RESOLUTION.

HC Deb 25 April 1884 vol 287 cc669-91

MR. J. G. HUBBARD

, in rising to call the attention of the House to the composition of the Public Revenue; and to move— That, accepting the principle which would adjust every man's taxation to his ability, this House desires that local and Imperial Taxation shall (whenever they are coincident) be levied upon a common basis and by a common measure of value; that Imperial Taxes shall, as regards the products of property, be (like local rates) charged upon their net or rateable annual value; and that industrial incomes shall be allowed, prior to assessment for Income Tax, an abatement, in compensation of their perishable nature, said, the question was one which affected several very important interests in the country, and had an important bearing, not only upon the levying of Imperial and local taxation, but also upon their administration and expenditure. Taxation and Revenue were too often regarded as convertible terms; and the amounts of the entries under the head of Expenditure in the official Statements of "Public Income and Expenditure" were assumed to be derived from the taxation of the country. This was very far from being the case. Of the £89,000,000 standing under the head of Income, £12,000,000 were repayments and cross entries, reducing the actual "Income" in 1883–4 to £77,000,000, from which again must be deducted the revenue from "Crown Services," "Crown Rights," and "Crown Lands." The sum actually raised by taxation was £73,000,000, of which the Income Tax contributed £12,000,000. It was especially to the Income Tax that he invited the attention of the House through the Resolution which proposed to adjust its assessment to the principle upon which local rates to the amount of £28,000,000 were already levied. How should the National Income be raised? To his mind, nothing was more obvious than that it should be the result of an aggregation of certain portions taken rateably from all individual incomes. The State, in the levying of that income, ought to be guided by the principle laid down by Adam Smith, "that every subject should be taxed in proportion to his ability "— that was, "in proportion to the revenue he enjoyed under the protection of the State." And it would be observed that the ability to expend, or, practically, expenditure, was the interpretation of Adam Smith's axiom. The Income Tax was, unhappily, not levied upon this sound principle, for it taxed at their nominal amounts of £1,200, incomes so widely different as these—A capitalist had a mortgage yielding him net £1,200; a landowner, out of a nominal rental of £1,200, had £1,100 net; a houseowner, out of£1,200, had but £1,000 net; and a millowner, out of a rental-of £1,200, had £800 net. This inequality was the more marked in the case of incomes derived from landed property, which might be so heavily mortgaged, or otherwise encumbered, that the nominal owner, when he had paid interest on the mortgages and tax on the supposed income, would have hardly any residue. Take the case of a houseowner with his nominal rental of £1,200 reduced by outgoings to £900. He might owe £900 as interest on a mortgage, and he had to pay out of his net residue of £100, Income Tax on £300, or in a ratio thrice as large as that of the capitalist mortgagee. A landowner with a burthened property would be in the same position, or worse, for with the present reduction of rents he might be compelled to pay Income Tax on the outgoings of his land without having any residue on which to live. The remedy was obvious—simply to levy the taxation, not on the nominal value, but on the rateable net value. Passing from the owners of property of this nature, he would refer to the case of owners of industrial incomes, those living by the exercise of their skill and intelligence, such as barristers or officials of that House, who were taxed upon the whole of their receipts. He would ask, on behalf of all classes earning industrial incomes, such an amount of remission of taxation as would place them in a position of safety as regarded the future—that was, in the same position relatively as the owners of real property, who, in the case of local rates, enjoyed reductions of from 10 to 33 per cent. His proposal was that all purely industrial gains be allowed an abatement of one-third to place them on an equality with the net results of the rents of real property. This concession would be nothing more than carrying out the principles enunciated by Adam Smith, and it was merely extending to industrial earnings the same principle of assessment which the House had already adopted on the subject of local taxation. He wanted to know why was it that the principle which had been declared by the House to be right, sound, and just, to be scientifically true, and to be equal as between individuals in respect of their property, was to be denied in the taxation of the same properties for the Queen's taxes? The right hon. Gentleman the Secretary of State for the Home Department would know that, in his Department, in the case of determining licences or qualifications which depended upon a certain amount of value, the decisions were determined on the rateable value; and he would, therefore, call upon the right hon. Gentleman to support him in extending the same enlightened policy to the levy of taxes. He would now refer to the important decision of the House of Lords in the case of "Dobbs v. The Grand Junction Waterworks Company" —a decision which gave to his cause a force which no indifference or sophistry could resist. In delivering that decision, Lord Bramwell said— What is the meaning of 'Annual Value?' We may safely adopt the definition (in 6 & 7 Will. IV. c. 96, 1836), viz., the rent at which it would let free of all usual tenants' rates and taxes, and deducting therefrom the probable average annual cost of the repairs, insurance, and other expenses, if any, necessary to maintain them in a state to command such rent. This is their value, this is the value, the net, the only value. …. 'Value' means 'net value,' 'net value' means 'value.' It was upon that decision that he placed his hope and confidence; and he thought the House, and he trusted the Government, would not continue to shut their ears and eyes to the evidence of such a decision with reference to the administration of that important branch of the Revenue which constituted the Queen's taxes. It was right to deduct from industrial earnings previous to their assessment the proportion which would be equivalent to their renovation or permanence. The millowner was allowed a deduction of 33 per cent on his machinery; but the professional man, who might be called a "human mill," as perishable as the other, was charged upon the gross income he received. The man himself could not be replaced, but his income might be; he could secure to his family the same amount which he could now spare out of his earnings. As regarded the question of what the amount should be, very able actuaries and students of scientific taxation, had determined that one-half of an industrial income would not be an excessive amount to allow as a reduction for taxation. His (Mr. Hubbard's) calculation was that a practising barrister, earning £1,200 a-year, should lay by one-third of it, say, in a policy of insurance, as a provision for his family. That would be simply carrying out a principle which had been adopted—namely, to allow a deduction from income not exceeding one-sixth for Income Tax. The only defect in that clause was that one-sixth was not enough; it should be not less than one-third; and it was also absurd to bind people down to insurance as the only means of providing for their families. Government, and the Prime Minister himself, had already accepted the principle in the case of a premium for insurance. One advantage of the acceptance of the proposal which he placed before the House would be that it would bring into harmony the two great branches of public Revenue—the local rates, amounting to £28,000,000, and the Income Tax to £10,000,000 or £12,000,000 more; and it would bring them under the same valuation list and a common collection, which would be a source of great economy, and save the taxpayer a large amount of molestation, as he would have one instead of two visits from the collector. The necessity for introducing some method which should relieve the taxpayer under the Income Tax was unavoidable, for the amount of demoralization it had caused was hardly to be described. In by no means a distant Report on the Income Tax Revenue, it was stated that of the amounts which should be returned under Schedule D only 44 per cent came under charge. That was a frightful picture, for as Schedule D was the result of self-assessment, it really pointed to fraud. Moreover, this violation of honesty and truth in the Return was provoked by the injustice of the tax itself. So completely had some become reconciled to these disgraceful consequences of the tax that Mr. Lowe, when Chancellor of the Exchequer, stated that people had the remedy in their own hands; and why should the Government care about it? He protested against the continuance of a system which demoralized both the administrators and the victims of the tax. Instances had been known of high officials counselling their subordinates not to inform the public of their rights, but to allow the taxpayer to pay far beyond his legal liability. But was the Income Tax a tax which could be done away with? The Prime Minister, some years ago, gave the people to under- stand that the Income Tax would be repealed; and he mentioned the other day, in a letter printed in The Times, that at the time he expressed that opinion the finances of the country were in such a state as to make the repeal of the Income Tax a very probable event. He (Mr. Hubbard) had no doubt the Prime Minister said that with perfect sincerity; but what he (Mr. Hubbard) had to say was, that he was not the best doctor who killed the patient. The best doctor was he who cured. If the Income Tax were repealed, he wanted to know by what means they would bring the enormous wealth of traders under contribution to the service of the State. The Income Tax was the only tax which reached the owners of vast incomes who might spend them in dissipation in Paris or elsewhere abroad; and it was the only way of reaching the large Corporations. What was required was a re-adjustment of the tax; and he was in favour of the tax being maintained, because it was the only means by which all classes of the community could, according to their ability, be brought under a charge for the general service of the State. It was objected that the effect of his proposal would be to increase the burdens of the large capitalists, while lightening those of other classes. That was undoubtedly so; but no one could justly complain if those who were undertaxed had their burdens equalized with those who were overtaxed. No doubt, one class would feel the operation of the change, and that was the rich capitalist class; they would be more heavily charged, while, on the other hand, it would relieve those who lived by their brains and industry. It would weigh heavily on the idle permanent income, and relieve the industrial but perishable income. They could not readjust an unequally distributed burden without its pressing upon some more severely than it did before. If A, E, I, O, and U were engaged to carry between them a given load, upon equal terms, and it was presently discovered that A, E, and I had been carrying more than their share, it was obvious that O and U would, under an equal distribution of the load, carry more than they did before. In this matter he had been moved solely by a desire to do his duty for the benefit of the country; and he trusted the Prime Minister would see his way to the intro- duction of a measure which would harmonize and combine the system of public taxes and local rates so as to make them more just and satisfactory. He trusted the right lion. Gentleman the Chancellor of the Exchequer also would be able to approve of a scheme which their own experienced officials were quite competent to carry out, which would remove all the inequalities and grievances under which the taxpayers now labour, and would substitute, for a system unjust, unequal, and demoralizing, one which would raise a portion of the Revenue easily and effectively as regarded the Crown, and acceptably and satisfactorily as regarded the taxpayer. The right hon. Gentleman concluded by moving the Resolution of which he had given Notice.

MR. TOMLINSON

seconded the Resolution.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "accepting the principle which would adjust every man's taxation to his ability, this House desires that Local and Imperil Taxation shall (whenever they are coincident) be levied upon a common basis and by a common measure of value; that Imperial Taxes shall, as regards the products of property, be (like local rates) charged upon their net or rateable annual value, and that industrial incomes shall be allowed, prior to assessment for Income Tax, an abatement, in compensation of their perishable nature,"— (Mr. J. G. Hubbard,) —instead thereof.

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

MR. GLADSTONE

Sir, my remarks on the speech of the right hon. Gentleman will be partly critical and partly apologetic; but before I proceed to them I wish to make an observation as to the circumstances under which this Motion has been made. Yesterday, with a perfectly good conscience and a firm conviction, the right hon. Gentleman made a Motion, and stated to the House that he had to call attention to a definite matter of urgent public importance, and full 40 Gentlemen from the division of the House opposite to that in which I have the honour to sit rose to their feet to support the assertion of the right hon. Gentleman that the discussion he proposed to bring on to-night was a definite matter of urgent public importance. The right hon. Gentleman has brought on his Motion, has delivered his speech, and the numbers present in that division of the House which yielded yesterday, with such case, 40 Members to make that assertion of the urgency of the subject have varied from between three to six. [Mr. WARTON: No.] I am stating matters of fact, which cannot be shaken by negation that appears to proceed from utter forgetfulness of fact. The numbers have varied between three and six —I should say seven; but out of the seven some have been here in anticipation of an interesting and, I think, rather urgent subject, the discussion of which was likely to follow. That is a curious illustration of the state of feeling [Interruption.] An hon. Baronet opposite interrupts me.

MR. WARTON

No; it was I who did so.

MR. GLADSTONE

I beg pardon; it was the hon. and learned Member for Bridport, who, in the exercise of his traditional privilege of disorder, interrupted me.

MR. WARTON

I rise to explain my interruption. [Cries of "Order!"]

MR. SPEAKER

The Prime Minister is in possession of the House.

MR. WARTON

Am I not to say anything? I wish to make an explanation. [Cries of''Order!"]

MR. GLADSTONE

There was great sympathy with the right hon. Gentleman the Member for the City of London (Mr. J. G. Hubbard), on the ground that if he brought forward his Motion last night he would not have fair play, because he would have been liable to have the discussion mingled with other subjects. There is, however, one advantage which the right hon. Gentleman would at least have had, and that is that he would have had the House pretty full to hear his statement, instead of the lank and lean attendance which has distinguished the portion of the House which was last night so deeply interested in the matter. But it is somewhat remarkable that the most fervent appeal made last night from the Front Bench opposite came from the right hon. Gentleman the late First Lord of the Admiralty (Mr. W. H. Smith), who testifies so deep and philanthropic an interest in the Motion of the right hon. Gentleman that he has not thought fit to honour him with his presence during a single sentence of his speech. These appear to me to be very extraordinary circum- stances; The hon. and learned Member for Bridport, or any other Member, may comment on them as they think fit; but they seem to me extraordinary circumstances in connection with the arrangement of Business in this House. I am very sorry that the right hon. Gentleman has not had greater justice done to him, on a subject, too, upon which I am sure he has bestowed the greatest pains; for there is no one in this House who is more able to explain his views on any question connected with political economy with clearness and force than is the right hon. Gentleman. The right hon. Gentleman has devoted himself to this matter with a chivalrous loyalty. He began upon it shortly after his entrance into Parliament, now more than 20 years ago; and I believe that he will pursue it to the death. It reminds me of the Crusades. They began somewhere about the year 1100, and they continued at intervals for about two and a-half centuries; and if the condition of human life, now so much less happy than in the patriarchal, age, permitted the right hon. Gentleman to extend his Parliamentary career to a period as lengthened as that embraced by the Crusades, I am sure that at the end of two centuries and a-half the right hon. Gentleman would still be found arguing with undeniable force and all his clearness of demonstration in favour of his plan for the reconstruction of the Income Tax. But the right hon. Gentleman must be content to look to the interest of this question. He has had some experience of it; and what has his experience been? In 1861 I had the honour to be Chancellor of the Exchequer; and then the right hon. Gentleman made a speech of much the same character as that which he has delivered to-night, and, if I remember aright, in greater detail. As Chancellor of the Exchequer, having had a responsible experience of this matter which the right hon. Gentleman has never had, I opposed his Motion; but he beat me by a majority of four, and obtained what was then the great object of his desire—a Select Committee to examine into his plans. Before that Committee the right hon. Gentleman developed his views with a fulness not here permitted. He called the most distinguished advocates of those views to support them in evidence; he made no complaint as to the impartiality or the ability of that Committee; and when I point out that, not to mention others, there sat on the Committee such men as my noble Friend Lord Sherbrooke and as the right hon. Baronet the Member for North Devon (Sir Stafford Northcote), it is plain that the House of Commons had done its best to make it an efficient and able Committee. That Committee produced a considerable Blue Book. The right hon. Gentleman himself was Chairman of that Committee, and had every advantage of bringing forward and pressing upon the minds of the Committee all the arguments that he has adumbrated—and necessarily only adumbrated—to-night. And what was the result? When the evidence had been taken, the right hon. Gentleman prepared a most elaborate and most able Report, setting forth these same views. The Committee were quite unable to accept the Report of their Chairman. They stated with sufficient frankness in the brief Report which they presented to the House that they had arrived at the conclusion that the plan proposed by their Chairman did not afford a basis for the practicable and equitable readjustment of the Income Tax. That was the effect produced on a Committee composed of the most able men by a full and accurate and open examination of the subject. And after having carried his Motion for a Committee, and failed to convince his Committee, which rejected his Report and adopted instead of it a Report drawn up by the right hon. Member for North Devon, the right hon. Gentleman now comes here and thinks that on the strength of a speech, however ingenious and clever, the House is to embark itself in the desperate undertaking that he invites it to enter upon.

MR. J. G. HUBBARD

I wish to explain that it is not the same scheme, and it is a new Parliament, without prejudices.

MR. GLADSTONE

It is a new Parliament, and a new generation, if you like; but I have not done with my history of the case; and, at any rate, there is this to be said—that the Leader of the Opposition and of the Party to which the right hon. Gentleman belongs is the same Gentleman who drew the Report from which I have just made a quotation. Whether it is a new or an old Parliament, it, of course, has a per- feet right to change its mind if it sees fit. What I have pointed out is simply this—not that we are bound by the acts of a former Parliament, but that a 'former Parliament did make a thorough and systematic examination before the right hon. Gentleman's Committee, that being a Committee of which he cannot complain, and after that examination rejected the plan of the right hon. Gentleman, and adopted a Report on a completely different basis. I am reminded that the right hon. Gentleman was a witness before that Committee as well as its Chairman, so that he had every opportunity of setting forth his views with the utmost advantage, and he failed in no part of his duty. It is right that I should mention that when it came to the question of supporting the views of the right hon. Gentleman by the Gentlemen, who had gone through the investigation, the numbers were, for my right hon. Friend, two, and against him seven. That was the division of opinion in the Committee which heard the case. Well, Sir, the right hon. Gentleman has shown, or endeavoured to show, various inequalities in the Income Tax. I do not contest one of them. I make a whole armful of concessions to him. I think I have had reason to know more of the Income Tax in the course of the 12 years that I was Chancellor of the Exchequer than even the right hon. Gentleman does. I will not accuse the right hon. Gentleman of exaggerating those inequalities; it is hardly possible to exaggerate them. The right hon. Gentleman has only touched on a few of them. Well, what is to follow? He says at the end of his speech that he offers us a scheme which our own official men are ready to carry into effect. I want to know what authority he has for that statement. I can only say that I have had large experience of the Board of Inland Revenue under three or four different Chairmen, and all those who were connected with them; and I never knew one who was ready to embark in the hopeless enterprise proposed by the right hon. Gentleman.

MR. J. G. HUBBARD

I have offered no scheme to-day; there is none before the House. What I said was, that the able officials of the Inland Revenue Department could, with great case, prepare a scheme for carrying out the principles of my Resolution.

MR. GLADSTONE

I am glad to have elicited that explanation from the right hon. Gentleman. He gave his opinion of what the officials of the Inland Revenue Board would be ready to do. I thought he had said that they were ready to carry out his scheme. There is all the difference between the two things. What the right hon. Gentleman's opinion is of the capacity of the officers of the Inland Revenue Department is no doubt important; but it is not so important that we can prevail on them to prepare such a scheme. Every Chairman of the Board whom I have known, from Mr. J. Wood to Mr. Charles Pressley, regarded this scheme as a wholly visionary project, though, no doubt, philanthropic and benevolent in intention, and as absolutely impossible of practical application. But the right hon. Gentleman says he proposes to relieve certain Schedules and to increase the burden on certain, other Schedules. I remember another Gentleman who was not less benevolent than the right hon. Gentleman. He was a very able man and one much accustomed to speak upon finance in this House, I mean the late Sir Fitzroy Kelly, who went to a constituency and attacked the inequalities of the Income Tax. He began with Schedule A, and he said that it suffered most grossly, as the right hon. Gentleman also said, and that was to receive a handsome reduction. Then he went on to Schedule B, touching the farmers' profits, and he said that that was a cruel shame, and they were to have a handsome reduction. He came to Schedule D, and he said that case was monstrous, and it was plain they must have a handsome reduction. Then he passed on to Schedule E, dealing with officials' salaries, and he said these were men whose remunerations were measured in the nicest way, and it was monstrous to lay on them the full tax, and they were to have a handsome reduction. He then came to Schedule C—the fundholders— who, relying on the public faith, had accepted the lowest interest, and he ended by saying that they also should have a handsome reduction. But what he failed to do was to exhibit the numerical and financial result of allowing handsome reductions to these gentlemen all round. He made a most popular speech without exhibiting a practical result. That is not the right hon. Gentleman's course; but I observe the right hon. Gentleman was what the Scotch call "canny." In his references to the Schedule I heard him speak of E I U, I did not hear him mention O; but it seemed all through to be A E I O U. Why was it necessary to go to the five vowels? We have got the first five letters of the alphabet, and is that not just as good? A B C D E he would not touch. He thought it was better to generalize a little, and detach the operation of his plan from dry, hard, matter-of-fact, because the right hon. Gentleman yesterday had the great advantage of enjoying the support of the landed interest. They rose on his behalf in order to insure this discussion. [Cries of "No, no!"] Who rose then? I constantly hear it boasted from that quarter of the House that they are the landed interest. I believe there are some other people in the House who have got land; but, at the same time, they are always calling themselves the "landed interest" by way of excellence. They are entitled to do that, and I believed in calling the Party opposite the landed interest I was paying a compliment. Well, now, what is the right hon. Gentleman who got those 40 Gentlemen to rise and help forward this Motion going to do with Schedule A? If he had taken A B O D and E, instead of the vowels, it would have been necessary to particularize, and to have said we will lighten A B and 0, and tax further I and U. No; he is not going to tax I and U, except upon the five vowels; but among the actual Schedules taxed be is going to tax further Schedule A as the main basis of his operations. Does the right hon. Gentleman mean to tell me that if he has got £12,000,000 to raise by the Income Tax, and has begun by allowing a reduction of 33 per cent on D and E, he will get his £12,000,000 without further taxing Schedule A?

MR. J. G. HUBBARD

It is my firm conviction that in the recommendation which I have made Schedule A would, as nearly as possible, be in the same position as it is now, with this advantageous result from an adjustment, that those who are most heavily burdened would have their burdens lightened.

MR. GLADSTONE

I must investigate this a little further. I think it would have been better had he not taken those five vowels. It would have been much better if he had told us that the question really was whether Schedule A was to be burdened or not. That is the main question. Now, the right hon. Gentleman said at present you do not get upon Schedule D one-half of what you ought to get. Why do you not? Why, because of the great indignation against the injustice of the law; and, in consequence of that indignation at the Revenue, persons only pay upon 44 per cent of their income. Well, Sir, the right hon. Gentleman has a faculty of imagination which came out in the last sentence of his speech, where he said that he was—I cannot remember the exact words—bringing forward a plan which would be easy of administration, lucrative in result, and satisfactory to the entire community. He offered to us a kind of paradise of taxation. I do not believe that the reason why you only get 44 per cent of this tax is this indignant sense of being oppressed. It is nothing of the kind. It is the unfortunate fact that a considerable portion of the community will escape paying dues to the Chancellor of the Exchequer if they can. At any rate, that is a question between the right hon. Gentleman and him; but what I want to know is this—the right hon. Gentleman from D and E deducts at least 33 per cent. Does he propose to deduct 33 per cent from A? No; nothing of the kind; and I will leave it to the landed interest and other gentlemen to say whether the fact of deducting 33 per cent from D and E, if the same sum of money has to be raised, will or will not be a burden, on Schedule A? [Mr. J. G. HUBBARD: I have not made the calculation.] I asked the right hon. Gentleman if he ventured to take 33 per cent from Schedule A; and he says no. I say that my right hon. Friend's plan manifestly goes to the burdening of Schedule A. That is a question which I have treated at great length in this House, and I will not refer to the arguments, because they are too long and intricate. I think it would have been better if the right hon. Gentleman had used the five vowels in the actual Schedule, and not have gone to the five vowels in order to obscure the operation of the plan. What is the real case? I have stated broadly to the right hon. Gentleman, and I do not question it, that there are a number of inequalities in the Income Tax, some of which he has shown, and many of which he has not shown at all, and many of which he does not seem to have any idea of. Are these inequalities incurable, or are they not? Sir, the right hon. Gentleman refers to a time when I, on the part of the Liberal Government, engaged that we should abolish the Income Tax. Why, according to the doctrine of the right hon. Gentleman, it would be a great mistake to do away with the Income Tax. That seems to be his idea. Now, can this operation of curing be performed? The right hon. Gentleman says it can; but he had the opportunity of stating his case ten times more fully before the Committee he induced the House of Commons to appoint, and that Committee, by seven to two, declared that he had entirely failed. That is an awkward fact for the right hon. Gentleman; but it is true. He was not dismayed by the adverse vote of his Committee, and he proposed it again the next year, on which occasion his majority was only four. Let me go a little further and tell him this—that with one single exception—a clever man, Mr. James Wilson—there never has been to my knowledge one single Minister or economist who had paid the slightest responsible attention to this subject for the 90 years since this tax has been established who would have concurred in the opinion of the right hon. Gentleman. Mr. Pitt and Sir Robert Peel are the two greatest financiers who have been at the head of a Government. Do you not think they took the greatest possible interest in finding, if they could, those means of removing an anomaly and an injustice, and to make the tax delightful and popular to everybody. Certainly they did; and I remember very well going to Sir Robert Peel when I was a Parliamentary youngster, a character that was then, I must say, very different indeed from what it is now—after hearing something like the speech I have heard to-night. I was extremely captivated by the speech, and I spoke to Sir Robert Peel about it. He put an extinguisher upon me and my speculations in half a minute, and declared that he would not entertain for an instant a proposition such as this. I have mentioned Mr. Pitt, Sir Robert Peel, Sir George Lewis. Mr. Herries, and the right hon. Baronet opposite (Sir Stafford Northcote). Beside these I say there is not one who would support the right hon. Member for the City, and I challenge him to produce one. Why does the right hon. Gentleman not make his plan? He said that we had no plan before us—[Mr. J. G. HUBBARD: A good plan.]—that does not really touch the difficulties of the case. I do not wish to quote myself as an authority; but I would like to refer to the time when I first became Chancellor of the Exchequer, 32 years ago. At that time Mr. Disraeli, who had been the Chancellor of the Exchequer before me—as I know simply in the expression of private opinion and without any communication with the Revenue Departments—had expressed an opinion in favour of taxing Schedule D at 3d. and Schedule A at 7d. That secured, to a great extent, the votes of the Conservative Party for a plan of that kind. In the Liberal Party of that time there was an extremely free prepossession in favour of a plan of the kind; and when I became Chancellor of the Exchequer I will venture to say that if the question had to be decided there and then an immense majority would have voted for the plan of differentiating the Income Tax. In these circumstances I think it is pretty obvious that if it had been possible for me with my faculties to find a way to do it I should have done it. I spent more labour on a subject of this kind than I have ever done on almost any other subject in my life. I came down to the House and argued the case at great length, and I showed the great anomalies and difficulties involved then, and they were as nothing compared with the anomalies and difficulties which would have been involved if you had fixed differentiated duties on different Schedules. The House of Commons, by a large majority, having been induced to look closely into the case, repelled entirely these plans, and voted for the Income Tax as it had been voted before. There are two rival plans. One is that of the right hon. Gentleman. There is no doubt whatever about inequalities in the tax. The right hon. Gentleman says— "Cure the inequalities, make the tax perfect, keep it perpetual." And the other plan is— The tax is incurable of its inequalities, and in support of that doctrine is arrayed every man who has ever been in the position of a Minister responsible for dealing with the tax. What said the Report of the right hon. Gentleman's own Committee? It said— This tax has now been made the subject of investigation before two Committees; and, no proposal for its amendment having been found satisfactory, your Committee are brought to the conclusion that the objections which are urged against it are objections to its nature and essence rather than to any particular shape which has been given to it. Well, it was upon that principle that we acted in 1874, when we saw that the finances of the country allowed the tax to be abolished, and when we engaged to abolish it if we were permitted. But that matter was referred to the country at a General Election; and the country chose to return a Parliament which they perfectly well knew was pledged to the Income Tax with all its inequalities. Nothing was said about removing its inequalities. They declined the offer of abolishing the tax that was given them, and the right hon. Gentleman need not trouble himself now to make many arguments against the abolition of the tax, for I can promise him that a sufficient number of years will pass over the heads of Englishmen before they will have another opportunity of abolishing it. I had been most anxious, ever since my connection with financial affairs began, to give them the choice. I gave them the choice, they took it, and the consequence cannot be disturbed for some very considerable time. One objection which I omitted to mention to the plan of the right hon. Gentleman is the sort of support which he received last night. I am not one of those who think that the land is overtaxed in this country. In the course now so freely pursued of continually transferring to the Consolidated Fund local charges, I have no doubt it will be necessary to settle accounts with those who have pushed forward that plan, and to make a just arrangement; but I do not think the land ought to be further taxed under the Income Tax as compared with the other Schedules. I have, however, a much stronger objection to the plan of the right hon. Gentleman. If I understand him rightly, he proposes to make certain allowances to Schedule A. I imagine he will undoubtedly make allowances to Schedule B, which is substantially, in his view, in the same category as Schedule D. In Schedule D he will deduct at least a third.

MR. J. G. HUBBARD

Certainly not. If you look at the Bill in your hand you will see that the deduction of one-third is entirely on industrial incomes, and not on the interest of capital.

MR. GLADSTONE

That does not touch my argument. My right hon. Friend is going to make a large reduction on Schedules D and E. What is he going to do with Schedule C?

MR. J. G. HUBBARD

I propose to make no deduction at all.

MR. GLADSTONE

Has my right hon. Friend considered the conditions under which this country contracted its loans? When it contracted its loans it gave the most solemn pledge to those who lent the money that their money should not be made the subject of taxation.

MR. J. G. HUBBARD

Quite so. Why have you taxed it?

MR. GLADSTONE

How has Mr. Pitt and how has Sir Robert Peel dealt with that? By this doctrine—that they laid the tax equally on every subject, without reference to the sources from which the income was derived. It has been in that way, and in that way alone, that those great men believed that they maintained the public faith; but my right hon. Friend proposes to cut away from under our feet that which they urged as their only defence against the charge that they were breaking faith with the public fundholders. It is impossible for the right hon. Gentleman to expect that he will find a responsible Government of this country to carry through such a plan as he proposes. He is the last man in the House who would knowingly do an act of questionable faith. This question of the fundholders is a very serious one, and it will be a very awkward thing for my right hon. Friend to come into conflict with Mr. Pitt and Sir Robert Peel when he proposes to do that which they saw would be a breach of faith with the public fundholders. I have quoted enough of historical authorities. It is all very well for ingenious Gentlemen to make speeches on this subject. I agree with very much that my right hon. Friend says, and I agree with a vast deal more that might be said; but, as to the point of practicability, I must say that those who have been in the position to be responsible in this matter in long succession, continued throughout many generations, without a motive to draw them aside from the right path, but with every motive to make them pursue it, are safer guides in a matter of this importance than what I regard as the academical speculations of my right hon. Friend.

SIR HERBERT MAXWELL

assured the Prime Minister that he and those who sat around him on the Opposition side were induced to take the action they did yesterday by their desire to maintain the rights of private Members, which, in their opinion, seemed to be threatened. He himself had been ignorant of the very terms of the Motion, though the name of his right hon. Friend was as closely connected with the subject of the Income Tax as that of Richard Cœur de Lion was with the crusades.

MR. MACFARLANE

said, he thought the Prime Minister was unnecessarily severe on the Gentlemen of the Opposition. The other night they panted for information as to General Gordon up to 7 o'clock, when the Sitting was suspended. The British Constitutional Party had then to go to dinner—for the British Constitution must be maintained—and at 9 none of them returned. He did not intend to go into the intricacies of this question, but wished to remark that he called attention to one particular branch of it last year, when an important error arose in the discussion. To the Customs and Inland Revenue Bill he moved an Amendment for the purpose of preventing the Chancellor of the Exchequer from putting his paw on incomes that never came into the United Kingdom. The Chancellor of the Exchequer told him that a case had been tried in 1808 in which it had been decided that the whole income, whether made in England or not, was to be assessed. Still, 100 Members voted for the Motion objecting to that which was stated to be the law. His own solicitor being unable to find the case in the published reports, he applied for a reference to it to the Chancellor of the Exchequer's Private Secretary, who furnished him with the full particulars of the case, from which it appeared that what the Chancellor of the Exchequer had been advised was a legal decision was only the opinion of the Inland Re- venue Board, which was not upheld by the Income Tax Commissioners, the case being that of a gentleman who carried on trade in Ireland, which was not then subject to Income Tax, and who, having for some time paid tax on the whole income, succeeded in obtaining exemption, except for the portion of his income which was expended in England. In these circumstances, he should raise the point again this year on the Inland Revenue Bill; and it was probable that some hon. Members who did not vote previously against what they were told was the law would support his Motion, which was in conformity with the law.

SIR E. ASSHETON CROSS

said, he understood that the object of the discussion on the Motion for the Morning Sitting was to prevent interference with the rights of private Members'; and he was under the impression that the first subject to be discussed was the Motion on Portpatrick Harbour, which it was said would not take long, but would lead to a Division. On reaching the House at five minutes to 10 he was surprised to find that the House was not discussing the first Motion on the Paper; and he believed many of his Friends were absent in the belief that that Motion would occupy more than an hour, and that the Motion on the Income Tax would be reached at a later period. He must emphasize one thing which had fallen from the Prime Minister. It had been shown clearly what the anomalies in the Income Tax were, and the Prime Minister had admitted that the anomalies were cruel; but he said they could not be remedied, and therefore they must be perpetuated as long as the Income Tax itself. He said there were the greatest possible difficulties in remedying them.

MR. GLADSTONE

Not difficulties, but impossibilities.

SIR R. ASSHETON CROSS

said, that the right hon. Gentleman's correction proved his case further than he had ventured to state it. It followed that if the Income Tax were continued the anomalies could not be removed. In 1874 the right hon. Gentleman offered the constituencies the greatest bribe ever held out to them—namely, the abolition of the Income Tax; but the constituencies resolutely and boldly re- fused to accept it, and now it seemed, because of this refusal, no attempt was to be made to remedy the inequalities, although it was admitted that the operation of them amounted to cruelty. He entirely agreed in the views of his right hon. Friend, and he had hoped that some expectation would have been held out to the public that the existing inequalities which the Prime Minister admitted would have received some attention from him with, a view to their removal. The Prime Minister, however, adopted a different course. He seemed to have taken offence because the country did not accept the bribe of the promised abolition of the Income Tax; but surely that was no reason why some attempt should not be made to remedy its inequalities. The taxation of the country had been greatly increased since 1874, and it was equally clear that the number of articles which were taxed had gradually diminished. If the Income Tax had been abolished it was difficult to say on what articles money could be raised to meet the expenditure of the country.

MR. GLADSTONE

I wish to explain. I must have conveyed a totally erroneous impression to the mind of the right hon. Gentleman. He says that I stated because the country refused to have the Income Tax repealed in 1874, therefore I am determined that no attempt shall be made to remedy the inequalities in its assessment. I am not aware that any word of my speech could in the slightest degree warrant that statement. In 1853, and on other occasions in this House, I stated plainly that it was impossible to reconstruct the Income Tax on the principle of different rates and allowances in the different Schedules; and the opinion I entertain on that subject is the opinion of the right hon. Baronet the Member for North Devon, as recorded in the Report of the Committee of 1861, and read by me to-night.

SIR R. ASSHETON CROSS

I understood the right hon. Gentleman to say that he had no remedy to propose for the inequalities. [Mr. GLADSTONE: Hear, hear!] As far as I can gather, that is the present position of the question.

MR. WHITLEY

said, the question was a very important one, and he had hoped that it would have been met by the Prime Minister in a different spirit to that in which he had addressed the House. Hon. Members seemed to think it only affected the owners of large property; but he could assure the House that those who suffered most were the owners of property in large towns. There they suffered from over-taxation, and he thought that by what the Prime Minister had said the House had been led away from the Resolution of his right hon. Friend (Mr. J. G. Hubbard). It was a very simple Resolution which dealt with an admitted grievance, that local taxation was upon the net value, whereas Imperial taxation was upon the gross value. This was a matter which he assured the right hon. Gentleman was oppressive, not upon the large owners of property, but upon the small owners. [Mr. GLADSTONE: I did not say so.] The right hon. Gentleman had stated that it would be a tax for many years to come. If it was to go forth to the people that the tax was likely to be continued, the country would be very much indebted to his right hon. Friend for having called attention to the subject. The other question was the difference between the taxation of settled incomes and the taxation of precarious incomes. He could well understand the difficulties to which the right hon. Gentleman had drawn attention; but, at the same time, the question was one worthy of serious consideration, and one which the country would expect the Government, if possible, to rectify; and he thought, therefore, that the Prime Minister had, if he would allow him to say so, led the House away from the issue before it. The Prime Minister seemed to lose sight of the real question of the right hon. Gentleman. It was a question which he was sure was deep in the minds of thousands of our fellow-countrymen—the owners of small property— and the great bulk of the constituencies must again and again have it brought before them. He was very much indebted to his right hon. Friend for having brought the question forward; but, considering the present condition of the House, he did not think it would be wise to press the matter any further.

SIR MASSEY LOPES

said, he did not hesitate to say that no owner of landed property ever received, say, 80 per cent net of any property which he held. He paid Income Tax on the gross rental. There was no allowance for repairs, insurance, bad debts, &c. Let the House compare the difference with regard to trades. In trade they made their own returns, and received a liberal allowance for all those outgoings which, in the case of land, were never taken into consideration. The comparison between the treatment of traders and the treatment of owners of landed property was certainly a very grievous one. [Mr. GLADSTONE: Hear, hear!"] He would give an illustration. Only a short time ago he owned a poor property in the middle of a moor of about 100 acres. The buildings were very dilapidated. It was a question with him whether he should let it go down to common, or reconstruct the farm buildings. He was unwilling that it should go down to common, and he built upon it. The cheapest buildings he could put up cost him £700. He let it for £50 a-year, and now he had paid 14 years' Income Tax, but had not received a single farthing for the property. At no period had the landed interest suffered so much as during the last few years. Reference had been made to the question of subventions. He contended that the whole of the subventions had been absorbed entirely by the extra taxation for education, &c., which had been imposed upon the landowners since 1870. He would remind the Prime Minister that many years ago he promised that this question should be considered when the subject of local taxation came before them, and that relief should be given some other way. That promise had been kept dangling before them without any definite remedy. He sympathized very much with the Motion, because, as regarded the landed interest, they had still a very great grievance.

Question put.

The House divided: —Ayes 73; Noes 35: Majority 38.—(Div. List, No. 71.)

Main Question again proposed, "That Mr. Speaker do now leave the Chair."