HC Deb 24 March 1863 vol 169 cc1817-48

said, he rose to move the Resolution of which he had given notice relative to the Income Tax. The provision of funds in a country like England, to meet the large unproductive expenditure, even curtailed as far as the safety of the country would permit, must always be a matter of very serious consideration; and it became still more serious when they considered that their indirect taxation was now narrowed to a very few articles, tea and sugar, the two most important, being subject to heavy duties imposed to assist in meeting a war expenditure. Nothing could be more natural than that there should be a loud and urgent cry for the reduction of these war duties. But a cry, at least, as loud and urgent, was raised for a reduction or removal of the income tax. It was not only unpopular in itself in the highest degree, but its existence was a memorial of broken faith and of the fallaciousness of all prophetic finance. But why should the income tax be thus unpopular? The annual expenditure of this country required an annual provision which must be raised out of the incomes of the people; and at first sight it would seem that an income tax was the most natural source for providing an important portion of revenue. But it was an undoubted fact that the income tax was detested. The only reason for that detestation was that the income tax was founded upon no principle whatever. It was not a creation of their own days, but came from the darkest ages of finance, and had never been proposed but for a temporary purpose— never introduced or accepted but under the solemn assurance that its days were numbered. What was now the prospect of its days being numbered it was not for him to decide; but, whether or not it were retained as a means of raising a permanent revenue or consigned to the armoury of fiscal legislation for future exigencies, he thought it equally the duty of the House not to part with it till they had placed it on a definite and acknowledged principle. Circumstances many years ago had attracted his attention to the working of the income tax, and gave him a peculiar insight into many of its more important provisions. Two years ago he moved for a Committee on the subject, and his right hon. Friend would forgive him for saying that neither the conclusions at which that Committee arrived, nor the rejection by the House of his propositions last year, had left on his mind the slightest feeling of discouragement. Those who like him had been fated to contend with the ablest men of a powerful Government, both in the Committee and the House, would sympathize with him when he said that he never felt more confident in the soundness of his principle and the ultimate triumph of his cause, and he could not acknowledge a defeat in numbers to be a defeat in principle. He was far from undervaluing the force of the opposition which had been brought against him; nor did he believe that either the House or the country thought lightly of that opposition. But if an opposition came with evidence of its being founded on an entire misconception of the principle and misconstruction of the objects at which he aimed, he felt that such an opposition he was bound not to succumb to, but to surmount; and having searched carefully through the whole series of debates he was prepared to give to the articles of indictment against him a distinct and deliberate negative. It had been imputed to him that in the conduct of the question he had propounded an impracticable scheme—that the scheme would create inequalities more numerous and grave than it removed, that he was attempting class legislation, that he proposed to violate a solemn compact with the fund holders, to give undue advantages to the capitalist and the great merchant, and lastly, and the heaviest blow of all, that his scheme was especially hostile to the agricultural interest and would seriously aggavate the damage that interest already suffered through the infliction of the income tax. He met that indictment frankly and fearlessly, and to every one of its allegations he gave an open distinct denial. He asked for nothing but a fair hearing. If the allegations were borne out, let the House reject the plan he proposed. If they were disproved, he thought he might fairly ask the House to bear with him while he endeavoured to supply the deficiency of principle in the income tax, and that he might ask his opponents to reconsider a scheme which they had misunderstood. It had been objected that his was not an original proposition; but so far from aiming at originality, that was the very thing he wished to avoid. The strength of his scheme was not that it was new, but that he could allege in its support the most undoubted and invaluable authorities. Confining himself for the present to the first part of his Motion, he would recall the attention of the House to the principle laid down when the Parochial Assessment Act was passed in 1836. That Act, after reciting that it was desirable that a uniform mode of rating for the relief of the poor should be established, enacted that no rate should thenceforth be allowed unless it were made on an estimate of the net annual value of the several hereditaments, such net annual value to be obtained by deducting the average annual cost of maintenance from the rents of the hereditaments themselves. That was a principle which he thought was most sound. It was a principle which was reaffirmed only last Session by that House, where, in the Union Assessment Act, it not only confirmed previous legislation, but confirmed in distinct terms the very definition to which he was drawing attention—namely, the necessity of arriving at a net annual value before assessment was made. Why, if that were a principle ac- knowledged to be desirable for local taxation, should it be said to be undesirable or inexpedient for imperial taxation? That was a question to which, if a negative answer could be given, he would be glad to hear it. He had to contend that the same principle was applicable in both cases, but he contended, moreover, that any inequality, any inconvenience, arising in local taxation from the absence of an accurate basis, was trivial as compared with the inconvenience arising from taxation of the gross rental instead of the net, in cases of income tax. At that point he would not trust to his own arguments, but would refer to the highest authority—authority most undeniable on the particular point— namely, that of the Chancellor of the Exchequer himself in 1853. That right hon. Gentleman, in proposing his Budget, said— I estimate that one fourth part of the gross income derived from land and houses goes into the pockets not of persons beneficially interested in them, properly speaking, but into those of mortgagees, annuitants, and others who receive under settlements. If that be so, then it appears that the owners of land and houses do not receive £67,200,000, but from that sum you must deduct the fourth part of £80,000,000, which reduces their income to £47,200,000. This sum of £47,200,000 is then the net receipt of those beneficially interested in land and houses. But you will justly say that the encumbrancers, who receive the £20,000,000 pay the income tax. Well, let us see what their quota amounts to:— 7d. in the pound on £20,000,000 gives £583,000; deduct this sum from the £2,333,000 paid by the owners of land and houses, and the sum of £1,750,000 will be left, and this is the amount actually paid on an income of £47,200,000. Now, if hon. Members will take the trouble to apply the figures I have stated they will find the result to be this:—That the sum of 9d. in the pound on a net income of £47,200,000 would amount to £1,732,500, and that, consequently, under the law as it now stands, the income derived from land and houses is taxed at the rate, not of 7d., but 9d. in the pound. That statement was most important, and he believed most accurate; but he would ask why had the landed interest been left in that most desolate condition for the last ten years? The measure of distress described in those remarks was only the average measure, and gave no idea of some extreme cases that might occur. The total annual value of houses and land was £80,000,000, from which must be deducted £12,800,000 for cost of maintenance, leaving £67,200,000 as the available income. But that income did not belong exclusively to the landowner, the claimants for life interests and mortgagees receiving their shares, upon the net amounts of which they paid income tax. The landed proprietors paid income tax not only upon what they received, but on their outgoings of £12,800,000 besides. Of all the grievances arising out of the mode of levying the income tax none was more oppressive than that which fell upon incumbered land. But these average results did not show the extreme limits of the grievance. He would put a case illustrating facts of which he was personally cognizant. A property was leased at £800 a year. The outgoings might be averaged at 10 per cent, leaving £720; but there was a mortgage upon the property for £16,000 at 4 per cent interest, which swallowed up £640, leaving only £80 net income to the proprietor. The mortgagee paid income tax upon the £640 he received; but the tax being levied upon the whole value of the property, the landowner had to pay, not upon the £80 he received, but upon £160, or at the rate of 1s. 6d. in the pound, instead of 9d. Supposing the rate of interest upon the mortgage debt had been raised to 4½ per cent it would have absorbed £720, thus leaving nothing for the landowner, who, nevertheless, would have had to pay the tax upon £80 a year. When he was told that his plan would create greater grievances than any already existing, he invited hon. Gentlemen to suggest a worse instance than the one he had given. He thanked his right, hon. Friend, and he was sure the House would thank him, for having forced this grievance upon their notice; for he confessed he should not himself have thought of searching in Schedule A for the graver defects of the law, being satisfied, that as his principle was sound, it must in application correct any grievance arising from comparative poverty or riches. The grievance was now clearly exposed, and he thought it required great confidence to tell the landed interest that they were benefited by the present arrangement of paying upon sixty-seven millions, when in fact they only received forty-seven millions. Although he did not pretend to be the friend of any particular interest, but was simply acting in the cause of justice, he declared that no charge could be more unfounded than that the plan he advocated would aggravate the injury suffered by the landed interest. In making such a charge the right hon. Gentleman had, without intending it, misled the House, especially when he stated the effect of the proposed change would be to raise the tax upon the unencumbered residue of landed property from 11 ½d., as at present, to 13½d. in the pound. The question to be considered was how were the grievances which he had pointed out to be removed. There was one effectual but simple method of dealing with them, and that was to apply to the case of income tax upon the rent of land and houses precisely the same principle as the House had affirmed to be proper in the case of local taxation—namely, to place the tax on the net ratable value of the land. Let that be done, and all inequalities would vanish, for whatever might be the amount of income the tax would be divided ratably among all parties interested. And he would remind the House that the mortgagee, whom he wished to see fairly sharing the burden of taxation with the landed proprietor, was the rich capitalist, whom it was alleged his scheme would chiefly benefit. If the House would refer to a Parliamentary paper published last year, and numbered 397, and would reduce the results to a 9d. tax, they would see that he had ground for affirming that the assessment on land and houses, combined under the wider operation by the scheme he proposed, would be 9d. and 64–100ths. That was the point to which the assessment of real property would descend from 11½d., at which his right hon. Friend fixed it under the present system. It was not merely land or houses that would receive benefit from that rational mode of taxation, but mines, quarries, and every kind of property would share in it equally; nay, it would carry relief even to that most helpless individual, the owner of a terminable annuity, who would find comfort and relief in the application of that simple principle of taxing nothing but net income. To show how that relief could be given, he had only to refer again to what had been done by legislation under the guidance of the right hon. Gentleman opposite. In 1846 the Government lent £3,000,000 to landowners, to be repaid by annual instalments extending over twenty-two years. Under the ordinary operation of the law those landowners, in making their instalments, would be entitled to deduct the income tax on the whole amount, as in 1853 a measure was introduced, or rather a provision was introduced in the general measure of the budget to the following effect:— That whereas advances of public money have been made, and the repayment has been secured by a rent charge, by which the principal sums advanced will be eventually repaid with interest, it is just that provision should be made for deducting the duty charged by this Act in proportion to such interest. With regard to that, Mr. Timms, the law adviser to the Board of Inland Revenue, said that the circumstances were peculiar; and the peculiarity seemed to be, that whereas in the case of every other terminable annuity the State was the debtor, in these peculiar Acts the State was the creditor; so that it deliberately made a law carrying out with regard to its debtors a principle which it utterly denied as a matter of justice to its creditors. He wished to know whether in England such an utter subversion of justice should be tolerated as thus to make one law for the debtor and another for the creditor of the State. For his own part he thought, that if they wished to make the income tax regarded with constant hatred and contempt the Government could do no better than perpetuate such a law.

He next passed to the second clause of his Resolution, relating to the relief of industrial incomes. That question had already been argued most largely, and he would therefore simply state the principle he adopted: —"Industrial profits are partially applied as income to purposes of expenditure, the residue passes into investment, and as capital yields new products for taxation. If therefore the portion saved is taxed, it is taxed twice— first as profits and again in its subsequent products." The question had been looked at in every possible light, but there was a general agreement in demanding very nearly the same remedy—namely, a concession in the amount of assessment. Here, again, he would refer to legislative precedent. In 1853 a clause was introduced into the Bill for the renewal of the income tax, awarding to the extent of one-sixth of his income a remission of the tax to every individual who spent the portion so saved in the purchase of life policies. He asked Mr. Pressly, chairman of the Inland Revenue, upon what he conceived the policy of that concession to be founded, and his answer was distinct. He said that that portion was exempt from taxation "because it was considered no part of a man's income." The principle was excellent; the mode in which it was carried out was open to grave reprehension. He would state this objection in the words of a most able and critical writer of the present day, who remarked— It is no part of the duty of the State to give bounties to saving, or to lay penalties on expenditure. The State cannot put itself in the position of individuals, and judge for them; and as it cannot judge whether it is better for a man to save or to spend, it ought not to interfere. A father, for instance, may do more wisely if he expend £200 a year in giving his son a good education than by laying by the money, and the State ought not to punish him for doing so. At the present moment the following case might arise:—A and B, two men in the same profession, each received £1,200 a year. Of that income A spent £200 a year in the education of his son, and B £200 in the purchase of a life annuity. The law remitted the tax upon B's life policy and it taxed A for his expenditure upon his son's education; so that, as now administered, it contravened the excellent policy laid down by the right hon. Member for Calne (Mr. Lowe). Now, his proposal was that upon professional incomes a concession should be made of one-third, and A and B would therefore both be taxed upon £800, and would be left perfectly free to apply their respective incomes as they chose. While, therefore, he adhered to the principle affirmed by the Act of 1853, he entirely condemned the mode in which it was endeavoured to be carried out, believing that nothing could be more tyrannical and impertinent than for the law to interfere and dictate in what shape a man should make his investment in order to be entitled to exemption. His proposition was conceived in the very words of his right hon. Friend in 1853, and that, he thought, must commend it strongly to the acceptance of the House. His right hon. Friend might, indeed, say, "It is one thing to admit that a certain remedy is desirable, and another thing to say that it is practicable." Now, upon the practicability of his scheme he could not wish to find more trustworthy evidence than that of the late Chairman of the Inland Revenue Office. An admirable servant of bis country, Mr. Pressly, was a most rigid adherent to things as they are, and under the influence of this strong Conservative tendency, with a strong perception of what was the feeling of the Government, he was not likely to concede any point which he did not feel bound as a man of honour to concede. Mr. Pressly was asked what were the points as to which he would find a difficulty in carrying out this measure. He mentioned two points. That was in the very earliest stage of the inquiry; but towards its close Mr. Pressly, having had laid before him papers relating to these two subjects, distinctly admitted that upon both points his difficulties were removed, adding that he had no objection no offer upon any other portion of the scheme. He appealed, therefore, to this as conclusive evidence in favour of the practicability of his proposal; and he might mention—not out of mere display, but to show that he had tried to set his mind to the solution of this question—that he had in his possession, drawn up by an eminent draughtsman, every provision which would be required to carry out his scheme.

Another and very serious charge was that his scheme would create inequalities more numerous and more grave than those which it removed. Now, the only grievance of that kind which had come to his knowledge was this—that he proposed to treat upon a different footing the profits arising from public companies and from private partnerships. With respect to public companies, they consisted of managers and clerks, who supplied the skill, labour, and intelligence, and of proprietors, who supplied the capital, had nothing whatever to do with the management, and received their dividends at the appointed time, just as they would the interest of money in the funds or in any other investment. At present the law taxed both those classes equally, but, according to the principle he submitted to the consideration of the House, the dividends of public companies would be fully taxed, while the intelligent managers and clerks who carried on the business would receive a proportionate abatement on the amount of their stipends or salaries. In private companies the partners among themselves provided both capital and management, and the result was one and inseparable. It might be said, that in perfect analogy with the case of public companies the capital and profits of partnerships should be separately assessed. There might be some large establishments which would make the requisite return; but nine-tenths of the whole number would be unable to do so, for they could not dissever the value of the capital from the value of the services which made that capital productive. In like manner, though there might be some instances in which professions were carried on with nothing but skill and intelligence, yet, generally speaking, capital, in one way or another, crept in, and contributed to professional profits, so that a distinction could not be made between professions and trades, and a principle could not be laid down on which separate assessments could be made.

It was also stated, that the rich capitalists and bankers were his clients, and that he was endeavouring to obtain for them a very unfair and improper advantage. Now, bankers' securities consisted in part—far the largest portion of them— of Government securities, railway securities, and private and public bonds, on the interest of which they paid income tax, and it never reached them without the deduction of that tax. As regarded the whole of that source of revenue, the effect of his proposition would be, that, instead of diminishing, it would aggravate the burden of their contribution to the Exchequer. With regard to the great brewers, great merchants, and others, they had a special advantage under the 133rd clause of the Act, which declared that whatever might be the amount of the average profits upon which they had been assessed, they should in a subsequent year be assessed wholly on the amount they had made; and that if that amount fell ever so far short of the average they returned, they should be entitled to the full abatement. Mr. Pressly said, that under the operation of that clause, great merchants, great brewers, and great manufacturers, whose profits were subjected to vicissitudes, had the means of escaping paying half or little more of the income tax, in the most legal manner. He asked why those individuals should be entitled to this prerogative, which was not shared in by professional men, by salaried officers of the State, or by employés in private life? He asked those persons to surrender that peculiar privilege, and take their share of a more fair and equitable taxation. There was another point on which he desired to offer an observation. Whenever it was desired to make a hard hit in debate, something was said about keeping faith with the fundholder. The English mind was peculiarly sensitive, and very rightly, on that point; but by his proposition the funds would not be taxed in any special manner, but would be treated only like other analogous income. As to the charge of class legislation, he wished to say, that no charge, in his opinion, could be considered more odious; but he challenged any one to point to a single word in anything he had said or written on the subject which could bear such a construction. He had felt it his duty to explain his scheme for the purpose of showing its consistency and safety, but he would, on that occasion, simply submit to the House the proposition, "that with regard to invested property, net income should only be assessed, and that some abatement ought to be made, for the purpose of taxation, from the net amount of industrial incomes," No result was more to be dreaded than that those who were aggrieved by the existing system should be driven by a continued refusal of relief into a stolid indifference, and should say to the Government, "Do your worst; we will take care of ourselves." He wished to press on the House the necessity of laying down some definite course of policy, and of directing the Government to reconstruct the tax, if it was to be renewed, in such a manner as to carry out what Adam Smith had declared to be the essential principle of all taxation, "That the subjects of every State ought to contribute to its support in proportion to the revenue which they may respectively enjoy." He therefore begged to move, as affirming the principle of an income tax— That, in the opinion of this House, the incidents of an Income Tax touching the products of invested property should fall upon net Income, and that the net amounts of industrial earnings should, previous to assessment, be subject to such an abatement as may equitably adjust the burden thrown upon intelligence and skill as compared with property.


rose to second the Resolution, and said: Mr. Speaker, Sir, I think that any one who proposes to reconstruct the incom tax upon some simple principle which shall remove all its inequalities and render it a tax justly levied upon the revenue of every one, must be either strangely unfamiliar with the difficulties which beset this question, or singularly confident in his own omnipotence. But although I fear that we must despair of doing justice to everybody, that is no reason why we should despair of redressing some of the more prominent inequalities, and so doing to large classes of persons a justice which, if it be not absolute, is at least comparative and approximate. If it be contended that with all our Amendments there must still remain much injustice unredressed, it is at least worth while to see whether we cannot reduce the sum of our necessary injustice to a minimum; and if it be objected that the tax is in its operation so full of inequalities that we are bewildered where to begin redressing them, instead of sitting down patiently under shuch a confession on our part, I fear that taxpayers will rather incline to use the language of a great statesman, once a very eminent Member of this House, and to ask whether "they are to despair of justice because they have need of so great justice." And, Sir, a special reason for moving in this matter now seems to me to be afforded by the change which has taken place in the policy of those who are for maintaining the tax as it is. The plea which used to be put forward was that the tax was lying under sentence of death, that it had but a little time to live, and that it was not worth while elaborately to reconstruct an impost which was trembling upon the verge of dissolution. But all this is changed now. The right hon. Gentleman the Chancellor of the Exchequer, who told us, in 1853, that "it was on all hands agreed that this tax was not adapted for a permanent part of your fiscal system, unless by reconstruction you could remove it inequalities," is now the strenuous advocate of an unadjusted income tax, and tells us, for our comfort, in the same breath, that "he thinks some better Chancellor of the Exchequer may, in some happier times, achieve the great accomplishment of abolishing this tax." Why, the right hon. Gentleman has even discontinued the performance of the annual pantomime, in which he carried the tax with great pomp to its burial, and then with equal pomp restored it again to life. The tax has not even the decency to die once a year, but has taken its place among the permanent sources of the revenue. And if any one were in doubt as to the policy of the Government with reference to it, he has only to refer to the evidence taken before the Committee appointed the year before last, and to watch the part played in that Committee by Members of the Administration. Besides the Chancellor of the Exchequer, then sat upon the Committee another right hon. Gentleman, the Vice President of the Committee of Council on Education, who lavished his ingenuity upon the answers of illogical physicians and other well-meaning persons who had only English common sense to help them, and who were therefore babes and sucklings in the hands of a right hon. Gentleman armed with all the logic of the schools. And since I have referred to the Report, permit me to express the disappointment which I believe the whole commercial community experienced at the abortive result of the labours of the Committee. Besides the illogical physicians, they examined some of the first statisticians and some of the most eminent political economists in the country. The most elaborate argumentation took place; every point was examined with the utmost nicety; no effort seemed to be spared in order to mystify and complicate the question; and then, when they had led us step by step into the very heart of the labyrinth, and we were looking to them for the clue which was to lead us safely out again, your Committee blew out the light and laughed in our faces. Yes, Sir, after this prodigious labour of the mountain, this ridiculous mouse of a Report was born. Nor can it be contended that the Committee had no leisure to prepare a Report. By a reference to the blue-book, I find that they took a whole month to frame it. They had an abundance of digested materials. The hon. Chairman prepared a Report. That Report they discarded—they do not vouchsafe to tell us why. For anything we can gather, for no better reason than that which made Dr. Fell so unpopular. The right hon Gentleman the Member for North Wilts—whom I regret not to see in his place—whom we all regret not to see in his place—who has devoted much attention to this question—prepared a Report. That was discarded. The right hon. Gentleman the Vice President prepared a Report, which was at least a high intellectual treat. That was discarded. The hon. Baronet the Member for Stamford prepared a Report. That Report was embodied in the Report of the Committee. But before embodying the Report of the hon. Baronet, the Committee took an unusual precaution—they disembowelled it. Having emptied out the Report of the hon. Baronet, they proceeded to fit it up with an interior of their own manufacture, the substance of which was that the objections to this tax were objections to its essence and nature, and not to its incidence (although how the Committee extracted that from the evidence I am at a loss to conceive); and secondly, that you must not reconstruct the income tax without taking into consideration the pressure of other taxation upon the various interests of the country, and especially of the succession duty. Why, Sir (although I know that another opinion has been expressed in this House), unsophisticated persons in the country imagined that the succession duty was imposed in order to remedy a great and startling injustice under which per- sonalty laboured when passing from father to son—although how completely it has failed to do so, through a system of evasion, there is no one in the House so well qualified as the right hon. Gentleman himself to tell. And as regards the pressure of other taxation upon the various classes in the country, I commend the discretion of the Committee in that they did not carry their investigations into this branch of the question; for had they done so, I am convinced that such an investigation would have disclosed anomalies in quite an opposite direction, which perhaps it would be safer to conceal. And this is the Report which is to extinguish the most wide-spread discontent which was probably ever excited by any unjust direct tax, and which is to eradicate the profound and universal instinct by which, from one end of the country to the other, the injustice of this tax has been condemned. When such was the Report, and such the men who framed it, we naturally enough supposed that they were reserving the reasons upon which it was founded for purposes of debate. It was therefore with considerable anxiety that we awaited the debate which took place when my hon. Friend brought his Motion before the House. We saw the name of the hon. Baronet upon the paper. I think we saw the right hon. Gentleman the Vice President in his place. We expected much from both the right hon. Gentleman and the hon. baronet. My hon. Friend made his statement with his usual clearness. He was ably seconded by my hon. Friend the Member for the City. We looked towards the hon. Baronet and the right hon. Gentleman. The hon. Baronet withdrew from the paper, the right hon. Gentleman retired from his place, and the Chancellor of the Exchequer was left single handed to vindicate the Report of the Committee, and to dispose of the case of my hon. Friend. Now, I am not going to deny that the right hon. Gentleman made on that occasion a most masterly speech. I have seldom listened to a speech of the right hon. Gentleman which was otherwise than masterly. We all know that the right hon. Gentleman possesses, in an eminent degree, the faculty of clothing the dry bones of a financial question like this with comeliness and life. We all know that he often illustrates and embellishes the whole with his eloquence, and now and then that he condescends to throw over it the brilliant halo of his imagination. If ever the right hon. Gentleman dazzled the House, it was upon the occasion to which I refer. He positively extinguished the debate. I watched hon. Members who had intended to take part in it, quietly return their papers to their pockets. I must confess that this was exactly my own predicament. But when we had had time to get from under the fascination of the right hon. Gentleman—when his speech appeared on the prosaic page of Hansard, we began to wonder how it was that it had made so profound an impression upon the House. And now, if I do not weary the House, I should like to state why (although I generally follow the right hon. Gentleman into the lobby) his line of argument upon that occasion does not appear to me to have been perfectly conclusive. The right hon. Gentleman, after having congratulated my hon. Friend upon his inflexible will in persevering with his Motion in the face of the adverse Report of his own Committee, proceeded to develop the argument upon which he evidently relied for the discomfiture of my hon. Friend. He said that the plan of my hon. Friend, if carried into execution, would create a gap of two and a half millions in the revenue, and he asked my hon. Friend how he proposed to fill up that gap. Now, if my hon. Friend had possessed the gift of prescience—if he could have foretold that the Government could by a scratch of the pen, without in the least impairing the efficiency of the services reduce the Estimates by a couple of millions, he would have possessed the key to a ready reply. But, of course my hon. Friend was ignorant of this fact. No doubt the right hon. Gentleman then was equally blind to it; because, if I remember rightly, it was at a subsequent period of the Session that those events occurred which brought sudden conviction to the minds of Ministers. And, Sir, I may say, in passing, that I shall be much surprised if the present Session should close without the pressure of events which will have the effect of carrying those convictions to a point which they have hitherto failed to reach. At that time, however, the right hon. Gentleman was unable to devise any means by which the gap could be filled up, except the imposition of an extra income tax of threepence in the pound. Now, it is wonderful how the fertility of resource of the right hon. Gentleman varies with circumstances. It reminds one of the fertility of the soil in some of the neighbouring counties. One moment the soil is deep and rich, unfathomable and inexhaustible. You mount a gentle eminence, and the fertility ceases. You are told that you have come upon the chalk. I have observed that when the right hon. Gentleman is preparing a budget his resources are inexhaustible, but when any one else proposes changes in our system of taxation which would result in a loss to the Exchequer, there is an end of the right hon. Gentleman's fertility of resource. We come at once upon the chalk. But on the supposition that all the other sources of revenue are already exhausted, and that a corresponding reduction in the Estimates is impossible; is it certain that we have so large a sum as two and a half millions to provide for by an extra income tax? My hon. Friend expects that the attempt to do justice to Schedule D will have a salutary effect upon the conscience of Schedule D, and that a large sum will he recouped through this resurrection of conscience. The right hon. Gentleman tells him that such an idea is altogether visionary. Now, so far as I am competent to form an opinion, I have formed one half way between that of the right hon. Gentleman and that of my hon. Friend. No doubt, when you have for years and years schooled men in duplicity and then proceed to set them a righteous example, you will find them better adepts in your first lesson than in your second; but I would beg the right hon. Gentleman to remember that a number of persons come every year for the first time under the operation of this tax, and that they, at all events, will not be tempted to commit fraud upon the specious plea that they do so in order to resist the fraudulent pressure of an unjust tax. Then there is the omission of Clause 133, as suggested by my hon. Friend. I believe that a large amount would be recovered from the omission of this clause, and that this additional advantage would accrue from its omission, namely, that it would hit large bankers and brewers—persons whom the right hon. Gentleman pursues with relentless hostility. But, Sir, I must protest against the manner in which the right hon. Gentleman draws a sharp line between the classes taxed under the different schedules. He tells us one moment that it is impossible to tax different classes differently in this country, as you might in India, because they all blend imperceptibly into one another, and the next he draws a sharp line between them, as though they were hopelessly distinct. It seems never to have occurred to the right hon. Gentleman that rich bankers and browers may be taxed under more than one schedule. It seems never to have occurred to him that rich bankers and brewers are in all probability great landowners, great fund-holders, and great holders of railway shares. And so universal is the application of this remark, that I believe rich bankers, brewers, merchants, and manufacturers would not gain a shilling by the scheme of my hon. Friend; for they would lose with one hand what they gained with the other. It is not for them, therefore, we demand justice, but for the 400,000 industrial and professional incomes, compared with which the incomes of rich bankers and brewers are but as a drop in the ocean. Well, Sir, from both these sources we should probably gain no inconsiderable sum—but the probability is that we should still have to provide for a deficiency of two millions, should the plan of my hon. Friend come into operation. Now, referring to the statistics, for which my hon. Friend moved at the close of last Session, I find that the distribution of an extra income tax to cover this amount would raise the tax on Schedule A to a fraction above 10d. in the pound, and lower the tax on Schedule E (the farmer's) to rather more than 7¼d.—and blending these two rates together, as we have a right to do on the supposition that this tax will be perpetual, we shall find that the tax upon land will be raised from 9d. to 9½d. Now, I do not think that the imposition of this odd halfpenny is likely to breed— Red ruin and the breaking up of laws, as the right hon. Gentleman appears to anticipate—and mark how the right hon. Gentleman piles up agony for the territorial interest. He tells them that, owing to the fact that most estates are more or less encumbered, and that the tax is levied upon the gross income, they pay already 2d. in the pound on the average more than they ought to pay. Well, I admit that this is a grievance. But what is its cure? Has the right hon. Gentleman proposed any? No, but my hon. Friend has. His proposition that net income alone should be taxed is the cure. But the right hon. Gentleman tells hon. Members opposite, that if they pass the measure of my hon. Friend, they will find that it will be materially improved upon in subsequent years. The right hon. Gentleman tortures the confiding imaginations of hon. Members with vague spectres of spoliation and confiscation to come. Now, why does the right hon. Gentleman do this? Because the right hon. Gentleman wishes to convince hon. Members that this scheme of my hon. Friend's, if it be not a deep-laid plot to destroy the social fabric, is at least the commencement of a strenuous struggle between the classes. But who is it who is the first to raise the cry of class against class? my hon. Friend or the right hon. Gentleman? Why I remember that two years ago the right hon. Gentleman, two or three times on the eve of a division, informed hon. Gentlemen opposite with a reiteration and an emphasis from which there could be no escape, that the struggle was not between himself and my hon. Friend, but between Schedule A and Schedule D. Nothing can be more adroit, nothing can be more admirable from a rhetorical point of view than the way in which the right hon. Gentleman deprecates the spirit of discord while steadily infusing it. But I think that the right hon. Gentleman pushed his happy intrepidity to the extreme when, after having proved to hon. Gentlemen opposite that it was their interest to reject the scheme of my hon. Friend, after having appealed to every selfish and sordid feeling, he wound up his speech by a peroration in which he besought them to have the manliness and virtue to vote against my hon. Friend—the manliness and virtue to vote in strict accordance with their personal interests! But it is not only the landed interest which will be unfairly taxed under the plan of my hon. Friend. There is the public creditor. The right hon. Gentleman tells us that Sir Robert Peel and Mr. Pitt were of opinion that to tax Schedule C in full, and the other Schedules not in full, would be equivalent to laying a special tax upon the funds. But Mr. Wilson, a high authority upon matters of finance, and a more recent authority than either Sir Robert Peel or Mr. Pitt, arrived at an opposite conclusion. In his memorandum—part of which I hold in my hand—he proposes to tax the fund-holders' income at 7d. while he taxes traders' profits at 4d. Now, there is another argument which is a great favourite with the right hon. Gentleman, and it is this: —That because there is a great disparity in the relative value of incomes in Scedule D, make what abatements we may, we shall still leave an immense amount of relative injustice unredressed. The right hon. Gentleman, in proof of this assertion, compares an income worth a few years' purchase, with that derived from a bank—a business which he estimates to be worth twenty-five years' purchase. Now, I feel infinitely obliged to the right hon. Gentleman for the high opinion which he has expressed as to the solidity of the kind of business in which I happen to be engaged. But will the right hon. Gentleman think me very ungracious and ungrateful if I say that his estimate appears to me to be so wild, so rash, so remote from the truth, that I am perfectly at a loss to conceive upon what grounds the right hon. Gentleman has arrived at so incredible an assumption. Does the right hon. Gentleman ask the House to believe that a capitalist would invest his capital in a business involving no inconsiderable risk, and, as we flatter ourselves, requiring no inconsiderable skill, upon such wretched terms as only to return him 4 per cent? It so happens that I was asked only the other day by a friend of mine (one of the most eminent private bankers in the North of England) at how many years' purchase I should put a banker's business? I at once replied that there was no banker's business in the country worth more than ten years' purchase. My friend demurred at my estimate, "Say rather five or six," said he. Now, if there be any truth in this estimate, what becomes of the argument of the right hon. Gentleman which is based upon the immense disparity in value of incomes in Schedule D? But I wonder that the use of such an argument did not suggest to the right hon. Gentleman a test by which to measure the iniquity of this tax. If it be so unjust to tax at the same rate incomes from professions worth five years' and incomes from professions supposed to be worth twenty-five years' purchase respectively, how much more unjust must it be to tax at the same rate incomes like that of a lawyer, which the right hon. Gentleman tells us is not worth a single shilling in case of his death, and incomes like those derived from land worth thirty or forty years', and in many parts of the county in which I reside fifty years' purchase? Now, there is only one more argument employed by the right hon. Gentleman to which I wish to reply before I sit down—namely, that which is based upon the proposition that Schedule D has no claim to an abatement because many persons in Schedule D take care to do themselves justice in the process of self-assessment, that is, by falsifying the returns. And first, I would recall the admission of the right hon. Gentle- man made two years ago, when he stated his— Conviction that a large portion of those who pay under Schedule D pay every farthing that they ought, and in many cases of doubt rule the doubt against themselves. And I would ask the right hon. Gentleman what kind of justice he is doing to these meritorious persons who, rather than evade the unjust impositions of the State, conspire with the right hon. Gentlemen in defrauding themselves, and who, in return for the exercise of a lofty morality, are told by the right hon. Gentleman, "It is all very well for you to talk about the morality of your class, but we know that in the folds of your schedule lurks all the roguery in the country?" But what is the right hon. Gentleman in effect saying to those who do themselves justice at the expense of truth and of the State? Is he not saying this?—" We are aware that you falsify the returns, and upon this fact we base our defence. We incorporate your falsehood into our system. Your falsehood and our injustice stand there face to face, confronting and neutralizing one another. What matter, so long as practical injustice is the result?" Let me tell the right hon. Gentleman that by persisting in the use of this argument, and persisting in a system of unjust taxation, admitting of the safe and ready remedy which he indicates, he is undermining the morality of a class upon whose high sense of honour, more perhaps than upon that of any other, the credit and reputation of this country in the eyes of foreign nations depend. And let me venture to remind him that the House of Commons is no mere vestry of tax-makers, but that we are supposed to be the guardians of the public morality, and the source of public justice, and that in this high character it becomes us to exhibit to the nation at all times no equivocal—I had almost said no disreputable —example, but especially when, as now, we were seeking to impose an obligation —abnormal, odious in itself, altogether removed from that public observation which is the safeguard of public morality— ought we to assume an attitude, the justice of which does not depend for its vindication upon the refinements of reasoning, but appeals at once to the public conscience —to the profound and intuitive instincts of our countrymen.

Motion made, and Question proposed.


Sir, there are certain acts, the repetition of which enables a man to cast aside whatever degree of bashfulness or shyness he may have previously exhibited in performing them. I am sorry to say that the repetition of the same annual speech on the same annual Motion is not one of those acts; and I most sincerely state to the House that it is with some degree of bashfulness that I feel myself compelled, by the Motion of my hon. Friend, to revert to the discussion of a subject which, as far as it can be opened out in a debate of this kind—and I am one of those who think it is not likely thus to be very fully opened out—is, to a certain extent, of a threadbare character as regards the principal topics and arguments it embraces. My hon. Friend appears here as a reformer of the income tax, and not only as a reformer of the income tax, but likewise as the advocate and champion of a particular plan. He does not appear as a reformer of the income tax in general, for no man has more mercilessly than my hon. Friend the Member for Buckingham cast aside, rejected, and repudiated the plans of every previous reformer. He enjoys, indeed, an absolute certainty that the plan which he himself proposes is, in all its essential parts, perfect and invulnerable; and if he could but convey to the minds of others that undoubting sentiment with which he himself regards it, certainly he would lead us at once to the adoption of his scheme. But I must be permitted to say this, that while I resist the project of my hon. Friend as being, in regard to its impracticable and visionary character, on a footing with the other schemes which he joins me in repudiating—nay, as being a scheme much more vulnerable in argument than those which he rejected because he found them so defective—I do not stand on the proposition that the structure of the income tax is to be defended as being, in all its parts, entirely agreeable to justice. It is not possible, I believe, to devise a tax of this kind which shall not be full of inequalities and anomalies. Still, the inequalities and anomalies of the income tax, as they now exist, have at any rate this advantage—an advantage which even the faults of every established tax possesses—namely, that they are in some degree understood, and that the back has, in some degree, adapted itself to the burden. But the faults, the anomalies, and as, I think, in most cases the injustices, which my hon. Friend proposes to introduce, have the additional disadvantge of novelty—a novelty which, to the speculative mind, may constitute an attraction, but which, if it even were the fate of my hon. Friend to have to propose his plan as a practical measure for the adoption of the House, he would find, when once he had to consider it as a question of legislation with a view to the supply of the public necessities, that to shift anomalies and injustice from one side to another is not merely not to remedy an evil, but to exchange an existing evil for another still worse and more difficult to bear.

Sir, my hon. Friend has submitted to us two Resolutions, and he proposes them, with the same confidence as he projected them last year. But I must again point out to him that upon which I have dwelt, when formerly engaged in argument against him—namely, the predicament in which he stands with reference to recorded authorities on this question. He spoke himself of an entire misconstruction of principles and misconception of objects on the part of those with whom he has to contend. But, at any rate, this must be admitted, that on a matter of such a character authority is of great importance, because the authority of men in such a case is not a naked and bare claim to domineer over the minds of others, but is the expressed result of the experience of those who have come nearest to this question, who have most closely and systematically examined it, and who have been obliged to adapt their conduct in this House to the principles which they found practically applicable to the subject with the least amount of objection. In that sense my hon. Friend does not doubt that the two greatest Finance Ministers of this country—if I may presume to form or pass an opinion upon our Finance Ministers—Mr. Pitt and Sir Robert Peel— have both considered this question, and have both left the tax as a uniform income tax, not, indeed, as the image of perfection in our fiscal system, but as that form on which, as wise, prudent, and practical men, they found it necessary to take their stand. But the question has also a more recent history, and that history is somewhat remarkable. A Committee was appointed in 1850 to consider, not the plan of my hon. Friend, but a plan which so far agreed with it that it aimed at a reconstruction of the tax in favour of those classes whom, at the expense of other classes, he now proposes to relieve. Now, what was the history of that Committee? The inquiry was voted by the House, if not unanimously, by at least a large majority. Every one was desirous of inquiry, and those who projected the investigation made the most sanguine and confident announcement that they would prove their case before it. The Committee sat; it examined the matter patiently; it ended by making no Report. That plan entirely broke down. Nor was that all. There were Gentlemen of eminence in this House who went into that Committee completely wedded to the plan of reconstruction, and who came out of it either entire converts to the principle of the present tax, or, at all events, greatly shaken in their adhesion to the scheme for reforming it. I have been told—and I may be contradicted if I am wrong — that my hon. Friend the Member for Rochdale (Mr. Cobden), who entered that Committee with the utmost confidence in the practicability of the re adjustment scheme, was entirely shaken in his belief as to its feasibility by hearing the evidence adduced. And it is perfectly well known that another Gentleman, then a Member of this House, and not second to anybody in his knowledge of, and fitness for dealing with, politico-economical questions—Mr. Ricardo—went into the Committee of 1850 prepossessed in favour of that scheme, and came out of it convinced that its agitation was mischievous and its adoption impracticable. Well, we had another Committee, on the urgent application of my hon. Friend, in 1861. How was it composed? My hon. Friend himself will not deny that which I am now about to assert. He did not lose his Report. His scheme was not rejected by that Committee, because it was a Committee which went to its inquiry with foregone conclusions adverse to his proposals. Some of the Members were opposed to the present mode of levying the tax; others were favourable to it; but the majority depended upon minds which were entirely impartial. Yet how did that inquiry end? By the adoption of a Report wholly hostile, to and condemnatory of, the scheme of my hon. Friend. And the reason why that Report was carried was because the majority who agreed to it consisted of men who were brought to their conclusions in consequence of their labours and inquiries on that Committee. Sir, these are facts of great importance. It is very easy to discuss a matter of this kind in the House of Commons, but something is due, in point of authority, to the conclusions of those who have been selected by the House for the purpose of examining in great detail a particular question of great intricacy and complexity. And when it is found that Committee after Committee closes its investigations with a mind more adverse to such schemes as my hon. Friend's than that with which they began them, that is a fact of great significance, which not all the ingenuity of my hon. Friend can shake. And although I do not pretend for one moment to say that the House is to be governed by the authority either of Ministers or of Committees, in opposition to its own conviction, yet it is an element of great weight in the case, which it would be highly for the interest of my hon. Friend's argument if he could eliminate from it, but the force of which I think we must all feel it difficult reasonably to disregard.

My hon. Friend the Member for Huddersfield (Mr. Leatham) made a very ingenious speech, but how does he know what may happen to himself? Other Gentlemen, ingenious like him, and with the same leanings, looking at the question from a distance, have thought to reform the income tax; but when they came to look at it more narrowly, have found, not that the present tax stood free from fault and blame of almost every kind, but that it was unwise to encourage the agitation of schemes which in themselves are impracticable, and tended to excite hopes and expectations that cannot be realized. Now, my hon. Friend, rejected by his own Committee, and having himself rejected the favourite schemes of reformers in the preceding Committee, after having had his Motion likewise rejected by a large majority in the House, comes forward with unabated confidence, and again submits his propositions; and I must say my hon. Friend, as he adds to the numbers of his campaigns, together with his experience— I had almost said together with his misfortunes—exhibits no small increase of hardihood. This evening he has adopted a much bolder tone than on any former occasion. He has undertaken to show us that there cannot be a greater mistake than to suppose that his proposition is favourable to the great capitalists, bankers, merchants, and brewers. That, says my hon. Friend, is all a mistake. Those gentlemen have all property invested, not, as we all thought, in their business, but in the funds and railway shares, where it is subject to the highest rate of tax. My hon. Friend is so modest with respect to Schedule D that he will not allow himself to assume the smallest credit as a benefactor to that unfortunate interest; and when he deals with Schedule A, he adopts quite an opposite tone. He says there cannot be a greater mistake than to suppose that I am going to augment the burden on Schedule A. He quotes an entirely impossible case of a gentleman with £800 a year, derived from landed estate, and that £720 of it may be put out on the interest of a mortgage. I certainly am not conversant with such a case, but he says, "This is a most cruel case. I have shown that under the present law such a man, instead of paving 9d. in the pound, may really pay 1s. 6d.; whereas under the plan I propose he will only pay 10¼d." Let us, then, try that issue. Does my hon. Friend admit or not that his is a plan to relieve one class at the expense of another? If he says that he does not impose unjust burdens on Schedule A, I fully admit he is not half so unjust to Schedule A as to some others. I don't know on what principle he has been pleased to select some descriptions of income which are generally considered most fluctuating and uncertain, in order to smite them with the weight of his right hand and lay on them the full weight of the tax. In his printed paper railway and canal property is to pay the highest tax. Canal property! Canal property, under railway competition, has undergone severe pressure and reverse, but he selects it for agreeable prominence in taxation, while he makes a deduction of one-third from every flourishing business in the City of London. Then with regard to railway property—I hope there is no railway shareholder in this House — if there be, he will judge what kind of remedial scheme that is which leaves railway property taxed as now at the full rate, and puts an extra tax on it, in order to give relief of 33 per cent to every flourishing business in the City of London. Is the income from railway property such a very flourishing income? I trust there is no person connected with the Great Western Railway present. Its dividend took a great jump upwards; but something of this kind lately happened, that the shareholders, enjoying an income of £3 per cent one half-year, the next it dwindled to 5s. per cent; but my hon. Friend has no mercy for such an income, and he proposes to levy a sur-tax for the benefit of those who are to enjoy a reduction of 25 per cent. My hon. Friend assumes an over-modesty with respect to Schedule D, and a degree of confidence, of innocence, towards Schedule A, of which he is hardly entitled to claim the benefit. His inference meant, if it meant anything, that he would give an effective reduction on Schedule A. Is that so, or is it not? Let us understand. Is the plan to relieve everybody out of some bottomless purse possessed by my hon. Friend, but of which no one else is cognizant; or is it the old vulgar plan of patting his hand into the pocket of one man to place the contents in that of another? That is my humble translation of my hon. Friend's speech, and it is very considerably supported by the figures and papers he has laid on the table. We have heard his speech to-night; how great a benefactor he is to Schedule A. Well, the amount of tax paid in 1860–1 under Schedule A was £2,048,000, and the amount of the tax which would have been paid under Schedule A, if the scheme of my hon. Friend had been in operation, is £2,308,000, showing an augmentation of £260,000, or about 12½ per cent. That is the plan; but do not be mystified about the amount of expenses and repairs and charges of maintenance. That is the net result presented by my him. Friend. Schedule A actually paid, under the present cruel and grinding tax, £2,048,000; and if his plan had been in operation, it would have paid £2,308,000 —an increase of £260,000—for the relief and benefit of other parties. My hon. Friend worked himself up by his dissertation on the three years' average clause till he appeared to arrive at the conclusion that the present law was by far too much in favour of those who pay the tax under Schedule D. Let us see how he ought thus modestly to disclaim the character of benefactor to Schedule D. I revert to his own simple figures. Schedule D in 1861, when the tax was 10d., paid £3,613,000; and if his plan had been in operation, Schedule D would have paid £3,049,000, or less by £564,000 than it actually paid. I therefore think I have established in favour of my hon. Friend, first of all, that he has somewhat overstated his claims to the gratitude of the taxpayers in Schedule A, and that he has greatly understated the grounds on which he is fairly entitled to be considered a benefactor to those paying under Schedule D.

Let us now come to the principle on which he founds his proposition; but first of all let me say, that what I have stated does not, in the least degree, exhibit the full amount of anomalies and cases of injustice my hon. Friend proposes to inflict on the country. Under Schedule, A he says will make an allowance of one-twelfth or 8⅓ per cent; let us see the meaning of that. Some owners of land have properties in which the repairs of agricultural holdings are very heavy and go far beyond one-eighth, but many other holders have properties on which they do not pay a shilling for repairs. The way the hon. Gentleman would remove anomalies is, that whether a man pays 20 per cent for repairs or nothing, a deduction of 8¼ per cent shall be made all round to him who pays nothing as well as to him who pays much. If he could grant that deduction to one without taking it from another, there would be something to say for such a mode of dealing, but that is not and cannot be the case. If you make a deduction all round, the meaning is, that to benefit one man you must tax somebody else. The general upshot of my hon. Friend's plan is, that he adds rather more than one-eighth to the payments of those who pay the tax upon land or houses. Every man upon the average who now pays £8 would then pay £9; but the difference would be, that while as a class those who now pay £8 would then pay £9, many of that class would still only pay £8, because the increase of the tax upon them would be counterbalanced by an arbitrary deduction, while others of the same class, instead of paying £9, would have to pay £10; and this immense inequality my hon. Friend seeks to introduce by a machinery as arbitrary in character as it is unsatisfactory and anomalous in results. But he says, he rests upon one main proposition as the basis of his plan— that is, he aims to relieve what he calls industrial incomes. I will come to the justice of that principle by-and-by; but upon what considerations does he found it? His argument is, "I will relieve industrial incomes, because under the law, as it now stands, the very same property which is taxed in one year as profits of trade is taxed in another year as capital, with reference to the fruits it produces." But, Sir, is that a reason why the income tax should be reconstructed? Because in 1863 you tax as profits in trade what in 1864, so far as unexpended, appears as capital, yielding fruits subject to taxation —I say, that is the principle of our law as to property in general. The law of this country makes property pass through preliminary taxation at the point when it comes into the possession of the holder, and then subjects it the year after, and every year after, to taxation in respect of its fruits. If a man makes £50,000 in trade in 1863, my hon. Friend says that ought not to be taxed in respect of its fruits as capital in 1864. But supposing a man inherits a property worth £50,000 in the Funds in 1863, he pays Probate Duty, Legacy Duty, or Succession Duty. It is taxed as capital in 1863, it remains in his possession, yielding income, in 1864, which is taxed again. The main reason which my hon. Friend urges for breaking up the income tax and substituting a scheme of his own is because we apply to savings made in trade the same rule which we apply—whenever the law can apply it —to any other property when it comes into possession of the holders. I think, therefore, that my hon. Friend has no ground for substituting his plan for the existing system, and the principle of his plan, I must say, appears to me to be fraught with danger.

The hon. Member for Huddersfield seems to think that the existence of a surplus would solve the question; and that the exception I took to my hon. Friend's proposition is simply that we had not a surplus, and therefore had not the money wherewith to do justice. I did mention the non-existence of a surplus as a difficulty for my hon. Friend to deal with, but not as any part of the difficulty I felt in acceding to his proposition. If there be a surplus—and it does not become me to say now whether there be or not—but if there be a surplus of taxation, we ought to deal with this question upon precisely the same footing as if there were no surplus—that is, we should do justice between the several classes of taxpayers of the country. Now, as to the practicability of the proposed scheme, my hon. Friend has, I think, done an involuntary injustice to the late Chairman of the Board of Inland Revenue. He said that Mr. Pressley, although he made difficulties at first, and although he was a most violent Conservative in all matters relating to revenue, yet such was the force and truth of my hon. Friend's plan, that at the close of the inquiry he withdrew all his objections, and had no more to make. My hon. Friend mistakes the character of Mr. Pressley, perhaps, because he has not been privileged, as many of us have, to enjoy the intimate friendship of that gentleman. What is the value of the term "conservative" as applied to politics, is not a question for discussion at present; but as applied to the administration of the revenue laws, never was error more ludicrous than to describe Mr. Pressley as eminently entitled to the epithet, on the ground of his being wedded to existing schemes and existing laws. For six years I have had the closest and most intimate intercourse with Mr. Pressley upon all matters relating to the revenue, and never in my life did I see a man more wholly free from all vestige of prejudice, more eager for improvements, or more desirous to carry them out. He never withdrew his objections to my hon. Friend's plan, because he never made any. Does my hon. Friend think that Mr. Pressley was so young in his duties as to commit himself in a reply to some ingenious question of my hon. Friend put with the hope of obtaining the sanction of Mr. Pressley's authority to his views, or that he was a man to put himself in the place of the Members of this House, and dictate to them the principles upon which the tax should be levied? All he said was "if the House chooses to enact a plan, we can carry it out," and there is no doubt of that; but I venture to say that the plan of my hon. Friend will not soon be submitted to any Chairman of the Board of Inland Revenue to carry into effect.

But what is the principle of my hon. Friend? He claims privilege for what he chooses to call industrial incomes. There is some degree of fallacy in that expression. Industry in this country is at present exempt from the income tax. I do not know that that exemption can be said to rest upon any very broad or clear principle, but, for my own part, I think it may be justified by two considerations:—First, that I believe it to be visionary to dream of levying income tax from the bulk of the labouring-classes; and next, because, as far as I am able to judge, under the system of taxation now existing the labouring man, although exempt from income tax, pays at least a very fair, perhaps a rather full, share of taxation; but, as far as the income tax is concerned, industry, properly so called, except a limited portion of the more highly skilled mechanics, is exempt. My hon. Friend means the profits of educated men in the professions, or some of them, and he likewise means the exercise of industry and intelligence in combination with capi- tal. I want to know upon what principle my hon. Friend gets to this particular distinction, as different amounts of taxation are to be taken from different people not according to the revenues they possess, which is an intelligible principle, not according to their poverty, which is an intelligible principle, not according to their wealth or poverty, but according to the degree in which industry and capital are mixed up together in making up the income. My hon. Friend propounds this as the foundation of his system. He confidently puts it forward as a self-evident proposition; but, in my opinion, a more dangerous principle it is not possible to conceive. Those whom he desires to relieve are the class whose fortunes are on the most rapid state of progress and increase. Those who are needy in proportion to the station they occupy my hon. Friend leaves untouched, or rather, he subjects them to additional burdens in order to give a great relief from taxation to a class whose fortunes are in the most rapid state of augmentation. But how does he think, when he has established his claim on behalf of what he calls industrial incomes, he will be able to shut out those who are disposd to recommend other principles? He will, no doubt, be shocked when I say that in my opinion more is to be said in favour of graduated taxation than for his plan. A graduated taxation recognises poverty in one class and overgrown wealth in another, and justice demands that one should pay less and the other more. There is something rather plausible in that principle, more so than in my hon. Friend's plan. My hon. Friend is very sensitive when the microscope is applied to the examination of his scheme, but that is really the only way in which to divest it of the plausibilities in which it is wrapped. He takes a widow, with £200 a year from the Funds, with six children to educate, to train, and to start in the world, and he takes the case of a great merchant—I will not say brewer or banker, as there seems to be some objection to specifying those flourishing classes—but to a great merchant, with £20,000 a year, he grants a relief to the extent of one-third, and in order to do that he adds 25 per cent to the burden of the poor widow. I protest against the principle of my hon. Friend. It is one, in my opinion, which, when carefully examined, is much less plausible, and at least as dangerous as the principle of graduating taxation. The hon. Member for Huddersfield says I appealed last year to the hon. Gentlemen opposite. He is much more fresh in his recollection of that speech than I am, having done me the honour to refer to it; but I am not aware that I appealed to the hon. Gentlemen opposite in particular. I appealed to the whole House, and I trust the whole House will have the justice and the manliness now to repeat the Vote which they gave on that occasion. Some justice and some manliness I think it requires, because I do not deny the faults and flaws of the present income tax. I do not deny that a feeling has existed, does exist, and I believe will always exist among considerable portions of the community, in the direction of the Motion which my hon. Friend has made. Neither do I deny that such a feeling is entirely natural. But I do say, that when the real merits of the case are examined, when investigation is made of broad practical issues, such as I have only endeavoured in one or two cases to exemplify, but which were more fully and sharply brought out before my hon. Friend's Committee, the danger involved in my hon. Friend's principle will be apparent. The danger, moreover, will be obvious of agitating subjects like this, and of substituting vague expectations in the minds of the community—expectations which only end in taking money from one man to give it to another—for those rational hopes of reduction which never can be realized by my hon. Friend's plan, but the realization of which must entirely depend on the adoption of judicious economy, and the consequent application of sound principles to the relief of the public.


asked the House to consider the position in which the subject was now left. He had met with a distinct denial and disproof every count in the indictment which had been urged against his plan of adjustment. His right hon. Friend in his speech had not even attempted to rebut his argument or invalidate his facts; but abandoning the logical contest, he had endeavoured to discredit his (Mr. Hubbard's) scheme by showing that all former schemes had failed. The only other scheme he had heard of was the one called Mr. Hume's—which he agreed with most practical men, with the officials, and with his right hon. Friend, in thinking impracticable; but surely one failure is no proof that amendment is unattainable. His right hon. Friend repelled the proposed adjust- ment by pleading that neither Pitt nor Peel had attempted one; but is no improvement in fiscal legislation to take place which Pitt or Peel neglected or ignored? Pitt was a great man, but is the policy of the author of the Sinking Fund to be a rule for us? Peel was a great man; but had he died a few years earlier, the Chancellor might have been quoting his authority now in support of a Protective system. The inequalities of the present tax are not denied, but we are told by the Chancellor of the Exchequer that the back must adjust itself to the burden — we must not hope to shake off our chains, but we are to find comfort in the expectation that our limbs will become callous to the pressure of the galling chain. I find, Sir, nothing more to reply to, and I must leave my Resolution to the decision of the House.

Question put, That, in the opinion of this House, the incidence of an Income Tax touching the products of invested property should fall upon net Income, and that the net amounts of industrial earnings should, previous to assessment, be subject to such an abatement as may equitably adjust the burthen thrown upon intelligence and skill as compared with property.

The House divided:—Ayes 70; Noes 118: Majority 48.