I believe they can put on a 100 per cent. duty, and the President himself has the power to do this without consulting Parliament. I am only trying to point out that these things are not quite so simple as might appear at the first blush. In summing up, I should like to say that in my opinion this is a Budget which increases the burden on the people of South Africa and which is going to increase the cost of living here, and I regret to say it must have the effect in the end of increasing unemployment. Finally, in reference to your preference arrangements, the only conclusion we can come to—and I am sorry to have to say it, and I do not think it is entirely the fault of the Prime Minister, but there it is—it will certainly have the effect of weakening the trade between Great Britain and South Africa.

Apart from his criticism on the tariff position, the hon. member who has just sat down found himself in a most unfortunate position. I must congratulate him on having laid the grave indictment against the administration, but which administration? He quoted various figures in regard to increased taxation and increased expenditure between 1910-1924. The indictment was, therefore, laid against the past and not present administration. I admit that he has proved his charge against the past administration. It was negligent, inefficient and incompetent. The hon. member has also referred to the provincial councils. I am inclined the think the greatest disappointment was that this Government did not take that Baxter report in to. They followed their own line, and I must say that the hon. Minister did the correct thing. Personally, I do not think that too much money has been spent on education; the money spent on education has been well spent. A certain agreement was made by the hon. Minister of Finance with the Provincial Council and with which the hon. member is not satisfied. Does he feel aggrieved because the past Government could do nothing? They were so accustomed to follow the policy of drift, that they could not get the provincial councils to do anything. Now the present Minister has come to an agreement, and members are satisfied because there is something definite to go on. It is better to have a definite agreement instead of letting matters drift, the result of the policy of drift having been that the provincial councils accumulated deficits of one and a half millions, for which the late Government is indirectly if not directly responsible. The hon. member is dissatisfied that there has been no reduction of taxation. The late Government was in power from 1910-1924, and I have been in the House the last six years. During that time those on this side of the House never thought of reduced taxation; it seemed absolutely impossible to get reduced taxation. We only had increased taxation. Yet the hon. member who happened to be a member of the late ministry now, after ten months, says: “Why have you not been able to reduce?” But we have reduced taxation. We reduced the tobacco tax about £200,000; the medicine tax about £100,000; the income tax, as applied to farmers, about £25,000; 1d. postage about £130.000; turnover tax £245,000, and another £500,000, indirectly through the provincial councils. This Government has, therefore, been responsible for reducing taxation directly and indirectly to the amount of £1,200,000 in ten months. Give us ten years, and we will show you what this Government will do. The hon. member was premature in his complaint. The Hon. member also referred to the nest egg. I do not know whether he was disappointed at the way in which the money is proposed to be spent in connection with that nest egg. The past Government also had nest eggs. It is well known that in past years they sold assets for £2,700,000 and used the money for current expenditure. Is that the way the hon. member wishes the present Minister of Finance to dispose of the present nest egg? We first of all had to cover the paper deficit of the past administration which amounted to £1,900,000, and the balance of this little nest egg will be used for the payment of debt and for constructional work.

I gave you full credit for that; I only mention it to show the flourishing financial position in which the country was. That was my sole reason.

I only wish to show the difference there is between the way we utilize these nest eggs and the way the past Government utilized theirs. The hon. member also complained about the deficit budgetted. The surplus this year will be more than in the past. After all, we have a better Government, and they will economise. With the present Government in power I have no doubt that in another year the surplus will be considerably higher, and the deficit of £180,000 need not worry us The hon. member has also referred to the gold mines. I think he was on rather unsafe ground. I wish to point out that this Government has already put certain charges upon that industry. You need not directly tax the gold industry. We were always concerned as to whether they were pulling their weight and doing their share towards the future of the country, and it was always the charge against the past Government that they did not bear this in mind. The present Government has already brought in a new Miners’ Phthisis Bill, which will, to a considerable extent, put further financial responsibility on the Mines. I believe that in future they may have to pay better wages than in the past. We also introduced the colour bar, but my main point is this: Two or three years ago, we argued that they were being undertaxed. Why? Those arguments were based on the fact that at that time they were drawing a gold premium of three to five millions a year. We said: “Why should the mines be allowed to draw an extra three to five millions and not be taxed in proportion to that amount?” Circumstances since then have considerably altered. The mines are not drawing three or five millions, and in the current year they will probably draw nothing. Now the hon. member never referred to this point, which after all is most important. But, apart from that, I still think the mines are not pulling their weight. In connection with that, I wish to refer to the report by the Commissioner of Inland Revenue. In 1914, apart from indirect taxation, the public paid no direct taxation, or next to nothing. The mines at that time did pay a certain amount in direct taxation. The amount paid by the gold mines in direct taxation in 1914 was £1,053,000, and in 1924 £1,236,000, an increase of 18 per cent. between 1914 and 1924. To that must be added certain revenue as a result of State ownership. Rentals, however, cannot be considered as taxation, but if I include rentals, the increase in taxation paid by the mines has been 140 per cent. Take the individual. In 1914 the Government got in direct taxation £178,000, and in 1924 £2,306,000—in other words, an increase of 1,200 per cent., whereas the increase so far as the mining industry was concerned was only 18 per cent. I am, therefore, entitled to say that the mines are not pulling their weight. The Government is, however, putting further charges on them, and we have no doubt that we shall hear further from them next year. The hon. member for Cape Town (Central) (Mr. Jagger) referred to preference, of which he has, perhaps, more knowledge than I have. I have a statement showing how the various amounts are arrived at and the way in which the matter has been treated, which certainly redounds to the credit of the Board of Trade. You have a net increase in revenue of £400,000, but in arriving at that amount they also provided for a reduction of duties on certain household and industrial articles of £270,000. They allowed the free admission of industrial materials of £80,000, the free admission of agricultural and industrial machinery and implements of £60,000, paper £15,000, and other items £25,000, making a total of £450,000. Against that there is the readjustment of preference which will show an increase in customs revenue of £600,000, increased duties on non-household or luxury articles will bring in £150,000, and protective duties on articles of household or industrial use will provide £100,000, making a total of £850,000, or a net increase of revenue of £400,000. With regard to the amount of £600,000 for preference, the hon. member for Cape Town (Central) told us that amount was to be paid by the consumers, yet at the same time he seemed to think that the abolition of preference would be detrimental to the British manufacturer. Well, you cannot have it both ways. If the consumer must pay, the abolition of preference will not affect the British manufacturer, but if the British manufacturer pays, it will not affect the consumer. You cannot have your cake and eat it. Yet the hon. member wished us to believe that the whole of the £600,000 will be paid by the consumer. I state that the £600,000 will, to a very small extent, come out of the pockets of the consumer. In the first place, can anyone seriously believe that the loss occasioned by the withdrawal of the rebate on iron pipes, electrical machinery and rubber tyres will be passed on to the consumer unless that rebate is allowed to other countries? If an importer can get an article for £100 duty paid in Cape Town from America, and he has to pay £103 for the same article from England, the £3 will be taken away, so that the article will still cost you £100. The Government will lose that £3. The consumer will not suffer, because if the rebate is taken off you will still be able to buy the article from America for £100. In this particular instance the withdrawal of preference will affect the British manufacturer, but it will not affect the consumer, and I will admit I am interested only in the South African consumer. If the British manufacturer can produce the article at the same price as his competitors, he has no right to ask for any preference. If he cannot make the article at the same price as the others it only means that we are taxing our consumers in order to permit the British manufacturer to sell his dearer articles at the same price as his competitors. This certainly affects the British manufacturer, to a lesser extent the importer, and to an even lesser extent it affects the consumer. I have no doubt that if the figures were gone into properly it will be found that out of the £600,000, probably £100,000 will come out of the pockets of the consumer, about £150,000 will come out of the importer’s pockets, but the balance will come from the British manufacturer. Apart from that, the Government intends to get £150,000 by way of duties on jewellery, motor spirits and expensive motor cars—not the cars that I am able to buy, but the cars the hon. member is able to buy—cars costing over £550. On the other hand, there is a rebate on sewing-machines, and it is satisfactory to know that a poor woman may be able to buy a sewing-machine at a cheaper rate, even though the hon. member may have to pay more for his expensive motor car. Is this alteration not in favour of the poor man? There is an increased duty on jewellery, but the poor man will not complain of that, as he very seldom buys jewellery—sometimes he can hardly buy food.

Yet you increase the duty on bacon!

The hon. member may not believe in protection, but there are other members who do. That is a question for argument. As far as taxation on luxuries is concerned, no one, except the rich man, will complain. The increase of duty on jewellery, plate, motor-cars, confectionery, bioscope films and tobacconists’ goods, amounts to £150,000. Against that, for the benefit of the poorer classes, and even for the middle classes, we have £270,000 allowed, i.e., cotton piece goods, £90,000; woollen goods, £80,000; other goods, £37,500; mechanics’ tools, £30,000 and sewing machines, hosiery, etc., £32,500. All that is in favour of the poor and middle classes. We allow them £270,000 extra, and we tax the hon. gentlemen on their motor-cars and other luxuries to the tune of £150,000. This tariff has been fixed in favour of the poorer classes against the richer classes and, although it will, to a certain extent, affect the British manufacturers, that does not affect me. From my point of view I consider the taxpayer of South Africa only. I congratulate the Minister on having had the courage of his convictions. The Government has proved, however fair and reasonable they may be to others, they have laid it down as a definite principle that the interests of South Africa will be considered before the interests of any other country. It is rather a pity that we should have had the cry of racialism again.

Who raised the question of racialism?

I must say the hon. member himself has not raised the question.

Then why don’t you leave it alone?

He has been leaning towards the other side by giving them something to go on.

Absolute nonsense.

Yes, by his arguments ’that the British manufacturer and the public will both lose and also his remark about ingratitude to the British interests. We have to consider this question of racialism and kill it if possible.

Why talk about it?

I must bring home to the Unionist friends that they are doing an injustice by bringing up racialism. We cannot permit members to talk racialism outside this House without calling them to account here.

For God’s sake leave racialism alone. I never raised it.

In 1923 the hon. member for Standerton (Gen. Smuts) said the tariff question was one-sided, and had to be altered in some way. Yet, because the Government now takes the courage in their hands, and does what the hon. member for Standerton said in 1923 should be done, we find the cry of racialism running throughout the country. The hon. member said racialism was not raised by him, but we have to consider these matters. What did Maj. Richards say?

The hon. member must not refer to hon. members by name.

Well, the hon. member for Weenen (Maj. Richards). We have an article on what the hon. member for Weenen has said on the attack on preference. I don’t want hon. members to talk racialism outside the House, and then run away from it when taken up inside the House. Racialistic statements were made even by the hon. member for Standerton (Gen. Smuts) outside the House, and surely it is not his wish that we should not refer to them inside. The hon. member for Weenen (Maj. Richards) referring to the attack on preference on British goods, spoke of the injury that was being done to British manufacturers. If I must believe the hon. member for Cape Town (Central) (Mr. Jagger) that the consumer must pay, what injury does that do to Great Britain? You can’t have it both ways. You can’t have your cake and eat it. England will still be our best customer if our consumer has to pay. It is very strange, but, fortunately there are some members of the Opposition party with saner minds. Mr. Gundelfinger, for instance, a staunch member of that particular party, who, I believe, is as great an authority as the hon. member for Cape Town (Central) (Mr. Jagger) says—

He considers—

Then we have Mr. Seals Wood, president of the Transvaal Chamber of Industries, who says that the outstanding feature of the Budget is its optimism; he regards as fully justified the readjustment of preference to the British Empire on a reciprocal basis, which seems to him quite sound. It is most amusing to read the articles appearing in the newspapers; trying to put this particular tax both on the consumer and on the British manufacturer. It is admitted that the Government must gain £400,000. It is also admitted someone must pay, but it is a pleasure to see the egg-dancing going on in connection with this matter Admittedly we gain £400,000, but if you contend it comes from the pocket of the consumer, you cannot also maintain that it comes from the British manufacturer. You cannot have it both ways. They are trying to get the sympathy of the taxpayer. They are entitled to that, and to tell them that they will have to pay the £400,000, but if they get the sympathy of the taxpayer they lose the racialists outside. They are between the devil and the deep sea. If they say the taxpayer must pay they annoy the racialists, and if they saw the British manufacturer must pay they naturally cannot gain the support of the taxpayer. In my opinion it is to the benefit of the taxpayer, and so far as I am concerned, I hope the Government will be able to find more methods of taxation that will relieve the taxpayer, even though the profits of those outside the country will be less. I would like to put the position before the country of the finances of the past Government as taken over by the present Government in 1924. We are continually being told, outside, in what an excellent state this Government found the finances when they took over in 1924. It seems that the Opposition believe that if they repeat an untruth often enough they will eventually get someone to believe it.

An inexactitude.

Yes, an inexactitude, and it is necessary in this instance to place the position as taken over by this Government in 1924 before the country. I will refer to the deficits and also the non-productive debts taken over by the present Government. A deficit is allowable occasionally, a deficit frequently is a sign of incompetence, as I believe the hon. member for Cape Town (Central) will admit, but a deficit such as the last Government had, a continuous and an ever-increasing deficit, is a crime.

It was due to bad trade.

I say that in no other country in this world would a Minister have been allowed to remain in power if he had allowed such a deficit to accumulate from year to year. There were two deficits—one an actual deficit and the other a paper deficit. We know what the paper deficit was—£1,900,000. The actual deficit was considerably more. I will not include railway matters, though even there they had a deficit, but I must admit that railway matters were much better run than the ordinary finances, principally due to the hon. member for Cape Town (Central) (Mr. Jagger). The paper deficit which we took over in 1924 amounted roughly to £1,900,000. But there was another deficit. The true deficit amounts to roughly £16,000,000. I can easily give the figures. I will accept the figure of £1,900,000. The Government in 1915 had a deficit of over £2,000,000. That they wrote off against the loan funds. It seems to me the easiest method in the world when you have any debt is to write it off against something. Unfortunately the private individual has not that power, and I say that the Government had no right to use that power. I am sure the hon. member will agree with me that no Government should write off the cost of raising loans against loan funds. That should come out of revenue. The initial expense should come out of loan funds, but the subsequent costs of raising loans should not come out of loan funds. The last Government increased our debt by about £80,000,000 or £90,000,000 since 1910, and yet they have raised £260,000,000—£80,000,000 on loan and £180,000,000 to keep on repaying the loans. Every time there is a loan there is a certain amount of expense. That amount should come out of revenue and should never have come out of loan funds. The expense referred to amounts to £2,600,000. They made certain advances to farmers and others, and on subsequent occasions they wrote off amounts totalling in all £1,600,000. Loss on speculations on flour and tobacco schemes debited loan account £600,000. A very serious charge against the Government is in regard to the pension funds. These funds are insolvent to the extent of about £2,200,000. No previous Minister has ever told this House that the pension funds were insolvent, and only now we discover that the pension funds are insolvent to that extent. Apart from that, they took away loan assets amounting to £2,700,000. Immigration expenses account for £500,000 and deficit provincial councils £1,600,000. In other words, we have an actual deficit, as distinct from a paper deficit, of £16,000,000, and not £1,900,000. That is also one of the good little things that this Government has had to take over from the past Government. It was very easy for the past Government; they had a majority, and at that time they were seeking popularity. When you have increased expenditure you must have increased taxation, and the charge I lay against the late Government is that, while they increased expenditure, in order to gain popularity, they never followed the only honourable course, i.e., increased taxation. They allowed deficits to accumulate, and when the deficits became too huge they used their power and wrote off those deficits against loan account. Far from being entitled to any thanks for the alleged good financial position, they stand convicted of having misled the people in the past by quoting convenient figures and forgetting to quote inconvenient figures. They camouflaged the position by making book entries which may be very convenient, but which are, in point of fact, very questionable. The debt of this country, I agree with the hon. member (Mr. Jagger), is out of all proportion to the population, but at the same time I think it must be recognized that in a young country still to be built up and developed you must necessarily increase your debt from time to time, and it is quite likely that the Government, this good Government of ours, will have to increase the debt from time to time.

They have started already.

That is so, but we have never been against that increase of debt. What we have always objected to was to take loan money to pay deficits or to take loan money for works of a non-productive nature or for works of a temporary nature, such as Morley’s Hotel, for instance.

That is a fixed asset.

It is only a lease for ten years. You don’t call a lease for ten years a fixed asset.

It is fixed for ten years.

Then you should have written off one-tenth every year against revenue. Apart from this, we also object to their selling loan assets in order to pay current expenditure. That has been our charge all along, not the increase in capital expenditure. The test is when you have capital expenditure you must be able to prove to the public what you have done with that money. If the present Government borrow £10,000,000, and they come and say: We have borrowed it, but here are the assets, the productive assets, of that £10,000,000, we will be satisfied. The non-productive debt in the Union amounts to between £50,000,000 and £70,000,000, I believe they cannot quite agree whether it is £50,000,000 or £70,000,000. This non-productive debt is another of the good little things which we took over from the last Government. The auditor-general places it at something like £70,000,000, and the Secretary for Treasury at £50,000,000. They cannot agree as to the exact amount, but there is no doubt that it is somewhere between £50,000,000 and £70,000,000. Even the Governments before 1910 wrote off accumulated deficits of over £4,000,000 against loan funds. All this helped to build up the huge non-productive debt which we, the present Government, must now take over. Something must be done; everyone will agree that the amount must be paid. There may be a difference of opinion with regard to redemption of loan monies expended on good assets, but where the question of money expended on non-productive, or as I prefer to call them, bad assets, is concerned, everyone must agree that the amount must be paid. The Minister has already started. Past Ministers never even referred to this amount of non-productive debt. The present Minister has only been in office ten months, but he now brings in a proposal. I have already pointed out that a certain amount is annually debited to loan fund for the Cost of raising loans. Over a period of the last fourteen years we have paid £2,600,000 for the cost of raising loans. Last year we paid almost £400,000. If the Minister puts aside £524,000 each year, at least £300,000 of that amount will be immediately deducted to cover the cost of further loans. That amount must increase in proportion as the debt increases from year to year. The actual position will then be that, instead of £524,000, only about £200,000 will be available for redemption of non-productive debt, which works out at .33 per cent., instead of .83 per cent., as stated by the Minister. I maintain this is not sufficient. A more scientific basis should be adopted for the repayment of this non-productive debt. We have to end it somehow and perhaps it would be advisable to refer to it a committee of financial experts. Meanwhile, I wish to make the following suggestion. The Minister should ascertain the amount of the non-productive debt (after deduction of existing sinking fund) and debit that to a certain account, whatever that account may be. He must in future debit to the same account such bad debts as were formerly written off against loan funds. Against that he will have surpluses to be paid in every year. He would then have to fix an amount to be annually paid out of revenue which amount, together with the surplus, should be equivalent roughly to 1 per cent. per year of the debt, or sufficient to ensure the redemption of the debt within 100 years. I sincerely hope the Minister will reconsider his original proposal and will probably agree that £524,000 for repayment is not sufficient.

I think the Minister is to be congratulated upon the Budget. I do not suppose anyone expected the Government to produce something which was going to satisfy every section of the community. It is produced under favourable circumstances; but the claim made by South African party supporters, that the present satisfactory position is due to the economy of the past Government, is entirely without foundation. Under present economic arrangements trade cycles of prosperity and depression chase each other, and in common with the rest of the world, we are on the eve of a wave of prosperity, and that being so, the Minister finds himself in the fortunate position in which he stands to-day in regard to increased revenue. I think it indicates that there is full confidence in the present Government on the part of financial interests and that the Government has not disturbed the security of the comfortable. I would repeat the warning I uttered last year to the Minister against the tendency of pleasing the well-to-do too much and the needy too little. The Budget definitely gives evidence of two lines of policy in respect of which the Minister is to be congratulated. He has departed from the policy of drift of the late South African party Government, in the first place on the question of our public debt, and in the second place in regard to our industries. He has definitely laid down certain proposals for debt reduction, and by his tariff proposals—however much they may be criticized in detail—the definite intention of the present Government is revealed to encourage the industries of South Africa, instead of allowing us to be dependent on the importation of all our requirements. But I must warn the Minister that he cannot make omelettes without breaking eggs, and if he desires effectively to pursue his policy of debt reduction he will have to alter, to a considerable extent, the monetary and credit policy of South Africa. In connection with the establishment of industry, the Minister must keep before his mind that the object of industry is not to secure profits to a certain section of the community, but to provide for the needs of the people, and the mere establishment of tariffs will not be sufficient to secure that result. In order to supply the needs of the people satisfactorily, industrial development will have to be based on a sound credit policy. The Government will have to keep a proper check on the waste of industry and a proper check on wealth distribution, so as to ensure a greater consuming capacity on the part of the people. I think, also, we should definitely work for the establishment of our own markets rather than of foreign markets, and thus make for the development of industry and agriculture in this country. Then the amount of the tax on industry made by the shipping rings must be considered. To these ends it will be necessary for the Government to consider seriously, in addition to their tariff proposals, making some provision by which they will be able to control industry for the protection of the consumer as well as of the producer, and where they find that industry ignores the needs of the consumer, the Government will have to be bold enough to consider whether they should not step in and take over industries producing the necessaries of life and run them in the interests of the community. There was one point made by the hon. member for Cape Town (Central) (Mr. Jagger) with which to some extent I am inclined to agree. He rather chaffed the Minister and the Government on their leniency towards the financial interests and the mining houses. I do not think that he was very serious in his criticism, but I agree with it, and I fear that in the main the Minister’s policy will tend to satisfy the satiated and neglect the needy, and because of that I believe, that apart from the South African party artificial thunder in the House—and that is to be expected—the Minister’s policy will be, in the main, assailed by feeble criticism from his satisfied opponents and hailed with faint enthusiasm by his disappointed supporters. But apart from these points of criticism—no Budget is entirely perfect—I consider the departures made by the Minister are likely to prove of benefit to South Africa. There is another point of criticism I would like to make, and that is that the Minister has unfortunately fallen into the habit of our friends of the South African party, of assuming that because our revenue is good it is an indication of general prosperity. The Minister took somewhat the line of the member for Cape Town (Central) (Mr. Jagger) and the South African party, and warned the country that we must go in for a policy of economy. He said that the people must work harder and return to a simpler mode of life and exercise more economy. No doubt that sentiment was received with enthusiasm by the South African party, but I wonder what effect it will have on the people who are not in a position to make ends meet at present? I think it is necessary to state the position of the vast majority of the people of this country—a position in which to a large extent they have been left owing to the Government of the South African party. The hon. member for Cape Town (Central) quoted census figures to show that the increase in the population has been less than the increase in taxation, and it comes very badly from him, because the small increase in population, if not directly due to the hon. member for Cape Town (Central), is due to the policy of his party, which has made it more and more necessary for the public of South Africa to consider the question of birth control. And the matter of increased taxation is also due to the policy of the South African party, for they have been in power all these years when the taxation has been increased from time to time. But let us see the true position as disclosed by the census of 1921. In that year the value of agricultural produce in South Africa was £55,745,647, but the value by the time it reached the wholesaler was £73,000,000, an increase of £18,000,000, of which neither the farmer nor the consumer got the benefit. The value of minerals produced that year was £51,839,724; the value of our manufactures, that is the value added to the raw materials in the process of manufacture, was £36,622,858. To that had to be added the value of fisheries and cognate industries, amounting to approximately £1,000,000, making a total wealth production of £141,208,229. From that had to be deducted something like £4,000,000, which consisted of raw materials utilized in connection with those industries, leaving a production of wealth amounting to £141,280,000. Mr. Aiken, who is accepted by the South African party as an authority on economics, calculated for the same period that the amount paid outside South Africa in interest dividends and profits came to something like £14,500,000, leaving a net wealth of £126,708,000. From that falls to be deducted the amount going to the native population, which again, according to the authority of someone who is accepted by the South African party, Professor Lehfeldt, is something like £30,000,000, leaving a net amount of £96,870,000, to be distributed among the white population of 1,519,488, giving an average of £63 12s. 10d. per head. I do not see very much possibility of economising on such an amount. Taking into consideration the increase in population and the reduced value in products as a result of deflation, I believe, the same analysis is applicable to 1924, as to 1921. But we have to go further with our analysis. Of the amount of £96,000,000 the taxable income as shown by the income tax return for 1923-’4 was £73,000,000. That was the amount available for distribution amongst those in receipt of incomes of £300 and over, and the number of those taxpayers in the year 1923-’24, was 78,000 odd. So we find that, after deducting this amount of £73,000,000, there was actually an income of £23,300,000 to be distributed amongst the rest of the European population, numbering 1,141,00 0. So, taking away the population in receipt of incomes of £300 and over, the remainder of the population, 1,141,000, had an average individual income of £16 3s.

You are including children in those figures.

The hon. member who makes that interjection supports a policy under which there will be fewer children. But I will take the hon. member at his own word, and on the basis of adults the position is that there were 785,000 in the Union and, after deducting the 78,000 in receipt of £300 and over, that leaves to be divided amongst the remaining 707,000 an average income of £32 19s. 1d. If we only take the adult male population, it means that the individual income is something like £70 a year upon which he has to maintain himself and his dependents, and, that being the case, it is ridiculous to advocate economy to them. If there is to be any economy, it has to be at the top, and one of the best methods to attain that is to alter the incidence of taxation and take some of the money that the well-to-do are wasting in luxury. It is well also to know who do the work of production—I am speaking of the European population. We find again that under the policy of the South African party, fewer people are doing the work. I am glad the hon. member for Cape Town (Central) (Mr. Jagger) makes the admission that the Europeans engaged in industry were fewer in 1921 than in 1911. We had in 1921 a total number of Europeans engaged in wealth production of 290,788, and the remainder of the population either did not need to engage in production, or they had not the opportunity. It is startling to find that this figure of 290,000 showed a reduction of 44,000 since 1911. If we take another aspect, that of distribution, it is startling to find that in 1921 there was a total of 104,000 people who were engaged in the work of distribution, an increase of 55,000 over 1911. I would commend to the notice of the hon. Minister, the House and the country, another very startling position that is disclosed. There were in 1921, 964,000 dependents, an increase of 472,000 over 1911, which means that there was an increase of people who had not the opportunity of making a living and producing wealth, and I hope and believe that the tariff proposals will encourage the establishment of industries and the absorption of many of these people in useful employment. Taking this income of £96,000,000 distributed amongst 1,519,488 Europeans, something like £26,278,000 goes in Government taxation. The hon. member for Cape Town (Central) (Mr. Jagger) was drawing attention to the heavy amount of taxation. I would draw attention to another aspect of that taxation, and that is, of that total amount of £26,278,000 a very large proportion went in the payment of interest to loan mongers. We are told that we must have Imperial preference or else the financiers will not lend us money; but so long as we are paying heavy interest on our loans, the financiers will not be very much concerned whether we have Imperial preference or not; they will lend us money very readily. We pay £4,425,000 in respect of public debt. That brings one to another interesting comparison. The average weekly income of a European in South Africa is £1 4s. 5½d., out of which 6s. 11d. goes in taxes, divided as follows: 1s. 2¼d., or 16.5 per cent., on debt charges; 7¾d., or 9.5 per cent., on police; 2¾d., or 3.4 per cent., on the Defence Force; 2¾d., or 3.4 per cent. on justice; 4½d., or 5.8 per cent., on agriculture, including irrigation; 1¼d., or 1.6 per cent., on public health; 9/10ths of a penny, or 1.1 per cent., on relief of unemployment, largely created by the South African party policy; and 7⅛d., or 8.25 per cent., on pensions, which are distributed among 17,360 pensioners, who, with their dependents, would roughly total about 30,000. Of the £2,208,000 payable annually in pensions, £693,000 is paid to pensioners in respect of the great war. We are, obviously, not paying adequately to the people who suffered during the great war, when it is remembered that, with regard to the war debt, calculating the interest at 4 per cent., and not 4½, per cent., as estimated by the hon. member for Cape Town (Central) (Mr. Jagger), we are paying £1,600,000 annually in interest to the patriots who lent us the money with which to prosecute the war, but to the men who made sacrifices in that conflict and to their dependents we are paying only £693,000. This is a very interesting and strange commentary on the relative values we attach to money and to life.

Under which of those categories did you come?

The same as you did.

I hear it now for the first time.

I hope and believe the Minister of Finance will take very seriously into consideration an alteration in the incidence of taxation so far as the lower scales of income-tax are concerned. I feel satisfied that the Minister will take definitely into consideration an alteration in the interests of the small people next year and certainly the moment that such a change is possible. I have already touched on our debt charges, but a few figures are worthy of emphasis. Of our total public debt of £208,000,000, £80,000,000 are non-productive, this figure including £40,000,000 for war debt, £8,870,000 accumulated deficits for which the South African party is responsible, and £7,299,000 the cost of raising the various loans. It is of interest to note that while the expense of raising our loans amounts to £3 10s. per cent., Australia, with its Commonwealth bank, is able to raise money at a cost of only 4s. 5d per cent. The Minister’s policy of paying off our national debt has to be taken into consideration with other factors, and when he finally arrives at a permanent policy as to how that is to be done. I hope he will take into consideration the facts I now propose to submit. Of our public debts, something like £70,000,000 was incurred during a period of very high inflation, from 1915 to 1921 or 1922. During that time the average value of the pound, so far as its purchasing and real value was concerned, was as 15s. is to 20s.; that is to say, that for every pound we borrowed we actually only received 15s. in real value, and at one time it was only 12s. 6d. Now that we are returning to a gold standard, and that must result in further deflation, we shall in effect repay the financiers overseas £1 for every 15s. they lent us; in other words, we shall make a present to the people who lent us money of £17,500,000, on which the annual interest is £700,000. The Minister is proposing to reduce the interest charges by £100,000 per annum, but by paying back debts borrowed in a period of inflation with deflated money he is increasing our interest charges by £700,000 per annum. I hope the Minister will take that into consideration. It is bound up intimately with the policy of the return to the gold standard and with the general monetary and credit policy of South Africa. This brings us to the question of the return to the gold standard and our banking policy. I want to make this comment in connection with the report that we know perfectly well what we were to expect from the report of the commission before they made enquiries. Dr. Kemmerer is one of the ablest orthodox economists of America, and Mr. Vissering is one of the ablest bankers in Europe, and we knew what to expect. They have reported in favour of the return to the gold standard. There is a general tendency in the world to return to a gold standard. That is the result of influences being brought to bear on the finances of the Governments of the world by America and American financiers. One of the reasons why America is anxious for other parts of the world to return to the gold standard was because everybody in the past only connected inflation with paper money. America found herself suffering from partial inflation through having too much gold, which was as bad as having too much paper, and it was necessary for her to unload her surplus gold. Therefore America has used its influences to get other countries to return to the gold standard. Dr. Kemmerer must have come here with his mind unconsciously influenced in that direction, as we find by the report. We come, now, to the position in the consideration of these matters when it is admitted by every orthodox economist that gold is not of a stable value. As the hon. member for Cape Town (Central) (Mr. Jagger) says it is a case of supply and demand. The greater the supply of gold, the lower will be its value, and the greater the demand the higher will be its value. It is more stable under present conditions than paper, but the point is that it is not as stable as we in the past were led to believe. It has varying values and if there be a return to the gold standard in every part of the world, under present arrangements, and the American policy, it will mean a tremendous amount of deflation because gold will go up to a tremendous extent in value and every country will have to restrict the facilities given to the people in the matter. On the question of the return to the gold standard, I want to urge on the Minister, with all my force, that it is imperative it should be accompanied by State control of credit, and the manipulation of our gold requirements shall not be in the hands of private banking institutions, but in the hands of the State. Currency is one of the most important principles in the development of any country in the world, just as oil is necessary to the proper running of machinery. In the same way that too much may not be advantageous, and too little is bad and would stop the machines. So while undue inflation in currency may be bad, undue deflation must be worse. Therefore it is imperative in the interests of farmers, manufacturers, and commercial men that the supply of currency shall not be in the hands of private institutions whose principal object is the making of profit, but the supply shall be definitely in the hands of the State, but that cannot be done by a reserve bank. I would like to quote to the hon. Minister a statement which has been made by Dr. Kemmerer and Mr. Vissering on page 26 of the report, paragraph 46, in which they say—

Taking into consideration the economic policy of these gentlemen, I submit you cannot have a more definite statement in favour of State banking than the statement in that report. They go further and point out—

I say to the hon. Minister that he should have dealt with the question of control of credit this year. Simultaneously with the return to the gold standard he should have made facilities for the promotion of a State bank. Not having done it I hope it will not be too late this session, but if it is, and if he wants his industrial policy effectively carried out, and wants to benefit industry and agriculture, then that should be one of the first pieces of legislation in the next session of this House. We need not be afraid of the money involved because they will be able to carry on a State bank with the money of the people and the credit of the country. On the 31st December, 1924, the paid up capital of the banks was £4,773,000 and the deposits were: Government £3,734,000 savings banks £3,169,000, fixed deposits £28,824,000, and deposits on demand £41,137,000. Really therefore the private banks had £76,864,000 of money belonging to the public with which to carry on their operations and make a profit for themselves. The proper solution of this question will affect the amount of production and will affect the success of industry and the farmers, and the restriction or the development of prices in the country. The hon. member for Cape Town (Central) (Mr. Jagger) talks about high prices. Well, one of the effective methods of checking it is by having State control over the credit facilities of the country and the establishment of a State bank. That brings me to the criticisms which have been levelled against the tariff proposals. The hon. member for Cape Town (Central) (Mr. Jagger) was, I admit, in a very unfortunate and invidious position. We know that the hon. member is the most consistent, the most able, and the most ardent advocate of free trade in South Africa. We have heard a good deal about “egg-dances” on the part of hon. members on this side, but we have had the hon. member for Cape Town (Central) giving, on the one hand, a brilliant exposition of the principles of free trade and, on the other hand, presumably to please the protectionist members of his party, making pleas in favour of Imperial preference, which is simply another form of protection. We remember that in 1924, as a result of a statement made by the right hon. the member for Standerton (Gen. Smuts) about the evils of free trade and the necessity of establishing industries in South Africa and going in for a policy of protection, the hon. member for Cape Town (Central) found himself obliged to retire from the Cabinet at a period of the greatest crisis in the history of the South African party. Here he comes along to-day and discusses this question of the tariff, firstly, by assailing it from the free trade point of view, and secondly, by assailing it because it does not give preference. Who is the hon. member for Cape Town (Central) representing, surely not the right hon. member for Standerton, or the secessionist member for Weenen (Maj. Richards) who, with many other South African party members of this House, believe in protection? I venture to say that he is only representing himself and the free trade opinions of commercial houses. In connection with the South African party criticism of the Imperial preference proposals, there is another aspect which has to be taken into consideration. The hon. member for Standerton told us that this policy of the Government on Imperial preference was a smack in the face for Great Britain. Mr. Burton, who, unfortunately for him and his party, cannot get a constituency to accept him, had to go away to some bazaar to give the South African party’s policy on Imperial preference, and he said it was an unfair thing to do as between Great Britain and ourselves, to withdraw the Imperial preference, and he spoke about its being retained for sentimental reasons. I am satisfied that, as far as the question of Imperial preference is concerned, all this talk that we hear from the South African party people, both inside and outside the House, about Imperial sentiment is so much eye-wash, that commerce looks upon this question entirely from the point of view of pounds, shillings and pence. I need only refer to the position in England. During the Great War Sir Leo Chiozza Money, who was then a member of the Government, had to repeatedly draw the attention of the Government of England to the fact that patriotic merchants of England were feeding Germany to the detriment of the people of England in that war. On the 4th April, 1916, Sir Chiozza Money drew the attention of the War Trade Committee to the manner in which “patriotic” merchants were trading with the enemy. He wrote—

Again on the 6th January, 1916, he drew the attention of the War Trade Committee to the action of patriotic, imperialistic, sentimental tea merchants. He wrote—

So much for patriotism and sentiment in commerce. No, let them talk to their friends, the commercial people, about sentiment before they come and talk to us about sentiment. But I go further, and take their own statements. I would draw the attention of the House to a speech made by the hon. member for Standerton (Gen. Smuts) in Johannesburg on December 14th, 1923, about Imperial preference. He said—

He continued—

Now, if the right hon. gentleman meant this, it was tantamount to an admission on his part that he was looking at this question of British preference from the point of view of a quid pro quo. If, on the other hand, he did not mean it, I say it was an undue and an unjustifiable attempt on the part of a Minister of this country to try and embarass the Labour Government in England, probably because it happened to be a Labour Government. Judged from another aspect, I can understand the objection to the policy in connection with Imperial preference which is now being initiated, and I would strongly support the policy of retaining this Imperial preference to the fullest possible extent, but not for sentimental reasons. Judging Great Britain with any other part of the world, the conditions of the wage earners in England are better, to a considerable extent, than the conditions in many other countries. I submit that Imperial preference is necessary in order to maintain labour conditions which are good, and to keep out of this country articles manufactured by sweated labour. It is no use introducing a tariff and a minimum wage Bill if you are going to encourage the importation of goods made under sweated conditions. By way of illustration, let me mention India and China. The conditions of labour there are alarming. In “yellow Asia,” to which reference was made the other day, adult labour is paid at something like 10s. 6d. a week, women at 5s. 3d. a week. Many of these women are mothers, and they are obliged to dope their children with opium in order to keep them quiet while they are working for these wages. Then you have the position in Germany, where, as a result of the settlement under the Dawes Report, the workers are being reduced to coolie standards. If we encourage the importation of goods manufactured under such conditions we are encouraging those conditions and are keeping down the standard of life in those countries and indirectly in. South Africa. Preference should be given in favour of Great Britain, because conditions are less sweated there than in many other countries.

Are you in favour of the principle of Imperial preference?

Yes, I have already indicated that I am. I would go so far as to prohibit the importation of any goods manufactured under sweated conditions. I believe that in the main the tariff is framed with the object of encouraging industry in South Africa, but in certain cases it is better to encourage an industry by means of a bounty than by means of a tariff. The hon. member for Cape Town (Central) (Mr. Jagger) says that the tariff will increase the cost of living. That may be so in some cases. But it is better for the wage-earner to have a greater demand for his labour, even if he has to pay a little more for his requirements. And it is surely better for the unemployed to secure avenues of employment and be able to pay more for their requirements than to remain unemployed and have the cost of his necessaries, which he cannot buy, kept down. In the case of industries established, or being established, there must be some definite check against waste. It is imperative that the Government and the Board of Trade shall have an adequate check upon industry in this respect and see that it is carried on in an efficient manner, and to see also that it shall not be possible for people to come and say they want a higher tariff because of their own waste. That is a matter of the utmost importance. Only recently Mr. Hoover, speaking of American industry, said: “The American wage-earner has at his elbow 50 per cent. more power than any of his competitors, consequently his production is greater, his wages are higher, and the physical strain that he undergoes is less.” In spite of that position, even in America there is a great deal of inefficiency and consequent loss of production in industry. And it may interest hon. members to learn that the main cause of loss of production is to be found in the inefficiency of the employer, and not in that of the employee. Mr. Hoover presided over a committee to enquire into the causes of inefficiency and loss of production in principal industries, and the committee allocated responsibility for such inefficiency and loss of production as follows:—Men’s clothing: Management, 75 per cent.; labour, 16 per cent.; other factors, 9 per cent. Building: Management, 65 per cent.; labour, 21 per cent.; other factors, 14 per cent. Printing: Management, 63 per cent.; labour, 28 per cent.; other factors, 9 per cent. Boot and shoe trade—and I commend the Minister to keep an eye on Port Elizabeth—Management, 73 per cent.; labour, 11 per cent.; other factors, 16 per cent. Metal trades: Management, 81 per cent.; labour, 9 per cent.; other factors, 10 per cent. Textiles: Management, 50 per cent.; labour, 10 per cent.; other factors—including the question of credit facilities and interest charges—40 per cent. If that is so in America, what must be the inefficiency here? We must admit that it is impossible with our small population and restricted market for small industries all over the country, manufacturing the same article, to be able to benefit by the tariff, and therefore it is bound to result in industry getting into the hands of a few people. I would make this definite suggestion to the Minister. I think, in connection with the present tariff, that a national board of enquiry should be appointed to go into the question not only of tariffs but of waste in management of industries; the financing of industry; the question of what industries are suitable for this country and what are not, and the question whether, in some instances—say in the woollen industry, for instance—it is not desirable that such an industry should be taken over by the State, to utilize the natural products of this country to produce the commodities we require An enquiry of this kind might result in a material alteration of our outlook in regard to a great many things. I think the report of such a body would show that it will become more and more necessary for the Government to take control of industry for the benefit of the people, without regard to the making of profits.

I am quite sure the House listened with a great deal of interest to the masterly manner in which the hon. member for Cape Town (Central) (Mr. Jagger) analysed the budget. He also made some comments on the new tariff which I think ought to sink into the minds of members of the House and of the public generally. The patient hearing granted to him by the House was a tribute not only to his knowledge of the subject and commercial experience, but also to his transparent sincerity. I am sure the Minister is anxious to do his best for the country in financial matters, and no doubt he will do the hon. member the honour of, at any rate, pondering over the suggestions he has made. I do not agree with the hon. member for Cape Town (Central) altogether with regard to his protectionist policy, but I do agree in the main with the remarks he made regarding the budget, particularly in this, that he pointed out that, instead of the economy which the House expected and which the public expected, we find that the Minister has budgeted for an amount of £1,900,000 greater than the budget of his predecessor. We were told during the last election, by the then Opposition, that the Government of the day was grossly extravagant; was piling up public debt; that the time had come to call a halt in the procedure of the Government and that if a new Government were put in power we should see a new order of economy. The public will now be able to judge whether the Government have carried out their election promises or not. The discussion that has taken place since the hon. member for Cape Town (Central) spoke has not in any way impugned the statements he made with regard to our financial position. I noticed that the hon. member for Troyeville (Mr. Kentridge) joined with the hon. member for Wonderboom (Mr. B. J. Pienaar) in congratulating the Government in its policy of trying to establish further industries and of increasing the existing ones. In that connection, I am very glad that the Government is continuing to do this, which was the policy of the late Government. The late Government’s tariff was framed from time to time with the intention of establishing industries and a Board of Trade and Industries was set up for the purpose of informing the Government of the best way in which industries could be fostered. The Prime Minister laughs; but let me remind him that certain industries in this country are in a flourishing condition as a result of the methods adopted by the late Government. Take the furniture industry, for instance. Comparatively little furniture is now being imported. Owing to the protective duties imposed by the late Government, the furniture is mainly made here. Take harness, boots and shoes, bacon and ham, wheat and flour, tea, sugar and a whole host of articles. In fact, it is common knowledge that the output of our industries has increased about five-fold since the late Government took office in 1910; so that although during the war period it was impossible to make the progress desired with regard to the actual tariffs and the protection of industries, there is no doubt at all that the foundation of the present industrial position of the country, such as it is, was laid by the late Government. I notice, however, that the hon. member for Troyeville (Mr. Kentridge) in the course of his speech wanted a board set up in order to enquire into the methods of industrialists, and into a good many matters which no doubt would be a good subject of enquiry in a highly industrialized country, but which, if introduced here will have the result of checking the amount of capital put into industries. Industries in their initial stage required to be fostered and not checked, and if the hon. member’s proposals are accepted we shall offer very little inducement to people to put capital into industries. Government interference is all very good in its way but it can be carried too far. I noticed that the hon. member for Troyeville analyzed at great length the census and income-tax figures. It seemed to me that he was grumbling because the Government was not taxing the people more. I thought one of the objects of Government was to carry on the Government as efficiently as possible, but the hon. member for Troyeville, like some of my friends on the labour benches, has never been known to object to expenditure. They are always for increasing it, knowing that the result will not fall mainly on their shoulders or on the shoulders of those whom they represent. The hon. member also complained that the late Government had put a crushing debt upon the shoulders of the people of this country, but he should remember that 70 per cent. of that debt is reproductive, and is no burden on their shoulders. He also told us that we were paying over one and a quarter million pounds as interest on our war debt and only about £600,000 in pensions to disabled soldiers. Assuming that the hon. member’s figures are correct, what do they prove? In the one case that we are paying our debts, paying interest to those who lend us the money. Does the hon. member want us to commit a default? It also proves that we are paying pensions to the extent of £600,000 to returned soldiers who were wounded and to the dependents of those who unfortunately were killed in the late war, including the pensions for the previous war. Would he like to have seen the casualty lists increased so that the amount of pensions would be increased and, as for the amount of interest we pay, does he want us to default? I do not understand what his point was. The men who fought were well paid and they are receiving a generous pension. I am sorry so many require a pension, but, judging by the hon. member’s statement, he regrets that there are not more men drawing pensions. He made another very extraordinary statement. He said when we borrowed money for the war the pound was worth only about 15s.; therefore, the Minister must be very careful about paying off public debt. I think the Minister is going on sound lines in paying off public debt as much as he can afford to do. The hon. member was I suppose hinting that one of these days, when he is in power, he would like to repudiate this public debt. That is the conclusion I draw from his statement. I would like to ask him whether, supposing we had borrowed money and our currency had appreciated by 5s. in the £, he would have paid that extra amount to the people who lent us the money? He cannot have it both ways. What is sauce for the goose is sauce for the gander. A good deal has been said about the people who lend the money. They lend it because we ask for it. They do not thrust their loans upon us. Yet hon. members talk as if these people were blood-suckers, sharks and Shylocks. And we borrow money in Great Britain cheaper than any other part of the world. The only other country where we can borrow is the United States, and some years ago financiers from America approached the Government in regard to financing us. The matter was gone into, and it was found that although America had tons and tons of money—more than she knew what to do with—the rate of interest was much higher than the rate at which we could borrow in old England; and I am reminded that was during war-time. I listened with a good deal of interest and a little bit of amusement to the hon. member for Wonderboom (Mr. B. J. Pienaar), but I think he made a faux pas when he referred to racialism. When the hon. member had the bad taste to charge the hon. member for Cape Town (Central) (Mr. Jagger) with racialism I was astounded. The hon. member for Cape Town (Central) did not utter a reference to the preference question except on a business footing. He referred to the fact that Great Britain was our best customer, taking about 70 per cent. of our produce, and he referred to the fact that we could borrow money more cheaply there than in any other part of the world. He also referred to the fact that South Africa is, like the rest of the Empire, protected by the British fleet. How that can be construed into raising racial question I am to tally at a loss to know, and I hope the hon. member will, on reflection, see that he made a mistake in introducing the subject, The hon. member for Cape Town (Central) might have gone a good deal further, and said that on sentimental grounds we should treat the Motherland a good deal better than other countries. That is the opinion of many in this House and outside. I regret if there has been any suspicion, or any statement made either in the press or elsewhere, in connection with this matter of preference, that the Minister’s proposals are actuated by hostile or anti-British motives, and I take his statement by the hon. Minister of Finance at its face value.

Business was suspended at 6 p.m., and resumed at 8.5 p.m.

When the sitting was suspended, I was about the draw attention to some political gems that fell from the lips of the hon. member for Wonderboom (Mr. B. J. Pienaar), but before that, perhaps, I may be in order in referring to a very interesting article that appeared in the “Argus” last evening. It purports to be a report of an interview which a gentleman called Mr. Frederick Stubbs, who represents the “Adelaide Observer,” had with the Prime Minister some time ago. Mr. Stubbs states that the substance of the interview was sent to the Prime Minister for correction, so that it may be regarded as authoritative. There is one very interesting thing in it that I should like to draw the Prime Minister’s attention to. The article goes on—

If that is authentic, and if these words represent the words of the Prime Minister, I think the country at large will feel relieved, because there is no doubt that a large number of people are still uneasy in their minds about the intention of my friends opposite.

You are stirring them up.

I am not. Now that the Prime Minister is in his place, I would like to ask him whether this is a correct report of what he told Mr. Stubbs, of the “Adelaide Observer.” I will not bore the House by repeating it. The hon. Prime Minister has no doubt read it, and if he will confirm this statement he would be doing a service to the country. We want peace and contentment in the country, because there is no doubt that the public mind is uneasy about this question of secession. If the Prime Minister and his party will confirm these words and speak in these terms, they will be doing a service to the country.

What is it all about?

It is a report of an interview Mr. Frederick Stubbs had with the Prime Minister. He reports for the “Adelaide Observer,” published in Australia, and I will read it again. The Prime Minister says—

I am afraid it is Natal he is referring to.

If the Prime Minister says it is incorrect—

I say it was Natal which is to-day looking upon it as a practical question.

The Prime Minister cannot sidetrack the question in this way. Either he used these words or he did not. In order to put the matter at rest, I invite him, in the course of this debate, to say whether this interview is correct, and whether he used these words or not. I sincerely hope he did use the words, and I hope his colleagues in the Government, including the Minister of Justice and those members sitting behind him, endorse these words. If he will confirm these words he will settle the minds of a great many people in this country, and do a great public service. There is just another point in connection with the interview, but if the Prime Minister tells me it is incorrect I will say no more. In the absence of a contradiction I take it is correct. The interviewer said to the Prime Minister—

He says these words—

If they are, they must be allowed to work as at present, but if we understood the Minister of Labour aright, when he introduced the Wages Bill, he intends to take the work away from the natives and give it to Europeans and coloured men. Without discussing the Wage Bill, it surely is not possible for the Prime Minister to adopt the policy of leaving the native labourers in the towns and cities, as at present, and to look after their interests, and at the same time prevent them from working? I have my own views about the matter, but I am not the Prime Minister, and it is the country, and the natives especially, who will want to know what is meant by these words. To go back for a minute to the statement made by the hon. member for Wonderboom (Mr. B. P. Pienaar), he found fault with the hon. member for Cape Town (Central) (Mr. Jagger) for criticizing the Government for helping the provincial councils to keep on spending money, and the hon. member for Wonderboom (Mr. B. P. Pienaar) said that any amount spent on education is well spent. If the hon. member had said any money that is well spent is properly spent, I could have understood him. Some provincial councils have been getting too much money in the past. I remember when the Union was started and the subsidies were paid to the Cape Province, on the £ for £ basis, including an amount for local taxation, the administrator and the council had so much money that they did not know how to spend it, so they spent it largely on education. I am all for education, but not for extravagant and unnecessary expenditure in education. The Baxter report and the other commission showed quite plainly there was unnecessary expenditure in connection with education, and for my part I entirely endorse the criticism by the hon. member for Cape Town (Central) (Mr. Jagger) in connection with the provincial council expenditure. A large number of people are so dissatisfied with the provincial councils that they would like to see them abolished. I am not one of those. I am in favour of them, and I have always been in favour of provincial councils, because I think they are doing the work that cannot be done as well by the central Government or the central Parliament. The system of giving them these large grants, and increasing the moneys paid under this Budget, is a mistaken one, because the more you give some of them the more they will want and the more they will spend. So far as provincial councils go, I believe they will have a long life—that is, if they cut their coat according to their cloth. The hon. member for Wonderboom (Mr. B. J. Pienaar) said we have a definite agreement with the provinces; that the late Government tried and failed, but that our Government has done this. It was an easy thing to agree with the provinces, because the hon. Minister gave them all they wanted. We are now asked to vote £949,000 additional to the provinces in the budget, and I am afraid that instead of a reign of economy coming into force in connection with provincial matters, we shall have more extravagance than ever. I am sorry to see that the Minister intends to take away from the Natal municipalities the revenue which they have had in the past from licences. It really is a case of robbing Peter to pay Paul. He takes away from the municipalities revenue which they have had since they were created 50 or 60 years ago and hands it over to the Provincial Council. I do not think he ought to encroach upon their functions at all. The result is that they will have to raise additional revenue just as the Provincial Council would have done, but in order to save the provincial councillors imposing additional taxation, he takes away a legitimate source of revenue from the Natal municipalities. I think that an act of injustice is about to be done to the municipalities. The hon. member for Wonderboom (Mr. B. J. Pienaar) told us in his speech that he wanted to inform the public as to the true financial position in this country. He made one very astounding statement, namely, that the taxation of the public had increased since 1910 by 1,200 per cent.

Direct taxation.

I think the hon. member is correcting himself now. My note says—

Of course that is nonsense. I could not follow the hon. member’s figures. If he means that for every £1 paid directly in 1910 a man pays £12 now, his figures must be wrong. Does he mean to say that the man who paid £20 in direct taxation in 1910 pays £240 a year now? I would like him to examine his figures a little more closely. He also told us that the wicked Government that preceded the present Government piled up a deficit of £16,000,000. I do not think the Minister of Finance agrees with his figures, because he has told us that he has wiped off the deficit by applying the surplus, £800,000, and taking from the balance in the hands of the Custodian of Enemy Property £1,100,000, making altogether £1,900,000. It is quite true that at one stage a certain amount of money was taken from loan funds to wipe off the deficit. That has been done all over the world during times of stress, but to try and make the public believe that there was an actual deficit of £16,000,000 is simply not borne out by the figures. In connection with preference, the hon. member (Mr. B. J. Pienaar) also said that, assuming the preference of 3 per cent. goes off, the British manufacturer loses the trade, but the consumer benefits. I don’t know how he is going to benefit, but that is what the hon. member said. He also said if the consumer pays more what harm would it do to British manufacturers, because they will still be doing the trade? He seemed to place the hon. member for Cape Town (Central) on the horns of a dilemma. Surely the hon. member (Mr. B. J. Pienaar) must admit that the abolition of the preference of 3 per cent. may mean that the foreigner will do the business, and the British manufacturer will be kept out, but the consumer of this country will get no benefit whatever and we shall do a bad turn to our best friend and our best customer. At the present time, generally speaking, we have a tariff of 20 per cent. against the foreigner and 17 per cent against the British manufacturer. The British manufacturer is doing, we will say, the bulk of the trade. If you take away his preference, the foreigner may come in on his 20 per cent., because he may beat the British manufacturer by 1, 2 or 3 per cent. and the consumers in this country will not be a penny better off. I would like to refer to another matter and that is the question of native taxation. The Minister said that additional taxation was to be placed upon the natives, which would bring in practically another half million. The present taxation produces £900,000, but he proposes to impose a general tax of £1,125,000 and a local tax of £290,000, giving a total of £1,415,000. I ask the House is this a good time to impose additional taxation on the natives when you are starting to deprive them of certain avenues of employment. I think these two matters have not been considered by the Government in juxtaposition. The Minister of Labour, in carrying out his idea of fostering white labour, is going to exclude the native from certain branches of work. If the Minister is to carry out his policy he will have to throw a large number of natives out of work. The Minister of Finance, on the other hand, is only concerned with the finances of the country and he has made up his mind that he is going to get an additional amount of money out of the natives.

That is for their own benefit—native development.

I do not think the natives are going to thank the Government for, on the one hand, depriving them of work, and, on the other hand, imposing taxation on the plea that we are going in for native development. It seems to me that either the one course or the other ought to have been adopted. There ought to have been no attempt to deprive the native of work, or if that were done there certainly should be no attempt to make him pay additional taxation. I would be the last man to say that the native must not pay his fair share of taxation. We know the natives of this country, speaking generally, are very poor. There are rich natives, there are well-to-do natives with cattle and other property, but they are few and far between. The bulk of the natives are living from hand to mouth, and to attempt to raise another half-million of taxation from them under present circumstances is, I think, to ask them to do something unreasonable. We saw the other day that in Natal a large number of native chiefs had a meeting; and they said, in view of the additional taxation which the Government intends to impose, they intended to organize and agitate for increased wages. They wanted the farmers to pay £4 a month in the case of married natives and £3 a month in the case of unmarried natives. They also said that if they were to be taxed for the education of their children, they must take away their boys and girls from work and send them to school. These natives, in demanding increased wages, were not agitators. They were not jumped-up Kolwas who had a little education. These were the old chiefs who in Natal are looked upon as representing the Government in native matters. There is a chain of responsibility in native affairs. We have the Native Department represented by magistrates; under them are the chiefs who are paid a retaining salary; each chief has so many headmen, and so it goes on down to the inmates of the kraal. When chiefs get together and formulate demands of this kind the Government should be most careful before seeking to increase the burden on the natives. I intend to do my best to prevent their doing so. It will be remembered that we had an unpleasant experience in Natal in connection with the Poll Tax imposed in 1906. I do not say it was the sole cause of the rebellion, but we had a very serious rebellion, and there was no doubt that it was partly owing to the imposition of the Poll tax which the natives thought was unreasonable. I think the Government ought to pause and consider the matter most carefully before carrying through their intention of imposing further taxation upon the natives. I am glad to see the Minister of Railways and Harbours in his place, because I want to say another word about railway rates. I took the liberty of addressing a few words to the House on this subject some time ago, but so far as I am aware, the Minister is adamant in connection with these rates. We know the railways are doing particularly well, and we compliment the Minister upon the position in which he finds himself, partly owing to his own efforts and partly owing to the efforts of the hon. member for Cape Town (Central) (Mr. Jagger). The Minister has always given him credit for his good work, and we give credit to the Minister for best intentions. The railway rates in this country are too high, and I refer especially to the coal rates. I want to know why the coal sent from Natal coalfields down to Durban for ships’ bunkers should be charged 125 per cent. higher than in 1914 The price at that time was 6s. 8d. a ton; it is now 15s a ton, and there is no doubt that these rates are hanging up the development of the Natal coalfields. There are large tracts of coal-bearing land in Natal which have been given in option to companies, but they are staying their hands. If they had encouragement to open up the coalfields there would be additional employment and the country generally would benefit. Apart from this, the industries of the country are also suffering. There is no doubt that manufacturers in Cape Town, Port Elizabeth, East London and Durban are suffering from these heavy rates; and seeing that the railways are now making a profit and are on the up grade, I think one of the first duties of the Minister is to encourage industries by reducing coal rates. Another matter is the housing loans. Hon. members will remember that every year for some years we voted sums of money to enable municipalities and others to build houses for the townspeople, or to lend money to private individuals for the purpose of erecting houses. That policy was introduced some years ago owing to the serious shortage of houses in the country, but evidently some municipalities are inclined to stay their hand. I was sorry to see that, although the Government were committed to spend £2,381,000, only £733,000 was expended last year. I am not blaming the Minister at all; I am blaming the municipalities. The Minister said this money was unexpended owing to delays on the part of local authorities. In that connection I read an interesting report by the Medical Officer of Health of Cape Town the other day. He stressed the absolute necessity of increasing the number of dwelling houses for the labouring classes, mentioning the deplorable state of overcrowding in Cape Town and giving some figures. He said that in a district west of Long Street and under Signal Hill 223 houses ―small houses of three or four apartments each—had two families in each house. 154 houses had three families in each house, and 127 houses each contained four or more families. And he went on to say that the first necessity is the construction of more houses for the labouring classes. I am hoping the Minister will communicate with the local authorities and point out to them what their duties are in this respect. The Government, I know, has placed the money at their disposal, but they are unwilling to spend it for fear of affecting the value of existing properties. I am afraid there are too many property owners on the Town Council, and that they are not looking after the interests of the poorer people.

You should join the Labour party.

I am glad I am getting some support. I read in the newspaper the other day a letter which purported to be written by the Administrator’s secretary to the Town Clerk of Cape Town, in which he urged the Council to go slowly in regard to house construction. I can hardly believe that such a letter was written, in view of the necessities of the case, but I would like the Government to enquire into the matter, because they can use a good deal of pressure with the municipalities. Overcrowding is a menace to the whole public of the country, and overcrowding of coloured people reacts on the white people, while overcrowding among poor whites reacts on the whole population. This is one of the matters in which the Government can perform a great public service, if they will persuade the municipalities to expend the money put at their disposal for the purpose of housing the poorer classes of the community. I hope that if the municipalities will not move, the Government will take legislative power to move at the expense of the municipalities.

The late Minister said there was no money.

No; the hon. member is quite wrong. I was instrumental, for several years running, in putting a sum of money on the Estimates which was never exceeded. In regard to the fact that there is to be no relief from taxation, I do not wish to repeat all that the hon. member for Cape Town (Central) (Mr. Jagger) has stated, but the fact remains that while the Government has an overflowing exchequer, the taxpayer of this country is to pay more in taxation than previously. We are asked to find close upon £2,000,000 more than was budgeted for last year, and I do not think the reasons given by the Minister will satisfy the public that their interests are being properly protected. I think that the Government might very well have looked around to see where they could have benefited the people. They might have reduced the amount of the income tax. It would have been a welcome relief if he had been able to reduce the basic figure from 1s. to 9d., or even to 6d. He might have removed the dumping duty on flour. People want cheap bread and his own commission recommends this, but it is not done. The dumping duty is kept on. While the millers are making big profits of from 12 to 15 per cent. per annum, the people are in many instances starving, and relief works have been provided, and yet the dumping duty is put on apparently for the benefit of the millers—rich people who are making large dividends.

You put it on.

I was surprised at the hon. member for Troyeville (Mr. Kentridge) not making a strong protest regarding this failure on the part of the Minister. No doubt the Minister has the best intentions in the world, but there is another way in which he might have relieved the public and that is by reducing the customs duty on such articles as come into this country but cannot be produced here—articles of necessity, of every-day use. He might have given way a little, seeing that he has an overflowing exchequer.

He has done.

Yes, but for every £1 he has given he has taken an extra £2 in taxation by abolishing preferences. A Government in the happy position of having increased trade and good harvests coming along and who are now reaping the benefit of the unpleasant work which the late Government were forced to do, might have done more. We had to impose all kinds of unpleasant and unpopular taxes. There is no Government in its sane senses that would impose taxation for the fun of the thing. But the late Government had to pay its way; the credit of this country had to be kept good, and we had to impose additional taxation which made us unpopular, but we also went in for drastic economy and drastic retrenchment. Now the Minister of Finance and his colleagues are reaping the benefit. I would like to remind them that during the last election the cry was still that the late Government were guilty of the greatest extravagance; that we were unmindful of the working-class, and looked after the moneyed class and had hordes of unnecessary officials.

Quite true.

Well, if that is so, he ought to ask the Minister of Finance and his colleagues to go into the services with a toothcomb and get rid of the superfluous officials. That has already been done. I hope it will be possible to do still more, but I am willing to make a bet with the hon. member—

Although you have not ruled me out of order, Mr. Speaker, I believe it is unparliamentary to make a bet, but I am quite sure that if the Minister of Finance appoints a committee to go through each branch of the public service as we did, and weed out the superfluous men, he will find that work has already been done and that he cannot introduce any further economies in that direction, notwithstanding the misleading statements that were made to the public at the time of the election.

We admit you sacked them all right.

Yes, we got rid of quite a number of superfluous men whom we could not afford to pay. With regard to the policy which underlies the Budget, I think everybody must agree with the Minister that we must put the interests of South Africa first every time. We must do our best to continue the policy which the late Government laid down of protecting our local industries, and I am sure the House will assist the Minister in doing those things. But when I say I am in favour of putting South Africa first I also say I am in favour of putting the British Empire second. I am inclined to think that the Minister does not put the British Empire in the position that some of us would put it. Instead of saying “South Africa first and the British Empire second and the rest of the world third,” I am inclined to think that the Minister says “South Africa first and the rest of the world, including the British Empire, second.”

Who says that?

That is the effect of the Budget.

You must not say a thing like that.

I hope it is not the case; but the Minister has told us he is going to give a miserable pittance of £100,000 extra benefit to Great Britain over and above the quid pro quo basis. The quid pro quo basis in favour of Great Britain amounts to £200,000, but he is going to be generous enough to give another £100,000. I think that his generosity must scare the British manufacturer.

Are the British manufacturers Great Britain?

After all Ministers no doubt hope to gain support and to remain in office for ten or twenty years, but they could only do that by getting additional support, and they will not get additional support in some quarters unless they consult public opinion and sentiment in some of these matters.

Like Klerksdorp?

I would like to ask, supposing South Africa were in financial trouble, or in trouble in time of war, from whom would you receive assistance—from Italy or Germany or the United States? When the hon. member for Cape Town (Central) (Mr. Jagger) asked a similar question a member on the other side said “The League of Nations.” He must be very credulous, however, to think that the League of Nations is able to help anybody very much at the present time. I am a great believer in the League of Nations, but it is in its infancy at present, though I believe it will grow.

It has been a failure up till now.

As I said, it is a toddling infant, and for carrying out any decision it has to rely mainly on the British navy.

The League has cost us £140,000 already.

I think the present is a very inopportune time to take away the preference, and to give a preference only on 22 articles, which seems to the limit of the Minister’s generosity. I think it is a very awkward time to be so parsimonious, so very mean, especially when the British Government are considering the granting of further preferences.

That has been discounted already.

Has been discounted?

Yes. We have allowed for that.

I should like to know whether the hon. Minister is taking power to give further British preference, because if it is in his power to grant preference to a foreign country he ought to give a further preference on other articles, or a greater preference on the 22 articles.

Britain stands in exactly the same position as any other country as regards the rest of the tariff.

Will the Hon. Minister say how Great Britain, a free-trade nation, can reduce its tariff on commodities on which it has no tariff?

Yes, I will tell him.

And will the hon. Minister also tell us, if he gives preference to Italy, Germany or some other country, will he give an equal preference to Great Britain? It is monstrous and unthinkable that we, as part of the Empire, should, in Parliament assembled, seriously think of giving a greater preference to any of these countries than to Great Britain, because when the matter was referred to before the Prime Minister said that England may be given equal preference. If we give preference to Germany we may give similar preference to England. But we must do it; I say we cannot possibly give foreign nations a greater preference in regard to trade, than we give to the Motherland. It is not a question of the flag—it is business. Does the hon. member for Bloemfontein (North) (Mr. Barlow) approve of giving a greater preference to any article of manufacture from Italy, France or Germany than he gives to one from Great Britain?

The Labour party in England don’t want preference.

The hon. member refuses to give a reply.

They are nearly half the population.

Why did you place your orders in Germany instead of in England?

I should also like to ask the Minister of Finance or the Prime Minister if he would be good enough to tell us whether any communication has passed between this Government and the British Government in regard to the various articles on which preference should be given to British manufacturers. I do not know sufficient about the matter to know whether the preference on these 22 articles is going to help the British manufacturer or not. One would imagine that, if the Government intends to negotiate with foreign countries regarding the tariff, they would have communicated with the British Government and asked them on what articles of manufacture it would be most useful to the manufacturers to give the preference. The Minister has not told us, so far as I followed his speech, whether any communications have passed; if so, we ought to know. If not, I think the Government has been very remiss in fixing up its new tariff which, with the assistance of their friends behind them, and the Labour party, they will carry. I ask, is it reasonable to withdraw the whole 3 per cent. preference and give a preference on 22 articles if they are not going into the matter with full sympathy and in a friendly manner towards the British Government? If there has been correspondence, I think the House is entitled to see it, and to see whether the two Governments are at one in regard to this matter. I am not one to wave the flag and say that we must, under all circumstances—(interruptions). But I do say that if there is any sincerity in the statement that the Prime Minister made, that Great Britain is the best friend of South Africa, then it is the duty of the Government, when arranging this matter, to communicate in a friendly spirit with that Government, and if they have done that, to place the correspondence before this House. There is one matter to which I want to refer finally. It is rather important, and is a legal matter. It is this: Supposing this Government negotiates with a foreign country—it may be Italy, Germany or any other country—and agree that that country should give us a preference in their markets, what would be the position of that country in regard to the treaties which it may have with other nations, under which those nations get the most-favoured-nation treatment in regard to tariffs? I understand that Italy, for instance, has a treaty with various countries, including England and France, under which they promise to give those countries the most-favoured-nation treatment. That is to say, if they give us any preferential treatment in their market to our produce, they will have to give the same preference to every other nation with which they have a treaty. Has that matter been considered by the Government? I can find nothing about the matter in the report which has been sent out by the Board of Trade. I am inclined to think the Board of Trade has overlooked the matter and that the Minister has also overlooked the matter, but it is most important. The Minister shakes his head. Will he take a note of the matter and enlighten the House? We are a portion of the British Empire, and in the past the Imperial Government have made treaties with foreign countries promising to give them the most-favoured-nation treatment with regard to trade. If we, as a part of the Empire, give preference to any foreign country, what is the position with reference to a treaty which has been made between England and other countries, under which they receive a most-favoured-nation treatment? It is rather an intricate matter to deal with and I will repeat it. Great Britain has, with our knowledge or consent, made treaties with foreign countries promising them the most-favoured-nation treatment in regard to customs duties and so on. Supposing a part of the Empire without further consultation with the Imperial authorities, gives preference to any country, will that in any way invalidate the treaty made between those countries? We in South Africa would like to arrange our own affairs; I would like to see us, while remaining a part of the Empire, be entirely free to arrange our customs duties as we like. Under present circumstances, and in view of the fact that in the past the Imperial Government has negotiated treaties in the name of the Empire, I want to know what the position will be of England in regard to those other nations if we give a preference to any European country. It is an important question and it may have a repercussion on us in South Africa. I do not know whether there is anything in the point, but I would ask the Minister to look into it very carefully.

What about the treaty between Canada and France?

That was entered into after consultation by Canada with the Imperial Government. I do not want to put obstacles in the way of South Africa making arrangements with foreign countries so long as Great Britain has the greater preference, but where she does not want a bigger preference she should get at least as good treatment as that accorded any other country. The Minister stated, in introducing the budget, that he was not animated by any anti-British feeling, and I believe that is the truth, but there is a want of warmth and sympathy in connection with this budget which, I think, is to be deplored. After all, there is no doubt at all that we in this country will find it to be in our interests to be in closer and more intimate terms with Great Britain than with any other country. We are a part of the Empire and ought to play our part; we are getting great benefits from being part of the Empire and we have to realize that we have a certain responsibility as well.

I am sure the House will agree that there is really little to reply to in the speech of the hon. member for Dundee (Sir Thomas Watt), for a good deal of it had nothing to do with the budget, and that which did refer to the budget was like a cross-word puzzle. I found the speech interesting, for it showed how hopelessly divided the counsels of the South African party are. Only two South African party speakers have so far taken part in the debate, and yet the second speaker has to repudiate entirely the most essential part of the speech of the hon. member for Cape Town (Central) (Mr. Jagger). The latter built up an enormous case against the new tariff on the ground that it is protective.

Nothing of the kind, but on the ground that it is going to raise the cost of living.

What is the difference?

A very considerable difference.

His colleague gets up and repudiates—

What nonsense!

This makes it very awkward for members on this side, for we really don’t know what is the policy of the Opposition. It would help us very considerably if hon. members opposite composed their differences before they spoke. There was another point about the speech of the hon. member for Cape Town (Central) on which I think the hon. member for Dundee will also disagree, namely the part in which the former deplored the increased taxation since 1913. It was bad enough to know that you have made a mess of things, but when you find a leading member telling his own party that they have made a mess and informing the country that owing to the mess we have unemployment it is going the limit. Yet what the hon. member for Cape Town (Central) has said is true, because it has been borne out by what has happened in South Africa during the last twelve months, for no sooner did the new Government take over and lighten the burden of taxation then there was an immediate turn in the tide. The remission was very slight, but after the major remission of this year has been granted the tide of prosperity will set in. The hon. member for Cape Town (Central) tries to make out that there is increased taxation, but I think there must be something very wrong with his arithmetic. The actual remission granted this year is: tobacco tax £200,000, the return to penny postage £130,000—

A promissory note.

Our promissory notes are honoured. Then there is the estate duty.

There is not a sixpence remission there.

Very well, I will allow nothing for that. Now we come to the tariff. The duty on household articles is reduced to the extent of £270,000. Then there is the free importation of industrial items, instruments of production in South Africa, which amounts to £180,000. A total of just over £780,000 with tobacco, the 1d. post and the reduced tariff remissions. In the second place you have a remission of provincial taxation. Unless the cause of education in South Africa is to be harmed irretrievably, increased provision had to be made for money for education. That is the mandate we had from the country only 12 months ago. We are granting £800,000 to the Provinces, but I will accept the figure given by the hon. Minister of Finance, namely, £500,000, a total of £1,280,000 remission from taxation. What are the increased duties?

You would make a fortune.

There are increased duties on luxuries, and to protect industries amounting to £250,000, and on preference £600,000, a total of £850,000. From the remissions of £1,280,000 that shows that we are on the right side by £500,000.

Do you mean that seriously?

Those are the figures. What is the figure the hon. member for Bezuidenhout (Mr. Blackwell) objects to?

Your remission of provincial taxation.

We have a mandate to look after education in South Africa, and we are doing so. The hon. member for Cape Town (Central) (Mr. Jagger) made an attack on our policy of education. I can understand members on the other side not being in favour of more education in South Africa, because the spread of education has disastrously affected their party. The more education in South Africa, the thinner the ranks in the membership of their party. I want to show him the disastrous effect of the Burton policy with regard to education in South Africa. I have the figures of school attendance in the Cape Province. The normal increase in the school attendance in the Cape Province up to 1921 was 5,000 per year, but after 1921, after the Burton policy was introduced, the normal increase the next year fell to 1,800, the next year to 142, and the year after there was a decrease of 1,944. Therefore, there has not only been a falling off but, if you add the loss of the normal increase, then the number of children out of schools in the Cape Province amounts to 15,000. That was the position in the Cape Province. It was just as serious in the Free State, where the normal increase was 2,000 per year. In 1923 there was a decrease of 130, and last year a decrease of 1,084. That is the effect of the Burton policy on education in the Cape Province and the Free State. The same thing happened exactly that I warned them about. Mr. Merriman in 1908 reduced the vote by £125,000 and drove 11,000 children from the schools. That policy was at the expense of education and 20,000 children have been robbed of their education. The hon. member for Cape Town (Central) (Mr. Jagger) says there has been waste. Here you have proof that there has been no waste in South Africa, for if there had been, it ought to have been possible to effect economy without driving children from school. Economy in education has gone beyond the economic limit. If there is a lot of dry wood on a tree you can take it away without ruining the tree. Here, it is the very life of education which has been taken away. I found a remarkable omission in the speech of the hon. member for Cape Town (Central) (Mr. Jagger). Why didn’t he attack us on the other heads of increased expenditure? Because he knew, apart from education, about which we got a definite mandate, that every other item of expenditure was due to clearing up the mess we got from them. Let me give the House proof of that. Every other increase on expenditure on this Budget this year is necessary to liquidate the debts allowed to accumulate by the party opposite when in power. The hon. member knows it.

What debt?

Let me give you one example, the pension fund. I don’t know whether the country knows in general what the deficits were which were left by the last Government. They left pensions in arrears to the extent of over £6,000,000.

What nonsense.

The hon. member for Cape Town (Central) (Mr. Jagger) has established for himself a reputation for figures, but I begin to wonder if he deserves it. He says there is not a deficit of £6,000,000. On the Cape Civil Service Pension Fund, the deficit is £1,361,000, on the Natal Police, £800,000, on the Natal Public Employees, £14,000, on the Natal Public Services, £10,000, altogether £2,186,000. Then you have on the railway both funds in arrear. The railway pension fund, £1,900,000, and the railway superannuation fund, the same amount, £1,900,000, a total on the railway of £3,800,000. Add those together and you get over £6,000,000. That is why I say, and the hon. member for Cape Town (Central) (Mr. Jagger) cannot disagree, this is the first honest budget we have had in South Africa. This is the first time that South Africa knows the true extent of its liabilities. The previous Government knew all about this, that all the funds were in a state of arrear, and they also knew that all these things had to be paid in pursuance of the law, and yet they refused to do their duty, but, like Mr. Micawber, they were ever waiting for something to turn up. Now we have got to liquidate their debts, and I am glad that the hon. member for Cape Town (Central) (Mr. Jagger) at least had so much honesty that he did not throw stones at us on this score, for the true role of the South African party on this question is to do penance. I want to come now to the question of the new tariff, and I must say at once that I cannot understand the hon. member for Cape Town (Central) (Mr. Jagger), because I want this House to know that we are not abandoning the principle of preference, but we are placing it on a business footing. We are no longer making it indiscriminate, we are trying to place it on a business footing, and if there is one member in this House who has preached to us business methods, it is the hon. member for Cape Town (Central) (Mr. Jagger). It has been his slogan for years past that we want less politics in business and more business in politics. The moment we propose to give practical effect to that slogan, he rises up in his wrath and predicts black ruin for South Africa. What are his objections to this tariff? In the first place, he says it is an injustice to Great Britain, it is a monstrous shame, a slap in the face. The hon. member must know that the balance of preference is still in favour of Great Britain.

You have a free market there.

Yes, we have a free market, but that free market is not merely extended to us; it is extended to the whole world. In the British market we have no preference; we have to compete against all the countries of the world. Let us face the facts. The balance is in favour of England—a balance to the extent of £100,000. Surely that is not a “slap in the face.”? As a matter of fact, this new tariff is a friendly gesture towards Great Britain. The whole spirit of the speeches made and the resolutions taken at the Imperial Economic Conference was in favour of the tariff as we have arranged it in South Africa.

No.

The hon. member knows it. I will read him one or two speeches. The hon. member for Standerton (Gen. Smuts) was present at this Conference. I want to show that the sort of tariff we are giving Great Britain to-day is the sort of tariff Great Britain wants. General Smuts said—

that is exactly what we are doing now in South Africa. He says—

What are we doing to-day? Instead of the old general percentage preference of three per cent. we are giving them specific preferences—the very thing they want. Mr. Burton said the same thing at the Imperial Conference in Great Britain. He said—

He says, further—

Let us see the principle upon which the Board of Trade proceeded. Here we have it. Your Board of Trade says this—

After all, who is on that Board of Trade?

Here you have Mr. Seals Wood, President of the Transvaal Chamber of industries saying that he thinks the outstanding feature of the Budget is its optimism. He regards as fully justified the re-adjustment of the preference to the British Empire on a reciprocal basis, which seems quite sound. Col. Ormsby-Gore, Under-Secretary for the Colonies said, referring to the reports which had appeared in the press as to the attitude of the South African Government regarding preference, that the statements in the press were grossly exaggerated, and that, actually, the proposals of the South African Government, as he read them, were unlikely to do any great harm to British industries. That is a very guarded statement, but it goes to prove that the Board of Industries specially designed this tariff to assist struggling British industries. Up to the present we have helped British industries that have not required it, and we are now going to help those industries that do require assistance. The hon. member for Cape Town (Central) (Mr. Jagger) will admit that South Africa is not a rich country. He has often said so himself. We cannot afford to throw away hundreds of thousands of pounds every year; that is waste. Here we propose to assist those British industries that actually require assistance, and to help South African industries along. I want to look at the second argument against the new tariff, and that is the cost of living argument. Let me say that even if the cost of living is going to be slightly affected by this new tariff, I would welcome it, because the compensating advantages to our industries will be great, and I am prepared to pay the price The time has come in South Africa when we must make a great move forward in industrial development. South Africa has shown during the war period what she can do in the way of industrial development, but unfortunately that development has been interrupted by the previous Government that sat here. The hon. member for Dundee (Sir Thomas Watt) brought forward a remarkable argument. He said we were going to reduce avenues of work. That is why we want industries in South Africa. Experience has shown that the agricultural and mining industries in South Africa are unable to afford a livelihood to all the European people in South Africa, it has been proved. The industries in their present state cannot absorb the European population in South Africa. The mining industry is a declining industry; and the time has come to build up industries in their place. Otherwise there will be no work for the white man in South Africa. I am not at all sure that there is going to be an increase in the cost of living.

Only on luxuries.

In the first place, in your new tariff there is a reduction of duty on household necessities, particularly clothing material. So that means a little cheaper clothing. In the second place the cost of primary production will be reduced by the free importation of implements of production. That means a little cheaper food in South Africa, and a little cheaper clothing. The only increase is on luxuries. With the little study I have given to it, I am forced to the opinion that most of these arguments on the cost of living are mere piffle. The more I study this Budget, the new tariff particularly, the more I come to the Conclusion that this is the first national tariff we have had in South Africa. I am glad the Minister of Finance publicly paid tribute to the work of the Board of Trade. This tariff reflects the greatest credit upon them, and if they do nothing else they have deserved well of South Africa. Everyone is going to benefit. The worker is going to have cheaper clothing and food and increased opportunities of work. The farmer is going to benefit by cheaper implements, and manufacturers all over the country are smiling at the best tariff they have ever had in South Africa. There is just one point more about this tariff which I should like to mention, and that is what it is going to mean to get better markets for our primary products in South Africa. It has been said that England was the best market for our products. I must admit it is a very good market, but what hon. members must not forget is that there are European markets exceedingly anxious to get some of our products. To-day, however, they have to buy our produce in the London markets. All we want to do is to open up direct trade with those countries which afford markets. Southern Europe is becoming a splendid market; they want our meat particularly. In this new tariff we have an instrument of bargaining to trade with these markets. There is nothing in this tariff in any way anti-British. The Government are prepared to co-operate with the British Empire, to assist British industries; but over and above that we want in South Africa economic exploration. That ought to be our motto and our slogan. Cooperation within the Empire as far as possible, but do not let us be merely content with markets in the Empire, but let us explore every possible avenue of trade and find good markets for our products. One thing I can say about the Budget is that there is not a farmer in the country who does not welcome it, and if the workers knew everything in it they would welcome it just as much as the farmers. Certainly it is the first Budget we have had in which due regard has been paid to the interests of South Africa. In conclusion, I wish to say to the Minister of Finance that the country applauds his Budget and the country also applauds the statement he made at the conclusion of his speech that there is still room for economy in South Africa. I know he is going to start economizing and when he does so I trust he will distinguish between unproductive and productive expenditure. I am not in favour of money being stinted on productive expenditure such as land settlement and education, as the very life and well-being of South Africa depends on these, but on unproductive expenditure there is room for economy and I will give one instance which happened in the time of the former Government. Does the House know that in the difficult times we passed through, in 1923, the transport expenses of the late Government increased by 7 per cent. The annual expenditure under this head is £400,000. In one year they increased motor and animal transport by £26,000. The cost of transport everywhere had come down and yet this large sum was spent on motor cars and horses and joy-rides. If the Minister of Finance is looking for ways of effecting economies, I recommend this to his notice. And I wish you to notice that this happened at a time when the country was badly in want of money. The Budget is a people’s budget. I think the Minister of Finance is one of the most popular members of the Government to-day, and if he succeeds in reducing our expenditure by effecting useful economies he will still be hailed as the greatest finance Minister we have had.

From the speech made by the hon. member who has just sat down (Mr. Werth) I think he would make a most excellent minister of finance. He has got that facility in conjuring with figures which is necessary in a minister dealing with that portfolio. Unfortunately he disagrees with his own Minister in many respects. For instance, he mentioned that the estate duty would show a reduction of £25,000, but I am afraid he looked in the wrong column. This White Paper shows that the Minister expects to receive £25,000 more from the death duties and not less. I quite agree that it is only a small detail as to whether you notice a thing is in one column or another, but it is rather unfortunate for the Minister of Finance that the fact is as I have stated it and I do not see how that sum of £25,000 could be realized unless the people of South Africa pay for it.

What about profits?

We are not talking about profits. I quite agree that the member who has just interrupted is another budding minister of finance, but even the members on this side have a great deal more faith in the present Minister than in either of the two members I have alluded to. Then a great song was made about the reduction in the tobacco excise. We are not told in these figures what the detailed items are as between tobacco and cigarettes, but we are told quite clearly that the Minister of Finance expects the smokers to pay him £70,000 more this year than last year. When the hon. member started talking it made my brain reel because it appeared that those two items alone would wipe away £100,000 of his savings. A little later on he dealt with the question of the tariff and he said: “Just look at the advantage to the man who has to live in this country. He is going to get a reduction on his clothing and that will reduce the cost of living.” But on looking up the tariff I find that prior to the Budget the tariff was 25 per cent., less 3 per cent. English preference, that is 22 per cent. net. The new tariff is to be 30 per cent. Well, I really do not know where I am. Here are one lot of printed figures handed to the House and the hon. member there, who is in the confidence of the Government, tells us the facts are entirely different from those in the printed document.

The duty on cloth has been reduced considerably.

The hon. member said nothing about cloth. He said the duty on clothing had been reduced which would help considerably in reducing the cost of living. But the cost of clothing is going up—8 per cent., in duty on clothing from the United Kingdom. I can assure the hon. member that the public will pay that 8 per cent.

Why will they?

Because, including the hon. member, there are no philanthrophists in the country who are going to pay it for him. I did not intend to digress on these various subjects because I recognize it is impossible for every member to go over the various phases of the expenditure of our Budget, and the hon. member for Cape Town (Central) has made an excellent criticism of the general details and has presented a case which it will be very difficult for the other side to answer. I should like however, to refer to one or two phases of the Budget which, perhaps, have not been fully touched. I am entirely with the hon. member for Cape Town (Central) (Mr. Jagger) when he said it was a very great shock to the community that there was no reduction in taxation when we have had such an excellent year and there are such excellent prospects, and also when he said that every penny saved in taxation goes to the development of this country, and the country is crying out for capital to develop it. Every penny spent in development is a penny spent in employment, and no development can take place without its bringing extra employment. Therefore, the fact that there is no decrease in taxation is going seriously to affect the unemployment question, and also the question of the development of this country in various aspects. I should like to have some information on the question of the taxation of companies. If the Minister of Finance will look at his statement with regard to his expected revenue from income, he will see that he anticipates an increase from the general normal tax of £260,000, and he also expects an increase of £100,000 under the dividend tax. How that is I do not quite understand. He expects an increase in the dividend tax when he is doing away with that tax. I notice that he expects a total increase of £550,000 in the various classes of income tax. Probably he is working the two things combined, but the country is going to pay half-a-million pounds more in income tax than in the previous financial year. Now, I have no quarrel with the income tax; I think a sound income tax is by far the best form of tax that can be levied; but I do not think that the taxation of companies in the form we have it fulfills the condition of a fair income tax, which should be levied so that the individual pays in proportion to his ability. The method of handling our income tax is that we do not tax the individual; we j tax the company as a whole; so that where you have 100 individuals drawing £1,000 a year each from a company, they are taxed in the same proportion as one individual drawing £100,000, which is very unfair. It is a tax on the person with a smaller income, and, therefore, indirectly putting a man with a larger income on a much more favourable basis. The English method of income tax has always been to tax the individual, though the authorities have always collected the tax at the source. Yet the tax has always been in proportion to the individual’s income and that is where hardship arises in the method in which we handle the income tax. The Act of 1917 went even further and took up the position that the money you borrowed on mortgage by issuing mortgage debentures was not a liability but an asset. The result is that, reduced to an absurdity, it is possible for a company to be charged with income tax on interest owing on bonds even if they make no profit at all. That is, of course, where the principle is wrong, and if you carry it to absurdity it shows a grave injustice. Now, a mortgage debenture is just the same as a mortgage upon a piece of property, but an individual drawing an income of, say, £250 a year from a mortgage, is free from income tax; but if the same individual is drawing exactly the same amount on a mortgage debenture he is subject to a tax of 2s. 6d. in the £, although a man whose income is £24,000 is only charged 2s. in the £, a man whose whole income may only be £250 pays 2s. 6d. in the £.

Three shillings if it is mining.

I think the hon. Minister of Finance will agree that is the position. You are making the individual who invests in a mortgage debenture bond pay a larger normal tax than the wealthiest man in this country. To remedy the absurdity, section 21 (2a) of the principal Act should be repealed. The interest on the money that you borrow is a liability and not a profit. The only other way to deal with it fairly is to give the individual who has been unfairly taxed by being called upon to pay 2s. 6d. in the £ when he is only liable to pay 1s. in the £ is leave to apply for a refund from the Treasury. That is the practice in England. The suggestion in the Act that a company can pay the income tax itself makes the thing more unjust than ever, for then you call upon the ordinary shareholder to pay not only 2s. 6d. in the £, which is more than the majority of shareholders should rightly have to pay, but 2s. 6d. in the £ on the money paid to his creditor. I would also like to refer to the question of preference shareholders. The general public do not recognize that debentures and preference shares are frequently held by people in very moderate circumstances, who invest their money in this way because they obtain increased security over that accorded to the holder of ordinary shares. The small preference shareholder pays under this scheme 2s. 6d. in the £ against the normal tax of 1s. The anomaly was not so great when the tax was 1s. or 1s. 6d. in the £, but now the tax has gone up to 2s. 6d. it represents one-eighth of a person’s income. The Government should take into consideration the necessity of refunding to such shareholders the excess income tax they have paid. There are many anomalies in this Act, but I will not burden the House with all of them, but will only mention one or two instances. A man with an income of £2,500 a year pays £131 8s. income tax, while a man with £3,000 pays £223.

I would like to call the attention of hon. members to rule 62 (2)—

I especially wish to point this out to the hon. member for the Paarl (Dr. de Jager).

I will give another instance of an anomaly. If a man’s income is increased from £4,000 to £5,000 the increase in the tax is £302, but if his income grows from £5,000 to £6,000 the increased income tax is only £215, so that the bigger your income becomes in these two instances the less you are taxed. I could mention a great many more anomalies, and I hope the Minister will bring in a Bill to remove some of the defects of the present Act. With regard to the United Kingdom preference, the hon. member who has just sat down calls this a “friendly gesture” by this Government. He was mentioning the care which the Government has taken so as to help the manufacturer in Great Britain. The hon. member for Cape Town (Central) Mr. Jagger) mentioned one case which knocks the bottom out of that suggestion altogether. The hon. member showed that under the proposed preference the British motor car manufacturer was knocked on the head. It is no use talking about that as a “friendly gesture”—it is a “friendly gesture” with a knobkerrie! I am not quite sure whether the hon. member who has just spoken has read the Tariff Bill right through, because he was so wrong on clothing that he may be under the impression that there is a preference for British motor cars. Now, I quite agree that the public of the Union are going to pay pretty well 90 per cent. of this 3 per cent. which has been knocked off. You are going to increase on numerous items the tax to the South African taxpayer by 3 per cent. On the goods that were at 17 per cent. ad valorem, you are going to make him pay 20 per cent., and the taxpayer is going to pay that, and it is going to add to the cost of living. I further agree it knocks the argument out that we are not doing England so much damage as we say, because the people on this side are going to pay the piper, and not the British manufacturer. I would like to offer this comment upon it. Personally, I never held that British preference in any way filled our obligation to bear part of the cost of our own naval protection. I believe it was an inadequate way of arranging to provide a portion of the cost of our own naval protection. I would have very little to say on the preference schedules if the Minister of Finance had come forward and had said that we don’t think we are doing our duty in this indirect and unsatisfactory way of looking after our own real interests, so we have decided to give a good round sum to the Imperial Government to put up our share for the protection of our own trade.

Why did not you do it?

Unfortunately, I was not in the House, and therefore I am not the Pooh-Bah, and I cannot say what I would have done. If the Minister of Finance had shown that he appreciated that our sea borne trade must be protected by someone, if he had shown appreciation by putting on the estimates a round sum as a contribution to the cost of the Imperial navy, then I should have said you have done that, you have taken away preference, but you have done a better thing because you have given a direct and clean donation to the expenses of that service. The argument seems to be from the other side of the House that it was not much use to England, so we take it away again. They don’t appreciate the feeling there is among the vast body of South Africans that it hurts our self respect when we see a man from any other part of the Empire, and we feel that we are getting protection of our trade at his expense. It hurts our self respect that we are not standing on our own legs like men, and paying our fair whack of the expense of the protection of the sea borne trade of our own country. I take that position, and I think the big body of the public of South Africa do. As regards the two scales, the minimum and the maximum, I believe the country that is not going to tax your exports at all should be put on the minimum scale. I don’t see how you get to a logical position any other way. You may have an article that you export, which England takes in free of duty. You may get a country that has a duty of 20 per cent. and you go to that country and say we will give you our minimum schedule if you will reduce your customs from 20 per cent. to 10 per cent. You then have the anomaly that the country taking your stuff free will be penalized to the extent of 10 per cent. as against the country inflicting on you a 10 per cent. duty. You are going to tie yourself up in most illogical knots, unless you lay down as a start that any country which is going to open its ports to you and give you free entry to its ports shall be put on the minimum scale right away. My opinion is that the least you can do as a business proposition is to give your best customer your best terms I do not ask it for sentimental reasons at all.

Would you apply that to all countries that take your stuff free?

I give two conditions—a country that takes 80 per cent. of your stuff and takes by far the largest portion of that stuff free. I say that the least you can do as an ordinary business transaction is to give that country the best terms you can under your customs.

Would you apply that to all countries which fulfil that condition?

From that side of the House my head staggers at your figures. How can two people both have 80 per cent.? I say that the country which takes 80 per cent. of your exports and takes them free should have the best terms. There is one detail in the customs dues to which I would like to refer. The last item of all says—

As I read that clause, it means that you are going to have two duties for the same thing. We have it now and it is most unsatisfactory. A requisite bona fide for use in your industries shall be free, but the same article not for use in an industry will be charged 20 per cent. I can give a case in this document itself. You have got the case of dyes on which the duty is about 20 per cent. The anomaly is at present in force in this country that when you import dyes to dye a suit of clothes a different colour you have got to pay 20 per cent. duty on the dye. If you import a dye for dyeing a piece of cloth which is going to make exactly the same suit, you get it free of duty. The ridiculous part of the position is this—and I speak with practical knowledge of the subject—that, according to the customs dues to-day, you have really got to have two dye pots of each colour, one for the thing which has been dyed something before and one for the thing that has not. Then you have to keep a check on your men to see that none of them make a mistake by putting the dye in the wrong pot. It should be a principle of the framers of any customs tariff that one class of article has one duty only and no other. Next I should like to say a word about licences. Of course, the commercial view has always been that licences should not be used as a taxing medium, but merely as an authority to carry on your trade or calling. You get your taxation by other methods such as income tax or any method you like, but licences should not be used as a revenue producing medium. To give you an instance of the unsatisfactory working of such a method, let us take the present proposal of taxing a business by putting on a licence of £2 per £1,000 of average stock. The Minister of Finance, not having been in business, would perhaps not appreciate the difficulty, but I should like to know how he proposes to arrive at the average stock. That, I take it, would be by regulation, which in all probability would also be framed by people who had never been in business. The injustice is that where one man might turn his stock over five or six times a year another might not turn it more than twice a year.

Would you prefer to retain the turnover basis?

I have already said that I object to licences being used for revenue producing purposes. What I am trying to impress upon the Minister is that whenever you try to impose that method you are always going to be unjust; you cannot help it. The turnover tax was even worse. It taxed a man exactly the same whether he made two per cent. profit on an item or 200 per cent:, and even when he made a loss. It was unjust. This is not so unjust as that was, but it is still unjust. You are never going to get a method of taxing trade fairly except through the method of income tax. I should like to say a word about the very difficult subject of education. There is no body of men in this world who have greater faith in education than the commercial class. Every commercial man looks upon education as the finest investment you can put into any community. What we object to is the frightful squandering of money which has gone on in this country on education. These ideal educationists who get up and talk won’t let you criticize and discuss any item of expenditure. You are looked upon as a heretic of the first order for suggesting there is any squandering. Let us come to a case, which I think I could vouch for, in which, within twenty miles of Cape Town, a school was being built and they wanted to line the walls with bricks for which they were paying £40 per 1,000 until they were stopped. Does my hon. friend, the member for Kroonstad (Mr. Werth), say that quality of bricks make any difference in the education of a boy? What we object to is the squandering of money on education. I would like to ask my hon. friend whether there is any indication that the excessive amount we spend per head on education has given our children in any way a better education than in any other part of the British Empire, and yet we spend from 30 to 50 per cent. more than other parts of the Empire in getting that education. That is the gravamen of our charge. I will put it in this way, that we have really done a disservice to education, as with the money we have wasted we could have given our youth a better education than they have to-day. I must say that I agree with the hon. member for Cape Town (Central) (Mr. Jagger) that when we hoped that this was going to cease, all our hopes are disappointed, when we see the Provincial financial relations proposals. We shall have an opportunity of discussing Provincial Council expenditure later on when the Bill comes before the House, but when I saw the Financial Relations Bill I really came to the conclusion that it would pay us very much better as a country to give the Free State and Natal another £100,000 each, and do away with the provincial councils altogether. The great difficulty in Natal is the educational question, but it should be possible to devise some scheme by which Natal could have control of its education on some such basis as is now suggested, namely, by a per capita grant, and then we should scrap this Provincial Council system altogether. It is going to drive this country down again into financial misery. I think the hon. member for Cape Town (Central) was rather jeered at when he suggested that there was not going to be a saving. What is the position? I understand that the revenue surrendered by the Cape Province is £125,000 and the increased subsidy is £587,000, so that the Cape gets £460,000 to the good. In the case of the Transvaal the revenue surrendered is £100,000 and the increased subsidy is £265,739. In the case of the Free State £20,000 is surrendered, and the increased subsidy is £152,793.

They all have deficits.

These people have out-run the constable, and now we have to provide money to pay their debts. What is to be the position in future? That meeting of the Administrators and the Minister of Finance reminds me very much of the old saying about the young lady of Riga who went for a ride on a tiger, but who came back from the ride with the lady inside. I do not criticize the Minister of Finance. He was up against the toughest set in South Africa, and he was very fortunate that he came away with all his clothes on. I fail entirely to see any substantial form of direct taxation which has been prohibited to the Provincial Councils. As a matter of fact, sections 8 and 9 of the suggested schedule of the Bill practically covers every form of direct taxation worth taxing. They come away with all the powers of direct taxation, plus a subvention on education, and the Minister gives them the right of taxing up to 20 per cent. of the income tax.

They had the right up to 100 per cent.

They still have the right to tax up to 20 per cent., and I would urge upon the Minister of Finance to consider that if there is one thing irritating it is to be taxed twice on the same income, and to have two bodies with a right of taxing the one source. We had very great hopes, when the Minister came out of the conference room, that things had been put right, and we are sorely disappointed. In conclusion may I say a few words about penny postage? The statement of the Minister of Posts and Telegraphs shows that there was a great drop when the postage was put up from 1d. to 1½d. and another drop when the rate was put up from 1½d. to 2d. I think the Minister’s estimate of a loss of £400,000 is entirely wide of the mark, and I am prepared to make a small bet that the loss will not amount to more than £200,000. I have gone carefully into the figures and I am convinced that he has very much over-estimated the loss. But even if it were £400,000 I think he might have started a great deal sooner than January 1 next, to give that small help to the general taxpayer, who has not had much consideration in this Budget. It would, at any rate, have been a graceful thing if he decided to give us penny postage from July 1.

I hope you are right.

I propose to address a few remarks to the hon. Minister of Railways. I think, after the speeches we have had on the General Budget, that some attention should now be devoted to railway matters. As a matter of fact, hon. members know that the Railway Budget is in many respects as important as the General Budget. In the first place, I wish to deal briefly with some important staff matters only and to deal with minor matters in the committee stage of the Estimates. I wish to congratulate the Minister on tackling some of the outstanding problems so far as the staff is concerned in a very praiseworthy manner. I am very sorry that the Minister did not last year accept the advice given from these benches and appoint a grievances commission to clear up the large number of grievances left over from the South African Party Government, for that would have been a real solid bit of business, both for himself and the men, and I am sure that the Minister must be tired of the constant procession of callers at his office and to this House and the unending stream of letters all having reference to grievances. The Minister should have made it his first business, on taking over his portfolio, to establish a grievance commission, which would have travelled through the country and heard alleged grievances. It would have done Teal good work, and would have saved the Minister and his hardworking staff any amount of trouble. However, I do not blame the Minister so much for not accepting the suggestion, for I understand the Administration does not agree that such a commission was necessary. The Minister certainly did have a splendid opportunity of wiping the slate clean of all the legacies of discontent left by the previous Government.. Well, the Minister has done the next best thing, and has appointed quite a number of departmental committees which have gone into the main grievances of the staff. They are doing valuable work in going into such questions as the eight hours’ day, piece-work, the superannuation fund, and the amendment of the Railway Service Act, and I think that when these committees report we shall probably get some very good results. I also wish to compliment the Minister on having done something we wanted carried out in 1911-12 in regard to the Railway Service Act. When we gave evidence on that subject before a Select Committee we tried to take the superannuation fund out of the Railway Service Bill, and to place it in a separate measure, as it was grossly unfair that the superannuation fund should be dovetailed in with the ordinary railway organization and disciplinary provisions, but we failed to achieve our purpose. The delegates who gave evidence at that time maintained that whatever the merits or demerits of a railway servant may be, that should not interfere in any shape of form with his pension rights because they are as much the property of his wife and children as they are his own. If you want to deal with a railway man for breach of discipline you can do so, but leave his pension contributions alone. We failed in 1911 and 1912 to get that established, and I compliment the Minister now in bringing forward a disciplinary measure as a separate one from the superannuation measure. Then, I want to refer to the two rates of pay for the artizan staff. I want the hon. Minister to realize how serious a matter it is for the workers themselves. The Minister knows that where you have trade union principles established and a standard rate of pay fixed, it is inadvisable to have two rates of pay. I told the hon. Minister the other day that if the principle of having two separate standards of rates of pay for the same work was introduced in any other country, there would be serious trouble. I intend to refer to this again when we reach the committee state. I also want to compliment the hon. Minister in making statutory provision for the conciliation board in his new Service Bill. Hitherto, it has been an annual business and I am glad that he has now put in the Amending Service Bill provision that the conciliation board shall be a statutory and a permanent board. When the railwaymen know it is to be a permanent board they will look to it as the proper medium to settle their disputes. I do not propose to deal any further with staff matters now, but when the vote comes on the Minister’s salary we are going to give him a warm time on the two rates of pay. Right through the Union they were very much concerned when the late Minister introduced two separate rates of pay for artizans in the railway workshops. We want the new Minister to use his new broom and sweep away that anomaly. I want to just deal with the railways from what we may call the national point of view. I think the time has really arrived in this country when we should look upon our railway system and our railways, generally, as a big national concern. We know how the railways have progressed in the past on separate colonial lines in linking up the main lines with the big inland centres of industry, but, apart from what we may call the main lines, it seems to me that there has never been any semblance of a comprehensive or national policy applied to the development of railways in this country. The result is that to-day you have your main arteries, your main lines as they are called, and running from these are a large number of branch-lines, many of them leading to nowhere, and large tracts of country are still untouched. I think it is quite possible that what will be necessary in the future in regard to our railways’ development in this country is that some body will have to be set up to deal with this question from a national point of view. You have at present your railway board, but its scope is rather limited in the sense of simply reporting on projected lines of railway, but the question will have to be tackled from a national point of view and from the point of view of having a big comprehensive scheme so as to link up your present system and, if necessary, drive another main line, say from Cape Town towards the South-West Protectorate, forming a complete network of railways over the country. The whole question will have to be dealt with quite irrespective of any political or local influences. Your railways in future will have to be planned and constructed on more scientific lines, which have been thought out by experts, with the ultimate view of linking up these branch lines with the main lines, and only then shall we begin to get the real benefits of our so-called state-owned railroad system. Many members of this House have some sort of idea that the Labour party of this country are not anxious to see railway development so as to serve the interests of the farming community. That is not the truth at all. From a Labour point of view, it will be infinitely better for Labour if the railway system were organized in the way I have indicated. We are not concerned only with the interests of the staff. All we insist upon is that the first charge upon the railway revenue of this country should be that every man employed on the railways shall receive a living wage, from the general manager to the humblest employee of the department. There is really no reason why there should be any controversy over this at all. There are wonderful possibilities ahead. I want to see more avenues of employment opened up in this country; I want to see it developed to such an extent that farmers can get rid of their produce and can load it on to the trains and send it down into the towns and receive a decent price in return. I also wish to compliment the Minister upon doing something which had been advocated for years from these benches, and the country generally. The “Cape Times” usual comments on the fact that I make the “same old speech” on railways annually. I admit that I do in the main, but they are the same old railways, and we have to keep hammering away for reforms. The point upon which I want to compliment the Minister is that he is making a start with reducing the capital debt on the railways of this count ry. Until we do this properly we cannot say we own the railways in South Africa, but the Minister is now taking a step which will enable us in the future to really be the owners of the railways. It is a positive fact that to-day we still hand over practically all the net profits as interest on the railway debt of this country, and we do not actually own them at all. I am very glad, indeed, the Minister is making a start to remedy this state of affairs. I am perfectly sure this is the right policy to adopt from the South African point of view, and from a business point of view also. I do not place much importance on the fact of the real Capital Debt being so large, as I agree with George Bernard Shaw, who said many years ago, in connection with the huge sums of money representing municipal debt in England, said that most of it was not a debt at all, but was similar to the capital of a company, and was mostly reproductive. The only difference was that in Municipal undertakings provision is always made to reduce the debt by a sinking fund, whereas, hitherto, no provision has been made in connection with our railways, and to-day we have this huge capital debt and we pay about £5,000,000 in interest yearly. If a Henry Ford wanted to buy these railways, he probably would not pay the capital value of £110,000,000, as a portion must be dead assets.

We could sell our railways for £120,000,000.

One has to remember all the mistakes made by engineers, etc., and all the mismanagement of the past, and the fact remains that we should not pay this huge sum of money annually as interest for ever and ever, Amen.

Look at the millions we spend in development.

We have to make up the deficiencies of the past and the present Minister is doing what you should have done before. The whole question of railway finance is very complicated and it must be remembered that according to a return called for by Senator Whiteside in 1923, the total interest paid to the 31st December, 1922, on the total loan liability from the time it was incurred and allowing for debt paid off from time to time is approximately £73,322,741 of which total £38,525,866 has been paid since Union. The ex-Minister of Railways knows that when he was short of money he took £2,000,000 out of the renewals fund at a time when the men’s wages were being cut down because of an alleged deficiency. There always seemed to be large sums lying at the credit of the various railway funds at the same time, and yet the Minister informed us that we had a deficit, I know that is not exactly the position to-day, but that the position is, that although you have substantial balances the commitments are such that there is very little over.

Business interrupted by Mr. Speaker at 10.55 p.m. and debate adjourned; to be resumed tomorrow.