HC Deb 06 April 1876 vol 228 cc1331-67

Order for Committee read.

Motion made, and Question proposed, "That MR. Speaker do now leave the Chair."—(Mr. Chancellor of the Exchequer.)


, in rising to move— That Local and Imperial Taxation, when they have a common incidence, should have a common basis of valuation, and should alike be assessed upon the net rental or value of Real Property; and that Imperial Taxation, when levied upon industrial earnings, should be subject to such an abatement as may equitably adjust the burthens thrown upon intelligence and skill as compared with property, said, he considered this one of the most important points of our fiscal policy. While the expenditure of the country was subject to constant and searching scrutiny, the mode of raising revenue was almost wholly neglected; yet it was a question which, as affecting the morality of the people, was not only equal, but superior, in importance. The Revenue of the country rested on no distinct principle whatever. Our Revenue, in fact, was nothing more than the residue of different taxes imposed at different times for different purposes, and for different periods of continuance. The Income Tax never would have been what it was but for this reason. It was originally imposed for a period of three years for the purpose of effecting great fiscal improvement. It was taken out of the old treasury of war taxation, and, without any improvement, was imposed in 1842. Although then regarded as a mere temporary imposition, it had come down to the present time full of inequalities, imperfections, and injustice. The notion that the Income Tax had nearly expired was quite exploded. An expiring tax was not subject to fresh alterations. It was now about to be subjected to another change in its incidence and amount. It was impossible not to be struck by the magnitude of the interests at stake. The amount of taxation for Imperial purposes was over £70,000,000, and for local purposes over £20,000,000. The President of the Local Government Board had a Bill before the House dealing with local taxation, and through that measure one object he had had in view for years would, he hoped, be happily fulfilled. That prospect relieved him of much of the labour he might have had in showing the present discreditable position of local taxation in the country. With respect to Imperial Taxation, there was something he desired to say upon the subjects of the Income Tax and the House Tax. The anomalies of the Income Tax were patent to every one, but they were more distinctly seen when Imperial taxation was contrasted with local taxation. Local taxation, he trusted, was fairly rooted in the legislative policy of the country upon this principle, that in levying rates you should charge not on the gross rental or gross value of property, but on that which remained after deducting the expenditure which was necessary to maintain the property in a condition to produce that rent. In that way you taxed a constant figure and not a variable sum. Compare that principle with the case of the Income Tax on the gross rental or gross value of the property. It was difficult to see how such an anomaly should be allowed to exist as that of having these two modes of taxation going on side by side. The assessment of the metropolis had been driven up by the joint efforts of assessment committees and Government officials until it had reached the enormous amount of £28,000,000 gross rental. Five millions, however, were expended annually in payment for repairs, &c., yet the Imperial taxation was levied on the gross amount of £28,000,000. He would not call this confiscation, because confiscation implied misconduct on the part of those whose property was confiscated. In this case there was no offence at all; his constituents had done nothing to bring on themselves such a fiscal exaction; but though it was not confiscation, he would say it was extortion. Although it might not be always apposite to adduce the experience of foreign countries on such a subject, he could not help referring to a passage in Mr. Gallenga's interesting book on the condition of Italy, wherein it was stated that the Chancellor of the Exchequer of that country was seldom, if ever, troubled with communications enclosing conscience money, because the Italian taxpayer looked upon the Government as his enemy and taxation as public robbery, and regarded it as heroism to evade the obligation of payment. He did not pretend there was any similarity between the systems of the two countries with regard to the feelings they engendered; but, still, the quotation was à propos so far as taxation was unjust. In its legitimate aspect taxation was a device of civilization for securing protection and comfort to all the members of society. It was not only the industrial, professional, and mercantile classes that suffered from the Income Tax—the wrongs done to the land and house interests were exceedingly severe. The taxation of rental in the gross was obviously unjust. A quarter of the gross rental of the lands and houses of the country belonged, not to the nominal owner, but to the mortgagee and the encumbrancer; and by this fact a new and important question was raised for consideration. Assuming a landed property of £2,000 gross and £1,800 net rental to be burthened to the extent of £1,600 a-year, the owner who was rated to the Income Tax on£2,000 recouped himself on £1,600 only; so that, receiving £200 as his residue, he was charged with the Tax on £400. Upon his share of the net rental the owner paid a tax twice as heavy as that levied upon the capitalist mortgagee. This would surely be a great flaw in any system; and although hon. Members might not have their property encumbered, a feeling of justice would make them anxious to afford some remedy to those whose estates were encumbered. In seeking to redress the inequalities of this tax, he appealed to those who held it to be unjust that our local rates were levied solely on real property. It was quite time that this question should be re-considered. If a remedy was to be found in contributions from Imperial to local rates in aid of Imperial objects it was evident it could be done only through the instrumentality, and therefore through the adjustment of the Income Tax. An Income Tax should not fall upon the corpus of property, and so be at once a Property and an Income Tax. He by no means condemned a Property Tax operating within its own area and incidence, as through the Legacy and Succession Duties. The greatest blot on the Income Tax was that it was levied upon the salary of the professional man and industrial earnings just as much as upon assured income from land or the funds; and to correct that defect the second portion of his Motion was directed. From the defects of the Income Tax he proceeded to the question whether it could be spared or not. There were in the House several resolute advocates for its abolition; and if we could pay off £4,000,000 of Debt yearly, it was plain that instead of doing that we might, if we chose, dispense with the Income Tax; but he did not recommend that course. He admitted it to be our duty to endeavour to reduce our Debt; but he did not think that reduction ought to be attained by the continuance of Imperial taxes, the levying of which demoralized the people by encouraging them to resort to practices which disgraced us in our own eyes and in the eyes of the civilized world. The impolicy of entirely abolishing the Income Tax would be seen when it was remembered that it was the only tax that at all reached absentees. They were to be found all over the world, and many of them preferred to live in a more genial climate, where they would receive their rents and dividends without in any wise contributing to the expenses of the Government at home. Since the Income Tax had been established there had been signal examples of the utility of the tax in reaching absentees. There was one illustration which had occurred during the present generation. A nobleman of high rank and enormous property, who had lived a self-indulgent career in Paris, had literally spent millions there which, but for the Income Tax, would never have contributed one farthing to the maintenance of the government of this country. The class of traders and merchants, but for the Income Tax, would also almost escape taxation. A merchant's capital was always in a state of activity and his investments were constantly changed. His profits accumulated, and might be enormous, and but for the Income Tax he would never pay an adequate contribution towards the expenditure of the Government. It might be argued that if he amassed a large fortune he must be caught at some time, because he must die, and then he would have to pay probate and succession duty. But he might escape even then, for he had heard of an exceedingly opulent man who, when he was near his end, called his children together and divided his millions among them. The Income Tax, therefore, ought to be retained, because such persons could be compelled by no other means whatever to contribute their fair share towards the expenses of government. The increase in commercial wealth had been enormous. Between 1858 and 1872, a period of 14 years, land had increased in value from £58,000,000 to £65,000,000, or an increase of 12 per cent. House property during the same period had increased from £55,000,000 to £88,000,000, an increase of 60 per cent. On the other hand, the assessments under Schedule D had increased from £91,000,000 to £168,000,000, an increase of no less than 85 per cent. In the face of those figures he had not the conscience to ask on behalf of the class to which he belonged exemption from the Income Tax. All that he would ask was, that it should be equitably adjusted. Having mentioned the advantages of the system, he would consider the defects imputed to it. It was inquisitorial, and it encouraged fraud. The amount assessed under Schedule D was stated in the sixth Report of the Inland Revenue Commissioners to be £203,000,000 as against £248,000,000 in the other Schedules. It was under Schedule D that persons were invited to make their own assessments, and it was this process of self-assessment which was called inquisitorial. He held, however, that there was nothing offensive in it supposing the system to be equitable, except in certain accessories. The reason why the small traders were especially averse to the Income Tax was because their returns might come to the knowledge of their neighbours and rivals in trade. That, however, was an inconvenience which might be easily disposed of. There were facilities in the Inland Revenue Department in London by which every person assessed under Schedule D could make his return to sworn agents of the Government, who were bound to respect the secrecy of his return. There was no reason why persons in the country should not claim the same facilities, and in that way the whole difficulty might be overcome, and no person who wished to be honest had any right to object to the inquisitorial character of the Income Tax. The abuse arose in the fraudulent returns which were made to the Inland Revenue Department. In their fourth Report the Commissioners stated that not only small traders, but very important institutions made fraudulent returns; and they mentioned a flagrant case, in which certain partners returned £6,500 a-year as their earnings, and being surcharged at £32,000, paid upon that amount without appeal. The sixth Report contained these amongst other instances—A returned £170 a-year, but was assessed and paid upon £350; B returned £400, and paid upon £1,500; C returned£2,000, and paid upon£3,000; D returned £2,200, and paid upon £5,000;and E, who returned £6,000, paid upon £10,000. As a rule, people who intended to defraud the Revenue did not make any return at all, but waited to see what assessment the surveyor made, and if it happened to be a low one they paid it and said nothing; but if it was heavy they appealed. It appeared that of 490,000 persons charged under Schedule D only 128,000, or one-fourth, made returns. One person whose case was given in another Report of the Commissioners returned £15,000 as his assessable income; but the amount was raised by the Commissioners to £20,000, on which he paid. The following year he made no return, and being assessed upon £45,000, paid duty on that amount, and in the next year the amount was raised to £60,000, with the same result. It was with no pleasure that he made these statements; but he wished the House to know the extent and depth of this evil. In their Special Report of 1870 the Commissioners of Inland Revenue assumed that £44,000,000 was the amount of income returned on assessment, £101,000,000 that which should be returned; the difference£57,000,000, being the sum on which duty was evaded. The Income Tax Acts empowered the Inland Revenue Commissioners to impose treble duty upon those whom they had reason to believe under-estimated their income; but, to use their own words, they had an "invincible repugnance "to exercise the power thus placed in their hands. But why was it that they thus shrank from the performance of their duty? It wassimply because they dared not put the Act in force, knowing, as they did, that the system they administered was rotten and full of scandalous injustice. The very form of their address to taxpayers to make returns showed that they were aware of the inequitable nature of the system. The only way to remedy the existing state of things was to cast off the trammels of bad legislation in the past, and to establish a system which would appeal directly to the good feeling of the taxpayer, which would make allowance for the different manner in which income was derived, whether from property which yielded a certain product, or from personal exertion and ability, depending upon health and other varying circumstances. If such a system were adopted, they might rely upon equitable, if not wholly accurate returns, and it would be for Parliament to make a suitable abatement in the case of precarious incomes. This, at least, ought to be borne in mind, that a dishonest and oppressive law made a dishonest people. If the Government of the country acted in a spirit of justice in this matter of taxation, they would find that the response of the country would be very different from what it was at present. They might not be able to put an end altogether to fraud and untruthfulness, but they would undoubtedly conciliate the sympathy and receive the support of all good citizens. Public opinion would be against the taxpayer who sought to defraud the Government, and with the Government which sought to enforce only its just rights. He should not be doing justice to the question under consideration if he did not refer to the Report of the Committee of 1861. To that Committee he presented at the close of the Session a Report which they declined to entertain, and they adopted a Report unfavourable to the scheme he had proposed. That Report he was ready to defend in its essential features against all comers, but that Report was not in question now. The Resolution before the House involved no details, and affirmed only the expediency of carrying out a principle admissible even by those who withheld their acquiescence from the scheme proposed in 1861. Within these 14 years circumstances had greatly changed as affecting the consideration of the Income Tax. In 1861, the objections to a re-adjustment were two-fold: the first was that the tax was a temporary tax: it was soon to expire, and it was undesirable to disturb its basis for the brief period it had yet to live. But since 1851, there had been important remissions of indirect taxation, and the House might think with him that the Income Tax could not now be spared, and as it could not be discontinued, must be amended. The other main objection to the proposed adjustment was, that professing to do justice generally, it gave too much to one and too little to another, and did justice to none. This objection, which impugned the action of relief by averages, had however been conclusively overborne by the legislation of the last few years. The Schedules of abatement for maintenance (proposed in Valuation Bills for the whole country) and adopted in the "Valuation of Property (Metropolis) Act," had decisively settled the controversy upon that head. Abatement by averages was the law as regarded incomes derived from real property, and it constituted an irresistible precedent for a similar treatment of incomes derived from trades and professions. The wide range of character within the limits of industrial incomes was undeniable. Traders and manufacturers had an appreciable value in their floating capital, their factories and their machinery, apart from their industry and skilled labour; while professional men had no other capital than the knowledge stored in their own brain by education and study. From the physician, with intellect as his sole capital, to the drug dealer whose stock could be valued to a shilling, there was a wide difference; but between the two stood the general practitioner, who was at once physician and druggist, and whose earnings combined fees for skilled advice and profits on the sale of drugs. On all sides were discovered gradations, but so insensible that they could stop at none; and the necessity arose for dealing with trades and professions upon the same scale of abatement. Again, as to the fixedness of the profits on trade: it would be found that sleeping partners in old and wealthy firms might be the inheritors of a lucrative position, almost the equivalent of a landed estate. But these rare and extreme cases were unknown to the administration of a law which must deal with classes of income, and he repelled by anticipation adverse criticism, founded upon the close approximation of individual border cases of different classes. Trading companies and trading partnerships in the same line of business, at first sight, might appear scarcely distinguishable from each other, but there were essential differences in their action and in their liability to taxation. In a trading company the labour of the directors, managers, and clerks was all paid by salaries, and those salaries, the remuneration of skill and industry, were entitled to an abatement before they were taxed; the remaining profits—after allowance made for the reserve, which might equalize their distribution—were, as interest of capital, and in the character of dividends equitably liable to taxation. The discrimination between the earnings of industry and the usufruct of capital, which was practicable in the case of a public company, was not practicable in the case of traders or trading firms possessing capital. From some few the needful information might be obtained, but the great bulk of shopkeepers and traders would be unable, and certainly unwilling, to make a septe statement of their capital in trade. In a private trade or partnership, the management was carried on by the trader or partner, and the profits returned to the Inland Revenue Office were a combination of the earnings of industry and of the usufruct of capital, so that they ought not to be confounded with the dividends of companies, which, so far as the shareholder was concerned, were purely the usufruct of capital. It had been argued that the injustice and inequalities of the Income Tax were less serious and less felt when the rate was low, and that the best answer to objectors was to be found in maintaining it unchanged at its present ratio of 2d. in the pound. He could not think that suggestion satisfactory or statesmanlike. It was irreconcilable with the theory that an Income Tax was a War tax, and must be available in the event of such a lamentable contingency. For at what rate would the Income Tax as a War tax be levied? not necessarily at 2d. in the pound. In the great war at the commencement of this century the Income Tax was levied at the rate of 10 per cent during the years 1806 to 1815. And who would venture to foretell the limits within which the Income Tax might hereafter operate? The conclusion to be drawn from the suitability of the Income Tax as a War tax was this—that the favourable moment for its adjustment should be eagerly seized, and that the pressure of war expenditure should not be aggravated by the defective action of the tax through which it was supplied. But there remained in full force the objection to the present law that it was unjust, and that its injustice generated fraud. Whether the tax was 2d., as now, or 2s. in the pound, as in 1806–1815, no Christian statesman could look with complacency upon a law which had such a character and entailed such consequences. And in the eye of him who was a God of Truth, and to whom a false balance was an abomination, it would be no excuse that the State profited comptively little by its deliberate oppression of the people, and that the people saved but little when they escaped that oppression by a lie. That the rate was only 2d. in the pound was most opportune in this—that the tax falling so gently upon all could be recast free from the prejudice raised by the argument that the adjustment which relieved the heavy burthens of the one oppressively aggravated the burthen of the other. So far as it was felt, the deprecated result was the inevitable and legitimate consequence of the correction of inequalities. Assume that A, E, I, O, and U were charged to convey 50 stone to a given destination, and that, their course half done, they found that they have been carrying—A, 12; E, 11; I, 10; O, 9; and U, 8 stone. The equitable adjustment of the burden would relieve A and E, and throw a heavier burden upon O and U; but assuredly these two would have no cause for complaint, because at last they were made equitably to bear the weight from which they had too long escaped. The receipts of the Inland Revenue Department from voluntary payments of Income Tax were a most remarkable feature in the history of this impost. The recurrence of these remittances of Conscience-money has been commented upon as another evidence of national immorality. It should be looked upon in a very different light—as the bright gleam in a very dark and revolting picture—for Conscience-money was not the inadequate reption for previous fraud, but the exhibition of that scrupulous and honourable instinct which would, in the same degree, be found in no other country under Heaven, and which in this country was found among men of every rank. It was a touching incident in the list of contributors of Conscience-money—"A Curate £1." Who can measure the importance to that curate of that £1, spontaneously rendered to the State in obedience to the dictates of his conscience? In England only could an Income Tax be successfully worked, for in England only they found the indispensable conditions of an advanced civilization and a high standard of morality. Although not to be named in the same breath with the removal of serious evils, an important advantage attending the consolidation of local and Imperial taxation in the same rate book, and on the same valuation, would be found in the economy of cost in their collection. A single charge-note might do the work of many, and might for instance collect at once the poor rate, county rate, local board rate, highway rate, house duty, and Income Tax, at periods alike convenient to the State and the taxpayer. The system of consolidated charge-notes had already been partially adopted, and might be made both more general and more comprehensive. In conclusion, he said he would make an appeal to that House, and first to the distinguished man who occupied the eminent position of First Minister of the Crown. In common with other Statesmen the Prime Minister had denounced the inequalities of the Income Tax; in common with other statesmen he had deprecated their continuance; but alone amongst Finance Ministers he stood conspicuous for having endeavoured to remove them. He appealed to the right hon. Gentleman to lend his powerful aid to the Resolution he proposed, and by its success insure the triumph of the just and generous principle which he had the sagacity and courage to enunciate 22 years since. And, then, might he say to the Members of that House, he had dealt with this great question with entire impartiality, but he must confess he had the deepest sense of personal interest in the success of his endeavours. During an unbroken period of half-a-century he had been intimately connected with the commerce of the City of London, and he was jealous for the honour of his profession—a profession which, in the case of his family, was one of inheritance—a profession which had been the foundation of England's greatness—and which—as it was one of the most independent and most beneficent, ought to be one of the most honourable. Did it command the honour which should be its due? In the course of 50 years he had seen the marvellous extension of our commerce, the wide development of our manufactures, the multiplication of our shipping, the acquisition of new colonies, the foundation of flourishing institutions, and the accumulation of princely fortunes. Would that he could say that the reputation of his country for honourable and fair dealing had kept pace with the growth of its material progress and prosperity. Could he say so when the records of the Inland Revenue exhibited so frightful a picture of habitual untruthfulness and fraud? But he laid the responsibility of these sins at the door of that House. The people were what their rulers made them, and the untruthfulness and fraud which they now lamented, was the fruit of unjust legislation; it was therefore that he beseeched the Members of that House to septe themselves from all complicity with the prolonged misrule which, for a whole generation, had been gnawing at the heart of English honesty. He beseeched them to purge their Statute Book from that shameful stain. He beseeched them to provide for Englishmen some alternative between a degrading submission to fiscal injustice, or an immunity purchased at the price of their own integrity. The right hon. Gentleman concluded by moving his Resolution.


, in seconding the Motion, said, it was desirable in the interest of justice and true policy that the principles on which local and Imperial taxes were assessed should be just and fair. At present the valuations were made by different bodies on totally different principles. In reference to the poor rate, for example, the valuation was settled by the assessment committee of the justices. The House Tax and the Income Tax sometimes, but by no means always, followed the poor rate. It was stated that in the county of Norfolk there were no fewer than 12 scales of different values by which taxation was levied. In his opinion, the estimates of value on which this large revenue was raised ought to be one and the same. Not only did the basis of the estimate of value differ in this arbitrary manner, but the ratio of assessment also differed. It was desirable, however, that this taxation should all be levied on one and the same basis. Supposing nothing else were done, it would be a great relief if the basis of valuation for the House Duty and the Income Tax were assimilated, in all places to the poor rate. He did not say this would do full justice, but it would remedy the existing evil to a great extent. If the House assented to the first part of the Resolution, it would be sanctioning, not a new principle, but one which was well known to our legislation as far back as the Plantagenets. He had presented Petitions from the Association of Chambers of Commerce of the United Kingdom, and also from his constituents—the one for a modification and the other for the entire abolition of the Income Tax. He (Mr. Sampson Lloyd) was entirely opposed to the abolition of direct taxation altogether, because it was evident that the poor paid in what they drank and smoked more than their fair proportion of taxes as compared with the rich. Besides, the continuance of some system of direct taxation afforded a simple and an easy means of raising a large revenue in a time of great emergency. It was just because he felt so strongly the necessity of continuing direct taxation as a portion of our Revenue that he respectfully asked the House to sanction the first part of the Resolution so as to pave the way towards remedying the injustice which excited so strong an agitation against the Income Tax. On the news reaching his constituents that the Chancellor of the Exchequer proposed another 1d. of the Income Tax, notwithstanding the large exemptions coupled with the proposal, a large meeting was called by the Chamber of Commerce, which was composed of some of the most intelligent merchants, shipowners, and traders, and they unanimously demanded the entire abolition of the Income Tax. Two or three of the causes of the agitation in the country were not touched by the present Resolution. One of these was the system under which the Income Tax was collected by a man's own neighbours and rivals in trade. He saw no reason, except that of economy, why a man should collect the Income Tax for his own parish, and have the opportunity of prying into the affairs of his neighbours. Another was the indiscretion of many local authorities in making vexatious surcharges. But the main point in which this tax was unjust was its incidence. If a man had £1,000 a-year from small houses, but had to pay 40 or 50 per cent out of that for repairs, surely it was very unjust that he should be taxed to the same extent as if he had £1,000 a-year coming in from the Funds. A man who had property which brought him in an income could leave that property to his children, whilst a professional or trading income died with the person who had earned it. It was said that £1,000 a-year was the same whether it arose from a profession or from Consols;but the test of value was that put upon it in the market, where a professional income would sell for, perhaps, 2½ or 3½ years' purchase, while an annuity from Consols would fetch 20 or 30 years' purchase. The two incomes, therefore, being of very unequal value, it was unjust to tax them alike; and this unequal taxation only tended to multiply dishonest returns. They had been told that any change in the mode of assessing the Income Tax would lead to more anomalies than existed under the present system; but they had not heard that there would be any difficulty in making an assessment upon the net instead of upon the gross amount of income. The Government acknowledged the principle for which he contended when they exempted from tax the premiums paid upon an insurance on life. If one man spent £200 a-year in educating his children and another £200 upon a life insurance, that he might leave the money to his children, in one case the £200 would be exempt from Income Tax and the other not. Then it was said—"If you reduce the tax on precarious incomes, why not reduce it in the case of life tenants, life interests, and pensions? "The answer was that these incomes, though not perpetual, were certain, while the former class was neither perpetual nor certain. It was not to be supposed that precise justice could be done in every case; but justice would be done as between great classes, instead of, as now, palpable injustice. There was greater agreement as to the injustice of the Income Tax than existed, perhaps, on any other social question, and he hoped the Government would, at least, try to remedy a grievance so widely felt and, in his opinion, so well founded.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "Local and Imperial Taxation, when they have a common incidence, should have a common basis of valuation, and should alike be assessed upon the net rental or value of Real Property; and that Imperial Taxation, when levied upon industrial earnings, should be subject to such an abatement as may equitably adjust the burthens thrown upon intelligence and skill as compared with property,"—(Mr. Hubbard,)—instead thereof.


said, so far as he understood the Motion before the House, it appeared to arise from a desire to see the Income Tax made equitable. He agreed with the hon. Gentleman who moved it so far. He had observed that the question had been very often discussed in that House, and that it was widely popular throughout the country. He had noticed also that it never made any progress in that House. His object in rising at the present time was to discuss very briefly the cause of the present increase of the Income Tax. They had, as he understood it, an estimated income of £77,270,000, and the Government came down to the House and told them that it was unable to conduct the business of the country upon that sum. He hoped that the country would note that condition of affairs, and he should be much surprised if it did not note it and remember it for some time to come. At a time of profound peace, when they had complete internal tranquillity—when the path of any Government was more smooth than probably within living memory—at such a time they were told that the Government could not conduct the business of the country on a sum exceeding £77,250,000, and they proposed to put an additional tax upon the incomes of the country, when to the knowledge of most Members of the House, business incomes had of late been reduced and might have to be much further reduced. The speech of the Chancellor of the Exchequer the other night was an instructive one. They learnt from it that the deficit of the Government did not arise from Votes for elementary instruction nor from the doubtful policy of voting money in that House for the relief of local taxation, nor did it arise from any expenditure for the benefit of any single individual; but it arose from the never-ceasing demands of the Army and Navy. There was one passage in the speech of the Chancellor of the Exchequer which struck him very forcibly. It was that where he gave them a moral lecture upon the indebtedness of the country. If that had been spoken by the Prime Minister instead of the Chancellor of the Exchequer he should have suspected that it was a piece of studied sarcasm. It seemed to him to be an extraordinary thing that they should have a sermon upon the Public Debt of the country by the Chancellor of the Exchequer, when sanctioning an expenditure so enormous that if it was allowed to continue it would be impossible to go on reducing the Debt. He was as willing as any Member of the House to give a generous support to the military and naval defence of the Empire; but he maintained that they had already done more than was requisite; and if the House were to determine that the amount expended two years ago should be the maximum amount in time of peace, not a single Member of the House would have any anxiety on the subject, and everything could be accomplished in the way of defence that anyone could desire. There appeared to him to be an irrational desire on the part of many persons to imitate the military States of the Continent, forgetting that our circum- stances were totally different, for they had no conquered territories to defend or lost territories to recover. They were surrounded by the sea, and they pursued so pacific a policy that they had to fear neither the hostility, nor the suspicions of any civilized country. But they were fast becoming a great military Power. They were told in the beginning of the Session that they had more than 500,000 armed men; and although it might be said they were not the Regular Army, yet he remembered that the Secretary of State for War maintained that every branch of that force was in fighting condition. Not only had they an Army of 500,000 men, but they had, or should have a mighty Navy. If they had not, what had become of the £200,000,000 of money voted during the last 18 years? He doubted if it could be shown that the combined maritime Powers of Europe spent so much over their Navies during the last 18 years. France, Prussia, Italy, and Germany combined were now spending only a sum of £12,000,000 a-year, and we were asked to spend between £11,000,000 and £12,000,000; and he presumed that in a short time it would get to a still larger amount. He had asked himself the question how it was that they had this growing expenditure. Nobody in the country asked for it. If a candidate went to a constituency he would be more readily selected if he was in favour of economy than if he was in favour of increased expenditure. Among the causes for this growing expenditure were two, one of which was that they had a feeble Government, and the other was the peculiar constitution of that House. They were told by those who had investigated the matter that more than one third of its Members belonged directly or indirectly, to the fighting interests of the country. They were a great trade union, and they were in the habit of supporting every proposition for fresh expenditure. He objected to this growing expenditure on various grounds. He objected to it in the interest of the Services themselves. He believed that countries less wealthy than we were managed those matters better than we did, because they were less wealthy. If the Army and the Navy had unlimited means at their command it tended to demoralize them. He certainly thought that both the Army and the Navy might be better managed, and he did not believe that the country had confidence as to the good management of either. It was not money that the Navy wanted, but discipline, knowledge, and a greater sense of responsibility on the part of those high in command. He objected to the expenditure in the interest of the commerce of the country. If they had not had a large surplus for some years instead of a deficit they would not have had the fetters of trade struck off, and a number of duties removed which had enabled a great number of people to live who otherwise could not have lived here. As representing a great commercial constituency, he was there to declare that they had yet duties to remove in order to make trade more free, and that the commercial condition of the country was not so good that they could afford to neglect them. They got £4,000,000 from articles of innocent consumption, and if the duties yielding this sum were removed the trade of the country would grow. He objected to this expenditure in the interest of the taxpayer himself. He had been often told that this was a wealthy country. There was, no doubt, a very wealthy class in this country to whom the addition of a few millions of taxation was of comptively small consequence; but there was also a very poor class which from infancy to old age had a precarious existence. He would refer to a fact which came under his observation a few weeks ago. It was stated that there was a proposition to build 1,000 houses in London of one room each for a number of poor families. Why, £1,000,000 extra money spent this year on the Army and the Navy would build 10,000 houses of a better class than many of their poor inhabited, and in 10 years it would build ten times 10,000. He would say to the Party opposite, that although it was always ready to vote money to an extravagant degree, it was never found when Motions for economy were made walking into the Lobby with those who made them. The tables of figures published by that House formed in themselves a history of successive administrations. If they came to a time when the expenditure was increasing, and when duties ceased to be diminished or removed, they might be sure that the Tory Government was in power. And if they came to a time when the expenditure was less and duties were being done away with, they might be almost sure that a Liberal Government had then the Seals of office. When the present Government came into power they began to increase the expenditure cautiously; but they were now going by leaps and bounds. It was just the same when they were in power in 1867. They put a stop to the removal of taxes and duties; and when they were in power in 1859 the same thing occurred. On the old plea of the re-construction of the Navy they voted £1,000,000 of the people's money away. In 1852 it did not take place because they were soon dispossessed of office. In conclusion, he affirmed that the Government was pursuing a course of profligate expenditure. They might do it for a short time with impunity, but the day of retribution would come. In the Election of 1868 one of the strongest weapons in the hands of the Liberal Party which they used against their opponents was the gross extravagance of 1867 and 1868, and he had no doubt it lost hon. Members opposite many seats. They would have the same thing at another Election, and the same result would follow. Gentlemen on the opposition Bench appeared to be very comfortable under this increased expenditure. He might say that they scarcely led the Opposition on this question; but he ventured to prophesy that when the next Election came, however silent they might be now, they would use this as a great weapon, and would use it with effect.


said, he would not follow the hon. Member in the remarks which he had just made; because, in making them, he seemed to have anticipated a discussion which was to come on at a later period of the evening. He would, however, say for himself, and he thought he might say for the Chancellor of the Exchequer, that the subject of the increasing expenditure of the country was one that caused the Government great anxiety, and that there was every desire to deal with it. He admitted that there were anomalies connected with the tax to which his right hon. Friend the Member for the City of London (Mr. Hubbard) had called attention, but successive statesmen had found them insuperable. On two former occasions this Session his right hon. Friend had brought under the notice of the House that portion of his Motion which applied to what he considered the injustice of the tax under Schedule A., and on the present occasion he had extended his remarks to Schedule D. as well. The amount of the tax levied under A, B, and D, formed the great bulk of the whole. It was shown by the right hon. Member for Greenwich (Mr. Gladstone) many years ago, in a celebrated speech, that the payers of Property and Income Tax under A, B, and D paid three-fourths of the whole tax levied, and the same might be said now. The whole tax levied in the year ending April, 1874, amounted to £8,668,000, and the three Schedules A, B, and D paid out of that sum within a fraction of £5,000,000. The Motion of his right hon. Friend contained two main charges against the Income Tax—one was the injustice of levying the tax on the gross rental with respect to land and houses, and, secondly, that of charging precarious and temporary incomes at the same rate as if they were permanent. On these two points he could bring forward no better or more convincing arguments than were adduced by one of our ablest financiers in 1853. The right hon. Gentleman then Chancellor of the Exchequer (Mr. Gladstone) exhausted the whole subject with reference to these Schedules. He showed conclusively that, whatever might be said as to the injustice done to the payers of the tax in those two Schedules—on totally different grounds—the one had the effect very much of cancelling the other. His right hon. Friend could hardly expect—perhaps he hardly desired that the House should accept this Resolution. He had brought forward a similar Motion every year since he had had a seat in the House, and made statements and used arguments identically the same; but in 1861, when the House granted him a Select Committee, which sat for a lengthened period, it arrived at conclusions which were not in accordance with those of his right hon. Friend who was the Chairman of that Committee. His right hon. Friend seemed to think that the House would be more inclined now than before to adopt his views; but he was rather inclined to think the reverse. The tax was no longer levied for a series of years; it was levied only from year to year. The question, therefore, of precarious incomes did not arise. The object was to tax the available income of the year, and no inquiry was necessary as to the origin or permanence of the income. The House, moreover, for the same reason, had full command over it. He admitted that that was no argument against the re-construction of the tax, if the House would undertake such a task; but it had never shown any real desire to face this difficult problem; the greatest financiers of modern times had shrunk from such a work; and he should be very sorry for the House to adopt the Resolution, as it would bind them to a task which might prove to be impossible. The right hon. Gentleman said that "local and Imperial taxation, when they have a common incidence, should have a common basis of valuation, "and that was the foundation of the Valuation Bill now on the Table of the House. But when his right hon. Friend went on to say that the tax should be assessed on the net, instead of on the gross rental of real property, although entirely agreeing with him as a matter of argument and justice, he was obliged to differ from him on the ground of expediency; because he was convinced that the amount by which houses and land were mulcted, so to speak, under the arrangement to which his right hon. Friend objected, was as nearly as possible the amount which the Income Tax payers under Schedule D would desire to be relieved from if the deviation which it was sought to make in their favour was carried into effect. He did not think this was an opportune time for the question to be raised. The tax being now levied only from year to year, Parliamentary control could be brought to bear upon it in the most effectual manner. It was always in the power of Parliament to bring the question forward and press it on the attention of Government. He was willing to make the admission from his Departmental point of view that the transference of the incidence of the tax under Schedule A from gross rental to rateable value would be a logical and reasonable concession, that it would give greater facilities in the collection of the tax, and that it would cause it to be paid with less reluctance; but he believed that the questions that would arise in dealing with Schedule D were much more difficult, and he was willing to allow the anomalies under Schedule A to remain, so that they might cancel those under Schedule D. The provisions of the Bill he had introduced would promote the future working out of the question without any alteration in the law of the Income Tax itself. In conclusion, he could only add, that although there was much of good theory and sound logic in the proposal, there were practical considerations which caused him to ask the House not to adopt it.


supported the Resolution of the right hon. Member for the City of London, so far as it aimed at a common basis of value, for he could never understand why the Income Tax should be levied upon an imaginary value. It was contrary to the principles of law as well as of justice, for Lord Mansfield had laid it down as fully understood, that all taxes were to be levied on profit only, and that where there was no profit there ought to be no tax. It must not be inferred that the tax was popular because little was heard about it, for he often received remonstrances about it from his own constituents. The machinery of the tax was so valuable that he would retain it, though he would reduce the tax as low as possible. The adoption of a common basis would save a great deal of trouble, and it would not involve a serious loss to the Exchequer.


said, the right hon. Gentleman could not know much of the recent discussions on this subject, or he would not have referred to the speech of 1853, delivered by "that great Statesman the present Member for Greenwich, "which, in regard to Schedule D, was full of fallacies. He desired to suggest that a Committee or Commission would have no difficulty in obtaining valuable information and opinions from most experienced accountants and commercial men, which would immensely facilitate the adjustment of the tax in the direction suggested by the right hon. Member for the City of London. At present it was well known that the most barefaced frauds were perpetrated. There were even men who made a profit out of the Income Tax, for they returned much less than they received, or deducted on the payments they made, so that they really committed a double fraud. Less than 1,000 persons returned their incomes under Schedule D as more than £10,000; whereas the Government must know that there were many large towns in the Kingdom, where there were within a radius of a few miles nearly that number of persons whose incomes were in excess of £10,000. The frauds were therefore palpable, and the Government were to blame for not taking steps to remedy such a state of things. He had hoped the Government would have availed themselves of this opportunity of redressing a great wrong. Inquiry would soon disclose the insufficiency of the returns on which the tax was at present paid, and the means of equitably adjusting the same.

Question put, "That the words proposed to be left out stand part of the Question."

The House divided:—Ayes 156;Noes 84: Majority 72.


said, that as he was precluded by the Forms of the House from taking a division upon the Motion of which he had given Notice, expressive of the regret of the House that the progressive increase of expenditure recommended by Her Majesty's Government should have made it necessary for them to propose increased burdens on the people, it was his intention to move it as an Amendment on the second reading of the Customs and Inland Revenue Bill.

Main Question, "That MR. Speaker do now leave the Chair," put, and agreed to.

Ways and Means—considered in Committee.

(In the Committee.)

(1.) Motion made, and Question proposed, That, towards raising the Supply granted to Her Majesty, there shall be charged, collected, and paid for one year, commencing on the sixth day of April, one thousand eight hundred and seventy-six, in respect of all Property, Profits, and Gains mentioned or described as chargeable in the Act of the sixteenth and seventeenth years of Her Majesty's reign, chapter thirty-four, the following Duties of Income Tax (that is to say): For every Twenty Shillings of the annual value or amount of all such Property, Profits, and Gains chargeable under Schedules (A) (C) (D) or (E) of the said Act, the Duty of Three Pence; And For every Twenty Shillings of the annual value of the occupation of Lands, Tenements, Hereditaments, and Heri- tages chargeable under Schedule (B) of the said Act:— In England, the Duty of One Penny Halfpenny; and In Scotland and Ireland respectively, the Duty of One Penny Farthing.

—(MR. Chancellor of the Exchequer.)


moved to leave out the words "Three pence," and insert "Two pence." He protested against the policy of the Conservative Party in respect to this tax. He believed that if the House consented to continue it at 2d., instead of 3d., other means would readily be discovered of providing for the service of the year. The tax in itself was inequitable and unjust, and ought to be resisted as strongly as possible. As to exemptions, there was no principle in them whatever, and there was no reason why a man with £400 a-year should be allowed an abatement any more than one with £500 or £600 a-year. He regarded the proposal of the Chancellor of the Exchequer as an endeavour to make things pleasant, and by some rule of thumb to gild the pill which was to be forced down the throats of the people in order to induce them to increase the Income Tax. The time had now come when it was necessary that the public should be treated with candour by the Government. He wished to know if the tax was to be retained as a part of the permanent Revenue of the country; and he was afraid that the Conservative party and a Conservative Government had done all in their power to make it permanent. The policy of the Government in reference to the tax was opposed to the pledges which had been given to the country at the last General Election. ["No, no!"] He contended that it was, for the great question raised by the right hon. Gentleman the Member for Greenwich (Mr. Gladstone) was whether the Income Tax should or should not be continued. The right hon. Gentleman at the head of the Government stated that the abolition of the Income Tax had always formed part of the Conservative policy of the country. Almost all the Conservative candidates supported that cry; but instead of doing what was promised, they had done all they could to perpetuate the tax. If he went alone into the Lobby, he should oppose the proposition to increase a tax which sapped the foundations of public and private morality, and which had been condemned as dishonest and unjust by every succeeding Chancellor of the Exchequer.

Motion made, and Question proposed, That, towards raising the Supply granted to Her Majesty, there shall be charged, collected, and paid for one year, commencing on the sixth day of April, one thousand eight hundred and seventy-six, in respect of all Property, Profits, and Gains mentioned or described as chargeable in the Act of the sixteenth and seventeenth years of Her Majesty's reign, chapter thirty-four, the following Duties of Income Tax (that is to say): For every Twenty Shillings of the annual value or amount of all such Property, Profits, and Gains chargeable under Schedules (A) (C) (D) or (E) of the said Act, the Duty of Two Pence; And for every Twenty Shillings of the annual value of the occupation of Lands, Tenements, Hereditaments, and Heritages chargeable under Schedule (B) of the said Act:— In England, the Duty of One Penny; and In Scotland and Ireland respectively, the Duty of One Penny."—(Mr. Charles Lewis.)


said, that he desired in support of the Amendment to recall attention to the address issued to his constituents by the right hon. Gentleman the Member for Buckinghamshire during the last Election. The right hon. Gentleman then stated as a positive fact that the abolition of the Income Tax was one of those measures which the Conservative Party had at all times favoured. He (MR. Rylands) well recollected the use which was made of that declaration during the contest. He was then standing for a constituency, and when his friends put out a red placard inviting and calling upon the electors to vote for him and the repeal of the Income Tax there immediately afterwards appeared on the other side a blue placard inviting the electors to vote for his opponent and the repeal of the Income Tax. Well, there could be no doubt that this statement of the right hon. Gentleman had its effect on the public, but the public were deceived. The Chancellor of the Exchequer, speaking a short time since at Manchester with his usual ability and with his usual clearness of insight, said that in 1874 the people had an idea that the advent to power of a Conservative Government was to be attended by all sorts of blessings, that the quart pot would in future hold three pints, and the sovereign pass for 25s. and other things of the same kind. There was no doubt a general feeling amongst all classes that if the Tories came into power it would have a most beneficial influence upon, and would add to the prosperity of the community. The Tories were to remove many causes of popular complaint, and amongst other things they were, it was believed, ready to go as far as the Liberals in repealing the Income Tax. The real truth was that the people of this country were thoroughly gulled by the statements contained in the address of the right hon. Member for Buckinghamshire, although one would have supposed that any enlightened constituent would have looked back to the political history of the country, and he would then have found that when the right hon. Gentleman came into office in 1867 the first thing he did was to add 1d. to the Income Tax. He added that 1d. just for the same reason that the Chancellor of the Exchequer had just added 1d. to the Income Tax, because a Conservative Government began making things pleasant all round by spending money, and if they spent money they must have more taxes. But the right hon. Gentleman next year put on 1d. more on the Income Tax, so that in a short period, from 1867 to 1868, the Conservative Government added to the expenses of the country to a large amount, and added also 3d. to the Income Tax. It would have been just as true for the right hon. Gentleman to have said that the Conservative Party was in favour of economy in the public expenditure as that the abolition of the Income Tax was one of the measures which the Conservative Party had at all times favoured. The fact was that the constituents of the hon. Member for Londonderry (Mr. Charles Lewis) had been gulled like his own, and the only difference was that while the hon. Member for Londonderry got in, he was rejected. However, at the next Election he did not think that the right hon. Gentleman the Member for Buckinghamshire would select the repeal of the Income Tax as one of the great questions of the Conservative Party. They would not hear anything of the kind from him, nor did anyone know what we should hear from that quarter; but Conservatives would certainly hear from their constituents complaints of the great in- crease in expenditure, and they would be called to account for having supported the continuance of the Income Tax.


Sir, I think we have heard quite enough of these extraordinary charges of breaches of faith and quotations or misquotations from election addresses. Upon a proper occasion—and on the present occasion if the Committee should think it a proper one—I shall be perfectly ready to enter into a discussion of the whole policy of the present Budget, and to discuss the principle upon which the Government have proceeded in the proposals they have made. I do not know whether it is the desire of the Committee that I should enter into that subject now. ["No, no!"] But it is absolutely necessary that there should be a clear understanding as to what is said to be a breach of faith on the part of Members of the Government. What are the circumstances of the case? There is no doubt that from time to time we have in Parliament and out of Parliament expressed our sense of the difficulties that have been observed in the Income Tax, and the objections we felt to the structure of the tax; and when challenged we have put forward our views very freely on the subject. I cannot tax myself with any inconsistency whatever in the language I have used at different times upon this subject. I have never denied that there is force in the allegations made with regard to inequalities of the Income Tax; but I have said those inequalities were of the essence of the tax, and that it must always be subject to them so long as it is retained. I have given that as one reason why we should not have recourse too freely and unnecessarily to the tax. But what took place at the dissolution of the last Parliament? The right hon. Gentleman the Member for Greenwich (MR. Gladstone) addressed to his constituents, and through them to the whole country, one of the most remarkable electioneering manifestoes that it was ever the lot of any one to read. In it he undertook to make something in the nature of a sketch Budget; and after stating what were his views as to the prospects of the Revenue and of a very large surplus, he indicated the mode in which he would apply that surplus. And what were the modes in which he proposed to apply it? I forget the precise words, but they were to this effect: that he proposed, not only to abolish the Income Tax, but also to make great remissions in local taxation, and to accompany those measures with other remissions which would be for the general benefit of the consuming classes of this country. And then the right hon. Gentleman went on to say that, although he had undoubtedly the prospect of a very large surplus, it would not be so large as to enable him to do all these things out of the sum at his disposal, and it would therefore be necessary that there should be certain re-adjustments of taxation. What was the answer which, upon the spur of the moment, my right hon. Friend now at the head of the Government gave? He remarked, in the address to his constituents, a copy of which is before me, that— The Prime Minister has addressed to his constituents a prolix narrative"—and so forth—"in which I find nothing definite as to the policy which he would pursue except this—that, having a prospect of a large surplus, he will, if retained in power, devote that surplus to the remission of taxation which would be for the benefit of the consuming classes. But what is remarkable in his proposals is that, on the one hand, they are accompanied by the disquieting information that the surplus, in order to make it adequate, will be enlarged by a re-adjustment, which must mean an increase, of our existing taxes; while, on the other hand, his principal measures of relief will be a diminution of local taxation and the abolition of the Income Tax, measures which the Conservative Party have always favoured, and which the Prime Minister and his friends have always opposed. There is no question that we have favoured remission of taxation, and especially that we have been desirous to reduce local taxation and the Income Tax. But we were told that there must be readjustments, and if those hon. Gentlemen who have so painfully studied the address of my right hon. Friend had been equally attentive in studying the speeches he made they would have found that he pointed out that abolition of Income Tax and adjustment of local taxation were objects to be pursued, not at the expense of new taxation, but by taking advantage of the gradual development of the wealth of the country, and the proper application of such surpluses as might arise. As I am challenged myself upon the matter, I may state that when I addressed my constituents I said—"Do not be deluded by the prospect of an abolition of the In- come Tax, because it is not to be an abolition gratis, but accompanied by readjustments; beware until we see what it is going to be." But what was the case as we put it to the House when we came into power? I would venture to refer to my own speech when I brought forward the Budget in 1874. I pointed out that our large surplus, as the right hon. Gentleman had warned us, was not enough to accomplish all he had proposed without a re-adjustment, and the decision we had arrived at was that we would not undertake any of those re-adjustments, but that we would endeavour as well as we could to deal with those subjects presented to our notice on which we felt strongly so far as the surplus would enable us to go. Was there any pledge we had ever given with regard to the abolition of the Income Tax that would compare with pledges we had given to deal, if possible, with local taxation? Would it have been possible for us, without a real and gross breach of faith, to have made our proposals, setting aside the question of local taxation, in order that we might go on with the abolition of the Income Tax? We knew that it was impossible. After having put local taxation first in my Budget speech as being the point to which we must direct attention, I said the complaints as to inequalities of local taxation were justly made; and then I went on to discuss how far the Income Tax question was connected with the other question. I said— It may be taken for granted that if you do away with the Income Tax some means must be found of making the owner of personal property contribute towards the burdens of the country. Possibly, if you retain the Income Tax, it will be found that his contributions to that tax supply the deficiency; but that is a point which requires careful consideration, and the whole position of the Income Tax is one of such great magnitude not only financially, but as I may even say, politically, that it would be wrong and culpable in us if on so short a notice we were to come forward with a definite or decided proposal with respect either to the absolute remission or the absolute perpetuation of that tax."—[3 Hansard, ccxviii. 661.] That was the position which we took up in 1874, as I think justly and in entire consistency both with the pledges we hadgiven, directly and indirectly, with regard to the Income Tax, and the language we had used during the election which immediately preceded our assumption of office. If those were not proper views then was the time to have challenged them. The attention of Parliament ought to have been called to the point, and we ought to have been told that we must lay aside everything for the purpose of dealing with the Income Tax. What has taken place since? Have we had any opportunity of remitting taxation at all? No; unless we had been prepared to do that which we said we were not prepared to do, and go into those great questions of re-adjustment of taxation, it has not been in our power. We had no surplus to deal with last year. This year we have a deficit. Is it possible for us, without doing that which my right hon. Friend distinctly repudiated—namely, attempting a re-adjustment of taxation, to act upon any such policy as the abolition of the Income Tax? Is there any other tax to which we can have recourse at this moment in order to meet the deficit with which we have to deal? Is there anything in what we are now doing that at all fetters or ties our hands with regard to any policy that may be hereafter possible for us to attempt with regard to the Income Tax? We are dealing as well as we can with this difficult question of local taxation; but we are unable to go fast. You tell us we do not go fast enough, and we agree; but we plead inability and the poverty of the land. ["Oh, oh!"] By that I mean poverty of the Exchequer in the matter of revenues which we can apply to it. We are endeavouring, as well as we can, to proceed with measures which may enable us to redeem those pledges, and we utterly repudiate the idea that we have in any way thrown over or fallen away from pledges that we have either directly or indirectly given. As I said before, I do not imagine that at the present time the Committee desire me to go into explanations in justification of our financial policy; but, at the same time, if challenged, I shall be ready to do so.


said, he did not agree with the hon. Member for Londonderry (Mr. Charles Lewis) that the Chancellor of the Exchequer had made a mistake in adding 1d. to the Income Tax; the real mistake was made two years ago when 1d. was taken off. He was astonished to hear it alleged that Conservative candidates in England went down to their constituents and advocated the repeal of the Income Tax. He did not believe that a single Conservative candidate for a county mentioned the tax with a view to abolition. For his own part, he distinctly repudiated it, believing it was the only way to tax the rich man's money bags, and the only chance of making personal property contribute to local taxation, or in any way relieve local burdens.


congratulated the right hon. Gentleman the Chancellor of the Exchequer, in the name of the working men with small and hard-earned incomes, on having exempted them from further payment of the Income Tax. He, however, wished to point out that the Income Tax was demoralizing to the country. He maintained that the tradesmen did not care whether the Income Tax was 3d., 4d., or 6d. in the pound. He did not pay it; he put it on his customers. He (Mr. Whalley) maintained that the Income Tax was the most improvident and the most foolish tax that could be imposed; and he had presented petitions signed by tens of thousands of persons against it.


said, the feeling on this question of the Income Tax had been shown by the rejoicings with which reductions had been received in the country. He regretted that increased expenditure should have made it necessary to impose an additional 1d. to supply the deficiency and relieve local taxation.

Question put.

The Committee divided:—Ayes 52;Noes 113: Majority 61.

Original Question put, and agreed to.

(2.) Motion made, and Question proposed, That the exemption granted by the Act of the fifth and sixth years of Her Majesty's reign, chapter thirty-five, to persons whose incomes are respectively less than One Hundred and Fifty Pounds a-year, shall be restored, and, in lieu of the relief granted by Section Twelve of 'The Customs and Inland Revenue Act, 1872,' to a person whose income, although amounting to One Hundred Pounds or upwards, is less than Three Hundred Pounds, a relief or abatement to the extent of Duty upon One Hundred and Twenty Pounds shall be given or made to a person whose income, although amounting to One Hundred and Fifty Pounds or upwards, is less than Four Hundred Pounds.


said, it seemed to him that the Chancellor of the Exchequer was introducing a dangerous principle in making these exemptions and abatements. The two classes who would be mainly affected were the artizans, such persons as had made themselves conspicuous by strikes, and the small traders in the small country towns. In the larger country towns the traders were more interested in the reduction of the Income Tax than in the proposed exemptions. The Chancellor of the Exchequer had been obliged to increase the Income Tax on account of the enormous expenditure on the Army and Navy; but, at the same time, he thought they were doing a dangerous thing in saying that those men who now exercised so large an influence in the return of Members to that House should be exempted from what was generally regarded as a very obnoxious and inquisitorial tax.


said, he did not know on what principle these exemptions were to be extended. They all knew that before the Session closed Supplementary Estimates would be presented to the House; and he thought it would be far better that the Chancellor of the Exchequer should keep a good balance in hand rather than extend these exemptions, which no ingenuity on the part of the right hon. Gentleman could justify.


said, the popular notion that the exemptions would affect chiefly the class recently enfranchised, and who exercised a large amount of influence in the election of Members of that House, was not well founded. The working classes, those working for weekly wages, did not, as a general rule, pay Income Tax, even though their incomes might amount to more than £100 a-year. It was extremely difficult to collect the tax from that class. A few of them might be brought within the range of the Income Tax collector, but workmen were so continually going about from place to place that it was very difficult to collect from them; and, as a matter of fact, he was informed by the Inland Revenue authorities there was no class which avoided payment of Income Tax so much as the men who were working for wages. Many of these working men frequently made £2 or £3 a-week, and it would be very hard that while such men were exempted from payment the smaller tradesmen who were by their side, and who were very much under the public eye, should be saddled with the tax. The principle laid down by the hon. Member for Greenwich seemed to be that it was reasonable to exempt working men who worked for wages. The hon. Gentleman (Mr. Hayter) referred to the hardships endured by one portion of the trading classes; but it was the struggling professional man and the struggling tradesman on whom the Income Tax pressed most severely. In reply to official inquiries which he had made the other day, he was informed that those who would profit most by the remission were a very large number of clergy and ministers of all religious denominations, a large number of officers in the Army and Navy, a large portion of the Civil Service, struggling men in all professions, some of whom were just getting their heads above water, many tradesmen, and the widows and single daughters of all these classes. These were the classes which it had been sought to relieve, for the proposal to diminish the heavy charges on small incomes was at the basis of the whole. He thought the changes proposed would turn out to be a satisfactory and moderate way of carrying out the views expressed by a large number of Gentlemen on both sides of the House. He hoped the Committee would accept the proposal, not as designed to "gild the pill" of the Income Tax, but to grant relief where taxation bore most heavily.


said, he thought the question of exemptions, when there was a necessity for increasing the Income Tax, was a very important one. He understood that the reduction in the Revenue otherwise derivable from the additional 1d. would amount to £400,000. Suppose the exigencies of the country should in some future year require the tax to be raised to 6d. or 1s. in the pound, it would become a very serious question for them to make a proportionate sacrifice on incomes below £400 a-year. More than that, if they made this precedent when the tax was at a low figure, they would be expected to multiply exemptions whenever they raised the tax to a higher amount. The result would be that the burden would become one imposed by the many upon the few. The only safe way, he thought, in which the tax could be levied was to adhere to some broad basis, and to make its incidence generally felt. The mode adopted by the Chancellor of the Exche- quer seemed to him to be likely to produce a public evil. He should like to know why the right hon. Gentleman only calculated upon the sum he had stated to be collected within the present year, when the estimate of the return from the additional 1d. was so much larger?


said, he supported the scheme on account of the exemptions, which, he thought, did not go far enough, believing that the amount necessary to purchase the necessities and comforts of life ought to be exempted altogether. If the principle of the proposition was agreed to, all incomes ought, for the purpose of the Income Tax, to be subject to some exemption.


said, he had no doubt that any attempt to levy an Income Tax upon working men would result in failure; but it would be important to ascertain to what extent and in what proportion they contributed their share towards the expenditure of the country by indirect taxation.


feared that the Chancellor of the Exchequer had over-estimated the Revenue, because the great industries of the country were in a very bad condition. He regretted the largeness of the expenditure; but he did not see how the Chancellor of the Exchequer could have dealt with it in a more practical way. He dissented altogether from what had been said about purchasing an additional taxation with an extravagant amount of exceptions.


said, he had no doubt that the extension of exemptions was a very convenient course for the Government to take, because it made their measure a more popular one; but when they departed from the principle which had been understood for some time, that wages should be the limit of exemption, it was not very easy to say where they could stop. When once they began to make arbitrary exemptions, and to say that incomes of £400 should be exempt, while those of £500 should not, they were laying, without, perhaps, intending it, the sure foundation of a graduated Income Tax.


said, he thought that if the Income Tax were to be continued it would be equitable to strike off a small fixed sum from every income.


said, that there ought to be an omission from all incomes of £250 or £300 a-year.


said, he had discussed this principle of exemption at great length with his advisers, and he had come to the conclusion that, on the whole, the principle adopted was the best. With regard to the produce of the tax within the year, there would be a collection of four-fifths of the tax within the year, and that would leave one-fifth for the year following. It would, therefore, result that a tax of 3d. in the pound with no other exemptions than those now existing would yield for each 1d. £1,966,000; and the tax with the new exemptions would yield £1,836,000.


remarked that the right hon. Gentleman had stated that he had discussed at great length with his official advisers the principles which had guided him in these exemptions, but he had not stated those principles to the House. Probably he would give these more elaborate reasons on another occasion. He wished to know whether they were to look for some further movement in the direction of the relief of local taxation? The right hon. Gentleman stated that the Government were prepared to carry out the pledge given in the Queen's Speech, and that some relief would be given by means of the Prisons Bill. He wished to know whether, if that relief were to be given in the present year, it would be compatible with the present Budget; was there any probability of Supplementary Estimates being proposed, or would the relief from local taxation be deferred to a future year? The question was one of very great importance.


said, there was no doubt of the importance of the principle of exemptions, and if the right hon. Gentleman (Mr. Goschen) had not just entered the House, he would have known that six or eight hon. Members had spoken, and that he (the Chancellor of the Exchequer) had given his reasons. The difficulty was, when any fresh Member came into the House that he should be expected to repeat them.


said, he had referred to the reasons which the right hon. Gentleman had mentioned in discussing the matter with his advisers.


said, he had already stated the reason why he proposed to extend the limit of exemption to £150, and that basis had been accepted by many hon. Gentlemen at the other side of the House. The hon. and gallant Member for Galway (Captain Nolan) had suggested that all incomes ought to be subject to some exemption; but he thought the hon. and gallant Gentleman, and those hon. Members who had expressed a similar view, would see that above a certain level—and that not a very high level—it would really not be worth while to make a deduction of £200 or £300. With respect to local taxation, his right hon. Friend the Secretary of State for the Home Department would shortly after Easter introduce his Prisons Bill; but he might say that the provisions of that Bill would not tend to disturb any of the proposals he had submitted to the Committee.


said, he thought the House was entitled to know whether, notwithstanding the statement in the Queen's Speech that a Bill would be introduced giving certain relief to local taxation, no relief would be given. [The Chancellor of the Exchequer: The Speech did not say in the year.] He (Mr. Goschen) admitted that was so; but it was expected when a measure was promised in that way that it would be introduced in the year.


said, he hoped that the right hon. Gentleman would restrain his highly laudable curiosity for a short time, as immediately after Easter the proposals of the Government with respect to local taxation would be introduced. They would be found to meet the conditions of the Royal Speech relative to local burdens, and he hoped they would be of great value in the administration and economy of expenditure with regard to prisons.


pointed out that by the proposed exemptions a large number of persons would actually pay less Income Tax this year than they did under the 2d. tax. All persons with incomes under £200 received not merely a relative but a positive benefit, for they would pay less for the tax at 3d. now than they did formerly at 2d., and the same was the case with persons whose incomes ranged between £300 and £350, while those whose incomes were between £200 and £300 would pay more. In 1873 it appeared that 585,000 persons paid the tax under Schedules D and E. Of these, 397,000 paid under £200; 79,000 between £200 and £300; about 16,000 between £300 and £350; and 93,000 above £350. The result was that 413,000 persons would pay less now under a 3d. tax than under a former 2d. one, and 172,000 would pay more. In fact, a great majority of taxpayers under D and E would benefit by the change. Such figures as these ought not to be hurriedly passed over, and he hoped the Chancellor of the Exchequer would give his attention to them.

Resolution agreed to. (3.) Resolved, That, towards raising the Supply granted to Her Majesty, the Duties of Customs now charged on Tea shall continue to be levied and charged on and after the first day of August, one thousand eight hundred and seventy-six, until the first day of August, one thousand eight hundred and seventy-seven, on importation into Great Britain or Ireland (that is to say): on

s. d.
Tea the lb. 0 6
(4.) Resolved, That it is expedient to amend the Law relating to the Inland Revenue and the Customs.

Resolutions to be reported To-morrow;

Committee to sit again To-morrow.