HC Deb 03 June 1861 vol 163 cc474-86

Order for Third Reading read.

THE CHANCELLOR OF THE EXCHEQUER

moved the third reading of this Bill.

SIR WILLIAM JOLLIFFE

said, he was prepared to sanction every precaution which might be requisite to prevent evasions of the payment of income tax, and for that purpose he would be willing, if necessary, to give increased powers to the Chancellor of the Exchequer; but he felt it his duty to bring under the notice of the House the system of quarterly collections as a departure from the original method. Suddenly and unexpectedly in the course of last winter the tax collector demanded from persons in receipt of fluctuating and precarious incomes that the tax upon them should be paid quarterly instead of half-yearly, as heretofore. To the end of 1860 the entire taxation of the country had been collected half-yearly; all the national payments were made upon the same principle. Interest on permanent investments and even on the great debt of the State was only paid twice a year, and it was impossible for any Government or any Chancellor of the Exchequer to forestall the period when the tax upon this account could be levied. An amount of capital nearly equalling the National Debt was invested in various securities, such as railways, mines, and mortgages, which were locked up in the same way from quarterly payments of income tax; and it seemed a great hardship that those in receipt of precarious incomes, on whom the tax already fell heaviest, should be the very persons subjected to the additional pressure arising from a quarterly collection. They all admitted that the tax pressed with great weight upon a variety of interests, and one would have imagined that the Government would have done all in their power to equalize and make it more generally bearable, instead of which greater anomalies were created than were already created by the income tax. This new arrangement had fallen in the most oppressive manner upon agriculturists, who had been prevented by the continuance of bad weather from sending anything to market. The change operated harshly enough on landlords with estates in their own hands; but in the case of tenants, contrary to previous law and custom, they were obliged to pay the collector three months before they bad any settlement with their landlords. The Chancellor of the Exchequer professed surprise at the view which he entertained, and contended that if carried out it would deprive the country of an entire quarter's revenue during the year. Considering, however, that the tax on a very large portion of investment would still be paid in the old way, the right hon. Gentleman had hardly stated the case with accuracy. But, however that might be, he could assure the right hon. Gentleman that he entertained no such intention; but he must say, in turn, that he had been greatly surprised at the statement of the Chancellor of the Exchequer, who said he had information which satisfied him that these quarterly payments were not only agreeable but convenient to many persons. That statement had filled him with astonishment, and led him to think that Chancellors of the Exchequer must, like other brilliant luminaries, be surrounded by some nubilous atmosphere which did not allow the truth to penetrate into their sphere. It would only be necessary for the right hon. Gentleman to travel with him to the first market town to learn that the new arrangement had increased the dislike to the tax, and had very much diminished the public faith in his clever financial arrangements as well as damaged the popularity of his Government. Therefore, both on the grounds of justice and expediency, he appealed to the Chancellor of the Exchequer, and to the Government of which he was a Member, not to persist in this mode of collecting the tax.

MR. H. BAILLIE

said, the question had been repeatedly asked why hon. Gentlemen on his side of the House continued so pertinaciously to oppose the remission of an Excise duty? No doubt it seemed an ungracious act to oppose the remission of duties which pressed upon any portion of the community but the reason was obvious. Many hon. Members occupying seats on those benches believed that the estimated surplus of the Chancellor of the Exchequer was calculated on insufficient grounds to justify the expectation that it could be applied to any satisfactory purpose; while it was avowed by hon. Gentlemen opposite that they supported the measure rather as one that was necessary than as a wise financial change. In the interests of the country he protested against the doctrine laid down by his hon. Friend the Member for Berkshire, that because the Chancellor of the Exchequer declared that he had a surplus, Members were hound to assume its existence, even though such a declaration was contrary to the evidence of their own senses. He felt it his duty, as the Bill was about to pass, to state his belief that even if the right hon. Gentleman the Chancellor of the Exchequer had a surplus, that surplus had been already disposed of. The right hon. Gentleman said that £408,000 was his estimated surplus; but a few evenings since he admitted that there had come in a charge of £150,000 which would have to be paid as compensation for the Stade Dues. There had lately been published a despatch from the Governor General of India, in which there was a financial letter, dated Fort William, March 3, 1861. In that letter it was stated that the amount of the advances which would be recoverable from England in the years 1861–2, on account of expeditions to China and other charges, was £1,250,000. For that item the right hon. Gentleman had only taken £1,000,000. The additional sum of £250,000, with the £150,000, made £400,000; in addition to which there was £25,000 which the right hon. Gentleman the Chancellor of the Exchequer admitted to be the increased sum which would have to be paid on Exchequer bills. There was also an addition of £30,000, the amount of the dower of the Princess Alice, which two sums would make £55,000, and, therefore, they had a total of additional charges amounting to £455,000; that was to say, about £50,000 more than the estimated surplus. Again, the Chancellor of the Exchequer had estimated the year's Customs and Excise at the same amount as that of last, without taking into account the disturbing causes in the United States of America. A circumstance had been related to him which showed what was likely to take place in that country. A large ship arrived in Cork the other day with a cargo of cotton; she was bound to Liverpool, but when she called at Cork she received orders immediately to return to New York. It was perfectly clear from that circumstance that the people of New York anticipated they would receive a short supply of cotton from the Southern States. Indeed, it was natural to suppose that the Northern States would have little chance of receiving any cotton from the Southern; and, on the other hand, the Northern had taken good care that we should receive none, for they had declared through their Minister their intention to enforce a strict blockade of the Southern ports. It might be said that we had got our supply of cotton for the present year—that was to say that we had the cotton of last year's growth; but the cotton of this year should commence to arrive in this country in the months of October and November next. He had an opportunity lately of speaking on the subject to one of the greatest cotton buyers in the United Kingdom—a very intelligent gentleman. That gentleman had stopped him in the lobby and informed him that the manufacturers in the north were in the greatest possible state of alarm, for they firmly believed that the blockade of the Southern States would be carried out, and that the consequence would be that we should have no cotton during the coming year. He further observed that, instead of it being a question of 20,000 people starving, as in Coventry last year, it would be a question of 3,000,000 or 4,000,000 people starving in the manufacturing districts. He stated to the gentleman that possibly he might be representing an exaggerated state of things, for he thought it possible that we could obtain a large quantity from India; but he informed him that that was not the case—that the staple of the Indian cotton would not suit the manufacturing districts, except to a very limited extent; that there was more of it in the market last year than the manufacturers could use; and that, unless they could get the people of India to grow long-staple cotton, their produce could not be used in the manufacturing districts. He asked the gentleman what steps the manufacturers had taken to get long staple cotton grown in India. He replied that at the commencement of this year, anticipating what would happen, the buyers held a large meeting, formed societies, and subscribed their money to send out agents with American cotton seed to India, in order to distribute it to the natives, and, if necessary, to advance them money for its cultivation. The whole of that scheme had been knocked on the head by the conduct of the Indian Government. Hon. Members had heard something of the conduct of that Government with reference to the indigo planters. The speculation of these planters was carried on in the way in which it was proposed to carry out the scheme to which he had just referred. The planters advanced their capital to the cultivators, and entered into contracts to be supplied with their produce; but it appeared that the Indian Government either fancied or believed that the people were screwed too much by these planters. However that might have been, the Lieutenant Governor of Bengal issued a Proclamation declaring that the people were not bound by the contracts. The result was that those who had engaged in the speculation had nothing but ruin staring them in the face, and the gentleman to whom he referred informed him that when that news arrived in the manufacturing districts those who had interested themselves in the cotton scheme put an end to it, and resolved that so long as the present Government of India remained in power they would neither send agents nor cotton seed to that country. There was, therefore, the prospect before us of getting no cotton from India, and the probability was that we should get none from the United States; so that the right hon. Gentleman drew rather largely on the credulity of the House when he asked them to believe that we should have the same amount from Customs and Excise this year as we had last. He had been accused by the, right hon. Gentleman the President of the Board of Trade of inconsistency on this subject. The right hon. Gentleman stated that on a former occasion he voted for an abstract Resolution for a remission of the paper duty. His answer to that charge was very simple. He would remind the right hon. Gentleman that the remission of a duty was not always a question of principle. It was sometimes a question of expediency, and the course which any one ought to pursue in reference to such matters was that which he believed would be most conducive to the interests of the country. He did not think he would have discharged his duty if he had not said those few words on the third reading of this Bill.

MR. ALDERMAN SIDNEY

said, he hoped the Chancellor of the Exchequer would adhere to the system of quarterly collections of the property and income tax. It might suit the richer class of the community to pay the tax half-yearly, but it was much more convenient for the poorer class of payers to do so quarterly. Parochial assessments were generally paid quarterly from a similar reason. It was not every taxpayer who kept a banker's account. There was great irregularity, however, in the mode of collecting the income tax. In some parts of the country, and with respect to particular classes of persons, the half-yearly mode of collection was followed, but he could not see why any such distinction should exist.

THE CHANCELLOR OF THE EXCHEQUER

said, he would not follow the lion. Member for Inverness-shire (Mr. H. Baillie), into anything like a full discussion of the surplus, at which he seemed determined to have what might be called a parting kick. The prophecies of Ministers of Finance were, no doubt, like those of other persons, liable to fail; but there was this difference between his prophecies and those of private persons, that he usually followed the advice of very competent persons, and that when he did make an erroneous estimate of coming income and expenditure he was very properly called upon to explain, and had to submit to all manner of criticism; whereas, when private Members made erroneous calculations and prophecies, it was not within the province of the Chancellor of the Exchequer to call them to account; and no notice was ever taken of the wonderful miscalculations they might have made. For example, in 1853 he, as Chancellor of the Exchequer, prophesied that £2,000,000 would be derived from the succession duty; and when his prophecy failed he was subjected to very severe criticism, while those private Members who said that as much as £3,000,000, £4,000,000, or £5,000,000 would be de-rived from the tax, and who had remonstrated with him for not fixing his estimate higher than £2,000,000, were left unnoticed, and allowed to remain under the shelter of a comfortable security. His hon. Friend the Member for Inverness-shire said, new charges to the amount of £455,000 had come up since the Budget had been presented. His hon. Friend was far from accurate in that statement. He had referred to a letter written by the Governor General of India with reference to a claim from India; but the Governor General when he sent that letter did not know enough of the state of the account to be able to tell what demands would be made upon Imperial resources to reimburse the Indian Exchequer for payments it had made, and for this reason, that he did not know what payments he had made on account. If it was true, as stated by his hon. Friend, that new charges to the amount of £455,000 had come up since the Budget was presented, how glad ought he to have been that the Motion on the tea duties, by which £285,000 more than the estimated surplus would be taken from the revenue. His hon. Friend said he had been charged with inconsistency in not giving the same vote for the abolition of the paper duties as he had given some years ago. He (the Chancellor of the Exchequer) would not charge his hon. Friend with inconsistency as to the paper duties; but he charged him with another inconsistency, that of questioning the surplus, and yet of voting that £285,000 more than the surplus should be taken from the revenue, when there was an occasion of voting against the Government. But even if it were true, which he did not admit, that £455,000 of new charges had arisen, a still larger sum than, that had already been derived from increased revenue. There had been an actual increase in the revenue under the heads of Excise, Customs, and Stamps during the first eight weeks of the present year, as compared with the first eight weeks of last year, of £500,000.

With regard to the collection of the income tax, his right hon. Friend (Sir William Jolliffe) was in error on two points. He was in error when he said that the quarterly mode of collection was a mere administrative arrangement. The arrangement was one distinctly made by law. The principle of income tax collection had always been quarterly, but practically it had been carried out till the Act of 23 & 24 Vict, c. 14, was passed. His hon. Friend was also in error when he made a comparison between the modes of collecting fixed and precarious incomes. There was no difference in the modes of collecting fixed and precarious incomes, except such as unavoidably arose from the different ways in which the income of individuals was derived. There was a peculiarity in the quarterly collection of last year that would not occur again; for, being the first of these collections, the effect was to throw three months more of payment within the year than ought to have been, and virtually to make the drain from the taxpayer nearly as much money as if an income tax of 14d. had been imposed. The quarterly mode of collection was attended with political advantage. The income tax was defective in this respect—that its collection was long in arrear of its imposition by Parliament. In 1842 Sir Robert Peel found a deficiency. He proposed an income tax, and the calculation was that next year he would have a surplus. But at the end of the year he had still a deficiency, no account having been taken of the circumstance that the collection of the income tax would be half a year behind. In 1854, at the time of the Russian war, they doubled the income tax; but, in consequence of the half-yearly system of collection, they were obliged to anticipate the tax by borrowing. The political advantage of the quarterly mode would, therefore, be very great, for it would increase the control of Parliament over revenue, and would put the tax in hand, not at the end of six, but of three months. He had never stated that that mode of collection had been found convenient to the taxpayer, but that when it was recommended to him by the practical officers who had charge of this department they expressed their opinion that it would be found more convenient to the taxpayer, and he had received no evidence whatever to shake that opinion. He did not, however, pretend to be in possession of conclusive information on the subject. It was a question most proper for examination by the House or by the Committee now sitting on the subject of the income tax, for he quite admitted that the convenience of the taxpayer must be a material element in deciding upon a half-yearly or a quarterly collection. For his own part he confessed that, along with his hon. Friend (Alderman Sydney), he thought that with respect to those classes of persons who had not a banker's account, it would be more convenient for them to pay by small driblets than to be expected to accumulate larger sums in order to meet those demands. As to the inequality which was said to exist in different parts of the country in the payment of the income tax, he would remind the House that the responsibility of the Government for the collection of the tax was a very qualified one. He wished the Government had a more effective control over the collection. He did not desire to uproot the admirable system, peculiar, he believed, to this country, by which the collection of the direct taxes was mainly conducted by the valuable aid of local commissioners. But a system by which both the assessment and the collection of the tax was left in the hands of local officers might, he thought, in some important particulars be amended, one of its consequences being, as had been pointed out, that there was great inequality in the efficiency of the machinery in various parts of the country. Any proposals which were made on this subject might be viewed with jealousy in the country, and must be made in conformity with the sense of the country. At the same time he thought there was room for important improvements in the system, and he should be glad to see a state of opinion which would allow the Government to propose these improvements to Parliament.

MR. BENTINCK

said, the right hon. Gentleman had a summary manner of disposing of the objections of hon. Members, by telling them that he had superior means of information over those who thought differently from him. His right hon. Friend (Sir William Jolliffe) near him said he looked upon the Chancellor of the Exchequer as a planet surrounded by a nebulous atmosphere, and it seemed to him (Mr. Bentinck) that the satellites upon whom the Chancellor of the Exchequer depended for his information were also surrounded by an equally nebulous atmosphere. At any rate, he (Mr. Bentinck) was not disposed to place the same confidence in them as the right hon. Gentleman did. Upon that occasion the right hon. Gentleman had, he thought, exercised a wise discretion in not attempting to answer the remarks of his hon. Friend as to the surplus; because it was perfectly impossible to controvert the short and clear statement his hon. Friend had made. He wished to take up one point referred to by the right hon. Gentleman, who had a habit of putting his own construction on the views and language of others, and commenting on that construction. The right hon. Gentleman accused him and some of his Friends of inconsistency in disputing the existence of a surplus, and then voting for a large remission of taxation. Now, that was not a fair statement of the case. He still, as formerly, denied the existence of any surplus; but he had said that if the House resolved to maintain that there was a surplus, they ought at least to repeal a tax which might be reimposed, and not one which when repealed was lost by the revenue for ever. He denied that there was any inconsistency in that view of the case. His hon. Friend the Member for Inverness-shire (Mr. Baillie) had referred to the probable diminution in the revenue upon Customs and Excise, in consequence of the present state of things in America. He (Mr. Bentinck) had twice called attention to the same subject, and the noble Lord at the head of the Government had anticipated that he was going to renew the question fortnightly. He would not say how often he might feel it his duty to renew the question, but he feared the arrival of the time when the noble Lord would not be able to answer that question as he had done on the two previous occasions. He had heard accounts R similar to those received by his hon. Friend, and, in his opinion, the supply of cotton must be inevitably very short; it was impossible to find a supply from any other quarter of the globe than the United States, and the result would be a diminution in the revenue derived from the Customs and Excise. He believed the time would come when the Government would stand convicted of great imprudence in blinding themselves to these considerations, and that the noble Lord would be compelled to admit that which he now so steadily denied.

MR. CRAWFORD

said, he only wished to remark it was an axiom in taxation to avoid making the duties on commerce a fluctuating charge, and, therefore, he disputed the expediency of reducing the tea duties in the belief which the lion. Member seemed to entertain that those duties might be increased again immediately afterwards without injury,

SIR STAFFORD NORTHCOTE

said, the argument just used by the hon. Member for the City of London (Mr. Crawford) formed one of the strongest points in the case of the Opposition, who, instead of renewing the tea duties from year to year, thus keeping the tea trade in a state of suspense as to whether the war duties would be repealed, wished at once to terminate that uncertainty. Like the hon. Member (Mr. Bentinck), he also would complain of the injustice of the taunt thrown out from the Treasury bench against the Opposition, who were said, after disputing the existence of my surplus, to have, nevertheless, supported a proposal for taking £200,000 or £300,000 more out of the Exchequer. But the Opposition declared that the sacrifice of revenue upon the reduction of the tea duties would be not greater, but smaller, than that entailed by the repeal of the paper duties. Their calculations had been disputed, but that was the ground on which they voted, and they were not, therefore, amenable to the charge of inconsistency when they supported a smaller remission of taxation than that proposed by the Government. The point was not to be looked at with reference to this year only, but in regard to future years. The total annual sacrifice by the repeal of the paper duty would be £1,300,000; by the reduction of the tea duty to 1s. 5d. per lb. the sacrifice would be £1,600,000 at the most; but there would certainly be a recovery of one-fourth, which would bring it down to £1,200,000. Hon. Gen- tlemen on that side of the House made allowance for the fact that the deficiency caused by the reduction of the tea duty would be gradual, and would cure itself, not in consequence of the tax being put on again, but of a gradual increase of consumption; and, on the other hand, they looked on the loss to be incurred by the repeal of the paper duty as an increasing loss, inasmuch as the duty at the time of its repeal was increasing and improving. The Chancellor of the Exchequer said-their calculations were inaccurate, but he never gave them credit for the increase which would follow in the consumption of sugar, which would be considerable. He denied, therefore, that there was any inconsistency in denying a surplus and supporting a reduction of the tea duties.

MR. BROWN WESTHEAD

said, that his constituents had been anxious for the repeal of the paper duty. As soon as they heard that it was the intention of the hon. Member for Liverpool to move for the reduction of the tea duties in lieu of the repeal of the paper duties, they immediately set about getting up a petition in favour of the repeal of the duty on paper, and within twenty-four hours that petition was signed by upwards of 700 of the citizens of York. He was neither a paper manufacturer nor a newspaper proprietor, but he paid a largo amount for paper duty, which from his own experience he could say pressed heavily upon the manufacturing and industrial interests of the country. The mercantile firm with which he was connected paid an amount for duty on paper equal to an income tax of 9d. in the pound upon an income of £15,800 per annum. He had obtained from his partners a statement of the amount of duty paid by them on paper. It appeared they paid for paper in one year £2,416, and for duty in one year £595 17s. 6d. He thought he might fairly ask why they should be made to pay so extravagant an amount towards the taxation of the country? In respect of this tax alone, he would venture to say that he paid a larger amount of duty to the revenue than was paid on the average by Members of that House in respect of the income tax. It was said that the cry against the paper duty was kept up by noisy agitators, but that could not apply to him, as this was the first occasion publicly upon which he had opened his lips on the subject. The repeal of the paper duty would have a most beneficial effect upon the manufactures of the country and upon the industry of the working classes, and it would enable them to compete with the Germans, who were able to export their manufactures in which paper was used to the United States at a great advantage over the English manufacturers, who were burdened in some cases with duties of 25 per cent by reason of the paper duty. The Germans had no paper duty to pay, and the consequence was that they could send their goods to America, and drive the English manufacturers out of the market. This was only one instance. Many others might be given of the way in which the manufacturers of the country were suffering from the incidence of the paper duty. He believed that if the question had not been made one of politics, hon. Gentlemen opposite would have thought the paper duty one of the first taxes which ought to be repealed. Very much had been said about the desirability of repealing war taxes. On that ground the paper duty had a claim for immediate repeal, for it was originally a war tax. In 1711 the 10th of Queen Anne an Act was passed for the raising of large supplies for the purposes of war, and it imposed duties on soap, paper, silk, calicoes, linens, stuffs, and other articles. The duties on soap, silk, calicoes, linens, and and stuffs had been repealed, and surely there was no inconsistency in asking the House to assent to the repeal of the paper duty.

MR. HENNESSY

said, he wished for a moment to refer to the denial which had been given by the hon. Member for Liskeard (Mr. Bernal Osborne) during the debate on Thursday evening to his statement that the price of Irish butter had fallen off since the reduction in the duty. Since the debate he had referred to the figures of the prices current, and he found that while on the 5th of March, 1860, the price of butter in Cork market was £6 10s. per cwt. for the first quality, and £5 15s. for the third quality; on the day before the hon. Member spoke it was £4 18s. first quality, and £4 3s. third quality, a falling off of 60 per cent. In a Cork paper he found it stated that the fall in price was principally owing to the fall in price of foreign and Irish butter in the London market.

MR. HENLEY

said, he was glad to hear the answer which had been given by the right hon. Gentleman the Chancellor of the Exchequer to the right hon. Gentleman the Member for Petersfield (Sir William Jolliffe) because, if he understood it aright, the right hon. Gentleman was disposed to watch closely the pressure of the particular mode of collecting taxes. No doubt it was difficult to form a judgment on the working of the plan in the first year, because it was a very severe pressure to have to pay five quarters' income tax in one year. He (Mr. Henley) had had many complaints respecting it. Whether those would continue when they came to the regular course of payment he did not know. With regard to taxes on land where rent was paid half-yearly, payment of the tax quarterly was a payment in advance for the tenant. However, the right hon. Gentleman spoke as if he were disposed to inquire into the matter, and if he found on the balance that there was more inconvenience than convenience he was disposed to consider the subject. He (Mr. Henley) had no intention of entering on the vexed question—tea or paper—more than saying that the hon. Member for York had opened a new page in the chapter of discussion upon taxes on knowledge, which it was a pity the House had not had an opportunity of profiting by before. He (Mr. Henley) thought it showed something of the nature of the original agitation on the subject.

MR. BERNAL OSBORNE

said, he had no intention to make any imputation on the hon. Member for the King's County, who usually took great pains and afforded considerable information to the House. Perhaps he said too much when he said the price of butter had almost doubled, but there had been a considerable increase in price all through the south of Ireland. The hon. Member ought to have taken the average price since the reduction, instead of the exceptional price which prevailed in a particular year or at a particular time of the year. Every one knew that the price of butter at the opening of the market in March was very different from the price in May or June.

Bill read 3°, and passed.