HC Deb 05 April 1878 vol 239 cc743-53

Resolutions [April 4th] reported.

First Resolution agreed to.

Second Resolution read a second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

SIR CHARLES W. DILKE

wished to point out that a great amount of smuggling took place at the present time. The smallest increase in the duty would cause the amount of smuggling still further to increase. He had been informed, on reliable authority, that the greater portion of tobacco smoked in the country at the present time was smuggled. The statement might seem exaggerated, but it was from the authority of Mr. Mark Blom. From a Return which he held in his hand, it appeared that 16,000 lbs of smuggled tobacco had been seized in a single year, and the Customs authorities had themselves stated that the extent to which smuggling was carried on could hardly be inferred from those figures. There was one other point connected with the character of the tobacco duty to which he would refer. There was no other tax which pressed so unequally upon high and low-priced qualities of goods. The effect of it was that the tax was 1,200 times greater on some tobaccos than on others. It absolutely prohibited some Indian and some Burmese tobaccos from being brought into the country. While the duty was over 1,000 per cent on some of the cheaper tobaccos, on others it was no more than 5 or even 1 per cent. In France, tobacco was a State monopoly, and the poor were there comparatively better off, as regarded the quality and price of tobacco, than they were in this country at the present time. An enormous revenue was made by the State from tobacco, while the duty was only about 6½d. per lb, yet it was proposed to raise the duty in this country to 3s. 6d. per lb alike on the high-priced and the low-priced tobaccos.

MR. RYLANDS

I think, Sir, that this tax is open to very serious objection. I do not wish to go into the question which we may have to consider later on —namely, the question as to whether, in the commercial circumstances of the country, there is any justification for the Government proposing so large an increase in the Estimates. If they do not stop short in this career of extravagant expenditure, the House must see that the increased burdens do not press heavily upon the working classes. We are now called upon to say in what way the burdens are to be laid upon the backs of the people, and I object to the particular way in which the right hon. Gentleman proposes to impose that burden. I daresay the right hon. Gentleman, and other hon. Gentlemen, will say—"If you do not put on this duty, how are you to raise the Revenue?" I say we have nothing to do with that; we are not to be called on, as independent Members of Parliament, to say what burdens are to be placed on the public shoulders. We have a right to show that the proposed burden would be improperly and unwisely laid, and I think my hon. Friend below me (Sir Charles Dilke) has shown a very strong objection, indeed, to this particular burden on the shoulders of the people. You may say that the smoking of tobacco is a luxury, and if the people choose they can do without it. That is a very common fallacy. You are continually saying to the people—"You can, if you choose, do without taxable commodities." Very well, how are we to carry out the idea that everyone of us can give up luxuries? Are we to go back to a savage state of existence? We say we will not go back to a savage state of existence. We do not ignore the luxuries of life; and, provided we can pay for them, we, no doubt, enjoy them; and can we go to the working classes and say—"Give up this small comfort—this pipe of tobacco that you enjoy after a hard day's work—you can do without it." You tell these poor men that they might get out of the tax by getting rid of the comfort. I am not prepared to take that course; and I say, in levying a tax upon a commodity, you must take care to lay it on so that it will press equally upon every class of society; but this is a tax upon the man that smokes a pipe of cheap tobacco far greater than upon the man who smokes the best cigars. I protest against it, because I object to this system of taxation. I decline to be drawn into the controversy as to what is a better duty; and I leave it to the Chancellor of the Exchequer, for whose ability I have the greatest respect, and I have no doubt that if we refuse his present proposal, the right hon. Gentleman will discover some other mode of putting the tax on other people's shoulders in order to get the money he requires.

MR. HERMON

did not think it was fair that the working classes should be exempt altogether from taxation. It was not pleasant for the wealthier classes to pay Income Tax, nor was it pleasant for the working classes to pay a farthing extra for every ounce of tobacco. But the working classes looked at the matter from a reasonable point of view, and were willing to bear their share of the burden for the good of the country. The views of the working classes on the Eastern Question had been very freely expressed; and, if the Chancellor of the Exchequer did not lay upon them their due share of the increased taxation, he would be taunted with having endeavoured to bribe them because they had shown a disposition to support Her Majesty's Government. He would, further, take this opportunity of expressing his satisfaction that the Chancellor of the Exchequer had not interfered with the principle he had laid down of paying off annually a portion of the National Debt.

MAJOR NOLAN

thought the tax upon tobacco very heavy and inequitable. At the present time the working classes paid the bulk of the taxation of the country, and the proposed increase would be one of a most unpopular character in Ireland.

MR. PEASE

thought the hon. Memfor Chelsea (Sir Charles W. Dilke) could not be right as to the amount of smuggling that went on. It was impossible for smuggling to be carried on to any great extent, considering the strictness of the Customs authorities. The tobacco tax was that part of the Budget which pleased him most; for, as it was well known, tobacco was a rank poison. The Report showed that year by year its use was becoming greater, and it ought to be highly taxed.

MR. MUNTZ

said, that if tobacco were a poison, it was a very slow one, for he had smoked it for 50 years. He thought it a mistake that a halfpenny extra duty had not been put on tobacco, instead of a farthing, because the consumer would pay a halfpenny extra, and the difference would go into the pockets of the dealers.

MR. MUNDELLA

was of opinion that, instead of being unduly taxed, the working classes were unduly spared from taxation. Thus, £3,600,000 was raised from Income Tax, while £780,000 came from tobacco duty. But the mistake was that an increased duty was not levied on alcohol. The incidence of the tax on tobacco was unequal, because the consumers of a lower quality of tobacco paid very much more than those who purchased the better sorts. As they were increasing this tax, there ought to have been some attempt to adjust its incidence. That spirits ought to be taxed in preference to tobacco was evident from the fact that they were less easy to smuggle than tobacco. The taxes on spirits could not be mathematically adjusted; but it would be highly desirable to put a greater duty on alcohol, the consumption of which was steadily increasing.

MR. FAWCETT

said, that unless a satisfactory explanation were given by the right hon. Gentleman the Chancellor of the Exchequer as to the principle of the Budget, he should feel it his duty to raise a distinct issue with regard to it on some future occasion. With respect to the remarks of the hon. Member for Chelsea (Sir Charles W. Dilke), it seemed to him (Mr. Fawcett) that they had been entirely misunderstood by the hon. Member for Preston (Mr. Hermon). There was at present a radical inequality in the system of indirect taxation; for, on those articles on which no ad valorem tax was imposed, the poorer classes had to pay in the shape of duty a great deal more than the rich. To take, for example, the tax on the lower qualities of tobacco. The consumer of those qualities paid about 1,200 per cent, while, on the higher qualities, the tax was hardly anything at all. The tax on tea consumed by the poor man, at 1s. 6d. per lb., amounted to from 33 to 40 per cent, while the qualities consumed by the rich only paid 14 or 15 per cent. But there seemed to him to be a very great omission from the discussion, when hon. Members spoke as if there were only two classes in this country—the upper and the lower classes. There was another great class—the struggling middle class—on whom the inequalities of indirect taxation bore very heavily. The man who paid 1s. for a bottle of some liquor or wine paid greatly more in the way of duty than the buyer of champagne or claret at 70s. a-dozen. That was a radical inequality in. the present system of indirect taxation, which would be aggravated by the increased taxation of tobacco, unless something were done to alter its incidence in the manner suggested by the hon. Member for Chelsea. The point to which he wished to direct the attention of the Chancellor of the Exchequer was the question whether the working classes or the middle classes contributed too much to the taxation of the country. The point on which he desired an explanation from the Chancellor of the Exchequer was this—The Budget, as far as it imposed additional taxation, did so in order to meet exceptional expenditure, demanded by the Government for placing the country in a proper state of defence. There might be exceptional expenditure for other purposes—for instance, there might be exceptional expenditure, as resulting from a demand of the great majority of the electors to carry out some national purpose. He wished to protest against the principle laid down by this Budget, that where there was exceptional expenditure, five-sixths of that exceptional expenditure should be borne by a small minority, and the remaining one-sixth by the majority who, with a democratic suffrage, had the power of insisting that the exceptional expenditure should be carried out. He desired to ask the Chancellor of the Exchequer what his reason was for making this extraordinary difference in the amounts to be borne respectively by direct and indirect taxation? The question was the more serious because of the exceptions made by the Chancellor of the Exchequer a year or two since, when he considerably diminished the number of contributors to the Income Tax. It was, he believed, no exaggeration to state that five-sixths of the exceptional expenditure was going to be thrown upon the shoulders of one quarter of the electors of this country. Therefore, this Budget sanctioned the principle—and it was, in his opinion, neither a safe, sound, nor just principle —that those who demanded that expenditure, the majority of the enfranchised people, would have to bear no more than the insignificant fraction of one-sixth of the increased taxation, whether that expenditure was for warlike preparations, or for any other national purpose; while five-sixths of the burden would fall upon the taxpayers of the country. Unless the Chancellor of the Exchequer gave a satisfactory reason for adopting this principle, he should consider it his duty to call the attention of the House, on some future occasion, to the important financial question which was involved.

MR. PARNELL

thought it should be understood in Ireland why the Irish Members divided against the Resolution for the increase of the tobacco duty last night, and why he (Mr. Parnell) supported the hon. Baronet the Member for Chelsea (Sir Charles W. Dilke) to-night. In making the calculation of the incidence of the tax, he found that, out of the increased sum the Chancellor of the Exchequer expected to realize by the increased duty, £110,000 would be contributed from Ireland. He certainly thought the House was indebted to the hon. Member for Chelsea for the light he had thrown upon this tobacco question, and especially for the information he had given with regard to the operation of the ad valorem duty. Before hearing the remarks of the hon. Member, he was not himself aware that no discrimination was made between the rich man and the poor man in this matter. He was surprised to learn that the difference was so slight—that the poor man who smoked his pipe of ordinary tobacco was, in fact, made to contribute to the Revenue as much as the rich man who smoked his shilling cigar. That was an intolerable state of things, and ought to be rectified in some way by the Government. With regard to the question, as it affected Ireland, he found that of the £110,000 which would be raised in that country by this increased duty, nearly £100,000 would, in all probability, be contributed by the poorer classes—the labourers and small farmers. In Ireland there was not an extensive middle class, nor a numerous upper class, similar to that which existed in England. The middle class of Ireland consisted chiefly of struggling farmers. Of course, there were some large graziers who were well off, but they were so few in number that they could scarcely be called a class; he, therefore, left them out of the question so far as his argument was concerned. The greater proportion of this increased duty for war purposes would fall upon the small farmers and labourers, and those were the persons in Ireland who were so badly off, and were the least able to bear this additional burden. The bad and scanty grain harvests of the last two or three years had reduced some of these farmers almost to the point of starvation, and that re-acted on the labourers and the poorer classes generally. It appeared to him, therefore, an unfortunate circumstance, that the adjustment of this tax should cause so great a portion of it to press heavily upon the Irish people, and at a time when they could least afford to make the contribution demanded of them for warlike objects. The hon. Member for Preston (Mr. Hermon) expressed an opinion, which appeared to be shared by others, that it was right and proper that a considerable proportion of the war tax should be thrown on the working classes, and that they should also feel an interest in the raising and in the expenditure of the money. It was possible that the working classes in England had a war fever on them at that moment; but that fever, at any rate, did not extend to the working classes, or to the farmers in Ireland. They did not sing "Rule Britannia!" and martial airs, which seemed to be so prevalent in the streets of London; but, if war should take place, the very class who would have to pay an undue proportion of the taxation, which the war fever might render necessary, were those who would contribute largely in fighting. That, he thought, was exceedingly unfair, and it was one of the reasons why he had voted the other night against the imposition of this increased duty on tobacco, and why he should vote against this Resolution to-night. If he had had the choice between taxing tobacco and spirits, he should have selected the latter, as the article best able to bear an additional duty; but he preferred that neither should be subject to this increased impost. His idea was the tax should fall upon champagne, claret, or some other of those wines which were consumed by the upper classes as luxuries. Had the Chancellor of the Exchequer adopted that course, he would have obtained without the slightest trouble every penny of this extra Revenue for carrying on war operations, and the burden would have fallen more equally upon the three Kingdoms than when it had to be borne by the consumers of tobacco.

MR. BURT

preferred that all classes of the community should contribute their fair proportion of the taxation of the country. It had been contended by some hon. Members that the working classes should bear a greater proportion than other classes, on the ground that they were more inclined for war. He begged entirely to dissent from that opinion; and he contended that this additional tax, so far, at any rate, as it was a war tax, should fall upon fashionable people, and those who sang popular songs about fighting, and not on the working population, who, he believed, were decidedly averse to war.

THE CHANCELLOR OF THE EXCHEQUER

The discussion upon the Report of the Resolution on the tobacco duties has taken a rather wide range. Not that I am surprised it should do so; but I hope I shall not be expected to enter fully into all the questions that have been raised, some of which would be more properly discussed when we come to consider the Budget as a whole. I would rather not follow the hon. Member for Hackney (Mr. Fawcett), at the present moment, into the question of the actual relations between direct and indirect taxation. I only wish to say that I disclaim the idea of laying down any general principles such as he seems to think I propose to lay down on the occasion of an extraordinary expenditure—that the large proportion of five-sixths of that extra burden should fall upon direct taxation, and the smaller proportion of one-sixth upon indirect taxation, I lay down no such principles, because I think it is unwise and unbusiness-like in the management of finance to tie one's hands in that way, especially when those principles come to be imaginary. To the proposition we have before us the most opposite objections have been taken. By some hon. Members, we are told that the tax is a bad one, because it is levied more highly in proportion to the value of the article, and falls so much more heavily upon the lower class, who consume tobacco, than upon other classes. On the other hand, we are told that the scheme of the Budget is bad, because too much is taken by means of the Income Tax, which falls upon the richer class, and that the poor do not bear their fair share of the burden. I think those objections, to some extent, answer one another; and I do not shrink from the discussion, which I suppose will, by-and-bye, be raised upon the subject. With regard to the other point, dwelt upon by the hon. Baronet the Member for Chelsea (Sir Charles W. Dilke) and the hon. Member for Hackney (Mr. Fawcett), as to the unfairness of the duty falling heavily upon the lower class rather than on the higher class, does the hon. Member for Hackney seriously mean that he thinks we ought to revert to the old system of ad valorem duty? If he really thinks that is the principle of our fiscal system, he will find that we shall be engaged in a difficult task, and cause the greatest possible dissatisfaction. If you were to attempt to tax such articles as tobacco and tea, and still more wine, according to their specific value, you would find yourself launched into a sea of embarrassment. I, for one, shall require much stronger arguments and much stronger proofs than have been presented to-night before I am disposed to take such a step as that. With regard to the remarks of the hon. Baronet the Member for Chelsea, I do not know what was the real meaning of his speech; but he seemed to me rather to glance at a system like that of countries where tobacco is made a monopoly of the State as a better mode of raising Revenue. Well, undoubtedly if tobacco were made a monopoly of the State, it would be easier to get over the difficulty of the ad valorem rate; but that again would raise a very serious question which could not be decided upon a proposal for what I hope will be, not a permanent, but only a temporary, addition to the present rate. I do not go into the question as to the danger or likelihood of this increase leading to smuggling; but I can say that this addition to the Customs duty has been strongly recommended to me by my practical advisers at the Customs, and they appear to entertain no fear of such a result. I do not, of course, deny that, to a certain extent, smuggling of tobacco is carried on. I do not know that I can at all dispute the argument of the hon. Member for Burnley (Mr. Rylands), who says—"We object to this tax; at the same time we agree that if we are to have some additional expenditure you must meet it by some additional tax; but you must find some other tax than this." Then he says—"I am not bound to find any tax; it lies with the Chancellor of the Exchequer to find a substitute." Well, of couse, that is an argument used fairly and properly by hon. Gentlemen who object to any particular tax; but, at the same time, I cannot but appeal to the hon. and gallant Member for Galway (Major Nolan), with whom I should like to have some private and confidential conversation, because he has informed us of the very interesting fact, that, knowing a good deal about the working classes, he has ascertained not only what taxes they do not like, but what taxes they do like. The choice of articles already taxed, to which an addition could be made, is a limited one. Of course, there is a possibility of laying a new tax on some article not now subject to taxation. If I had to face that difficulty, the range of articles is wide enough to furnish the Exchequer with a large addition to the Revenue; but I should be exceedingly sorry, under any circumstances—and certainly I do not wish for a temporary need—to revert to taxation on any articles that have been entirely exempted from taxation. Assuming that I am not to go to any article at present untaxed, I am driven to the alternative of selecting some of those now taxed, and to consider which of them would bear an increase. With regard to the area of choice it was not a very large one, being confined to tea, spirits, and tobacco. I think that even those who object most to the tobacco duty do not desire to substitute for it an increase of the spirit duty. Spirits are now as highly-taxed as they will bear from a fiscal point of view; and, although it might be advisable, from a moral point of view, to diminish the consumption of spirits, still I think I should not have secured an increased Revenue by adding to the duty on spirits. The choice, therefore, lay between tea and tobacco. The latter article was, in my opinion, much more likely to bear an increase of duty than tea; and I believe I have acted for the best in choosing tobacco as the article to be taxed. I do not know that I need enter more fully into the question at the present time. I can only express a hope that the House will confirm the decision of the Committee of Ways and Means.

Question put.

The House divided:—Ayes 100; Noes 17: Majority 83.—(Div. List, No. 100.)

Subsequent Resolutions agreed to.

Bill ordered to be brought in by Mr. RAIKES, Mr. CHANCELLOR of the EXCHEQUER, and Sir HENRY SELWIN-IBBETSON.

Bill presented, and read the first time. [Bill 146.]