HC Deb 28 June 1875 vol 225 cc686-700

Order for Third Reading read.

Motion made, and Question proposed, "That the Bill be now read the third time."—(Mr. Chancellor of the Exchequer.)

MR. J. G. HUBBARD,

in rising to move, as an Amendment— That it is inexpedient, as proposed by this Bill, to require by law the reduction of the National Debt, by annual accounts of constantly-increasing magnitude, without any limitations of time, said, the Bill had been read a second time without any discussion, and through the forms of the House he had not, since the Motion for going into Committee, had an opportunity of asking the right hon. Gentleman the Chancellor of the Exchequer for an elucidation of some of the provisions of the plan which he thought required explanation in order to make them satisfactory. He had drawn up his Amendment in as precise terms as possible, so as to prevent misconception of the character of the proposal which he had made to the right hon. Gentleman, and which was that £5,000,000 should be yearly set aside, and be an item in the Budget expenditure for the purchase and cancellation I of Government Stock in the open market The right hon. Gentleman the Member for Pontefract had stated that his proposal was a regular conundrum; but that right hon. Gentleman had since admitted to him that when he used that expression he had not made himself acquainted with the real character of the proposal. The same right hon. Member had committed himself to an assertion which showed that he had not mastered the question of Terminable Annuities, when he spoke of the connection existing between a possible surplus and those Annuities: when in the very nature of things they were opposed to each other, the surplus being an asset and the Terminable Annuities being so many Government liabilities. The Chancellor of the Exchequer, in his Budget speech, expatiated with very great truth on the great inconvenience of one feature belonging to Terminable Annuities—namely, their spasmodic action. He had himself, therefore, suggested a scheme of Terminable Annuities for the reduction of the Debt which would be regular and continuous in its operation year by year, and not open to objection on account of its spasmodic character. The objections which were raised to his plan in the previous debates were founded on an entire misconception of its character. He maintained that, so far from their being able to apply an annually increasing sum to the reduction of the National Debt as proposed by the right hon. Gentleman, it would be impossible, as the Debt became diminished, to go on applying even the same sum to its reduction. He should be glad, therefore, to hear what were the right hon. Gentleman's ultimate and deliberate views as to the amount of Debt which it would be practicable to redeem from year to year. If the Chancellor of the Exchequer would take due time to consider the question, they might, perhaps, in another Session, have a measure on that subject connected with the Savings Banks introduced in a shape which might meet with the acceptance of the House. The right hon. Gentleman concluded by moving his Resolution.

The Amendment, not being seconded, was not put.

MR. LOWE

Sir, I wish to offer a few words of explanation to the House in vindication of myself. In the debate on going into Committee on this Bill, the Chancellor of the Exchequer was vigorously attacked by my right hon. Friend the Member for Greenwich, for having, as he said, trusted to the normal increment of the taxes to meet some extra expenditure beyond that which was provided for. The Chancellor of the Exchequer, in his reply, stated that this zeal of my right hon. Friend seemed to be an intermittent one, and then he quoted Questions that were asked me in 1872, to this effect— Mr. Sclater-Booth asked the Chancellor of the Exchequer…. Although the right hon. Gentleman estimated his surplus at a little over, £300,000, he gave the Committee to understand, with some complacency, that it would probably be his duty to propose later on in the year a Supplementary Estimate of £400,000, and that sum he proposed to meet by the growth of Revenue, of which he had taken no account in his Estimate of the present year. And then the answer I gave was also read— The Chancellor of the Exchequer: That is quite true. But, on the other hand, I have taken no credit for the corresponding increase on the other side which will make up the deficiency, and more than make it up. So that the Chancellor of the Exchequer argued from these premises, and, I am bound to say, with very great force and plausibility, that while he was being taken to task by my right hon. Friend for having counted on the normal increase of the Revenue—that is, on something beyond the Estimates he laid before the House, to meet his liabilities, I had been guilty of the very same thing, whatever the offence might amount to. It certainly appeared a very fair retort, and I was not at the moment able to give the explanation which was required. I felt confident in my own mind that I had not done so; but I was not then prepared to prove it, therefore I have remained all this while under the imputation. I have, however, looked into the matter, and it stands thus—It is perfectly true that I had only a surplus of £300,000 in 1872. It is also perfectly true that I said that, judging by the experience of other years, and knowing that Supplementary Estimates ever since the passing of the Exchequer and Audit Act have become a matter of necessity, I estimated that the Supplementary Estimate would be the same as it was the year before—that is, £420,000; and it is also perfectly true that I said I had made no provision for the odd £120,000 beyond my £300,000 estimated surplus, but had trusted to the increase of the Revenue for it. So far, therefore, nothing could seem clearer against me than the state of the case, and the allegation seems to be borne out. But there is one important fact which could only be discovered by reading—as I have been obliged to read—the Budget Speech of the year, and that fact is this:—I estimated my Revenue, and I never varied my opinion of what that Revenue would be so long as the circumstances remained the same as when I made the Estimate. I took off £3,300,000 in taxes—income tax, 2d. in the pound, and other things—and then I left myself a surplus of £300,000; and having this Supplementary Estimate to meet, and having only that £300,000 estimated under the altered circumstances of the case—that is, these Estimates having been made before I took off this £3,300,000, and looking at them after that was taken off—I did presume that the relief to the taxpayer of £3,300,000 would have the effect of increasing the Estimates of the year to an extent larger than the £120,000 which I was short of. That, of course, has no resemblance to the case referred to by my right hon. Friend the Chancellor of the Exchequer. I did not rely on the Estimates under the same circumstances; but I relied that after the very great change in taxation that had taken place, the Revenue would be increased in consequence of it, and I maintain that my expectations were fully realized, because not only did I get the £120,000, but I got a surplus of no less than £4,700,000 for the next year. I do not know that I have been unfairly misrepresented in the matter, because it was a mistake very natural to fall into under the circumstances; but the explanation shows that whether my right hon. Friend was right or wrong in what he did, my case was distinct from his, because the Estimates I relied on were subject to increase, not from the normal increment of expenditure, but from causes which I myself had set in motion.

MR. CHARLES LEWIS

thought that the course taken in reference to this Bill was somewhat unfortunate as regarded the point of its effect upon the permanency of the income tax. Neither the House nor the country had up to the present moment had any explanation as to whether by this Bill it was intended directly or indirectly that the income tax should form a permanent portion of the Revenue of the country. It seemed to him, however, the measure would really involve the retention of that tax indefi- nitely for the purpose of paying off Debt, and that the real meaning of the Bill was that the income tax was to be perpetuated. It might be that at the present time, with that tax at a very low rate, people were quiescent in regard to the matter; but if it was to become a permanent source of Revenue, the time would come when it would be treated by Chancellors of the Exchequer as it had been treated before, as a balancing item to be increased at pleasure, and the result would be its becoming a continually irritating sore in the minds and the pockets of the people of this country. The inquisitorial character of the tax, its tendency to promote fraud, its inequality of incidence, were just as great as ever. In the course of the next eight or ten years there would be a large reduction in the amount of interest payable upon the National Debt, and it being anticipated that an agitation would then commence in favour of the abolition of the tax, this measure was brought in with a view of binding Parliament, and preventing it from yielding to that agitation. At the present moment the tax produced some £4,000,000 per annum, while the interest payable on the Terminable Annuities amounted to somewhere about £4,600,000 per annum, and therefore it was evident that the finances of the country had been so worked that at the present time the income tax was maintained for the purpose of providing a fund for paying off Debt. At the time of the Crimean War the tax was used as a tax for a great national purpose, about which the whole nation was agreed; but since then the truth was that the nation had been induced to forget the bargains which successive Ministers of the Crown had made with it in connection with this tax, and there was great danger that the tax would eventually be allowed to slide into and become a part of the permanent Revenue of the country. Successive Prime Ministers and Chancellors of the Exchequer had been committed on that point, and yet the effect of our financial policy during the last 15 years had simply been to bring us to this state of things—that the income tax was now required and maintained for the purpose of paying of Debt. He had always looked with regret to the possibility of its being said that under a Conservative Government with a Conservative majority the tax should be made permanent. The tax in its present form was unequal and unjust, promoted fraud, and was productive of great evils amongst the commercial classes; and he therefore wished to justify his conduct on this occasion by saying that were he to remain silent he should hereafter be taunted with having been a consenting party to the permanent retention of the tax by having sanctioned this Bill. If he were forced to do so alone, he should be willing to go into the Lobby by himself to vote against it. He begged to move an Amendment in somewhat similar terms to that which had been moved by the right hon. Member for the City of London on the Motion for going into Committee upon the Bill, to the effect— That, as reduction of Debt implies taxation in excess of the requirements of the State for the services of the year, the pressure of the income tax should he diminished to the extent of the interest saved upon the amount of Debt previously redeemed. The Amendment, not being seconded, was not put.

MR. FAWCETT

thought that as the third reading of the Bill had been on the Order Book for some time without any Notice being given of opposition to it, the hon. Member for Londonderry had adopted an unusual and inconvenient course in raising a discussion on the subject now. What the hon. Member had said would certainly not induce him (Mr. Fawcett) to oppose the Bill, but rather supplied him with an additional argument for supporting it. He should not have troubled the House with any remarks, but for the fact that the discussion of the Bill had hitherto been confined to the two front benches, and because he feared from the manner in which the subject had been treated on his own side of the House, that an impression might be created in the country that if the Liberal Party returned to office they would not consider that it was under any very strong obligations to continue the principle and plan embodied in the measure. A question of greater importance could scarcely come before the House than that which had reference to the reduction of the National Debt, and he regretted that it should be obscured by the raising of the issue as to the relative advantages of Terminable Annuities and a fixed appropriation. It was admitted that the time had come when they were bound by every sentiment of patriotism to make a sincere effort to reduce the Debt, He cared not how it was reduced. It was of the first importance that it should be reduced; it was of secondary importance whether that should be done by Terminable Annuities or by fixed appropriations. For his own part, he felt bound in candour to say that he could not see any difference whatever in the relative advantages of a Terminable Annuity and a Sinking Fund. The Debt could not be reduced by ingenious book-keeping, or by a clever manipulation of figures; there was one way and one way only of reducing the Debt, and that was by obtaining a greater amount of Revenue than the actual charges of the year; and if you obtained a surplus, it was a matter of no moment whether it was applied in the form of reducing the Debt by Terminable Annuities or in the simple form of cancelling Stock. So far as he understood the scheme of the Chancellor of the Exchequer, if he had a surplus, there was nothing whatever to prevent him resorting to Terminable Annuities as a means of reducing the Debt. There was, therefore, no necessity for the House involving itself in all those intricacies about Terminable Annuities and a Sinking Fund, The simple question the House had to consider was whether the Debt was more likely to be reduced by the passing of that Bill or not. He believed that such a Bill must exercise a very important influence in the reduction of the Debt. What, he asked, was the use in saying that a Sinking Fund would fail now as it had failed in the time of Mr. Pitt? A scheme for the reduction of Debt which would have been impolitic 60 years ago might now, in the altered circumstances of the country, in its present condition of prosperity, be perfectly politic now. It was quite true that they could not control the future, and that a scheme which was accepted this year might become nugatory next year; but did the House think that if such a Bill as that under consideration had been passed by the late Government, the present Government, with a surplus of £6,000,000 last year, could have proposed the repeal of the horse duty, and have altogether ignored the subject of the reduction of the Debt? It would be easy for the political opponents of the Government to ask them this question—how it was that they had adopted what seemed to him (Mr. Fawcett) a somewhat undignified course for a Government to adopt, that' when they had, as last year, £6,000,000 to spare they did nothing for the reduction of Debt, whereas now, when they had nothing in their coffers, they proposed to do a good deal. The question involved was of far greater moment than the personal credit due to the Government. By passing the Bill the House would bind itself to the principle that some serious effort ought to be made to reduce the National Debt, and would tie up the hands of the Chancellor of the Exchequer as to the amount of money he would have to spend. He hoped the House would not be so unwise and so unpatriotic as to oppose the passing of the Bill. When we reflected on what our predecessors had done for us, we could not think it any undue sacrifice on our part to set aside an insignificant portion of our vast accumulated wealth for the benefit of our posterity. He believed it was no exaggeration to say that England was at least 10 times wealthier now than she was 60 years ago, and the burden of the National Debt was twice heavier then than it was now. We certainly ought not to let these days of prosperity pass without reducing our liabilities, for less happy times might come, when the Debt would be a heritage of difficulty and danger to the country, and he hoped the Bill would not only be passed, but that it would be patriotically carried out.

MR. ANDERSON

said, the right hon. Member for the City of London argued that there was no connection between Terminable Annuities and a surplus, because the former was a liability and the latter was an asset; but that really was exactly where the connection lay, because the asset would be needed to pay the liability, and no prudent Chancellor of the Exchequer would ever undertake to create those Terminable Annuities unless there was a prospect of a surplus to redeem them afterwards. The right hon. Member also spoke of Terminable Annuities being a spasmodic affair; but for his (Mr. Anderson's) own part he thought it was the most regular way of paying, and he preferred that the reduction of the Debt should be carried out by that means, rather than by fixed appropriations, provided it was not carried too far. He did not at all like the proposal of the right hon. Member to set aside a fixed sum of £5,000,000 continuously every year for the reduction of the Debt. He should like to know how the money was to be raised—it could only be done by laying on new taxation, and he, for one, decidedly objected to new taxation for that purpose. The hon. Member for Hackney (Mr. Fawcett) had said a great deal about the sacrifices our forefathers had made for us, and argued from that our duty to pay the Debt. He differed entirely from that deduction. He very willingly admitted that we should honour our forefathers for what they had done in preserving the freedom of the country. But they did not do it for us; they did it for themselves—we were not thought of at that time. What our forefathers did for us was to hand down the bill to pay, and they handed down to us a great load of Debt; and while he was anxious that this generation should do nothing to increase that Debt, should even do something to reduce it, it was most important that that should be done as easily as they could. He denied that there was any reason for making any great sacrifice for the purpose of paying a Debt which we did not incur. The analogy of the hon. Member for Hackney between the individual and the country did not hold good in that respect. He saw very little objection to reducing the Debt slowly, and he thought they had done very well indeed so far. The sum as at present proposed by the Chancellor of the Exchequer out of the £28,000,000 was not very burdensome, and not very large; but he agreed with the right hon. Gentleman the Member for the City of London (Mr. Goschen) about its gradually increasing importance—that while now the sum apportioned to reduction was less than £1,000,000, as Annuities fell in it would soon increase to£8,000,000. £10,000,000, £12,000,000, or even £20,000,000. But he had no doubt before that time arrived this Bill would be upset, for no Chancellor of the Exchequer could resist the temptation of laying his hands on that splendid sum. He did not consider that that amount of taxation of £28,000,000 could be kept up permanently without, as the hon. Member for Londonderry said, making the income tax perpetual; and as he considered that the passing of the Bill would tend to have that effect, he would vote against the measure.

COLONEL EGERTON LEIGH

expressed his belief that if there had been a strong feeling in the country against the income tax it would have manifested itself at the last General Election. He regarded the impost as a most legitimate one. But for the income tax, a man with £50,000 a-year, if he lived in lodgings and refrained from consuming taxed articles, might avoid paying a single farthing to the country. It was hard on the people in general to have to pay taxes when so many men with immense incomes had the power of escaping from every sort of subscription to their country; and it was on that ground that he was in favour of an income tax, which was the only means of touching men of very large property who would not pay a farthing in any other way. It was all very well for hon. Members to say that it was intended as a war tax, but they did not, happily, often go to war.

MR. E. J. REED

said, he was very glad that some attention had been paid by the Government to the often-repeated wish of some hon. Members on both sides of the House that a determined effort should be made to reduce the National Debt, and he was sorry that the efforts of the Government in that respect had been represented to be an attempt, as they had no surplus, to create a fictitious credit for themselves, and that, too, by a process which would impose all the burden of this system on their successors. There might be some truth in that representation if it had been uttered with reference to a Government that was about to expire, but it was uttered with reference to a Government in its second year of office, and apparently in the prime of its strength. He sympathized with the hon. Member for Londonderry (Mr. C. Lewis) with reference to the income tax, and should be sorry to find that we were more permanently committed to it than before; but the views of the hon. Member for Hackney (Mr. Fawcett), so very well expressed, entirely accorded with his own, and he was not at all prepared to support the opposition offered to the plan of the right hon. Gentleman the Chancellor of the Exchequer. On the contrary', his conscientious opinion was that it was a good thing in prosperous times to make some effort to reduce the National Debt of the country.

GENERAL SIR GEORGE BALFOUR

supported the Bill, and agreed in the main with the statements and arguments of the hon. Member for Hackney (Mr. Fawcett). He advocated the maintenance of the income tax on the broad ground on which it was re-established by Sir Robert Peel, in view to changes in the taxation of the country, which bore unfairly and unequally on classes of trade. No doubt, great changes had been effected in the Customs and with immense benefit to the country. But there still remained burdensome taxes which might be abrogated or reduced. The duties on coffee, on tea, on chicory, on wine, and on fruits, still needed reform. Then, the burdens on shipping urgently needed attention to enable this country to compete successfully with other countries. There were also the duties on carriages, male servants, on guns, urgently needing relief. But still more important was the bad system of granting aids from the Imperial Exchequer towards local taxation. That bad and dangerous form of aiding localities to expend public money should be discontinued, and to that end the income tax should be applied in order to transfer to localities all those taxes which were raised locally, such as licences of every description, all of which, including the gun, dog, and game licences, should be appropriated to local uses, and the aids from the Imperial Exchequer discontinued. And with regard to the paying off of the National Debt, it appeared of little importance whether that was effected by Terminable Annuities which originated in the reign of Queen Anne, or in the direction of buying up or cancelling Consols, or to the form of a Sinking Fund as now proposed. The whole question resolved itself into one of practical administration, so difficult to enforce, that of actually doing it.

SIR JOHN LUBBOCK

said, he could not support an Amendment which would defeat the measure, which he regarded as a valuable one. He could not help thinking that the statement of the hon. Member for Londonderry that hon. Members committed themselves at the last Election to the abolition of the income tax was too broad an assertion. In his opinion, anything which would have the effect of abolishing direct taxation would be simply a step in the wrong direction. Without some form of direct taxation, an unfair proportion of the national expenditure would fall on the shoulders of the working classes. But while he intended to support the present Bill, he thought it was a strong condemnation of last year's Budget. The right hon. Gentleman the Chancellor of the Exchequer spoke strongly in favour of appropriating £28,000,000 a-year to the reduction of the National Debt. But what were the facts? Why, that in the present year, he would only be enabled to set aside for that purpose £27,400,000, next year £27,800,000, and it would only be the year after he could set aside £28,000,000, or the sum set down in the Bill. He could not understand that anyone who proposed to reduce the National Debt at all could regard the sum proposed by the right hon. Gentleman as too large for that purpose. Those who were opposed to reducing it believed that in a few years they would be called on to make less sacrifices than they did at present. He thought it would not be prudent to take so sanguine a view. At the same time, he thought that there was a disadvantage in Terminable Annuities, and in the scheme proposed in the Bill. He preferred a simple repayment, for when the interest annually payable was seen to be diminishing the people of this country would be better able to appreciate the advantage of reducing the Debt. The hon. Member for Glasgow (Mr. Anderson) had said that the Bill, even if such a scheme became law, would probably be upset in a few years; but, at any rate, the Bill would throw the onus probandi upon those who sought to reduce taxation. The right hon. Member for the City of London (Mr. Hubbard) appeared to be under the apprehension that we should pay off the Debt too rapidly; but he (Sir John Lubbock) did not share in that fear, because he was only too much afraid that the process would be stopped prematurely. He regarded the Bill as an honest expression on the part of Her Majesty's Government that the reduction of the Debt was a wise policy, and a duty which they owed to the country, and therefore he should give the measure his hearty support.

THE CHANCELLOR OF THE EXCHEQUER

said, he would not trouble the House with many observations, seeing that he had already addressed it two or three times on the subject of the Bill. He was, however, anxious to take the last opportunity of expressing his thanks to various hon. Gentlemen who had spoken, especially to the hon. Member for Hackney (Mr. Fawcett), who had so very ably and powerfully expressed the opinions which had guided the Govern- ment in proposing the measure; to the hon. Baronet opposite (Sir John Lubbock) who had just sat down; and to other hon. Members on the Opposition side of the House, for the spirit of frankness and candour which they had displayed, and which he believed really reflected the opinion of the great majority of the country. He believed that the time had now come when there was a very general feeling of accord in favour of making a sustained effort towards the reduction of the Debt, and he thought there was a sounder and more generous feeling afloat than that expressed by the hon. Member for the city of Glasgow (Mr. Anderson) with regard to our duty to our ancestors on the one hand, and to our posterity on the other. It was hardly generous to speak of our ancestors as though they had left us nothing else than a Debt which we had to pay. They had made not only great sacrifices in their financial arrangements, but great personal sacrifices, and endured great personal hardships, and developed a power of endurance, which raised this country to the pitch of glory which she had so long maintained, and of which she was now so proud. And when he came to the financial question, let him remind hon. Members that, although it was quite true that a nation engaged in a formidable struggle for existence and independence ought to pay its way as far as it could, yet it might be impossible for it to raise the sums necessary to meet its expenditure, without laying such burdens upon it as would have choked its rising industries and would have strangled its future prospects in its cradle. He was of opinion, then, that our ancestors did wisely in borrowing rather than increase taxation beyond what the nation could bear, and in not being in too great a hurry to pay off the Debt until our finances were in a condition to bear the strain. But what was laudable in the case of our ancestors would be very wrong for us to adopt. We were now enjoying a period of great prosperity; our people were happily not overburdened with taxes, and were able to pursue their avocations with very few inconveniences and restrictions, and therefore now was the time to make an effort and endeavour to reduce our Debt. The question then was, in what way were we to reduce that Debt? He did not approve of mere spasmodic efforts in that direction, which would be influenced by temporary political exigencies and by fluctuating finances; but he thought that we ought to systematize our efforts so as not to inconvenience the country, but at the same time make a real and permanent effect upon our Debt. We were now paying off our Debt, as far as the Terminable Annuities were concerned, at the rate of £3,700,000 per annum, and all that he asked the House to do by this Bill was to sanction the continuance of the present burden upon the country until circumstances should arise when it might become prudent for the Government of the day to propose a change in the scheme. The pressure upon the country, owing to its growing prosperity, would fortunately be less and less, while the impression upon the Debt would be greater and greater year by year. He had been asked whether he proposed to bind the country by this Bill for all time, and to that inquiry he replied that it was impossible to bind the country for all time, because it was impossible to bind any future or even the present Parliament beyond the present Session. There were, undoubtedly, two limitations to the Government proposal. One was, that if a time should arrive when it would be impossible with advantage to get Stock enough to redeem, it would be open to the Financial Minister of the day to propose some different legislation; and the other limitation was, that if a time came when our circumstances greatly altered, and when we were called upon to make far greater exertions than at present, then we should have on this system a reserve which would easily and properly be made applicable to prevent the necessity of borrowing, and to substitute for borrowing simply a cessation of paying off the Debt. But as matters stood at present what the Government asked them to do was a very simple matter, involving little or no sacrifice beyond what they were now willing to submit to. He would not go into the particular questions at issue between the right hon. Member for the City of London and himself. He admitted the authority of his right hon. Friend (Mr. Hubbard) was such that he should be sorry to set up his judgment against that of the right hon. Member; but, at the same time, he thought his (the Chancellor of the Exchequer's) proposal was in no way inconsistent with that of the right hon. Gentleman. As regarded what had been said by the hon. Member for Londonderry (Mr. C. Lewis), he denied altogether that the Bill would have the effect the hon. Gentleman supposed in respect of the income tax. That question lay apart from this measure, and ought not to be argued in connection with it. The Bill in no way militated against what he had laid down in his Budget speech, and that was, that in regard to the income tax we ought not to use it as a financial makeweight in order to get a balance every year, but that the object should be, so long as we paid the tax, to keep it low and uniform. He would not enter further into any discussion of the measure, which he thought had already been sufficiently discussed, and would only express a hope that it might prove satisfactory to the interests of the country.

MR. MUNDELLA

protested against the doctrine laid down by the hon. Member for Mid-Cheshire (Colonel Egerton Leigh) and the hon. Member for Maidstone (Sir John Lubbock), that at the last General Election the country agreed to the perpetuation of the income tax. His opinion was, that at the last Election the impression was strong that whatever Party came into power the income tax would be abolished. He should support the Bill for the reasons which the right hon. Gentleman the Chancellor of the Exchequer had assigned. He did not believe that it involved the perpetuation of the income tax. If he believed it would do so, he would not support it. But he agreed that in the present state of the country they were bound to make some fair and honest attempt to reduce, as far as possible, the mass of the Debt.

Motion agreed to.

Bill read the third time, and passed.