§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a second time."
§ MR. CHILDERS
I do not propose to move any Amendment to the second reading of this Bill, nor will it be necessary for me to speak at any great length on the subject; but several disputable statements were made by the Chancellor of the Exchequer when he introduced the Budget the other day, and I especially wish to observe more fully than I have done on one statement which he then made. I wish to call attention to what the Chancellor of the Exchequer said as to his nominal responsibility for the deficit. The Chancellor of the Exchequer used very strong language disclaiming all responsibility for the deficit. Of course, the present Chancellor of the Exchequer is not responsible for the whole of that deficit, but he is responsible for a large part of it. It is true that his Resolution which was adopted by the House makes it a partner with him in responsibility for the removal from the Budget of the proposal about the Death Duties, and I think the amount we proposed to 929 raise in that way was £250,000. So far, he is responsible in partnership with the House; but the Chancellor of the Exchequer is, as I will show, alone responsible for a very large increase in the deficit in consequence of his refusal to introduce into his present Bill any provision for increased duties on liquor. I will ask the House to consider what was the Amendment which the present Chancellor of the Exchequer carried on the second reading of the Budget Bill. It was in these words, and I ask the House to weigh them—This House regards the increase proposed in the Duties levied on Beer and Spirits as inequitable in the absence of a corresponding addition to the Duties on Wine.Now, Sir, that Resolution left the Chancellor of the Exchequer entirely free to impose any addition to the duties on spirits and beer, provided a corresponding addition wore also made to the duty on wine; and he is in a particularly favourable position for such a proposal, because, as he told me in answer to a Question the other day, the Government proposes to abandon the two Resolutions which were adopted by the House in Committee of Ways and Means, which raised the superior limit of the 1s. duty on wine from 26 to 30 degrees. That abandonment leaves the Government entirely free as to the Wine Duties. They are no longer restrained, as we were, by the negotiations which were going on for several years with Spain. Those negotiations have come to an end, and, therefore, it is quite in the power of the Government now to increase, if they should think fit, the Wine Duties in the same proportion as it was proposed to increase the duties on spirits and beer. It is therefore clear that the Government and the Chancellor of the Exchequer are entirely responsible for not proposing an increase in the duties on wine, spirits, and beer. The responsibility for the absence of any such provision in the present Bill is entirely theirs, and they cannot shift that responsibility on the House or on anyone else. If that is the case—and I think there can be no doubt about it—the present Government is distinctly responsible for between £1,500,000 and £2,000,000 of the deficit. I pass now to the way in which it is proposed to deal with the deficit, which the Chancellor of the Exchequer states as being estimated at between £3,500,000 930 and £4,000,000. His plan is simplicity itself—namely, to add £4,000,000 to the Debt. Of course that, in future years, could be paid off out of the Sinking Fund like all other Debt. We proposed to add nothing to the Debt; but to take the deficit out of the Sinking Fund of next year direct. I cannot conceive what the difference between the two operations is, for which the Chancellor of the Exchequer takes so much credit. It is really the difference between tweedledum and tweedledee. I have no objection to the manner in which it is proposed to deal with what is called the New Sinking Fund; and, indeed, I admit that this is an improvement on my plan. I should now like to refer to what the Chancellor of the Exchequer said as to the Expenditure for which provision is to be made—I mean the increase upon the Expenditure as we left it. I am not going to refer for a a moment to the attack on the Admiralty, because the Committee about to be appointed will deal with the whole matter; but I wish to refer to the statement as to War Office expenditure which the right hon. Gentleman made, and which I think requires some further explanation. He used these words—Of the sum estimated by the War Office, a certain portion was duo to the provision which had been authorized for the defence of our principal coaling stations and commercial harbours, an item for which, in spite of its great importance, and in spite of the pledges given to Parliament last December by the First Lord and the Secretary to the Admiralty, no provision had been made in the Army Estimates.I do not attribute a wilful mistake to the Chancellor of the Exchequer; but I am bound to say that this is incorrect. The ordinary Army Estimates provided £198,000 for works and armaments for Colonial coaling stations, in addition to £67,000 which was to be provided by the Indian and Colonial Governments, and in addition to £35,000 which had been provided in the Supplementary Estimates of last year, and to £9,000 also provided last year by the Indian and Colonial Governments. My noble Friend the late Secretary of State for War made a short statement on March 19 in moving the Army Estimates, when he stated that work had been begun at Aden and Hong Kong, and enumerated the other stations at which work was to be com- 931 menced this year. It is true that no provision was made for the fortification of commercial harbours at home; but he referred to this subject in the preliminary discussion of the Estimates, and promised a more detailed statement of the views of the Government on the proper Vote. While, therefore, it is true, as stated by the Chancellor of the Exchequer, that the Vote of Credit included a sum of £200,000 which was required for the submarine mining defence of the Home and Colonial ports and the acceleration of the armaments of some of the latter, it is the case that this was in addition to the £198,000 provided in the ordinary Estimate for defence of coaling stations, of which the Chancellor of the Exchequer does not seem to be aware. I come now to what is of graver importance—I mean the declaration of the Chancellor of the Exchequer as to indirect taxation, its prospects, and the powers of this House to increase it. Now, it seems to me that the greatest caution is necessary in dealing with this most important question. Everyone knows the dangers which are ahead, and which were so well indicated by my lamented Friend the late Mr. Fawcett when he described what might be expected in future days from a Parliament popularly constituted. He warned us, in pregnant words, of the impatience of indirect taxation which such a Parliament might exhibit; those who elected it being interested in lavish expenditure on war, but careful to throw all the charge for it, the taxation required to meet it, on property. Therefore, Sir, with that warning before us, I think that whatever a Chancellor of the Exchequer proposes as to direct and indirect taxation, he should be careful not to use, without absolute necessity, strong language, which could not fail to have great weight with the House and with future Ministers deprecatory of increased charges, even on an emergency, upon the consumer; and I must say that I was, above all things, surprised at the words which the right hon. Gentleman used, coming, as they did, from a Conservative Chancellor of the Exchequer. How often have hon. Gentlemen opposite, whether in power or in Opposition, proclaimed the necessity of adhering to the principle laid down by my late right hon. Friend. So lately as in November last, when it was my duty to pro- 932 pose to Parliament a small additional charge on property for the Soudan Expedition, in the shape of an increase of 1d. in the Income Tax, I was vigorously attacked by several hon. Gentlemen opposite, warning me of the impolicy of relying alone upon taxes on property; and they received from me answers which appeared to be acceptable to the House generally, to the effect that although towards the end of the year it might be impossible to have recourse to anything but the Income Tax when a large addition of Expenditure was necessary, that was a practice which ought not to be adopted by Parliament in the Budget at the commencement of the year, but that both direct and indirect taxation in these circumstances should be had recourse to. Let me remind the House of what the Chancellor of the Exchequer said in his Budget Speech. He used these words, which I have taken from the best report I could find—We have arrived for the purposes of Revenue at the limits of increased taxation on the most important taxed articles of consumption except perhaps one article—namely, tea.
§ THE CHANCELLOR OF THE EXCHEQUER (Sir MICHAEL HICKS-BEACH)
Will the right hon. Gentleman allow me to correct him. I prefaced these words with the remark "in such times as these."
§ MR. CHILDERS
I accept the correction; although the words really occurred later in theright hon. Gentleman's speech, and I am about to quote them; although I hardly see how they qualify his statement. Then the right hon. Gentleman went on to say—The scheme to increase the duties on beer and spirits is financially unsound.He said, further—The Revenue from these articles is notoriously decreasing…The Inland Revenue authorities now assure me that the yield from the increased tax on these articles would not have approached the low estimate he (I) had formed of it…The principle that the whole of additional taxation in times like these should not fall upon property cannot he carried into effect without the addition of some one or more articles to our Customs tariff.Now, in the comments which I am about to make on this most important statement of the Chancellor of the Exchequer I am sorry that I cannot have the spoken support of my right hon. Friend the Member for Mid Lothian; but if he had been able he would have taken part 933 in this debate, and he entirely agrees with me in the principles which I now advocate. It appears to me, Sir, that these words of the Chancellor of the Exchequer sound the knell of indirect taxation. They are very important, and they evidently were deliberately spoken; and I repeat that, whatever our individual sentiments may be, they sound the knell of indirect taxation. In passing, I would say that I am not prepared to assent absolutely to the assertion of the right hon. Gentleman that there is a notorious decrease in the Revenue from spirits and from beer. There was some years ago, between 1876 and 1881; but matters are different now. As to beer, that is certainly not the case, and the Chancellor of the Exchequer can hardly have looked at the figures for the last few years. The official figures are as follows:—In 1882£–3 the Revenue from beer was £8,400,000; in 1883–4 it was £8,488,000; and in 1884£–5 it was £8,545,000. The increase has not been a rapid increase, but it is an increase; and there is not, therefore, a "notorious decrease," as the right hon. Gentleman stated. In the case of spirits there is a slight decrease, but it is very slight. In 1882–3 the Revenue from spirits was £18,570,000; in 1883–4 it was £18,436,000; and in 1884£–5 it was £18,295,000. So that, although there is a decrease in those three years in the Revenue from spirits, that decrease is under 1 per cent per annum, and certainly is not such a decrease as should interfere with financial operations which on other grounds may be advisable. Perhaps I may be allowed to read to the Chancellor of the Exchequer the advice given to the House by a Predecessor of his with respect to the duty on spirits. Lord Iddesleigh, on April 16, 1874, used these words as to an increase in the Spirit Duty—That is one source of Revenue which is still open to us upon an emergency, for I verily believe it would be possible to increase the duty without diminishing the consumption, and without raising the danger of illicit distillation. But that resource we keep as a reserve for the future."—(3 Hansard,  666.)That was the language of Lord Iddesleigh in 1874, and in his subsequent speeches I never heard him use any words qualifying the advice which he then gave to Parliament. I take, again, the question of the Beer Duty. The actual duty on beer is only 20 per cent 934 on its value; and I am confident of this—that the Inland Revenue authorities have never told the right hon. Gentleman that the duty on beer, considered upon Revenue grounds, could not be raised so to produce more Revenue.
§ MR. CHILDERS
In his speech the right hon. Gentleman spoke of every article now subject to duty except tea; and, therefore, he included not only spirits, but all other articles now taxed. Therefore, I take it as being beyond question that the Revenue from beer, regarded solely as a question of Revenue, might be increased from '2d., the present rate, to 3d. a gallon—that is to say, to 9s. a barrel—with the greatest possible ease. If any Member will read the discussions which have lately appeared on this subject in The Economist—one of the best authorities outside this House, they will see it distinctly shown that a very large increase of Revenue could be raised with perfect safety from beer. I am not speaking of the political and other aspects of the question, but only of its Revenue aspect. From that source £11,000,000, instead of £8,500,000, could easily be obtained. Then as to the duty on wine, that is one of the important branches of Revenue of which the Chancellor of the Exchequer spoke. The present duty on wine averages 1s. 9d. a gallon, or 25 per cent on the value. Before 1860 it was 5s. 7d., or 80 per cent on the value. The duty received from wine in 1856–7 was £2,016,000. In 1884£–5 itwas£l,230,000. Who can doubt for a moment that, if it were a question of Revenue only, we could easily obtain in all £2,500,000 from wine? Therefore, as to beer and wine, there is no question that a very large amount of additional Revenue might with perfect safety be raised upon sound Revenue grounds, putting aside altogether for the moment political and other considerations. I do not think the assertion can be disproved when I say that it would be perfectly possible to raise from liquor, if Revenue only were considered, between £5,000,000 and £6,000,000 more than is raised at present. Lot those who are conversant with the subject discuss it with the figures which I have given to the House, and they will find that that calculation 935 can be substantiated. Of course, I do not say that this increase of duty should be now, or at any particular time, obtained. In fact, in the Budget which the House set aside I proposed much less. But, in settling what duties should be increased, besides the general question as between property and consumption, we have many considerations to weigh in addition to those of Revenue; for instance, we have to look, first, at the distribution of incidence as between England, Scotland, and Ireland; secondly, at the effect on the producer of the raw material; and, thirdly, at the effect on our trade with foreign countries, which send us articles of drink. But I repeat that, excluding all considerations which are not Revenue considerations, the amount raised from liquor might be increased by £5,000,000 or £6,000,000 a-year. I am now only answering what appeared to me at that time, and what I still think was, a very incautious declaration in the mouth of a Minister as to the impossibility of raising more Revenue by indirect taxation. Might I even now hope that the right hon. Gentleman will qualify that declaration, by which, coming from the Leader of the Conservative Party in this House, I fear that much mischief has been done? I do not believe that whatever may be the emergency after that declaration, if unqualified, the right hon. Gentleman or any Minister would dare to increase, to any considerable extent, the Revenue obtained from indirect taxation. I have thus felt myself bound to enter my protest—a protest in which my right hon. Friend the Member for Mid Lothian concurs—against the language of the Chancellor of the Exchequer in this respect. I admit that after our defeat by the right hon. Gentleman the contest is for the present, over; and we can now do little more than struggle for a fair distribution of taxation on property. But if in this struggle the landed interest should suffer, let them remember to whose fatal Amendment they owe their misfortune.
§ MR. J. G. HUBBARD,
in moving the following Resolution, of which he had given Notice;#x2014That, in view of the rapid extension of local rating and of the continuous imposition of the Income Tax, it is desirable that the province of Local Eating and of Imperial Taxation be severally readjusted and defined, and 936 that a common authority and common measure be provided for the levy of both rates and taxes so as to regulate their incidence upon the principle of assessing the rate or tax upon the real or upon the net annual value,said, he did not-attach to the recent remarks of the Chancellor of the Exchequer the importance which had been given to them by the right hon. Gentleman who had just spoken; but he thought the House would agree that whatever articles were necessary for the sustenance of the people should be provided as cheaply as possible, in order that our working classes might stand the competition of the other nations of the world. But it was not so much to indirect as to direct taxation that he wished to drawn attention. The charges which he proposed to deal with comprised Imperial taxation to the extent of about £22,000,000, and local rates to the amount of £30,000,000. It was perfectly remarkable how the local rating and the local indebtedness of the country had increased. In the year 1871 local rates amounted to £17,000,000. in 1880 to £25,000,000, and now they were £30,000,000. The £30,000,000 of local rates, together with £21,000,000 of Imperial taxation, formed the matter to which he desired to draw the attention of the House. The growth of local rates was remarkable in the amount annually levied; but it was still more visible when they examined the question of local indebtedness. In the year 1871 the local indebtedness of the country was £63,000,000, in 1875 it was £93,000,000, in l879 it was£128,000,000, and in 1883 it was £159,000,000. Contrasting these figures with the liabilities of Imperial finance, they found that in the years he had mentioned—namely, from 1871 to 1883 —the public Debt had diminished by £48,000,000, and the local indebtedness had increased by £96,000,000. This was a very remarkable contrast, and the growth of local indebtedness was far larger than it ought to be. The local debts had been incurred by virtue of authority given through Private Bills, and when he considered how those Bills were carried through Parliament he was not astonished at the result. He knew that it was practically impossible for Local Authorities to act rigidly on the maxim that the Expenditure and the Income of the year should balance one another; 937 but he thought they should not, in their Private Bills, be allowed to borrow for more than 30 years, so that each generation should pay its own debts. The only portion of England now provided with a perfect system of administration in regard to local rating was the Metropolis; and ho was of opinion that the Act under which the rates were levied in London ought to have been extended to the country a long time ago. In the Metropolis the accuracy of the local assessment was tested by the amount charged under Schedule A; and the Income Tax levied under that Schedule was, in the gross assessment, almost identical with local taxation. In the country, however, there was a 10 per cent difference between the actual gross value of property and the amount at which it was assessed for local purposes; and, this being the difference on the average of all assessments, it is obvious that individual discrepancies must be still larger. The object which he had in view in moving the Resolution of which he had given Notice was that the salutary and scientific rule already adopted in the matter of local legislation should be applied to Imperial legislation also, and that the Income Tax, among other taxes, should be subject to the rule of being levied not upon gross value, but upon net. Under his plan capital would pay considerably more and industry considerably less than at present. The adjustment of Income Tax which he proposed had been greatly misunderstood or misrepresented. The adjusted Income Tax, which had been the subject of controversy ever since its proposal by Mr. Disraeliin 1853, wasnot a graduated Income Tax at all. Assuming three different kinds of property of the nominal value of £1,000 each a-year—interest from money in the funds, rents of land, and rents of houses—while the real income from interest of money in the funds would be £1,000, the real value of £1,000 derived from rents of land would be £900, and from rents of houses £800. It was quite clear that if they charged one and the same rate upon all these properties they must in fairness first reduce the assessment to what was the real value. Mr. Disraeli's proposal was to charge upon the gross or nominal income a rate diminished in proportion to the outgoings—a proposal agreeing in principle, though 938 less perfect in operation, with the process of reducing gross incomes to net incomes, and then charging an uniform rate. That principle had existed since 1869 in the Metropolis Valuation Act. The present system, from beginning to end, favoured wealth and pressed hard on property. In the Customs and Inland Revenue Bill there was one portion to which he referred with great gratification—namely, the clause which imposed an annual charge upon Corporations in lieu of Succession Duty, which they might be called upon to pay if their property was precisely on the same footing as other properties. The Bill assumed that this annual charge was not to be levied on the gross rental at all, but upon rental with such deduction as might be necessary to obtain the real value of the property. This Corporation Tax was, in fact, the adoption, with respect to Corporations, of an Income Tax constructed precisely upon the conditions which he advocated in the Income Tax levied upon all incomes. He found that the present Probate Duty, which produced £4,000,000 sterling, was almost entirely composed of the newly enacted charges of 2 and 3 per cent. But why should the Probate Duty be 2 or 3 per cent? The original Probate Duty was simply a Stamp Duty imposed to certify the title of the administrator of the property bequeathed or inherited. He looked upon the Legacy and Succession Duties in quite a different light from the Probate Duty. The Probate Duty, as he had said, was simply a Stamp Duty, but in the case of legacy and succession the State constituted itself a joint heir with every subject of the Crown, and took a portion of the substance according to the proximity of the heirs, rightly taking the least from the children and the most from those who were strangers. Therefore he did not raise any objection to the continuance of the Legacy and Succession Duties. He thought they might fairly continue as at present, and he entirely concurred with his right hon. Friend near him that they ought to do away with those fictitious distinctions which merely complicated the matter. The more simple they could make the operations of finance the better they were understood. He wished to give relief to those who were suffering. He thought it was a cruel thing, when the father of a family died, that they should come down 939 on the widow and children for 3 per cent of the property. The result of that was often to destroy their homes and make them break them up. Legacy Duties ought to be levied in such a way as to be most easily paid. He trusted that the House would support him in his Resolution, with a view to persuading the Government to introduce at no distant period a comprehensive adjustment of our fiscal system. The right hon. Member concluded by moving his Amendment.
To leave out from the word "That" to the end of the Question, in order to add the words "in view of the rapid extension of local rating and of the continuous imposition of the Income Tax, it is desirable that the province of Local Eating and of Imperial Taxation be severally readjusted and defined, and that a common authority and common measure be provided for the levy of both rates and taxes so as to regulate their incidence upon the principle of assessing the rate or tax upon the real, that is, upon the net annual value,"—(Mr. J. G. Hubbard,)
§ Question proposed, "That the words proposed to be left out stand part of the Question."
observed that he did not propose to follow his right hon. Friend the Member for the City of London (Mr. Hubbard) into the wide field of subjects, not unfamiliar to the House, over which he had ranged; but he could not help feeling that he had done the previous Conservative Government an injustice in his remarks upon their endeavour to apply to the whole country the same principles in respect of valuation which were applied to the Metropolis. Had the House been allowed to adopt that proposal, considerable incidental advantage might have accrued to the Exchequer; but his right hon. Friend, instead of assisting the Government in that direction, was constantly occupied in placing an obstructive Amendment against the Valuation Bill, and did his utmost to prevent its becoming law. He had heard with surprise the comments of the right hon. Gentleman opposite (Mr. Childers) upon the speech of the Chancellor of the Exchequer. Ho (Mr. Sclater-Booth) had not understood his right hon. Friend (Sir Michael Hicks-Beach) to state that indirect taxation would never under any circumstances be increased. 940 What his right hon. Friend meant probably was that the limit of addition to the taxation of certain commodities appeared to have been practically reached, and that great difficulties would be placed in the way of any Chancellor of the Exchequer who should endeavour to select any one of those commodities for the purpose of taxing it additionally, and so raising any important sum of money. Although experience had shown in a practical way the great difficulty in which Governments or Chancellors of the Exchequer were placed who endeavoured to augment the Spirit, or Beer, or Tea Duties, or the duties on other articles of consumption, he was not on that account persuaded that no means could be found by which a more equitable and satisfactory state of the public mind might be brought about which would enable a Government on either side of the House to deal with this subject without exciting the acrimony of the Party contests which had accompanied previous endeavours to deal with these subjects of taxation. The relative incidence of these taxes was pronounced ex cathedra by the Chancellor of the Exchequer from time to time, and few people had the knowledge or opportunity to contest his decision; but they found that when, after making his Financial Statement, he proposed to increase the duties on this or that article of consumption, a great party came forward to thwart and oppose his proposition; and the practical result was that he found himself obliged to surrender. He, however, deeply regretted that the circumstances of the moment were such that his right hon. Friend the Chancellor of the Exchequer was unable to propose anything in the way of alleviating or reducing existing anomalies. He thought it would be to the advantage of the country if the House of Commons were to pay a little more attention to the principles on which this indirect taxation was levied, and would endeavour to arrive at an understanding as to what should be the normal amount of them. In that case, without doubt, the duty of the Chancellor of the Exchequer would be much more easily accomplished. There would be no endeavour to trip up a Government by rousing up the enemies of a particular tax, and a much more fair and just system might possibly be arrived at. He would 941 throw it out as a suggestion whether by bringing a Committee of the House into immediate contact with the heads of the Revenue Department, and enabling some dispassionate scheme to be propounded as to the principles which ought to guide the indirect taxation of the country, entirely separated from the Parties of this House, a good work might be done, which would be of great assistance to future Chancellors of the Exchequer, on whichever side of the House they might sit. He felt that for the present, and probably for the future, the great mass of indirect taxation must be considered to be for the most part fixed upon the articles of luxury, on quasi-luxuy, and upon the drinks consumed by the public at large; and with the exception of sugar, which he should be very glad to see brought into the same category, he did not know that there was any other article of consumption which could be fairly included in the list of Revenue-producing commodities. The attention of the House might fairly now be given to the Customs Duties generally, and the system on which they were levied. He thought the time had arrived when the great volume of articles of consumption imported from abroad, without imposing any restriction upon their consumption, might have a small duty levied upon them. He did think that by charging a small duty, or rather registration fee, on such commodities they might raise an important sum, certainly enough to defray the cost of the Customs Establishment. He took it that the duties of the Custom House officers in boarding a ship bringing goods from foreign countries was simple and easy enough; and if the charges were as low as he would desire them to be, it seemed to him that they would be a kind of guarantee of the information contained in the statistics compiled by the Custom House officers, and would make them more reliable and worthy of greater attention. He did not for a moment pretend that in this way any large sums could be collected; but so far as they could be they would be of such a general and comprehensive character that they could not be objected to from Party or interested motives. He would only add, in conclusion, that he believed if some such inquiry as he had suggested were made, perhaps in the next Session of Parlia- 942 ment, the consequence of it would be not to embarrass, but to greatly facilitate the operations of the Chancellor of the Exchequer, and to place the public finance of the country upon a sounder and more satisfactory footing.
§ SIR JOHN LUBBOCK
said, there seemed to be a prevailing impression that this was a modest and unpretentious Budget, and one of no great importance one way or the other. So far from that being the case, it appeared to him to involve consequences of the utmost gravity, and to be one of the most momentous for many years. The Chancellor of the Exchequer had stated that "under the circumstances" it would scarcely have been possible for him to take any other course than that which he had adopted. But the right hon. Gentleman, more than anyone else, was responsible for the circumstances in which he now found himself. The Budget itself sinned against the two great cardinal principles which had hitherto been held as regards finance by the Conservative Party—namely," under any circumstances "to pay one's way; and, secondly, that" the increased expenditure should not fall wholly on property or on those payers of Income Tax who are by no means synonymous with the holders of property." "When Sir Stafford North-cote took Office on the formation of the last Conservative Administration he made an excellent speech, in which he clearly proved that we had not done enough in the direction of repaying Debt, and he brought in a Bill to quicken this process. Such, then, were the wise principles enunciated by the Leaders of the Conservative Party; such were their principles; but their practice was, unfortunately, very different, for Sir Stafford Northcote was never able in any one year fully to carry his own Act into operation. The Chancellor of the Exchequer, however, not only now proposed that they should pay off no Debt whatever, but he proposed that they should borrow no less than £4,000,000. The second principle, which had always been most strongly advocated by hon. Gentlemen opposite, had been that any necessary increase of taxation should be equitably divided between the different classes of the community. In the present instance the increase of expenditure was agreed to by hon, Gentlemen 943 opposite. The difference of opinion had not been as to whether the expenditure was necessary, but as to how the money should be raised. The right hon. Baronet objected to the proposals of the late Chancellor of the Exchequer; and even if he was not bound to bring forward an alternative plan then, now that he was in Office that responsibility certainly devolved on him. They could well imagine the indignation which would have been expressed by hon. Gentlemen opposite if the right hon. Gentleman the Member for Pontefract (Mr. Childers) had proposed to raise £5,500,000 by an increase in the Income Tax without any addition whatever to the indirect taxation. But the Chancellor of the Exchequer had gone further than that. He had stated that we had "arrived at the limits of increased taxation on the most important taxed articles of consumption," with, perhaps, the single exception of tea; and that it would be impossible to raise the duty on tea because it would be so intensely unpopular. The right hon. Gentleman had not only done nothing to carry out his own principles, but he had done a great deal to prevent anyone else from carrying them out either. It would in future require a bold Chancellor of the Exchequer—though he hoped they might find one strong enough in case of need—to propose any increase in indirect taxation. Under these circumstances, he could not join in congratulating the Chancellor of the Exchequer on any part of his Budget. Ho preferred the course proposed by the right hon. Gentleman the Member for Pontefract, because he saw very little use paying off Debt on the one hand, and borrowing on the other. It was a serious matter, and one greatly to be regretted, that during a time of peace, instead of meeting the increased Expenditure of the country by a bold and manly increase of taxation, they were resorting to the weak and ignoble course of adding to the indebtedness of the country.
§ MR. NEWDEGATE
said, he must express his regret at hearing from the right hon. Gentleman the late Chancellor of the Exchequer (Mr. Childers) that the death-knell of indirect taxation had been sounded by the present Chancellor of the Exchequer. [Mr. CHILDERS said, he had referred to increased in- 944 direct taxation.] If the right hon. Gentleman meant the opposite of what he (Mr. Newdegate) and two other hon. Gentlemen near him understood, the right hon. Gentleman should not have used the word "knell," but the word "carol," over the prospect of reviving indirect taxation. Perhaps the House would allow him (Mr. Newdegate) to mention what the repeal of indirect taxation had cost the country within his own memory. Between the years 1840 and 1854, inclusive, the amount of Customs Duties which the Legislature had repealed or reduced was £10,092,719. In mentioning these figures, he asked the House to remember that he had begun his career in Parliament by supporting the late Sir Robert Peel in the abrogation of a part of that indirect taxation of £10,000,000, which chiefly consisted of Custom Duties. Where ho had differed with the right hon. Baronet was on the repeal of the Corn Laws; and with regard to that question he would tell the House where he got his education. It was in the United States of America that he was taught to recognize the value of the Corn Laws, not as a commercial measure, not as a measure of finance, but as a measure of national self-defence. Between the years 1800 and 1805, the First Napoleon endeavoured to establish the "Continental System," a combination of Foreign Powers, the object of which was to starve out the people of this country; and he had been so nearly successful that in the absence of a Corn Law the people of London mobbed King George III., and subsequently hailed the adoption of a Corn Law, which provided them with food. Now that the Navy of England was weak, this, he thought, was a matter which deserved careful consideration. At the period to which he had referred the naval supremacy of this country was questioned, and continued to be so, until the victories of Nelson, which culminated at Trafalgar, put an end to Napoleon's projects in combining Foreign Powers against England on the sea. As an old Member of the House, he had seen the Corn Laws repealed; but in what he was saying he did not advert to the Corn Laws. He reverted to the subject of indirect taxation generally, and called the attention of the House to the fact that from 1840 to 1854, inclusive, not 945 less than £10,092,719 of indirect taxation had been repealed. Again, from 1855 to 1869, inclusive, £9,255,526 of indirect taxation was repealed. From 1870 to 1874, inclusive, £6,924,245 of indirect taxation was repealed. So that within the period from 1840 to 1874 not less than £26,272,490 was the amount of indirect taxation repealed. It was important to notice what the nations of the Continent were doing at the present moment. Germany, which was not the most stupid nation in the world, had re-imposed a Corn Law, and other im-port duties. The French Republic had also re-imposed a Corn Law, and taxation upon foreign imports. According to the present system in this country, taxation by Customs Duties, on imports to largo amounts, seemed to be abandoned. Let this House remember that it stood before the country self-condemned by its own act; it had invoked a new, and he (Mr. Newdegate) hoped a wiser, House of Commons. Why should this House, standing in that peculiar position, endeavour to preclude its Successor from the use of a method of indirect taxation which its Predecessors, and not inferior Parliaments, had so largely used? As matters stood, the House seemed to think that it had little to fall back upon in the form of indirect taxation, except that which might be effected through the Exchequer. He (Mr. Newdegate) felt unable to speak more at length, but begged, as one of the senior Members of the House, to apologize for having uttered these few sentences upon that which appeared to him a very grave subject.
§ MR. MONK
said, ho wished to draw attention to the omission of Clause 3 of the Bill, introduced by the late Chancellor of the Exchequer, granting power to the Commissioners of the Treasury to alter the alcoholic scale of the Wine Duties from 26 to 30 degrees. The House was aware that the right hon. Gentleman the Member for Pontefract proposed to take power to charge the 1s. duty up to 30 degrees in order to enable the negotiations with Spain, which were approaching completion, to be carried out. He heard with regret that evening from his right hon. Friend that the negotiations were now at an end. He believed that was not the case. He found in a letter dated the 22nd of May, from Madrid, that the 946 Minister for Foreign Affairs made this statement:—That on her part Spain is ready, and always has been ready, to carry out strictly the engagements she has contracted, and it is her wish to give sincere and loyal proof of this towards Great Britain.In the reply sent by Lord Granville to the Spanish Minister on the 8th of June he found those words—Her Majesty's Government have made no alteration of their intention to alter the lower half of the alcoholic scale to 30 degrees.This being the case, he hoped the Chancellor of the Exchequer would be able to confirm his statement that the negotiations had not been broken off. Ho thought that this country had been treated in a most unjustifiable manner by Spain. It was insufferable that a Power of the standing of Spain should have refused to grant Most Favoured Nation treatment to Great Britain. Although this country had received fair expressions from the Spanish Government, the acts of the latter had not corresponded in any degree with their expressions. The right hon. Gentleman must admit that this question of the Wine Duties had been thoroughly threshed out. What was the use, therefore, in postponing the negotiations? They had been brought almost to a conclusion, and to his mind no useful purpose would be served by breaking them off now in order at some future time to resume them. He thought the best course for the Government to pursue was to send an ultimatum to Spain calling upon that country to fulfil the engagements which it had entered into in the declaration of December, 1884. Large quantities of British goods had been sent from Yorkshire and Lancashire to Spanish ports. They were now lying in British vessels, and could not be imported into Spain because they were liable to pay duty under the general tariff; whereas, when they were sent from this country, an agreement had been entered into between the two Governments that British goods should come under the conventional tariff. There was no reason why the present Government should not renew the negotiations and carry them to a successful issue. At the present time the Spanish wines brought into this country reached 40 per cent of the whole amount imported, whereas France 947 contributed only 30 per cent, Portugal 20 per cent, Italy 4 per cent, and all other countries 6 per cent. When they came to regard the alcoholic test, it was found that up to 20 degrees Spain only exported 1 per cent, whereas France exported 92 per cent. Between 20 and 30 degrees of alcoholic strength Spain exported to this country 78 per cent, France 8 per cent, Portugal 4 per cent, and all other countries 10 per cent. In the higher scale, reaching from 30 to 40 degrees, Spain exported 50 per cent, France practically nothing, Portugal 37 per cent, and all other countries 13 per cent. Considering the assurances that were given by the late Government, it took the House by surprise when the late Under Secretary for Foreign Affairs stated that the negotiations with Spain had fallen through. He hoped the Chancellor of the Exchequer would assure the House that the negotiations with Spain had not been broken off; but that they would be carried on and completed. He still expressed a hope that the Chancellor of the Exchequer in Committee on the Bill would take power for the reduction of the Wine Duties, otherwise the whole matter must be postponed for another year to the great injury of British commerce.
§ MR. HICKS
said, he must express his surprise that the late Chancellor of the Exchequer should be of opinion that it was still possible to raise a large amount of additional Revenue from an increased duty on beer. The figures which the right hon. Gentleman himself had given showed that any large increase of that duty would yield little or nothing. The right hon. Gentleman had proposed to increase the duty on beer by 4/25 but had estimated the increase of the Revenue at only 2/25 The increase ought only to have been £1,500,000, but he put it at £750,000. Again, the right hon. Gentleman the Member for Mid Lothian, when Chancellor of the Exchequer, during the Crimean War, imposed an increased duty on malt. In the first year the quantity malted fell off in the second year⅙ He (Mr. Hicks) believed an increased duty of instead of giving an increased Revenue, would probably cause a decrease. The right hon. Gentleman then said that the speech of the Chancellor of the Exchequer had sounded the knell of indirect taxation. He (Mr. Hicks) did not so understand it, and if it 948 meant that he could not agree with him. For himself, he did not believe that we had reached the limits of indirect taxation. On the contrary, he thought that the views of the right hon. Gentleman the Member for North Hampshire (Mr. Sclater-Booth) were sound views, and that the country would, in a short time, call upon the House to return to a larger and wider system of Customs Duties. The name of the Excise had been hateful to the English people ever since it was imposed. The price of barley for the last 12 months had been 31s. per quarter, and taking beer at 25s., which was the duty imposed at 6*. Si. per barrel, the duty at the present time upon the raw material was no less than 80 per cent; while if the additional duty had been imposed according to the Budget of the right hon. Member for Pontefract, the duty some weeks ago would have been about 90 per cent on the raw material. With regard to the proposals of the right hon. Member for the City of London (Mr. J. G. Hubbard), he believed that they would increase the very great injustice now inflicted on owners of real property. As to Probate Duty, he would suggest to the Chancellor of the Exchequer that a simpler and less troublesome method of collecting the duty might be advantageously adopted; and that details should not be required on affidavit for probate, but the property sworn to at a lump sum, as in former years, leaving the items for residuary account. The present system caused great and unnecessary trouble to executors, and delay, and also great additional trouble to the Office; and he thought it was a great hardship that the recipients of small legacies, who were in many cases servants and other persons in humble life, should have 10 per cent taken in the shape of duty from the sums left to them. Another matter well deserving of attention was the bounties on foreign sugar. If the present Government remained in power, as he felt confident they would, he believed they would redress that grievance, and not suffer an important home industry to be oppressed through the bounties given by foreign Governments.
MR. ALDERMAN W. LAWRENCE
expressed his dissent from the views advanced by his right hon. Colleague in the representation of the City (Mr. 949 J. G. Hubbard) with regard to a remedy for the inequalities of the Income Tax. Neither could he agree with his suggestions in respect to the Probate Duty. The Chancellor of the Exchequer had declined to face the difficulties attaching to the duties on leasehold and freehold property. For his own part, he was an advocate of the placing of leasehold and freehold property on the same footing for purposes of taxation. If no Probate Duty was to be paid on leasehold property, as was suggested by his right hon. Friend (Mr. Hubbard), leasehold and freehold property would be put on an equality with respect to Succession Duty. The right hon. Gentleman the Member for Pontefract (Mr. Childers) was the only Chancellor of the Exchequer who had attempted to remedy the injustice which had existed so long in the taxation of leasehold and freehold property under the Death Duties. Take the case of a large landowner, who had let land, in this Metropolis, on building leases for 80 or 90 years, on which land had been built numerous streets and large squares of magnificent houses. Some 40 years had already expired, during which time Probate Duty on the full value of the leaseholds and also Succession Duty had been paid by the successors, and would continue to be paid during the remainder of the lease, on the transfer of these leasehold houses, by death. At the termination of the building leases the ground landlord would let the houses at rack rentals on leases for 21 years, the Probate Duty on which would be of small amount; and the freehold estate, now of great value and consisting of the whole of the houses built upon the estate, and let at an enormous rental, would pass by death to successors on the payment of Succession Duty only, according to the value of the lives, and a very large sum would be lost in perpetuity to the Exchequer. Take the case of a father leaving a leasehold house to one son, and a freehold house to another son. The one would have to pay Probate Duty on the full value of the house, and also Succession Duty; the other would have only to pay Succession Duty according to the value of his life. He asked if these anomalies were not most unfair, unequal, and unjust, and ought they not to be remedied at the earliest opportunity? The right hon. Member for North Hampshire had suggested a number of small 950 duties on articles now imported free, which he proposed to register. Was he not aware that the expense of collecting a small duty was as great as that of collecting a large one? It was not surprising that the hon. Member for South Warwickshire had cheered that proposal, which was only a disguised form of Fair Trade, and, as such, he protested against it.
§ MR. SALT
said, he hoped that his right hon. Friend would not put the House to the trouble of a division, as it would make very little difference, in the present state of Parliamentary affairs, whether his Motion were carried or not. Among the many unfortunate political circumstances that had occurred during the present year one of the worst things that had happened to the country had been the introduction of such a Budget as was now before the House. Ho recognized that it arose from stern and unadvoidable circumstances; but those in any way acquainted with financial matters must admit that it was not a Budget which was creditable to a great commercial country. He believed, as the Chancellor of the Exchequer stated, that the Budget did not represent his right hon. Friend's financial views, but that it was a Budget of necessity, and not of correct financial policy. There was a large deficiency to be met, which was provided for partly by increased income tax, partly by suspension of the Sinking Fund, and partly by loans. It was unfortunate that at a time when it was desirable to show financial strength, with a view to foreign complications, it should be found necessary so soon to have recourse to the method of loans. Absolute necessity was the only excuse for such a policy. He never took a Party view of financial matters if he could possibly help it. It was quite right to criticize, but all Parties had a common interest, and that was to raise the necessary taxation in that manner which was most convenient and easy to every class of the community. He had merely risen in order to emphasize, as strongly as he could, what he believed to be the view of the Chancellor of the Exchequer himself with regard to the character of the present Budget. In conclusion, there was one question he would like to ask, and that was—What had become of the money which was paid upon Spirit Duties between 1st of May 951 and the time when the additional duties were abolished? He believed some of it had been recovered, but it must have been a difficult and inconvenient process, and he would like to know whether all of it had been recovered by those who had paid it?
§ MR. SHIELD
said, he regretted that while the right hon. Gentleman the Chancellor of the Exchequer had given the go-by to much that was meritorious in the Budget of his Predecessor he had not also hardened his heart and foregone the £150,000 which the right hon. Gentleman the late Chancellor of the Exchequer (Mr. Childers) had expected would accrue to the Revenue from the duty on bodies corporate and incorporate. The long list of exemptions took out of the Bill the only bodies worth taxing—namely, the great holders of land in mortmain. In his opinion the Bill would inflict on the Corporations to which it did apply an infinity of vexation, and on some of them great injustice, and all this would be done for the sake of an almost infinitesimal revenue. As a Fellow of a College and as a Bencher of an Inn of Court, he took an interest in the second part of the Bill. What, in the estimation of the Chancellor of the Exchequer, would be the operation of that part of the measure upon the Colleges of Oxford and Cambridge? There seemed to be an impression that those Colleges were exempt, but this was not the view of his hon. Friend who sat near him; and he had been told that the view of the Chancellor of the Exchequer was that the stipends even of those Fellows who were engaged in tuition in the Colleges would be exposed to the tax. With regard to the Inns of Court, no part of their income was, in the language of the exemption, "legally" appropriated for the promotion of education, or for any other purpose which would bring it within the exemption, although, in fact, it was so applied. Consequently the effect of the Bill would be to levy a tax of 5 per cent upon the whole of the income of those bodies for which they already paid Income Tax. He hoped the Bill would not leave Committee without such Amendments being introduced as would remove the very considerable grievances he had indicated.
§ MR. WHITLEY
said, he thought that successive Chancellors of the Exchequer, through regarding the Income Tax as a 952 temporary tax, had failed to recognize the inequality of the present mode of levying it. If it were to be perpetual it was necessary to remove those inequalities. He heartily supported the Amendment, because it was not right that one section of the community should pay an unfair proportion of the Income Tax in order to save the pockets of others. Under existing circumstances he did not think the Chancellor of the Exchequer could have acted more wisely than ho did in regard to the Budget he had presented to the House. He, however, heartily approved of the proposal of his right hon. Friend the Member for the City of London to remedy the inequalities of the Income Tax, which now pressed most unfairly upon the owners of small properties. In taking this step the right hon. Gentleman had hit a blot in the Income Tax regulations, and the country would owe a deep debt of gratitude to him.
§ GENERAL SIR GEORGE BALFOUR
said, he wished to call attention to the Income Tax charged in Schedule B on the occupation of land, and hoped the Chancellor of the Exchequer would take into consideration the practicability of its abolition. The charge on the existing rate was 8d, the portion under this Schedule being fixed at 4d. in England and 3d. in Scotland and Ireland. The rate, however, ought to be only one-third of 8d. for Scotland and Ireland. Even those rates of charge was burdensome, because it was a tax on the profits of farmers, which were assumed, and not real. It gave great dissatisfaction, while the amount raised by it was very trifling. No doubt the farmers could claim exemption on proof of profits not being realized; but the necessity of keeping elaborate books prevented farmers from establishing their claims to exemption.
MR. ILLING WORTH
said, the present financial condition of the country was one of the greatest gravity. The Expenditure of this year, he believed, had not been equalled in this generation. He should never cease to regret that the Party to which he belonged was, in the first instance, responsible for this extraordinary outlay, and that, instead of being checked by the Party opposite, the latter lent every encouragement to the most extravagant proposals which proceeded from the late Government. If the Expenditure had been extraordi- 953 nary, our present position in regard to the Budget was still more singular, and even inexplicable. The present Chancellor of the Exchequer belonged to a Party which had been always understood to defend a combination of the systems of direct and indirect taxation. Apologies for the Chancellor of the Exchequer had been made that night by hon. Members, who said be bad not struck the death-knell of indirect taxation by any utterance of his; but in the country the right hon. Gentleman would be judged, not by his utterances, but by his action. He had produced a Budget in which he had deliberately thrown overboard the proposals of his Predecessor; and, so far as he grappled with the great deficit under which the country was suffering, ho bad laid it entirely on real property, and he had made it almost impossible that we should in the future fall back upon any substantial Revenue from indirect sources. In one respect be (Mr. Illingworth) differed from his right hon. Friend the Member for Pontefract (Mr. Childers), inasmuch as he had been an advocate for nearly the whole of his life of the principle of direct taxation, both in local and Imperial finance; and, therefore, he saw a future in which we should be confined to direct taxation without any anxiety or alarm. He had considerable sympathy with the Chancellor of the Exchequer in being obliged to bring in a miserable and make-shift Budget, in which he had been compelled to do the thing that he did not-wish to do—that was, to lay increased burdens on real property; and had neglected to do that which he would have liked to have done—that was, to put new burdens upon personal property; and in which he bad been obliged to suspend the operation of the Sinking Fund, on which his late Colleague set so much store. He (Mr. Illingworth) was glad the sham of the Sinking Fund was exploded, for he had contended, over and over again, that it would be wise not to set up the practice of reducing the National Debt in good times and in bad times equally. The right hon. Member for the City of London (Mr. Hubbard) drew attention to the fact that of late years the loans of municipalities had largely increased, and he and some other Members appeared to think that this was an evil and a danger to the communities. So far from that being 954 the case, he (Mr. Illingworth) believed that there was no investment that had added so much to the prosperity and the stability of our large towns as the enter-prizes of which these loans were the representation. How could the municipalities otherwise provide a boundless supply of pure water, which would benefit the community for endless generations? It was impossible that the expenditure could be met at the time that it was incurred. He did not hesitate to say that for substantial purposes of that character even 60 years was an unnecessarily short period within which to limit municipalities in the repayment of capital, though he admitted that in sewerage works, and, perhaps, street paving and improvements, the time now generally understood to be the limit was reasonable. Not long ago in his own town, where they had used those borrowing powers very largely, one of the best-informed and most experienced officials of the borough stated, at a public meeting, that if their gas and water works, which were the main items that bad run up those large loans, were to be handed over to Companies, they would sell for a very large premium, and, so far from the outlay being a burden on the town, it was a valuable investment. Therefore, the hon. Gentleman who had manifested an undue anxiety as to the position of towns on asking Parliament for those loans might rest assured that in 99 cases out of 100 the outlay was a wise one on the part of the municipalities, which were as well capable of taking care of their affairs as Parliament had shown itself to be in Imperial matters. Some Members on the other side had shown a disposition to resort to the taxation of imported commodities in order to relieve the Chancellor of the Exchequer from the difflculty of putting taxation altogether upon real property. He was surprised to hear the right hon. Member for North Hants (Mr. SclatorBooth) talk about raising large sums which should be a substantial relief of the Exchequer by very small import charges. Nothing was more absurd than that idea. The charge upon the imports must be substantial, otherwise the relief would be very trifling. If Members wore to discuss import charges, he only wished they would speak plainly, so that the country might understand what was intended. 955 The Chancellor of the Exchequer would save his own Party from confusion if he would, by a plain declaration, state at once, as his Predecessor in the lead of the Conservative Party stated, that it was impossible for this country to return to anything like import duties, and that those who advocated such a change were only indulging in an allusion. He was not sorry, upon the whole, that just before a General Election there should be this deficit and this increased taxation. If the deficit pointed a moral, it would not be altogether useless. We had had wars, purposeless wars, in his opinion; we had had extravagant expenditure; and we were now cowardly enough to accumulate debt instead of meeting the expenditure immediately. He hoped the country would learn the lesson, and teach it to many Members.
§ THE CHANCELLOR OF THE EXCHEQUER
I think, if the country does make the inquiry suggested by the hon. Member as to who has been instrumental in raising the National Expenditure, no one on this side of the House will have much cause to fear the result. My right hon. Friend the Member for the City of London (Mr. Hubbard) has raised in the Motion which he has made a subject of great importance and interest. It is one of which I may almost say he has made a life study. For something like 30 years he has continually brought forward this question, and he expressed his views on a certain occasion so effectively that he obtained the appointment of a Committee to investigate it; but he has not been able to carry the question further than he carried it then. As long ago as 1861, my right hon. Friend obtained the appointment of that Committee. It was a very strong Committee, and after full inquiry they reported that the plan proposed did not, in their opinion, give a satisfactory basis for the practical and equitable re-adjustment of the tax, and they were not prepared to offer to the House any suggestions. The matter has been frequently discussed since that time. It has been debated by a right hon. Gentleman of far greater experience than I can pretend to—by the Member for Mid Lothian (Mr. Gladstone)—and I think there has been a general conviction that, although, no doubt, there are anomalies in the present system of assessing the Income Tax, yet no change in that system could 956 cure all these anomalies, while it might substitute even greater anomalies for them. I am not implying that the speech which my right hon. Friend has delivered does not deserve consideration. I shall give it such consideration as is in my power; but what has fallen from him to-night shows us something of the difficulty of dealing with this subject. He has shown, while dwelling on the great importance and usefulness of arriving at one basis for all direct taxation, that, so far from being able to do this, Parliament had not even been able to establish a uniform basis for the poor rate and county rate throughout the country. If we cannot do that as to the poor rate and the county rate, surely the prospect of establishing such a basis for Imperial as well as local burdens is not encouraging. I think the result of this scheme might be very considerably to relieve certain Schedules of the Income Tax at the cost of other Schedules—[Mr. HUBBARD: Of course.]—and that one Schedule which would be more heavily burdened would be that relating to land—a thing which I do not think my right hon. Friend would desire. I do not wish to pursue the subject now, because the Motion raises so many important questions that I do not think it would be possible satisfactorily to discuss them at present. All I can say is that I shall give attention to the statement he has made, and that I shall endeavour to approach it without prejudice. The right hon. Gentleman opposite (Mr. Childers) has made, in a spirit which I wish to acknowledge, some observations upon the Budget. In the first place, he stated to the House that, in his opinion, I could not fairly abjure all the responsibility for the deficit. Well, the part of the deficit for which I may be said to be responsible amounts to £1,550,000. Of course, I am responsible for that amount; but I did not find anything in the remarks of the right hon. Gentleman to show that he really believed that I could have persevered with the increased Beer and Spirit Duties. He pointed out that it was perfectly consistent with the Resolution I carried against him to propose an increased duty on beer and spirits, as well as on wine; but he did not intimate that, if I made that proposal, he would himself support it, much less did he hold out any hope that it would 957 be accepted by the House of Commons. I think it is perfectly obvious that my Motion was carried, not only by those who wished to see a corresponding increase in the Wine Duties to the duty proposed on spirits and beer, but also by the support of those who objected altogether to any increase in the duties on beer and spirits. The House practically negatived the increased Beer and Spirit Tax; and, therefore, I have abandoned it. The right hon. Gentleman put forward some very remarkable theories as to the sort of Budget which might be expected in the future, perhaps even from himself; because, as I understood him, he said that a very largo increase of Revenue might, in his opinion, be raised from those very articles of indirect taxation to which I have just alluded. He talked of raising £5,000,000 or £6,000,000 from intoxicating liquors; he spoke of increasing the Beer Duty by 50 per cent. If he thought it possible to make such a large increase in those duties, why did he not take more from that source in his own Budget? He may reply to me that he did not make these suggestions as proposals which could be practically carried out. I do not charge him with any intention of carrying them out; but I submit to the House that if he is to be exonerated from such an intention, I may be equally exonerated from having ever proposed an increased duty on tea—a charge against me which even in this debate has been repeated by no less an authority than the hon. Baronet the Member for the University of London (Sir John Lubbock). The argument of the right hon. Gentleman with regard to the possibility of an increase in the duties on beer, spirits, and wine, was this—that, as a Revenue question, such an increase would be possible; and he referred to it in connection with the statements which I ventured to make in my speech the other day when I said that, in my opinion, in such times as these I feared we had arrived, for the purpose of Revenue, at the limits of increased taxation on the most important taxed articles of consumption. The whole of that sentence was governed by the comparison which I drew as to the amount of indirect taxation which could be levied in times of prosperity and times of depression such as that through which we are now passing. I stated to the 958 House that in times of prosperity such as this country had formerly experienced it was a very easy matter indeed for any Chancellor of the Exchequer to obtain from the annual increment in the consumption of such articles a very much larger increase in indirect taxation than the comparatively small amount of £1,350,000 which the right hon. Gentleman desired to raise. I did not in my remarks sound the knell of direct taxation; what I did was simply to endeavour to show the House that in such circumstances as those in which we were at present placed—in times of depressed trade and decreased consumption—you could not raise increased Revenue from articles of consumption already highly taxed. I will endeavour to prove my case from the argument of the right hon. Gentleman in opening his Budget to the House of Commons. As the House will remember, the right hon. Gentleman proposed to raise the duty on spirits from 10s. to 12s. per gallon on home-made spirits, and on foreign and Colonial spirits from 10s. 4d. to 12s. 4d. a-gallon. The right hon. Gentleman said—This we calculate will produce during the present year, under the head of Customs and Excise, about £900,000. Of course, this is based upon some reduction in consumption. At the present time the consumption is about 36,000,000 gallons, producing about £18,000,000 a-year. If the higher duty produces only £900,000 more, a simple sum in arithmetic will show that the consumption will have fallen below 32,000,000 gallons."—(3 Hansard,  1155.)What I argued was that increased taxation was not based upon sound financial principles when you could only obtain it by a process which would so seriously reduce the consumption of the article on which you levied it. Again, the same remarks will apply to beer. The right hon. Gentleman this evening told the House that the receipts from beer had increased to a small extent within the last three years. That, no doubt, was a fact; but what was the right hon. Gentleman's own estimate of the yield of the increased duty he proposed to put upon beer? He said—By increasing the duty on beer from 6s. 3d. to 7s. 3d. per barrel of 36 gallons, he hoped to get during the year £750,000, or about 9 per cent more than the present Revenue."—[Ibid.]The increase ought to have been more than that—it ought to have raised the 959 receipts from beer from £8,500,000 to £9,860,000. Instead of that, the right hon. Gentleman only put the receipts at £9,250,000.
§ MR. CHILDERS
was understood to say that he had spoken only of the increase in the first year; but, of course, any addition to a tax would, no doubt, cause decreased consumption.
§ THE CHANCELLOR OF THE EXCHEQUER
But the House will remember that the right hon. Gentleman proposed that the duty on beer should only last for a year; and therefore, so far as the statement went, it applied to the whole time for which he proposed to increase the tax. The increase in the receipts from beer during the last three years has been very small, while the receipts from spirits are decreasing, so that the right hon. Gentleman would not have been too cautious if he had put his Estimate for the Beer Duty at a lower figure than he did. The right hon. Gentleman has alluded to one part of my remarks on the Budget in which I referred to an increased expenditure of £200,000, which had been included by the War Office in their revised Estimate of the Vote of Credit. That expenditure was understood to be for the defence of certain commercial harbours and military ports. The right hon. Gentleman complained that I had omitted to state that there was already included in the Army Estimates a certain sum for expenditure of the same kind. My statement was a quotation from the Budget Speech of the right hon. Gentleman himself. The item of £200,000 to which I referred was for expenditure of the same general kind, but for a different special purpose to that included in the Army Estimates. In his Budget Speech the right hon. Gentleman, speaking of this matter, said—But I must also point out to the Committee that in the Army Estimates of this year there is no provision for the defence of our commercial harbours, or for the improvement of the seaward defences of our great military ports. As to these, statements were made in both Houses on the 2nd of December last, by Lord Northbrook in the House of Lords, and by my hon. Friend the Secretary to the Admiralty (Sir Thomas Brassey) in this House, and they pledged the Government to full consideration of the Report on these subjects, and to probable proposals for large expenditure in future years.
§ MR. CHILDERS
What I said was that we had made, in the original Army The Chancellor of the Exchequer 960 Estimates, provision for our coaling stations to the extent of £200,000.
§ THE CHANCELLOR OF THE EXCHEQUER
I was speaking of an expenditure for a different special purpose. I think I have now alluded to all the points to which the right hon. Gentleman referred. With regard to the remarks of the hon. Member for Gloucester (Mr. Monk), who complained that I did not insert a clause in the Bill now under the consideration of the House enabling the Treasury to raise the limit of the 1s. duty on wines from 26 to 30 degrees, I may say that I deliberately excluded the clause, because the negotiations with the Spanish Government had come to an end. The House is acquainted with the manner in which those negotiations came to an end. I do not wish to apply any strong language to what occurred; but it amounted to a treatment of this country by the Spanish Ministers to which it can hardly be possible to apply anything but strong terms. Certain Treaty arrangements were entered into which this country loyally accepted, and which the Spanish Ministry failed to carry through. Under these circumstances, the position was entirely changed from what it was when the right hon. Gentleman opposite included this provision in his Budget Bill. I have excluded this power for two reasons—first, its presence in the Bill would have the effect of keeping the wine trade in a state of uncertainty, from which, I am advised, it has already suffered so much; and, secondly, I was anxious to intimate that, however much it may be to our interests to conclude commercial negotiations with Spain, yet it is of very much greater importance to Spain than to us. I do not wish, after the treatment we have received from Spain, to put a provision in the Act which would have seemed like weakness on the part of this country. Those are the reasons why I deliberately excluded such a power from the Bill; but I can assure the House that we desire a better commercial footing with Spain than we at present occupy, and that Her Majesty's Government will do their best, consistently with the interests of the country, to obtain it. The hon. Member for Cambridge (Mr. Shield) referred at length to the exemptions set forth in the clause of the Bill which deals with the new tax to be imposed on corporate property. That is 961 a matter I do not think it desirable to discuss now—it is more fitted for the Committee stage; but this I will venture to say—that I was rather surprised to hear from the hon. Member a desire to increase the number of exemptions. They are sufficiently large at present. The hon. and gallant Member for Kincardineshire (General Sir George Balfour) asked me some questions with regard to the Income Tax. I may say that there is nothing in the Bill relating to the Income Tax which is at all at variance with previous Acts of the same character; but I cannot undertake to make any change in the direction suggested by the hon. and gallant Member. I am a farmer myself, and I should be glad to be exempted from Schedule B; but I do not believe that the House would deliberately strike out that Schedule from the Bill, although it does not yield a very large revenue, without a very careful consideration of other matters affecting the general incidence of the tax. For myself, I must say that I think it would be better for the agricultural interest to keep Schedule B as it stands than to make the alteration in the system of assessment suggested by the hon. and gallant Member. I do not think that there is anything else with which I need trouble the House. I heard with great interest the remarks of my right hon. Friend the Member for North Hampshire (Mr. Sclater-Booth), which I shall take into consideration. The hon. Baronet the Member for the University of London (Sir John Lubbock) and the hon. Member for Bradford (Mr. Illingworth) said something about the iniquity of not paying off our debts, of appropriating the Sinking Fund, and of carrying over a large deficit to next year. I do not think that these doctrines, however much they may be preached by financial purists, are very popular at the present moment, for surely there are very few persons, either in the House or in the country, who consider that either the circumstances or the taxation of the present year are of a normal character. We certainly do not live in what can be called peaceful or prosperous times, and there could be no year in which it could be more thoroughly justifiable to pause in the system of repayment of our debts which we have adopted in times of more prosperity, and of expen- 962 diture on a more peaceful scale. I repudiate the desire which has been attributed to me by some speakers in this debate of doing anything which would be likely to put an end to our system of indirect taxation. I think that the right Gentleman said more than he actually intended in that respect, and I do not think that my words were open to such an interpretation. My only desire is to meet existing circumstances in the best way in my power; and if it is my lot—as I hope it may be—to deal with this matter next year, I trust that I may be able to deal with it in a way which will show that I adhere to, and endeavour to put into practice, the principles I have professed as to the relations between direct and indirect taxation.
§ MR. CHILDERS
For the sake of clearness, perhaps I may be permitted to say that I gather from the remarks of the right hon. Gentleman that he gives up for the present the clause raising the superior limit of the 1s. Wine Duty from 26 to 30 degrees; but that he proposes to renew the endeavour to secure improved commercial arrangements with Spain. If he does so I am satisfied. By abandoning all reference to the rate of the lower duty we shall be free, and the negotiations might be much more satisfactorily continued.
§ MR. J. G. HUBBARD
said, that upon the understanding that the Government would require from the officials of the Inland Revenue and Local Government Departments a careful consideration of our present systems of local and Imperial taxation, and an honest Report upon the practicability of their adjustment, he withdrew his Motion.
§ Question put, and agreed to.
§ Main Question again proposed, "That the Bill be now read a second time."
§ MR. MACFARLANE
said, that the Amendment which stood on the Paper in his name was to the effect—That a Select Committee be appointed to inquire into the excessive use of moisture in the manufacture of Tobacco, and to the mode in which Duties are now levied upon that article.Seeing, however, that it was obviously useless at that period of the Session to 963 ask for a Committee to inquire into anything, he did not seriously wish the House to appoint the Committee proposed in his Amendment. He desired, however, to make an appeal to the right hon. Baronet the Chancellor of the Exche-quer to add this question to the many others which he had already promised to consider in the autumn. The question was well worthy of consideration; because the moisture used in the manufacture of tobacco was so excessive as to amount to adulteration on a wholesale scale, to the depreciation of tobacco, to the detriment of the Revenue, and to the great injury of the poorer classes of the country who indulged in it. The tobacco imported into this country in 1883 amounted to 49,500,000 lbs., and from that 84,000,000 lbs. of commercial tobacco were made and sold over the counter. About 34,500,000 lbs. were, therefore, sold over the counter without having paid duty. In fact, it consisted of water which had been used in the manufacture of the article.
§ MR. SPEAKER
I must remind the hon. Member that there is nothing in the Bill now before the House which deals with tobacco. He will, therefore, not be in Order in speaking upon this subject.
§ MR. MACFARLANE
said, he did not put down the Amendment on the Paper without consulting the authorities of the House, including the Speaker, as to his right to raise the question upon the second reading of the Customsand Inland Revenue Bill; and he assumed that the Amendment having been placed on the Paper was an indication that he would be in Order in moving it.
§ MR. SPEAKER
There must be some misconception on the point, as it never came under my notice. The hon. Member cannot be in Order, because the question which he has raised is not dealt with by the Bill.
§ MR. MACFARLANE
said, he wished to know how it would be possible to raise the question, if it could not be discussed on the Bill now before the House?
§ Main Question put, and agreed to.
§ Bill read a second time, and committed for Monday next.